-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ntH7IQWwQAybBVvAgNrzmH6tGEPsjkZEELjYbH7f3c6mUA0EslwKff9pLsk5DrbP 8zB4/58F/dcGpMk0297AKA== 0000950112-94-001127.txt : 19940502 0000950112-94-001127.hdr.sgml : 19940502 ACCESSION NUMBER: 0000950112-94-001127 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 19940129 FILED AS OF DATE: 19940429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPERMARKETS GENERAL HOLDINGS CORP CENTRAL INDEX KEY: 0000821139 STANDARD INDUSTRIAL CLASSIFICATION: 5411 IRS NUMBER: 133408704 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-16404 FILM NUMBER: 94525396 BUSINESS ADDRESS: STREET 1: 301 BLAIR RD STREET 2: P.O. BOX 5301 CITY: WOODBRIDGE STATE: NJ ZIP: 07095-0915 BUSINESS PHONE: 9084993000 MAIL ADDRESS: STREET 1: 301 BLAIR RD STREET 2: P.O. BOX 5301 CITY: WOODBRIDGE STATE: NJ ZIP: 07095-0915 10-K 1 SUPERMARKETS GENERAL HOLDINGS CORPORATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. ------------------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER JANUARY 29, 1994 0-16404 SUPERMARKETS GENERAL HOLDINGS CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 13-3408704 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 301 BLAIR ROAD, P. O. BOX 5301 07095-0915 WOODBRIDGE, NJ (Zip Code) (Address of principal executive office) 908-499-3000 (Registrant's telephone number, including area code) ------------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: $3.52 CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK (Title of Class) ------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of April 1, 1994. There were outstanding 650,675 shares of $0.01 par value Class A Common Stock (voting) and 320,000 shares of $0.01 par value Class B Common Stock (non-voting), all of which are privately owned and not traded on a public market. Documents Incorporated by Reference: None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1 of 97 PART I ITEM 1. BUSINESS* Registrant was incorporated in the State of Delaware in April 1987 as SMG Holdings Corporation. Subsequently, registrant's name was changed to Supermarkets General Holdings Corporation (the "Company"). The Company acquired Supermarkets General Corporation ("Old Supermarkets"), in October 1987 (the "Acquisition"). References to the Company in this Report refer to the Company and its subsidiaries on a consolidated basis, except where the context requires otherwise. In October 1989, Old Supermarkets adopted an amended and restated Plan of Liquidation pursuant to which it was liquidated into three wholly owned subsidiaries of the Company. In November 1989, pursuant to such Plan, Old Supermarkets transferred substantially all of the assets of its Purity Supreme division to two of the three above mentioned wholly owned subsidiaries of the Company, Purity Supreme, Inc. ("Purity") and Li'l Peach Corp. ("Li'l Peach", and together with Purity, the "Purity Operations"), and said subsidiaries assumed substantially all of the liabilities of Old Supermarkets related to such division. Old Supermarkets completed the liquidation just prior to the year ended February 3, 1990 by merging with the third of the above mentioned wholly owned subsidiaries of the Company, which retained the name Supermarkets General Corporation. In connection with the Recapitalization referred to below, Supermarkets General Corporation changed its name to Pathmark Stores, Inc. ("Pathmark"). On December 17, 1991, the Company completed the sale of the Purity Operations for approximately $257.0 million (as adjusted), including the assumption of certain indebtedness of Purity and Li'l Peach. The Company recognized a loss of $228.0 million on the sale of the Purity Operations. Included in the loss was a write-off of approximately $214.0 million of goodwill related to the Purity Operations. The Company retains a 10% common equity interest in Purity Supreme and a new issue of Purity Supreme exchangeable preferred stock with an aggregate stated value of approximately $18.0 million. These retained investments in Purity Supreme are carried on the Company's books at zero value. Pathmark is contingently liable for certain obligations of the Purity Operations under certain instruments, primarily 60 leases for real property, in the event of default thereunder by the Purity Operations, and is subject to a non-compete agreement with the Purity Operations restricting Pathmark's ability to operate supermarkets in Massachusetts, New Hampshire and part of Connecticut until July, 1994. Prior to the sale of the Purity Operations, three properties of Purity Supreme were transferred to Pathmark. See "Properties". THE RECAPITALIZATION The Company consummated a recapitalization plan (the "Recapitalization") on October 26, 1993. In connection with the Recapitalization, the Company transferred all of the capital stock of Pathmark to PTK Holdings, Inc. ("PTK"), a newly formed, wholly owned subsidiary of the Company. The Recapitalization reduced Pathmark's interest expense and will allow Pathmark to devote its capital to growing its core supermarket and drug store business. The Recapitalization involved the following transactions (dollar amounts are as of October 26, 1993): The Creation of PTK. The incorporation in the State of Delaware of PTK and the transfer to PTK of all the capital stock of Pathmark. PTK owns 100% of the capital stock of Pathmark and also owns 100% of the capital stock of Plainbridge, Inc., a newly formed Delaware corporation ("Plainbridge"). Pathmark distributed the capital stock of Plainbridge to PTK in the Plainbridge Spin-Off (as defined below). - --------------- * Except as otherwise indicated, information contained in this Item is given as of January 29, 1994. 1 The Spin-Offs. The contribution by Pathmark to Plainbridge of the Rickel home center business, the warehouse, distribution and transportation operations and the inventory therein that service the Pathmark supermarkets and drug stores and certain other assets and the distribution of the shares of Plainbridge to PTK (the "Plainbridge Spin-Off") and the contribution by Pathmark to Chefmark, Inc., a newly formed Delaware corporation ("Chefmark"), of the Chefmark deli food preparation operations and a related warehouse and a leased banana ripening warehouse and the distribution of the shares of Chefmark to the Company (the "Chefmark Spin-Off", and, together with the Plainbridge Spin-Off, the "Spin-Offs"). In connection with the Plainbridge Spin-Off, Pathmark entered into a logistical services agreement with Plainbridge (the "Logistical Services Agreement") that provides for the continuing supply of merchandise to the Pathmark supermarkets and drug stores and for the provision of warehousing, distribution and logistical services relating to the supply of such merchandise. Pursuant to such agreement, Pathmark directs the purchase of such merchandise and negotiates the terms and conditions of its sale directly with the applicable vendors. For a further description of the terms of the Logistical Services Agreement see "--Business of Pathmark-Logistical Services Agreement". The Company intends to further spin off Plainbridge to its common stockholder within the next year, although there can be no assurance that such spin-off will be consummated. Any such spin-off would require satisfying the dividend restrictions with respect to the Company's $3.52 cumulative Exchangeable Redeemable Preferred Stock (the "Exchangeable Preferred Stock"), as well as, obtaining consents from various lenders to Plainbridge and PTK. New Borrowings. (a) Borrowings by Pathmark from banks of $400.0 million under a new term loan facility (the "Term Loan") and $50 million under a new $175.0 million working capital facility (the "Working Capital Facility", and, together with the Term Loan, the "Bank Credit Agreement"). (b) The issuance by Pathmark of $440.0 million aggregate principal amount of its 9 5/8% Senior Subordinated Notes due 2003 (the "Senior Subordinated Notes"). (c) The consummation of the offer by Pathmark to exchange (the "11 5/8% Exchange Offer") a new issue of its 11 5/8% Subordinated Notes due 2002 (the "Subordinated Notes") for up to the $200.0 million aggregate principal amount outstanding of the Company's 11 5/8% Subordinated Notes due 2002 (the "Holdings Subordinated Notes") and, in connection with the 11 5/8% Exchange Offer, the solicitation by the Company of consents from the holders of the Holdings Subordinated Notes to certain proposed amendments to delete certain restrictions in the indenture under which the Holdings Subordinated Notes were issued (the "Holdings Subordinated Note Indenture") and payment of related consent fees. Holders of over 98% of the outstanding aggregate principal amount of such Notes accepted the 11 5/8% Exchange Offer and consented to the proposed amendments. Accordingly, Pathmark issued $198.5 million of its Subordinated Notes and the Company executed a supplemental indenture to the Holdings Subordinated Note Indenture reflecting the proposed amendments. Approximately $1.5 million aggregate principal amount of Holdings Subordinated Notes not tendered and accepted for exchange in the 11 5/8% Exchange Offer remains outstanding. An equivalent amount of subordinated Intercompany Notes with terms corresponding to the terms of the Holdings Subordinated Notes also remains outstanding. (d) The consummation of the offer by Pathmark and the Company (the "12 5/8% Exchange Offer") pursuant to which Pathmark issued $95.8 million aggregate principal amount of its 12 5/8% Subordinated Debentures due 2002 (the "Subordinated Debentures") in exchange for $95.8 million aggregate principal amount of the $415.0 million aggregate principal amount outstanding of the Company's 12 5/8% Subordinated Debentures due 2002 (the "Holdings Subordinated Debentures") held by persons other than certain affiliates of The Equitable Life Assurance Society of the United States (the "Equitable Affiliates"). The Company also purchased $4.2 million aggregate principal amount of such Debentures for cash 2 at a price of 112.125% of the aggregate principal amount thereof, together with accrued interest to the date of purchase (the "Tender Offer", and, together with the 12 5/8% Exchange Offer, the "Tender and Exchange Offer"), solicited consents from all holders of the Holdings Subordinated Debentures to certain proposed amendments to delete certain restrictions in the indenture under which the Holdings Subordinated Debentures were issued (the "Holdings Subordinated Debenture Indenture") and paid related consent fees. Holders of Holdings Subordinated Debentures (other than the Equitable Affiliates) tendered $95.8 million aggregate principal amount of Holdings Subordinated Debentures for Subordinated Debentures pursuant to the Tender and Exchange Offer, and holders representing over 99% of the aggregate outstanding principle amount of the Holdings Subordinated Debentures consented to the proposed amendments. Accordingly, Pathmark issued its Subordinated Debentures and the Company executed a supplemental indenture to the Holdings Subordinated Debenture Indenture reflecting the proposed amendments. In addition, as part of the Recapitalization, the Company also purchased for cash $185.0 million aggregate principal amount of the Holdings Subordinated Debentures from the Equitable Affiliates at the same price offered in the Tender Offer and sold PTK's Exchangeable Guaranteed Debentures due 2003 (the "PTK DIBs") with an issue price of $130.0 million to the Equitable Affiliates in exchange for the remaining $130.0 million of Holdings Subordinated Debentures held by the Equitable Affiliates as described below. (e) The issuance (the "Deferred Coupon Notes Offering", and, together with the Senior Subordinated Notes Offering, the "Debt Offerings") by Pathmark of $225.25 million aggregate principal amount at maturity of its Junior Subordinated Deferred Coupon Notes due 2003 (the "Deferred Coupon Notes") at an issue price of $532.74 per $1,000 principal amount at maturity. (f) The issuance by PTK to the Company of $130.0 million aggregate principal amount of PTK DIBs that the Company sold to the Equitable Affiliates in a private placement (the "Private Placement") in exchange for $130.0 million aggregate principal amount of the Holdings Subordinated Debentures held by the Equitable Affiliates. The Company also paid in cash to the Equitable Affiliates the Tender Offer premium and consent fees with respect to such Holdings Subordinated Debentures. Such Holdings Subordinated Debentures were cancelled and the related intercompany indebtedness of Pathmark to the Company (the "Intercompany Notes") was forgiven resulting in a $130.0 million capital contribution to the Company. Debt Repayment. (a) The repayment of the full amount of indebtedness outstanding under Pathmark's old working capital facility (the "Old Working Capital Facility"), which amounted to $80.0 million at the date of the Recapitalization. (b) The payment by Pathmark to the Company of $894.4 million (which reflects that holders of $4.2 million aggregate principal amount of Holdings Subordinated Debentures tendered for cash pursuant to the Tender Offer) of the proceeds from the Debt Offerings and the other borrowings described above and the transfer by Pathmark to the Company of (i) $198.5 million aggregate principal amount of Holdings Subordinated Notes acquired by Pathmark in the 11 5/8% Exchange Offer and (ii) $95.8 million aggregate principal amount of Holdings Subordinated Debentures acquired by Pathmark in the Tender and Exchange Offer in order to retire Intercompany Notes. The Holdings Subordinated Debentures acquired in the Private Placement were also used to retire Intercompany Notes as described above. The Company used the cash proceeds it received (i) to fund the redemptions of the Holdings' 14 1/2% Senior Subordinated Notes due 1997 (the "Holdings Senior Subordinated Notes") and the Holdings' 13 1/8% Junior Subordinated Discount Debentures due 2003 (the "Holdings Discount Debentures"), (ii) to purchase $4.2 million aggregate principal amount of Holdings Subordinated Debentures tendered pursuant to the Tender Offer from holders other than the 3 Equitable Affiliates, (iii) to purchase $185.0 million aggregate principal amount of Holdings Subordinated Debentures from the Equitable Affiliates as described above and (iv) to pay consent fees and expenses of the Company related to the Recapitalization. The Company believes that if a recapitalization had not been consummated, Pathmark's total capital expenditures would have been limited to $125.0 million over the next three fiscal years and would have resulted in approximately 30 renovations as well as the funding of ongoing projects for Fiscal 1993, which would not have materially altered Pathmark's total selling square footage. Due primarily to such limitation on investment, the Company believes that Pathmark's growth would have been restricted to approximately 0.5% per year if a recapitalization had not been consummated. Improvements in Pathmark's operating results also are significantly dependent upon Pathmark's store expansion and renovation program which in turn depended on a recapitalization. Moreover, without a recapitalization, the Company believes that its interest costs would have exceeded its projected operating earnings resulting in additional losses. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations" for a discussion of the basis for such projections and further information on the impact on the Company if a recapitalization had not been consummated. BUSINESS OF THE COMPANY The Company's primary business activity is the management of its interests in Pathmark, Plainbridge and Chefmark. The Company holds all of the capital stock of PTK and all of the capital stock of Chefmark. Through PTK, the Company owns all of the capital stock of Pathmark and Plainbridge. The primary business activity of Plainbridge is to operate the Rickel home center business in New Jersey, New York, Pennsylvania and Delaware and the warehouse distribution and transportation operations that service the Pathmark supermarkets and drug stores. Chefmark's primary business is to supply Pathmark will deli food preparation services and merchandise from the banana ripening facility. The Company intends to further spin off Plainbridge to its common stockholders within the next year, although there can be no assurance that such spin-off will be consummated. BUSINESS OF PATHMARK Pathmark is the leading supermarket retailer, based on sales volume, operating under a single trade name in the northeast United States and the thirteenth largest in the United States. At January 29, 1994, Pathmark operated 143 supermarkets, primarily in the New York-New Jersey and Philadelphia metropolitan areas. These metropolitan areas contain over 10% of the population and grocery sales in the United States. At January 29, 1994, Pathmark also operated 33 freestanding drug stores, primarily in the New York City metropolitan area, and 136 pharmacies in its supermarkets, making it one of the leading drug store retailers, based on sales volume, in the northeast United States. The following table presents the market area, number of stores and selling and total square footage for Pathmark's supermarkets and drug stores as of January 29, 1994.
SELLING NUMBER OF SQ. FT. TOTAL SQ. FT. TYPE OF STORE MARKET AREA STORES (000'S) (000'S) - ------------------------------------------------------------ ---------------- ------------- ----------- ------------- Supermarkets and Super Centers(1)........................... NJ, NY, PA, CT, 143 5,089 7,028 DE Drug Stores................................................. NY, NJ, CT 33 276 315
- --------------- (1) Reflects the Company's decision in the second quarter of the fiscal year ended January 29, 1994 ("Fiscal 1993") to close or dispose of five stores (the "Five Stores"). 4 BUSINESS STRATEGY Pathmark's business strategy is to increase profitability and market penetration in its existing markets (i) by providing superior value to its customers through its marketing and merchandising programs, (ii) through store openings, enlargements and renovations and (iii) through increased operating efficiencies. In implementing this strategy, Pathmark has used a large-store format to increase operating efficiencies and to expand its offering of higher margin merchandise and services, most notably, perishable products. Marketing and Merchandising . Super Center Format. The average Pathmark Super Center is over 50% larger than the average size supermarket in the United States and offers greater convenience by providing one-stop shopping and a wider assortment of foods and general merchandise than is offered by conventional supermarkets. Pathmark expects that its new stores opened during the current and next two fiscal years will average approximately 62,000 square feet. . Pathmark 2000. Pathmark 2000 is a new, larger Super Center format designed to provide Pathmark customers with a substantially greater selection of perishable products, particularly produce. Pathmark 2000 stores are also designed to be more "customer friendly", with wider aisles, more accessible customer service and information departments, improved signs and graphics, and increased availability of Pathmark associates. Implementation of elements of this format in certain stores has significantly enhanced sales and operating margins in these stores. A majority of Pathmark's new supermarkets and supermarket enlargements completed in Fiscal 1993 employed the Pathmark 2000 concept, and Pathmark expects that virtually all new stores and enlargements thereafter will employ the same concept. By Fiscal 1996, Pathmark expects that approximately 50% of its supermarket sales will be derived from stores that employ this concept. . Flexible Merchandising. Pathmark believes that its large-store format gives it considerable flexibility to respond to changing consumer demands and competition by varying and enhancing its merchandise selection. Pathmark's "Big Deals" program, currently consisting of over 400 merchandise items offers large-sized merchandise at prices which Pathmark believes are competitive with those available in "warehouse" and "club" stores. Pathmark emphasizes competitive pricing plus weekly sales and promotions supported by extensive advertising, primarily in print media. Merchandising flexibility and effectiveness is enhanced through the increased utilization of a category management approach. . Pathmark Label. Pathmark believes that it is one of the leading supermarket retailers of private label merchandise in the United States. During Fiscal 1993, approximately 23% of Pathmark's sales of grocery and frozen merchandise was derived from private label items (the Pathmark and No Frills brands). Over 3,300 items are currently offered through the complete private label program. . Pharmacy. Pathmark, which is the leading filler of prescriptions in the New York metropolitan area, provides full pharmacy services in virtually all of its Super Center stores and in all of its drug stores. Pathmark's broad market coverage within its marketing area has enabled it to become a leading filler of third-party prescriptions in this area. Pathmark believes that its well-established pharmacy operations provide a competitive advantage in attracting and retaining customers. Store Expansion and Renovation Program . New Stores, Enlargements and Renovations. With the completion of the Recapitalization, Pathmark plans to accelerate the expansion of its total selling square footage. During Fiscal 1994, Fiscal 1995 and Fiscal 1996, Pathmark plans to open an aggregate of 18 new Pathmark Super Centers, nine of which will replace smaller Pathmark stores, and to complete up to an aggregate of 85 major renovations and enlargements, at a total investment of approximately $340.0 million. Realization of this plan would increase supermarket selling square footage by more than 14% over the three-year 5 period. Expansion of selling square footage also may occur as a result of the acquisition of new stores. The Company believes that if a recapitalization had not been consummated, Pathmark's total capital expenditures would have been limited to approximately $125.0 million over the same period and would have resulted in approximately 30 renovations as well as the funding of ongoing projects for Fiscal 1993, which would not have materially altered Pathmark's total selling square footage. Pathmark recognizes the importance of keeping its stores looking fresh and up-to-date; thus, each store typically receives a major renovation or enlargement every five years. At the end of Fiscal 1993, Pathmark derived approximately 73% of its supermarket sales from stores that were opened or enlarged or underwent major renovations during the last five years. . Core Market Focus. Pathmark has identified approximately 90 potential locations for new supermarkets within its current marketing areas and expects that all new stores opened during Fiscal 1994, Fiscal 1995 and Fiscal 1996 will be located in these areas. Pathmark believes that, by opening stores in its current marketing areas, it can achieve additional operating economies and other benefits from its store expansion program without the risks and costs associated with opening stores in new marketing areas. Operating Efficiencies . Technology. Pathmark has made a significant and continuing investment in information technology and believes it is a leader in the supermarket industry in this area. All Pathmark supermarket checkout terminals have recently installed, third-generation "state of the art" IBM 4680 scanner systems supported by a RISC 6000 application processor in each store. These systems allow consumer credit and EFT transactions, greatly facilitate system-wide promotion and merchandising programs, and improve the speed and control of customer transactions. . "Outsourcing" Agreement. In Fiscal 1991, Pathmark entered into a long-term facilities management and systems integration agreement with a subsidiary of IBM. This contract offers significant advantages to Pathmark in controlling computer hardware and software costs and providing ongoing access to "state of the art" information technology. . Geographic Concentration. Approximately 99% of the Pathmark supermarkets and drug stores are located within 100 miles of the Pathmark headquarters and principal warehousing facilities that service them. This allows for more efficient management supervision, increased speed of delivery and reduced transportation costs. All of the stores which Pathmark expects to open in Fiscal 1994, Fiscal 1995 and Fiscal 1996 will be within this 100 mile radius. 6 PATHMARK SUPERMARKETS AND DRUG STORES Pathmark operated 143 supermarkets at January 29, 1994. Supermarkets accounted for approximately 96% of Pathmark's sales for Fiscal 1993. The following table presents selected data respecting supermarket sales and stores for the last five fiscal years.
FISCAL YEARS ----------------------------------------------------- 1993 1992 1991 1990 1989(A) --------- --------- --------- --------- --------- (DOLLARS IN MILLIONS) Supermarket sales............................................ $ 4,027(b) $ 4,143 $ 4,137 $ 4,237 $ 4,256 Average sales per store...................................... 28.7 29.0 28.6 29.5 30.1 Number of Stores: Major Renovations(c)....................................... 12 8 13 11 14 Enlargements(d)............................................ 5 10 15 5 4 Opened..................................................... 4 3 1 2 3 Closed..................................................... 7(e) 3 1 -- 1 Type of Stores(f): Super Center............................................... 126 137 139 135 132 Pathmark 2000.............................................. 10 2 -- -- -- Supermarket................................................ 7 7 7 11 12 Total Stores Open at Year End......................... 143 146 146 146 144
- --------------- (a) 53-week fiscal year. (b) Does not include sales from the Five Stores after the first quarter of Fiscal 1993. (c) Major renovations involve an investment of $350,000 or more and average nearly $1.0 million per store. (d) Enlargements involve the addition of selling space and average an investment in excess of $2.2 million. (e) Includes the Five Stores. (f) Includes two stores not wholly owned, one of which opened in Fiscal 1990. The sales figures for these stores are not included above. By industry standards, Pathmark stores are large and productive, averaging approximately 49,100 square feet in size and generating high average sales volume of approximately $28.7 million per store ($809 per selling square foot) for stores open for all of Fiscal 1993. Pathmark's 143 supermarkets at January 29, 1994 ranged from 20,000 to 66,000 square feet in size and included 128 supermarkets that are 40,000 square feet or larger in size. All Pathmark stores carry a broad variety of food and drug store products, including an extensive variety of the Pathmark and No Frills brands. Pathmark pioneered the development of the large "superstore" in the northeast United States, opening the first "Pathmark Super Center" in 1977, and currently operates 136 such stores, including 10 "Pathmark 2000" stores. Super Centers represented 96% of Pathmark supermarket sales for Fiscal 1993. The majority of Super Centers were created through the enlargement or renovation of existing stores. Super Centers average approximately 50,000 square feet in size, approximately 50% larger than the average size supermarket in the United States. In addition to the broad variety of food and non-food items carried in conventional Pathmark stores, a typical Super Center includes a customer service center, pharmacy, additional food selections (including expanded perishables departments, cheese shops, bakeries, fresh fish-on-ice and service delicatessen departments), videotape rentals, book departments and expanded health and beauty care departments. At April 1, 1994, all Super Centers had EFT and credit transaction capability at their checkout terminals and 130 Super Centers also featured in-store automated teller machines. Pathmark has recently developed a new, larger Super Center format called "Pathmark 2000" designed to provide Pathmark customers with a substantially greater selection of perishable products, particularly produce. Pathmark 2000 stores are also designed to be more "customer friendly", with wider aisles, more accessible customer service and information departments, improved signs and 7 graphics, and increased availability of Pathmark associates. Implementation of elements of this format in certain stores has significantly enhanced sales and operating margins in these stores. A majority of Pathmark's new supermarkets and supermarket enlargements completed in Fiscal 1993 employed the Pathmark 2000 concept and Pathmark expects that virtually all new stores and enlargements thereafter will employ the same concept. By Fiscal 1996, Pathmark expects that 50% of its supermarket sales will be derived from stores that employ this concept. Pathmark was the leader in its market areas in extending the operation of supermarkets to 24 hours a day. Currently, almost all Pathmark supermarkets are open seven days a week, 24 hours a day. Pathmark believes that these hours of operation increase both customer convenience and operating efficiency. Pathmark also operated 31 freestanding conventional drug stores at January 29, 1994 primarily in the New York City metropolitan area and two "deep-discount" drug stores in Connecticut. These stores, which accounted for approximately 4% of Pathmark's sales for Fiscal 1993, average 9,600 square feet in size and offer the full variety of products customarily offered by drug stores. In Fiscal 1993, Pathmark pharmacies, in both supermarkets and drug stores, filled approximately ten million prescriptions, making Pathmark one of the leading drugstore retailers, based on sales volume, in the northeast United States and the leading filler of prescriptions in the New York metropolitan area. In Fiscal 1993, Pathmark renovated a total of four drug stores. Pathmark plans to open four additional "deep-discount" drug stores in former Pathmark supermarkets during Fiscal 1994. Pathmark's free-standing drug stores are generally open seven days a week during conventional hours. Pathmark's supermarket and drug store business is generally not seasonal, although sales in the second and fourth quarters tend to be slightly higher than those in the first and third quarters. STORE EXPANSION AND RENOVATION PROGRAM A key feature of Pathmark's business strategy has been and will continue to be the expansion of the total selling square footage of its operations. Pathmark believes that by adding new stores and increasing the selling area of existing stores, it can improve its competitive position and widen operating margins by achieving economies of scale in merchandising, advertising, distribution and supervision. During the five years ending with Fiscal 1993, Pathmark completed 102 major renovations and enlargements and opened 13 new supermarkets. At the close of Fiscal 1993, sales in these stores accounted for 73% of its total supermarket sales. Over the past five years, Pathmark has spent approximately $240.0 million on store openings, enlargements and major renovations including properties acquired under capital leases. In Fiscal 1993, Pathmark opened four new Super Centers and completed 12 major renovations and five enlargements of its existing supermarkets. Pathmark currently expects to open up to four new Pathmark Super Centers during Fiscal 1994. During Fiscal 1994, Fiscal 1995 and Fiscal 1996, Pathmark plans to open an aggregate of 18 new Pathmark Super Centers, nine of which will replace smaller stores, and to complete an aggregate of up to 85 major renovations and enlargements, at a total investment of approximately $340.0 million, including properties acquired under capital leases. Realization of this plan would increase supermarket selling square footage by more than 14% over the three-year period, although no assurance can be given that Pathmark will be able to successfully complete the number of store openings, renovations and enlargements planned for each year during this period. Expansion of selling square footage may also occur as a result of the acquisition of new stores. ADVERTISING AND PROMOTION As part of its marketing strategy, Pathmark emphasizes its competitive pricing through weekly sales and promotions supported by extensive advertising. Additional savings are offered each week through Pathmark "super coupons" in newspapers and circulars. Pathmark's advertising expenditures are concentrated on print advertising, including advertisements and circulars in local and area newspapers and advertising flyers distributed by shopping malls. Most of the remaining advertising expenses are for television and radio advertisements. 8 CONSUMER RESEARCH Pathmark conducts numerous ongoing and special consumer research projects. These typically involve customer surveys (both in-store and by telephone) as well as focus groups. The information derived from these projects is used to evaluate consumers' attitudes and purchasing patterns and helps shape Pathmark's marketing programs. Pathmark conducts approximately 300,000 customer interviews per year. TECHNOLOGY Pathmark has made a significant and continuing investment in information technology and believes it is a leader in the supermarket industry in this area. All Pathmark supermarket checkout terminals have recently installed, third-generation "state of the art" IBM 4680 scanner systems supported by a RlSC 6000 application processor in each store. These systems allow consumer credit and EFT transactions, greatly facilitate system-wide promotion and merchandising programs, and improve the speed and control of customer transactions. This technology and the data generated by scanning not only have led to lower labor costs, improved price control and shelf allocation and quicker customer check-out, but also have assisted in the analysis of product movement, profit contribution and demographic merchandising. Pathmark also has a computer-assisted ordering system which enables it to replenish inventory to avoid "out of stocks" at store level while maintaining optimum overall inventory levels. All of the pharmacies are equipped with pharmacy computers. In addition to improving customer service, these computers aid pharmacists in detecting drug interaction, improve the collection of third-party receivables and help to attract third-party businesses such as health maintenance organizations and union welfare plans. In August 1991, Pathmark entered into a long-term facilities management and systems integration agreement with Integrated Systems Solutions Corporation ("ISSC"), a subsidiary of IBM. Under the agreement, ISSC has taken over Pathmark's data center operations and mainframe processing and information system functions (formerly performed by approximately 150 employees) and is providing business applications and "state of the art" systems designed to enhance Pathmark's customer service and efficiency. ISSC developed Pathmark's recently installed scanner and checkout terminals. Additionally, over the next several years, ISSC has contracted to develop an integrated purchasing application, a new financial system, and electronic data interchange capabilities that will streamline communications between Pathmark and its primary suppliers. SUPPLY AND DISTRIBUTION Pursuant to the Logistical Services Agreement and subject to Pathmark's direction, Plainbridge now supplies Pathmark with most of the merchandise sold in Pathmark's supermarkets and drug stores through Plainbridge distribution facilities located in New Jersey, together with warehousing, distribution and logistical services relating to the supply of such merchandise. See "--Logistical Services Agreement". During Fiscal 1993, the Plainbridge distribution facilities supplied approximately 83% of the merchandise sold in Pathmark's supermarkets and drug stores. In addition, pursuant to a supply agreement between Chefmark and Pathmark (the "Chefmark Supply Agreement"), Chefmark now supplies Pathmark with merchandise from its banana ripening and deli food preparation operations. The Chefmark Supply Agreement provides that, for a period of seven years, such services are to be performed by Chefmark in substantially the same manner as they have been performed by Pathmark's banana ripening and deli food preparation operations prior to the Chefmark Spin-Off. 9 Approximately 99% of Pathmark's stores are located within 100 miles of the principal Plainbridge and Chefmark distribution centers. The following table presents information concerning the distribution and processing facilities through which Plainbridge and Chefmark will supply Pathmark, and the product lines relevant to each as of January 29, 1994: DISTRIBUTION FACILITIES (1)
SQUARE LOCATION PRODUCT LINE FOOTAGE YEAR OPENED - ------------------------------------ --------------------------------- --------- ----------- Woodbridge, NJ(2)................... Dry Grocery 475,000 1968 Edison, NJ(3)....................... General Merchandise, Health and 266,000 1980 Beauty Care Products, Pharmaceuticals, Tobacco Woodbridge, NJ(2)................... Meat, Dairy, Deli, Produce, 255,000 1970 Frozen Food Rockaway, NJ(3)..................... Frozen Food Distribution Center 72,500 1989 South Plainfield, NJ(2)............. Pathmark Price Break, Rickel 721,000 1973 Merchandise
PROCESSING FACILITIES
SQUARE LOCATION PRODUCT LINE FOOTAGE YEAR OPENED - ------------------------------------ --------------------------------- --------- ----------- Somerset, NJ(4)..................... Delicatessen Products 16,000 1976 Avenel, NJ(5)....................... Banana Ripening 30,000 1984
- --------------- (1) Pathmark also stores and ships certain products from independent warehouses, including a food storage facility in North Brunswick, New Jersey. (2) Owned by Plainbridge. (3) Leased by Plainbridge. (4) Owned by Chefmark. (5) Leased by Chefmark. LOGISTICAL SERVICES AGREEMENT In connection with the Plainbridge Spin-Off, Pathmark and Plainbridge entered into the Logistical Services Agreement to provide for the supply by Plainbridge to Pathmark of most of the merchandise sold in Pathmark's retail stores and for the provision of warehousing, distribution and other logistical services relating to the supply of such merchandise. Pursuant to the Logistical Services Agreement, Pathmark directs the purchase of the merchandise to be provided to it by Plainbridge. Pathmark negotiates directly with vendors regarding the types of merchandise required, the quantities needed, delivery schedules, pricing, and all other terms and conditions of sale. All merchandise is ordered by Pathmark for the account of Plainbridge, which pays for, and retains title to, such merchandise until it has been delivered to Pathmark. If requested by a vendor, Pathmark, in its sole discretion, may guarantee payment of such orders by Plainbridge. In general, the Logistical Services Agreement also requires Plainbridge to perform the same services, in substantially the same manner, that were performed by Pathmark's warehouse and distribution group prior to the Plainbridge Spin-Off. The Logistical Services Agreement requires, with certain exceptions and subject to certain termination rights, Plainbridge to sell to Pathmark, for a period of ten years, to the extent requested by Pathmark, all of Pathmark's merchandise requirements for both its existing and future stores. In addition, Pathmark has five one-year renewal options following the expiration of the original ten-year 10 term. The Logistical Services Agreement does not limit Pathmark's ability to purchase goods from other suppliers and merchandise that Pathmark customarily obtains directly from vendors is excluded from the Logistical Services Agreement. The Logistical Services Agreement requires Plainbridge to store and deliver to Pathmark all merchandise purchased at Pathmark's direction. Pathmark is required in good faith to designate Plainbridge as its carrier with respect to merchandise customarily shipped directly from vendors to the Pathmark stores. Plainbridge is required to maintain inventory with a book value of at least $130.0 million (which amount represents the approximate book value of inventory contributed by Pathmark to Plainbridge in connection with the Plainbridge Spin-Off) for the exclusive use of Pathmark, and to the extent that the inventory value falls below such level, Plainbridge must purchase sufficient merchandise to maintain such level to the extent such merchandise is ordered by Pathmark. Plainbridge is also required to accommodate physical annual increases of up to five percent in the volume of the Pathmark-directed purchases of merchandise to be handled by Plainbridge. Pathmark reimburses Plainbridge for all reasonable incremental out-of-pocket costs (but not capital costs) incurred by Plainbridge for the storage and handling of merchandise that is in excess of the five percent annual capacity increase, provided that such out-of-pocket costs do not exceed the costs of storage and handling at local independent warehouses. Upon the delivery of merchandise to the Pathmark stores by Plainbridge, Pathmark will owe Plainbridge for the cost of the merchandise plus a specified variable payment. This payment will vary according to the type and value of the merchandise. A minimum guaranteed payment is payable by Pathmark to the extent that the aggregate of the variable payments described above payable in any year does not exceed the minimum guaranteed payment. The minimum guaranteed payment for Fiscal 1994 is $134.9 million and such payment is adjusted upward (but not downward) each fiscal year by the rate of inflation. Pathmark is obligated to pay the minimum annual fee to Plainbridge irrespective of whether Pathmark purchases merchandise from other suppliers, except in cases of force majeure or when Plainbridge shall have materially breached the Logistical Services Agreement or shall have failed to obtain or maintain the licenses and permits needed to operate its business. The minimum guaranteed payment will be reduced to the extent that the volume of merchandise purchases decreases as a result of any store dispositions by Pathmark and will also be reduced if the volume of Pathmark-directed merchandise falls below 90% of the actual volume achieved in Fiscal 1992, to the extent that Plainbridge is, as a result, able to realize reductions in its operating costs. Plainbridge will grant Pathmark an allowance, based on the amount of merchandise purchased by Plainbridge at Pathmark's direction, which will be credited against the variable fees and minimum guaranteed payment obligation. In addition, certain cost benefits derived from increases in the volume of merchandise purchased from Plainbridge by Pathmark or third parties will be shared equally between Pathmark and Plainbridge. Estimated payments are payable in weekly installments with an annual reconciliation for the amount of payments that are actually payable for such year. Pathmark will pay to Plainbridge the costs of the merchandise at the time a vendor requires payment from Plainbridge. The Logistical Services Agreement allows Plainbridge to sell merchandise and provide logistical services to third parties, although it is not permitted to sell merchandise to supermarkets, drug stores and other retail stores stocking merchandise carried by Pathmark in Pathmark's current market areas, except for retail stores that do not in the ordinary course of business engage to a significant degree in the sale of food or pharmacy-related products, without Pathmark's prior written consent, which consent may not be unreasonably withheld. Plainbridge is also permitted to "piggyback" such third parties' orders onto Pathmark's orders from vendors, so long as they do not interfere with Pathmark's delivery schedules, quantity needs or other requirements. Each of Pathmark and Plainbridge is allowed to terminate the Logistical Services Agreement if the other (i) materially breaches its terms and fails to cure such breach for 60 days after written notice has been provided by the other party or (ii) experiences certain insolvency events. Additionally, following 11 the fourth anniversary of the date of the Logistical Services Agreement, Pathmark will have the option of terminating it at will on six months' notice. If Pathmark terminates the Logistical Services Agreement because of a material breach by, or insolvency of, Plainbridge, Pathmark will have the right to purchase, within 30 days of the termination, that portion of the assets of Plainbridge which is essential to the support of Plainbridge's obligations to Pathmark under the Logistical Services Agreement (the "Pathmark Distribution Assets") at the lower of (i) their net book value or (ii) their fair market value. If Pathmark exercises its at will option to terminate the Logistical Services Agreement, Pathmark will be required to offer to purchase the Pathmark Distribution Assets at their fair-market value. If Plainbridge terminates the Logistical Services Agreement because of a material breach by, or insolvency of, Pathmark, Plainbridge will have the right to sell to Pathmark (and Pathmark will have the obligation to buy) the Pathmark Distribution Assets at their fair market value within 30 days of such termination. Other than in the ordinary course of business, Plainbridge is not permitted to sell any of the Pathmark Distribution Assets without Pathmark's prior written consent. Additionally, in the event of a change in the ultimate beneficial ownership of Plainbridge voting stock such that a person, other than ML&Co. or an affiliate of ML&Co., holds a majority of such stock, Pathmark has, for a period of two years, the irrevocable and exclusive right to purchase any or all of the Pathmark Distribution Assets at their fair market value. Other provisions of the Logistical Services Agreement include (i) that Plainbridge will pass on to Pathmark all discounts and allowances made available to it by vendors in respect of merchandise purchased for Pathmark, unless such discounts or allowances were made available solely as a result of actions taken or not taken by Plainbridge, (ii) that Plainbridge must ensure that merchandise quality meets or exceeds the standards established by Pathmark for such merchandise, and that Pathmark may place its representatives at the Distribution Facilities to ensure that such quality is maintained, (iii) that Plainbridge will deliver merchandise to Pathmark at a 98% or better level of service measured in accordance with Pathmark's practices prior to the Plainbridge Spin-Off, (iv) that Pathmark will pay Plainbridge for any use of trailers for storage and (v) that each of Pathmark and Plainbridge will cooperate to reduce costs and improve service levels. Disputes between Pathmark and Plainbridge under the Logistical Services Agreement will be submitted to an arbitration panel made up of representatives of both parties. The President of Pathmark shall act as chairman of the dispute panel and each party shall appoint two other members to the dispute panel, the decision of which will be subject to the approval of the boards of directors of each party. If the decision of the dispute panel is not approved by each board of directors, the dispute will be required to be submitted to independent arbitration. The Logistical Services Agreement is a result of a related party negotiation between Pathmark and Plainbridge. Pathmark believes that the payments provided for under the terms of the Logistical Services Agreement represent a reasonable allocation of the costs and benefits for both companies. In addition, Pathmark believes that the terms of the Logistical Services Agreement are no less favorable to Pathmark than those which could be obtained from unaffiliated parties and enable Pathmark to obtain substantially the same level of supply and other logistical services as was available from the Distribution Facilities prior to the Spin-Offs at substantially the same or a lower cost. COMPETITION The supermarket and drug store businesses are highly competitive and are characterized by high asset turnover and narrow profit margins. Pathmark's earnings are primarily dependent on the maintenance of relatively high sales volume per supermarket, efficient product purchasing and distribution and cost-effective store operating techniques. Pathmark's main competitors are national and regional supermarkets, drug stores, convenience stores, discount merchandisers, "warehouse" and 12 "club" stores and other local retailers in the areas served. Principal competitive factors include price, store location, advertising and promotion, product mix, quality and service. TRADE NAMES, SERVICE MARKS AND TRADEMARKS Pathmark has registered a variety of trade names, service marks and trademarks with the United States Patent and Trademark Office, each for an initial period of 20 years, renewable for as long as the use thereof continues. Pathmark considers its Pathmark service marks to be of material importance to its business and actively defends and enforces such service marks. REGULATION Pathmark's food and drug business requires it to hold various licenses and to register certain of its facilities with state and federal health, drug and alcoholic beverage regulatory agencies. By virtue of these licenses and registration requirements, Pathmark is obligated to observe certain rules and regulations, and a violation of such rules and regulations could result in a suspension or revocation of the licenses or registrations. In addition, most of Pathmark's licenses require periodic renewals. Pathmark has experienced no material difficulties with respect to obtaining, effecting or retaining its licenses and registrations. EMPLOYEES At January 29, 1994, Pathmark employed approximately 28,000 people, of whom approximately 20,000 were employed on a part-time basis. Approximately 90% of Pathmark's associates are covered by 36 collective bargaining agreements (typically having three or four year terms) negotiated with approximately 21 different local unions. During May 1993, approximately 7,000 associates belonging to one union struck Pathmark and three of its major competitors. On May 29, 1993, the labor dispute was settled and subsequently, a new four year agreement was ratified. During Fiscal 1994, nine contracts covering approximately 10,000 Pathmark associates and six contracts covering approximately 1,100 associates at the warehouse, distribution and transportation operations that service the Pathmark supermarkets and drugstores will expire. The Company does not anticipate any difficulty renegotiating these contracts. The Company believes that its relationship with its associates is generally satisfactory. ITEM 2. PROPERTIES** Reference is made to the answer to Item 1, "Business" of this report for information concerning the states in which the Company's supermarkets, drug stores and home centers are located. THE COMPANY The Company's primary subsidiary, Pathmark, leases and owns a large group of properties, as described below. In addition, Chefmark owns a 16,000 square foot delicatessen products processing and distribution facility in Somerset, New Jersey and leases a 30,000 foot banana ripening facility in Avenel, New Jersey. These facilities supply Pathmark's supermarkets with delicatessen and produce products. - --------------- ** Except as otherwise indicated, information contained in this Item is given as of January 29, 1994. 13 PATHMARK Pathmark's 143 supermarkets have an aggregate selling area of approximately 5.1 million square feet. The ownership interest in the buildings and real property of ten supermarket locations (one of which is a closed store location) and the headquarters in Woodbridge, New Jersey were contributed to Plainbridge in the Spin-Offs and, except for the closed store location, were leased to Pathmark. Thirteen of the supermarkets are owned by Pathmark (or its subsidiaries) and the remaining 130 are leased. These supermarkets either are freestanding stores or are located in shopping centers. Forty leases expire during the current and next four calendar years and Pathmark has options to renew 37 of them. Pathmark's 33 freestanding drug stores (those not located in supermarkets) have an aggregate selling area of approximately 276,000 square feet. Two of the drug stores are owned by Pathmark and the remaining 31 are leased. Nineteen leases expire during the current and next four calendar years and Pathmark has options to renew 13 of them. Certain distribution facilities that supply Pathmark supermarkets and drug stores were transferred to Plainbridge in connection with the Plainbridge Spin-Off. Certain of these facilities are leased and some are owned. See "Business of Pathmark--Supply and Distribution" in Item 1 of this report. Pathmark maintains administrative and accounting offices in Carteret, New Jersey in leased premises totalling approximately 150,000 square feet in size. Pathmark also currently leases or owns additional office space totaling approximately 128,000 square feet in various locations that are used as the Pathmark headquarters and regional offices for its operating divisions. Additionally, three Rickel Home Centers are sublet and six Rickel Home Centers are leased to Plainbridge by Pathmark. See "The Recapitalization--Spin-Offs" in Item 1 of this report. Prior to the sale of the Purity Operations, the following three properties of Purity Supreme were transferred to Pathmark: a closed supermarket leased by Purity Supreme in Dartmouth, Massachusetts, an office building leased by Purity Supreme in Newton, Massachusetts, for which Pathmark has assumed the leases, and a closed distribution center that Purity owned in Woburn, Massachusetts. Pathmark has transferred the properties located in Dartmouth and Woburn to Plainbridge. Most of the facilities owned by Pathmark are owned subject to mortgages. Pathmark plans to acquire leasehold or fee interests in any property on which new stores or other facilities are opened and will consider entering into sale/leaseback or mortgage transactions with respect to owned properties if Pathmark believes such transactions are financially advantageous. ITEM 3. LEGAL PROCEEDINGS On December 7, 1990, a lawsuit (the "Complaint") was commenced by a holder of the Exchangeable Preferred Stock, Stanley D. Bernstein, as custodian for Michelle Bernstein, against the Company, SMG-II Holdings Corp. ("SMG-II"), Merrill Lynch Capital Partners, Inc. ("ML Capital Partners"), ML&Co. and the directors of the Company in the Chancery Court, New Castle County, Delaware. The Complaint purports to be a class action and alleges that the original terms of the Exchangeable Preferred Stock Offer, at $5 per share, constitute a coercive tender offer and a breach of fiduciary duties owed to holders of Exchangeable Preferred Stock. The Complaint seeks declaratory and injunctive relief, as well as monetary damages, with respect to the Exchangeable Preferred Stock Offer, but no motions seeking any such relief on a provisional or permanent basis were filed either prior to the completion of the Exchangeable Preferred Stock Offer on February 4, 1991 or as of the date hereof. The Company has entered negotiations to settle the Complaint and expects to reach a settlement agreement during the next several months. The Company does not expect the amount of its obligations under any settlement agreement to be material and will defend the Complaint vigorously if a settlement is not reached. 14 On March 1, 1993 Pathmark was served with a summons and complaint filed by Hygrade Milk & Cream Co., Inc., Terminal Dairies, Inc., Sunbeam Farms, Inc., Hytest Milk Corp., Gold Metal Farms, Inc., Queens Farms Dairy, Inc., Babylon Dairy Co., Inc. and Meadowbrook Farms, Inc., in an action being heard in the United States District Court for the Southern District of New York. Also named as defendants are Tropicana Products, Inc., Tropicana Products Sales, Inc., The Great Atlantic & Pacific Tea Company, Inc., Fleming Foods East, Inc., and Di Giorgio Corporation. The action had been pending against certain of the defendants and wholesale entities since 1988. In the complaint the plaintiffs allege, among other things, that Pathmark induced processors of Tropicana orange juice to provide it with favorable price and other terms that discriminated against other sellers of orange juice in violation of the price discrimination provisions of the Robinson-Patman Act. The prayer for relief does not claim any specific amount of damages. After consultation with counsel, the Company believes that this lawsuit is without merit and intends to defend the action vigorously. In addition to the litigation referred to above, the Company is a party to a number of legal proceedings in the ordinary course of business. Management believes that the ultimate resolution of these proceedings will not, in the aggregate, have a material adverse impact on the financial condition, results of operations or the business of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (AS OF APRIL 1, 1994) Neither the Company's Class A Common Stock nor its Class B Common Stock, each $0.01 par value, is publicly traded on any market. All of registrant's outstanding Common Stock is held by SMG-II. The authorized preferred stock of the Company consists of 9,000,000 shares of Exchangeable Preferred Stock, of which 4,890,671 shares were issued and outstanding at January 29, 1994. The Exchangeable Preferred Stock has a liquidation preference of $25 per share and its terms provide for cumulative quarterly dividends at an annual rate of $3.52 per share, when, as, and if declared by the Board of Directors of the Company. No active public trading market currently exists for the Company's Exchangeable Preferred Stock. The Exchangeable Preferred Stock is non-voting, except that if an amount equal to six quarterly dividends is in arrears in whole or in part, the holders thereof, voting as a class are entitled to elect an additional two members of the board of directors of the Company. The Company is currently in arrears on payment of five quarterly dividends on the Exchangeable Preferred Stock and does not expect to receive cash flow sufficient to permit payments of dividends on the Exchangeable Preferred Stock in the forseeable future. See Note 15 to the Company's Consolidated Financial Statements in Item 8 of this report for additional information. The payment of dividends to holders of the Company's Common Stock is subject to restrictions by the Certificate of Designation of Rights, Preferences and Privileges under which its Exchangeable Preferred Stock was issued. The Company has not paid any dividends on its Common Stock and does not anticipate paying cash dividends on its Common Stock during Fiscal 1994. The authorized capital stock of SMG-II consists of 3,000,000 shares of SMG-II Class A Common Stock, 3,000,000 shares of SMG-II Class B Common Stock, of which 650,675 and 320,000 shares, respectively, were issued and outstanding at April 1, 1994, and 4,000,000 shares of SMG-II Preferred Stock, of which 1,500,000 shares are SMG-II Series A Preferred Stock and 1,500,000 shares are SMG- 15 II Series B Preferred Stock and of which 236,731 and 180,769 shares, respectively, were issued and outstanding at April 1, 1994. SMG-II's capital stock is held beneficially as follows: (i) SMG-II Class A Common Stock by approximately 62 holders, including six affiliates of ML&Co. (The "ML Common Investors"), CBC Capital Partners, Inc. ("CBC"), an affiliate of Chemical Bank, and 55 current and former members of the Company's management (the "Management Investors"); (ii) SMG-II Series A Preferred Stock by five holders, all affiliates of ML&Co., (the "Merrill Lynch Investors"); (iii) SMG-II Class B Common Stock held by four holders, including CBC, The Equitable Life Assurance Society of the United States ("Equitable") and the Equitable Affiliates (collectively, the "Equitable Investors"); and (iv) SMG-II Series B Preferred Stock held by four holders, including CBC and the Equitable Investors. Holders of shares of SMG-II Class A Common Stock are entitled to one vote per share on all matters to be voted on by stockholders. Holders of shares of SMG-II Class B Common Stock are not entitled to any voting rights, except as required by law or as otherwise provided in the Restated Certificate of Incorporation of SMG-II. Subject to compliance with certain procedures, holders of shares of SMG-II Class B Common Stock may exchange their shares for shares of SMG-II Class A Common Stock and holders of shares of SMG-II Class A Common Stock may exchange their shares for shares of SMG-II Class B Common Stock, in each case on a share-for-shares basis. SMG-II Preferred Stock has a stated value and liquidation preference of $200 per share and bears dividends at the rate of 10% of the stated value per annum, payable annually. At the option of SMG-II dividends are payable in cash or may accumulate (and the amount thereof shall compound annually at a rate of 10% of the stated value per annum, payable annually. At the option of SMG-II, dividends are payable in cash or may accumulate (and the amount thereof shall compound annually at a rate of 10% per annum). Holders of shares of SMG-II Series A Preferred Stock are entitled to one vote per share of SMG-II Class A Common Stock into which such SMG-II Series A Preferred Stock is convertible on all matters to be voted on by SMG-II stockholders, subject to increase to 1.11 votes per share upon the occurrence of certain events. Holders of shares of SMG-II Series B Preferred Stock are entitled to one vote per share of SMG-II Class B Common Stock into which such SMG-II Series B Preferred Stock is convertible for the purpose of voting on any consolidation or merger, any sale, lease or exchange of substantially all of the assets or any liquidation, dissolution or winding up, of SMG-II. Additionally, holders of SMG-II Preferred Stock have separate voting rights with respect to alteration in the voting powers, rights and preferences and certain other terms affecting the SMG-II Preferred Stock. Subject to compliance with certain procedures, holders of SMG-II Series B Preferred Stock may exchange their shares for shares of SMG-II Series A Preferred stock, on a share-for-share basis. At the option of the holder, SMG-II Preferred Stock is convertible into SMG-II Common Stock at any time on or prior to the occurrence of certain events, including an initial public offering of in excess of 25% of the number of outstanding shares of common stock of SMG-II, at a conversion ratio of one share of the corresponding class of SMG-II Common Stock for each share of SMG-II Preferred Stock, subject to adjustment upon the occurrence of certain events. Holders of SMG-II Preferred Stock are party with the holders of SMG-II Common Stock to the SMG-II Stockholders Agreement which, among other things, restricts the transferability of SMG-II capital stock and relates to the corporate governance of SMG-II. None of SMG-II's capital stock is publicly traded on any market. See Item 12. "Security Ownership of Certain Beneficial Owners and Management" and Note 16 to the Company's Consolidated Financial Statements in Item 8 for additional information. The Company intends to further spin-off Plainbridge, which includes the assets of the Rickel homes centers business and the Company's warehouse, transportation and real estate operations contributed to Plainbridge as part of the Recapitalization, to the Company's common stockholder within the next year, although there can be no assurance that such spin-off will be consummated. Any such spin-off would require satisfying the dividend restrictions with respect to the Company's Exchangeable Preferred Stock, as well as obtaining consents from various lenders to Plainbridge and PTK. 16 ITEM 6. SELECTED FINANCIAL DATA SUPERMARKETS GENERAL HOLDINGS CORPORATION SUMMARY OF OPERATIONS AND FINANCIAL HIGHLIGHTS (IN MILLIONS)
FISCAL YEARS(A) ----------------------------------------------------------- 1993 1992 1991(B) 1990(B) 1989(B) --------- --------- ----------- ----------- ----------- STATEMENTS OF OPERATIONS DATA: Sales Pathmark.................................................. $ 4,207 $ 4,340 $ 4,323 $ 4,418 $ 4,436 Purity.................................................... -- -- 997 1,287 1,384 --------- --------- ----------- ----------- ----------- Total sales................................................. 4,207 4,340 5,320 5,705 5,820 Cost of sales (exclusive of depreciation and amortization shown separately below)..................................... 3,052 3,184 3,965 4,282 4,417 --------- --------- ----------- ----------- ----------- Gross profit................................................ 1,155 1,156 1,355 1,423 1,403 Selling, general and administrative expenses................ 921 894 1,067 1,109 1,102 Depreciation and amortization............................... 68 69 93 94 91 Recapitalization expenses(c)................................ 16 -- -- -- -- Provision for store closings(d)............................. 6 -- -- -- -- Amortization of goodwill.................................... -- 18 23 24 23 Goodwill write-off.......................................... -- 601 -- -- -- Restructuring charge(e)..................................... -- -- -- -- 5 --------- --------- ----------- ----------- ----------- Operating earnings (loss)................................... 144 (426) 172 196 182 Interest expense, net(f).................................... 180 185 204 225 245 Gain on sale of photofinishing plant(g)..................... -- -- 4 -- -- Gain (loss) on disposal of Purity Operations(h)............. -- 2 (228) -- -- --------- --------- ----------- ----------- ----------- Loss from continuing operations before income taxes, extraordinary items and cumulative effect of accounting changes..................................................... (36) (609) (256) (29) (63) Income tax provision (benefit).............................. (20) 7 (30) (1) (13) --------- --------- ----------- ----------- ----------- Loss from continuing operations before extraordinary items and cumulative effect of accounting changes................. (16) (616) (226) (28) (50) Loss from discontinued operations........................... (1) (1) (191)(i) (13) (27)(e) --------- --------- ----------- ----------- ----------- Loss before extraordinary items and cumulative effect of accounting changes.......................................... (17) (617) (417) (41) (77) Extraordinary items, net.................................... (106)(j) (5)(k) 15(l) -- -- --------- --------- ----------- ----------- ----------- Loss before cumulative effect of accounting changes......... (123) (622) (402) (41) (77) Cumulative effect of accounting changes, net(m)............. (40) -- -- -- -- --------- --------- ----------- ----------- ----------- Net loss.................................................... (163) (622) (402) (41) (77) Less non-cash preferred stock accretion and dividend requirements..................................... (19) (18) (14) (10) (12) --------- --------- ----------- ----------- ----------- Net loss attributable to common stockholders(n)............. $ (182) $ (640) $ (416) $ (51) $ (89) --------- --------- ----------- ----------- ----------- --------- --------- ----------- ----------- ----------- Deficiency in earnings available to cover fixed charges(o).................................................. $ 36 $ 609 $ 256 $ 29 $ 63 --------- --------- ----------- ----------- ----------- --------- --------- ----------- ----------- -----------
AS OF --------------------------------------------------------------- JAN. 29, JAN. 30, FEB. 1, FEB. 2, FEB. 3, 1994 1993 1992 1991 1990 ----------- ----------- ----------- ----------- ----------- BALANCE SHEET DATA: Total assets............................................... $ 1,145 $ 1,114 $ 1,736 $ 2,439 $ 2,555 Working capital deficiency................................. 117 80 95 138 126 Obligations under capital leases, long-term................ 132 127 136 180 184 Other long-term debt, net of current maturities............ 1,415 1,278 1,248 1,449 1,471 Cumulative exchangeable redeemable preferred stock......... 100 99 85 123 114 Redeemable common stock, net(p)............................ -- -- -- 6 7 Stockholder's deficit...................................... 1,285 1,103 467 168 117 (footnotes on following page)
17 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO SUMMARY OF OPERATIONS AND FINANCIAL HIGHLIGHTS (a) The Company's fiscal year ends on the Saturday nearest to January 31 of the following calendar year. Fiscal years consist of 52 weeks except for 53 weeks in Fiscal 1989. (b) Results for Fiscal 1989 through Fiscal 1991 include the Purity Operations through its December 17, 1991 sale date. (c) In connection with the Recapitalization, the Company recorded a pretax charge of $16 million related to reorganization and restructuring costs. See Note 3 to the Company's Consolidated Financial Statements in Item 8 of this report. (d) During Fiscal 1993, the Company decided to close or dispose of the Five Stores and recorded a pretax charge of $6 million. See Note 14 to the Company's Consolidated Financial Statements in Item 8 of this report. (e) During Fiscal 1989, the Company recorded a pretax restructuring charge of $36 million of which approximately $5 million related to continuing operations and $31 million related to discontinued operations. (f) Interest expense, net reflects interest expense net of interest income allocated to discontinued operations. See Note 3 to the Company's Consolidated Financial Statements in Item 8 of this report. (g) During Fiscal 1991, the Company sold its Coastal Photo photofinishing plant to Quality Photo Systems (East), Inc. (a subsidiary of Konica Corporation) which resulted in a gain on sale of $4 million. See Note 25 to the Company's Consolidated Financial Statements in Item 8 of this report. (h) On December 17, 1991, the Company completed the sale of the Purity Operations for approximately $257 million (as adjusted) including the assumption of certain indebtedness of Purity Supreme and Li'l Peach, to a company organized by Freeman Spogli & Co. The Company recorded a loss of $228 million on the disposal of the Purity Operations. Included in this loss is a write-off of approximately $214 million of goodwill related to the Purity Operations. During Fiscal 1992, the Company recorded a gain of $2 million related to the disposal of the Purity Operations. See Note 26 to the Company's Consolidated Financial Statements in Item 8 of this report. (i) Includes a pretax loss of $24 million in connection with the disposition of certain Rickel Stores and a charge of $170 million accelerating the remaining amortization of goodwill related to its Rickel home centers segment. See Note 3 to the Company's Consolidated Financial Statements in Item 8 of this report. (j) During Fiscal 1993, in connection with the Recapitalization, the Company recorded an extraordinary charge of $106 million, net of an income tax benefit, relating to the early extinguishment of debt. See Notes 3 and 18 to the Company's Consolidated Financial Statements in Item 8 of this report. (k) During Fiscal 1992, the Company recorded an extraordinary charge of $5 million, net of an income tax provision, relating to the early extinguishment of debt. See Note 18 to the Company's Consolidated Financial Statements in Item 8 of this report. (l) The results for Fiscal 1991 include an extraordinary gain of $15 million, net of an income tax benefit, on the early extinguishment of debt. See Note 18 to the Company's Consolidated Financial Statements in Item 8 of this report. (m) The cumulative effect of accounting changes in Fiscal 1993 of $40 million, net of an income tax benefit of $29 million, reflects the adoption of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits other than Pensions"; the adoption of Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits"; the change in the method utilized to calculate last-in, first-out (LIFO) inventories; and the change in the determination of the discount rate utilized to record the present value of certain noncurrent liabilities. All of the accounting changes were made as of the beginning of Fiscal 1993. See Notes 5, 9, 21, and 22 to the Company's Consolidated Financial Statements in Item 8 of this report. (n) On February 4, 1991, the Company became a wholly owned subsidiary of SMG-II through the consummation of an exchange offer whereby the then existing stockholders exchanged on a one-for-one basis shares of the Company's common stock for shares of common stock of SMG-II. Since the Company is a wholly owned subsidiary, earnings (loss) per share information is not presented. (o) For purposes of determining the deficiency in earnings available to cover fixed charges, earnings are defined as earnings (loss) before income taxes plus fixed charges. Fixed charges consist of interest expense on all indebtedness (including amortization of deferred debt issuance costs) and the portion of operating lease rental expense that is representative of the interest factor (deemed to be one-third of operating lease rentals). (p) Since the Company is a wholly owned subsidiary, there was no redeemable common stock at January 29, 1994, January 30, 1993 and February 1, 1992.
18 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion and analysis of the Company's financial condition and results from continuing operations. The Company intends to distribute Plainbridge to its common stockholder. Accordingly, discontinued operations represent the results of operations related to the warehouse, transportation and certain real estate operations subsequent to the Plainbridge Spin-off as well as the home center segment for all years presented. See Notes 1, 2 and 3 to the Company's Consolidated Financial Statements in Item 8 of the report. Although the discontinued operations have generated positive operating cash flows, the Company believes that the impact of the anticipated distribution of Plainbridge on the Company's liquidity will not be material. References to the Company in this section refers to the Company and its subsidiaries, on a consolidated basis, except as otherwise stated herein. RESULTS OF OPERATIONS Fiscal 1993 v. Fiscal 1992 Sales. Sales for Fiscal 1993 were $4.21 billion compared to $4.34 billion in Fiscal 1992, a decrease of 3.1%. The sales decrease for the year is primarily due to the impact of the strike and lockouts in the second quarter of Fiscal 1993 and the exclusion from reported results of the sales since the beginning of the second quarter of Fiscal 1993 of the Five Stores anticipated to be closed or sold as part of the provision for store closings. During Fiscal 1993 the Company opened four supermarkets, enlarged five supermarkets, and completed major renovations in twelve supermarkets. Including the Five Stores, seven supermarkets were closed during Fiscal 1993. Sales for stores opened in both periods decreased by 2.4%. At fiscal year end, the Company operated 143 supermarkets, including 136 Pathmark Super Centers, and 33 Pathmark freestanding drug stores. This compares with Fiscal 1992 year end when the Company operated 146 supermarkets, including 139 Pathmark Super Centers, and 33 Pathmark freestanding drug stores. In order to improve sales while continuing to improve profitability in its supermarket businesses, the Company is continuing its focus on increasing the value and variety of merchandise offerings available to customers through its enlargement and renovation program which has been proven to be successful as renovated expanded stores show higher same-store sales growth than non-modified stores. Gross Profit. Gross profit for Fiscal 1993 was $1.15 billion or 27.5% of sales compared with $1.16 billion or 26.6% of sales in Fiscal 1992. This improvement in gross profit as a percentage of sales for Fiscal 1993 is attributable primarily to the Company's continuing emphasis on large super stores allowing expanded variety in all departments, particularly higher margin perishables and service departments. The gross profit comparisons were affected by the pretax LIFO credit (which is included in cost of sales) for Fiscal 1993 of $2.6 million which was computed utilizing the Company's new LIFO method of valuing its Pathmark store inventories (see Note 5 to the Company's Consolidated Financial Statements), compared with the pretax LIFO provision of $2.2 million in Fiscal 1992. Selling, General and Administrative Expenses. Selling, general and administrative expenses for Fiscal 1993 period increased $26.6 million or 3.0% compared to Fiscal 1992. As a percentage of sales, selling, general and administrative expenses were 21.9% for Fiscal 1993, up from 20.6% in Fiscal 1992. The increase as a percentage of sales during Fiscal 1993 was primarily attributable to higher promotional expenses and the lower sales volume and increased costs resulting from the strike and lockouts. Recapitalization Expenses. In connection with the Plainbridge Spin-Off and Recapitalization, the Company recorded a pretax charge of approximately $23.7 million in the third quarter of Fiscal 1993 to record estimated reorganization and restructuring costs, including an early retirement program offered to certain Company associates. During the fourth quarter of Fiscal 1993, the Company determined that the estimated costs related to the reorganization and restructuring were less than originally estimated and recorded a pretax credit of approximately $7.1 million. Of the total net pretax charge of $16.6 19 million for Fiscal 1993, $6.4 million related to the early retirement program and severance costs incurred to reduce the Company's workforce, $8.1 million related to additional technical information systems costs incurred in order to accomplish the Plainbridge Spin-Off, and $2.1 million related to warehouse and consulting costs associated therewith. Through January 29, 1994, the Company has expended $11.9 million related to these costs. Management expects to pay the remaining $4.7 million by the second quarter of Fiscal 1994. Provision for Store Closings. Effective with the beginning of the second quarter of Fiscal 1993, the Company made a decision to close or dispose of the Five Stores which the Company believes will continue to be unprofitable. As a result, the Company recorded a pretax charge in the second quarter of Fiscal 1993 of approximately $6.0 million. Operating results for the Five Stores have been excluded from the consolidated statement of operations for the 52 weeks ended January 29, 1994 since the beginning of the second quarter of Fiscal 1993. Depreciation and Amortization. Depreciation and amortization expense of $67.7 million for Fiscal 1993 was $1.5 million less than the $69.2 million in Fiscal 1992. The decrease in depreciation and amortization expense is primarily due to the impact of the assets transferred to Plainbridge as part of the Plainbridge Spin-Off. Goodwill Write-Off. During Fiscal 1992, the Company wrote off its remaining goodwill balance of $600.7 million. As a result of the write-off, there was no amortization of goodwill for Fiscal 1993 compared with $17.5 million for Fiscal 1992. Operating Earnings. For Fiscal 1993, the Company reported operating earnings of $143.6 million compared to an operating loss of $425.8 million in Fiscal 1992. The increase in operating earnings is due to the goodwill write-off of $600.7 million and the amortization of goodwill in Fiscal 1992, partially offset in Fiscal 1993 by the impact of the strike and lockouts and the subsequent promotional programs implemented in order to regain sales levels, the recapitalization expenses of $16.6 million and the provision for store closings of $6.0 million. Operating earnings were also affected by a pretax LIFO credit of $2.6 million in Fiscal 1993, compared to the pretax LIFO provision of $2.2 million in Fiscal 1992. Interest Expense. Interest expense for Fiscal 1993 was $189.3 million, a decrease of $8.5 million from the $197.8 million in Fiscal 1992. Interest income allocated to discontinued operations for Fiscal 1993 was $9.9 million compared to $12.9 million in Fiscal 1992. The lower interest expense, net of interest income related to income allocated to discontinued operations, was primarily due to the benefit of lower interest rates on the debt incurred in connection with the Recapitalization partially offset by additional interest on the accreted principal of Holdings 13.125% Discount Debentures. Income Taxes. As a result of the Company's net operating loss, the Company recorded income taxes receivable of approximately $22.4 million resulting from the carryback of such losses. The carryforward of those losses not carried back results in a net deferred tax asset of approximately $41.3 million at January 29, 1994. Since the Company has experienced pretax losses in each of Fiscal 1993, Fiscal 1992, and Fiscal 1991, the Company was unable to conclude that realization of such deferred tax assets was more likely than not. Accordingly, the Company has provided a valuation allowance of $38.4 million to fully reserve its net deferred tax assets, except for its alternative minimum tax credit carryforwards which do not expire. The valuation allowance will be adjusted when, in the opinion of management, significant positive evidence exists which indicates that its more likely than not that the Company will be able to realize deferred tax assets. Such reductions in the valuation allowance, if any, will be reflected as a component of income tax expense (see Note 23 to the Company's Consolidated Financial Statements). The Omnibus Budget Reconciliation Act of 1993 was signed into law on August 10, 1993, which, among other things, increased the federal income tax rates for corporations to 35% from 34%, effective 20 January 1, 1993. Deferred tax liabilities and assets have been adjusted to reflect the 1% increase in federal income tax rates. Summary of Continuing Operations. The Company's loss from continuing operations before extraordinary items and cumulative effect of accounting changes was $15.5 million in Fiscal 1993 compared to $17.1 million (excluding the write-off of the remaining goodwill balance of $600.7 million and the Purity Operations gain of $2.0 million) in Fiscal 1992. The decrease in the loss is primarily due to lower interest expense as a result of the Recapitalization, increased operating earnings as discussed above and the elimination of goodwill amortization, partially offset by the impact of the strike and lockouts and the subsequent promotional programs implemented in order to regain sales levels, the recapitalization expenses, and the provision for store closings. Extraordinary Items. In connection with the Recapitalization, the Company recorded a loss on early extinguishment of debt totalling $107.1 million, net of an income tax benefit, related to the repayment of outstanding debt and the write off of existing deferred financing fees associated with the Recapitalization. Cumulative Effect of Accounting Changes. In the fourth quarter of Fiscal 1993, the Company changed the method it utilizes to calculate LIFO store inventories related to its indirect wholly owned subsidiary, Pathmark. Prior to Fiscal 1993, the Company utilized a retail approach to determine current cost and a general warehouse purchase index to measure inflation in the cost of its merchandise inventories in its stores. The Company's change arose from the development and utilization in Fiscal 1993 of internal cost indices based on the specific identification of merchandise in its stores to measure inflation in the prices thereby eliminating the average and estimation inherent in the retail and general warehouse purchase index methods. The Company believes the use of such specific costs and internal indices results in a more accurate measurement of the impact of inflation in the cost of its store merchandise. The effect of this change as of January 31, 1993 resulted in a charge to income of $10.7 million, net of an income tax benefit of $7.8 million, and has been presented as a cumulative effect of a change in accounting method in the accompanying consolidated statement of operations for Fiscal 1993. For Fiscal 1993, this change of method increased the LIFO credit by $1.3 million, resulting in a total LIFO credit of $2.6 million for Fiscal 1993. The effect of this change on prior periods was not determinable. Effective January 31, 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits other then Pensions" ("SFAS No. 106"). Under SFAS No. 106, the Company is required to accrue the expected cost of providing postretirement benefits, principally health care and life insurance benefits, over the working careers of the Company's associates. The Company previously expensed the cost of these benefits as claims were paid. SFAS No. 106 allows two methods for recognizing the transition obligation, which is defined as the unfunded and unrecognized accumulated postretirement benefit obligation at the date of adoption. This obligation could be recognized immediately as an earnings charge in the year of the change, as the effect of a change in accounting principles, or deferred and amortized as a component of net periodic postretirement benefit cost. The Company recognized the transition obligation immediately upon adoption. The operating results for Fiscal 1993 include the effect of adopting the SFAS No. 106 transition obligation as of January 31, 1993 on an immediate recognition basis. The resulting $15.6 million charge represents the accumulated postretirement benefit obligation at January 31, 1993 amounting to $26.9 million, less an income tax benefit of approximately $11.3 million determined utilizing an assumed interest rate of 7.75%. This obligation was determined by application of the provisions of the Company's medical plans including established maximums and sharing of costs, relevant actuarial assumptions and health-care cost trend rates projected at 14.25% and grading down to 5.75% which is reached in Fiscal 1999. 21 The annual charges recorded by the Company on a pay-as-you-go (cash basis) amounted to $1.2 million in each of Fiscal 1992 and Fiscal 1991. In Fiscal 1993, the effect of adopting SFAS No. 106 reduced the Company's pretax earnings from continuing operations by $1.8 million, representing the difference between the accrual in accordance with SFAS No. 106 and the amount paid with respect to these benefits. In the fourth quarter of Fiscal 1993, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS No. 112") effective January 31, 1993. Under SFAS No. 112, the Company is required to accrue the expected cost of providing postemployment benefits, primarily long-term disability, over the working careers of the Company's associates. The Company previously expensed the cost of these benefits as claims were paid. The adoption of this new statement did not have a material impact on the Company's operating results or financial position. Effective January 31, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Prior to January 31, the Company's financial statements had been prepared in accordance with Statement of Financial Accounting Standards No. 96, "Accounting for Income Taxes" ("SFAS No. 96"). SFAS No. 96 and SFAS No. 109 require the calculation of deferred taxes using the asset and liability method. Under this method, deferred tax balances must be adjusted to reflect enacted changes in income tax rates and deferred taxes must be provided on book and tax basis differences. The implementation of SFAS No. 109 had no effect on the consolidated statements of operations, however, it resulted in a reclassification of the current and noncurrent deferred taxes since, in accordance with SFAS No. 109, the classification of such deferred taxes correspond with the classification of the related asset or liability which gave rise to the book and tax basis difference. Certain noncurrent liabilities, such as self-insured liabilities for incurred but unpaid claims relating to customer, employee and vehicle accidents, and closed store liabilities are recorded at present value utilizing a discount rate based on the projected payout of these claims. The Company made a change in the determination of the discount rate utilized to record the present value of certain noncurrent liabilities and reduced such rate from 12%, representing the Company's effective interest rate, to a risk free rate, estimated at 4% in Fiscal 1993. The cumulative effect of this accounting change, as of January 31, 1993, totalled $11.6 million, net of an income tax benefit of $8.4 million. While this change increased total liabilities by approximately $20.0 million, the actual cash outflows to satify these liabilities will remain unchanged. Fiscal 1992 v. Fiscal 1991 Sales. Sales for Fiscal 1992 were $4.34 billion compared to $5.32 billion in Fiscal 1991, a decrease of 18.4%. Excluding the Purity Operations, sales for Fiscal 1992 were comparable to Fiscal 1991. During Fiscal 1992 the Company opened three supermarkets, enlarged ten supermarkets, and completed major renovations in eight supermarkets. Three supermarkets were closed during Fiscal 1992. At fiscal year end, the Company operated 146 supermarkets, including 139 Pathmark Super Centers and 33 Pathmark freestanding drug stores. This compares with Fiscal 1991 year end, when the Company, excluding the Purity Operations, operated 146 supermarkets, including 139 Pathmark Super Centers and 32 Pathmark freestanding drug stores. Gross Profit. Gross profit for Fiscal 1992 was $1.16 billion or 26.6% of sales compared with $1.35 billion or 25.5% of sales in Fiscal 1991. Excluding the Purity Operations, gross profit for Fiscal 1991 was $1.11 billion or 25.8% of sales. This improvement in gross profit as a percentage of sales for Fiscal 1992 is attributable to the Company's continuing emphasis on large super stores allowing expanded variety in all departments, particularly higher margin perishables and service departments. The gross profit comparisons, excluding the Purity Operations, were affected by the pretax LIFO charge (which is included in cost of sales) for Fiscal 1992 of $2.2 million compared with $5.8 million in Fiscal 1991. 22 Selling, General and Administrative Expenses. Selling, general and administrative expenses for Fiscal 1992 period decreased $172.3 million or 16.2% compared to Fiscal 1991. As a percentage of sales, selling, general and administrative expenses were 20.6% for Fiscal 1992, up from 20.0% in Fiscal 1991. Excluding the Purity Operations, selling, general and administrative expenses as a percentage of sales were 19.9% in Fiscal 1991. The increase as a percentage of sales in the period was attributable to promotional costs representing 0.4%, employee benefit expenses representing 0.2%, public liability claims expense representing 0.2% and occupancy expense representing 0.1%, partially offset by administrative expense savings representing 0.2%. Depreciation and Amortization. Depreciation and amortization of $69.2 million for Fiscal 1992 was $23.9 million less than the $93.2 million in Fiscal 1991. Excluding the Purity Operations, depreciation and amortization for Fiscal 1991 was $73.4 million. Goodwill Write-Off. Since the Acquisition in 1987, the Company, as constituted prior to the Recapitalization, did not achieve the sales and earnings projections prepared at the time of the Acquisition due to the economic recession in the Company's geographic trading area, increased competitive pressures (from new and enlarged supermarkets, discount stores and warehouse club stores), the related weak retail environment and lower food inflation rates than were projected. These conditions have resulted in higher than expected losses and a significant deficiency in equity and negatively impacted the real estate and financial markets so that the Company was not able to achieve the new store growth, enlargements and remodeling anticipated in the projections. The Company determined, based on the trend of operating results for Fiscal 1988 through Fiscal 1992, and without anticipating the effects of the Recapitalization and Spin-Offs on future projections, that its projected results would not support the future amortization of the Company's remaining goodwill balance of $600.7 million. The methodology that the Company used to assess the recoverability of goodwill was to project results of operations forward 35 years, which represented the remaining life of the goodwill as of January 30, 1993, based on a five-year historical trend line of actual results. The Company believed that the projected future results, based on this historical trend, are the most likely scenario assuming a recapitalization is not consummated. The Company evaluated the recoverability of goodwill based on this forecast of future operations and income. The Company also evaluated recoverability based on the discounted value of this same forecast using a discount rate that reflects Pathmark's average cost of funds. Such methodology established that the goodwill balance was impaired as of January 30, 1993 and could not be recovered from results of future operations. The Company's forecast calculated projected revenue growth of approximately 0.5% per annum over the next 35 years, primarily as a result of limited capital available for new store growth, enlargements and remodelings, and indicated that operations conducted through the remaining life of the goodwill yielded a cumulative loss of $155.0 million on an undiscounted basis and $103.0 million on a discounted basis of measurement before the effects of goodwill amortization. Accordingly, the Company wrote off its remaining goodwill balance in the fourth quarter of Fiscal 1992. Operating Earnings. For Fiscal 1992, the Company reported an operating loss of $425.8 million compared to operating earnings of $172.0 million in Fiscal 1991. Excluding the Purity Operations, the Company's operating earnings were $143.7 million for Fiscal 1991. Excluding the write-off of the remaining goodwill balance of $600.7 million in Fiscal 1992, and the Purity Operations impact in Fiscal 1991, the Company's operating earnings for Fiscal 1992 were $174.9 million, an increase of 8% compared with $162.2 million from the prior year. Interest Expense. Interest expense declined $18.7 million to $197.8 million in Fiscal 1992 compared with $216.5 million in Fiscal 1991. Lower interest expense was due to the reduction in bank debt 23 outstanding from the proceeds of the sale of the Purity Operations and lower interest rates partially offset by the net interest impact of the sale of the Old Notes. Gain on Sale of Photofinishing Plant. In Fiscal 1991, the Company sold its Coastal Photo photofinishing plant to Quality Photo Systems (East), Inc. (a subsidiary of Konica Corporation) for $5.7 million, including the assumption of leases, which resulted in a gain on sale of $4.1 million for Fiscal 1991. In addition, the Company entered into a servicing arrangement under which Quality Photo Systems (East), Inc. agreed to supply improved photofinishing services at lower than the Company's previous operating costs. Loss on Disposal of Purity Operations. On December 17, 1991, the Company completed the sale of the Purity Operations for approximately $257.0 million (as adjusted), including the assumption of certain indebtedness of the Purity Operations. The Company used a portion of the net cash proceeds from the sale to retire $155.0 million of the Term Loan. The Company applied the remaining net cash proceeds to repurchase Senior Subordinated Notes in open-market transactions during the second and third quarters of Fiscal 1992. The Company recognized a loss of $228.0 million on the disposal of the Purity Operations. Included in this loss is a write-off of approximately $214.0 million of goodwill related to the Purity Operations. Income Taxes. Although the Company reported pretax losses for Fiscal 1992, the Company generated taxable income due to the effect of amounts expensed for tax purposes, which were less than amounts used for financial reporting, primarily the goodwill write-off. In addition, the income tax benefit for the Fiscal 1991 included a net benefit of $6.9 million relating to a state income tax refund of prior years' taxes. Summary of Continuing Operations. Excluding the write-off of the remaining goodwill balance of $600.7 million and the Purity Operations gain of $2.0 million in Fiscal 1992 and the loss related to the disposal of Purity Operations of $228.0 million in Fiscal 1991, the Company's loss from continuing operations for Fiscal 1992 was $17.0 million compared to a loss from continuing operations of $23.5 million in Fiscal 1991. The improved results are due to lower interest expense, primarily as a result of the use of the net proceeds from the sale of the Purity Operations to reduce the outstanding balance of the Term Loan, and improved operating performance. FINANCIAL CONDITION Recapitalization. During Fiscal 1993, the Board of Directors authorized management of the Company to proceed with the Recapitalization, which resulted in a refinancing of the Company's debt. On October 26, 1993, the Recapitalization was consummated. Pathmark borrowed $400.0 million under the Pathmark Term Loan and $50.0 million under the Pathmark Working Capital Facility, borrowed $436.6 million through the issuance of Pathmark Senior Subordinated Notes, issued $120.0 million initial principal amount of the Pathmark Deferred Coupon Notes, exchanged $95.8 million principal amount of Pathmark Subordinated Debentures for $95.8 million principal amount of Holdings Subordinated Debentures and exchanged $198.5 million principal amount of Pathmark Subordinated Notes for $198.5 million principal amount of Holdings Subordinated Notes. As part of the Recapitalization, PTK borrowed $126.1 million through the issuance of the PTK DIBs in a private placement and Plainbridge borrowed $3.5 million under the $50.0 million Plainbridge Working Capital Facility. The proceeds from the aforementioned borrowings were used to repay the Old Working Capital Facility, redeem the Holdings Senior Subordinated Notes and Holdings Discount Debentures and to purchase for cash $189.2 million aggregate principal amount of Holdings Subordinated Debentures. The Pathmark Subordinated Notes mature in Fiscal 2002 and contain a sinking fund provision that requires Pathmark to deposit $49.4 million (25% of the original aggregate principal amount) with the trustee of the Pathmark Subordinated Notes on June 15 in each of Fiscal 2000 and Fiscal 2001 for the redemption of the Pathmark Subordinated Notes at a redemption price equal to 100% of the principal 24 amount thereof, plus accrued interest to the redemption date, providing for the redemption of 50% of the original aggregate principal amount of such notes prior to maturity. The Pathmark Deferred Coupon Notes accrete to a maturity value of $225.3 million in Fiscal 2003. These notes begin paying cash interest semiannually on May 1, 2000 and have no sinking fund requirements. The PTK DIBs accrete to a maturity value of $218.3 million in Fiscal 2003. The PTK DIBs begin paying cash interest semiannually on June 30, 1999 and have no sinking fund requirements. The Pathmark Senior Subordinated Notes accrete to a maturity value of $440.0 million in Fiscal 2003. These notes begin paying cash interest semiannually on May 1, 1994 and have no sinking fund requirements. The Pathmark Subordinated Debentures mature in Fiscal 2002 and began paying semi-annual cash interest on December 15, 1993. These Debentures have no sinking fund requirements. The Recapitalization improved the Company's liquidity by eliminating the requirement to repay the $388.2 million principal amount of the Holdings 14.5% Senior Subordinated Notes due in 1997, partially offset by amortization requirements of the Pathmark Term Loan. The interest on the Recapitalization debt versus the interest on the debt repaid will reduce the Company's interest expense annually by approximately $33.8 million ($60.2 million on cash basis). Debt Service. During Fiscal 1993, total debt increased $173.6 million from the prior year end primarily due to the Recapitalization and lower earnings due to the impact of the strike and lockouts, partially offset by a $7.5 million reduction in other debt primarily as a result of a $5.7 million prepayment of a mortgage on the Rickel distribution center and a $2.5 million repayment of a mortgage on two Pathmark retail properties in connection with the Recapitalization. Borrowings under the Pathmark Working Capital Facility were $29.0 million at January 29, 1994 and have decreased to $26.0 million at April 26, 1994. Borrowings under the Plainbridge Working Capital Facility were $8.5 million at January 29, 1994 and have decreased to $7.0 million at April 26, 1994. Under the Pathmark Working Capital Facility, which expires in Fiscal 1998, Pathmark can borrow or obtain letters of credit in an aggregate amount not to exceed $175.0 million subject to an annual cleanup provision commencing in Fiscal 1994. Under the terms of the Pathmark cleanup provision, in each fiscal year loans cannot exceed $50.0 million under the Pathmark Working Capital Facility for a period of 30 consecutive days. Under the Plainbridge Working Capital Facility, which expires in Fiscal 1996, Plainbridge can borrow or obtain letters of credit in an aggregate amount not to exceed $50.0 million subject to an annual cleanup provision, commencing in Fiscal 1994. Under the terms of the Plainbridge cleanup provision, in each fiscal year, loans cannot be made for a period of 30 consecutive days. The Company satisfied the terms of the Pathmark cleanup provision for Fiscal 1994 during the first quarter of Fiscal 1994. Pathmark is required to repay a portion of its borrowings under the Pathmark Term Loan each year, which commenced in January 1994, so as to retire such indebtedness in its entirety by Fiscal 1999. The indebtedness under the Pathmark and Plainbridge Working Capital Facilities and the Pathmark Term Loan bear interest at floating rates. To the extent that certain indebtedness of the Company bears interest at floating rates, cash interest payments on that indebtedness may vary in future years. The Company does not currently maintain any interest rate hedging arrangements due to the reasonable risk that near term interest rates will not rise significantly. The Company is continuously evaluating this risk and will implement interest rate hedging arrangements when deemed appropriate. 25 The amounts of principal payments required each year on outstanding long-term debt (excluding the original issue discount with respect to the Pathmark Deferred Coupon Notes and the PTK DIBs) are as follows (dollars in millions):
PRINCIPAL FISCAL YEARS PAYMENTS - ------------------------------------------------------------------------- ------------------- 1994................................................................... $ 46.2 1995................................................................... 38.2 1996................................................................... 56.7 1997................................................................... 58.3 1998................................................................... 135.7 1999................................................................... 138.8 2000................................................................... 50.6 2001................................................................... 50.0 2002................................................................... 194.2 2003................................................................... 692.7
Liquidity: The consolidated financial statements of the Company indicates that at January 29, 1994, current liabilities exceed its current assets by $117.2 million and the Company's stockholder's deficit approximates $1.3 billion. Management believes that cash flows generated from operations, supplemented by the unused borrowing capacity under the Pathmark and Plainbridge Working Capital Facilities (see Note 10 of the Company's Consolidated Financial Statements) and the availability of capital lease financing will be sufficient to pay the Company's debts as they come due, provide for its capital expenditure program and meet its seasonal cash requirements. Further, the Company believes it will be in compliance throughout the upcoming fiscal year with its various debt covenants. Holdings believes that it will be able to make the scheduled payments or refinance its obligations with respect to its indebtedness through a combination of operating funds and future borrowing facilities not currently in place. Future refinancing may be necessary if cash flow from operations is not sufficient to meet its debt service requirements related to the amortization of the Term Loan and the maturity of the Working Capital Facility and certain mortgages in Fiscal 1998, the maturity of the Pathmark Term Loan in Fiscal 1999, and the maturity of the Pathmark Subordinated Notes and Pathmark Subordinated Debentures in Fiscal 2002. The Company expects that it will be necessary to refinance all or a portion of the Pathmark Senior Subordinated Notes, the Pathmark Deferred Coupon Notes and the PTK DIBs due in Fiscal 2003. The Company may undertake a refinancing of some or all of such indebtedness sometime prior to its maturity. The Company's ability to make scheduled payments or to refinance its obligations with respect to its indebtedness depends on its financial and operating performance, which, in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond its control. Although the Company's cash flow from its operations and borrowings has been sufficient to meet its debt service obligations, there can be no assurance that the Company's operating results will continue to be sufficient for payment of Pathmark's and PTK's indebtedness or that future borrowing facilities will be available. While it is the Company's intention to enter into refinancings that it considers advantageous, there can be no assurances that the prevailing market conditions will be favorable to the Company. In the event the Company obtains any future refinancing on less than favorable terms, the holders of indebtedness could experience increased credit risk and could experience a decrease in the market value of their investment, because the Company might be forced to operate under terms that would restrict its operations and might find its cash flow reduced. Preferred Stock Dividends. The terms of the Exchangeable Preferred Stock provide for cumulative quarterly dividends at an annual rate of $3.52 per share when, as, and if declared by the Board of Directors of Holdings. Dividends for the first 20 quarterly dividend periods (through October 15, 1992) 26 were paid at the Company's option in additional shares of Exchangeable Preferred Stock. Prior to the Recapitalization, the Old Working Capital Facility and the terms of the indentures governing the Company's public debt restricted the payment of cash dividends on the Holdings Exchangeable Preferred Stock unless certain conditions were met, including tests relating to earnings and cash flow ratios of Holdings. Prior to the Recapitalization, Holdings had not met the conditions permitting cash dividend payments on the Holdings Exchangeable Preferred Stock. Subsequent to the Recapitalization, the Company does not expect to receive cash flow sufficient to permit further payments of dividends on the Exchangeable Preferred Stock in the foreseeable future. All dividends not paid in cash will cumulate at the rate of $3.52 per share per annum, without interest, until declared and paid. As of January 29, 1994, unpaid dividends of $21.5 million were accrued. Capital Expenditures. Capital expenditures related to Pathmark supermarkets and drug stores for Fiscal 1993, including property acquired under capital leases, were approximately $74.0 million compared to approximately $64.1 million for Fiscal 1992 and $56.9 million for Fiscal 1991. In Fiscal 1993, Pathmark opened four new Super Centers and completed 12 major renovations and five enlargements of its existing supermarkets. In Fiscal 1992, Pathmark opened three new Super Centers and completed eight major renovations and ten enlargements of its existing supermarkets. In Fiscal 1991, Pathmark opened one new Super Center and completed 13 major renovations and 15 enlargements of its existing supermarkets. The Company currently expects Pathmark to open up to five new Pathmark Super Centers during Fiscal 1994, two of which will replace smaller stores. The Company also expects Pathmark to complete up to 14 major renovations and ten enlargements in Fiscal 1994. During Fiscal 1994, Fiscal 1995 and Fiscal 1996, Pathmark plans to open 18 new Pathmark Super Centers, nine of which will replace smaller stores, and to complete up to 85 major renovations and enlargements, at a total investment of approximately $340.0 million including properties acquired under capital leases. The Company expects such investment to be approximately in the range of $110.0 million to $115.0 million each year during such period. Realization of this plan would increase supermarket selling square footage by more than 14% over the three year period, although the Company can give no assurance that Pathmark will be able to successfully complete the number of store openings, renovations and enlargements planned for each year during this period. Pathmark intends to fund this program through the leasing of certain properties and equipment and cash provided from operations. The extent of lease financing will depend on the availability of such financing on favorable terms and the amount of cash provided from operations. Pathmark believes that if a recapitalization were not consummated, the total capital expenditures would have been limited to approximately $125.0 million over the same period and would have resulted in approximately 30 renovations as well as the funding of ongoing projects for Fiscal 1993, which would not have materially altered Pathmark's total selling square footage. Cash Flows. Net cash provided by operating activities amounted to $66.9 million for Fiscal 1993, compared to $132.2 million for Fiscal 1992 and $138.0 million for Fiscal 1991. Cash provided by financing activities for Fiscal 1993 was $4.8 million, compared to cash used for financing activities of $69.4 million for Fiscal 1992 and $270.2 million for Fiscal 1991. The increase in cash provided by financing activities for Fiscal 1993 was primarily due to the net proceeds realized from the Recapitalization. The decrease in cash used for Fiscal 1992 compared to Fiscal 1991 primarily reflected the sale of the Subordinated Notes during Fiscal 1992 and greater use of cash to repay the Term Loan during Fiscal 1991, partially offset by greater use of cash to repay the Old Working Capital Facility during Fiscal 1992. Cash used for investing activities was $69.4 million for Fiscal 1993, compared to $63.1 million for Fiscal 1992 and cash provided by investing activities was $131.5 million for Fiscal 1991. Cash provided by investing activities during Fiscal 1991 reflected the proceeds of the sale of the Purity Operations. 27 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS. SUPERMARKETS GENERAL HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS)
52 WEEKS ENDED ------------------------------------------- JANUARY 29, JANUARY 30, FEBRUARY 1, 1994 1993 1992 ------------- ------------- ------------- Sales Pathmark.............................................................. $ 4,207,187 $ 4,339,834 $ 4,323,030 Purity................................................................ -- -- 996,892 ------------- ------------- ------------- Total sales............................................................. 4,207,187 4,339,834 5,319,922 Cost of sales (exclusive of depreciation and amortization shown separately below)....................................................... 3,052,483 3,183,951 3,965,404 ------------- ------------- ------------- Gross profit............................................................ 1,154,704 1,155,883 1,354,518 Selling, general and administrative expenses............................ 920,835 894,261 1,066,605 Depreciation and amortization........................................... 67,665 69,243 93,173 Recapitalization expenses............................................... 16,612 -- -- Provision for store closings............................................ 5,975 -- -- Amortization of goodwill................................................ -- 17,459 22,681 Goodwill write-off...................................................... -- 600,714 -- ------------- ------------- ------------- Operating earnings (loss)............................................... 143,617 (425,794) 172,059 Interest expense........................................................ 189,304 197,773 216,508 Interest income allocated to discontinued operations.................... 9,869 12,953 12,748 Gain on sale of photofinishing plant.................................... -- -- 4,068 Gain (loss) on disposal of Purity Operations............................ -- 2,000 (227,985) ------------- ------------- ------------- Loss from continuing operations before income taxes, extraordinary items and cumulative effect of accounting changes........................... (35,818) (608,614) (255,618) Income tax provision (benefit).......................................... (20,281) 7,176 (29,336) ------------- ------------- ------------- Loss from continuing operations before extraordinary items and cumulative effect of accounting changes................................. (15,537) (615,790) (226,282) Loss from discontinued operations....................................... (1,177) (1,165) (191,215) ------------- ------------- ------------- Loss before extraordinary items and cumulative effect of accounting changes................................................................. (16,714) (616,955) (417,497) Extraordinary items, net of an income tax benefit of $9,354 in Fiscal 1993, an income tax benefit of $3,276 in Fiscal 1992 and an income tax provision of $10,099 in Fiscal 1991................................... (106,155) (4,763) 15,055 ------------- ------------- ------------- Loss before cumulative effect of accounting changes..................... (122,869) (621,718) (402,442) Cumulative effect of accounting changes Postretirement benefits other than pensions, net of an income tax benefit of $11,289................................... (15,636) -- -- Postemployment benefits, net of an income tax benefit of $1,813.................................................. (2,488) -- -- Change in the determination of the discount rate utilized to record the present value of certain noncurrent liabilities, net of an income tax benefit of $8,430............................................ (11,570) -- -- Change in the method utilized to calculate last-in, first-out (LIFO) inventories, net of an income tax benefit of $7,770................ (10,664) -- -- ------------- ------------- ------------- Net loss................................................................ (163,227) (621,718) (402,442) Less non-cash preferred stock accretion and dividend requirements................................................. (18,771) (18,025) (13,813) ------------- ------------- ------------- Net loss attributable to common stockholders............................ $ (181,998) $ (639,743) $ (416,255) ------------- ------------- ------------- ------------- ------------- -------------
See notes to consolidated financial statements. 28 SUPERMARKETS GENERAL HOLDINGS CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE AMOUNTS)
JANUARY 29, JANUARY 30, 1994 1993 ------------- ------------- ASSETS Current Assets Cash.............................................................................. $ 6,168 $ 3,806 Accounts receivable, net.......................................................... 15,428 12,182 Merchandise inventories........................................................... 323,036 349,418 Income taxes receivable........................................................... 22,422 2,524 Prepaid expenses.................................................................. 21,838 26,511 Due from suppliers................................................................ 20,600 25,302 Other current assets.............................................................. 12,432 11,197 ------------- ------------- Total Current Assets......................................................... 421,924 430,940 Property and Equipment, Net......................................................... 645,843 636,811 Deferred Financing Costs, Net....................................................... 46,497 19,923 Deferred Income Taxes............................................................... 2,890 -- Investment in Purity Supreme (net of valuation allowance of $30,017 at January 29, 1994 and $29,889 at January 30, 1993).............................. -- -- Other Assets........................................................................ 27,736 26,102 ------------- ------------- $ 1,144,890 $ 1,113,776 ------------- ------------- ------------- ------------- LIABILITIES AND STOCKHOLDER'S DEFICIT Current Liabilities Accounts payable.................................................................. $ 282,771 $ 263,480 Current maturities of long-term debt.............................................. 46,244 9,520 Accrued payroll and payroll taxes................................................. 60,204 60,552 Current portion of obligations under capital leases............................... 18,844 15,210 Current portion of deferred income taxes.......................................... -- 2,244 Accrued interest payable.......................................................... 16,633 40,674 Accrued expenses and other current liabilities.................................... 114,431 118,954 ------------- ------------- Total Current Liabilities.................................................... 539,127 510,634 ------------- ------------- Long-Term Debt...................................................................... 1,415,236 1,278,315 ------------- ------------- Obligations Under Capital Leases, Long-Term......................................... 131,506 127,048 ------------- ------------- Deferred Income Taxes............................................................... -- 37,266 ------------- ------------- Other Noncurrent Liabilities........................................................ 243,385 164,434 ------------- ------------- Redeemable Securities Exchangeable Preferred Stock, $.01 par value...................................... 100,346 98,791 Authorized: 9,000,000 shares Issued and outstanding: 4,890,671 shares at January 29, 1994 and January 30, 1993 Liquidation preference, $25 per share: $122,267 at January 29, 1994 and January 30, 1993 ------------- ------------- Total Redeemable Securities.................................................. 100,346 98,791 ------------- ------------- Commitments and Contingencies Stockholder's Deficit Class A Common Stock, $.01 par value.............................................. 7 7 Authorized: 1,075,000 shares Issued and outstanding: 650,675 shares at January 29, 1994 and January 30, 1993 Class B Common Stock, $.01 par value.............................................. 3 3 Authorized: 1,000,000 shares Issued and outstanding: 320,000 shares at January 29, 1994 and January 30, 1993 Paid-in Capital................................................................... 200,748 202,303 Accumulated Deficit............................................................... (1,485,468) (1,305,025) ------------- ------------- Total Stockholder's Deficit.................................................. (1,284,710) (1,102,712) ------------- ------------- $ 1,144,890 $ 1,113,776 ------------- ------------- ------------- -------------
See notes to consolidated financial statements. 29 SUPERMARKETS GENERAL HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT (IN THOUSANDS EXCEPT SHARE AMOUNTS)
CLASS A CLASS A CLASS B COMMON TOTAL COMMON COMMON PAID-IN STOCK IN ACCUMULATED STOCKHOLDER'S STOCK STOCK CAPITAL TREASURY DEFICIT DEFICIT ------------- ------------- ---------- --------- ------------- ------------- Balance, February 2, 1991.................... $ 6 $ 3 $ 87,130 $ (2,918) $ (251,953) $ (167,732) Net loss................................... -- -- -- -- (402,442) (402,442) Purchase of Class A common stock........... -- -- 349 (412) -- (63) Exchange of Company common stock for SMG-II common stock................................. 1 -- 3,736 3,330 -- 7,067 Capital contribution from SMG-II of Company preferred stock.............................. -- -- 21,339 -- -- 21,339 Capital contribution from SMG-II of Company merger debentures............................ -- -- 35,142 -- -- 35,142 Capital contribution from SMG-II of Company senior notes, including accrued interest..................................... -- -- 10,457 -- -- 10,457 Cash capital contribution from SMG-II...... -- -- 12,260 -- -- 12,260 Gain on retirement of preferred stock...... -- -- 30,797 -- -- 30,797 Dividends on preferred stock (.0352 share per share of preferred stock)..... -- -- -- -- (12,395) (12,395) Accretion on preferred stock............... -- -- (1,418) -- -- (1,418) --- --- ---------- --------- ------------- ------------- Balance, February 1, 1992.................... 7 3 199,792 -- (666,790) (466,988) Net loss................................... -- -- -- -- (621,718) (621,718) Dividends on preferred stock (.0352 share per share of preferred stock) ............... -- -- -- -- (12,214) (12,214) Accrued dividends on preferred stock ($.88 per share)................................... -- -- -- -- (4,303) (4,303) Accretion on preferred stock............... -- -- (1,508) -- -- (1,508) Capital contribution from SMG-II of Company senior notes, including accrued interest..................................... -- -- 4,019 -- -- 4,019 --- --- ---------- --------- ------------- ------------- Balance, January 30, 1993.................... 7 3 202,303 -- (1,305,025) (1,102,712) Net loss................................... -- -- -- -- (163,227) (163,227) Accrued dividends on preferred stock ($.88 per share)................................... -- -- -- -- (17,216) (17,216) Accretion on preferred stock............... -- -- (1,555) -- -- (1,555) --- --- ---------- --------- ------------- ------------- Balance January 29, 1994..................... $ 7 $ 3 $ 200,748 $ -- $ (1,485,468) $ (1,284,710) --- --- ---------- --------- ------------- ------------- --- --- ---------- --------- ------------- -------------
See notes to consolidated financial statements. 30 SUPERMARKETS GENERAL HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
52 WEEKS ENDED ------------------------------------- JANUARY 29, JANUARY 30, FEBRUARY 1, 1994 1993 1992 ----------- ----------- ----------- Operating Activities Net loss..................................................................... $(163,227) $(621,718) $(402,442) Adjustments to reconcile net loss to net cash provided by operating activities Extraordinary (gain) loss on early extinguishment of debt................ 106,155 4,763 (15,055) Cumulative effect of accounting changes.................................. 40,358 -- -- Depreciation and amortization............................................ 67,665 69,243 93,173 Deferred income tax benefit.............................................. (28,895) (12,228) (37,880) Amortization of goodwill................................................. -- 17,459 22,681 Goodwill write-off....................................................... -- 600,714 -- Interest accruable but not payable....................................... 3,312 18,480 45,688 Amortization of original issue discount.................................. 4,593 18,295 23,870 Amortization of debt issuance costs...................................... 4,767 4,369 5,208 (Gain) loss on disposal of property and equipment........................ (93) 1,637 (320) Loss from discontinued operations........................................ 1,177 1,165 191,215 (Gain) loss on disposal of Purity Operations............................. -- (2,000) 227,985 Cash provided by (used for) operating assets and liabilities............. Accounts receivable, net............................................... (3,246) (580) 262 Merchandise inventories................................................ 7,948 441 (8,108) Income taxes receivable................................................ (19,898) (2,026) (498) Other current assets................................................... 7,500 (5,725) (9,183) Accounts payable....................................................... 19,291 26,032 32,176 Income taxes payable................................................... -- -- (20,766) Other current liabilities.............................................. (15,224) 8,353 (9,672) Other noncurrent assets and liabilities, net........................... 34,749 5,504 (373) ----------- ----------- ----------- Cash provided by operating activities................................ 66,932 132,178 137,961 ----------- ----------- ----------- Investing Activities Property and equipment expenditures.......................................... (70,853) (65,622) (59,446) Proceeds from disposition of property and equipment.......................... 1,486 519 5,663 Proceeds from note receivable................................................ -- -- 1,163 Proceeds from disposal of Purity Operations.................................. -- 2,000 184,100 ----------- ----------- ----------- Cash provided by (used for) investing activities..................... (69,367) (63,103) 131,480 ----------- ----------- ----------- Financing Activities Borrowings under Pathmark Term Loan.......................................... 400,000 -- -- Proceeds from issuance of Pathmark Senior Subordinated Notes................. 436,625 -- -- Proceeds from issuance of Pathmark Deferred Coupon Notes..................... 120,000 -- -- Proceeds from issuance of PTK Deferred Interest Bonds........................ 126,100 -- -- Proceeds from New Working Capital Facilities borrowings in connection with the Recapitalization....................................................... 53,500 -- -- Purchase of Holdings Senior Subordinated Notes............................... (388,192) (72,208) -- Purchase of Holdings Subordinated Debentures................................. (319,229) -- -- Purchase of Holdings Discount Debentures..................................... (184,752) -- -- Repayment of Old Working Capital Facility in connection with the Recapitalization............................................................... (80,000) -- -- Premiums and other fees in connection with the Recapitalization.............. (98,499) -- -- Deferred financing fees in connection with the Recapitalization.............. (47,538) -- -- Increase (decrease) in Old Working Capital Facility borrowings prior to the Recapitalization............................................................... 40,000 (53,280) (43,000) Decrease in New Working Capital Facilities borrowings subsequent to the Recapitalization............................................................... (16,000) -- -- Decrease in Pathmark Term Loan subsequent to the Recapitalization............ (15,000) -- -- Old Working Capital Facility borrowings related to the sale of the Holdings Subordinated Notes and purchase of Holdings Senior Subordinated Notes.......... -- 16,280 -- Increase in other borrowings................................................. 2,581 3,969 4,280 Cash capital contribution from SMG-II........................................ -- -- 12,714 Proceeds from the sale of the Holdings Subordinated Notes.................... -- 200,000 -- Premium on purchase of Holdings Senior Subordinated Notes.................... -- (5,394) -- Fees associated with the sale of Holdings Subordinated Notes................. -- (6,678) -- Repayment of Holdings Term Loan.............................................. -- (132,000) (225,000) Repayment of other long-term borrowings...................................... (9,768) (5,912) (7,104) Reduction in obligations under capital leases................................ (15,031) (14,182) (11,762) Purchase of Class A common stock............................................. -- -- (313) ----------- ----------- ----------- Cash provided by (used for) financing activities..................... 4,797 (69,405) (270,185) ----------- ----------- ----------- Increase (decrease) in cash.................................................... 2,362 (330) (744) Cash at beginning of period.................................................... 3,806 4,136 4,880 ----------- ----------- ----------- Cash at end of period.......................................................... $ 6,168 $ 3,806 $ 4,136 ----------- ----------- ----------- ----------- ----------- -----------
See notes to consolidated financial statements. 31 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION Supermarkets General Holdings Corporation and its wholly owned subsidiary SMG Acquisition Corporation ("SMG") were formed by Merrill Lynch Capital Partners, Inc., a wholly owned subsidiary of Merrill Lynch & Co., Inc., to effect the acquisition (the "Acquisition") of Supermarkets General Corporation ("Old Supermarkets"). On June 15, 1987, Supermarkets General Holdings Corporation completed the first step of the Acquisition when it acquired 32,800,000 shares (approximately 85%) of Old Supermarkets' common stock through a tender offer (the "Tender Offer") by SMG. The remaining outstanding common stock of Old Supermarkets was acquired on October 5, 1987 when SMG was merged with and into Old Supermarkets pursuant to a Merger Agreement dated April 22, 1987, as amended. The Acquisition was accounted for as a purchase, and accordingly, Holdings recorded the assets and liabilities of Old Supermarkets at their fair values at the date of the Acquisition. The tax basis for the assets and liabilities acquired was retained. In October 1989, Old Supermarkets adopted an amended and restated Plan of Liquidation pursuant to which it was liquidated into three wholly owned subsidiaries of Supermarkets General Holdings Corporation. In November 1989, pursuant to such Plan, Old Supermarkets transferred substantially all of the assets of its Purity Supreme division to two of the three above-mentioned wholly owned subsidiaries, Purity Supreme, Inc. and Li'l Peach Corp., and said subsidiaries assumed substantially all of the liabilities of Old Supermarkets related to such division. Old Supermarkets completed the liquidation just prior to the year ended February 3, 1990 by merging with the third of the above- mentioned wholly owned subsidiaries which retained the name Supermarkets General Corporation ("Supermarkets"). On December 17, 1991, Purity Supreme, Inc. and Li'l Peach Corp. were sold (see Note 26). Supermarkets General Holdings Corporation and its respective subsidiaries are hereafter collectively referred to as "Holdings" or the "Company". On November 15, 1990, SMG-II Holdings Corporation, a newly incorporated Delaware corporation ("SMG-II"), commenced offers to purchase for cash up to $155.5 million principal amount of the Company's Junior Subordinated Discount Debentures (the "Discount Debenture Offer") and up to 1.7 million shares of the Company's Cumulative Exchangeable Redeemable Preferred Stock (the "Exchangeable Preferred Stock Offer"). Concurrently with the Discount Debenture Offer and Exchangeable Preferred Stock Offer, SMG-II commenced an exchange offer (the "Exchange Offer", together with the Discount Debenture Offer and Exchangeable Preferred Stock Offer, the "Offers") pursuant to which the then existing common stockholders of the Company could exchange on a one-for-one basis shares of the Company's common stock for shares of SMG-II's common stock. The Offers were subsequently amended to provide for offers to purchase up to $110.0 million principal amount of the Company's Junior Subordinated Discount Debentures (the "Discount Debentures") and up to 3.4 million shares of the Company's Cumulative Exchangeable Redeemable Preferred Stock (the "Exchangeable Preferred Stock"). In February 1991, SMG-II purchased approximately $74.1 million principal amount of the Discount Debentures at 33% of their principal amount and 2.7 million shares of Exchangeable Preferred Stock at $7.00 net per share, pursuant to the Discount Debenture Offer and the Exchangeable Preferred Stock Offer, respectively. In addition, all outstanding shares of the Company's common stock were exchanged pursuant to the Exchange Offer. As a result of the Exchange Offer, SMG-II owns all of the Company's common stock and is effectively a holding company for the operations of the Company. SMG-II financed the Purchases by selling 417,500 shares of its Cumulative Convertible Preferred Stock (the "SMG-II Preferred Stock") for an aggregate purchase price of $83.5 million to various 32 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION--(CONTINUED) institutional investors. The holders of SMG-II's voting and non-voting common stock and SMG-II Preferred Stock include certain limited partnerships controlled directly or indirectly by Merrill Lynch Capital Partners, Inc. and certain indirectly wholly owned subsidiaries of Merrill Lynch & Co., Inc. ("ML & Co."). ML & Co. beneficially owns approximately 88.6% of the outstanding stock of SMG-II, and accordingly, controls SMG-II and, indirectly, the Company. Subsequent to the completion of the Offers in Fiscal 1991, SMG-II acquired through open market transactions approximately $21.3 million principal amount of Discount Debentures, $9.8 million principal amount of the Company's 14.5% Senior Subordinated Notes due 1997 (the "Senior Subordinated Notes") and 94,900 shares of Exchangeable Preferred Stock and made a capital contribution to the Company of such securities together with the amounts of the Discount Debentures and Exchangeable Preferred Stock purchased pursuant to the Discount Debenture Offer and Exchangeable Preferred Stock Offer, respectively, as well as cash sufficient to pay associated taxes. The Company has retired the Senior Subordinated Notes, Discount Debentures and Exchangeable Preferred Stock contributed by SMG-II. The accompanying consolidated financial statements of the Company indicate that at January 29, 1994 current liabilities exceed its current assets by $117.2 million and the Company's stockholder's deficit approximates $1.3 billion. Management believes that cash flows generated from operations, supplemented by the unused borrowing capacity under the Pathmark and Plainbridge Working Capital Facilities (see Note 10) and the availability of capital lease financing will be sufficient to pay the Company's debts as they come due, provide for its capital expenditure program and meet its seasonal cash requirements. Further, the Company believes it will be in compliance throughout the upcoming fiscal year with its various debt covenants. NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The financial statements include the accounts of the Company and its subsidiaries, all wholly owned. The Company intends to distribute Plainbridge to certain of the Company's stockholders. Accordingly, discontinued operations represent the results of operations related to the warehouse, transportation and real estate operations subsequent to the Plainbridge Spin-Off as well as the home center segment for all years presented (see Note 3). Fiscal Year: The Company's fiscal year ends on the Saturday nearest January 31 of the following calendar year. Normally each fiscal year consists of 52 weeks, but every five or six years, as was the case in Fiscal 1989, the fiscal year consists of 53 weeks. Reclassifications: Certain reclassifications have been made to the prior years' consolidated financial statements to conform to the Fiscal 1993 presentation. 33 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) Statements of Cash Flows: All short-term investments with a maturity of three months or less are considered to be cash equivalents. The Company had no such investments during all periods presented. Merchandise Inventories: Merchandise inventories are valued at the lower of cost or market. Cost for substantially all merchandise inventories is determined on a last-in, first-out (LIFO) basis. See Note 5 for the change in the method utilized to calculate LIFO store inventories related to the Company's indirect wholly-owned subsidiary, Pathmark Stores, Inc. Property and Equipment: Property and equipment are stated at cost. Depreciation and amortization expense on owned property and equipment is computed on the straight-line method over their estimated useful lives. Amortization of property under capital leases is computed on the straight-line method over the term of the lease or the leased property's estimated useful life, whichever is shorter. Income Taxes: Effective January 31, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Prior to January 31, 1993, the Company's financial statements had been prepared in accordance with Statement of Financial Accounting Standards No. 96, "Accounting for Income Taxes" ("SFAS No. 96"). SFAS No. 96 and SFAS No. 109 require the calculation of deferred taxes using the asset and liability method. Under this method, deferred tax balances must be adjusted to reflect enacted changes in income tax rates and deferred taxes must be provided on book and tax basis differences. The implementation of SFAS No. 109 had no effect on the consolidated statements of operations, however, it resulted in a reclassification of the current and noncurrent deferred taxes since, in accordance with SFAS No. 109, the classification of such deferred taxes correspond with the classification of the related asset or liability which gave rise to the book and tax basis difference (see Note 23). Deferred Financing Costs: Deferred financing costs are amortized on the interest method over the life of the related debt. Net Loss Per Common Share: Since the Company is a wholly owned subsidiary, loss per share information is not presented. Store Preopening and Closing Costs: Store preopening costs are expensed as incurred. Costs associated with the closing of stores, such as future rent and real estate taxes, net of expected sublease recovery, are expensed when management makes a decision to close such stores. Postretirement Benefits other than Pensions: Effective January 31, 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits other than Pensions" ("SFAS No. 106"). In accordance with SFAS No. 106, the Company accrued for the cost of providing 34 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) postretirement benefits, principally health care and life insurance benefits, over the working careers of the Company's associates. The Company previously expensed the cost of these benefits as claims were paid (see Note 21). Postemployment Benefits: Effective January 31, 1993, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS No. 112"). In accordance with SFAS No. 112, the Company accrued for the expected cost of providing postemployment benefits, primarily long-term disability, over the working careers of the Company's associates. The Company previously expensed the cost of these benefits as claims were paid (see Note 22). NOTE 3--RECAPITALIZATION AND DISCONTINUED OPERATIONS During Fiscal 1993, the Board of Directors authorized management of the Company to proceed with a recapitalization plan (the "Recapitalization") consisting of a refinancing of the Company's debt. On October 26, 1993, the Recapitalization was consummated. Pathmark Stores, Inc. (formerly Supermarkets General Corporation, hereinafter referred to as "Pathmark") borrowed $450.0 million under a bank credit agreement, consisting of $400.0 million under a term loan facility ("the Pathmark Term Loan") and $50.0 million under a $175.0 million working capital facility (the "Pathmark Working Capital Facility"), borrowed $436.6 million from the issuance of its 9.625% Senior Subordinated Notes due 2003 (the "Pathmark Senior Subordinated Notes"), issued $120.0 million initial principal amount of its 10.75% Junior Subordinated Deferred Coupon Notes due 2003 (the "Pathmark Deferred Coupon Notes"), exchanged $95.8 million principal amount of its 12.625% Subordinated Debentures due 2002 (the "Pathmark Subordinated Debentures") for $95.8 million principal amount outstanding of Holdings Subordinated Debentures and exchanged $198.5 million principal amount of its 11.625% Subordinated Notes due 2002 (the "Pathmark Subordinated Notes") for $198.5 million principal amount outstanding of the Holdings Subordinated Notes. As part of the Recapitalization, PTK Holdings, Inc. ("PTK"), a newly formed wholly owned subsidiary of Holdings, borrowed $126.1 million through the issuance of its $130.0 million aggregate principal amount 10.25% Exchangeable Guaranteed Debentures due 2003 (the "PTK DIBs") in a private placement, which bonds the Company has guaranteed. The proceeds from the aforementioned borrowings were used to redeem the Old Working Capital Facility, Holdings 14.5% Senior Subordinated Notes due 1997 (the "Holdings Senior Subordinate Notes") and Holdings 13.125% Junior Subordinated Discount Debentures due 2003 (the "Holdings Discount Debentures") and to purchase $185.0 million aggregate principal amount of the Holdings 12.625% Subordinated Debentures due 2002 (the "Holdings Subordinated Debentures") from the Equitable Affiliates. In addition, on October 26, 1993, Plainbridge, Inc. ("Plainbridge"), a newly formed indirectly wholly owned subsidiary of the Company, borrowed $3.5 million under a $50.0 million bank revolving credit agreement (the "Plainbridge Working Capital Facility"). In conjunction with the Recapitalization, the assets, liabilities and related operations of the Company's home centers segment as well as certain assets and liabilities of the warehouse, distribution and processing facilities which service Pathmark's supermarkets and drug stores and certain inventories and real property, were contributed by Pathmark to Plainbridge and the shares of Plainbridge were distributed to PTK (the "Plainbridge Spin-Off"). As a result, PTK holds 100% of the capital stock of both Plainbridge and Pathmark. The Company intends to further spin-off Plainbridge to its common 35 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 3--RECAPITALIZATION AND DISCONTINUED OPERATIONS--(CONTINUED) stockholder within the next year, although there can be no assurance that such spin-off will be consummated. Any such spin-off would require satisfying the dividend restrictions with respect to Holding's Exchangeable Preferred Stock (see Note 15) as well as obtaining consents from various lenders to Plainbridge and PTK. Accordingly, the accompanying consolidated statements of operations for all periods presented include the operating results of the Company's home centers segment as discontinued operations. The results of operations related to the warehouses and distribution facilities are included in the continuing operating results of the Company through the date of the Plainbridge Spin-Off since such operations represented a portion of the supermarkets and drug stores segment. Subsequent to the Plainbridge Spin-Off, the operating results related to the warehouses and distribution facilities are included as discontinued operations. The net assets of Plainbridge as of January 29, 1994 were approximately $223.5 million. In conjunction with the Recapitalization, Pathmark entered into a 10-year logistical services agreement with Plainbridge. The terms of the logistical services agreement were designed to require Plainbridge to continue to provide Pathmark with substantially the same level of supply and other logistical services as was available from the warehouse, distribution and processing facilities prior to the Plainbridge Spin-Off at substantially the same or a lower cost. Subsequent to the Plainbridge Spin-Off, these intercompany purchases from Plainbridge are included in the Company's continuing operations. The corresponding revenues generated by Plainbridge from such transactions are included in the Company's discontinued operations. Operating results of the discontinued operations were as follows (dollars in thousands):
FISCAL YEARS ---------------------------------------- 1993(A) 1992 1991 ------------- ----------- ------------ Sales Rickel home centers...................................... $ 343,643 $ 344,279 $ 409,679 Affiliate................................................ 705,785 -- -- Other.................................................... 6,164 -- -- ------------- ----------- ------------ Total sales................................................ $ 1,055,592 $ 344,279 $ 409,679 ------------- ----------- ------------ ------------- ----------- ------------ Loss before income taxes(b)................................ $ (2,120) $ (2,069) $ (206,115)(c) Income tax benefit......................................... (943) (904) (14,900) ------------- ----------- ------------ Net loss from discontinued operations...................... $ (1,177) $ (1,165) $ (191,215) ------------- ----------- ------------ ------------- ----------- ------------
- --------------- (a) Represents the results of operations related to the warehouse and distribution facilities subsequent to the Plainbridge Spin-Off as well as the Rickel's home center segment for the entire fiscal year. (b) The home centers segment was not allocated any portion of the Company's Acquisition debt (see Note 10). However, the Company charged the home centers segment interest expense relating to a proportionate share of certain borrowings. These charges amounted to $13.1 million, $13.0 million, and $12.7 million in Fiscal 1993, Fiscal 1992 and Fiscal 1991, respectively, and are included in the results of the discontinued operations.
(Footnotes continued on following page) 36 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 3--RECAPITALIZATION AND DISCONTINUED OPERATIONS--(CONTINUED) (Footnotes continued from preceding page) (c) Includes charges in connection with the Company's dispostion of 12 Rickel stores in connection with its strategic plan to withdraw from the Connecticut and Long Island, New York market areas (the "Home Centers Partial Disposition"). At the end of Fiscal 1993, ten stores were closed and have been partially or fully leased, subleased or assigned. One store has been closed and is expected to be subleased in the future and the lease for the remaining store is expected to terminate by mutual consent during Fiscal 1994. During the fourth quarter of Fiscal 1991, the Company recorded a charge of $23.6 million, including $16.3 million of non-cash charges (primarily related to the write-off of intangibles allocated to fixed assets as a result of the Acquisition) as a result of the Home Centers Partial Disposition. The Company determined that the reduced scope of operations and the increased competitive environment have impacted future prospects of the home centers segment and, therefore, the operations of the remaining Rickel stores would not support the future amortization of the home centers segment goodwill. Accordingly, the Company recorded a non-cash charge of $170.2 million in the fourth quarter of Fiscal 1991 accelerating the remaining amortization of goodwill related to its home centers segment.
In connection with the Plainbridge Spin-Off and Recapitalization, the Company recorded a pretax charge of approximately $23.7 million in the third quarter of Fiscal 1993 to record estimated reorganization and restructuring costs, including an early retirement program offered to certain Company associates. During the fourth quarter of Fiscal 1993, the Company determined that the estimated costs related to the reorganization and restructuring were less than originally estimated and recorded a pretax credit of approximately $7.1 million. Of the total net pretax charge of $16.6 million for Fiscal 1993, $6.4 million related to the early retirement program and severance costs incurred to reduce the Company's workforce, $8.1 million related to the additional technical information systems costs incurred in order to accomplish the Plainbridge Spin-Off, and $2.1 million related to warehouse and consulting costs associated therewith. Through January 29, 1994, the Company has paid $11.9 million related to these costs. Management expects to pay the remaining $4.7 million included in other accrued expenses by the second quarter of Fiscal 1994. NOTE 4--ACCOUNTS RECEIVABLE Accounts receivable are comprised of the following (dollars in thousands):
JANUARY 29, JANUARY 30, 1994 1993 ----------- ----------- Prescription plans..................................................................... $ 13,377 $ 11,271 Other.................................................................................. 3,842 2,625 ----------- ----------- Accounts receivable.................................................................... 17,219 13,896 Less allowance for doubtful accounts................................................... 1,791 1,714 ----------- ----------- Accounts receivable, net............................................................... $ 15,428 $ 12,182 ----------- ----------- ----------- -----------
37 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 5--MERCHANDISE INVENTORIES Merchandise inventories are comprised of the following (dollars in thousands):
JANUARY 29, JANUARY 30, 1994 1993 ----------- ----------- Merchandise inventories at FIFO cost............................................... $ 377,516 $ 386,901 Less LIFO reserve.................................................................. 54,480 37,483 ----------- ----------- Merchandise inventories at LIFO cost............................................... $ 323,036 $ 349,418 ----------- ----------- ----------- -----------
In the fourth quarter of Fiscal 1993, the Company changed its method utilized to calculate LIFO store inventories related to its indirect wholly owned subsidiary, Pathmark. Prior to Fiscal 1993, the Company utilized a retail approach to determine current cost and a general warehouse purchase index to measure inflation in the cost of its merchandise inventories in its stores. The Company's change arose from the development and utilization in Fiscal 1993 of internal cost indices based on the specific identification of merchandise in its stores to measure inflation in the prices, thereby eliminating the averaging and estimation inherent in the retail and general warehouse purchase index methods. The Company believes the use of such specific costs and internal indices results in a more accurate measurement of the impact of inflation in the cost of its store merchandise. The effect of this change as of January 31, 1993 resulted in a charge to income of $10.7 million, net of an income tax benefit of $7.8 million, and has been presented as a cumulative effect of a change in accounting method in the accompanying consolidated statement of operations for Fiscal 1993. This change of method increased the LIFO credit by $1.3 million, resulting in a total LIFO credit of $2.6 million for Fiscal 1993. The effect of this change on prior periods was not determinable. Liquidation of LIFO layers in the periods reported did not have a significant effect on the results of continuing operations. NOTE 6--PROPERTY AND EQUIPMENT Property and equipment are comprised of the following (dollars in thousands):
JANUARY 29, JANUARY 30, 1994 1993 ----------- ----------- Land................................................................................... $ 65,840 $ 64,594 Buildings and building improvements.................................................... 196,212 177,148 Fixtures and equipment................................................................. 225,582 234,114 Leasehold costs and improvements....................................................... 309,995 300,269 Transportation equipment............................................................... 19,771 22,705 Construction in progress............................................................... 680 3,985 ----------- ----------- Property and equipment, owned.......................................................... 818,080 802,815 Property and equipment under capital leases............................................ 176,496 155,813 ----------- ----------- Property and equipment, at cost........................................................ 994,576 958,628 Less accumulated depreciation and amortization......................................... 348,733 321,817 ----------- ----------- Property and equipment, net............................................................ $ 645,843 $ 636,811 ----------- ----------- ----------- -----------
NOTE 7--GOODWILL In the fourth quarter of Fiscal 1992, the Company wrote off its remaining goodwill balance of $600.7 million. 38 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 7--GOODWILL--(CONTINUED) Since the Acquisition in Fiscal 1987, the Company, as constituted prior to the Recapitalization, did not achieve the sales and earnings projections prepared at the time of the Acquisition due to the economic recession in the Company's geographic trading area, increased competitive pressures (from new and enlarged supermarkets, discount stores and warehouse club stores), the related weak retail environment and lower food inflation rates than were projected. These conditions resulted in higher than expected losses and a significant deficiency in equity and negatively impacted the real estate and financial markets so that the Company was not able to achieve the new store growth, enlargements and remodeling anticipated in the projections. The Company determined, based on the trend of operating results for Fiscal 1988 through Fiscal 1992, and without anticipating the effects of the Recapitalization and Spin-Offs on future projections, that its projected results, as of January 30, 1993, would not support the future amortization of the Company's remaining goodwill balance of $600.7 million. The methodology that management used to assess the recoverability of goodwill was to project results of operations forward 35 years, which represented the remaining life of the goodwill as of January 30, 1993, based on a five year historical trend line of actual results. Management believed that the projected future results, based on this historical trend, were the most likely scenario assuming a recapitalization was not consummated. Management evaluated the recoverability of goodwill based on this forecast of future operations and income. Management also evaluated recoverability based on the discounted value of this same forecast using a discount rate that reflected the Company's average cost of funds. Management believed that if a recapitalization was not consummated, Pathmark's total capital expenditures would be limited to approximately $125.0 million between Fiscal 1993 and Fiscal 1996 and would result in approximately 30 renovations as well as the funding of ongoing projects for Fiscal 1993, which would not materially alter Pathmark's total selling square footage. Assuming a recapitalization was not consummated, sales growth would be restricted to approximately 0.5% per year. Management's projection of 0.5% sales growth per year was derived from the Company's five-year historical sales trend and the management's estimate of future sales performance. In the projection, management assumed the five-year historical average rates of inflation, financing costs and competitive conditions to be representative during the projected period. Management believed that these projected future results so derived depict the Company's projected performance without the benefits of a recapitalization. Such projection indicated that operations to Fiscal 2026 yielded a cumulative loss of $155.0 million on an undiscounted basis and $103.0 million on a discounted basis of measurement before the effects of goodwill amortization. NOTE 8--DEFERRED FINANCING COSTS Deferred financing costs are comprised of the following (dollars in thousands):
JANUARY 29, JANUARY 30, 1994 1993 ----------- ----------- Deferred financing costs.............................................................. $ 49,086 $ 56,015 Less accumulated amortization......................................................... 2,589 36,092 ----------- ----------- Deferred financing costs, net......................................................... $ 46,497 $ 19,923 ----------- ----------- ----------- -----------
In connection with the Recapitalization, the Company incurred deferred financing costs of approximately $47.5 million. Also in connection therewith, the Company wrote off, as part of the extraordinary items, $16.8 million of deferred financing costs associated with debt which was extinguished (see Notes 3 and 18). 39 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 9--OTHER NONCURRENT LIABILITIES Other noncurrent liabilities are comprised of the following (dollars in thousands):
JANUARY 29, JANUARY 30, 1994 1993 ----------- ----------- Self-insured liabilities............................................................. $ 85,943 $ 74,631 Pension and deferred compensation.................................................... 15,975 14,216 Disposal of Purity Operations........................................................ 41,028 34,700 Postretirement benefits other than pensions.......................................... 35,670 6,700 Postemployment benefits.............................................................. 4,938 1,093 Accrued dividends.................................................................... 21,519 4,304 Other................................................................................ 38,312 28,790 ----------- ----------- Other noncurrent liabilities......................................................... $ 243,385 $ 164,434 ----------- ----------- ----------- -----------
Certain noncurrent liabilities, such as self-insured liabilities for incurred but unpaid claims relating to customer, employee and vehicle accidents, and closed store liabilities are recorded at present value utilizing a discount rate based on the projected payout of these claims. The Company made a change in the determination of the discount rate utilized to record the present value of certain noncurrent liabilities and reduced such rate from 12%, representing the Company's effective interest rate, to a risk free rate, estimated at 4% in Fiscal 1993. The cumulative effect of this accounting change as of January 31, 1993 totalled $11.6 million, net of an income tax benefit of $8.4 million. While this change increased total liabilities by approximately $20.0 million, the cash outflows to satisfy these liabilities will remain unchanged. NOTE 10--LONG-TERM DEBT Long-term debt is comprised of the following (dollars in thousands):
JANUARY 29, JANUARY 30, 1994 1993 ------------- ------------- Pathmark Term Loan.................................................................. $ 385,000 $ -- Pathmark Working Capital Facility................................................... 29,000 -- Plainbridge Working Capital Facility................................................ 8,500 -- 10.25% PTK Exchangeable Guaranteed Debentures due 2003.............................. 129,649 -- 9.625% Pathmark Senior Subordinated Notes due 2003.................................. 436,718 -- 10.75% Pathmark Deferred Coupon Notes due 2003...................................... 123,312 -- 12.625% Pathmark Subordinated Debentures due 2002................................... 95,750 -- 11.625% Pathmark Subordinated Notes due 2002........................................ 198,517 -- 11.625% Holdings Subordinated Notes due 2002........................................ 1,483 200,000 13.125% Holdings Junior Subordinated Discount Debentures............................ -- 183,801 Old Working Capital Facility........................................................ -- 40,000 14.5% Holdings Senior Subordinated Notes............................................ -- 388,192 12.625% Holdings Subordinated Debentures............................................ -- 414,979 Industrial Revenue Bonds............................................................ 6,375 6,375 Other Debt (primarily mortgages).................................................... 47,176 54,488 ------------- ------------- Total debt.......................................................................... 1,461,480 1,287,835 Less current maturities............................................................. 46,244 9,520 ------------- ------------- Long-term portion................................................................... $ 1,415,236 $ 1,278,315 ------------- ------------- ------------- -------------
40 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 10--LONG-TERM DEBT--(CONTINUED) Scheduled Maturities of Debt: Long-term debt principal payments required during the next five fiscal years are as follows (dollars in thousands):
PRINCIPAL FISCAL YEARS PAYMENTS - ---------------------------------------------------------------------- ----------- 1994................................................................ $ 46,244 1995................................................................ 38,244 1996................................................................ 56,694 1997................................................................ 58,272 1998................................................................ 135,654 ----------- $ 335,108 ----------- -----------
Recapitalization: On October 26, 1993, the Recapitalization was consummated. Pathmark borrowed $400.0 million under the Pathmark Term Loan and $50.0 million under the Pathmark Working Capital Facility, borrowed $436.6 million through the issuance of Pathmark Senior Subordinated Notes, issued $120.0 million initial principal amount of Pathmark Deferred Coupon Notes, exchanged $95.8 million principal amount of Pathmark Subordinated Debentures for $95.8 million principal amount of Holdings Subordinated Debentures and exchanged $198.5 million principal amount of Pathmark Subordinated Notes for $198.5 million principal amount outstanding of the Holdings Subordinated Notes. As part of the Recapitalization, PTK borrowed $126.1 million through the issuance of PTK DIBs in a private placement which bonds the Company has guaranteed. The proceeds from the aforementioned borrowings were used to redeem the Old Working Capital Facility, Holdings Senior Subordinated Notes and Holdings Discount Debentures and to purchase $189.2 million aggregate principal amount of the Holdings Subordinated Debentures. In addition, on October 26, 1993, Plainbridge borrowed $3.5 million under the $50.0 million Plainbridge Working Capital Facility (see Notes 3 and 18). The indebtedness under the Pathmark and Plainbridge Working Capital Facilities and the Pathmark Term Loan bear interest at floating rates. Pathmark is required to repay a portion of its borrowings under the Pathmark Term Loan each year, which commenced in January 1994, so as to retire such indebtedness in its entirety by October 31, 1999. Under the Pathmark Working Capital Facility, which expires on July 31, 1998, Pathmark can borrow or obtain letters of credit in an aggregate amount not to exceed $175.0 million subject to an annual cleanup provision commencing in Fiscal 1994. Under the terms of the Pathmark cleanup provision, in each fiscal year loans cannot exceed $50.0 million under the Pathmark Working Capital Facility for a period of 30 consecutive days. Subsequent to January 29, 1994, the Company satisfied its cleanup provision related to the Pathmark Working Capital Facility for Fiscal 1994. Under the Plainbridge Working Capital Facility, which expires in Fiscal 1996, Plainbridge can borrow or obtain letters of credit in an aggregate amount not to exceed $50.0 million subject to annual cleanup provision, commencing in Fiscal 1994. Under the terms of the Plainbridge cleanup provision, in each fiscal year, loans cannot be made for a period of 30 consecutive days. Holdings believes that Pathmark and Plainbridge have sufficient unused borrowing capacity under their respective working capital facilities which can be utilized for unforeseen or seasonal cash requirements. At January 29, 1994 and April 26, 1994, Pathmark and Plainbridge, in the aggregate, had approximately $110.2 million and $112.8 million, respectively, in unused borrowing capacity under their working capital facilities. At January 29, 1994, the Company was in compliance 41 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 10--LONG-TERM DEBT--(CONTINUED) with all of its debt covenants and based upon projected results for the upcoming fiscal year, the Company believes it will be in compliance throughout the upcoming fiscal year with its various debt covenants. The PTK DIBs accrete to a maturity value of $218.3 million in Fiscal 2003. The PTK DIBs begin paying cash interest semiannually on June 30, 1999 and have no sinking fund requirements. The Pathmark Senior Subordinated Notes accrete to a maturity value of $440.0 million in Fiscal 2003. These notes begin paying cash interest semiannually on May 1, 1994 and have no sinking fund requirements. The Pathmark Deferred Coupon Notes accrete to a maturity value of $225.3 million in Fiscal 2003. These notes begin paying cash interest semiannually on May 1, 2000 and have no sinking fund requirements. The Pathmark Subordinated Debentures mature in Fiscal 2002 and began paying semi-annual cash interest on December 15, 1993. These Debentures have no sinking fund requirements. The Pathmark Subordinated Notes mature in Fiscal 2002 and contain a sinking fund provision that requires Holdings to deposit $49.4 million (25% of the original aggregate principal amount) with the trustee of the Pathmark Subordinated Notes on June 15 in each of Fiscal 2000 and Fiscal 2001 for the redemption of the Pathmark Subordinated Notes at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date, providing for the redemption of 50% of the original aggregate principal amount of such notes prior to maturity. On April 30, 1993, the Company repaid $5.7 million of indebtedness secured by a mortgage on the distribution center of the home centers segment transferred to Plainbridge and on May 14, 1993, the Company repaid $2.5 million of indebtedness secured by mortgages on two Pathmark retail properties transferred to Plainbridge (see Notes 3 and 18). Under the Old Working Capital Facility, the Company could borrow or obtain letters of credit in an aggregate amount not to exceed $210.0 million at floating rates. On October 26, 1993, as part of the Recapitalization, the balance of $40.0 million outstanding was paid off. The Pathmark Term Loan, the Pathmark and Plainbridge Working Capital Facilities and the indentures for the recapitalized debt contain covenants, including, but not limited to, covenants with respect to the following matters: (i) limitation on indebtedness; (ii) limitation on restricted payments; (iii) limitation on transactions with affiliates; (iv) limitation on liens; (v) limitation on the issuance of preferred stock by subsidiaries; (vi) limitation on issuances of guarantees of indebtedness by subsidiaries; (vii) limitation on transfer of assets to subsidiaries; (viii) limitation on dividends and other payment restrictions affecting subsidiaries; and (ix) restriction on mergers and transfers of assets. 14.5% Holdings Senior Subordinated Notes due 1997: The Holdings Senior Subordinated Notes original maturity date was September 15, 1997. Interest was payable semi-annually in cash. On October 26, 1993, as part of the Recapitalization, the balance of $388.2 million principal amount outstanding was paid off. During Fiscal 1992, the Company retired $72.2 million principal amount of Holdings Senior Subordinated Notes, which were purchased through open market transactions utilizing a portion of the proceeds from the sale of the $200.0 million principal amount of 11.625% Subordinated Notes due 2002 (the "Subordinated Notes") as well as additional Old Working Capital Facility borrowings. In 42 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 10--LONG-TERM DEBT--(CONTINUED) addition, SMG-II purchased and made a capital contribution to the Company of $4.8 million principal amount of Senior Subordinated Notes, which were retired by the Company. 12.625% Holdings Subordinated Debentures due 2002: The Holdings Subordinated Debentures mature on June 15, 2002. Interest on the Subordinated Debentures accrued semi-annually, but was not payable to holders thereof until December 15, 1992. Interest accrued but not paid was added to the original principal amount thereof in accordance with the terms of the indenture. On October 26, 1993, as part of the Recapitalization, $189.2 million principal amount of the balance outstanding was paid off, $95.8 million of the balance outstanding was exchanged for $95.8 million of Pathmark Subordinated Debentures and $130.0 million of the balance outstanding was exchanged for $130.0 million aggregate principal amount of the PTK DIBs. 11.625% Holdings Subordinated Notes due 2002: On May 28, 1992, the Company completed a public offering of $200.0 million principal amount of the Holdings Subordinated Notes. The Subordinated Notes rank junior to indebtedness under the Bank Credit Agreement and the Senior Subordinated Notes, pari passu with the Subordinated Debentures and senior to the Discount Debentures. Interest on the Subordinated Notes is payable semi-annually. On October 26, 1993, as part of the Recapitalization, $198.5 million principal amount of the Holdings Subordinated Notes were exchanged for $198.5 million principal amount of Pathmark Subordinated Notes. Approximately $1.5 million principal amount of the Subordinated Notes remain outstanding. 13.125% Holdings Junior Subordinated Discount Debentures Due 2003. The Holdings Junior Subordinated Discount Debentures were issued at a fair market value of $122.5 million with a maturity value of $311.0 million at October 5, 2003. The original issue discount (difference between fair market value at date of issue and maturity value) was amortized on the interest method over the life of the Discount Debentures. The Discount Debentures represented unsecured subordinated obligations of the Company and did not require cash interest payments for the first five years. On October 26, 1993, as part of the Recapitalization, the Discount Debentures were redeemed. Industrial Revenue Bonds: Interest rates for the industrial revenue bonds range from 10.5%-10.9%. The bonds are payable in installments ending in Fiscal 2003. The industrial revenue bonds outstanding at January 29, 1994 are unsecured. Other Debt: Other debt includes mortgage notes which are secured by property and equipment having a net book value of $72.1 million at January 29, 1994 and $88.6 million at January 30, 1993. Rates applied to these borrowings range from 4%-11%. The borrowings are payable in installments ending in Fiscal 2000. Fair Value of Debt Instruments: The estimated fair value of the debt instruments referred to above were based on the quoted market prices at January 29, 1994 and January 30, 1993, to the extent such debt instrument were publicly traded. Management has evaluated all non-publicly traded debt instruments and has determined based on interest rates and terms, that the fair value of such instruments approximates carrying value. At 43 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 10--LONG-TERM DEBT--(CONTINUED) January 29, 1994 and January 30, 1993, the fair value of the Company's debt instruments in the aggregate was $1,509.8 million and $1,370.9 million, respectively. NOTE 11--INTEREST EXPENSE Interest expense is comprised of the following (dollars in thousands):
FISCAL YEARS ------------------------------------- 1993 1992 1991 ----------- ----------- ----------- Pathmark Term Loan......................................................... $ 6,471 $ -- $ -- Pathmark Working Capital Facility.......................................... 978 -- -- Plainbridge Working Capital Facility....................................... 118 -- -- Pathmark Senior Subordinated Notes Amortization of original issue discount.................................. 93 -- -- Currently payable........................................................ 11,176 -- -- Pathmark Deferred Coupon Notes Accruable but not payable................................................ 3,312 -- -- Pathmark Subordinated Debentures........................................... 3,156 -- -- Pathmark Subordinated Notes................................................ 6,068 -- -- Amortization of PTK DIBs original issue discount........................... 3,549 -- -- Old bank credit agreement.................................................. 4,337 7,595 35,257 Holdings Senior Subordinated Notes......................................... 41,573 60,550 68,796 Holdings Subordinated Debentures Accruable but not payable................................................ -- 18,480 45,688 Currently payable........................................................ 38,711 32,744 -- Holdings Subordinated Notes................................................ 17,253 15,629 -- Holdings Discount Debentures............................................... 20,794 9,196 -- Amortization of Holdings original issue discount........................... 951 18,295 23,870 Amortization of debt issuance costs........................................ 4,767 4,369 5,208 Obligations under capital leases........................................... 14,818 15,500 20,354 Mortgages.................................................................. 4,491 4,853 5,408 Other, net................................................................. 6,688 10,562 11,927 ----------- ----------- ----------- Interest expense........................................................... $ 189,304 $ 197,773 $ 216,508 ----------- ----------- ----------- ----------- ----------- -----------
The Company made cash interest payments of $196.6 million in Fiscal 1993, $132.8 million in Fiscal 1992 and $135.3 million in Fiscal 1991. 44 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 12--LEASES At January 29, 1994 the Company was liable under terms of noncancellable leases for the following minimum lease commitments (dollars in thousands):
CAPITAL OPERATING LEASES LEASES ----------- ----------- 1994.................................................................................... $ 34,256 $ 31,360 1995.................................................................................... 31,076 30,852 1996.................................................................................... 27,436 29,530 1997.................................................................................... 24,309 27,772 1998.................................................................................... 20,449 26,645 Later years............................................................................. 159,230 273,732 ----------- ----------- Total minimum lease payments(a)......................................................... 296,756 $ 419,891 ----------- ----------- Less executory costs (such as taxes, maintenance and insurance)......................... 2,953 ----------- Net minimum lease payments.............................................................. 293,803 Less amounts representing interest...................................................... 143,453 ----------- Present value of net minimum lease payments (including current installments of $18,844)................................................................................ $ 150,350 ----------- -----------
- --------------- (a) Net of sublease income of $12,472 and $68,203 for capital and operating leases, respectively. During Fiscal 1993, Fiscal 1992 and Fiscal 1991 the Company incurred capital lease obligations of $25.7 million, $8.7 million and $19.4 million, respectively, in connection with lease agreements to acquire property and equipment. Rent expense included in continuing operations under all operating leases having noncancellable terms of more than one year is summarized as follows (dollars in thousands):
FISCAL YEARS ------------------------------- 1993 1992 1991 --------- --------- --------- Minimum rentals................................................................ $ 43,716 $ 37,894 $ 47,738 Contingent rentals(b).......................................................... 193 196 1,890 Less rentals from subleases.................................................... (4,329) (3,831) (5,777) --------- --------- --------- Rent expense................................................................... $ 39,580 $ 34,259 $ 43,851 --------- --------- --------- --------- --------- ---------
- --------------- (b) Primarily based on sales. NOTE 13--LABOR DISPUTE The Company's pretax earnings in the second quarter of Fiscal 1993 were adversely impacted by a labor dispute and the related promotional programs implemented subsequent to such labor dispute in order to regain sales levels. The Company, with three other major supermarket companies (ShopRite, Foodtown and Grand Union), conducted separate but simultaneous negotiations with respect to an expired labor contract. The major issues of the contract concerned health care and related benefits. On May 7, 1993, the union began selective strikes against one of the Company's competitors. Over the course of the next three weeks, the labor dispute expanded until, on May 28, 1993, union members at over 250 supermarkets, including 53 Pathmark supermarkets, were either on strike or locked out. On May 29, 1993, the labor dispute was settled and, in June, the union membership ratified a new four-year contract, and the membership returned to work. 45 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 14--PROVISION FOR STORE CLOSINGS Effective with the beginning of the second quarter of Fiscal 1993, the Company made a decision to close or dispose of five stores which the Company believes will continue to be unprofitable. As a result, the Company recorded a pretax charge in the second quarter of Fiscal 1993 of approximately $6.0 million. Operating results for these five stores have been excluded from the consolidated statements of operations for the 52 weeks ended January 29, 1994 since the beginning of the second quarter of Fiscal 1993. NOTE 15--CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK The Company's Exchangeable Preferred Stock, which has a maturity date of December 31, 2007, consists of 9,000,000 authorized shares of which 4,890,671 shares are issued and outstanding at January 29, 1994. The fair market value of the Exchangeable Preferred Stock at date of original issuance of October 5, 1987 was $20 per share and the liquidation preference is $25 per share. Due to its mandatory redemption requirements, the Exchangeable Preferred Stock has been stated on the balance sheet as Redeemable Securities. The difference between fair market value at date of issue and liquidation preference is being accreted quarterly. Cumulative dividends at the rate of $3.52 per annum, payable quarterly, accrue on each share of Exchangeable Preferred Stock. The Old Bank Credit Agreement prohibited the payment of cash dividends through April 30, 1993. Dividends in additional shares of Exchangeable Preferred Stock were paid in lieu of cash at the rate of .0352 shares per share and recorded at fair value at the date of dividend issuance through October 15, 1992. As of January 29, 1994, the Company is in arrears on the payment of five quarterly dividends on the Exchangeable Preferred Stock and does not expect to receive cash flow sufficient to permit payments of dividends on the Exchangeable Preferred Stock in the foreseable future. In the event of any liquidation, dissolution or winding up of the Company, holders of the Exchangeable Preferred Stock will be entitled to receive their full liquidation preference per share, together with accrued and unpaid dividends, before the distribution of any assets of the Company to the holders of shares of the Company's common stock or other shares which would rank junior to the Exchangeable Preferred Stock. The Exchangeable Preferred Stock may be redeemed, at the option of the Company, in whole or in part, at liquidation preference, together with all accrued and unpaid dividends to the redemption date. Optional redemption of the Exchangeable Preferred Stock will be subject to restricted payments and other similar provisions of the Company's debt instruments. Commencing December 31, 2004, the Company is required to redeem in each year 20% of the highest amount at any time outstanding of the Exchangeable Preferred Stock, calculated to retire 60% of the issue prior to final maturity with the remaining amount of the issue to be redeemed at maturity. If an amount equal to six quarterly dividends is in arrears in whole or in part, the holders of the Exchangeable Preferred Stock voting as a class, may elect two members of the Board of Directors of the Company at a special meeting called by the Company until such time as all accrued dividends on the Exchangeable Preferred Stock shall have been paid for all dividend periods. The Company has the option to require holders to exchange the Exchangeable Preferred Stock on any dividend payment date, in whole or in part, for exchange debentures (the "Exchange Debentures") of the Company. Such option is available at any time if (a) no event of default exists under any of the Company's loan agreements and (b) the exchange is allowed under the provisions of the limitation on 46 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 15--CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK--(CONTINUED) the Company's indebtedness and other applicable provisions of the Company's loan agreements. Any such exchange will result in the issuance of Exchange Debentures in an amount equal to the aggregate liquidation preference of all shares of Exchangeable Preferred Stock being exchanged into Exchange Debentures and an amount equal to all accrued but unpaid dividends. During Fiscal 1991, SMG-II made a capital contribution to the Company of 2.8 million shares of Exchangeable Preferred Stock purchased pursuant to the Exchangeable Preferred Stock Offer and open market transactions. The Company has retired these shares (see Note 1). At January 29, 1994, the fair value of the Exchangeable Preferred Stock based on quoted market price was $136.9 million. Exchangeable Preferred Stock activity for the three years ended January 29, 1994 was as follows (dollars in thousands):
NUMBER OF SHARES AMOUNT ------------ ----------- Balance, February 2, 1991............................................................ 6,647,649 $ 123,392 Retirement of shares contributed from SMG-II....................................... (2,808,772) (52,136) Non-cash dividends................................................................. 569,728 12,395 Accretion.......................................................................... -- 1,418 ------------ ----------- Balance, February 1, 1992............................................................ 4,408,605 85,069 Non-cash dividends................................................................. 482,066 12,214 Accretion.......................................................................... -- 1,508 ------------ ----------- Balance, January 30, 1993............................................................ 4,890,671 98,791 Accretion.......................................................................... -- 1,555 ------------ ----------- Balance, January 29, 1994............................................................ 4,890,671 $ 100,346 ------------ ----------- ------------ -----------
The terms of the Exchangeable Preferred Stock provide for cumulative quarterly dividends at an annual rate of $3.52 per share when, as, and if declared by the Board of Directors of the Company. Dividends for the first 20 quarterly dividend periods (through October 15, 1992) were paid at the Company's option in additional shares of Exchangeable Preferred Stock. Prior to the Recapitalization, the Old Bank Credit Agreement and the terms of the indentures governing the Company's public debt restricted the payment of cash dividends on the Exchangeable Preferred Stock unless certain conditions were met, including tests relating to earnings and cash flow ratios of the Company. Prior to the Recapitalization, the Company had not met the conditions permitting cash dividend payments on the Exchangeable Preferred Stock. However, these tests were not deemed to be a default under the Old Bank Credit Agreement or Holdings public debt. Holdings does not expect to receive cash flow sufficient to permit payments of dividends on the Holdings Exchangeable Preferred Stock in the foreseeable future. All dividends not paid in cash will cumulate at the rate of $3.52 per share per annum, without interest, until declared and paid. As such, at January 29, 1994, the unpaid dividends of $21.5 million was accrued and included in other noncurrent liabilities. Dividends on the Exchangeable Preferred Stock must be paid in full for all prior periods as of the most recent dividend payment date before any dividends, other than dividends payable in shares of the Company's common stock or any other class of the Company's capital stock ranking junior to the Exchangeable Preferred Stock, can be paid or set apart for payment to holders of common stock or any other shares which would rank junior to the Exchangeable Preferred Stock. 47 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 15--CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK--(CONTINUED) In addition, dividends on the Exchangeable Preferred Stock must be paid in full for all prior periods before the redemption or purchase by the Company of shares of common stock or any other shares which would rank junior to the Exchangeable Preferred Stock. NOTE 16--COMMON STOCK The Company's authorized common stock, par value $.01 per share, consists of 1,075,000 shares of Class A common stock and 1,000,000 shares of Class B common stock of which 650,675 shares and 320,000 shares, respectively, were issued and outstanding at January 29, 1994 and January 30, 1993. Holders of shares of Class A common stock are entitled to one vote per share on all matters to be voted on by stockholders. Holders of shares of Class B common stock are not entitled to any voting rights, except as required by law or as otherwise provided in the Restated Certificate of Incorporation of the Company. Subject to compliance with certain procedures, holders of Class B common stock may exchange their shares for Class A common stock and holders of Class A common stock may exchange their shares for shares of Class B common stock on a share-for-share basis. Upon liquidation or dissolution of the Company, holders of the Company's common stock are entitled to share ratably in all assets available for distribution to stockholders after payment of all prior claims, including liquidation rights of any Exchangeable Preferred Stock outstanding. Holders of the Company's common stock have no preemptive or subscription rights. On February 4, 1991, as a result of the consummation of the Exchange Offer, all shares of the Company's Class A common stock and Class B common stock were owned directly by SMG-II. SMG-II is effectively a holding company for the operations of the Company (see Note 1). The Company and certain executives of Supermarkets ("Management Investors") entered into a management subscription agreement under which, on October 5, 1987, the Management Investors purchased an aggregate of 100,000 shares of Class A common stock for consideration of $100 per share. In connection with the Exchange Offer, the Management Investors entered into an agreement (the "Management Investors Exchange Agreement") with respect to the SMG-II common stock which was received in exchange for the Company's Class A common stock. Under the terms of the Bank Credit Agreement there are limitations in the amount of repurchases from Management Investors to $2 million during any fiscal year and $5 million in the aggregate. Prior to the Exchange Offer, all of the Class A common stock held by Management Investors was classified as Redeemable Securities. In Fiscal 1991, prior to the Exchange Offer, the Company repurchased 3,490 shares from Management Investors at an aggregate cost of $.4 million. Certain Management Investors who purchased shares of Class A common stock borrowed a portion of the purchase price from the Company and were required to deliver a note to the Company ("Recourse Note") in the principal amount of the loan. Interest on the Recourse Note is to be paid annually and the principal is payable on the tenth anniversary of the date of issue. Each Management Investor who issued a Recourse Note was required to enter into a stock pledge agreement ("Stock Pledge Agreement") with the Company pursuant to which the Management Investor pledged shares of Class A common stock to secure the repayment of the Recourse Note. In connection with the Exchange Offer, each Management Investor who issued a Recourse Note was required to execute an amendment to the Stock Pledge Agreement which provided for the substitution of the SMG-II common stock received in the Exchange Offer for the Company Class A common stock to secure the repayment of the Recourse Note. In connection with the repurchases of common stock from Management Investors, approximately $.1 million of Recourse Notes were repaid during Fiscal 1991. No payments were made 48 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 16--COMMON STOCK--(CONTINUED) during Fiscal 1993 and Fiscal 1992. Recourse Notes in the amount of approximately $1.7 million were outstanding at January 29, 1994 and January 30, 1993. The Recourse Notes have been classified as Other Assets. NOTE 17--STOCK OPTION PLANS The Management Investors 1987 Stock Option Plan (the "Management Plan") and the 1987 Employee Stock Option Plan (the "Employee Plan") were approved by the Board of Directors of the Company on November 24, 1987 and by the Stockholders on December 21, 1987. Under the terms of the Management and the Employee Plans, associates receive either incentive stock options or nonqualified stock options, the duration of which may not exceed ten years from the date of grant, to purchase shares of the Company's Class A common stock. In connection with the Exchange Offer, adjustments to outstanding options under the Management and the Employee Plans were made. As a result of these adjustments, each option under the Management and the Employee Plans outstanding on February 4, 1991 became an option for the purchase of an equal number of shares of SMG-II Class A common stock. NOTE 18--EXTRAORDINARY ITEMS The extraordinary items reflected in the statements of operations are comprised of (dollars in thousands):
TAX NET GAIN PROVISION GAIN FISCAL 1993 (LOSS) (BENEFIT) (LOSS) - ------------------------------------------------------------------------ ------------ ---------- ------------ Loss on early extinguishment of indebtedness............................ $ (115,509) $ (9,354) $ (106,155) ------------ ---------- ------------ ------------ ---------- ------------ FISCAL 1992 - ------------------------------------------------------------------------ Loss on acceleration of Term Loan paydown............................... $ (1,087) $ (455) $ (632) Loss on early extinguishment of Senior Subordinated Notes............... (6,952) (2,821) (4,131) ------------ ---------- ------------ Extraordinary items..................................................... $ (8,039) $ (3,276) $ (4,763) ------------ ---------- ------------ ------------ ---------- ------------ FISCAL 1991 - ------------------------------------------------------------------------ Gain on early extinguishment of Discount Debentures..................... $ 27,804 $ 11,214 $ 16,590 Loss on acceleration of Term Loan paydown............................... (2,257) (943) (1,314) Loss on early extinguishment of Senior Subordinated Notes............... (393) (172) (221) ------------ ---------- ------------ Extraordinary items..................................................... $ 25,154 $ 10,099 $ 15,055 ------------ ---------- ------------ ------------ ---------- ------------
On October 26, 1993, in connection with the Recapitalization, the Company repaid or exchanged $1.3 billion of debt through the issuance of new Pathmark and PTK indebtedness. This repayment of outstanding debt and origination of new debt included premiums and other expenses, including the write off of existing deferred financing fees associated with debt which was extinguished, which resulted in a net loss on early extinguishment of debt of $106.0 million. On July 31, 1993, in connection with the Recapitalization, the Company repaid $2.5 million principal amount of indebtedness secured by mortgages on two retail properties to be transferred to Plainbridge. This repayment resulted in a net loss on early extinguishment of debt of $0.06 million. 49 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 18--EXTRAORDINARY ITEMS--(CONTINUED) On May 1, 1993, in connection with the Recapitalization, the Company repaid $5.7 million aggregate principal amount of indebtedness secured by a mortgage on the distribution center of the home centers segment to be transferred to Plainbridge. This repayment resulted in a net loss on early extinguishment of debt of $0.1 million. In May 1992, the Company paid off the remaining $132.0 million principal outstanding under the Term Loan by utilizing a portion of the proceeds from the sale of the Subordinated Notes resulting in the accelerated amortization of the deferred financing costs related to the Term Loan of $1.1 million, before applicable income tax benefit of $0.5 million. In June 1992, utilizing a portion of the proceeds from the sale of the Subordinated Notes as well as additional Working Capital Facility borrowings, the Company, through open market purchases, purchased $71.0 million principal amount of Senior Subordinated Notes at a cost of $76.0 million. The premium paid of $5.0 million, as well as the accelerated amortization of deferred financing costs and transaction expenses of $1.5 million related to the repurchased Senior Subordinated Notes, resulted in a loss of $6.5 million, before applicable income tax benefit of $2.6 million. In October 1992, SMG-II purchased and subsequently contributed to the Company $4.8 million principal amount of Senior Subordinated Notes and the Company, through open market purchases, purchased an additional $1.2 million principal amount of Senior Subordinated Notes. The premium paid on the contributed and purchased Senior Subordinated Notes of $0.3 million, as well as the accelerated amortization of deferred financing costs and transaction expenses of $0.1 million related to the repurchased Senior Subordinated Notes resulted in a loss of $0.4 million, before applicable income tax benefit of $0.2 million. In March 1991, SMG-II made a capital contribution to the Company of $95.4 million face value of the Company's Discount Debentures which were acquired by SMG-II in February 1991 pursuant to the Discount Debenture Offer and additional open market purchases for an aggregate cost of $33.2 million. The Discount Debentures, which had a net accreted book value of $62.9 million, were retired by the Company resulting in a gain of $27.8 million, net of $1.9 million of transaction expenses, before applicable income tax provision of $11.2 million. In December 1991, the Company permanently reduced its Term Loan $155 million by applying a portion of the net cash proceeds from the disposal of the Purity Operations resulting in an accelerated amortization of the deferred financing cost related to the Term Loan of $2.3 million, before applicable income tax benefit of $0.9 million. In January 1992, SMG -II made a capital contribution to the Company of $9.8 million face value of the Company's Senior Subordinated Notes which were acquired by SMG-II through open market purchases in February 1991. The Company has retired the Senior Subordinated Notes resulting in an accelerated amortization of deferred financing costs and transactions expenses of $0.4 million, before applicable income tax benefit of $0.2 million. Income taxes on the extraordinary items for Fiscal 1992 and Fiscal 1991 have been provided based on statutory income tax rates. 50 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 19--RELATED PARTY TRANSACTIONS The following is a summary of the related party agreements and transactions between Pathmark and Plainbridge: 1) Spin-off: A) Services Agreements: Pathmark, Plainbridge and the Company have entered into agreements pursuant to which Pathmark will continue to provide certain administrative services relating to the warehouse, distribution and home centers operations of Plainbridge and certain administrative services to Chefmark. Such services include, among other things, legal, human resources, data processing, insurance, accounting, tax, treasury and property management services. Each of the agreements have a term of five years, with renewal options at the end of such term. The cost of the services under the Plainbridge and Chefmark service agreements in the aggregate was approximately $4.2 million for the period ended January 29, 1994. B) The Logistical Services Agreement: In connection with Plainbridge Spin-Off, Pathmark Plainbridge have entered into the Logistical Services Agreement to provide for the supply by Plainbridge to Pathmark of most of the merchandise sold in Pathmark's retail stores and for the provision of warehousing, distribution and other logistical services relating to the supply of such merchandise. Pursuant to the Logistical Services Agreement, Pathmark directs the purchase of the merchandise to be provided to it by Plainbridge. Pathmark negotiates directly with vendors regarding the types of merchandise required, the quantities needed, delivery schedules, pricing, and all other terms and conditions of sale. All merchandise is ordered by Pathmark for the account of Plainbridge, which will pay for and will retain title to such merchandise until it has been delivered to Pathmark. If requested by a vendor, Pathmark, in its sole discretion, may guarantee payment of such orders by Plainbridge. At January 29, 1994, Pathmark has guaranteed approximately $42.8 million of such orders. In general, the Logistical Services Agreement also requires Plainbridge to perform the same services in substantially the same manner as they were performed by Pathmark's warehouse and distribution group prior to the Plainbridge Spin-Off. The Logistical Services Agreement requires that, with certain exceptions and subject to certain termination rights, Plainbridge is to sell to Pathmark, for a period of ten years, to the extent requested by Pathmark, all of Pathmark's merchandise requirements for both its existing and future stores. In addition, Pathmark has five one-year renewal options following the expiration of the original ten-year term. The Logistical Services Agreement does not limit Pathmark's ability to purchase goods from other suppliers, and merchandise that Pathmark customarily obtains directly from vendors is excluded from the Logistical Services Agreement. The Logistical Services Agreement provides that Plainbridge is to store and deliver to Pathmark all merchandise purchased at Pathmark's directions. Pathmark is required in good faith to designate Plainbridge as its carrier with respect to merchandise customarily shipped directly from vendors to Pathmark's stores. Plainbridge is required to maintain inventory with a book value of at least $130.0 million for the exclusive use of Pathmark, and to the extent that the inventory value falls below such level, Plainbridge must purchase sufficient merchandise to maintain such level to the extent such merchandise is ordered by Pathmark. Plainbridge is also required to accommodate physical annual increases of up to five percent in the volume of Pathmark directed purchases of merchandise to be handled by Plainbridge. Pathmark is to reimburse Plainbridge for all reasonable incremental out-of- 51 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 19--RELATED PARTY TRANSACTIONS--(CONTINUED) pocket costs (but not capital costs) incurred by Plainbridge for the storage and handling of merchandise that is in excess of the five percent annual capacity increase, provided that such out-of-pocket costs do not exceed the costs of storage and handling at local independent warehouses. Upon the delivery of merchandise to Pathmark's stores by Plainbridge, Pathmark will owe Plainbridge for the cost of the merchandise plus a specified variable payment. This payment will vary according to the type and value of the merchandise. A minimum annual fee will be payable by Pathmark to the extent that the aggregate of the variable fees described above payable in any year does not exceed the minimum annual fee. The annual fee for Fiscal 1994 is $134.9 million and such fee is adjusted upward (but not downward) each fiscal year by the rate of inflation. This fee approximates the historical cost to Pathmark of operating the warehouse, distribution and transportation facilities. The initial minimum annual fee was determined by applying the variable fees to 95% of the volume of merchandise purchased in Fiscal 1992 by Pathmark. Pathmark is obligated to pay the minimum annual fee to Plainbridge irrespective of whether Pathmark purchases merchandise from other suppliers, except in cases of force majeure or when Plainbridge shall have materially breached the Logistical Services Agreement or shall have failed to obtain or maintain the licenses and permits needed to operate its business. The minimum annual fee will be reduced to the extent that the volume of merchandise purchases decreases as a result of any store dispositions by Pathmark and will also be reduced if the volume of Pathmark-directed merchandise falls below 90% of the actual volume achieved in Fiscal 1992, to the extent that Plainbridge is, as a result able to realize reductions in its operating costs. Under this agreement, Pathmark paid Plainbridge approximately $36.1 million during the period from the date of the Plainbridge Spin-Off to January 29, 1994. Plainbridge grants Pathmark an allowance, based on the amount of merchandise purchased by Plainbridge at Pathmark's direction, which is credited against the variable fees and minimum annual fee obligation. For the period from the date of the Plainbridge Spin-Off through January 29, 1994, an allowance of approximately $6.6 million was received by Pathmark. In addition, certain cost benefits derived from increases in the volume or value of merchandise purchased from Plainbridge by Pathmark or third parties is to be shared equally between Pathmark and Plainbridge. Estimated fees are payable in weekly installments with an annual reconciliation for the amount of fees that are actually payable for such year. Pathmark will pay to Plainbridge the costs of the merchandise at the time a vendor requires payment from Plainbridge. The Logistical Services Agreement provides that Plainbridge may sell merchandise and provide logistical services to third parties, although it is not permitted to sell merchandise to supermarkets, drug stores and other retail stores stocking merchandise carried by Pathmark in Pathmark's current market areas, except for retail stores that do not in the ordinary course of business engage to a significant degree in the sale of food or pharmacy related products, without Pathmark's prior written consent which consent may not be unreasonably withheld. Plainbridge is also permitted to "piggyback" such third parties' orders onto Pathmark's orders from vendors, so long as they do not interfere with Pathmark's delivery schedules, quantity needs or other requirements. Plainbridge and Pathmark are allowed to terminate the Logistical Services Agreement if the other (i) materially breaches its terms and fails to cure such breach for 60 days after written notice has been provided by the other party or (ii) experiences certain insolvency events. Additionally, following the fourth anniversary of the date of the Logistical Services Agreement, the Company has the option of terminating it at will on six months' notice. If Pathmark terminates the Logistical Services Agreement because of a material breach by, or insolvency of, Plainbridge, Pathmark has the right to purchase, within 30 days of the termination, that portion of the assets of Plainbridge which is essential to the support of Plainbridge's obligations to Pathmark under the Logistical Services Agreement (the 52 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 19--RELATED PARTY TRANSACTIONS--(CONTINUED) "Pathmark Distribution Assets") at the lower of (i) their net book value or (ii) their fair market value. If the Company exercises its at will option to terminate the Logistical Services Agreement, the Company is required to offer to purchase the Pathmark Distribution Assets at their fair market value. If Plainbridge terminates the Logistical Services Agreement because of a material breach by, or insolvency of Pathmark, Plainbridge has the right to sell (and Pathmark will have the obligation to buy) the Pathmark Distribution Assets at their fair market value within 30 days of such termination. Other than in the ordinary course of business, Plainbridge is not permitted to sell any of the Pathmark Distribution Assets without Pathmark's prior written consent. Additionally, in the event of a change in the ultimate beneficial ownership of Plainbridge's voting stock such that a person, other than ML & Co. or an affiliate of ML & Co. (the majority shareholder of Holdings), holds a majority of such stock, the Company has for a period of two years, the irrevocable and exclusive right to purchase any or all of the Pathmark Distribution Assets at their fair market value. Other provisions of the Logistical Services Agreement include (i) that Plainbridge passes on to Pathmark all discounts and allowances made available to it by vendors in respect of merchandise purchased for Pathmark, unless such discounts or allowances were made available solely as a result of actions taken or not taken by Plainbridge, (ii) that Plainbridge must ensure that merchandise quality meets or exceeds the standards established by Pathmark for such merchandise, and that Pathmark may place its representatives at the Distribution Facilities to ensure that such quality is maintained, (iii) that Plainbridge deliver merchandise to Pathmark at a 98% or better level of service measured in accordance with Pathmark's practices prior to the Plainbridge Spin-Off, (iv) that Pathmark pay Plainbridge for any use of trailers for storage and (v) that each of Pathmark and Plainbridge cooperate to reduce costs and improve service levels. 2) Other: In conjunction with the Plainbridge Spin-Off, certain real property with a net book value of $64.5 million was transferred to Plainbridge and is being leased to Pathmark at rentals which the Company believes approximate fair value. For the period from the date of the Plainbridge Spin-Off through January 29, 1994, such rentals amounted to $1.1 million. In addition, Pathmark is leasing six store properties to Plainbridge with a net book value of $9.5 million. The Company believes that the rentals received from Plainbridge approximate fair value. For the period from the date of the Plainbridge Spin-Off through January 29, 1994, such rentals amounted to $1.0 million. As discussed in Note 16, certain Management Investors issued Recourse Notes to the Company related to the purchase of the Company's Class A common stock. These Management Investors have pledged shares of SMG-II Class A common stock to secure the repayment of the Recourse Notes. Recourse Notes in the amount of $1.7 million were outstanding at January 29, 1994 and January 30, 1993. During Fiscal 1993, in conjunction with the Recapitalization, the Company paid ML & Co. fees of $12.8 million. The Company engaged ML & Co. to act as dealer-manager in connection with the Discount Debenture Offer and the Exchangeable Preferred Stock Offer for which ML & Co. was paid fees of $1.2 million in Fiscal 1991. During Fiscal 1991, the Company also paid ML & Co. an advisory fee of $2.0 million relating to the sale of the Purity Operations. 53 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 19--RELATED PARTY TRANSACTIONS--(CONTINUED) SMG-II, the Company's parent, purchased $9.8 million of the Company's Senior Subordinated Notes through open market purchases in February and March 1991. The Senior Subordinated Notes were contributed to the Company by SMG-II on January 10, 1992. Interest expense of approximately $1.5 million was recorded by the Company during the period the $9.8 million of Senior Subordinated Notes were held by SMG-II. NOTE 20--BENEFIT PLANS The Company has several noncontributory defined benefit pension plans covering substantially all nonunion and some union associates. Pension benefits to retired and terminated vested associates are primarily based upon their length of service and a percentage of qualifying compensation. The Company's funding policy, which is consistent with federal funding requirements, is intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. The following table sets forth the funded status of the pension plans and amounts recognized in the Company's financial statements at January 29, 1994 and January 30, 1993 (dollars in thousands):
JANUARY 29, 1994 JANUARY 30, 1993 -------------------------- -------------------------- ASSETS ACCUMULATED ASSETS ACCUMULATED EXCEED BENEFITS EXCEED BENEFITS ACCUMULATED EXCEED ACCUMULATED EXCEED BENEFITS ASSETS BENEFITS ASSETS ------------ ------------ ------------ ------------ Actuarial present value of accumulated benefit obligation: Vested............................................ $ (93,214) $ (15,852) $ (84,607) $ (14,505) Unvested.......................................... (6,194) (149) (5,943) (77) ------------ ------------ ------------ ------------ Total............................................. (99,408) (16,001) (90,550) (14,582) Plan assets at fair value.............................. 147,329 508 137,345 58 ------------ ------------ ------------ ------------ Plan assets higher (lower) than accumulated benefit obligation............................................. $ 47,921 $ (15,493) $ 46,795 $ (14,524) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Actuarial present value of projected benefit obligation................................... $ (131,877) $ (17,657) $ (119,067) $ (15,633) Plan assets at fair value.............................. 147,329 508 137,345 58 ------------ ------------ ------------ ------------ Plan assets higher (lower) than projected benefit obligation............................................. 15,452 (17,149) 18,278 (15,575) Unrecognized net loss (gain) from past experience different from that assumed and effects of changes in assumptions............................................ (13,034) 535 (12,904) 746 Unrecognized prior service cost........................ 1,086 392 1,951 151 ------------ ------------ ------------ ------------ Prepaid (accrued) pension cost......................... $ 3,504 $ (16,222) $ 7,325 $ (14,678) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Assets of the Company's pension plans are invested in marketable securities which are primarily equities of domestic corporations, U.S. Government instruments and money market investments. 54 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 20--BENEFIT PLANS--(CONTINUED) The following table provides the assumptions used in determining the actuarial present value of the projected benefit obligation at January 29, 1994 and January 30, 1993:
JANUARY 29, JANUARY 30, 1994 1993 ------------- ------------- Weighted average discount rate....................................................... 7.25 % 7.75 % Rate of increase in future compensation levels....................................... 5.5 6.25 Expected long-term rate of return on plan assets..................................... 9.5 9.5
These changes in assumptions used in determining the actuarial present value of the projected benefit obligation will not have a material impact on the Company's net pension cost for Fiscal 1994. Net periodic pension cost included in continuing operations includes the following components (dollars in thousands):
FISCAL YEARS ---------------------------------- 1993 1992 1991 ---------- ---------- ---------- Service cost of benefits earned during the period.......................... $ 3,915 $ 4,018 $ 5,737 Interest cost on projected benefit obligation.............................. 8,530 8,499 9,440 Actual gain on plans' assets............................................... (10,352) (9,221) (25,944) Deferred gain (loss)....................................................... 55 (583) 14,743 ---------- ---------- ---------- Net periodic pension cost.................................................. $ 2,148 $ 2,713 $ 3,976 ---------- ---------- ---------- ---------- ---------- ----------
The Company also contributes to many multi-employer plans which provide defined benefits to certain union associates. The Company's contributions to these multi-employer plans were $17.9 million in Fiscal 1993, $17.7 million in Fiscal 1992 and $20.0 million in Fiscal 1991. The Company sponsors a savings plan for eligible nonunion associates. Contributions under the plan are based on specified percentages of associate contributions. The Company's contribution to the savings plan were $4.0 million in Fiscal 1993, $3.0 million in Fiscal 1992 and $3.3 million in Fiscal 1991. The Company has established and funded a Voluntary Employee Benefit Association ("VEBA") to provide for certain employee health benefits. The Company's tax-deductible contributions to the VEBA were $25.8 million in Fiscal 1993, $21.3 million in Fiscal 1992 and $24.7 million in Fiscal 1991. NOTE 21--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS Effective January 31, 1993, the Company adopted SFAS No. 106. Under SFAS No. 106, the Company is required to accrue the expected cost of providing postretirement benefits, principally health care and life insurance benefits, over the working careers of the Company's associates. The Company previously expensed the cost of these benefits as claims were paid. SFAS No. 106 allows two methods for recognizing the transition obligation, which is defined as the unfunded and unrecognized accumulated postretirement benefit obligation at the date of adoption. This obligation could be recognized immediately as an earnings charge in the year of the change, as the effect of a change in accounting principles, or deferred and amortized as a component of net periodic postretirement benefits cost. The Company recognized the transition obligation immediately upon adoption. The operating results for the year ended January 29, 1994 include the effect of adopting the SFAS No. 106 transition obligation as of January 31, 1993 on an immediate recognition basis. The resulting $15.6 million charge represents the accumulated postretirement benefit obligation at January 31, 1993 amounting to $26.9 million, less an income tax benefit of approximately $11.3 million, determined utilizing an assumed discount rate of 7.75%. This obligation was determined by application of the provisions of the Company's medical plans including established maximums and sharing of costs, 55 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 21--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS--(CONTINUED) relevant actuarial assumptions and health-care cost trend rates projected at 14.25% and grading down to 5.75% which is reached in Fiscal 1999. The effect of a 1% change in the assumed cost trend rate would change the accumulated postretirement benefit obligation by approximately $4.0 million as of January 29, 1994 and the net periodic postretirement benefit cost by $0.4 million for Fiscal 1993. The assumed discount rate used in determining the postretirement benefit obligation as of January 29, 1994 was 7.25%. This change in assumption used in determining the actuarial present value of the projected benefit obligation will not have a material impact on the Company's net periodic postretirement benefit cost for Fiscal 1994. The annual charges recorded by the Company on a pay-as-you-go (cash basis) amounted to $1.2 million in Fiscal 1992 and Fiscal 1991. In Fiscal 1993, the effect of adopting SFAS No. 106 reduced the Company's pretax earnings from continuing operations by $1.8 million, representing the difference between the accrual in accordance with SFAS No. 106 and the amount paid with respect to these benefits. The following table provides information on the status of the plans (dollars in thousands):
JANUARY 29, 1994 ----------- Accumulated postretirement benefit obligation: Retirees........................................................................................... $ 9,995 Other active plan participants..................................................................... 25,590 ----------- Total................................................................................................ $ 35,585 ----------- -----------
Net postretirement benefit cost related to continuing operations for the year ended January 29, 1994 consisted of the following components (dollars in thousands):
FISCAL YEAR 1993 ----------- Service cost of benefits earned during the year...................................................... $ 995 Interest cost on accumulated postretirement benefit obligation....................................... 2,241 ----------- Net postretirement benefit cost...................................................................... $ 3,236 ----------- -----------
NOTE 22--POSTEMPLOYMENT BENEFITS In the fourth quarter of Fiscal 1993, the Company adopted SFAS No. 112. Under SFAS No. 112, the Company is required to accrue the expected cost of providing postemployment benefits, primarily long-term disability, over the working careers of the Company's associates. The Company previously expensed the cost of these benefits as claims were paid. The effect of this change as of January 31, 1993 resulted in a charge to income of $2.5 million, net of an income tax benefit of $1.8 million, and has been presented as a cumulative effect of a change in accounting method in the accompanying consolidated statement of operations for Fiscal 1993. This obligation was determined by application of the provisions of the Company's long-term disability plan including age of active claimants at disability and at valuation, length of time on disability and the probability of claimant remaining on disability to maximum duration. These liabilities are recorded at their present value utilizing a discount rate of 4%. The annual charges recorded by the Company on a pay-as-you-go (cash basis) amounted to $0.7 million in Fiscal 1992 and $1.0 million in Fiscal 1991. In Fiscal 1993, the effect of adopting SFAS No. 112 increased the Company's pretax earnings from continuing operations by $0.3 million, representing the difference between the accrual and interest charge in accordance with SFAS No. 112 and the amount paid with respect to these benefits. 56 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 22--POSTEMPLOYMENT BENEFITS--(CONTINUED) The accumulated postemployment benefit obligation as of January 29, 1994 is $4.9 million. The net postemployment benefit cost for continuing operations for the year ending January 29, 1994 consisted of the following components (dollars in thousands):
FISCAL YEAR 1993 ------------- Service cost of benefits earned during year.......................................................... $ 335 Interest cost on accumulated postemployment obligation............................................... 186 ------ Net postemployment benefit cost...................................................................... $ 521 ------ ------
NOTE 23--INCOME TAXES The income tax provision (benefit) from continuing operations is comprised of the following (dollars in thousands):
FISCAL YEARS ---------------------------------- 1993 1992 1991 ---------- ---------- ---------- Current Federal................................................................... $ 1,219 $ 8,948 $ 7,799 State..................................................................... 7,395 10,456 745 Deferred Federal................................................................... (14,539) (9,814) (28,710) State..................................................................... (5,406) (2,414) (9,170) Change in valuation allowance............................................... (8,950) -- -- ---------- ---------- ---------- Income tax provision (benefit).............................................. $ (20,281) $ 7,176 $ (29,336) ---------- ---------- ---------- ---------- ---------- ----------
Deferred tax assets and liabilities as of January 29, 1994 consist of the following (dollars in thousands):
ASSETS LIABILITIES ------------ ----------- Depreciation........................................................................... $ -- $ 107,924 Self-insured liabilities............................................................... 56,158 -- Benefit plans.......................................................................... 23,434 -- Lease capitalization................................................................... 18,960 -- Closed store reserves.................................................................. 15,586 -- Merchandise inventory and gross profit................................................. 12,150 29,096 Alternative minimum taxes.............................................................. 2,890 -- General business credits............................................................... 9,029 -- Net operating loss carryforward........................................................ 19,156 -- Other accrued expenses................................................................. 5,010 -- Prepaid expenses....................................................................... -- 7,234 Postretirement benefits................................................................ 16,850 -- Capital loss carryforward expiring in Fiscal 1996...................................... 5,084 -- Other.................................................................................. 5,815 4,542 ------------ ----------- Subtotal............................................................................. 190,122 148,796 Less valuation allowance............................................................... 38,436 -- ------------ ----------- Total................................................................................ $ 151,686 $ 148,796 ------------ ----------- ------------ -----------
Effective January 31, 1993, the Company adopted SFAS No. 109. Prior to January 31, 1993 the Company's financial statements had been prepared in accordance with SFAS No. 96. SFAS No. 96 and SFAS No. 109 require the calculation of deferred taxes using the asset and liability method. Under this 57 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 23--INCOME TAXES--(CONTINUED) method, deferred tax balances must be adjusted to reflect enacted changes in income tax rates and deferred taxes must be provided on book and tax basis differences. The implementation of SFAS No. 109 had no effect on the consolidated statements of operations, however, it resulted in a reclassification of the current and noncurrent deferred taxes since, in accordance with SFAS No. 109, the classification of such deferred taxes correspond with the classification of the related asset or liability which gave rise to the book and tax basis difference. As a result of the Company's net operating tax loss, the Company recorded income taxes receivable of approximately $22.4 million resulting from the carryback of such losses. The carryforward of those losses not carried back results in a net deferred tax asset of approximately $41.3 million at January 29, 1994. Since the Company has experienced pretax losses in each of Fiscal 1993, Fiscal 1992 and Fiscal 1991, the Company was unable to conclude that realization of such deferred tax assets was more likely than not. Accordingly, the Company has provided a valuation allowance of $38.4 million to fully reserve its net deferred tax assets, except for its alternative minimum tax credit carryforwards which do not expire. The valuation allowance will be adjusted when, in the opinion of management, significant positive evidence exists which indicates that its more likely than not that the Company will be able to realize deferred tax assets. Such reductions in the valuation allowance, if any, will be reflected as a component of income tax expense. The Omnibus Budget Reconciliation Act of 1993 was signed into law on August 10, 1993, which, among other things, increased the federal income tax rates for corporations to 35% from 34%, effective January 1, 1993. Deferred tax liabilities and assets have been adjusted to reflect the 1% increase in federal income tax rates. Although the Company reported a pretax loss for Fiscal 1992 and Fiscal 1991, the Company has generated taxable income in Fiscal 1992 and 1991 due to the effect of amounts expensed for tax purposes which were less than amounts used for financial reporting, primarily the goodwill write-off of $600.7 million in Fiscal 1992, the net capital loss related to the disposal of the Purity Operations in Fiscal 1991, the amortization of goodwill related to the Acquisition in the two years, as well as the certain deferred federal income tax items. The Company's state income tax provision in Fiscal 1993 and Fiscal 1992 resulted primarily from taxable income generated in New Jersey. The Company's state income tax benefit in Fiscal 1991 resulted from $10.4 million in state income tax refunds of prior years' taxes partially offset by New Jersey income taxes. In Fiscal 1993, Fiscal 1992 and Fiscal 1991 the Company made income tax payments of $3.1 million, $21.0 million and $41.2 million, respectively, and received income tax refunds of $10.1 million, $5.9 million and $6.0 million. A federal income tax refund of $20.5 million was received in February, 1994 related to the carryback of the Fiscal 1993 net operating losses. 58 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 23--INCOME TAXES--(CONTINUED) The effective tax rate applicable to continuing operations differs from the federal statutory tax rate as follows:
FISCAL YEARS ------------------------------- 1993 1992 1991 --------- --------- --------- Federal income tax benefit at statutory tax rate............................... (35.0)% (34.0)% (34.0)% Effect of loss carryback at 34% rate........................................... 1.0 -- -- Capital loss on disposal of Purity Operations.................................. -- -- 22.3 State income taxes, net of federal income tax benefit.......................... 3.7 .9 (2.2) Tax credits.................................................................... (2.1) (.1) (.6) Amortization of goodwill....................................................... -- 1.0 3.0 Goodwill write-off............................................................. -- 33.6 -- Change in valuation allowance.................................................. (22.4) -- -- Other.......................................................................... (1.8) (.2) -- --------- --------- --------- Effective tax rate............................................................. (56.6)% 1.2% (11.5)% --------- --------- --------- --------- --------- ---------
NOTE 24--COMMITMENTS AND CONTINGENCIES On December 7, 1990, a lawsuit was commenced by a holder of the Exchangeable Preferred Stock against the Company, SMG-II, Merrill Lynch Capital Partners, Inc., Merrill Lynch & Co., Inc., and the directors of the Company (the "Director Defendants") in the Chancery Court, New Castle County, Delaware. The complaint purports to be a class action and alleges that original terms of the Exchangeable Preferred Stock Offer, at $5 per share, constitute a breach of fiduciary duties owed by the Director Defendants to holders of the Exchangeable Preferred Stock. The complaint seeks declaratory and injuctive relief, as well as monetary damages, with respect to the Exchangeable Preferred Stock Offer, but no motions seeking any such relief on a provisional or permanent basis were filed either prior to the completion of the Exchangeable Preferred Stock Offer on February 4, 1991 or as of the date hereof. The Company has entered negotiations to settle the complaint and expects to reach a settlement agreement during the next several months. The Company does not expect the amount of its obligations under any settlement agreement to be material and will defend the Complaint vigorously if a settlement is not reached. On March 1, 1993 the Company was served with a summons and complaint which alleges, among other things, that the Company and other co-defendants induced processors of Tropicana orange juice to provide it with a favorable price and other terms that discriminated against other sellers of orange juice in violation of the price discrimination provisions of the Robinson-Patman Act. The prayer for relief does not claim any specific amount of damages. After consultation with counsel, the Company believes that this lawsuit is without merit and intends to defend the action vigorously. In addition to the litigation referred to above, the Company is a party to a number of legal proceedings in the ordinary course of business. Management believes that the ultimate resolution of these proceedings will not, in the aggregate, have a material adverse impact on the financial condition, results of operations or business of the Company. The Company is contingently liable for certain obligations of the Purity Operations under certain instruments, primarily approximately 60 leases for real property, in the event of default thereunder by the purchaser of the Purity Operations. As of January 29, 1994, the estimated present value of such lease obligations approximated $115 million. In addition, the Company is bound by a non-compete agreement, expiring in Fiscal 1994, with the purchaser of the Purity Operations restricting the Company from operating supermarkets in Massachusetts, New Hampshire and part of Connecticut. 59 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 24--COMMITMENTS AND CONTINGENCIES--(CONTINUED) In August 1991, the Company entered into a long-term agreement with Integrated Systems Solutions Corporation ("ISSC"), a subsidiary of IBM, to provide a wide range of information systems services. Under the agreement, ISSC has taken over the Company's data center operations and mainframe processing and information system functions and is providing business applications and systems designed to enhance the Company's customer service and efficiency. The charges under this agreement are based upon the services requested at predetermined rates. The Company may terminate the agreement upon 90 days notice in payment of a specified termination charge. The amounts expensed under this agreement and included in selling, general and administrative expenses in the accompanying statements of operations were $12.6 million, $12.9 million and $6.2 million during Fiscal 1993, Fiscal 1992 and Fiscal 1991, respectively. Further, the Company expensed an additional $8.1 million of technical information costs in connection with the Plainbridge Spin-Off (see Note 3). NOTE 25--GAIN ON SALE OF PHOTOFINISHING PLANT In Fiscal 1991 the Company sold its Coastal Photo photofinishing plant to Quality Photo Systems (East), Inc. (a subsidiary of Konica Corporation) for $5.7 million, including the assumption of leases, which resulted in a pretax gain on sale of $4.1 million. In addition, the Company entered into a servicing agreement under which Quality Photo Systems (East), Inc. has agreed to supply improved photofinishing services at lower than the Company's previous operating costs. NOTE 26--GAIN (LOSS) ON DISPOSAL OF PURITY OPERATIONS AND INVESTMENT IN PURITY SUPREME On December 17, 1991, the Company completed the sale of two subsidiaries, Purity Supreme, Inc. ("Purity Supreme") and Li'l Peach Corp. ("Li'l Peach", and together with Purity Supreme, the "Purity Operations"), for approximately $257.0 million (as adjusted), including the assumption of certain indebtedness of the Purity Operations to a Company organized by Freeman Spogli & Co. In connection with the disposal of the Purity Operations, the Company retained a 10% common equity interest in Purity Supreme with a net book value of $8.9 million (as of sale date), a new issue of Purity Supreme exchangeable preferred stock (the "Purity Preferred Stock") with an aggregate stated value of $18.0 million and a convertible subordinated note of Purity Supreme (the "Purity Note") in the principal amount of $2.0 million. The Purity Preferred Stock matures December 17, 2003 and accrues dividends at 6.24% per annum on a semi-annual basis each June 17 and December 17. The Purity Preferred Stock is subordinated to Purity Supreme's Series B Preferred Stock, redeemable at the option of Purity Supreme at stated discount rates and convertible into Purity Supreme debentures at the option of Purity Supreme. Due to the Company's inability to readily convert these securities into cash, as there exists no current trading market, and the uncertainty of the future cash flows from these securities, a valuation allowance for the face value of these securities has been recorded at January 30, 1993 and February 1, 1992. During Fiscal 1991, the Company recognized a loss of $228.0 million on the disposal of the Purity Operations. Included in this loss is a write-off of $214.0 million of goodwill related to the Purity Operations. During Fiscal 1992, the Company collected the principal amount of the Purity Note and recorded a gain of $2.0 million reflecting the reversal of the valuation reserve recorded upon the disposal of the Purity Operations. 60 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 27--QUARTERLY FINANCIAL DATA (UNAUDITED) Financial data for the interim periods of Fiscal 1993 and Fiscal 1992 is as follows (dollars in thousands):
13 WEEKS ENDED 52 WEEKS --------------------------------------------------- ENDED MAY 1, JULY 31, OCTOBER 30, JANUARY 29, JANUARY 29, 1993* 1993* 1993* 1994 1994 ----------- ----------- ------------ ----------- ----------- 52 WEEKS ENDED JANUARY 29, 1994 Sales............................................... $ 1,071,307 $ 1,003,055 $1,050,880 $1,081,945 $4,207,187 Gross profit(a)..................................... 295,653 273,372 278,078 307,601 1,154,704 Selling, general and administrative expenses........ 238,539 227,292 223,067 231,937 920,835 Recapitalization expenses........................... -- -- 23,737 (7,125) 16,612 Provision for stores closings....................... -- 5,975 -- -- 5,975 Depreciation and amortization....................... 17,160 17,644 17,883 14,978 67,665 Operating earnings.................................. 39,954 22,461 13,391 67,811 143,617 Interest expense, net............................... 45,713 46,807 45,168 41,747 179,435 Earnings (loss) from continuing operations before income taxes, extraordinary items and cumulative effect of accounting changes........................ (5,759) (24,346) (31,777) 26,064 (35,818) Income tax provision (benefit)...................... (1,192) (9,129) (11,597) 1,637 (20,281) Earnings (loss) from continuing operations before extraordinary items and cumulative effect of accounting changes.................................. (4,567) (15,217) (20,180) 24,427 (15,537) Earnings (loss) from discontinued operations........ (1,959) 1,984 890 (2,092) (1,177) Earnings (loss) before extraordinary items and cumulative effect of accounting changes............. (6,526) (13,233) (19,290) 22,335 (16,714) Extraordinary items, net of income tax benefit...... (99) (39) (106,017) -- (106,155) Earnings (loss) before cumulative effect of accounting changes.................................. (6,625) (13,272) (125,307) 22,335 (122,869) Cumulative effect of accounting changes, net of an income tax benefit of $29,302....................... (40,358) -- -- -- (40,358) Net earnings (loss)................................. (46,983) (13,272) (125,307) 22,335 (163,227) 52 WEEKS ENDED JANUARY 30, 1993 Sales............................................... $ 1,060,802 $ 1,073,525 $1,071,738 $1,133,769 $4,339,834 Gross profit(b)..................................... 280,838 286,994 282,910 305,141 1,155,883 Selling, general and administrative expenses........ 217,679 220,781 226,669 229,132 894,261 Depreciation and amortization....................... 18,056 17,321 16,922 16,944 69,243 Amortization of goodwill............................ 4,365 4,365 4,365 4,364 17,459 Goodwill write-off.................................. -- -- -- 600,714 600,714 Operating earnings (loss)........................... 40,738 44,527 34,954 (546,013) (425,794) Interest expense, net............................... 45,619 46,484 46,304 46,413 184,820 Gain on disposal of Purity Operations............... -- -- -- 2,000 2,000 Loss from continuing operations before income taxes and extraordinary items............................. (4,881) (1,957) (11,350) (590,426) (608,614) Income tax provision (benefit)...................... 432 1,912 (1,957) 6,789 7,176 Loss from continuing operations before extraordinary items............................................... (5,313) (3,869) (9,393) (597,215) (615,790) Earnings (loss) from discontinued operations........ (1,574) 2,311 (791) (1,111) (1,165) Loss before extraordinary items..................... (6,887) (1,558) (10,184) (598,326) (616,955) Extraordinary items, net of income tax benefit...... -- (4,499) (264) -- (4,763) Net loss............................................ (6,887) (6,057) (10,448) (598,326) (621,718)
- --------------- (a) The pretax LIFO inventory credit for the 52 weeks ended January 29, 1994 was estimated to be $0.65 million in each of the four fiscal quarters. The annual credit was $2.6 million. (b) The pretax LIFO inventory provision for the 52 weeks ended January 30, 1993 was estimated to be $1.6 million in each of the first two fiscal quarters and $1.1 million in the third fiscal quarter. The annual provision was $2.2 million, resulting in a $2.1 million credit in the fourth quarter. * The quarterly financial data for the 13 weeks ended May 1, 1993, July 31, 1993 and October 30, 1993 have been restated to the reflect the effects of the accounting changes adopted as of January 31, 1993. As a result of these changes, the net loss for the 13 weeks ended May 1, 1993, July 31, 1993 and October 30, 1993 have been adjusted by $25.3 million, $0.1 million and $18.0 million, respectively. For further information with respect to such changes (see Notes 5, 9, 21, 22 and 23). 61 INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholder SUPERMARKETS GENERAL HOLDINGS CORPORATION Woodbridge, New Jersey We have audited the accompanying consolidated balance sheets of Supermarkets General Holdings Corporation and its subsidiaries as of January 29, 1994 and January 30, 1993, and the related consolidated statements of operations, stockholder's deficit and cash flows for each of the three years in the period ended January 29, 1994. Our audits also included the financial statement schedules listed in the Index at Part IV, Item 14(a)(2). These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Supermarkets General Holdings Corporation and its subsidiaries as of January 29, 1994 and January 30, 1993, and the results of their operations and their cash flows for each of the three years in the period ended January 29, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Notes 5, 9, 21, 22 and 23 to the consolidated financial statements, the Company changed its method of accounting for postretirement benefits other than pensions, postemployment benefits, income taxes, LIFO inventories and the determination of the discount rate utilized to record certain noncurrent liabilities. DELOITTE & TOUCHE Parsippany, New Jersey April 28, 1994 62 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY (AS OF APRIL 15, 1994) (A) DIRECTORS OF THE COMPANY The following table sets forth the name, principal occupation or employment at the present time and during the last five years, and the name and principal business of any corporation or other organization in which such occupation or employment is or was conducted, of the directors of the Company, all of whom are citizens of the United States unless otherwise indicated. Each individual named below is a director of both the Company and Pathmark, except for Mr. Rubenstein, who is a director of the Company only.
DIRECTOR OF THE COMPANY NAME, AGE, PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS SINCE(1) - -------------------------------------------------------------------------------------------------- ----------------- JACK FUTTERMAN, 60, Chairman and Chief Executive Officer of the Company.(2) 1986 ANTHONY J. CUTI, 48, President and Chief Financial Officer of the Company.(2) 1993 JAMES J. BURKE, JR., 42, President and Chief Executive Officer, Merrill Lynch Capital Partners 1988 ("MLCP") since 1987; Managing Director of Merrill Lynch since 1985; First Vice President of MLPF&S since 1988. Mr. Burke is also a Director of Amstar Corporation, AnnTaylor, Inc., Borg Warner Security Corporation, John Alden Financial Corp, London Fog Corporation, United Artists Theatre Circuit, Inc., World Color Press, Inc. and Wherehouse Entertainment, Inc. STEPHEN M. MCLEAN, 36, Senior Vice President, MLCP since 1987; Managing Director of Merrill Lynch 1987 since 1988; Vice President of MLPF&S from 1984 to 1988. Mr. McLean is also a director of Ithaca Industries, Inc. and Clinton Mills Inc. SUNIL C. KHANNA, 37, (Citizen of India) Principal, MLCP since May 1993. Director of Merrill Lynch 1987 & Co., Inc. since January 1993. Vice President of Merrill Lynch, MLPF&S and MLCP since 1989, Assistant Vice President MLCP, from 1987 to 1989; Associate of Merrill Lynch from 1986 to 1989. SUSAN C. PENNY, 44, Senior Vice President, Alliance Corporate Finance Group 1994 Incorporated--Investment Advisors (since July 1993); Senior Vice President, Equitable Capital Management Corp.--Investment Advisors prior thereto. JERRY G. RUBENSTEIN, 63, Managing Partner, Omni Management Associates. Mr. Rubenstein is also a 1988 director of Esstar, Inc.; Consultant to ML Capital Partners since 1988.
- --------------- (1) Includes service with Old Supermarkets. (2) Prior positions are reflected under "--Executive Officers". Pursuant to the SMG-II Stockholders Agreement, the Merrill Lynch Investors are entitled to designate seven directors, the Management Investors are entitled to designate three directors and The Equitable Life Assurance Society of the United States and the Equitable Affiliates (collectively, the "Equitable Investors") are entitled to designate one director to Holdings' Board of Directors. Currently, four of the persons serving as directors were designated by the Merrill Lynch Investors (Messrs. Burke, Khanna, McLean and Rubenstein), two were designated by the Management Investors (Messrs. Futterman and Cuti) and one was designated by the Equitable Investors (Ms. Penny). No 63 family relationship exists between any director and any other director or executive officer of the Company. (B) EXECUTIVE OFFICERS The following table sets forth the name, principal occupation or employment at the present time and during the last five years, and the name of any corporation or other organization in which such occupation or employment is or was conducted, of the executive officers of the Company, all of whom are citizens of the United States unless otherwise indicated and serve at the discretion of the Board of Directors of the Company. The executive officers of the Company listed below were elected to office for an indefinite period of time. No family relationship exists between any executive officer and any other executive officer or director of the Company. All current executive officers now hold identical positions with the Company and Pathmark, except for Messrs. Kenny and Rallo, who are executive officers of Pathmark only and Mr. Borshadel who is an executive officer solely of the Plainbridge subsidiary.
OFFICER OF THE COMPANY NAME AGE POSITIONS AND OFFICE SINCE(1) - ---------------------------------- ----------- --------------------------------------------------------- ------------- JACK FUTTERMAN 60 Chairman and Chief Executive Officer (since September 1986(2) 1989); President from September 1989 to August 1993); Vice Chairman prior thereto. Mr. Futterman joined the Company in 1973.(3) ANTHONY J. CUTI 48 President (since August 1993) and Chief Financial Officer 1990 (since October 1990); Executive Vice President (from October 1990 to August 1993); Vice President--Bristol- Myers Squibb Co. (from January 1990 to September 1990); Vice President of Finance Operations and Chief Financial Officer, Bristol-Myers International Group, a division of Bristol-Myers Co., prior thereto.(3) JULES BORSHADEL 54 Chairman of Plainbridge (since October 1993); 1989 President--Rickel division (since July 1990); Senior Vice President--Retail Development of the Company (from October 1989 until July 1990); Senior Vice President--Planning, Administration and Retail Development, Pathmark division prior thereto. Mr. Borshadel joined the Company in 1965. HARVEY M. GUTMAN 48 Senior Vice President--Retail Development of the Company 1990 (since December 1991); Vice President--Retail Development of the Company (from October 1990 to December 1991); Vice President--Grocery/Frozen Sales & Merchandising, Pathmark division (from January 1990 to September 1990); Vice President--Non-Foods/Pharmacy Sales & Merchandising, Pathmark division prior thereto. Mr. Gutman joined the Company in 1976.
64
OFFICER OF THE COMPANY NAME AGE POSITIONS AND OFFICE SINCE(1) - ---------------------------------- ----------- --------------------------------------------------------- ------------- ROBERT JOYCE 48 Senior Vice President--Administration (since October 1989 1990); Senior Vice President-- Human Resources (from April 1990 to October 1990); Vice President--Human Resources (from October 1989 to April 1990); Vice President--Human Resources, Pathmark division prior thereto. Mr. Joyce joined the Company in 1963. BERNARD KENNY 56 Senior Vice President--Operations (since July 1993); 1993 Senior Vice President--Southern division, Pathmark division prior thereto. Mr. Kenny joined the Company in 1960. RONALD RALLO 56 Senior Vice President--Merchandising (since July 1993); 1993 Senior Vice President-- Merchandising Pathmark division (from September 1992 to July 1993); Senior Vice President--Perishable Merchandising, Pathmark division (from February 1991 to September 1992); Vice President--Dairy, Deli and Bakery Sales and Merchandising, Pathmark division prior thereto. Mr. Rallo joined the Company in 1962. JOSEPH W. ADELHARDT 47 Vice President and Controller (since March 1990); 1987 Controller prior thereto. Mr. Adelhardt joined the Company in 1976. JOHN HENRY 44 Vice President--Operational Reporting and Planning (since 1992 March 1992); Senior Vice President--Finance and Systems, Rickel division (from September 1989 to February 1992); Vice President--Finance and Systems, Rickel division prior thereto. Mr. Henry joined the Company in 1974. MAUREEN MCGURL 46 Vice President--Human Resources. Ms. McGurl joined the 1984(2) Company in 1973. MARC A. STRASSLER 45 Vice President, Secretary and General Counsel (since 1987 December 1991); Secretary and General Counsel prior thereto. Mr. Strassler joined the Company in 1974. MYRON D. WAXBERG 60 Vice President and General Counsel--Real Estate (since 1991 December 1991); General Counsel--Real Estate prior thereto. Mr. Waxberg joined the Company in 1976.
- --------------- (1) Includes service with Old Supermarkets. (2) Officer of holdings since 1987. (3) Member of the Company's Board of Directors. 65 ITEM 11. EXECUTIVE COMPENSATION. SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION ------------- ANNUAL COMPENSATION AWARDS ------------------------------------- ------------- SECURITIES OTHER ANNUAL UNDERLYING ALL OTHER COMPENSATION OPTIONS/ COMPENSATION NAME AND PRINCIPAL POSITION FY SALARY ($) BONUS ($) ($)(1)(2) SARS (3) ($)(2)(4) - ---------------------------------------------- ----------- ----------- --------- ------------- ------------- ------------- Jack Futterman................................ 1993 482,539 138,762 -- -- 8,254 Chairman and Chief Executive Officer 1992 431,385 419,510 -- 3,000 8,010 1991 426,539 159,952 -- -- -- Jules Borshadel............................... 1993 286,750 216,583 -- 500 8,254 Chairman of Plainbridge 1992 246,827 148,096 -- 1,000 8,010 1991 228,750 137,250 -- -- -- Anthony J. Cuti............................... 1993 280,250 76,260 -- 3,000 8,254 President and Chief Financial Officer 1992 255,000 198,450 -- 1,000 8,010 1991 252,500 90,900 -- 900 -- Bernard Kenny(5).............................. 1993 179,026 42,966 -- 750 8,254 Senior Vice President--Operations of Pathmark Ronald Rallo(5)............................... 1993 177,500 42,600 4,311 750 8,098 Senior Vice President--Merchandising of Pathmark
- --------------- (1) Represents amounts paid to Mr. Rallo as Reimbursement Amounts as described in "Certain Relationships and Related Transactions" in Item 13 of this report with respect to a loan to Mr. Rallo of less than $60,000. (2) Information is provided solely with respect to Fiscal 1993 and Fiscal 1992. (3) Stock options shown were granted pursuant to the Management Investors 1987 Stock Option Plan of SMG-II (the "Plan") and relate to shares of Class A Common Stock of SMG-II. (4) Represents Pathmark's matching contribution to the Supermarkets General Corporation Savings Plan (the "Savings Plan"). (5) Messrs. Kenny and Rallo became executive officers of Pathmark in October 1993. OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)(2)
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION FOR OPTION INDIVIDUAL GRANTS TERM - --------------------------------------------------------------------------------------------------------------- --------- NUMBER OF SECURITIES % OF TOTAL UNDERLYING OPTIONS/ SARS OPTIONS/ GRANTED TO EXERCISE OR SARS EMPLOYEES IN BASE EXPIRATION NAME GRANTED (#) FISCAL YEAR PRICE ($/SH) DATE 5% ($) - ------------------------------------------------- ------------- --------------- --------------- ----------- --------- Jack Futterman................................... -- -- -- -- -- Jules Borshadel.................................. 500 3.3 100 3/12/03 31,445 Anthony J. Cuti.................................. 1,750 11.7 100 3/12/03 110,057 1,250 8.4 100 1/13/04 78,612 Bernard Kenny.................................... 750 5.0 100 1/13/04 47,167 Ronald Rallo..................................... 750 5.0 100 1/13/04 47,167 IN - ------------------------------------------------- NAME 10% ($) - ------------------------------------------------- --------- Jack Futterman................................... -- Jules Borshadel.................................. 79,687 Anthony J. Cuti.................................. 278,905 199,218 Bernard Kenny.................................... 119,531 Ronald Rallo..................................... 119,531
- --------------- (1) Options shown were granted pursuant to the Management Investors 1987 Stock Option Plan of SMG-II, and relate to shares of Class A Common Stock of SMG-II. (2) Except for 500 options granted to Mr. Kenny, 500 options granted to Mr. Rallo and 833 options granted to Mr. Cuti, options are fully vested and exercisable at the time of grant, provided that no exercise may occur unless a registration statement has been filed under the Securities Act of 1933 with respect to the shares subject to the option or the Compensation Committee of the Board of Directors of SMG-II determines that an exemption from registration is available. 66 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES(1)
NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS/SARS AT FY-END (#) EXERCISABLE/ NAME UNEXERCISABLE - ------------------------------------------------------------------------------------------------ ------------- Jack Futterman.................................................................................. 13,000/0 Jules Borshadel................................................................................. 2,640/0 Anthony J. Cuti................................................................................. 4,967/833 Bernard Kenny................................................................................... 1,700/500 Ronald Rallo.................................................................................... 2,350/500
- --------------- (1) Options shown were granted pursuant to the Management Investors 1987 Stock Option Plan of SMG-II and relate to shares of Class A Common Stock of SMG-II. No options were exercised in Fiscal 1993. PENSION PLAN TABLE
YEARS OF SERVICE -------------------------------------------------------------------------- FINAL AVERAGE PAY 10 15 20 25 30 35 - ------------------------------------ --------- ----------- ----------- ----------- ----------- ----------- $150,000............................ $ 20,000 $ 30,000 $ 40,000 $ 50,000 $ 60,000 $ 60,000 200,000............................ 26,667 40,000 53,333 66,667 80,000 80,000 225,000............................ 30,000 45,000 60,000 75,000 90,000 90,000 250,000............................ 33,333 50,000 66,667 83,333 100,000 100,000 300,000............................ 40,000 60,000 80,000 100,000 120,000 120,000 350,000............................ 46,667 70,000 93,333 116,667 140,000 140,000 450,000............................ 60,000 90,000 120,000 150,000 180,000 180,000 500,000............................ 66,667 100,000 133,333 166,667 200,000 200,000 550,000............................ 73,333 110,000 146,667 183,333 220,000 220,000 600,000............................ 80,000 120,000 160,000 200,000 240,000 240,000 650,000............................ 86,667 130,000 173,333 216,667 260,000 260,000 700,000............................ 93,333 140,000 186,667 233,333 280,000 280,000 750,000............................ 100,000 150,000 200,000 250,000 300,000 300,000
- --------------- (1) The table above illustrates the aggregate annual pension benefits payable under the Supermarkets General Pension Plan and Excess Benefit Plan (collectively, the "Pension Plans"). The retirement benefit for individuals with 30 years of credited service is 40% of the individual's average compensation during his or her highest five compensation years in the last ten years before retirement, less one-half of the social security benefit received. The retirement benefit is reduced by 3.33% for every year of credited service less than 30. Covered compensation user the Pension Plans includes all cash compensation subject to withholding plus amounts deferred under the Savings Plan pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended, and as to individuals identified in the Summary Compensation Table, would be the amount set forth in that table under the headings "Salary" and 'Bonus". The table shows the estimated annual benefits an individual would be entitled to receive if normal retirement at age 65 occurred in January 1994 after the indicated number of years of covered employment and if the average of the participant's covered compensation for the five years out of the last ten years of such employment yielding the highest such average equalled the amounts indicated. The estimated annual benefits are based on the assumption that the individual will receive retirement benefits in the form of a single life annuity (married participants may elect a joint survivorship option) and are before applicable deductions for social security benefits in effect as of January 1994. As of December 31, 1993, the following individuals had the number of years of credited service indicated after their names: (footnotes continued on following page) 67 (footnotes continued from preceding page) Mr. Futterman, 20.6; Mr. Borshadel, 28.5; Mr. Cuti, 2.0; Mr. Kenny, 30 and Mr. Rallo, 30. As described below in "Compensation Plans and Arrangements--Supplemental Retirement Agreements", each of the named executives (other than Mr. Rallo) is party to a Supplemental Retirement Agreement with Pathmark. COMPENSATION PLANS AND ARRANGEMENTS Directors' Fees. Directors of the Company are not currently compensated for their services as such, except for Mr. Rubenstein who receives an annual fee of $20,000. Supplemental Retirement Agreements. The Company has entered into supplemental retirement agreements with certain key executives, including four of the executive officers named in the Summary Compensation Table, which provide that the executive will be paid upon termination of employment after attainment of age 60 a supplemental pension benefit in such an amount as to assure him or her an annual amount of pension benefits payable under the supplemental retirement agreement, the Company's qualified pension plans and certain other plans of the Company, including Savings Plan balances as of March 31, 1983, (a) in the case of Mr. Futterman, equal to (i) $475,000 or (ii) his base salary on the date of his retirement, death or disability, whichever is greater, and (b) in the cases of Messrs. Borshadel, Cuti and Kenny, equal to 30% of his final average Compensation (as hereinabove defined) based on ten years of service with the Company and increasing 1% per year for each year of service thereafter to a maximum of 40% of his final average Compensation based on 20 years of service. "Compensation" includes base salary and payments under the Executive Incentive Plan, but excludes Company matching contributions under the Savings Plan and cash awards under Old Supermarkets' former Long-Term Incentive Plan. If the executive leaves the Company prior to completing 20 years of service (other than for disability), the supplemental benefit would be reduced proportionately. Should the executive die, the surviving spouse then receiving or, if he or she was not then receiving a supplemental pension benefit, the spouse would be entitled to a benefit equal to two-thirds of the benefit to which the executive would have been entitled, provided the executive has attained at least ten years of service with the Company. Mr. Cuti's agreement credits him with ten years of service over and above his actual service. Employment Agreements. As of August 1, 1993, the Company and Pathmark entered into an employment agreement with Mr. Futterman (the "1993 Employment Agreement"). The 1993 Employment Agreement is for an initial term of three years, which term is automatically extended for an additional year on the second anniversary of the commencement of the term and on each successive anniversary thereafter. Under the 1993 Employment Agreement, Mr. Futterman is entitled to a minimum annual base salary of $475,000. The 1993 Employment Agreement also provides that Mr. Futterman shall be eligible to receive an annual bonus of up to 75% of his annual base salary and shall be provided the opportunity to participate in pension and welfare plans, programs and arrangements that are generally made available to executives of Pathmark, or as may be deemed appropriate by the Compensation Committee of the Board of Directors of Holdings. As of August 1, 1993, the Company entered into employment agreements (the "August Agreements", together with the 1993 Employment Agreement, the "Employment Agreements") with Messrs. Cuti and Borshadel. Each August Agreement is for an initial term of three years, which term is automatically extended for an additional year on the second anniversary of the commencement of the term and on each successive anniversary thereafter. Under the August Agreements, Mr. Cuti and Mr. Borshadel are each entitled to a minimum annual base salary of $300,000. The August Agreements also provide that each of them shall be eligible to receive an annual bonus of up to 75% of his annual base salary and shall be provided the opportunity to participate in pension and welfare plans, programs and arrangements that are generally made available to executives of Pathmark, with respect to Mr. Cuti and Rickel, with respect to Mr. Borshadel, or as may be deemed appropriate by the Compensation Committee of the Board of Directors of Holdings. 68 In the event one of the above named executives' employment is terminated by the Company without Cause (as defined in the Employment Agreements), or by the executive for Good Reason (as defined in the Employment Agreements) prior to the termination of the applicable Employment Agreement, such executive will be entitled to continue to receive his base salary, plus bonus (if earned) and continued coverage under health and insurance plans for the two year period commencing on the date of such termination or resignation, reduced by any compensation or benefits which the executive is entitled to receive in connection with his employment by another employer during said period. In addition, if Mr. Futterman's employment is terminated by the Company without Cause or by him for Good Reason on or after a Change in Control, he will then be entitled to receive such benefits for a three year period, and his base salary shall be the greater of his base salary at the annual rate in effect immediately prior to such termination of resignation or $500,000. Under the 1993 Employment Agreement, a Change in Control means (a) the acquisition by a Third Party (as hereinafter defined) of beneficial ownership of more than 30% of the issued and outstanding voting common stock of SMG-II, Holdings or the Company or (b) the acquisition of all or substantially all of the assets of the Company by a Third Party; provided, however, that no Change in Control will be deemed to occur as long as (i) the ML Investors, (ii) the management employees of the Company, or (iii) the ML Investors, in combination with the management employees of the Company, beneficially own, directly or indirectly, more than 50% of the voting common stock of the Company. "Third Party" shall mean any person other than the Company, Holdings or SMG-II, each of the ML Investors, or The Equitable Life Assurance Society of the United States and its affiliates. For purposes of the 1993 Employment Agreement, "person" and "beneficial ownership" shall have the meanings assigned to such terms under Section 13(d) of the Exchange Act, as amended, and "affiliate" of any first person shall mean a second person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first person. The Employment Agreements contain agreements by the executives not to compete with the Company as long as they are receiving payments under an Employment Agreement and an agreement by the executives not to disclose confidential information. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Messrs. Burke, Khanna and McLean comprise the compensation committees of the Board of Directors of both Holdings and SMG-II, and were responsible for decisions concerning compensation of the executive officers of the Company. Messrs. Burke, Khanna and McLean are all executive officers of ML&Co. and ML Capital Partners. See "Certain Transactions--Certain Relationships and Related Transactions". 69 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Since February 4, 1991, all shares of the Company's Common Stock are held by SMG-II. As of April 1, 1994, the number of shares of SMG-II(i) Class A Common Stock, (ii) Class B Common Stock, (iii) Series A Preferred Stock, and (iv) Series B Preferred Stock beneficially owned by the persons known by management of the Company to be the beneficial owners of more than 5% of the outstanding shares of any class as "beneficial ownership" has been defined under Rule 13d-3, as amended, under the Securities Exchange Act of 1934, are set forth in the following table:
NUMBER % OF NAME OF SHARES CLASS - -------------------------------------------------------------------------------------- ----------- ----------- SMG-II Class A Common Stock Merrill Lynch Capital Appreciation Partnership No. IX, L.P.(2)...................... 488,704.8 68.2 ML Offshore LBO Partnership No. IX(2)............................................... 12,424.7 1.7 Barfield House St. Julians Avenue St. Peter Port Guernsey Channel Islands ML Employees LBO Partnership No. I, L.P.(2)......................................... 12,148.6 1.7 ML IBK Positions, Inc.(3)........................................................... 21,258.9 3.0 Merchant Banking L.P. No. 1(3)...................................................... 8,119 1.1 Merrill Lynch KECALP L.P. 1987(3)................................................... 7,344 1.0 CBC Capital Partners, Inc.(4)....................................................... 30,000 4.2 270 Park Avenue New York, NY 10017 Management and other employees (including former employees of Pathmark)............. 138,917 (1) 19.3 301 Blair Road Woodbridge, NJ 07095 SMG-II Class B Common Stock The Equitable Life Assurance Society of the United States(5)........................ 114,000 35.6 c/o Equitable Capital Management Corporation 1285 Avenue of the Americas, 19th Floor New York, NY 10019 Equitable Deal Flow Fund, L.P.(5)................................................... 150,000 46.9 c/o Equitable Capital Management Corporation 1285 Avenue of the Americas, 19th Floor New York, NY 10019 Equitable Variable Life Insurance Company(5)........................................ 36,000 11.3 2 Penn Plaza, 21-C New York, NY 10121 CBC Capital Partners, Inc.(4)....................................................... 20,000 6.2 SMG-II Series A Preferred Stock(6) Merrill Lynch Capital Appreciation Partnership No. B-X, L.P.(2)..................... 133,043 56.2 ML Offshore LBO Partnership No. B-X(2).............................................. 40,950 17.3 MLCP Associates, L.P. No. II(2)..................................................... 1,740 .7 ML IBK Positions, Inc.(3)........................................................... 46,344.5 19.6 Merchant Banking L.P. No. IV(3)..................................................... 3,779 1.6 Merrill Lynch KECALP L.P. 1989(3)................................................... 7,000 3.0 Merrill Lynch KECALP L.P. 1991(3)................................................... 3,874.5 1.6 SMG-II Series B Preferred Stock(6) CBC Capital Partners, Inc.(4)....................................................... 12,500 6.9 Equitable Variable Life Insurance Company(5)........................................ 20,192 11.2 The Equitable Life Assurance Society of the United States(5)........................ 63,942 35.4 Equitable Deal Flow Fund, L.P.(5)................................................... 84,135 46.5
(footnotes on following page) 70 (footnotes for preceding page) - --------------- (1) Includes presently exercisable options granted under the Plan for 67,492 shares of SMG-II Class A Common Stock held by Management Investors and 750 shares of SMG-II Class A Common Stock that SMG-II has agreed to sell to three of the Company's employees, including 250 shares to Mr. Cuti. Does not include 39,744 options to purchase shares of SMG-II Class A Common Stock granted to non-management employees of the Company, which options are not exercisable until a public offering of SMG-II Common Stock occurs. The total number of Management Investors is 55. (2) ML Capital Partners and its affiliates are the direct or indirect managing partners of ML Offshore LBO Partnership No. IX, Merrill Lynch Capital Appreciation Partnership No. IX, L.P., ML Employees LBO Partnership No. 1, L.P., Merrill Lynch Capital Appreciation Partnership No. B-X, L.P., ML Offshore LBO Partnership No. B-X and MLCP Associates, L.P. No. II. Such in footnote (3) below, are referred to herein as the "Merrill Lynch Investors". The address of such entities is c/o ML Capital Partners, 767 Fifth Avenue, New York, New York 10153. ML Capital Partners is a wholly owned subsidiary of ML&Co. (3) Merchant Banking L.P. No. 1, Merchant Banking L.P. No. IV, Merrill Lynch KECALP L.P. 1987, Merrill Lynch KECALP L.P. 1989, Merrill Lynch KECALP L.P. 1991 and ML IBK Positions, Inc. are indirectly controlled by ML&Co. The address of such entities is c/o James Caruso, Merrill Lynch & Co., Inc., World Financial Center, North Tower, New York, New York 10281-1326. (4) CBC Capital Partners, Inc. is a wholly owned subsidiary of Chemical Banking Corp. (5) The Equitable Investors are separate purchasers who are affiliates of each other. (6) SMG-II Preferred Stock may be converted into an equivalent number of shares of common stock of SMG-II in accordance with its terms. No officer or director claims beneficial ownership of any share of the Company's Common Stock, or of SMG-II stock other than SMG-II Class A Common Stock. The number of shares of SMG-II Class A Common Stock beneficially owned by each director, by each of the five highest compensated executive officers and by all directors and all current and executive officers as a group is as follows:
NAME NUMBER OF SHARES % OF CLASS - ------------------------------------------------------- ------------------- ------------- Jules Borshadel(1) .................................... 5,140 .7 James J. Burke, Jr. ................................... -- -- Anthony J. Cuti(1)..................................... 5,217 .7 Jack Futterman(1)...................................... 23,000 3.2 Sunil C. Khanna........................................ 700 .1 Bernard Kenny(1) ...................................... 4,700 .7 Stephen M. McLean...................................... -- -- Susan C. Penny ........................................ -- -- Ronald Rallo(1) ....................................... 2,750 .4 Jerry G. Rubenstein(1)................................. 2,500 .3 Directors and executive officers as a group(1)......... 55,662 7.8
- --------------- (1) Includes 250 shares of SMG-II Class A Common Stock that SMG-II has agreed to sell to Mr. Cuti and presently exercisable options granted under the Plan to purchase shares of SMG-II Class A Common Stock as follows: Mr. Borshadel, 2,640; Mr. Cuti, 5,217; Mr. Futterman, 13,000; Mr. Kenny, 1,700; Mr. Rallo, 2,350; Mr. Rubenstein, 1,000, and all directors and executive officers as a group, 33,612. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In March 1990, Jerry G. Rubenstein, a Director, borrowed from the Company $100,000 in order to help finance his purchase of Company Class A Common Stock. Subsequently, such shares of Company 71 Class A Common Stock were exchanged for shares of SMG-II Class A Common Stock. The foregoing indebtedness to the Company is evidenced by a full recourse promissory note (the "Recourse Note"). The Recourse Note is for a term of ten years and bears interest at the rate of 8.02% per annum, payable annually. Except as otherwise provided in the Recourse Note, no principal on such recourse loan shall be due and payable until the tenth anniversary of the date of issue of such Recourse Note. Under the terms of the agreement pursuant to which the shares of Company Class A Common Stock were exchanged for shares of SMG-II Class A Common Stock, the Company is obligated to pay to each Management Investor who pays interest on his Recourse Note (except under certain circumstances) an amount equal to such interest, plus an amount sufficient to pay any income taxes resulting from the above described payment after taking into account the value of any deduction available to him as a result of the payment of such interest or taxes (the "Reimbursement Amount"). As of April 1, 1994, Mr. Rubenstein remained indebted to the Company in the amount of $100,000. During Fiscal 1992, the Company retained Merrill Lynch, of which Messrs. Burke, Khanna and McLean are principals, to act as underwriter in connection with its offering of the Subordinated Notes. In addition, in Fiscal 1993 Merrill Lynch acted as Dealer Manager in connection with the Exchange Offer and related Solicitation, and as underwriter in connection with the Pathmark Senior Subordinated Notes and Junior Subordinated Deferred Coupon Notes Offerings for which it received customary fees. The Company believes that the terms of the transactions referred to under this paragraph were no less favorable than those obtainable in transactions with unrelated persons. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Documents filed as part of this Report.
PAGE NUMBER ----------------- 1. Financial Statements: 2. Financial Statement Schedules:
Schedule V-- Property and Equipment 74 Schedule VI-- Accumulated Depreciation and Amortization of Property and 75 Equipment Schedule VIII-- Allowance for Doubtful Accounts Receivable, Trade 76 Schedule X-- Supplementary Income Statement Information 77 All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto. 3. Exhibits: Incorporated herein by reference is a list of the Exhibits contained in the Exhibit Index on Pages 78 through 80 of this Report.
(b) Reports on Form 8-K. Current report on Form 8-K dated November 1, 1993 (Items 5 and 7). (c) Exhibits required by Item 601 of Regulation S-K. See item 14(a) 3 above. 72 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: April 29, 1994 SUPERMARKETS GENERAL HOLDINGS CORPORATION By: /s/ ANTHONY CUTI .................................. Anthony Cuti President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - ---------------------------------------------- ---------------------------------------------- ----------------- JACK FUTTERMAN Director, Chairman and Chief Executive Officer April 29, 1994 .............................................. (Principal Executive Officer)* (Jack Futterman) /S/ ANTHONY CUTI Director, President April 29, 1994 .............................................. and Chief Financial Officer (Anthony Cuti) (Principal Financial Officer) /s/ JOSEPH ADELHARDT Vice President and Controller (Principal April 29, 1994 .............................................. Accounting Officer) (Joseph Adelhardt) JAMES J. BURKE, JR. Director* April 29, 1994 .............................................. (James J. Burke, Jr.) SUNIL C. KHANNA Director* April 29, 1994 .............................................. (Sunil C. Khanna) STEPHEN M. MCLEAN Director* April 29, 1994 .............................................. (Stephen M. McLean) SUSAN C. PENNY Director* April 29, 1994 .............................................. (Susan C. Penny) JERRY G. RUBENSTEIN Director* April 29, 1994 .............................................. (Jerry G. Rubenstein) *By: /s/ MARC A. STRASSLER ......................... Marc A. Strassler Attorney-in-Fact
73 SCHEDULE V SUPERMARKETS GENERAL HOLDINGS CORPORATION PROPERTY AND EQUIPMENT (IN THOUSANDS)
COLUMN B COLUMN E COLUMN G ------------ COLUMN C COLUMN D ---------- ---------- COLUMN A BALANCE AT --------- ----------- DISPOSITION COLUMN F BALANCE - -------------------------------------------------- BEGINNING ADDITIONS RETIREMENTS OF PURITY ----------- AT CLOSE CLASSIFICATION OF PERIOD AT COST OR SALES OPERATIONS TRANSFERS OF PERIOD - -------------------------------------------------- ------------ --------- ----------- ---------- ----------- ---------- 52 WEEKS ENDED JANUARY 29, 1994 Land.............................................. $ 64,594 $ 1,814 $ 568 $ -- $ -- $ 65,840 Buildings and building improvements............... 177,148 17,309 1,926 -- 3,681 196,212 Fixtures and equipment............................ 234,114 24,991 35,182 -- 1,659 225,582 Leasehold costs and improvements.................. 300,269 24,139 14,893 -- 480 309,995 Transportation equipment.......................... 22,705 85 3,019 -- -- 19,771 Construction in progress.......................... 3,985 2,515 -- -- (5,820) 680 ------------ --------- ----------- ---------- ----------- ---------- 802,815 70,853 55,588 -- -- 818,080 Property and equipment under capital leases....... 155,813 25,655 4,972 -- -- 176,496 ------------ --------- ----------- ---------- ----------- ---------- Total.................................... $ 958,628 $ 96,508 $ 60,560 $ -- $ -- $ 994,576 ------------ --------- ----------- ---------- ----------- ---------- ------------ --------- ----------- ---------- ----------- ---------- 52 WEEKS ENDED JANUARY 30, 1993 Land.............................................. $ 57,496 $ 7,341 $ 243 $ -- $ -- $ 64,594 Buildings and building improvements............... 166,637 8,870 3,335 -- 4,976 177,148 Fixtures and equipment............................ 264,040 23,496 53,555 -- 133 234,114 Leasehold costs and improvements.................. 293,058 20,525 8,874 -- (4,440) 300,269 Transportation equipment.......................... 21,818 1,487 600 -- -- 22,705 Construction in progress.......................... 811 3,903 60 -- (669) 3,985 ------------ --------- ----------- ---------- ----------- ---------- 803,860 65,622 66,667 -- -- 802,815 Property and equipment under capital leases....... 148,694 8,724 1,605 -- -- 155,813 ------------ --------- ----------- ---------- ----------- ---------- Total.................................... $ 952,554 $ 74,346 $ 68,272 $ -- $ $ 958,628 ------------ --------- ----------- ---------- ----------- ---------- ------------ --------- ----------- ---------- ----------- ---------- 52 WEEKS ENDED FEBRUARY 1, 1992 Land.............................................. $ 63,566 $ 701 $ 3,750 $ 3,032 $ 11 $ 57,496 Buildings and building improvements............... 186,658 5,476 10,659 14,838 -- 166,637 Fixtures and equipment............................ 349,174 26,447 27,269 84,742 430 264,040 Leasehold costs and improvements.................. 352,907 21,550 36,357 47,131 2,089 293,058 Transportation equipment.......................... 29,327 123 1,963 6,012 343 21,818 Construction in progress.......................... 3,250 5,149 4 4,711 (2,873) 811 ------------ --------- ----------- ---------- ----------- ---------- 984,882 59,446 80,002 160,466 -- 803,860 Property and equipment under capital leases....... 184,939 19,409 9,916 45,738 -- 148,694 ------------ --------- ----------- ---------- ----------- ---------- Total.................................... $ 1,169,821 $ 78,855 $ 89,918 $ 206,204 $ -- $ 952,554 ------------ --------- ----------- ---------- ----------- ---------- ------------ --------- ----------- ---------- ----------- ----------
74 SCHEDULE VI SUPERMARKETS GENERAL HOLDINGS CORPORATION ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT (IN THOUSANDS)
COLUMN B COLUMN C COLUMN D COLUMN F ---------- ----------- ----------- COLUMN E --------- COLUMN A BALANCE AT CONTINUING DISCONTINUED ----------- DISPOSITION COLUMN G - ------------------------------------------------- BEGINNING OPERATIONS OPERATIONS RETIREMENTS OF PURITY ----------- CLASSIFICATION OF PERIOD ADDITIONS ADDITIONS OR SALES OPERATIONS TRANSFERS - ------------------------------------------------- ---------- ----------- ----------- ----------- --------- ----------- 52 WEEKS ENDED JANUARY 29, 1994 Buildings and building improvements.............. $ 43,068 $ 7,364 $ 2,537 $ 2,418 $ -- $ -- Fixtures and equipment........................... 115,796 22,717 4,240 30,922 -- -- Leasehold costs and improvements................. 97,832 21,837 3,043 13,746 -- -- Transportation equipment......................... 13,955 1,691 525 2,651 -- -- ---------- ----------- ----------- ----------- --------- ----------- 270,651 53,609 10,345 49,737 -- -- Property and equipment under capital leases...... 51,166 14,056 1,571 2,928 -- -- ---------- ----------- ----------- ----------- --------- ----------- Total................................... $ 321,817 $ 67,665 $ 11,916 $ 52,665 $ -- $ -- ---------- ----------- ----------- ----------- --------- ----------- ---------- ----------- ----------- ----------- --------- ----------- 52 WEEKS ENDED JANUARY 30, 1993 Buildings and building improvements.............. $ 35,405 $ 8,045 $ 1,173 $ 2,540 $ -- $ 985 Fixtures and equipment........................... 133,105 25,916 3,707 46,995 -- 63 Leasehold costs and improvements................. 82,971 20,189 2,909 7,189 -- (1,048) Transportation equipment......................... 12,068 2,322 123 558 -- -- ---------- ----------- ----------- ----------- --------- ----------- 263,549 56,472 7,912 57,282 -- -- Property and equipment under capital leases...... 37,515 12,771 1,132 252 -- -- ---------- ----------- ----------- ----------- --------- ----------- Total................................... $ 301,064 $ 69,243 $ 9,044 $ 57,534 $ -- $ -- ---------- ----------- ----------- ----------- --------- ----------- ---------- ----------- ----------- ----------- --------- ----------- 52 WEEKS ENDED FEBRUARY 1, 1992 Buildings and building improvements.............. $ 31,467 8,948 1,178 $ 2,319 $ 3,869 $ -- Fixtures and equipment........................... 150,170 41,628 4,443 22,876 40,260 -- Leasehold costs and improvements................. 84,583 25,242 3,953 10,483 20,324 -- Transportation equipment......................... 12,467 3,543 225 1,384 2,783 -- ---------- ----------- ----------- ----------- --------- ----------- 278,687 79,361 9,799 37,062 67,236 -- Property and equipment under capital leases...... 36,981 13,811 1,707 4,992 9,992 -- ---------- ----------- ----------- ----------- --------- ----------- Total................................... $ 315,668 $ 93,172 $ 11,506 $ 42,054 $ 77,228 $ -- ---------- ----------- ----------- ----------- --------- ----------- ---------- ----------- ----------- ----------- --------- ----------- COLUMN H COLUMN A BALANCE AT - ------------------------------------------------- CLOSE OF CLASSIFICATION PERIOD - ------------------------------------------------- ---------- 52 WEEKS ENDED JANUARY 29, 1994 Buildings and building improvements.............. $ 50,551 Fixtures and equipment........................... 111,831 Leasehold costs and improvements................. 108,966 Transportation equipment......................... 13,520 ---------- 284,868 Property and equipment under capital leases...... 63,865 ---------- Total................................... $ 348,733 ---------- ---------- 52 WEEKS ENDED JANUARY 30, 1993 Buildings and building improvements.............. $ 43,068 Fixtures and equipment........................... 115,796 Leasehold costs and improvements................. 97,832 Transportation equipment......................... 13,955 ---------- 270,651 Property and equipment under capital leases...... 51,166 ---------- Total................................... $ 321,817 ---------- ---------- 52 WEEKS ENDED FEBRUARY 1, 1992 Buildings and building improvements.............. $ 35,405 Fixtures and equipment........................... 133,105 Leasehold costs and improvements................. 82,971 Transportation equipment......................... 12,068 ---------- 263,549 Property and equipment under capital leases...... 37,515 ---------- Total................................... $ 301,064 ---------- ---------- ----------
Depreciation and amortization expense of owned property and equipment is computed on the straight-line method over their estimated useful lives. Amortization of property under capital leases is computed on the straight-line method over the remaining terms of the leases. Depreciable lives are primarily the following: Buildings....................................... 40 years Building/leasehold improvements: Structural.................................... Remaining life of building or lease Other improvements............................ 8 to 15 years Fixtures and equipment.......................... 3 to 10 years Transportation equipment........................ 3 to 8 years
75 SCHEDULE VIII SUPERMARKETS GENERAL HOLDINGS CORPORATION ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE, TRADE (IN THOUSANDS)
52 WEEKS ENDED ------------------------------------- JANUARY 29, JANUARY 30, FEBRUARY 1, 1994 1993 1992 ----------- ----------- ----------- Balance, beginning of period............................................. $ 1,714 $ 2,120 $ 2,210 Additions charged to earnings............................................ 3,245 4,211 4,935 Deductions: Items determined to be uncollectible, less recovery of amounts previously written off................................................... (3,168) (4,617) (4,983) Disposal of Purity Operations.......................................... -- -- (42) ----------- ----------- ----------- Balance, end of period................................................... $ 1,791 $ 1,714 $ 2,120 ----------- ----------- ----------- ----------- ----------- -----------
76 SCHEDULE X SUPERMARKETS GENERAL HOLDINGS CORPORATION SUPPLEMENTARY INCOME STATEMENT INFORMATION (IN THOUSANDS)
52 WEEKS ENDED ------------------------------------- JANUARY 29, JANUARY 30, FEBRUARY 1, ITEM 1994 1993 1992 - ------------------------------------------------------------------------- ----------- ----------- ----------- Maintenance and repairs.................................................. $ 51,807 $ 49,757 $ 62,763
Certain items noted in Rule 12-11 of Regulation S-X have been excluded from the above schedule on the basis that each is less than 1% of net sales as reported in the related Consolidated Statements of Operations. 77 EXHIBIT INDEX
EXHIBIT PAGE NO. EXHIBIT NO. - -------- --------------------------------------------------------------------- ----------- 2.1* --Distribution and Transfer Agreement among Pathmark, PTK and Plainbridge.......................................................... 2.2* --Distribution and Transfer Agreement dated as of May 3, 1993 among Pathmark, the Company and Chefmark. (incorporated by reference from Exhibit 2.2 to the Registration Statement on Form S-1 of the Company and Pathmark, File No. 33-59616 the "1993 Registration Statement").......................................................... 2.3 --Agreement and Plan of Merger dated as of April 22, 1987 by and among Old Supermarkets, SMG Acquisition Corporation and Holdings, as amended and restated (incorporated by reference from Exhibit 2 to the Registration Statement on Form S-1 of the Company, File No. 33-16963)............................................................ 2.4 --Agreement and Plan of Merger dated as of July 29, 1991 among Holdings, Purity Supreme, Inc. and PSLP Holding Corporation (incorporated by reference from Exhibit 10.55 to the Registration Statement on Form S-1 of the Company, No. 33-16963)................ 2.5 --Amendment No. 1 dated as of October 23, 1991 to the Agreement and Plan of Merger dated as of July 29, 1991 among the Company, Purity Supreme, Inc. and PSLP Holding Corporation (incorporated by reference from Exhibit 2.2 to the Current Report on Form 8-K of the Company dated December 17, 1991)..................................... 3.1 --Restated Certificate of Incorporation of the Company, as amended. (incorporated by reference from Exhibit 3.3 to the Registration Statement on Form S-1 of Pathmark, File No. 33-59612, the "October 1993 Registration Statement")........................................ 3.2 --Amendment to the Restated Certificate of Incorporation of the Company, as amended. (incorporated by reference from Exhibit 3.2 to the October Registration Statement)................................ 3.3 --By-Laws of the Company, as amended. (incorporated by reference from Exhibit 3.6 to the 1993 Registration Statement).................... 3.4 --Restated Certificate of Incorporation of the Company, as amended. (incorporated by reference from Exhibit 3.4 to the 1993 Registration Statement).............................................. 3.5 --Certificate of Designation of the $3.52 Cumulative Exchangeable Redeemable Preferred Stock of Holdings. (incorporated by reference from Exhibit 3.5 to the 1993 "Registration Statement")............. 4.1* --Indenture dated as of May 1, 1992 between the Company and Wilmington Trust Company, Trustee, relating to the 11 5/8% Subordinated Notes due 2002 of Holdings.............................. 4.2* --Supplemental Indenture between the Company and Wilmington Trust Company, Trustee, to the Indenture dated as of May 1, 1992 between Holdings and Wilmington Trust Company, Trustee, relating to the 11 5/8% Subordinated Notes dues 2002 of Holdings...................... 4.3 --Commitment Letter dated March 12, 1993 between the Company and Bankers Trust Company. (incorporated by reference from Exhibit 4.4B to the 1993 Registration Statement)................................ 4.4* --Credit Agreement among Pathmark, the Lenders, listed therein, and Banker's Trust Company as Agent.................................... 4.5* --Credit Agreement among Plainbridge, the Lenders, listed therein, and Banker's Trust Company as Agent................................ 4.6* --Indenture between Pathmark and United States Trust Company of New York, Trustee, relating to the Senior Subordinated Notes due 2003 of Pathmark.......................................................... 4.7* --Indenture between Pathmark and NationsBank of Georgia, National Association, Trustee, relating to the Junior Subordinated Deferred Coupon Notes due 2003 of Pathmark..................................
78
EXHIBIT PAGE NO. EXHIBIT NO. - -------- --------------------------------------------------------------------- ----------- 4.8* --Indenture between Pathmark and Wilmington Trust Company, Trustee, relating to the 11 5/8% Subordinated Notes due 2002 of Pathmark.... 4.9* --Indenture between Pathmark and Wilmington Trust Company, Trustee, relating to the 12 5/8% Subordinated Debentures due 2002 of Pathmark............................................................. 10.1* --Logistical Services Agreement between Pathmark and Plainbridge..... 10.2* --Services Agreement between Pathmark and Plainbridge relating to the Rickel home centers................................................ 10.3 --Services Agreement between the Company and Plainbridge relating to the warehouse and distribution facilities. (incorporated by reference from Exhibit 10.3 to the October 1993 Registration Statement)........................................................... 10.4 --Services Agreement dated as of May 3, 1993 between the Company and Chefmark (incorporated by reference from Exhibit 10.4 to the 1993 Registration Statement).............................................. 10.5 --Chefmark Supply Agreement, dated May 3, 1993, between the Company and Chefmark (incorporated by reference from Exhibit 10.5 to the 1993 Registration Statement)....................................... 10.6* --Tax Sharing Agreement between the Company and SMG-II............... 10.7* --Tax Indemnity Agreement between the Company and Plainbridge........ 10.8 --Supermarkets General Corporation Pension Plan (as Amended and Restated effective January 1, 1979) as amended through May 29, 1987 (incorporated by reference from Exhibit 10.21 to the Registration Statement on Form S-1 of Holdings, File No. 33-16963).............. 10.9 --Supermarkets General Corporation Savings Plan (as Amended and Restated effective April 1, 1983) as amended through January 1, 1987 (incorporated by reference from Exhibit 10.22 to the Registration Statement on Form S-1 of Holdings, File No. 33-16963)............................................................ 10.10 --Supermarkets General Corporation Management Incentive Plan effective June 17, 1971 (incorporated by reference from Exhibit 10.23 to the Registration Statement on Form S-1 of Holdings, File No. 33-16963)........................................................ 10.11 --Supplemental Retirement Agreements dated as of March 9, 1987 between Old Supermarkets and Jack Futterman, Jeffrey C. Girard, Jules Borshadel and Isadore Lemmerman (incorporated by reference from Exhibit 10.25 to the Registration Statement on Form S-1 of Holdings, File No. 33-16963)......................................... 10.12 --Excess Benefit Plan of Supermarkets General Corporation, effective as of March 9, 1987................................................ 10.13 --Recourse Secured Promissory Note, dated October 5, 1987, given to Holdings from each Management Investor listed therein (incorporated by reference from Exhibit 10.43 to Post-Effective Amendment No. 1 to the Registration Statement on Form S-1 of Holdings, File No. 33-16963)............................................................ 10.14 --Stock Pledge Agreement dated October 5, 1987, between Holdings and each Management Investor listed therein (incorporated by reference from Exhibit 10.44 to Post-Effective Amendment No. 1 to the Registration Statement on Form S-1 of Holdings, File No. 33-16963)............................................................ 10.15 --SMG-II Holdings Corporation Management Investors Stock Option Plan, as amended May 17, 1991 (the "Option Plan")........................ 10.16 --Form of Stock Option Agreement under the Option Plan............... 10.17 --SMG-II Holdings Corporation Employees 1987 Stock Option Plan, as amended May 17, 1991............................................... 10.18* --Employment Agreement dated as of August 1, 1993 among the Company, Pathmark, SMG-II and Jack Futterman..................................
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EXHIBIT PAGE NO. EXHIBIT NO. - -------- --------------------------------------------------------------------- ----------- 10.19* --Employment Agreement dated as of August 1, 1993 between the Pathmark and Jules Borshadel....................................... 10.20* --Employment Agreement dated as of August 1, 1993 between the Company, SMG-II and Anthony Cuti................................... 10.21 --Stockholders Agreement, dated as of February 4, 1991, among SMG-II Holdings Corporation and its Stockholders (incorporated by reference from Exhibit 10.54 to the Registration Statement on Form S-1 of Holdings, File No. 33-16963).................................. 10.24 --Supplemental Retirement Agreements dated as of March 12, 1993 between the Company and Anthony Cuti and Isadore Zalkin............ 10.25 --Supplemental Retirement Agreement, dated March 9, 1987 between the Company and Bernard Kenny.......................................... 22.* --List of Subsidiaries of the Company 23.* --Letter from Deloitte & Touche as to preferability of accounting change............................................................. 24.* --Powers of Attorney
- --------------- *Filed herewith. 80 EX-2.1 2 DISTRIBUTION AND TRANSFER AGREEMENT AMONG PTK HOLDINGS, INC., PATHMARK STORES, INC. AND PLAINBRIDGE, INC. DATED AS OF OCTOBER 26, 1993 DISTRIBUTION AND TRANSFER AGREEMENT TABLE OF CONTENTS Page ARTICLE I CERTAIN DEFINITIONS Section 1.01 Certain Defined Terms ............... 2 ARTICLE II THE REORGANIZATION Section 2.01 The Asset and Liability Transfer .... 7 Section 2.02 The Distribution .................... 7 Section 2.03 Cooperation Prior to the Distribution ...................... 8 Section 2.04 Conditions Precedent ................ 8 ARTICLE III CERTAIN MATTERS RELATING TO THE REORGANIZATION Section 3.01 Transfer Instruments ................ 9 Section 3.02 No Representations or Warranties .... 9 Section 3.03 Further Assurances and Consents ..... 10 Section 3.04 Sales and Transfer Taxes ............ 11 Section 3.05 Proration of Taxes, Lease and Utility Payments .................. 12 Section 3.06 Signs; Use of Pathmark Name ......... 12 Section 3.07 Products, Supplies and Documents .... 13 Section 3.08 Plant Closings and Layoffs .......... 13 Section 3.09 Competition ......................... 14 Section 3.10 Insurance ........................... 14 ARTICLE IV INDEMNIFICATION Section 4.01 Indemnification by Pathmark ......... 16 Section 4.02 Indemnification by Plainbridge ...... 16 Section 4.03 Limitations on and Adjustments to Indemnification Obligations ....... 17 Section 4.04 Procedures for Indemnification of Third Party Claims ............. 19 Section 4.05 Remedies Cumulative ................. 22 Section 4.06 Survival of Indemnities ............. 22 i Page ARTICLE V ACCESS TO INFORMATION Section 5.01 Provision of Books and Records ...... 22 Section 5.02 Access to Information ............... 23 Section 5.03 Production of Witnesses ............. 23 Section 5.04 Retention of Records ................ 23 Section 5.05 Confidentiality ..................... 24 Section 5.06 Privileged Matters .................. 24 ARTICLE VI DISPUTE RESOLUTION Section 6.01 Mediation and Binding Arbitration ... 26 Section 6.02 Initiation .......................... 26 Section 6.03 Submission to Mediation ............. 26 Section 6.04 Selection of Mediator ............... 26 Section 6.05 Mediation ........................... 27 Section 6.06 Selection of Arbitrator ............. 27 Section 6.07 Cost of Arbitration ................. 27 ARTICLE VII GENERAL PROVISIONS Section 7.01 Complete Agreement; Construction .... 27 Section 7.02 Survival of Agreements .............. 28 Section 7.03 Expenses ............................ 28 Section 7.04 Governing Law ....................... 28 Section 7.05 Notices ............................. 28 Section 7.06 Amendments .......................... 29 Section 7.07 Successors and Assigns .............. 29 Section 7.08 Termination ......................... 29 Section 7.09 No Third-Party Beneficiaries ........ 30 Section 7.10 Headings ............................ 30 Section 7.11 Severability ........................ 30 Section 7.12 Counterparts ........................ 30 SCHEDULE I Transferred Assets SCHEDULE II Assumed Liabilities ANNEX A Rickel Services Agreement ANNEX B Blair Services Agreement ANNEX C Logistical Services Agreement ANNEX D Tax Indemnity Agreement ii DISTRIBUTION AND TRANSFER AGREEMENT, dated as of October 26, 1993 (this "Agreement"), among PTK HOLDINGS, INC., a Delaware corporation ("Holdings"), PATHMARK STORES, INC., a Delaware corporation and, as of the date hereof, a wholly owned subsidiary of Holdings ("Pathmark"), and PLAINBRIDGE, INC., a Delaware corporation and, as of the date hereof, a wholly owned subsidiary of Pathmark ("Plainbridge"). W I T N E S S E T H : WHEREAS, in connection with a Reorganization (the "Reorganization") of Pathmark, as described in Registration Statements Nos. 33-59616, 33-59612 and 33-50053 filed with the Securities and Exchange Commission (collectively and as amended and declared effective, the "Registration Statements"), the Board of Directors of Pathmark has determined that it is appropriate and desirable to contribute certain owned Pathmark retail properties and certain assets and properties related to the operations of its Rickel division and its warehouse and distribution operations (collectively, the "Transferred Businesses") to the capital of Plainbridge and for Plainbridge to assume certain of the liabilities and obligations relating to the Transferred Businesses (such contribution and assumption being the "Asset and Liability Transfer"); WHEREAS, the Board of Directors of Pathmark has determined that it would be in the best interest of Pathmark for Pathmark to distribute (the "Distribution") to Holdings all the outstanding shares of the Class A common stock, par value $.01 per share, of Plainbridge (the "Plainbridge Class A Common Stock"); WHEREAS, the Board of Directors of each of Pathmark and Plainbridge has determined that it is in the best interest of Pathmark and Plainbridge, respectively, to participate in the Asset and Liability Transfer; WHEREAS, it is intended that, for federal income tax purposes, the Distribution shall qualify as a tax-free distribution under the provisions of Section 355 of the United States Internal Revenue Code of 1986, as amended (the "Code"); and WHEREAS, Holdings, Pathmark and Plainbridge have determined that it is appropriate and desirable to set forth their agreements regarding the principal corporate transactions required to effect the Asset and Liability Transfer and the Distribution and certain other agreements relating to the Asset and Liability Transfer and the Distribution; NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, Holdings, Pathmark and Plainbridge hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Action" means any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority. "Affiliate" means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person; provided, however, that Holdings and its Subsidiaries, Pathmark and its Subsidiaries and Plainbridge and its Subsidiaries, respectively, shall not be deemed to be Affiliates of one another for purposes of this Agreement. "Agreement" has the meaning specified in the preamble to this Agreement. "Asset and Liability Transfer" has the meaning specified in the recitals to this Agreement. "Assumed Liabilities" means, collectively, all the Liabilities and other obligations of Pathmark described on Schedule II. "Blair Services Agreement" means the Blair Services Agreement, to be dated as of the Pathmark Distribution Date, between Pathmark and Plainbridge, substantially in the form of Annex B. "Code" has the meaning specified in the recitals to this Agreement. "Distribution" has the meaning specified in the recitals to this Agreement. "Distribution Date" means the date on which the Distribution shall occur. "Final Determination" means, with respect to any issue or item for any taxable period: (i) a decision by a court of competent jurisdiction, but only after such decision has become final and unappealable; (ii) the expiration of the time for filing a claim for refund or, if a refund claim has been timely filed, the time for instituting a suit in respect of such refund claim, provided that no further adjustment to the items of income, gain, loss, deduction or credit for such period may thereafter be made; (iii) the execution by or on behalf of the taxpayer and the IRS of a closing agreement under section 7121 of the Code or comparable agreements under the laws of other jurisdictions; (iv) the acceptance by the IRS or its counsel of a tender pursuant to an offer in compromise under section 7122 of the Code, or comparable agreements of other jurisdictions; (v) the execution of a Form 870 or Form 870AD and the subsequent payment of the tax deficiency or the receipt of the refund reflected therein; or (vi) any other final and irrevocable determination of the tax liability of a party to this Agreement for any taxable period. "Governmental Authority" means any United States federal, state or local or any foreign government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body. "Governmental Order" means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority. "Holdings" has the meaning specified in the preamble to this Agreement. "Holdings Common Stock" means the common stock, par value $.01 per share, of Holdings. "Indemnifiable Loss" means, with respect to any claim by an Indemnitee for indemnification authorized pursuant to Article IV hereof, any and all losses, liabilities, claims, damages, obligations, payments, costs, and expenses (including, without limitation, the costs and expenses of any and all Actions, demands, assessments, judgments, settlements, and compromises relating thereto and attorneys' fees and expenses in connection therewith) suffered by such Indemnitee with respect to such claim. "Insurance Proceeds" means those monies (i) received by an insured from an insurance carrier or (ii) paid by an insurance carrier on behalf of the insured, in either case net of any applicable premium adjustments (including reserves), retrospectively rated premium adjustments, deductibles, retentions and costs paid by such insured. "Insurance Program" means, collectively, the series of policies pursuant to which various insurance carriers provide insurance coverage to Pathmark in respect of claims or occurrences relating to, without limitation, property damage, business interruption, transit, fire, extended coverage, fiduciary, fidelity, environmental impairment, employee crime, general liability, products' liability, automobile liability and employer's liability. "IRS" means the United States Internal Revenue Service. "Law" means any federal, state, local or foreign statute, law, ordinance, regulation, rule, code, order, other requirement or rule of law. "Liabilities" means any and all debts, liabilities, and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, or determined or undeterminable, including, without limitation, those arising under any Law (including, without limitation, any environmental Law), Action, or Governmental Order and those arising under any contract, agreement, arrangement, commitment, or undertaking. "Logistical Services Agreement" means the Logistical Services Agreement, to be dated as of the Distribution Date, between Pathmark and Plainbridge, substantially in the form of Annex C. "Losses" means any and all losses, Liabilities, claims, damages, obligations, payments, costs and expenses, matured or unmatured, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, known or unknown (including, without limitation, the costs and expenses of any and all Actions, threatened Actions, demands, assessments, judgments, settlements and compromises relating thereto and attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any such Actions or threatened Actions). "Pathmark" has the meaning specified in the preamble to this Agreement. "Pathmark Subsidiary" means any Subsidiary of Pathmark other than Plainbridge or any Plainbridge Subsidiary. "Person" means any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended. "Plainbridge" has the meaning specified in the preamble to this Agreement. "Plainbridge Class A Common Stock" has the meaning specified in the recitals to this Agreement. "Plainbridge Subsidiary" means any Subsidiary of Pathmark that will become a Subsidiary of Plainbridge immediately following the Asset and Liability Transfer, and any other Subsidiary of Plainbridge that thereafter may be organized or acquired by Plainbridge. "Prospectuses" means the prospectuses included in the Registration Statements, as supplemented and filed with the United States Securities and Exchange Commission pursuant to Rule 424(b) promulgated under the Securities Act of 1933, as amended. "Registration Statements" has the meaning specified in the recitals to this Agreement. "Related Agreements" means, collectively, the Rickel Services Agreement, the Logistical Services Agreement, the Blair Services Agreement and the Tax Indemnity Agreement. "Reorganization" has the meaning specified in the recitals to this Agreement. "Rickel Services Agreement" means the Rickel Services Agreement, to be dated as of the Distribution Date, between Pathmark and Plainbridge, substantially in the form of Annex A. "Services Agreements" means, collectively, the Rickel Services Agreement and the Blair Services Agreement. "SGHC" has the meaning specified in the recitals to this Agreement. "Subsidiary" of a Person means any corporation, partnership, joint venture, association or other entity controlled by such Person directly or indirectly through one or more intermediaries. "Tax" means all federal, state, local, foreign and other income, gross receipts, alternative or added on minimum, gains, sales, use, employment, franchise, profits, excise, payroll, social security (or similar), property (real or personal), value added, license, registration or other taxes, fees, stamp taxes and duties, assessments or charges of any kind whatsoever (whether payable directly or by withholding), together with any interest and penalties, additions to tax or additional amounts imposed by any taxing authority with respect thereto. "Tax Indemnity Agreement" means the Tax Indemnity Agreement, to be dated as of the Distribution Date, between Pathmark and Plainbridge, substantially in the form of Annex D. "Transfer Date" means the date on which the Asset and Liability Transfer shall occur. "Transfer Instruments" means, collectively, the various agreements, instruments and other documents to be entered into in order to effect the Asset and Liability Transfer. "Transferred Assets" means, collectively, all the assets and properties of Pathmark identified on Schedule I. "Transferred Businesses" has the meaning specified in the recitals to this Agreement. ARTICLE II THE REORGANIZATION SECTION 2.01. The Asset and Liability Transfer. Subject to Section 2.04(a), Pathmark and Plainbridge shall use their respective best efforts to cause, prior to the Distribution, (i) all of Pathmark's right, title and interest in and to the Transferred Assets to be conveyed, assigned, transferred and delivered to Plainbridge, and (ii) all of Pathmark's duties, obligations and responsibilities in respect of the Assumed Liabilities to be assumed by Plainbridge. Except as otherwise expressly provided in this Agreement or the Related Agreements, Plainbridge shall, following the Asset and Liability Transfer, assume, perform, pay, and discharge when due, any and all of the Assumed Liabilities. Subject to Section 3.03, to the extent that any such conveyances, assignments, transfers and deliveries shall not have been so consummated prior to the Distribution, Pathmark and Plainbridge shall cooperate to effect such consummation as promptly thereafter as shall be practicable, it nonetheless being understood and agreed by Pathmark and Plainbridge that neither shall be liable in any manner to any Person who is not a party to this Agreement for any failure of any of the transfers contemplated by this Article II to be consummated prior to, on the date of or subsequent to the Distribution. Whether or not all the Transferred Assets or the Assumed Liabilities shall have been legally transferred to or assumed by Plainbridge prior to the Distribution Date, Pathmark and Plainbridge agree that, as of the Transfer Date, Plainbridge shall have, and shall be deemed to have acquired, complete and sole ownership of all the Transferred Assets, except as described herein with respect to assets that are non-assignable, together with all of Pathmark's rights, powers and privileges (except as provided in Section 5.06) incidental thereto, and shall be deemed to have assumed in accordance with the terms of this Agreement all the Assumed Liabilities and all of Pathmark's duties, obligations and responsibilities incidental thereto. SECTION 2.02. The Distribution. Subject to Section 2.04(b), Pathmark shall, on the Distribution Date, deliver to Holdings stock certificates evidencing all the shares of Plainbridge Class A Common Stock then owned by Pathmark. The Board of Directors of Pathmark shall in its discretion establish the Distribution Date and all appropriate procedures in connection with the Distribution. The Distribution shall be effective as of 5:00 P.M., New York City time, on the Distribution Date. Plainbridge shall provide to Pathmark any information required in order to complete the Distribution. SECTION 2.03. Cooperation Prior to the Distribution. Holdings, Pathmark and Plainbridge shall cooperate with each other in effecting, and (i) if so requested by Pathmark, Holdings shall, as the sole stockholder of Pathmark, (ii) if so requested by Plainbridge, Pathmark shall, as the sole stockholder of Plainbridge prior to the Distribution Date, and (iii) Holdings shall, as the sole stockholder of Plainbridge after the Distribution Date, approve or ratify, as the case may be, any actions that are reasonably necessary or desirable to be taken by Holdings, Pathmark or Plainbridge, as the case may be, to effectuate the transactions referenced in or contemplated by this Agreement or the Related Agreements in a manner consistent with the terms of such agreements, including, without limitation, the preparation and implementation of appropriate plans, agreements, and arrangements for the establishment of, or amendments to, any employee benefit and other plans contemplated by this Agreement. SECTION 2.04. Conditions Precedent. (a) The obligations of Pathmark and Plainbridge to effect the Asset and Liability Transfer are subject to the satisfaction or waiver at or prior to the Transfer Date of each of the following conditions: (i) This Agreement, the Related Agreements and the consummation of each of the transactions provided for herein and therein shall have been approved by the Boards of Directors of Holdings, Pathmark and Plainbridge, as applicable. (ii) All authorizations, consents, approvals, and clearances of all federal, state, and local governmental agencies required to permit the valid consummation of the Asset and Liability Transfer shall have been obtained without any conditions being imposed that would have a material adverse effect on Pathmark or Plainbridge. (iii) No action shall have been instituted or threatened by or before any court or administrative body to restrain, enjoin, or otherwise prevent the Asset and Liability Transfer, and no restraining order or injunction issued by any court of competent jurisdiction shall be in effect restraining the Asset and Liability Transfer. (b) Upon the consummation of the Asset and Liability Transfer, the obligation of Pathmark to effect the Distribution is subject to the satisfaction or waiver at or prior to the Distribution Date of each of the following conditions: (i) Plainbridge shall have obtained commitments satisfactory to it for a bank credit facility or other financing for an aggregate principal amount of at least $50 million. (ii) All authorizations, consents, approvals, and clearances of all federal, state, and local governmental agencies required to permit the valid consummation of the Distribution shall have been obtained without any conditions being imposed that would have a material adverse effect on Holdings, Pathmark or Plainbridge. (iii) Pathmark shall have received an opinion of Shearman & Sterling, counsel to Pathmark, and of Deloitte & Touche, independent accountants of Pathmark, dated as of the Distribution Date, in form satisfactory to Pathmark, to the effect that no income, gain or loss should be recognized by Pathmark or its stockholders upon the Distribution and that the Distribution should constitute a tax-free distribution under Section 355 of the Code. (iv) No action shall have been instituted or threatened by or before any court or administrative body to restrain, enjoin, or otherwise prevent the Distribution, and no restraining order or injunction issued by any court of competent jurisdiction shall be in effect restraining the Distribution. ARTICLE III CERTAIN MATTERS RELATING TO THE REORGANIZATION SECTION 3.01. Transfer Instruments. Subject to Section 2.04(a), Pathmark and Plainbridge agree to execute or cause to be executed and to deliver the Transfer Instruments. SECTION 3.02. No Representations or Warranties. Plainbridge understands and agrees that Pathmark does not represent or warrant in any way, and shall not be deemed or implied to represent or warrant in any way, in this Agreement or in any other agreement or document contemplated by this Agreement, as to (a) the value or freedom from encumbrance of, or any other matter concerning, any Transferred Asset or (b) the legal sufficiency to convey title to any Transferred Asset by the execution, delivery, and filing of the Transfer Instruments, IT BEING UNDERSTOOD AND AGREED THAT ALL SUCH ASSETS ARE BEING TRANSFERRED "AS IS, WHERE IS" and that Plainbridge shall bear the economic and legal risk that any conveyances of the Transferred Assets shall be insufficient or that Plainbridge's title to any Transferred Assets shall be other than good and marketable and free from encumbrances. Similarly, Plainbridge understands and agrees that Pathmark does not represent or warrant in any way, in this Agreement or in any other agreement or document contemplated by this Agreement, that the obtaining of the consents and approvals, the execution and delivery of any amendatory agreements, or the makings of the filings and applications contemplated by this Agreement shall satisfy the provisions of all applicable agreements or the requirements of all applicable Laws, it being understood and agreed that, subject to Section 3.03(b) hereof, Plainbridge shall bear the economic and legal risk that any necessary consents or approvals are not obtained or that any requirements of Law are not complied with. SECTION 3.03. Further Assurances and Consents. (a) Each of Pathmark and Plainbridge shall execute and deliver such further instruments of conveyance, transfer and assignment and shall take such other actions as each of them may reasonably request of the other in order to effectuate the purposes of this Agreement and to carry out the terms hereof. Without limiting the generality of the foregoing, at any time and from time to time after the Transfer Date, at the request of Plainbridge and without further consideration, Pathmark shall execute and deliver to Plainbridge such other instruments of transfer, conveyance, assignment and confirmation and take such action as Plainbridge may reasonably deem necessary or desirable in order to more effectively transfer, convey and assign to Plainbridge and to confirm Plainbridge's title to all the Transferred Assets, to put Plainbridge in actual possession and operating control thereof and to permit Plainbridge to exercise all rights with respect thereto (including, without limitation, rights under contracts and other arrangements as to which the consent of any third party to the transfer thereof shall not have previously been obtained), and Plainbridge shall execute and deliver to Pathmark all instruments, undertakings and other documents and take such other actions as Pathmark may reasonably deem necessary or desirable in order for Plainbridge to assume fully the Assumed Liabilities and relieve Pathmark of all Liabilities and obligations with respect thereto and evidence the same to third parties. Notwithstanding the foregoing, Pathmark and Plainbridge shall not be obligated, in connection with the foregoing, to expend monies other than reasonable out-of-pocket expenses and attorneys' fees. (b) Pathmark and Plainbridge shall use their best efforts to obtain all consents, approvals and amendments required to novate or assign all agreements, leases, licenses and other rights of any nature whatsoever relating to the Transferred Assets to Plainbridge; provided, however, that Pathmark shall not be obligated to pay any consideration therefor (except for filing fees and other administrative charges) to the third party from whom such consents, approvals and amendments are requested. In the event and to the extent that Pathmark is unable to obtain any such required consent, approval or amendment (i) Pathmark shall continue to be bound thereby and (ii) unless not permitted by law or the terms thereof, Plainbridge shall pay, perform and discharge fully all the obligations of Pathmark thereunder from and after the Transfer Date and indemnify Pathmark for all Indemnifiable Losses arising out of such performance by Plainbridge, and Pathmark shall, without further consideration therefor, pay and remit to Plainbridge promptly all monies, rights and other consideration received in respect of such performance. Pathmark shall exercise or exploit its rights and options under all such agreements, leases, licenses and other rights and commitments referred to in this Section 3.03(b) only as reasonably directed by Plainbridge and at Plainbridge's expense. If and when any such consent shall be obtained or such agreement, lease, license or other right shall be obtained or such agreement, lease, license or other right shall otherwise become assignable or able to be novated, Pathmark shall promptly assign and novate all its rights and obligations thereunder to Plainbridge without payment of further consideration and Plainbridge shall, without the payment of any further consideration therefor, assume such rights and obligations. To the extent that the assignment of any agreement, lease, license or other right (or any proceeds therefrom) pursuant to this Section 3.03(b) is prohibited by law, the assignment provisions of this Section 3.03 shall operate to create a subcontract with Plainbridge to perform each relevant unassignable Pathmark contract or agreement at a subcontract price equal to the monies, rights and other considerations received by Pathmark with respect to the performance by Plainbridge under such subcontract. SECTION 3.04. Sales and Transfer Taxes. (a) Plainbridge and Pathmark agree to cooperate to determine the amount of sales, transfer and other taxes and fees (including, without limitation, all real estate, copyright and trademark transfer taxes and recording fees) payable in connection with the Asset and Liability Transfer (the "Asset and Liability Transfer Transaction Taxes"). Pathmark agrees to file promptly and timely the returns for such Asset and Liability Transfer Transaction Taxes with the appropriate taxing authorities and remit payment of the Asset and Liability Transfer Transaction Taxes, and Plainbridge shall join in the execution of any such tax returns or other documentation as appropriate. (b) Pathmark and Plainbridge agree to cooperate to determine the amount of sales, transfer and other taxes and fees (including, without limitation, all real estate, copyright and trademark transfer taxes and recording fees) payable in connection with the Distribution (the "Distribution Transaction Taxes"). Pathmark agrees to file promptly and timely the returns for such Distribution Transaction Taxes with the appropriate taxing authorities and remit payment of the Distribution Transaction Taxes, and Plainbridge shall join in the execution of any such tax returns or other documentation as appropriate. SECTION 3.05. Proration of Taxes, Lease and Utility Payments. All real property, personal property and similar taxes and installments of general and special assessments, if any, with respect to the Transferred Assets shall be prorated on the basis of actual days elapsed between the commencement of the relevant fiscal tax year and the Transfer Date, based on a 365-day year and the most recent tax statements or bills applicable thereto, without later adjustment. Any installment of rental payments with respect to leases that are part of the Transferred Assets or utility or similar periodic charges incurred by the Transferred Businesses which are payable with respect to the current period in which the Transfer Date occurs shall be prorated between Pathmark and Plainbridge on the basis of actual days elapsed from the first day of the relevant period to the Transfer Date. Pathmark shall be responsible for all such taxes, payments and charges allocable to all times prior to and including the Transfer Date and Plainbridge shall be responsible for all such taxes, payments and charges allocable to all times after the Transfer Date. Following the Transfer Date, each of Pathmark and Plainbridge (each, for purposes of this Section 3.05, a "party") shall, upon the request of the other party, immediately reimburse the other party for any such taxes, payments and charges or other expenses for which said party is responsible but have been paid by or are owed by the other party and for collections made by one party on behalf of the other party. SECTION 3.06. Signs; Use of Pathmark Name. (a) Except as provided in Section 3.06(b) or as otherwise agreed to by Pathmark, within 120 days after the Distribution Date, Plainbridge, at its own expense, shall remove (or, if necessary, on an interim basis, cover up) any and all exterior and interior signs and identifiers which refer or pertain to Pathmark at the Transferred Businesses. After such period, Plainbridge shall not and shall cause each of its Subsidiaries not to use or display the name "Pathmark" or other trademarks, tradenames or their identifiers owned by Pathmark that have not been assigned or licensed to Plainbridge or such Subsidiaries ("Non-Permitted Names"), without the prior written consent of Pathmark. (b) Plainbridge shall be permitted to continue to use and display the name "Pathmark" on vehicles used in the distribution of merchandise to retail grocery and other stores; provided, however, that such right is subject to revocation by Pathmark 90 days after written notice of such revocation has been delivered by Pathmark to Plainbridge. SECTION 3.07. Products, Supplies and Documents. Plainbridge shall have the right to use existing products, supplies and documents (including, but not limited to, purchase orders, forms, labels, shipping materials, catalogues, sales brochures, operating manuals, instructional documents and similar materials, and advertising material) being transferred to it pursuant to this Agreement which have imprinted thereon the name "Pathmark" or trademarks, logotypes or variations comprising the name "Pathmark" or a Non-Permitted Name, for a period not to exceed six months following the Distribution Date (or for such longer period as necessary to fulfill existing contractual relationships under contracts which have not been novated), provided that Plainbridge agrees (i) to use only such supplies and documents existing in inventory as of the Transfer Date, (ii) to conspicuously state on such supplies and documents when used that they are no longer documents of Pathmark and (iii) not to order or utilize in any manner any additional supplies and documents containing the name "Pathmark". This Section 3.07 shall not apply to merchandise labeled with the Pathmark name that is to be handled by Plainbridge for Pathmark pursuant to the Logistical Services Agreement. SECTION 3.08. Plant Closings and Layoffs. Plainbridge agrees that it shall not, at any time during the 90-day period following the Transfer Date, (i) effectuate a "plant closing" as defined in the Worker Adjustment and Retraining Notification Act of 1988, as amended (the "WARN Act"), affecting any site of employment or operating units within any site of employment of the Transferred Businesses or (ii) take any action to precipitate a "mass layoff" as defined in the WARN Act. Plainbridge agrees to indemnify Pathmark and to defend and hold Pathmark harmless from and against any and all claims, losses, damages, expenses, obligations and liabilities (including attorneys' fees and other costs of defense) that Pathmark may incur in connection with any suit or claim of violation brought against Pathmark under the WARN Act, that relate, in whole or in part, to actions taken by Plainbridge or any Plainbridge Subsidiary with regard to any site of employment operated by Plainbridge or any Plainbridge Subsidiary. SECTION 3.09. Competition. Except as otherwise provided in the Logistical Services Agreement, Pathmark and Plainbridge expressly acknowledge that Pathmark and Plainbridge may, after the Transfer Date, engage, either directly or through their Subsidiaries and Affiliates, in certain activities that may compete with the business of Plainbridge or Pathmark, as the case may be, and nothing contained in this Agreement shall be construed in such a manner as to prohibit Pathmark or Plainbridge or any of their Subsidiaries or Affiliates from engaging in such activities. SECTION 3.10. Insurance. (a) Plainbridge understands that to the extent that the applicable insurance policy or policies in the Insurance Program may be amended, Pathmark is transferring or adding coverage under its Insurance Program with respect to the Transferred Assets and Transferred Businesses as of the Transfer Date. Plainbridge shall reimburse Pathmark for the cost of such transferred or added coverage pursuant to the Services Agreements. To the extent that the applicable policy or policies in the Insurance Program may not be amended so as to transfer or add coverage under the Insurance Program with respect to the Transferred Assets and the Transferred Businesses, Pathmark shall assist Plainbridge in obtaining initial insurance coverage for Plainbridge from and after the Transfer Date in such amounts as are agreed to by the parties. Pathmark's Insurance Program will allow Plainbridge to make claims for any occurrence (an "Occurrence" as defined in the applicable insurance policy or policies in the Insurance Program) on or prior to the Transfer Date. Following the Transfer Date, Pathmark and Plainbridge shall cooperate with and assist each other in the prevention of conflicts or gaps in insurance coverage and collection of proceeds. (b) Pathmark and Plainbridge agree that Plainbridge shall have the right to present claims to Pathmark or Pathmark's insurers under all policies of insurance placed by Pathmark on Plainbridge's behalf, or which include Plainbridge within them, for insured incidents occurring from the date such coverage first commenced until the Transfer Date. The parties agree that any such policies written on a "claims made" rather than "occurrence" basis may not provide coverage to Plainbridge for incidents occurring prior to the Transfer Date but which are first reported after the Transfer Date. (c) Pathmark agrees that with respect to claims made prior to the Transfer Date by Pathmark and claims made following the Transfer Date at Plainbridge's request for Occurrences that, in either case, relate to the Transferred Businesses, it will use its reasonable efforts to obtain recoveries for Plainbridge and that it will reimburse Plainbridge for any recovery obtained by it pursuant to such claims; provided, however, that notwithstanding the foregoing, if Pathmark has made a claim or claims under an insurance policy that is not to be paid to Plainbridge pursuant to this Section 3.10(c) and a claim or claims that are to be paid to Plainbridge pursuant to this Section 3.10(c) and the amount of the recovery for such claims in the aggregate is limited by the amount of coverage provided by such policy, Pathmark may use its reasonable discretion in allocating the recovery between it and Plainbridge for such claims. Plainbridge shall pay all costs incurred by Pathmark after the Transfer Date in making any claim pursuant to this Section 3.10(c), including the salaries of its officers and employees based on the portion of time spent on such claims and that such costs incurred in pursuing a claim may be deducted from any recovery for such claim and Plainbridge agrees to make available to Pathmark such of its employees as Pathmark may reasonably request as witnesses or deponents in connection with Pathmark's management of claims, at Plainbridge's sole cost and expense. (d) With respect to any insured Losses or retroactive premium adjustments relating to assets or operations of Plainbridge or any Plainbridge Subsidiary prior to the Transfer Date or such later date as may be agreed to pursuant to Section 3.03(a): (i) Pathmark shall pay over to Plainbridge any Insurance Proceeds it receives on account of such Losses and any such retroactive premium reductions; and (ii) Plainbridge and the Plainbridge Subsidiaries shall reimburse Pathmark for all costs and expenses incurred and payments made by Pathmark after the Transfer Date to insurers on account of such Losses (including, without limitation, any self-insured retention payments) and any such retroactive premium increases. ARTICLE IV INDEMNIFICATION SECTION 4.01. Indemnification by Pathmark. Except with respect to insurance claims, which shall be governed by Sections 3.10 and 4.03, Pathmark shall indemnify, defend, and hold harmless Plainbridge, each Affiliate of Plainbridge, and each of their respective directors, officers, and employees and each of the heirs, executors, successors, and assigns of any of the foregoing (the "Transferee Indemnitees") from and against any and all Losses of the Plainbridge Indemnitees arising out of or due to, directly or indirectly, (i) all Losses arising out of any business conducted or to be conducted by Pathmark or any Pathmark Subsidiary, whether such Losses relate to events occurring, or whether such Losses are asserted, before or after the Transfer Date, excluding the Transferred Businesses to be conducted by Plainbridge (whether directly or through a subsidiary or Affiliate of Plainbridge) and the Transferred Assets, (ii) any claim that (A) the Registration Statements, at the time the Registration Statements became effective, 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 (B) the Prospectuses, at the time the Prospectuses were first filed pursuant to Rule 424(b) promulgated under the Securities Act of 1933, 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 and (iii) any failure by Pathmark to perform or otherwise comply with any provision of this Agreement, the Related Agreements or any other agreement to be entered into in connection with this Agreement that calls for performance or compliance by Pathmark. Anything in this Section 4.01 to the contrary notwithstanding, neither Pathmark nor any Pathmark Subsidiary shall have any liability whatsoever to either Plainbridge or any Plainbridge Subsidiary in respect of any Tax except as otherwise provided in Section 3.04, 3.05 or 4.03 or the Tax Indemnity Agreement. SECTION 4.02. Indemnification by Plainbridge. Except with respect to insurance claims, which shall be governed by Sections 3.10 and 4.03, Plainbridge shall indemnify, defend and hold harmless Pathmark, each Affiliate of Pathmark and each of their respective directors, officers and employees and each of the heirs, executors, successors and assigns of any of the foregoing (the "Pathmark Indemnitees") from and against any and all Losses of the Pathmark Indemnitees arising out of or due to the failure or alleged failure of Plainbridge or any of its Affiliates to pay, perform or otherwise discharge in due course (i) all Losses arising out of the Transferred Businesses and the Transferred Assets (whether directly or through an Affiliate of Plainbridge or a Plainbridge Subsidiary), whether such Losses relate to events occurring, or whether such Losses are asserted, before, on or after the Transfer Date, (ii) all Losses arising out of any guarantees or obligations to third parties of Pathmark or any Pathmark Subsidiary with respect to any obligations of Plainbridge or any Plainbridge Subsidiary to third parties and (iii) any failure by Plainbridge to perform or otherwise comply with any provision of this Agreement, the Related Agreements or any other agreement to be entered into in connection with this Agreement which calls for performance or compliance by Plainbridge. Anything in this Section 4.02 to the contrary notwithstanding, neither Plainbridge nor any Plainbridge Subsidiary shall have any liability whatsoever to either Pathmark or any Pathmark Subsidiary in respect of any Tax, except as otherwise provided in Section 3.05 or 4.03 or the Tax Indemnity Agreement. SECTION 4.03. Limitations on and Adjustments to Indemnification Obligations. (a) The amount that Pathmark or Plainbridge, as the case may be (an "Indemnifying Party"), is or may be required to pay to any Person (an "Indemnitee") pursuant to Section 4.01 or Section 4.02 (an "Indemnity Payment") shall be reduced (including, without limitation, retroactively) by any Insurance Proceeds or other amounts actually recovered by or on behalf of such Indemnitee, in reduction of the related Loss. If an Indemnitee shall have received the payment required by this Agreement from an Indemnifying Party in respect of any Loss and shall subsequently actually receive Insurance Proceeds or other amounts in respect of such Loss, then such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount of such Insurance Proceeds or other amounts actually received (up to but not in excess of the amount of any indemnity payment made hereunder). An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto, or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other third party shall be entitled to a "windfall" (i.e., a benefit they would not be entitled to receive in the absence of such indemnification provisions) by virtue of the indemnification provisions hereof. Each Indemnitee agrees that each Indemnifying Party shall be subrogated to such Indemnitee under any insurance policy. (b) (i) If an Indemnitee receives a tax saving by reason of having incurred an Indemnifiable Loss for which such Indemnitee shall have received an Indemnity Payment from an Indemnifying Party, then such Indemnitee shall pay to such Indemnifying Party an amount equal to such tax saving. For purposes of this Section 4.03(b), an Indemnitee shall be deemed to have received a tax saving with respect to an Indemnifiable Loss if, upon the filing of a federal, state or local income tax return for a taxable year ending on or after the Transfer Date (the "Indemnity Return"), an amount attributable to an Indemnifiable Loss (the "Indemnifiable Loss Deduction") is deductible by the Indemnitee or any of its wholly owned Subsidiaries and an amount attributable to the Indemnity Payment is not includible in gross income by the Indemnitee or any of its wholly owned Subsidiaries. If the Indemnity Payment is includible in gross income by the Indemnitee or if the Indemnifying Party claims as a deductible expense or loss an amount attributable to the Indemnity Payment, Indemnitee shall be deemed to have not received a tax saving with respect to an Indemnifiable Loss. Both Pathmark and Plainbridge shall act in good faith to coordinate their tax return filing positions with respect to Indemnity Payments for the periods that include an Indemnity Payment. (ii) In the event that an Indemnitee will receive a tax saving by reason of an Indemnifiable Loss, such Indemnitee shall pay the Indemnifying Party within 30 days after the filing of an Indemnity Return, a sum equal to the Indemnifiable Loss Deduction multiplied by an amount equal to A + [(1 - A) x .05], where A equals the highest marginal corporate federal income tax rate applicable to corporations taxable under Subchapter C of the Code on the date the Indemnity Return is filed (the "Tax Saving Amount"). (iii) In the event that an Indemnitee may receive a tax saving by reason of an Indemnifiable Loss, such Indemnitee shall adopt in good faith a reasonable tax return filing position so as to report the Indemnifiable Loss Deduction on such returns. The Indemnitee shall have the sole responsibility for the preparation of its tax returns and reporting thereon such Indemnifiable Loss Deduction. If a dispute arises between the Indemnitee and the Indemnifying Party as to the reasonableness of an Indemnity Return filing position with respect to an Indemnifiable Loss Deduction, such dispute shall be resolved by a nationally recognized public accounting firm selected and approved by both the Indemnitee and the Indemnifying Party. The cost of retaining such firm shall be shared by the Indemnitee and the Indemnifying Party equally, and the decision of the accounting firm shall be binding on the parties. (iv) There shall be an adjustment to any Tax Saving Amount calculated under Section 4.03(b)(ii) in the event of an audit or other proceeding which results in a Final Determination that increases or decreases the amount of the Indemnifiable Loss Deduction reported on the Indemnity Tax Return by the Indemnitee. The Indemnitee shall promptly inform the Indemnifying Party of any such audit or proceeding and shall attempt in good faith to sustain the tax saving at issue. Upon receiving a written notice of a Final Determination in respect of an Indemnitee Loss Deduction, the Indemnitee shall redetermine the Tax Saving Amount attributable to the Indemnifiable Loss Deduction under the tax saving calculation of Section 4.03(b)(ii), taking into account the Final Determination (the "Restated Tax Saving Amount"). If the Restated Tax Saving Amount is greater than the Tax Saving Amount, the Indemnitee shall pay the Indemnifying Party a sum equal to the difference between such amounts, within 30 days after receiving written notice of the Final Determination. If the Restated Tax Saving Amount is less than the Tax Saving Amount, then the Indemnifying Party shall pay the Indemnitee, within 30 days of receiving written notice from the Indemnitee of the Final Determination, an amount equal to the sum of (A) the difference between such amounts, and (B) any interest or penalty assessed against the Indemnitee by a tax authority which is attributable to any tax assessed as a result of a reduction in the Indemnifiable Loss Deduction effected by the Final Determination. SECTION 4.04. Procedures for Indemnification of Third Party Claims. The procedures for Indemnification of Third Party Claims (as defined below) shall be as follows: (a) If an Indemnitee shall receive notice or otherwise learn of the assertion by a Person (including, without limitation, any Governmental Authority) who is not a party to this Agreement of any claim or of the commencement by any such Person of any Action (a "Third Party Claim") with respect to which an Indemnifying Party may be obligated to provide indemnification pursuant to this Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof promptly after becoming aware of such Third Party Claim; provided, however, that the failure of an Indemnitee to give notice as provided in this Section 4.04(a) shall not relieve the related Indemnifying Party of its obligations under this Article IV, except to the extent that such Indemnifying Party is prejudiced by such failure to give notice. Such notice shall describe the Third Party Claim in reasonable detail and, if ascertainable, shall indicate the amount (estimated if necessary) of the Loss that has been or may be sustained. (b) An Indemnifying Party may elect to defend or to seek to settle or compromise, at such Indemnifying Party's own expense and by such Indemnifying Party's own counsel, any Third Party Claim. Within 30 days of the receipt of notice from an Indemnitee in accordance with Section 4.04(a) (or sooner, if the nature of such Third Party Claim so requires), the Indemnifying Party shall notify the Indemnitee of its election whether the Indemnifying Party will assume responsibility for defending such Third Party Claim, which election shall specify any reservations or exceptions. After notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third Party Claim, such Indemnifying Party shall not be liable to such Indemnitee under this Article IV for any legal or other expenses (except expenses approved in advance by the Indemnifying Party) subsequently incurred by such Indemnitee in connection with the defense thereof; provided, however, that if the defendants in any such claim include both the Indemnifying Party and one or more Indemnitees and in any Indemnitee's reasonable judgment a conflict of interest between one or more of such Indemnitees and such Indemnifying Party exists in respect of such claim or if the Indemnifying Party shall have assumed responsibility for such claim with any reservations or exceptions, such Indemnitees shall have the right to employ separate counsel to represent such Indemnitees and in that event the reasonable fees and expenses of such separate counsel (but not more than one separate counsel, other than local counsel, reasonably satisfactory to the Indemnifying Party) shall be paid by such Indemnifying Party. If an Indemnifying Party elects not to assume responsibility for defending a Third Party Claim, or fails to notify an Indemnitee of its election as provided in this Section 4.04(b), such Indemnitee may defend or (subject to the remainder of this Section 4.04(b)) seek to compromise or settle such Third Party Claim. Notwithstanding the foregoing, neither an Indemnifying Party nor an Indemnitee may settle or compromise any claim over the objection of the other; provided, however, that consent to settlement or compromise shall not be unreasonably withheld. Neither an Indemnifying Party nor an Indemnitee shall consent to entry of any judgment or enter into any settlement of any Third Party Claim which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnitee, in the case of a consent or settlement by an Indemnifying Party, or the Indemnifying Party, in the case of a consent or settlement by the Indemnitee, of a written release from all liability in respect of such Third Party Claim. (c) If an Indemnifying Party chooses to defend or to seek to compromise or settle any Third Party Claim, the related Indemnitee shall make available to such Indemnifying Party all personnel and all books, records or other documents within its control or which it otherwise has the ability to make available that are necessary or appropriate for such defense, settlement or compromise, and shall otherwise cooperate in the defense, settlement or compromise of such Third Party Claims. (d) Notwithstanding anything else in this Section 4.04 to the contrary, if an Indemnifying Party notifies the related Indemnitee in writing of such Indemnifying Party's desire to settle or compromise a Third Party Claim on the basis set forth in such notice (provided that such settlement or compromise includes as an unconditional term thereof the giving by the claimant or plaintiff of a written release of the Indemnitee from all liability in respect thereof) and the Indemnitee shall notify the Indemnifying Party in writing that such Indemnitee declines to accept any such settlement or compromise, such Indemnitee may continue to contest such Third Party Claim, free of any participation by such Indemnifying Party, at such Indemnitee's sole expense. In such event, the obligation of such Indemnifying Party to such Indemnitee with respect to such Third Party Claim shall be equal to the sum of (i) the costs and expenses of such Indemnitee prior to the date such Indemnifying Party notifies such Indemnitee of the offer to settle or compromise (to the extent such costs and expenses are otherwise indemnifiable hereunder) and (ii) the lesser of (A) the amount of any offer of settlement or compromise which such Indemnitee declined to accept and (B) the actual out-of-pocket amount such Indemnitee is obligated to pay subsequent to such date as a result of such Indemnitee's continuing to pursue such Third Party Claim. (e) Any claim on account of a Loss that does not result from a Third Party Claim shall be asserted by written notice given by the Indemnitee to the related Indemnifying Party. Such Indemnifying Party shall have a period of 30 days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such 30-day period, such Indemnifying Party shall be deemed to have refused to accept responsibility to make payment. If such Indemnifying Party does not respond within such 30-day period or rejects such claim in whole or in part, such Indemnitee shall be free to pursue such remedies as may be available to such party under this Agreement or under applicable law. (f) In addition to any adjustments required pursuant to Section 4.03, if the amount of any Loss shall, at any time subsequent to the payment required by this Agreement, be reduced by recovery, settlement or otherwise, the amount of such reduction, less any expenses incurred in connection therewith, shall promptly be repaid by the Indemnitee to the Indemnifying Party. (g) In the event of payment by an Indemnifying Party to any Indemnitee in connection with any Third Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim or against any other Person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right or claim. Section 4.05. Remedies Cumulative. The remedies provided in this Article IV shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party. SECTION 4.06. Survival of Indemnities. The obligations of Pathmark and Plainbridge under this Article IV shall survive the sale or other transfer by either of them of any assets or businesses or the assignment by either of them of any Liabilities, with respect to any Loss of the other related to such assets, businesses or Liabilities. ARTICLE V ACCESS TO INFORMATION SECTION 5.01. Provision of Books and Records. As soon as practicable after the Transfer Date, Pathmark shall deliver to Plainbridge all books and records that relate exclusively to the Transferred Businesses and the Transferred Assets or are necessary for Plainbridge to operate the Transferred Businesses and the Transferred Assets, including, without limitation, all such books and records relating to transferred employees, the purchase of materials, supplies, and services, and dealings with customers and suppliers of the Transferred Businesses and all files relating to any Action being assumed by Plainbridge as part of the Assumed Liabilities; provided, however, that Pathmark shall retain such books and records as may be reasonably needed by it for the provision of services by Pathmark to Plainbridge under the Services Agreements. SECTION 5.02. Access to Information. From and after the Transfer Date, Pathmark shall afford to Plainbridge and its authorized agents, representatives, Affiliates, employees, officers, directors, accountants, counsel and other designated representatives (collectively, "Representatives") reasonable access and duplicating rights during normal business hours to all records, books, contracts, instruments, computer data and other data and information (collectively, "Information") within Pathmark's possession relating to Plainbridge or any Plainbridge Subsidiary, insofar as such access is reasonably required by Plainbridge or any Plainbridge Subsidiary. Similarly, Plainbridge shall afford to Pathmark and its Representatives reasonable access and duplicating rights during normal business hours to Information within Plainbridge's possession relating to Pathmark or any Pathmark Subsidiary and insofar as such access is reasonably required by Pathmark or any Pathmark Subsidiary. Information may be requested under this Article V for, without limitation, audit, accounting, claims, litigation and tax purposes, as well as for purposes of fulfilling disclosure and reporting obligations and for performing this Agreement and the Related Agreements and the transactions contemplated hereby and thereby. SECTION 5.03. Production of Witnesses. After the Transfer Date, each of Pathmark and Plainbridge and their respective Subsidiaries shall use all reasonable efforts to make available to the other party and its Subsidiaries, upon written request, its directors, officers, employees and agents as witnesses to the extent that any such Person may reasonably be required (giving consideration to the business demands on such Persons) in connection with any legal, administrative or other proceedings in which the requesting party may from time to time be involved. SECTION 5.04. Retention of Records. Except as otherwise required by Law or agreed to in writing, each of Pathmark and Plainbridge shall retain, and shall cause its Subsidiaries (in the case of Plainbridge, the Plainbridge Subsidiaries), if any, to retain, following the Transfer Date for a period consistent with the document retention policies in effect at Pathmark and Plainbridge, respectively, all significant Information relating to the business of the other and the other's Subsidiaries. In addition, after the expiration of the applicable periods, such Information shall not be destroyed or otherwise disposed of at any time unless, prior to such destruction or disposal, (a) the party proposing to destroy or otherwise dispose of such Information shall provide no less than 30 days' prior written notice to the other, specifying in reasonable detail the Information proposed to be destroyed or disposed of and (b) if a recipient of such notice shall request in writing prior to the scheduled date for such destruction or disposal that any of the Information proposed to be destroyed or disposed of be delivered to such requesting party, the party proposing the destruction or disposal shall promptly arrange for the delivery of such of the Information as was requested at the expense of the party requesting such Information. SECTION 5.05. Confidentiality. Each of Pathmark and the Pathmark Subsidiaries on the one hand, and Plainbridge and the Plainbridge Subsidiaries on the other hand, agree to and will cause their respective Representatives to: (i) treat and hold as confidential (and not disclose or provide access to any Person to) all Information concerning the other in its possession or furnished by the other or the other's Representatives pursuant to either this Agreement or any Related Agreement, (ii) in the event that either party or its Representatives become legally compelled to disclose any such Information, provide the other party with prompt written notice of such requirement so that such other party may seek a protective order or other remedy or waive compliance with this Section 5.05 and (iii) in the event that such protective order or other remedy is not obtained, or the other party waives compliance with this Section 5.05, furnish only that portion of such Information which is legally required to be provided and exercise its best efforts to obtain assurances that confidential treatment will be accorded such Information; provided, however, that this sentence shall not apply to any Information that, at the time of disclosure, is available publicly and was not disclosed in breach of this Agreement by such party or its Representatives. Each of Pathmark and Plainbridge agrees and acknowledges that remedies at law for any breach of its obligations under this Section 5.05 are inadequate and that in addition thereto Plainbridge or Pathmark, as the case may be, shall be entitled to seek equitable relief, including injunction and specific performance, in the event of any such breach, without the necessity of demonstrating the inadequacy of monetary damages. SECTION 5.06. Privileged Matters. (a) Pathmark and Plainbridge agree that Plainbridge shall maintain, preserve and assert all privileges arising under or relating to the attorney-client relationship, including but not limited to the attorney-client and work product privileges, that relate directly or indirectly to the Transferred Businesses or the Transferred Assets for any period prior to the Transfer Date ("Privilege" or "Privileges"). Pathmark shall be entitled to control the assertion or waiver of any and all Privileges in perpetuity. Plainbridge shall not waive any Privilege that could be asserted under applicable law without the prior written consent of Pathmark. The rights and obligations created by this paragraph shall apply to all Information as to which, but for the Asset and Liability Transfer, Pathmark would have been entitled to assert or did assert the protection of a Privilege ("Privileged Information"), including but not limited to (i) any and all Information generated prior to the Transfer Date but which, after the Transfer Date, is in the possession of Plainbridge; (ii) all communications subject to a Privilege occurring prior to the Transfer Date between counsel for Pathmark and any Person who, at the time of the communication, was an employee of Pathmark, regardless of whether such employee is or becomes a Plainbridge employee; and (iii) all Information generated, received or arising after the Transfer Date that refers or relates to Privileged Information generated, received or arising prior to the Transfer Date. (b) Upon receipt by Plainbridge of any subpoena, discovery or other request that arguably calls for the production or disclosure of Privileged Information or if Plainbridge obtains knowledge that any current or former employee of Plainbridge has received any subpoena, discovery or other request that arguably calls for the production or disclosure of Privileged Information, Plainbridge shall promptly notify Pathmark of the existence of the request and shall provide Pathmark a reasonable opportunity to review the Privileged Information and to assert any rights it may have under this Section 5.06 or otherwise to prevent the production or disclosure of Privileged Information. Plainbridge will not produce or disclose any Information arguably covered by a Privilege under this Section 5.06 unless (i) Pathmark has provided its express written consent to such production or disclosure, or (ii) a court of competent jurisdiction has entered a final, non-appealable order finding that the Information is not entitled to protection under any applicable privilege. (c) Pathmark's transfer of Books and Records and other Information to Plainbridge, and Pathmark's agreement to permit Plainbridge to possess Privileged Information occurring or generated prior to the formation of Plainbridge, are made in reliance on Plainbridge's agreement, as set forth in this Section 5.06, to maintain the confidentiality of Privileged Information and to assert and maintain all applicable Privileges. The access to information being granted pursuant to Section 5.02, the agreement to provide witnesses and individuals pursuant to Section 5.03 and transfer of Privileged Information to Plainbridge pursuant to this Agreement shall not be deemed a waiver of any Privilege that has been or may be asserted under this Section 5.06 or otherwise. Nothing in this Agreement shall operate to reduce, minimize or condition the rights granted to Pathmark in, or the obligations imposed upon Plainbridge by, this Section 5.06. ARTICLE VI DISPUTE RESOLUTION SECTION 6.01. Mediation and Binding Arbitration. Except with respect to matters involving Section 5.06, if a dispute arises between Pathmark and Plainbridge as to the interpretation of this Agreement, including, without limitation, any matter involving an Indemnifiable Loss, Pathmark and Plainbridge agree to use the following procedures, in lieu of either of Pathmark or Plainbridge pursuing other available remedies and as the sole remedy, to resolve the dispute. SECTION 6.02. Initiation. If either of Pathmark or Plainbridge seeks to initiate the procedures described in this Article VI, it shall give written notice to Plainbridge or Pathmark, as the case may be, describing briefly the nature of the dispute. A meeting shall be held between Pathmark and Plainbridge within 10 days of the receipt of such notice, attended by individuals with decision-making authority regarding the dispute, to attempt in good faith to negotiate a resolution of the dispute. SECTION 6.03. Submission to Mediation. If, within 30 days after such meeting, Pathmark and Plainbridge have not succeeded in negotiating a resolution of the dispute, they agree to submit the dispute to mediation in accordance with the Center for Public Resources Model ADR Procedure - Mediation of Business Disputes or the procedure of another mutually agreed-upon organization, as modified herein, and to bear equally the costs of the mediation. SECTION 6.04. Selection of Mediator. Pathmark and Plainbridge shall jointly appoint a mutually acceptable mediator, seeking assistance in such regard from the Center for Public Resources or another mutually agreed-upon organization if they have been unable to agree upon such appointment within 20 days from the conclusion of the negotiation period. SECTION 6.05. Mediation. Pathmark and Plainbridge agree to participate in good faith in the mediation and negotiations related thereto for a period of 30 days following the initial mediation session. If Pathmark and Plainbridge are not successful in resolving the dispute through the mediation by the end of such 30-day period, then Pathmark and Plainbridge agree to submit the matter to binding arbitration in accordance with the Center for Public Resources Rules for Non-Administered Arbitration of Business Disputes, as modified herein, by a sole arbitrator, in New York, New York, selected in accordance with the provisions of Section 6.06. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Secs. 1-16, and judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. SECTION 6.06. Selection of Arbitrator. Pathmark and Plainbridge shall have 10 days from the end of the mediation period to agree upon a mutually acceptable neutral person not affiliated with either Pathmark or Plainbridge to act as arbitrator. If no arbitrator has been selected within such time, Pathmark and Plainbridge agree jointly to request the Center for Public Resources or another mutually agreed-upon organization to supply within 10 days a list of potential arbitrators with qualifications as specified by Pathmark and Plainbridge in the joint request. Within five days of receipt of the list, Pathmark and Plainbridge shall independently rank the proposed candidates, shall simultaneously exchange rankings, and shall select as the arbitrator the individual receiving the highest combined ranking who is available to serve. SECTION 6.07. Cost of Arbitration. The costs of arbitration shall be apportioned between Pathmark and Plainbridge as determined by the arbitrator in such manner as the arbitrator deems reasonable taking into account the circumstances of the case, the conduct of Pathmark and Plainbridge during the proceeding, and the result of the arbitration. ARTICLE VII GENERAL PROVISIONS SECTION 7.01. Complete Agreement; Construction. This Agreement and the Related Agreements, including any schedules and exhibits hereto or thereto, and other agreements and documents referred to herein, shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous agreements and undertakings, both written and oral, with respect to such subject matter. Notwithstanding any other provisions of this Agreement to the contrary, in the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of the Tax Indemnity Agreement, the provisions of the Tax Indemnity Agreement shall control. SECTION 7.02. Survival of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement shall survive the Transfer Date. SECTION 7.03. Expenses. Except as otherwise set forth in this Agreement or the Tax Indemnity Agreement, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors, and accountants, arising on or prior to the Transfer Date, as the case may be (whether or not then payable), in connection with the Reorganization (other than (i) costs incurred in connection with any financing arrangements entered into by Plainbridge or any Plainbridge Subsidiary, (ii) the fees and expenses of any outside consultant or counsel retained by Plainbridge, (iii) costs (including attorneys' fees) of establishing any new employee benefit or compensation plans of Plainbridge, and (iv) expenses, including any lenders' or agents' fees, incurred in connection with a bank credit facility or other financing for Plainbridge incurred in connection with the Reorganization, which shall be paid by Plainbridge, and other than costs and expenses properly attributable to Holdings, which shall be paid by Holdings) shall be paid by Pathmark to the extent that appropriate documentation concerning such costs and expenses shall be provided to Pathmark. SECTION 7.04. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New Jersey, without regard to the principles of conflicts of laws thereof. SECTION 7.05. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by courier service, by cable, by telecopy, by telegram, by telex, or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 7.05): (a) If to Holdings: PTK Holdings, Inc. 301 Blair Road P.O. Box 5301 Woodbridge, New Jersey 07095-0915 Telecopier: (908) 499-3460 Attention: Chief Executive Officer With a copy to: Corporate Secretary (b) If to Pathmark: Pathmark Stores, Inc. 301 Blair Road P.O. Box 5301 Woodbridge, New Jersey 07095-0915 Telecopier: (908) 499-3460 Attention: Chief Executive Officer With a copy to: Corporate Secretary (c) If to Plainbridge: Plainbridge, Inc. P.O. Box 5021 Woodbridge, New Jersey 07095- Telecopier: (908) 499-3460 Attention: President With a copy to: Corporate Secretary SECTION 7.06. Amendments. This Agreement may not be modified or amended except by an agreement in writing signed by the parties. SECTION 7.07. Successors and Assigns. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. SECTION 7.08. Termination. This Agreement may be terminated and the Reorganization abandoned at any time prior to the Distribution Date, by and in the sole discretion of the Board of Directors of Pathmark without the approval of Holdings or Plainbridge. In the event of such termination, no party shall have any liability of any kind to any other party on account of such termination except that expenses incurred in connection with the transactions contemplated hereby shall be paid as provided in Section 7.03. SECTION 7.09. No Third-Party Beneficiaries. Except for the provisions of Article IV relating to Indemnitees, this Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person, including, without limitation, any union or any employee or former employee of Holdings, Pathmark or Plainbridge or of any Pathmark or Plainbridge Subsidiary, any legal or equitable right, benefit or remedy of any nature whatsoever, including, without limitation, any rights of employment for any specified period, under or by reason of this Agreement. SECTION 7.10. Headings. The descriptive headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 7.11. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. SECTION 7.12. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. PTK HOLDINGS, INC. By /s/ Marc A. Strassler Name: Marc A. Strassler Title: Vice President PATHMARK STORES, INC. By /s/ John Henry Name: John Henry Title: Vice President PLAINBRIDGE, INC. By /s/ Marc Strassler Name: Marc A. Strassler Title: Vice President SCHEDULE I TRANSFERRED ASSETS Transferred Assets includes, without limitation, the following assets and properties as of the Transfer Date: (i) the Transferred Businesses as going concerns; (ii) all the real property used in the Transferred Businesses (a) owned by Pathmark or any of its Subsidiaries and (b) leased by Pathmark or any of its Subsidiaries, as tenant, as listed on Schedule I-A hereto; together with, to the extent owned or leased by Pathmark or any of its Subsidiaries, all buildings and other structures, facilities and improvements currently or hereafter located thereon, all fixtures, systems, equipment and items of personal property of Pathmark or any of its Subsidiaries attached or appurtenant thereto, and all easements, licenses, rights and appurtenances relating to the foregoing; (iii) all furniture, fixtures, equipment, machinery and other tangible personal property used or held for use by Pathmark, excluding assets used in the ordering of merchandise and other assets necessary for Pathmark to fulfill its obligations under the Services Agreements, at the locations at which the Transferred Businesses are conducted, or otherwise owned or held by Pathmark at the Transfer Date for use in the conduct of the Transferred Businesses and not otherwise included in clause (ii) above; (iv) all vehicles used in the Transferred Businesses; (v) all inventories, merchandise, goods, packaging, supplies, and other personal property relating to the Transferred Businesses, excluding merchandise located in Pathmark stores and assets used in the ordering of merchandise and other assets necessary for Pathmark to fulfill its obligations under the Services Agreements; (vi) all books of account, general, financial, tax and personnel records, invoices, shipping records, supplier lists, correspondence and other documents, records and files owned by Pathmark and used primarily in the Transferred Businesses at the Transfer Date, excluding assets used in the ordering of merchandise and AI-1 other assets necessary for Pathmark to fulfill its obligations under the Services Agreements; (vii) all claims, causes of action, choses in action, rights of recovery and rights of set-off of any kind (including rights to insurance proceeds and rights under and pursuant to all warranties, representations and guarantees made by suppliers of products, materials or equipment, or components thereof), pertaining to and arising out of the Transferred Businesses and enuring to the benefit of Pathmark; (viii) all sales and promotional literature, customer lists and other sales-related materials owned by Pathmark and used exclusively in connection with the Transferred Businesses; (ix) all rights of Pathmark under all contracts, licenses, sublicenses, agreements, leases, commitments, and sales and purchase orders relating exclusively to the Transferred Businesses; (x) all municipal, state and federal franchises, permits, licenses, agreements, waivers and authorizations held or used by Pathmark in connection with, or required for, the Transferred Businesses, to the extent transferable, excluding those items necessary for Pathmark to fulfill its obligations under the Services Agreements; (xi) all rights and interests of Pathmark in, to and with respect to the marks and trademark registrations listed on Schedule I-B hereto; (xii) all the capital stock of (a) Pauls Trucking Corp., a New Jersey corporation and wholly owned subsidiary of Pathmark, (b) Trauts-South Plainfield, Inc., a New Jersey corporation and a wholly owned subsidiary of Pathmark and (c) Eatontown Stuart, Inc., a New Jersey corporation and a wholly owned subsidiary of Pathmark; and (xiii) all Pathmark's right, title and interest on the Transfer Date in, to and under all other assets, rights and claims of every kind and nature used or intended to be used in the operation of, or residing with, the Transferred Businesses, excluding those items necessary for Pathmark to fulfill its obligations under the Services Agreements. AI-2 SCHEDULE I-A Real Property Leases of Pathmark That Are Included in Transferred Assets Bay Plaza (Rickel store) Bay Plaza 2264 Bartow Avenue Bronx, NY 10475 Bergenfield (Rickel store) 25 W. Central Ave. Bergenfield, NJ 07621 Bethlehem (Rickel store) 2120 W. Union Blvd. Bethlehem, PA 19464 Bloomfield (Rickel store) Bloomfield Ave. & Grove St. Bloomfield, NJ 07003 Broomall (Rickel store) Lawrence Park Shopping Center Broomall, PA 19008 Glen Burnie (former Rickel store) 7321 Ritchie Highway Glen Burnie, MD 21061 Hamden (former Rickel store) 1019 Dixwell Ave. Parkway Plaza II Hamden, CT 06514 Hazlet (Rickel store) Rte. 35 & Hazlet Ave. Hazlet, NJ 07730 Holbrook (former Rickel store) 5801 Sunrise Highway Sun Vet Mall Holbrook, NY 11741 Howell (Rickel store) 2230 Rte. 9 Friendship Plaza Howell, NJ 07731 AIA-1 SCHEDULE I-A (continued) Real Property Leases of Pathmark That Are Included in Transferred Assets Huntington (former Rickel store) 5020 Jericho Turnpike Commack, NY 11725 Jersey City (Rickel store) Rte. 440 & Danforth Ave. Jersey City, NJ 07305 Ledgewood (Rickel store) Ledgewood Mall Route 10 Ledgewood, NJ 07852 Levittown (former Rickel store) 3675 Hempstead Turnpike Levittown, NY 11714 Manchester (former Rickel store) 1026 Tolland Turnpike Manchester, CT 06040 Menlo Park (Rickel store) 90 Parsonage Road Menlo Park, NJ 08837 Meriden (former Rickel store) Town Line Square 455 S. Broad St., Bldg. A Meriden, CT 06450 Middletown (Rickel store) Route 211 East Middletown, NY 10940 Newark (Rickel store) 400 College Square Newark, Del. 19713 Newington (former Rickel store) 3090 Berlin Turnpike Newington, CT 06111 AIA-2 SCHEDULE I-A (continued) Real Property Leases of Pathmark That Are Included in Transferred Assets Norwalk (former Rickel store) 330 Connecticut Avenue Norwalk, CT 08654 Parsippany (Rickel store) Arlington Plaza Route 46 Parsippany, NJ 07054 Pleasantville (Rickel store) 1230 Blackhorse Pike Pleasantville, NJ 08232 Pottstown (Rickel store) N. Charlotte St. Route 663 Pottstown, PA 19464 Selden (former Rickel store) 323 Middle Country Road Selden, NY 11784 Stony Brook (former Rickel store) 2200 Nesconset Highway Stony Brook, NY 11790 Toms River (Rickel store) Indian Head Plaza 1334 Lakewood Road Toms River, NJ 08755 Totowa (Rickel store) Rte. 46 & Union Blvd. Totowa, NJ 07512 Union (Rickel store) Union Plaza Shopping Center Rte. 22 & Springfield Road Union, NJ 07083 Warminster (Rickel store) Warminster Plaza 654 York Road Warminster, PA 18974 AIA-3 SCHEDULE I-A (continued) Real Property Leases of Pathmark That Are Included in Transferred Assets Watchung (Rickel store) Rte. 22 & Terrill Road Watchung, NJ 07060 Wayne (Rickel store) Preakness Shopping Center Hamburg Turnpike Wayne, NJ 07470 West Babylon (former Rickel store) 501 Montauk Highway West Babylon, NY 11704 West Orange (Rickel store) Essex Green Mall 46 Prospect Ave. West Orange, NJ 07052 - - - - - - - - - - - - - - - - Dartmouth (former Purity Supreme store) Faunce Corner Road Dartmouth, MA 02714 Edison (Pathmark GMDC warehouse) B Court South Sutton Kilmer Industrial Park Edison, NJ 08817 Rockaway (Pathmark freezer warehouse) 92 Greenpond Road Rockaway, NJ 07866 AIA-4 SCHEDULE I-A (continued) Real Property Owned by Pathmark That Is Included in Transferred Assets Aramingo (Pathmark store) 3500 Aramingo Ave. Philadelphia, PA 19134 Baldwin (Pathmark store) 1764 Grand Avenue Baldwin, NY 11510 Bricktown (Rickel store) 51 Chambers Bridge Road Bricktown, NJ 08723 Copiague (Pathmark store and gas station) 1255 Sunrise Highway Copiague, NY 11726 Eatontown (Pathmark and Rickel stores)* 50 & 70 Highway 36 Eatontown, NJ 07724 Greenvale (former Rickel store) 90 Northern Blvd. Greenvale, NY 11548 Lawnside (Pathmark and Rickel stores and gas station) 130 & 200 White Horse Pike Lawnside, NJ 08045 Madison Township (former Pathmark store) Ernston Road and Highway 9 Sayreville, NJ 08872 Marple (Pathmark store) 50 Lawrence Road Broomall, PA 19008 Medford (CVS drug store) 85 High Street Medford, MA 02155 * Pursuant to the transfer of stock in Eatontown Stuart, Inc., a New Jersey corporation. AIA-5 SCHEDULE I-A (continued) Real Property Owned by Pathmark That Is Included in Transferred Assets Ozone Park (Pathmark store) 92-10 Atlantic Avenue Ozone Park, NY 11417 Poughkeepsie (vacant land) Rte. 9 & Sheafe Road Poughkeepsie, NY 12601 Rickel Office and Distribution Center* 200 Helen Street South Plainfield, NJ 07080 Seaford (Pathmark store) 4055 Merrick Road Seaford, NY 11783 Warminster (Pathmark store) 700 York Road Warminster, PA 18974 Woburn (closed Distribution Center) 479-481 Wildwood Avenue Woburn, MA 01801 Woodbridge Office and Distribution Center 301 Blair Road P.O. Box 5301 Woodbridge, NJ 07095-0915 * Pursuant to the transfer of stock in Trauts-South Plainfield, Inc., a New Jersey corporation. AIA-6 SCHEDULE I-B TRADEMARKS AND SERVICE MARKS Mark Registration No. Registration Date RICKEY RICKEL 660,693 April 22, 1958 and design (trademark) PTC and arrow 1,258,869 November 22, 1983 design (service mark) RICKEL 1,315,158 January 15, 1985 (service mark) AIB-1 SCHEDULE II ASSUMED LIABILITIES Assumed Liabilities: All Liabilities and obligations relating to or arising from the operation of the Transferred Businesses, whether accrued or arising before, on or after the Transfer Date, including but not limited to: (a) all Liabilities and obligations of Pathmark pursuant to, under or relating to all agreements, contracts and leases of Pathmark constituting Transferred Assets, excluding any accounts payable incurred in the purchase of inventory transferred to Plainbridge as of the date hereof; (b) all warranty, performance and similar obligations entered into or made in the course of business of the Transferred Businesses; (c) all Liabilities and obligations of Pathmark pursuant to and under all collective bargaining agreements (including each collectively bargained pension agreement, supplemental agreement, and letter of understanding) to the extent such agreements cover employees of Pathmark who are assigned to the Transferred Businesses as of the Transfer Date (each, a "Transferred Employee"); (d) the Liabilities and obligations of Pathmark to or with respect to the Transferred Employees and to former employees of Pathmark who were employed prior to the date hereof exclusively in connection with the Transferred Businesses ("Former Employees"), including, but not limited to, (i) compensation and benefits provided by Pathmark to Transferred Employees and Former Employees, including, without limitation, all benefits payable to Transferred Employees and Former Employees and their respective beneficiaries pursuant to pension, medical, dental, life, accident, health, disability, prescription, vision, salary continuation or supplemental employment plans, and programs or arrangements of Pathmark applicable to such Transferred Employees or Former Employees, (ii) the Retirement Agreement, dated July 16, 1990, between Jules Borshadel and Pathmark, and AII-1 the Supplemental Retirement Agreement, dated March 9, 1987, between Jules Borshadel and Pathmark and (iii) withholding, payroll and employment taxes; (e) the Liabilities and obligations being assumed by or agreed to be performed by Plainbridge pursuant to any other agreement being entered into in connection with the Agreement, including, without limitation, the Related Agreements; and (f) the Liabilities and obligations relating to all Actions related to or arising out of the operations of the Transferred Businesses. AII-2 EX-4.1 3 EXHIBIT A SUPERMARKETS GENERAL HOLDINGS CORPORATION, Issuer, and WILMINGTON TRUST COMPANY, Trustee INDENTURE Dated as of May 1, 1992 As Amended and Restated as of October 5, 1993 11-5/8% Subordinated Notes due 2002 Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of May l, l992, as amended and restated as of October 5, 1993* Trust Indenture Indenture Act Section Section Sec. 310(a)(1) ............................. 608 (a)(2) ............................. 608 (b) ............................. 607, 609 Sec. 312(c) ............................. 701 Sec. 314(a) ............................. 703 (a)(4) ............................. 1019 (c)(1) ............................. 103 (c)(2) ............................. 103 (e) ............................. 103 Sec. 315(b) ............................. 601 Sec. 316(a)(last sentence) ............................. 101 ("Out- standing") (a)(1)(A) ............................. 502, 512 (a)(1)(B) ............................. 513 (b) ............................. 508 (c) ............................. 105 Sec. 317(a)(1) ............................. 503 (a)(2) ............................. 504 Sec. 318(a) ............................. 108 * This reconciliation and tie shall not, for any purpose, be deemed to be part of the Indenture. TABLE OF CONTENTS PAGE ARTICLE ONE Definitions and Other Provisions of General Application Section 101. Definitions ............................ 1 Affiliate .............................. 2 Average Life to Stated Maturity ........ 2 Board of Directors ..................... 2 Board Resolution ....................... 2 Business Day ........................... 2 Capital Lease Obligation ............... 3 Capital Stock .......................... 3 Change in Control ...................... 3 Commission ............................. 4 Company ................................ 4 Company Request or Company Order ....... 4 Corporate Trust Office ................. 4 corporation ............................ 4 Default ................................ 4 Equitable Investors .................... 4 Event of Default ....................... 4 Exchange Act ........................... 4 Exchange Debentures .................... 5 Exchange Offer ......................... 5 Fair Market Value ...................... 5 Federal Bankruptcy Code ................ 5 First Supplemental Indenture ........... 5 Generally Accepted Accounting Principles or GAAP ................... 5 Guaranteed Debt ........................ 5 Holder ................................. 6 Indebtedness ........................... 6 Indenture .............................. 7 Interest Payment Date .................. 7 Interest Rate Hedge Arrangement ........ 7 Lien ................................... 7 Majority-owned Subsidiary .............. 7 Management Investors ................... 7 Maturity ............................... 7 ML Funds ............................... 7 Officers' Certificate .................. 8 Opinion of Counsel ..................... 8 Note: This table of contents shall not, for any purpose, be deemed to be a part of this Indenture. PAGE Outstanding............................. 8 Pathmark................................ 9 Paying Agent............................ 9 Permitted Holders....................... 9 Permitted Senior Subordinated Indebtedness.......................... 9 Person.................................. 10 Predecessor Security ................... 10 Redeemable Capital Stock ............... 10 Redemption Date ........................ 10 Redemption Price ....................... 10 Regular Record Date .................... 10 Representative ......................... 10 Responsible Officer .................... 10 Security and Securities ................ 11 Senior Indebtedness .................... 11 Senior Subordinated Notes .............. 11 SMG-II ................................. 12 Special Record Date .................... 12 Specified Senior Indebtedness .......... 12 Stated Maturity ........................ 12 Subsidiary ............................. 12 Trust Indenture Act .................... 12 Trustee ................................ 12 Voting Stock ........................... 12 Working Capital Facility ............... 13 Section 102. Other Definitions ...................... 13 Section l03. Compliance Certificates and Opinions ... 13 Section l04. Form of Documents Delivered to Trustee . 14 Section l05. Acts of Holders ........................ 15 Section 106. Notices, etc., to Trustee and Company .......................... 16 Section l07. Notice to Holders; Waiver .............. 16 Section l08. Conflict of any Provision of Indenture with Trust Indenture Act ... 17 Section 109. Effect of Headings and Table of Contents ............................. 17 Section l10. Successors and Assigns ................. 17 Section 111. Separability Clause .................... 18 Section 112. Benefits of Indenture .................. 18 Section 113. Governing Law .......................... 18 Section 114. Legal Holidays ......................... 18 Section 115. No Recourse Against Others ............. 18 -ii- PAGE ARTICLE TWO Security Forms Section 201. Forms Generally ........................ 19 Section 202. Form of Face of Security ............... 19 Section 203. Form of Reverse of Security ............ 21 Section 204. Form of Trustee's Certificate of Authentication ....................... 25 ARTICLE THREE The Securities Section 301. Title and Terms ........................ 26 Section 302. Denominations .......................... 26 Section 303. Execution, Authentication, Delivery and Dating ............................... 27 Section 304. Temporary Securities ................... 28 Section 305. Registration, Registration of Transfer and Exchange ......................... 29 Section 306. Mutilated, Destroyed, Lost and Stolen Securities ........................... 30 Section 307. Payment of Interest; Interest Rights Preserved ............................ 31 Section 308. Persons Deemed Owners .................. 32 Section 309. Cancellation ........................... 32 Section 310. Computation of Interest ................ 33 ARTICLE FOUR Satisfaction and Discharge Section 401. Satisfaction and Discharge of Indenture ......................... 33 Section 402. Application of Trust Money ............. 34 ARTICLE FIVE Remedies Section 501. Events of Default ...................... 35 Section 502. Acceleration of Maturity; Rescission ... 37 Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee ........... 38 -iii- PAGE Section 504. Trustee May File Proofs of Claim ....... 39 Section 505. Trustee May Enforce Claims Without Possession of Securities ............. 40 Section 506. Application of Money Collected ......... 40 Section 507. Limitation on Suits .................... 41 Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest ............................. 41 Section 509. Restoration of Rights and Remedies ..... 42 Section 510. Rights and Remedies Cumulative ......... 42 Section 511. Delay or Omission Not Waiver ........... 42 Section 512. Control by Holders ..................... 42 Section 513. Waiver of Past Defaults ................ 43 Section 514. Undertaking for Costs .................. 43 Section 515. Waiver of Stay, Extension or Usury Laws ........................... 44 Section 516. Unconditional Right of Holders to Institute Certain Suits ........... 44 ARTICLE SIX The Trustee Section 601. Notice of Defaults ..................... 44 Section 602. Certain Rights of Trustee .............. 45 Section 603. Not Responsible for Recitals or Issuance of Securities ............... 47 Section 604. Trustee and Agents May Hold Securities; Collections; Etc. ........ 47 Section 605. Money Held in Trust .................... 47 Section 606. Compensation and Reimbursement ......... 47 Section 607. Conflicting Interests .................. 48 Section 608. Corporate Trustee Required; Eligibility .......................... 49 Section 609. Resignation and Removal; Appointment of Successor ......................... 49 Section 610. Acceptance of Appointment by Successor ............................ 51 Section 611. Merger, Conversion, Consolidation or Succession to Business ............... 52 Section 612. Preferential Collection of Claims Against Company ....................... 52 -iv- PAGE ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company Section 701. Disclosure of Names and Addresses of Holders ........................... 52 Section 702. Reports by Trustee ..................... 53 Section 703. Reports by Company ..................... 53 ARTICLE EIGHT [Intentionally Omitted] ARTICLE NINE Supplemental Indentures Section 901. Supplemental Indentures Without Consent of Holders ........... 54 Section 902. Supplemental Indentures With Consent of Holders .............. 55 Section 903. Execution of Supplemental Indentures ... 56 Section 904. Effect of Supplemental Indentures ...... 56 Section 905. Conformity with Trust Indenture Act .... 56 Section 906. Reference in Securities to Supplemental Indentures ........................... 56 Section 907. Effect on Senior Indebtedness .......... 56 ARTICLE TEN Covenants Section 1001. Payment of Principal, Premium and Interest ............................. 57 Section 1002. Maintenance of Office or Agency ........ 57 Section 1003. Money for Security Payments to Be Held in Trust ........................ 57 Section 1004. [Intentionally Omitted] ................ 59 Section 1005. [Intentionally Omitted] ................ 59 Section 1006. [Intentionally Omitted] ................ 59 Section 1007. [Intentionally Omitted] ................ 59 Section 1008. [Intentionally Omitted] ................ 59 Section 1009. [Intentionally Omitted] ................ 59 Section 1010. [Intentionally Omitted] ................ 59 -v- PAGE Section 1011. [Intentionally Omitted] ................ 59 Section 1012. [Intentionally Omitted] ................ 59 Section 1013. [Intentionally Omitted] ................ 59 Section 1014. [Intentionally Omitted] ................ 59 Section 1015. Purchase of Securities Upon Change in Control .................... 60 Section 1016. [Intentionally Omitted] ................ 63 Section 1017. [Intentionally Omitted] ................ 63 Section 1018. [Intentionally Omitted] ................ 64 Section l019. Statement as to Compliance ............. 64 Section l020. Waiver of Certain Covenants ............ 64 ARTICLE ELEVEN Redemption of Securities Section 1101. Right of Redemption .................... 64 Section l102. Applicability of Article ............... 64 Section 1103. Election to Redeem; Notice to Trustee .. 65 Section 1104. Selection by Trustee of Securities to Be Redeemed .......................... 65 Section 1105. Notice of Redemption ................... 65 Section 1106. Deposit of Redemption Price ............ 66 Section 1107. Securities Payable on Redemption Date .. 67 Section 1108. Securities Redeemed in Part ............ 67 ARTICLE TWELVE Sinking Fund Section 1201. Mandatory Sinking Fund Payments ........ 67 Section 1202. Satisfaction of Sinking Fund Payments with Securities ............. 68 Section 1203. Redemption of Securities for Sinking Fund ......................... 68 ARTICLE THIRTEEN Subordination of Securities Section 1301. Securities Subordinate to Senior Indebtedness ......................... 69 -vi- PAGE Section 1302. Payment Over of Proceeds Upon Dissolution, etc. .................... 69 Section 1303. No Payment When Specified Senior Indebtedness in Default .............. 71 Section 1304. Payment Permitted if No Default ........ 72 Section 1305. Subrogation to Rights of Holders of Senior Indebtedness ............... 73 Section 1306. Provisions Solely to Define Relative Rights ...................... 73 Section 1307. Trustee to Effectuate Subordination .... 74 Section l308. No Waiver of Subordination Provisions .. 74 Section l309. Notice to Trustee ...................... 74 Section 1310. Reliance on Judicial Order or Certificate of Liquidating Agent ..... 75 Section l311. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights ..................... 76 Section l312. Article Applicable to Paying Agents .... 76 ARTICLE FOURTEEN Defeasance and Covenant Defeasance Section l401. Option to Effect Defeasance or Covenant Defeasance ............... 76 Section l402. Defeasance and Discharge ............... 77 Section l403. Covenant Defeasance..................... 77 Section l404. Conditions to Defeasance or Covenant Defeasance .................. 78 Section l405. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions ....... 81 Section l406. Reinstatement .......................... 81 TESTIMONIUM........................................... 82 SIGNATURES AND SEALS.................................. 82 ACKNOWLEDGMENTS -vii- INDENTURE, dated as of May l, 1992, as amended and restated as of October 5, 1993, between SUPERMARKETS GENERAL HOLDINGS CORPORATION, a Delaware corporation (hereinafter called the "Company"), and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as trustee (hereinafter called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the creation of an issue of its 11-5/8% Subordinated Notes due 2002 (hereinafter called the "Securities"), of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture; This Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act that are required to be part of and to govern indentures qualified under the Trust Indenture Act; All acts and things necessary have been done to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid, binding and legal obligations of the Company, and to make this Indenture a valid agreement of the Company in accordance with its terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (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 generally accepted accounting principles and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States as of the date hereof; and (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Articles Five, Six, Ten, Thirteen and Fourteen are defined in those Articles. "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of Voting Stock, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Average Life to Stated Maturity" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from the date of determination to the date or dates of each successive scheduled principal payment of such Indebtedness multiplied by (b) the amount of each such principal payment by (ii) the sum of all such principal payments. "Board of Directors" means the board of directors of the Company 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 to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking - 2- institutions in The City of New York or the State of Delaware are authorized or obligated by law, regulation or executive order to close. "Capital Lease Obligation" of any Person means any obligations of such Person and its Subsidiaries on a consolidated basis under any capital lease of real or personal property which, in accordance with GAAP, has been recorded as a capitalized lease obligation. "Capital Stock" of any Person means any and all shares, interests, participations, or other equivalents (however designated) of such Person's capital stock whether now outstanding or issued after the date of this Indenture. "Change in Control" means an event as a result of which: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than Permitted Holders is or becomes the "beneficial owner" (as defined in Rules 13d-3 and l3d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 30% of such total Voting Stock of the Company, provided that the Permitted Holders "beneficially own" (as so defined) a lesser percentage of such Voting Stock than such other Person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Company; (ii) the Company consolidates with or merges with or into any Person or conveys, transfers or leases all or substantially all of its assets to any Person, or any corporation consolidates with or merges with or into the Company, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company is 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, or where (a) the outstanding Voting Stock of the Company is changed into or exchanged for (1) Voting Stock of the surviving corporation which is not Redeemable Capital Stock or (2) 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 permitted under Section 1008 of the Indenture in effect prior to the execution of the First Supplemental Indenture and (b) Permitted Holders own, directly or indirectly, not less than 50% of the Voting Stock of the surviving corporation immediately after such transaction; (iii) the Company is liquidated or dissolved; or (iv) Pathmark ceases to be a Majority-owned Subsidiary. - 3- "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this instrument, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. To the extent necessary to comply with the requirements of the provisions of Trust Indenture Act Sections 3l0 through 317 as they are applicable to the Company, the term "Company" shall include any other obligor with respect to the Securities for the purposes of complying with such provisions. "Company Request" or "Company Order" means a written request or order signed in the name of the Company (i) by its Chairman, a Vice Chairman, its President or a Vice President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee; provided, however, that such written request or order may be signed by any two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "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 Rodney Square North, Wilmington, Delaware 19890. "corporation" includes corporations, associations, partnerships, companies and business trusts. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Equitable Investors" means The Equitable Life Assurance Society of the United States and any of its Affiliates that beneficially own, directly or indirectly, shares of Capital Stock of SMG-II. "Event of Default" has the meaning specified in Article Five. "Exchange Act" means the Securities Exchange Act of 1934, as amended. - 4- "Exchange Debentures" means, if and when issued, the Company's 14-1/8% Junior Subordinated Exchange Debentures Due 2007. "Exchange Offer" means an offer commenced on , 1993 by Pathmark to exchange $1,000 principal amounts of its 11-5/8% Subordinated Notes due 2002 for each $1,000 principal amount of the Securities. "Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer. "Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the United States Code, as amended from time to time. "First Supplemental Indenture" means the First Supplemental Indenture dated as of , 1993, to the Indenture dated as of May 1, 1993, between the Company and the Trustee. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect from time to time; provided, however, that with respect to the obligations of any Person under Article Ten and the definitions applicable thereto, "GAAP" means generally accepted accounting principles in the United States as in effect on the date hereof. "Guaranteed Debt" of any Person means, without duplication, all Indebtedness of any other Person referred to in the definition of Indebtedness contained in this Section 101 guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to supply funds to, or in any other manner invest in, the debtor (including any agreement to pay for property or services to be acquired by such debtor irrespective of whether such property is received or such services are rendered) or (iv) to maintain working capital or equity capital of the debtor, or otherwise to maintain the net worth, solvency or other financial condition of the debtor or (v) otherwise to assure a creditor against loss; provided that the term "guarantee" shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or - 5- any obligation or liability of such Person in respect of leasehold interests assigned by such Person to any other Person. "Holder" means a Person in whose name a Security is registered in the Security Register. "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 in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any letters of credit and acceptances issued under letter of credit facilities, acceptance facilities or other similar facilities, (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness 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 accounts payable arising in the ordinary course of business, (iv) all Capital Lease Obligations of such Person, (v) all Indebtedness referred to in (but not excluded from) clause (i), (ii), (iii) or (iv) above of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien, upon or in 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 Guaranteed Debt of such Person, (vii) 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 contracts of such Person, and (ix) any amendment, supplement, modification, deferral, renewal, extension or refunding of any liability of the types referred to in clauses (i) through (viii) above. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Redeemable Capital Stock, such fair market value to be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock. - 6- "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. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Securities. "Interest Rate Hedge Arrangement" means any rate swap transaction under a rate swap agreement to which the Company is a party or becomes a party, and any interest rate protection agreement, interest rate future, interest rate option or other interest rate hedge arrangement to or under which the Company is a party or a beneficiary, or becomes a party or a beneficiary, or to or under which any Subsidiary of the Company is or becomes such a party or beneficiary if the obligations of such Subsidiary thereunder are guaranteed by the Company. "Lien" means any mortgage, charge, pledge, lien, privilege, security interest or encumbrance of any kind. "Majority-owned Subsidiary" means a Subsidiary at least 80% of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more of the Subsidiaries, or the Company and one or more of the Subsidiaries, provided that Majority-owned Subsidiary shall not include any such Subsidiary if the equity ownership or the Voting Stock of such Subsidiary not owned by the Company and/or one or more of the Subsidiaries, is owned by SMG-II and/or one or more Affiliates of SMG-II. "Management Investors" means the officers and other members of the management of the Company who at any particular date shall beneficially own, directly or indirectly, Voting Stock of the Company. "Maturity" when used with respect to any Security means the date on which the principal of (and premium, if any) and interest on such Security becomes due and payable as therein or herein provided, whether at Stated Maturity, Change in Control Purchase Date or Redemption Date and whether by declaration of acceleration, Change in Control, call for redemption or otherwise. "ML Funds" means Merrill Lynch Capital Appreciation Partnership No. IX, L.P., a Delaware partnership, ML Offshore LBO Partnership No. IX, a Cayman Islands partnership, ML Employees LBO Partnership No. I, L.P., a Delaware partnership, Merrill Lynch Interfunding Inc., a Delaware corporation, Merchant Banking L.P. No. I, a Delaware partnership, Merrill Lynch KECALP L.P., a Delaware partnership, Merrill Lynch - 7- Capital Appreciation Partnership No. B-X, L.P., a Delaware partnership, ML Offshore LBO Partnership No. B-X, a Cayman Islands partnership, MLCP Associates, L.P. No. II, a Delaware partnership, Merrill Lynch Venture Capital, Inc., a Delaware corporation and any Affiliates of the foregoing that beneficially own, directly or indirectly, shares of Capital Stock of SMG-II. "Officers' Certificate" means a certificate signed by (i) the Chairman, a Vice Chairman, the President, a Vice President or the Treasurer of the Company and (ii) the Secretary or an Assistant Secretary of the Company and delivered to the Trustee; provided, however, that such certificate may be signed by two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee. Each such opinion shall include the statements provided for in Trust Indenture Act Section 314(e) to the extent applicable. "Outstanding" when used with respect to Securities means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (a) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (b) Securities, or portions thereof, for whose payment, redemption or purchase money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities and the Trustee or such Paying Agent is not prohibited from paying such money to the Holders on that date pursuant to the terms of Article Thirteen of this Indenture; provided that, if such Securities 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; (c) Securities, except to the extent provided in Sections 1402 and 1403, with respect to which the Company has effected defeasance or covenant defeasance as provided in Article Fourteen; and - 8- (d) Securities in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands the Securities are valid obligations of the Company; provided, however, that, in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, notice, direction, consent or waiver hereunder, Securities owned by the Company, or any other obligor upon the Securities or any Affiliate of the Company, or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, notice, direction, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor. "Pathmark" means Pathmark Stores, Inc., a Delaware corporation, and any successor thereto. "Paying Agent" means any Person authorized by the Company to pay the principal of (or premium, if any) or interest on any Securities on behalf of the Company. "Permitted Holders" means ML Funds, the Management Investors and the Equitable Investors, provided that the Equitable Investors shall not be a Permitted Holder if they are a member of a "group" (as such term is used in Section 13(d) of the Exchange Act) in respect of the Company which does not include the Management Investors and the ML Funds. "Permitted Senior Subordinated Indebtedness" means (i) the Senior Subordinated Notes, (ii) Indebtedness of the Company not to exceed $200,000,000 outstanding at any one time in the aggregate, and (iii) any renewals, extensions, substitutions, refinancings or replacements of any Indebtedness described in the foregoing clauses (i) and (ii), including any successive extensions, renewals, substitutions, refinancings or replacements, so long as the aggregate amount of Indebtedness represented thereby is not increased by such renewal, extension, substitution, refinancing or replacement and such renewal, extension, substitution, refinancing or replacement does not reduce the Average Life to Stated Maturity or the Stated Maturity of such Indebtedness. - 9- "Person" means any individual, corporation, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for a mutilated Security or in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Security. "Redeemable Capital Stock" means any Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or otherwise, is or upon the happening of an event or passage of time would be required to be redeemed prior to the final Stated Maturity of the Securities or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date means the June 1 or December 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Representative" means the indenture trustee or other trustee, agent or representative for an issue of Senior Indebtedness. "Responsible Officer", when used with respect to the Trustee, means any officer assigned to the Corporate Trust Administration of the Trustee or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers or assigned by the Trustee to administer corporate trust matters at its Corporate Trust Office and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. - 10- "Security" and "Securities" have the meaning set forth in the second paragraph of this Indenture. "Senior Indebtedness" means the principal of, premium, if any, and interest on (such interest on Senior Indebtedness, wherever referred to in this Indenture, being deemed to include interest accruing after the filing of a petition initiating any proceeding pursuant to any bankruptcy law in accordance with and at the rate (including any rate applicable upon any default or event of default, to the extent lawful) specified in any document evidencing the Senior Indebtedness, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such bankruptcy law) any Indebtedness of the Company (other than as otherwise provided in this definition), whether outstanding on the date hereof or thereafter created, incurred or assumed in accordance with the provisions of this Indenture, 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 the Securities. Without limiting the generality of the foregoing, "Senior Indebtedness" shall include the principal of, premium, if any, and interest (including interest accruing after the occurrence of an event of default) on all obligations of every nature of the Company from time to time owed under Permitted Senior Subordinated Indebtedness and to the lenders under the Working Capital Facility, including, without limitation, principal of and interest on, and all fees, expenses, indemnities, payments for early termination and reimbursement obligations under letters of credit payable under the Working Capital Facility. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) Indebtedness evidenced by the Securities and, if and when issued, the Exchange Debentures, (ii) Indebtedness that is subordinate or junior in right of payment to any Indebtedness of the Company (other than Permitted Senior Subordinated Indebtedness), (iii) Indebtedness that when incurred, and without respect to any election under Section 1111(b) of Title II, United States Code, is without recourse to the Company, (iv) Indebtedness that is represented by Redeemable Capital Stock, (v) any liability for federal, state, provincial, local or other taxes owed or owing by the Company, (vi) Indebtedness of the Company to a Subsidiary of the Company or any other Affiliate of the Company or any of such Affiliate's subsidiaries, (vii) that portion of any Indebtedness which at the time of issuance is issued in violation of this Indenture, and (viii) amounts owing under leases (other than Capital Lease Obligations). The Securities will rank senior in right of payment to, if and when issued, the Exchange Debentures. "Senior Subordinated Notes" means the Company's 14-1/2% Senior Subordinated Notes Due 1997. - 11- "SMG-II" means SMG-II Holdings Corporation, a Delaware corporation. "Special Record Date" means a date fixed by the Trustee for the payment of any Defaulted Interest pursuant to Section 307. "Specified Senior Indebtedness" means (i) all Senior Indebtedness under the Working Capital Facility and (ii) any other issue of Senior Indebtedness or refinancings thereof permitted by said definition having a principal amount of at least $100,000,000. For purposes of this definition: (a) the amount of the Indebtedness of the Company with respect to any Interest Rate Hedge Arrangement shall be deemed to be the lesser of (x) 25% of the notional amount of such Interest Rate Hedge Arrangement, or (y) the maximum amount the Company could be required to pay under such Interest Rate Hedge Arrangement; and (b) a refinancing of any such Indebtedness shall be treated as such only if it ranks or would rank pari passu with the Indebtedness refinanced. "Stated Maturity", when used with respect to any Indebtedness or any installment of interest thereon, means the date specified in such Indebtedness as the fixed date on which the principal of such Indebtedness or such installment of interest is due and payable. "Subsidiary" means any Person a majority of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, and as in force at the date as of which this instrument was executed, except as provided in Section 905. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument, until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Voting Stock" means stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). - 12- "Working Capital Facility" means the Working Capital Agreement dated as of June 15, 1987 among SMG Acquisition Corporation and the lenders party thereto, for the express purpose of financing working capital and other general corporate purposes consistent with the past practices of the Company and its Subsidiaries, as in effect on the date hereof and as such agreement may be amended, renewed, extended, substituted, refinanced, restructured, replaced, supplemented or otherwise modified from time to time. For purposes of this Indenture the Working Capital Facility shall be deemed to include the Bank Credit Agreement (as defined in the Prospectus relating to the Exchange Offer) which replaced the Working Capital Facility described above. Section 102. Other Definitions. Defined in Term Section "Act"............................................. 105 "Change in Control Notice" ....................... 1015 "Change in Control Offer" ........................ 1015 "Change in Control Purchase Date" ................ 1015 "Change in Control Purchase Notice" .............. 1015 "Change in Control Purchase Price" ............... 10l5 "covenant defeasance" ............................ 1403 "Defaulted Interest" ............................. 307 "defeasance" ..................................... 1402 "incorporated provision" ......................... 108 "Notice of Default" .............................. 501 "Security Register" .............................. 305 "Security Registrar" ............................. 305 "U.S. Government Obligations" .................... 1404 Section 103. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. - 13- Every certificate or opinion (other than the certificates required by Section 1019(a)) with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 104. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. - 14- Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 105. 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 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 of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Trust Indenture Act Section 315) 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 Securities shall be proved by the Security Register. (d) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of such Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding Trust Indenture Act Section 316(c), any such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not more than 30 days prior to the first solicitation of Holders generally in connection therewith and no later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date - 15- shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Securities then Outstanding have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for this purpose the Securities then Outstanding shall be computed as of such record date; provided that no such request, demand, authorization, direction, notice, consent, waiver or other Act by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act by the Holder of any Security shall bind every future Holder of the same Security or the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, suffered or omitted to be done by the Trustee, any Paying Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Security. Section 106. Notices, etc., to Trustee and Company. 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, any Representative or the Company shall be sufficient for every purpose hereunder if made, given, furnished or delivered, in writing, to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration; or (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or delivered in writing or mailed, first-class postage prepaid, to the Company addressed to it c/o Pathmark Stores, Inc., 301 Blair Road, Woodbridge, New Jersey 07095, Attention: President, or at ay other address furnished in writing to the Trustee by the Company. Section 107. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, - 16- not later that 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 108. Conflict of any Provision of Indenture with Trust Indenture Act. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 318, inclusive, of the Trust Indenture Act, or conflicts with any provision (an "incorporated provision") required by or deemed to be included in this Indenture by operation of such Trust Indenture Act Sections, such imposed duties or incorporated provision shall control. 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 109. 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 110. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its respective successors and assigns, whether so expressed or not. - 17- Section 111. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 112. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person (other than the parties hereto and their successors hereunder, any Paying Agent, the Holders and the holders of Senior Indebtedness) any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 113. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the conflicts of laws principles thereof. Section 114. Legal Holidays. In any case where any Interest Payment Date, any date established for payment of Defaulted Interest pursuant to Section 307, or any Maturity with respect to any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, or date established for payment of Defaulted Interest pursuant to Section 307, or Maturity, and no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date, or date established for payment of Defaulted Interest pursuant to Section 307, or Maturity, as the case may be, to the next succeeding Business Day. Section 115. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting any of the Securities waives and releases all such liability. - 18- ARTICLE TWO SECURITY FORMS Section 201. Forms Generally. The Securities and the Trustee's certificate of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. Any portion of the text of any Security may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Security. The definitive Securities shall be printed, 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 Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Section 202. Form of Face of Security. The form of the face of the Securities shall be substantially as follows: SUPERMARKETS GENERAL HOLDINGS CORPORATION 11-5/8% Subordinated Note due 2002 No. $ Supermarkets General Holdings Corporation, a Delaware corporation (herein called the "Company", which term includes any successor entity under the Indenture hereinafter referred to), for value received, hereby promises to pay to or registered assigns, the principal sum of Dollars on June 15, 2002, at the office or agency of the Company referred to below, and to pay interest thereon on June l5, 1992 and semiannually thereafter, on June 15 and December 15 in each year and at Stated Maturity, from May 28, 1992 or from the most recent Interest Payment Date to which interest has been paid or - 19- duly provided for, at the rate of 11-5/8% per annum, until the principal hereof is paid or duly provided for. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the June 1 or December 1 (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 Securities, 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 Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities 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 Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address shall appear on the Security Register. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. - 20- IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: SUPERMARKETS GENERAL HOLDINGS CORPORATION By Attest: By [SEAL] Authorized Signature Section 203. Form of Reverse of Security. The form of the reverse of the Securities shall be substantially as follows: This Security is one of a duly authorized issue of securities of the Company designated as its 11-5/8% Subordinated Notes due 2002 (herein called the "Securities"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $200,000,000, which may be issued under an indenture dated as of May 1, 1992 as amended and restated as of , 1993 (herein, as so amended and restated, called the "Indenture") between the Company and Wilmington Trust Company, 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 and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. The Securities are subject to redemption otherwise than through the operation of the sinking fund (as described below) upon not less than 30 nor more than 60 days' notice, in amounts of $1,000 or an integral multiple of $1,000, at any time on or after June 15, 1997, as a whole or in part, at the election of the Company, at a Redemption Price equal to the percentage of the principal amount set forth below if redeemed - 21- during the 12-month period beginning June 15 of the years indicated below: Year Redemption Price 1997 105.8125% 1998 103.8750% 1999 101.9375% and thereafter at 100% of the principal amount, together in the case of any such redemption with accrued interest, if any, to the Redemption Date (subject to the right of Holders of record on relevant Regular Record Dates to receive interest due on a Interest Payment Date), all as provided in the Indenture. In the event that a Change in Control occurs, each Holder shall have the right to require that the Company repurchase such Holder's Securities in whole or in part in integral multiples of $1,000 at a purchase price in cash in an amount equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase; provided that the Company shall have first either (i) repaid in full all Indebtedness under the Working Capital Facility and permanently reduced the commitments of the lenders thereunder or offered to repay in full all such Indebtedness and permanently reduce such commitments and repaid the Indebtedness and permanently reduced the commitment of each lender that accepted such offer or (ii) obtained the requisite consent under the Working Capital Facility to permit the repurchase of the Securities. The Securities are also subject to redemption on June 15 in each of the years 2000 and 2001 through the operation of a sinking fund, at a Redemption Price equal to 100% of the principal amount, together with accrued interest, if any, to the Redemption Date, all as provided in the Indenture. The Company may, at its option, receive a credit against the sinking fund obligation equal to the aggregate principal amount of Securities acquired by the Company and surrendered to the Trustee for cancellation and of Securities redeemed or called for redemption otherwise than through operation of the sinking fund that have not previously been so credited for such purpose by the Trustee. In the case of any redemption of Securities, interest installments whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Date referred to on the face hereof. Securities (or portions thereof) for whose redemption and payment provision is made in accordance with the - 22- Indenture shall cease to bear interest from and after the Redemption Date. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. If an Event of Default shall occur and be continuing, the principal of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Security and (b) certain restrictive covenants and the related Defaults and Events of Default, upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Security. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security 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 Security. The indebtedness evidenced by the Securities is subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full of all Senior Indebtedness of the Company whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by his acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on his behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee his attorney-in-fact for such purpose; provided that the indebtedness evidenced by this Security shall cease to be - 23- so subordinate and subject in right of payment upon any defeasance of this Security as provided in the Indenture. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place, and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable on the Security Register of the Company, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for such purpose in The City of New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities 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 Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any registration of transfer or exchange or redemption of Securities, but the Company may require payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charges payable in connection with any registration of transfer or exchange. Prior to the time of due presentment of this Security 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 Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any agent shall be affected by notice to the contrary. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. - 24- Customary abbreviations may be used in the name of a Holder or a assignee, such as: TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to Minors Act). I/We assign and transfer this Security to Insert assignee's soc. sec. or tax ID no. ........ (Print or type assignee's name, address and zip code) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: Signed: (Sign exactly as your name appears on the other side of this Security.) Section 204. Form of Trustee's Certificate of Authentication. TRUSTEEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities referred to in the within-mentioned Indenture. WILMINGTON TRUST COMPANY as Trustee By Authorized Signatory - 25- ARTICLE THREE THE SECURITIES Section 301. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $200,000,000, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 303, 304, 305, 306, 906 or 1108. The Securities shall be known and designated as the "11-5/8% Subordinated Notes due 2002" of the Company. Their Stated Maturity shall be June 15, 2002, and they shall bear interest at the rate of 11-5/8% per annum from May 28, 1992, or the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable on June 15, 1992 and semi-annually thereafter on June 15 and December 15 in each year and at said Stated Maturity, until the principal thereof is paid or duly provided for. Subject to Article Thirteen, interest on any overdue amount of principal, interest (to the extent lawful) or premium, if any, shall be payable on demand. The principal of (and premium, if any) and interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose; provided, however, that, at the option of the Company, interest may be paid by check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Security Register. The Securities shall be redeemable as provided in Article Eleven. The Securities shall be entitled to the benefits, and shall be redeemable through the operation, of the sinking fund as provided in Article Twelve. The Indebtedness evidenced by the Securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article Thirteen. Section 302. Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. - 26- Section 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by any two of the following: its Chairman, one of its Vice Chairmen, its President or one of its Vice Presidents, under its corporate seal reproduced thereon and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices on the date of such Securities. The Trustee shall (upon Company Order) authenticate and deliver Securities for original issue in an aggregate principal amount of up to $200,000,000. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as provided in this Indenture and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of one of its duly authorized signatories, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. In case the Company, pursuant to Article Eight, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of substantially all of its properties and assets to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company shall have been merged, or the successor Person which shall have received a conveyance, transfer, lease or other disposition as - 27- aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article Eight, any of the Securities authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Securities executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Securities surrendered for such exchange and of like principal amount; and the Trustee, upon Company Order of the successor Person, shall authenticate and deliver Securities as specified in such request for the purpose of such exchange. If Securities shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section in exchange or substitution for or upon registration of transfer of any Securities, such successor Person, at the option of any Holder but without expense to such Holder, shall provide for the exchange of all Securities at the time Outstanding held by such Holder for Securities authenticated and delivered in such new name. Section 304. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. - 28- Section 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee (and any other office or agency so designated) is hereby initially appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at the office or agency of the Company designated pursuant to Section 1002 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denomination or denominations and of a like aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denomination or denominations of a like aggregate principal amount upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer, or for exchange or redemption, shall (if so required by the Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange or redemption of Securities, but the Company may require payment of a sum sufficient to pay all - 29- documentary, stamp or similar issue or transfer taxes or other governmental charges that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 303, 304, 306, 906, l0ll, 1015 or 1108 not involving any transfer. The Company shall not be required (a) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business (i) 15 days before the mailing of a notice of redemption of the Securities selected for redemption under Section 1104 or l203 and ending at the close of business on the day of such mailing or (ii) 15 days before an Interest Payment Date and ending on the close of business on the Interest Payment Date, or (b) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of Securities being redeemed in part. Section 306. Mutilated, Destroyed, Lost and Stolen Securities. If (a) any mutilated Security is surrendered to the Trustee, or (b) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them and any agent of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a replacement Security of like tenor and principal amount, and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a replacement Security, pay such Security. Upon the issuance of any replacement Securities under this Section, the Company may require the payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charges that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every replacement Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute a contractual obligation of the Company, whether or - 30- not the destroyed, lost or stolen Security 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 Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 307. Payment of Interest; Interest Rights Preserved. Interest on any Security 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 Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security 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 applicable interest rate borne by the Securities, to the extent lawful (such defaulted interest (and such interest thereon) herein collectively called "Defaulted Interest"), shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder; and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Subsection (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) 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 Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Subsection provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the - 31- date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date. 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 his address as it appears in the Security 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 Securities (or their respective Predecessor Securities) are registered at the close of business 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 Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Subsection, such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 308. Persons Deemed Owners. Prior to 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 whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 307) interest on such Security and for all other purposes whatsoever, whether or not such Security 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 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any - 32- sinking fund payment pursuant to Section l202 shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company shall deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order. Section 310. Computation of Interest. Interest on the Securities shall be computed on the basis of a year of twelve 30-day months. ARTICLE FOUR SATISFACTION AND DISCHARGE Section 401. Satisfaction and Discharge of Indenture. This Indenture shall, upon Company Request, cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Securities herein expressly provided for) and the Trustee, on demand of and at the expense of the Company shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (l) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities 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 1003) have been delivered to the Trustee for cancellation; or (2) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or - 33- (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that (i) all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with and (ii) such satisfaction and discharge will not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company or Pathmark is a party or by which the Company or Pathmark is bound. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607 and, if money shall have been deposited with the Trustee pursuant to subclause (2) of Subsection (a) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section l003 shall survive. Section 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of - 34- the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee. Money so held in trust shall not be subject to the provisions of Article Thirteen of this Indenture. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 401 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 401; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE FIVE REMEDIES Section 501. Events of Default. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether or not it shall be occasioned or prohibited by the provisions of Article Thirteen or be voluntary or involuntary or be effected by the operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administration or governmental body): (a) default in the payment of interest on any Security when the same becomes due and payable and continuance of such default for a period of 30 days; or (b) default in the payment of the principal of (or premium, if any, on) any Security at its Maturity; or (c) default in the deposit of any sinking fund payment, when and as due by the terms of Article Twelve hereof or the Securities; or (d) default in the performance, or breach, of any covenant or agreement of the Company hereunder in any material respect (other than a default in the performance, or breach, of a covenant or agreement that is specifically dealt with elsewhere in this Section), and continuance of - 35- such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least a majority in principal amount of the Outstanding Securities a written notice specifying such default or breach and stating that such notice is a "Notice of Default" hereunder; or (e) the entry of a decree or order by a court having jurisdiction in the premises (i) for relief in respect of the Company in an involuntary case or proceeding under the Federal Bankruptcy Code or any other federal or state bankruptcy, insolvency, reorganization or similar law or (ii) adjudging the Company a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under the Federal Bankruptcy Code or any other applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of any of its properties, or ordering the winding up or liquidation of any of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (f) the institution by the Company of a voluntary case or proceeding under the Federal Bankruptcy Code or any other applicable federal or state law or any other case or proceedings to be adjudicated a bankrupt or insolvent, or the consent by the Company to the entry of a decree or order for relief in respect of the Company in any involuntary case or proceeding under the Federal Bankruptcy Code or any other applicable federal or state law or to the institution of bankruptcy or insolvency proceedings against the Company, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of any of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due or taking of corporate action by the Company in furtherance of any such action. - 36- Section 502. Acceleration of Maturity; Rescission. If an Event of Default (other than an Event of Default specified in Section 50l(e) or 501(f)) occurs and is continuing, the Trustee or the Holders of at least a majority of the principal amount of the Securities then Outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare all unpaid principal of, premium, if any, and accrued interest on all the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders) and, if the Working Capital Facility is in effect, to the agent under the Working Capital Facility, and upon any such declaration such principal shall become due and payable, except as provided below, (a) if the Working Capital Facility is not in effect, immediately, or (b) if the Working Capital Facility is in effect, upon the first to occur of (l) an acceleration under the Working Capital Facility (written notice of which the Company shall give to the Trustee as promptly as practicable upon the occurrence thereof; provided, however, that the Trustee shall not be deemed to have knowledge of such acceleration unless and until it receives such written notice thereof), or (2) the fifth Business Day after receipt by the Company and by such agent under the Working Capital Facility of such written notice given hereunder, unless (in the absence of an acceleration under the Working Capital Facility) on or prior to such fifth Business Day the Company shall have discharged the Indebtedness, if any, that is the subject of such Event of Default or otherwise cured the default relating to such Event of Default and shall have given written notice of such discharge or cure to the Trustee. If an Event of Default specified in Section 501(e) or 501(f) occurs and is continuing, the amounts described above shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. 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 at least a majority in aggregate principal amount of the Securities outstanding, by written notice to the Company and the Trustee, may annul 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 Securities, (iii) the principal of and premium, if any, on any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate - 37- borne by the Securities, and (iv) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Securities; and (b) all Events of Default, other than the non-payment of principal of the Securities which have become due solely by the declaration of acceleration, have been waived as provided in Section 513 or cured. No such rescission shall affect any subsequent default or impair any right consequent thereon. Upon a determination by the Company that the Working Capital Facility is no longer in effect, the Company shall promptly give to the Trustee written notice thereof, which notice shall be countersigned by an agent under the Working Capital Facility. Unless and until the Trustee shall have received such written notice with respect to the Working Capital Facility, the Trustee, subject to the provisions of Section 601, shall be entitled in all respects to assume that the Working Capital Facility is in effect (unless a Responsible Officer of the Trustee shall have actual knowledge to the contrary). Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (a) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest, with interest upon the overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon overdue installments of interest, at the rate borne by the Securities; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid and may prosecute - 38- such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders under this Indenture by such appropriate private or judicial proceedings as the Trustee shall deem most effectual to protect and enforce such rights. Section 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (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, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances - 39- of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 606. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any proposal, plan of reorganization, arrangement, adjustment or composition or other similar arrangement affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 506. Application of Money Collected. Subject to Article Thirteen, any money, securities or other property collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 606; SECOND: To the payment of the amounts then due and unpaid upon the Securities for principal (and premium, if any) and interest, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest; and THIRD: The balance, if any, to the Company. - 40- Section 507. Limitation on Suits. No Holder of any Securities shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or the Securities, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture except in the manner provided in this Indenture and for the equal and ratable benefit of all the Holders. Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 307) interest on such Security on the respective due dates expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. - 41- Section 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, 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 510. Rights and Remedies Cumulative. Except as provided in Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 512. Control by Holders. The Holders of not less than a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided that (a) such direction shall not be in conflict with any rule of law or with this Indenture or expose the Trustee to personal liability, and - 42- (b) subject to the provisions of Trust Indenture Act Section 315, the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 513. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities 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 (or premium, if any) or interest on any Security, 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 Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 514. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security 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 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 Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). - 43- Section 515. Waiver of Stay, Extension or Usury Laws. The Company 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, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 516. Unconditional Right of Holders to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any other provision of any Security, the right of any Holder of any Security to receive payment of the principal of, premium, if any, and interest on such Security on or after the respective due dates expressed in such Security, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. ARTICLE SIX THE TRUSTEE Section 601. Notice of Defaults. Within 60 days after the occurrence of any Default, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security 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 (or premium, if any) or interest on any Security or in the payment of any sinking fund installment, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders; and provided further that, in the case of any default or breach of the character specified in Section 501(d), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. - 44- Section 602. Certain Rights of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee need perform only those duties as are specifically set forth in this Indenture and no covenants or obligations shall be implied in this Indenture that are adverse to the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided that the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this subsection (c) does not limit the effect of subsection (b) of this Section 602; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 512; and (iv) 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, and does believe, that repayment of such funds - 45- or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to this Section 602. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense, including such reasonable advances as may be requested by the Trustee. (f) Subject to the foregoing subsections (a) through (e) of this Section 602: (i) The Trustee may rely and shall be protected in acting or in refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. Any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or a Company Order and any resolution by the board of directors of the Company may be sufficiently evidenced by a Board Resolution. (ii) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. In addition, in determining the Company's compliance with the financial covenants set forth herein, the Trustee may rely on the certificate delivered to the Trustee pursuant to Section 1019(a). (iii) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (iv) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers. (v) The Trustee may consult with counsel, accountants or other experts and any advice of such counsel, accountants or other experts shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it - 46- hereunder in good faith and in accordance with such advice. Section 603. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, 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 Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility and Qualification on Form T-l supplied to the Company are true and accurate, subject to the qualifications set forth therein. Section 604. Trustee and Agents May Hold Securities; Collections; Etc. The Trustee, any Paying Agent, Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities with the same rights it would have if it were not the Trustee, Paying Agent, Security Registrar or such other agent and, subject to Trust Indenture Act Sections 310(b) and 31l, 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 Trustee, Paying Agent, Security Registrar or such other agent. Section 605. Money Held in Trust. All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust hereunder for the purposes for which they were received and need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. Section 606. Compensation and Reimbursement. The Company covenants and agrees: - 47- (a) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee and each of its officers, directors, employees, agents and counsel for, and to hold them harmless against, any loss, liability or expense incurred without negligence or bad faith on their part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation of the Company under this Section 606 to compensate the Trustee and to pay and reimburse the Trustee for such expenses, disbursements and advances shall constitute additional Indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. As security for the performance of the obligations of the Company under this Section, the Trustee shall have a claim prior to the Securities upon all money, securities or other property held or collected by the Trustee as such, except funds held in trust for the benefit of Holders of particular Securities, and the Securities are hereby subordinated to such claim. If the Trustee incurs expenses or renders services after an Event of Default specified in Section 501(g) or 501(h) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under the Federal Bankruptcy Code and any other applicable federal or state bankruptcy Law. Section 607. Conflicting Interests. The Trustee shall comply with the provisions of Section 3l0(b) of the Trust Indenture Act. - 48- Section 608. 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 Section 310(a)(1) and which shall have a combined capital and surplus of at least $100,000,000 and have its Corporate Trust Office located in The City of New York (or, if its Corporate Trust Office shall not be located in The City of New York, the Company shall, pursuant to Section 1002, maintain an office or agency in The City of New York where the Securities may be presented or surrendered and notices and demands hereunder may be made or served) to the extent there is such an institution eligible and willing to serve. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of Federal, State, Territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 609. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 610, at which time the retiring Trustee shall be fully discharged from its obligations hereunder. (b) The Trustee may resign at any time by giving written notice thereof to the Company. 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 30 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 Security 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. - 49- (c) The Trustee may be removed at any time by an Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and the Company. (d) If at any time: (l) the Trustee shall fail to comply with the provisions of Trust Indenture Act Section 310(b) after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 608 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 Security for at least six months, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 514, the Holder of any Security who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with Section 610, 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 Securities and so accepted appointment, the Holder of any Security who has been a bona - 50- 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 Securities as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Section 610. 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; provided, however, that the retiring Trustee shall continue to be entitled to the benefit of Section 606(c); but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Upon acceptance of appointment by any successor Trustee as provided in this Section 610, the Company shall give notice thereof to the Holders of the Securities, by mailing such notice to such Holders at their addresses as they shall appear on the Security Register. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 609. If the Company fails to give such notice within 10 days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Company. - 51- Section 611. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 612. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor under the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any other such other obligor). ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 701. Disclosure of Names and Addresses of Holders. Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee or any agent of either of them shall be held accountable by reason of the disclosure of any information as to the names and addresses of the Holders in accordance with Trust Indenture Act Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Trust Indenture Act Section 312. - 52- Section 702. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Securities, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, as provided in Trust Indenture Act Section 313(c), a brief report dated as of such May l5 if required by Trust Indenture Act Section 313(a). Section 703. Reports by Company. The Company shall: (a) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section l3 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of such Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; and (b) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations. - 53- ARTICLE EIGHT [Intentionally Omitted] ARTICLE NINE SUPPLEMENTAL INDENTURES Section 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; (b) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein or in the Securities conferred upon the Company; (c) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture; provided that, in each case, such provisions shall not adversely affect the interests of the Holders; (d) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act, as contemplated by Section 905 or otherwise; (e) to evidence and provide the acceptance of the appointment of a successor Trustee hereunder; or (f) to make any other change that does not adversely affect the rights of any Holder. - 54- Section 902. Supplemental Indentures With Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by Act of such Holders delivered to the Company and the Trustee, each when authorized by a Board Resolution, and the Trustee may enter into one or more indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of waiving or modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture, amendment or waiver shall, without the consent of the Holder of each Outstanding Security affected thereby: (a) change the Stated Maturity of the principal of, or any installment of interest on, any Security or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which the principal of any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date) or modify the obligation of the Company to make and consummate a Change in Control Offer; or (b) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; or (c) modify any of the provisions of this Section or Section 513 or Section 1020, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby; or (d) modify any of the provisions of Article Thirteen hereof in a manner adverse to the Holders of the Securities. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. - 55- Section 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Trust Indenture Act Section 315(a) through 315(d) and Section 602 hereof) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 906. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Company, bear a notation in form approved by the Company as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Company, to any such supplemental indenture may be prepared and executed by the Company and shall be authenticated and delivered by the Trustee in exchange for Outstanding Securities. Section 907. Effect on Senior Indebtedness. No supplemental indenture shall adversely affect the rights of any holders of Senior Indebtedness under Article Thirteen unless the requisite holders of each issue of Senior Indebtedness affected thereby shall have consented to such supplemental indenture. - 56- ARTICLE TEN COVENANTS Section 1001. Payment of Principal, Premium and Interest. The Company will duly and punctually pay the principal of (and premium, if any) and interest on the Securities in accordance with the terms of the Securities and this Indenture. Section 1002. Maintenance of Office or Agency. The Company will maintain, in The City of New York, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. If the Corporate Trust Office is located in New York City, then it shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Securities 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 recission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or recission and any change in the location of any such office or agency. Section 1003. Money for Security Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons - 57- entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for the Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any Securities, deposit with a Paying Agent a sum in same day funds (or New York Clearing House funds if such deposit is made prior to the date on which such deposit is required to be made) sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest; (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 respects with the provisions of this Indenture relating to the duties, rights and obligations 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 - 58- Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such 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 (and premium, if any) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 1004. [Intentionally Omitted] Section 1005. [Intentionally Omitted] Section l006. [Intentionally Omitted] Section 1007. [Intentionally Omitted] Section 1008. [Intentionally Omitted] Section 1009. [Intentionally Omitted] Section 1010. [Intentionally Omitted] Section 1011. [Intentionally Omitted] Section 1012. [Intentionally Omitted] Section 1013. [Intentionally Omitted] Section 1014. [Intentionally Omitted] - 59- Section l0l5. Purchase of Securities Upon Change in Control. (a) If there shall have occurred a Change in Control, Securities shall be purchased by the Company, at the option of the Holder thereof, in whole or in part in integral multiples of $1,000, on a date that is not earlier than 45 days nor later than 60 days from the date the Change in Control Notice referred to below is given to Holders or such later date as may be necessary for the Company to comply with requirements under the Exchange Act (such date, or such later date, being the "Change in Control Purchase Date"), at a purchase price in cash (the "Change in Control Purchase Price") equal to an amount equal to 101% of the principal amount of such Securities, plus accrued and unpaid interest (including any Defaulted Interest), if any, to the Change in Control Purchase Date, subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 1015(c). (b) Within 30 days following a Change in Control and prior to the mailing of the Change in Control Notice to Holders provided for in paragraph (c) below, the Company covenants to either (1) repay in full all Indebtedness under the Working Capital Facility and permanently reduce the commitments of the lenders thereunder or offer to repay in full all such Indebtedness and permanently reduce such commitments and repay the Indebtedness and permanently reduce the commitment of each lender who has accepted such offer or (2) obtain the requisite consent under the Working Capital Facility to permit the repurchase of the Securities as provided for in this Section 1015. The Company shall first comply with this subsection (b) before it shall be required to repurchase the Securities pursuant to this Section 1015, and any failure to comply with this subsection (b) shall constitute a default of a covenant for purposes of Section 501(d). (c) Within 30 days after the occurrence of a Change in Control, the Company shall give written notice of such Change in Control (a "Change in Control Notice") and of its offer (the "Change in Control Offer") to purchase Securities as specified herein to the Trustee, and to each Holder of the Securities at his address appearing on the Security Register, by first-class mail, postage prepaid. The Trustee shall be under no obligation to ascertain the occurrence of a Change in Control. The Change in Control Notice shall contain all instructions and materials necessary to enable such Holders to tender Securities, shall include a form of Change in Control Purchase Notice to be completed by the Holder and shall state: - 60- (i) the events causing the Change in Control and the date such Change in Control is deemed to have occurred for purposes of this Section 1015; (ii) the date by which a Holder must give a Change in Control Purchase Notice; (iii) the Change in Control Purchase Price; (iv) the Change in Control Purchase Date; (v) that any Security not purchased will continue to accrue interest; (vi) that Securities to be purchased shall, on the Change in Control Purchase Date, become due and payable at the Change in Control Purchase Price and from and after such date (unless the Company shall default in the payment of the Change in Control Purchase Price) such Securities shall cease to bear interest; and (vii) the procedures a holder must follow to exercise rights under this Section 1015 and a brief description of those rights and the procedures for withdrawing a Change in Control Purchase Notice. (d) A Holder may exercise its rights specified in Section l015(a) upon (i) delivery to any Paying Agent a written notice (a "Change in Control Purchase Notice") at any time prior to the close of business on the Change in Control Purchase Date, stating (A) the certificate number of the Security that the Holder will deliver to be purchased and (B) the portion of the principal amount of the Security that the holder will deliver to be purchased, which portion must be $1,000 or an integral multiple thereof and (ii) delivery of such Security to such Paying Agent at such office prior to, on or after the Change in Control Purchase Date (together with all necessary endorsements), such delivery being a condition to receipt by the Holder of the Change in Control Purchase Price therefor. If a Holder has elected to deliver to the Company for purchase a portion of a Security, and if the principal amount of such portion is $1,000 or an integral multiple of $1,000, the Company shall purchase such portion from the Holder thereof pursuant to this Section 1015. Provisions of this - 61- Indenture that apply to the purchase of all of a Security also apply to the purchase of a portion of such Security. Each Paying Agent shall promptly notify the Company of the receipt by the former of any and all Change in Control Purchase Notices and any and all written notices of withdrawal thereof. (e) Upon receipt by any Paying Agent of a Change in Control Purchase Notice, the Holder of the Security in respect of which such Change in Control Purchase Notice was given shall (unless such Change in Control Purchase Notice is withdrawn pursuant to Section 1015(i)) thereafter be entitled to receive solely the Change in Control Purchase Price with respect to such Security. Such Change in Control Purchase Price shall be paid to such Holder promptly following the later of the Business Day following the Change in Control Purchase Date (provided the conditions in Section l0l5(d) have been satisfied) and the time of delivery of such Security to the relevant Paying Agent at the office of such Paying Agent by the Holder thereof in the manner required by Section 1015(d). (f) On or prior to the Change in Control Purchase Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in same day funds (or New York Clearing House funds if such deposit is made prior to the Change in Control Purchase Date) sufficient to pay the Change in Control Purchase Price of, and (except if the Change in Control Purchase Date shall be an Interest Payment Date) accrued interest on, all the Securities or portions thereof which are to be purchased on that date. (g) Upon a Change in Control Purchase Notice having been given as aforesaid, Securities to be purchased shall, on the Change in Control Purchase Date, become due and payable at the Change in Control Purchase Price and from and after such date (unless the Company shall default in the payment of the Change in Control Purchase Price) such Securities shall cease to bear interest. Upon surrender of any such Security for purchase in accordance with the foregoing provisions, such Security shall be paid by the Company at the Change in Control Purchase Price; provided, however, that installments of interest whose Stated Maturity is on or prior to the Change in Control Purchase Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 307. If any Security tendered for purchase shall not be so paid upon surrender thereof, the principal thereof (and premium, if any, thereon) shall, until paid, bear interest from the Change in Control Purchase Date at the rate borne by such Security. - 62- (h) Any Security that is to be purchased only in part shall be surrendered to a Paying Agent at the office of such Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, one or more new Securities of any authorized denomination as requested by such Holder in an aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Security so surrendered that is not purchased. (i) The Company shall comply with the applicable tender offer rules, including Rule l4e-l under the Exchange Act, in connection with a Change in Control Offer. (j) A Change in Control Purchase Notice may be withdrawn before or after delivery by the Holder to the relevant Paying Agent at the office of such Paying Agent of the Security to which such Change in Control Purchase Notice relates, by means of a written notice of withdrawal (by facsimile transmission or letter) received by such Paying Agent at such office not later than three Business Days prior to the Change in Control Purchase Date, specifying, as applicable: (i) the certificate number of the Security in respect of which such notice of withdrawal is being submitted; (ii) the principal amount of the Security with respect to which such notice of withdrawal is being submitted; and (iii) the principal amount, if any, of the Security that remains subject to the original Change in Control Purchase Notice and that has been or will be delivered for purchase by the Company. A written notice of withdrawal may be in the form set forth in the preceding paragraph. Each Paying Agent will promptly return to the prospective Holders thereof any Securities with respect to which a Change in Control Purchase Notice has been withdrawn in compliance with this Indenture. Section 1016. [Intentionally Omitted] Section 1017. [Intentionally Omitted] - 63- Section 1018. [Intentionally Omitted] Section 1019. Statement as to Compliance. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year ending after the date hereof, a brief certificate of its principal executive officer, principal financial officer or principal accounting officer stating whether, to such officer's knowledge, the Company is in compliance with all covenants and conditions to be complied with by it under this Indenture. For purposes of this Section 1019, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. Section 1020. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any covenant or condition set forth in Section 1015 if, before or after the time for such compliance, the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding shall, by Act of such Holders, waive such compliance in such instance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. ARTICLE ELEVEN REDEMPTION OF SECURITIES Section 1101. Right of Redemption. The Securities may be redeemed, otherwise than through the operation of the sinking fund provided for in Article Twelve, at the election of the Company, on or after June 15, 1997, as a whole or from time to time in part subject to the conditions and at the Redemption Prices specified in the form of Security, together with accrued interest to the Redemption Date. Section 1102. Applicability of Article. Redemption of Securities at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. - 64- Section 1103. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by it (unless a shorter notice period shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed. Section 1104. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed, the particular Securities or portions thereof to be redeemed shall be selected not more than 60 days and not less than 30 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, either pro rata, by lot or, by any other method the Trustee shall deem fair and reasonable, and the amounts to be redeemed may be equal to $1,000 or any integral multiple thereof. The Trustee shall promptly notify the Company and the Security Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. Section ll05. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (a) the Redemption Date; (b) the Redemption Price; (c) if less than all Outstanding Securities are to be redeemed, the identification (and, in the case of a - 65- Security to be redeemed in part, the principal amount) of the particular Securities to be redeemed; (d) that on the Redemption Date the Redemption Price will become due and payable upon each such Security or portion thereof, and that (unless the Company shall default in payment of the Redemption Price) interest thereon shall cease to accrue on and after said date; (e) the place or places where such Securities are to be surrendered for payment of the Redemption Price; (f) if applicable, that such redemption is for the sinking fund provided in Article Twelve; (g) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (h) the CUSIP number, if any, relating to such Securities; and (i) in the case of a Security to be redeemed in part, the principal amount of such Security to be redeemed and that after the Redemption Date upon surrender of such Security, new Security or Securities in the aggregate principal amount equal to the unredeemed portion thereof will be issued. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at its request, by the Trustee in the name and at the expense of the Company. Section 1106. Deposit of Redemption Price. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in same day funds (or New York Clearing House funds if such deposit is made prior to the applicable Redemption Date) sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities or portions thereof which are to be redeemed on that date. - 66- Section 1107. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal thereof (and premium, if any, thereon) shall, until paid, bear interest from the Redemption Date at the rate borne by such Security. Section 1108. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 1002 (with, if the Company, the Security Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company, the Security Registrar or the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE TWELVE SINKING FUND Section 1201. Mandatory Sinking Fund Payments. As a mandatory sinking fund for the retirement of the Securities, the Company will, until all of the Securities shall have been paid, or payment thereof duly provided for, pay to - 67- the Trustee, on or prior to June 15, 2000 and on or prior to June 15, 2001, an amount in same day funds (or New York Clearing House funds if such payment is made prior to the applicable June 15) sufficient to redeem $50,000,000 of the original aggregate principal amount of Securities at the Redemption Price specified in the form of Security hereinbefore set forth. The cash amount of any sinking fund payment is subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities on such June 15 as herein provided. Section 1202. Satisfaction of Sinking Fund Payments with Securities. The Company (a) may deliver Outstanding Securities (other than any previously called for redemption pursuant to this Article Twelve) theretofore purchased or otherwise acquired by the Company and (b) may apply as a credit Securities which have been redeemed at the election of the Company pursuant to Section 1101, in each case in satisfaction of all or any part of any sinking fund payment required to be made pursuant to Section 1201; provided that such Securities have not been previously so credited. Each such Security shall be received and credited for such purpose by the Trustee at the Redemption Price specified in the form of Security set forth in Article Two for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. Section 1203. Redemption of Securities for Sinking Fund. On or before April l5, 2000 and April 15, 2001, the Company will deliver to the Trustee an Officers' Certificate specifying the portion of the mandatory sinking fund payment in Section 1201, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering or crediting Securities pursuant to Section l202 and will also deliver, if not previously delivered, to the Trustee any Securities to be so delivered. Such certificate shall be irrevocable and upon its delivery the Company shall be obligated to make the cash payment or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. In the case of the failure of the Company to deliver such certificate, the sinking fund payment due on the next succeeding sinking fund payment date for the Securities shall be paid entirely in cash and shall be sufficient to redeem the principal amount of such Securities subject to a mandatory sinking fund payment without the option to deliver or - 68- credit Securities as provided in Section 1202. Before May 1 in each such year the Trustee shall select the Securities to be redeemed upon the next ensuing June 15 in the manner specified in Section 1104 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1105. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1107 and 1108. ARTICLE THIRTEEN SUBORDINATION OF SECURITIES Section 1301. Securities Subordinate to Senior Indebtedness. The Company covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the indebtedness represented by the Securities and the payment of the principal of and premium, if any, and interest on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness (including any interest accruing after the occurrence of an Event of Default under Section 501(e) or (f)). Section 1302. Payment Over of Proceeds Upon Dissolution, etc. In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its creditors, as such, or to its assets, or (b) any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Company, then and in any such event: (1) the holders of Senior Indebtedness shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Senior Indebtedness, or provision shall be made for such payment in cash or cash equivalents, before the Holders of the Securities are entitled to receive any payment on account of principal of (or premium, if any) or interest on the Securities; and - 69- (2) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the provisions of this Article Thirteen, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities (except, so long as the effect of this parenthetical clause is not to cause the Securities to be treated in any case or proceeding or similar event described in Subsection (a), (b) or (c) of this Section 1302 as part of the same class of claims as the Senior Indebtedness or any class of claims on a parity with or senior to the Senior Indebtedness, for any such payment or distribution (x) authorized by an order or decree giving effect, and stating in such order or decree that effect is given, to the subordination of the Securities to the Senior Indebtedness, and made by a court of competent jurisdiction in a reorganization proceeding under any applicable bankruptcy law, or (y) of securities which are subordinated, to at least the same extent as the Securities, to the payment of all Senior Indebtedness then outstanding), shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their Representative or Representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the principal of, and premium, if any, and interest on, and other amounts due or in connection with, the Senior Indebtedness held or represented by each, to the extent necessary to make payment in full of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (3) in the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any such payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being - 70- subordinated to the payment of the Securities, before all Senior Indebtedness is paid in full or payment thereof provided for, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance, transfer or lease of its properties and assets substantially as an entirety to another corporation upon the terms and conditions set forth in Article Eight of the Indenture in effect prior to the execution of the First Supplemental Indenture shall not be deemed a dissolution, winding up, liquidation, reorganization, assignment for the benefit of creditors or marshalling of assets and liabilities of the Company for the purposes of this Section if the corporation formed by such consolidation or into which the Company is merged or the corporation which acquires by conveyance, transfer or lease such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance, transfer or lease, comply with the conditions set forth in Article Eight of the Indenture in effect prior to the execution of the First Supplemental Indenture. Section 1303. No Payment When Specified Senior Indebtedness in Default. (a) (i) In the event of and during the continuation of any default in the payment of principal of (or premium, if any) or interest on any Specified Senior Indebtedness beyond any applicable grace period with respect thereto, or (ii) in the event that any other event of default with respect to any Specified Senior Indebtedness shall have occurred and be continuing and shall have resulted in such Specified Senior Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, or (b) in the event that any event of default (other than a default described in clause (a)) with respect to any Specified Senior Indebtedness shall have occurred and be continuing permitting the holders of such Specified Senior Indebtedness (or a trustee on behalf of such holders) to - 71- declare such Specified Senior Indebtedness due and payable prior to the date on which it would otherwise have become due and payable, then no payment shall be made by the Company on account of the principal of (or premium, if any) or interest on the Securities or on account of the purchase or redemption or other acquisition of Securities (x) in case of any event of default described in subclause (i) of clause (a), or an event of default described in subclause (ii) of clause (a) resulting in an acceleration as specified in clause (a), unless and until such payment event of default shall have been cured or waived or shall have ceased to exist or such acceleration shall have been rescinded or annulled or the holders of such Specified Senior Indebtedness or their agents have waived the benefits of this Section, or (y) in case of any event of default specified in clause (b), from the earlier of the date the Company or the Trustee receives written notice of such event of default from the agent or any other Representative of a holder of Specified Senior Indebtedness until the earlier of (1) 179 days after such date and (2) the date, if any, on which the Specified Senior Indebtedness to which such event of default relates is discharged or such event of default is waived by the holders of such Specified Senior Indebtedness or otherwise cured (provided that further written notice relating to the same or any other event of default specified in clause (b) above with respect to any Specified Senior Indebtedness received by the Company or the Trustee within 12 months after such receipt shall not be effective for purposes of this clause (y)). In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, then and in such event such payment shall be paid over and delivered forthwith to the Company. The provisions of this Section shall not apply to any payment with respect to which Section 1302 would be applicable. Section 1304. Payment Permitted if No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent the Company, at any time except during the pendency of any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 1302 or under the conditions described in Section 1303, from making payments at any time of principal of (and premium, if any) or interest on the Securities. - 72- Section 1305. Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness, the Holders of the Securities shall be subrogated (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated to Senior Indebtedness of the Company to the same extent as the Securities are subordinated and which is entitled to like rights of subrogation) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. Section 1306. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the express limitations set forth in Article Five and to the rights, if any, under this Article of the holders of Senior Indebtedness (1) in any case, proceeding, dissolution, liquidation or other winding up, - 73- assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 1302, to receive, pursuant to and in accordance with such Section, cash, property and securities otherwise payable or deliverable to the Trustee or such Holder, or (2) under the conditions specified in Section 1303, to prevent any payment prohibited by such Section. Section 1307. Trustee to Effectuate Subordination. Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes. Section 1308. No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any Person liable in any manner for the collection of Senior Indebtedness; and (d) exercise or refrain from exercising any rights against the Company and any other Person. Section 1309. Notice to Trustee. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of - 74- the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from the Company or a holder of Senior Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 601, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least three Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date. Subject to the provisions of Section 601, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Section 1310. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 601, and the Holders of the Securities shall be entitled to rely upon any order or decree - 75- 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 of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. Section 1311. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 606. Section 1312. Article Applicable to Paying Agents. In case at any time 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 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 in addition to or in place of the Trustee; provided, however, that Section 1311 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE Section 1401. Option to Effect Defeasance or Covenant Defeasance. The Company may, at its option by Board Resolution, at any time, with respect to the Securities, elect to have either - 76- Section 1402 or Section 1403 be applied to all Outstanding Securities upon compliance with the conditions set forth below in this Article Fourteen. Section 1402. Defeasance and Discharge. Upon the Company's exercise under Section l401 of the option applicable to this Section 1402, the Company shall be deemed to have been discharged from its obligations with respect to all Outstanding Securities 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 Outstanding Securities, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 1405 and the other Sections of this Indenture referred to in (A) and (B) below, and to have satisfied all its other obligations under such Securities and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Securities to receive solely from the trust fund described in Section 1404 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any) and interest on such Securities when such payments are due, (B) the Company's obligations with respect to such Securities under Sections 304, 305, 306, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (D) this Article Fourteen. Subject to compliance with this Article Fourteen, the Company may exercise its option under this Section 1402 notwithstanding the prior exercise of its option under Section 1403 with respect to the Securities. Section 1403. Covenant Defeasance. Upon the Company's exercise under Section 1401 of the option applicable to this Section 1403, the Company shall be released from its obligations under the covenants contained in Article Thirteen and in Section 1015 with respect to the Outstanding Securities on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Securities shall thereafter be deemed to be not "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder (it being understood that such Securities shall not - 77- be deemed Outstanding for financial accounting purposes). For this purpose, such covenant defeasance means that, with respect to the Outstanding Securities, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a default or an Event of Default under Section 501(d), but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. In addition, upon the Company's exercise under Section 1401 of the option applicable to Section 1403, Section 501(d) shall not constitute Events of Default. Section 1404. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 1402 or Section 1403 to the Outstanding Securities: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 608 who shall agree to comply with the provisions of this Article Fourteen 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 Securities, (A) cash in U.S. Dollars in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, cash in U.S. Dollars in an amount, or (C) a combination thereof, 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, (i) the principal of (and premium, if any) and interest on the Outstanding Securities on the Stated Maturity of such principal or installment of principal (and premium, if any) or interest and (ii) any mandatory sinking fund payments or analogous payments applicable to the Outstanding Securities on - 78- the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to the Securities. For this purpose, "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (y) 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, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt; (2) In the case of an election under Section 1402, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since May 1, 1992, 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 Securities 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; - 79- (3) In the case of an election under Section 1403, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States to the effect that the Holders of the Outstanding Securities will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; (4) No Default or Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit or, insofar as Subsection 501(e) or 501(f) is concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); (5) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which the Company is bound; (6) In the case of an election under either Section 1402 or 1403, 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; (7) In the case of an election under either Section 1402 or 1403, the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit made by the Company pursuant to its election under Section 1402 or 1403 was not made by the Company with the intent of preferring the Holders over other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (8) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel in the United States, each stating that all conditions precedent provided for relating to either the defeasance under Section 1402 or the covenant - 80- defeasance under Section 1403 (as the case may be) have been complied with as contemplated by this Section 1404. On and after the date the conditions set forth above are satisfied, the United States dollars or U.S. Government Obligations so deposited shall not be subject to the rights of the holders of Senior Indebtedness pursuant to the provisions of Article Thirteen. Section 1405. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 1405, the "Trustee") pursuant to Section 1404 in respect of the Outstanding Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. Money and U.S. Government Obligations so held in trust are not subject to Article Thirteen. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or U.S. Government Obligations deposited pursuant to Section 1404 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities. Anything in this Article Fourteen 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 1404 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 1404(l)), are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. Section 1406. Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or U.S. Government Obligations in accordance with Section 1402 or 1403, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 1402 or 1403, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1402 or 1403, as the case may be; provided, however, that, if the Company makes any payment of principal of (or premium, if any) or interest on any Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent. * * * * * - 81- This Indenture may be signed in any number of counterparts with the same effect as if the signatures to each counterpart were upon a single instrument, and all such counterparts together shall be deemed an original of this Indenture. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. SUPERMARKETS GENERAL HOLDINGS CORPORATION By: Title: Attest: Title: WILMINGTON TRUST COMPANY By: Title: Attest: Title: - 82- This Indenture may be signed in any number of counterparts with the same effect as if the signatures to each counterpart were upon a single instrument, and all such counterparts together shall be deemed an original of this Indenture. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. SUPERMARKETS GENERAL HOLDINGS CORPORATION By: Title: Attest: Title: WILMINGTON TRUST COMPANY By: Title: Attest: Title: - 83- STATE OF ) ) ss.: COUNTY OF ) On the day of , 1993, before me personally came and , respectively, to me known, who, being by me duly sworn, did acknowledge before me that they reside at and at and , respectively; that they are and , respectively, of Wilmington Trust Company, one of the corporations described in and which executed the above instrument; that they know the corporate seal of such corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed pursuant to authority of the Board of Directors of such corporation; and that they signed their names thereto as and , respectively, of such corporation pursuant to like authority. (NOTARIAL SEAL) - 84- STATE OF ) ) ss.: COUNTY OF ) On the day of , 1993, before me personally came and , respectively, to me known, who, being by me duly sworn, did acknowledge before me that they reside at and , respectively; that they are and , respectively, of Supermarkets General Holdings Corporation, one of the corporations described in and which executed the above instrument; that they know the corporate seal of such corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed pursuant to authority of the Board of Directors of such corporation; and that they signed their names thereto as and , respectively, of such corporation pursuant to like authority. (NOTARIAL SEAL) - 85- EX-4.2 4 FIRST SUPPLEMENTAL INDENTURE Dated as of October 5, 1993 FIRST SUPPLEMENTAL INDENTURE dated as of , 1993 (the "First Supplemental Indenture"), between SUPERMARKETS GENERAL HOLDINGS CORPORATION, a Delaware corporation (hereinafter called the "Company"), and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as trustee under the Indenture referred to below (hereinafter called the "Trustee"). WHEREAS, the Company and the Trustee are parties to an Indenture, dated as of May 1, 1992 (hereinafter called the "Existing Indenture", all capitalized terms used in this Supplemental Indenture and not otherwise defined being used as defined in the Existing Indenture), pursuant to which the Company issued its 11-5/8% Subordinated Notes due 2002 (hereinafter called the "Securities"); WHEREAS, on May 26, 1993, Supermarkets General Corporation (to be renamed as Pathmark Stores, Inc.), a Delaware corporation and a wholly owned subsidiary of the Company ("Pathmark"), made an offer (the "Exchange Offer") to exchange $1,000 principal amount of Pathmark's 11-5/8% Subordinated Notes due 2002 for each $1,000 principal amount of the Securities issued by the Company, and, concurrently with the Exchange Offer, the Company solicited (the "Solicitation") consents to amend certain provisions of the Existing Indenture; WHEREAS, the Existing Indenture provides that, when authorized by a Board Resolution, indentures supplemental thereto may be executed and delivered by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities (or in certain cases the consent of the Holder of each Outstanding Security affected thereby), such consent to be by Act of said Holders delivered to the Company and the Trustee; WHEREAS, pursuant to the Exchange Offer and the Solicitation, the Holders of at least a majority in principal amount of the Outstanding Securities have so consented to the execution and delivery of this First Supplemental Indenture; and WHEREAS, all things necessary have been done to make this First Supplemental Indenture, when executed and delivered by the Company, the legal, valid and binding agreement of the Company, in accordance with its terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: The parties hereto mutually covenant and agree as follows: PART ONE The Existing Indenture is hereby supplemented, modified and restated to read as set forth in Exhibit A to this First Supplemental Indenture. PART TWO Sec. 1. This First Supplemental Indenture shall be construed as supplemental to the Indenture and shall form a part thereof, and the Indenture is hereby incorporated by reference herein and, as supplemented, modified and restated hereby, is hereby ratified, approved and confirmed. Sec. 2. This First Supplemental Indenture shall be governed and construed in accordance with the laws of the State of New York. Sec. 3. This First Supplemental Indenture may be signed in any number of counterparts with the same effect as if the signatures to each counterpart were upon a single instrument, and all such counterparts together shall be deemed an original of this First Supplemental Indenture. Sec. 4. It is the intention of the parties hereto that this First Supplemental Indenture be deemed to be delivered in the State of New York, and that such delivery by the Company be deemed to occur only upon delivery by the Trustee in the State of New York. Sec. 5. This First Supplemental Indenture shall be effective on the date and time hereof; provided, however, that this First Supplemental Indenture shall not become operative, and the Existing Indenture shall remain in effect, until the date the Exchange Offer expires; and provided, further, that if the Exchange Offer is terminated, this First Supplemental Indenture shall be rescinded automatically and shall not have further force and effect. -2- IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. SUPERMARKETS GENERAL HOLDINGS CORPORATION By: /s/ Anthony Cuti Name: Title: President Attest: /s/ Myron D. Waxberg Name: Myron D. Waxberg Title: Assistant Secretary WILMINGTON TRUST COMPANY By: Name: Title: Attest: Name: Title: -3- STATE OF Delaware ) ) ss.: COUNTY OF New Castle ) On the 4th day of October, 1993, before me personally came James T. Skelly, III and Emmett R. Harmon, respectively, to me known, who, being by me duly sworn, did acknowledge before me that they reside at Wilmington, DE and at Wilmington, DE and , respectively; that they are Vice President and Vice President, respectively, of Wilmington Trust Company, one of the corporations described in and which executed the above instrument; that they know the corporate seal of such corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed pursuant to authority of the Board of Directors of such corporation; and that they signed their names thereto as James T. Skelly, III and Emmett R. Harmon , respectively, of such corporation pursuant to like authority. (NOTARIAL SEAL) /s/ Sonja F. Allen --------------- Notary Public STATE OF New York ) ) ss.: COUNTY OF New York ) On the 5th day of October, 1993, before me personally came Anthony Cuti and , respectively, to me known, who, being by me duly sworn, did acknowledge before me that they reside at 36 E. Saddle River Rd. and Saddle River, New Jersey, respectively; that they are Vice President and Vice President , respectively, of Supermarkets General Holdings Corporation, one of the corporations described in and which executed the above instrument; that they know the corporate seal of such corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed pursuant to authority of the Board of Directors of such corporation; and that they signed their names thereto as and , respectively, of such corporation pursuant to like authority. (NOTARIAL SEAL) EX-4.4 5 PLAINBRIDGE, INC. CREDIT AGREEMENT This CREDIT AGREEMENT is dated as of October 26, 1993 and entered into by and among PLAINBRIDGE, INC., a Delaware corporation ("Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to herein as a "Lender" and collectively as "Lenders"), and BANKERS TRUST COMPANY ("Bankers"), as agent for Lenders (in such capacity, "Agent"). R E C I T A L S - - - - - - - - WHEREAS, in connection with the Spin-Off (this and other capitalized terms used in these recitals without definition being used as defined in subsection 1.1), Company proposes to acquire certain assets, and assume certain liabilities, of Pathmark and to enter into the Spin-Off Agreements and certain other arrangements with SMG-II, Holdings, PTKH, Pathmark and Chefmark; WHEREAS, Company desires that Lenders extend certain credit facilities to Company for working capital purposes of Company and its Subsidiaries; WHEREAS, concurrently with the execution of this Agreement, Pathmark is entering into the Pathmark Credit Agreement; and WHEREAS, Company desires to secure all of the Obligations hereunder and under the other Loan Documents by granting to Agent, on behalf of Lenders, a first priority Lien on certain unencumbered real, personal and mixed property of Company; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Company, Lenders and Agent agree as follows: Section 1. DEFINITIONS 1.1 Certain Defined Terms. ------- ------- ----- The following terms used in this Agreement shall have the following meanings: "Adjusted Eurodollar Rate" means, for any Interest Rate Determination Date with respect to a Eurodollar Rate Loan, the rate obtained by dividing (i) the offered quotation -------- (rounded upward to the nearest 1/16 of one percent) to first class banks in the interbank Eurodollar market by Bankers for U.S. dollar deposits of amounts in same day funds comparable to the principal amount of the Eurodollar Rate Loan of Bankers for which the Adjusted Eurodollar Rate is then being determined with maturities comparable to the Interest Period for which such Adjusted Eurodollar Rate will apply as of approximately 10:00 A.M. (New York time) on such Interest Rate Determination Date by (ii) a percentage equal to 100% minus -- ----- the stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of "Eurocurrency liabilities" as defined in Regulation D (or any successor category of liabilities under Regulation D). "Affected Lender" has the meaning assigned to that term in subsection 2.6C. "Affiliate", as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. "Agent" has the meaning assigned to that term in the introduction to this Agreement and also means and includes any successor Agent appointed pursuant to subsection 9.6A, and the term "Agent" shall include Agent acting in its capacity as secured party under the Collateral Documents unless the context otherwise requires. "Agreement" means this Credit Agreement dated as of October 26, 1993, as it may be amended, supplemented or otherwise modified from time to time. "Asset Sale" means (i) the sale by Company or any of its Subsidiaries to any Person other than Company or any of its wholly-owned Subsidiaries of (a) any of the stock of any of Company's Subsidiaries or (b) any other assets (whether tangible or intangible) of Company or any of its Subsidiaries other than (1) inventory sold in the ordinary course of business and (2) any other assets to the extent that the aggregate fair market value of such assets sold in any single transaction or related series of transactions is equal to $1,000 or less, (ii) the assignment by Company or any of its Subsidiaries to any Person other than Company or any of its wholly-owned Subsidiaries of any lease, whether a Capital Lease or an Operating Lease, to which it is a party as lessee, (iii) the taking of any assets of Company or any of its Subsidiaries, or any part thereof or interest therein, for public or quasi-public use under the power of eminent domain, condemnation or otherwise, other than any such taking to the extent that the aggregate net cash proceeds received by Company and its Subsidiaries in connection with such taking and all other takings related to such taking are equal to or less than $100,000, or (iv) the occurrence of any loss, damage or destruction of any assets of Company or any of its Subsidiaries giving rise to insurance proceeds, other than any such occurrence to the extent that the aggregate insurance proceeds received by Company and its Subsidiaries in connection with such occurrence are equal to or less than $5,000,000. "Assignment and Acceptance" means an Assignment and Acceptance entered into by a Lender and an Eligible Assignee, and accepted by Agent, in substantially the form of Exhibit XII annexed hereto. ------- --- "Bankers" has the meaning assigned to that term in the introduction to this Agreement. "Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute. "Base Rate" means, at any time, the higher of (x) the Prime Rate or (y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate. "Base Rate Loans" means Loans bearing interest at rates determined by reference to the Base Rate as provided in subsection 2.2A. "Borrowing Base" means, as at any date of determination, an aggregate amount equal to up to fifty percent (50%) of Eligible Inventory. "Borrowing Base Certificate" means a certificate substantially in the form annexed hereto as Exhibit VII ------- --- delivered to Lenders by Company pursuant to subsection 4.1M or subsection 6.1(v). "Business Day" means (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institu- tions located in such state are authorized or required by law or other governmental action to close, and (ii) with respect to all notices, determinations, fundings and payments in connection with the Adjusted Eurodollar Rate or any Eurodollar Rate Loans, any day that is a Business Day described in clause (i) above and that is also a day for trading by and between banks in Dollar deposits in the applicable interbank Eurodollar market. "Capital Lease", as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "Cash" means money, currency or a credit balance in a Deposit Account. "Cash Equivalents" means (i) marketable securities issued or directly and unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more than six months from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any Lender or any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia having unimpaired capital and surplus of not less than $250,000,000 (each Lender and each such commercial bank herein called a "Cash Equivalent Bank"); and (v) Eurodollar time deposits having a maturity of less than one year purchased directly from any Cash Equivalent Bank (whether such deposit is with such Cash Equivalent Bank or any other Cash Equivalent Bank). "Chefmark" means Chefmark, Inc., a Delaware corporation. "Closing Date" means the date on or before October 29, 1993, on which (i) the initial Loans are made or (ii) in the event the initial Loans have not yet been made, the initial Letters of Credit are issued. "CO-AGENT" has the meaning assigned to that term in -------- subsection 9.1B. "Collateral" means, collectively, all real, personal and mixed property collateral securing the Obligations pursuant to the Collateral Documents. "Collateral Account" has the meaning assigned to that term in the Collateral Account Agreement. "Collateral Account Agreement" means the Collateral Account Agreement executed and delivered by Company and Agent on the Closing Date, substantially in the form of Exhibit XIV ------- --- annexed hereto, as such Collateral Account Agreement may hereafter be amended, supplemented or otherwise modified from time to time. "Collateral Agent" has the meaning assigned to that term in subsection 9.1C. "Collateral Documents" means the Company Pledge Agreement, the Company Security Agreement, the Company Trademark Security Agreement, the Collateral Account Agreement, the Subsidiary Pledge Agreements, the Subsidiary Security Agreements, the Subsidiary Trademark Security Agreements, the Mortgages and all other instruments or documents delivered by any Loan Party pursuant to this Agreement or any of the other Loan Documents in order to grant to Agent, on behalf of Lenders, Liens in real, personal or mixed property of that Loan Party as security for the Obligations. "Commercial Letter of Credit" means any letter of credit or similar instrument issued for the purpose of providing the primary payment mechanism in connection with the purchase of any materials, goods or services by Company or any of its Subsidiaries in the ordinary course of business of Company or such Subsidiary. "Commitments" means the commitments of Lenders to make Loans as set forth in subsection 2.1A. "Company" has the meaning assigned to that term in the introduction to this Agreement. "Company Pledge Agreement" means the Pledge Agreement executed and delivered by Company on the Closing Date, substantially in the form of Exhibit XV annexed hereto, ------- -- as such Pledge Agreement may hereafter be amended, supplemented or otherwise modified from time to time. "Company Security Agreement" means the Security Agreement executed and delivered by Company on the Closing Date, substantially in the form of Exhibit XVI annexed hereto, ------- --- as such Security Agreement may hereafter be amended, supplemented or otherwise modified from time to time. "Company Trademark Security Agreement" means the Trademark Collateral Security Agreement and Conditional Assignment executed and delivered by Company on the Closing Date, substantially in the form of Exhibit XVII annexed ------- ---- hereto, as such Trademark Collateral Security Agreement and Conditional Assignment may hereafter be amended, supplemented or otherwise modified from time to time. "Compliance Certificate" means a certificate substantially in the form annexed hereto as Exhibit VIII ------- ---- delivered to Lenders by Company pursuant to subsection 6.1(iv). "Consolidated Adjusted EBITDA" means, for any period, the sum of the amounts for such period of (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) provisions for taxes based on income, (iv) total depreciation and amortization expense, (v) provisions for expenses related to the Restructuring, and (vi) other non-cash items (including without limitation LIFO charges) reducing Consolidated Net Income less other non-cash ---- items increasing Consolidated Net Income, all of the foregoing as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP. "Consolidated Capital Expenditures" means, for any period, an amount equal to (i) the sum of (a) the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases which is capitalized on the consolidated balance sheet of Company and its Subsidiaries) by Company and its Subsidiaries during that period that, in conformity with GAAP, are included in "additions to property, plant or equipment" or comparable items reflected in the consolidated statement of cash flows of Company and its Subsidiaries plus ---- (b) to the extent not covered by clause (a) hereof, the aggregate of all expenditures by Company and its Subsidiaries during that period to acquire (by purchase or otherwise) the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person minus (ii) the ----- aggregate amount of all Net Cash Proceeds of Asset Sale received by Company and its Subsidiaries during that period in connection with Sale and Lease-backs of Equipment all or a portion of the purchase price of which was included in the calculation of Consolidated Capital Expenditures for that period or any prior period. For purposes of this definition (1) the purchase price of any Equipment that is purchased simultaneously with the trade-in or other disposition in the ordinary course of business of existing Equipment or with insurance proceeds received by Company and its Subsidiaries in respect of the actual or constructive total loss of any Equipment shall be included in Consolidated Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such ---- Equipment for the Equipment being traded in at such time or the amount of proceeds from such other disposition or the amount of such insurance proceeds, as the case may be, and (2) the amount of any expenditure for any Equipment (the "New Equipment") that replaces existing leased Equipment (the "Leased Equipment") that was purchased at the end of the applicable lease term and then subsequently sold for a greater amount shall be included in Consolidated Capital Expenditures only to the extent of the gross amount of the expenditure for the New Equipment less the excess of the proceeds received by ---- Company or any of its Subsidiaries from the sale of the Leased Equipment over the gross amount of the purchase price of the Leased Equipment. "Consolidated Interest Expense" means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) of Company and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Company and its Subsidiaries, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Agreements, but excluding, however, (i) any amounts referred to in subsection 2.3 payable to Agent and Lenders on or before the Closing Date and (ii) any deferred financing expenses amortized by Company and its Subsidiaries during such period. "Consolidated Net Income" means, for any period, the net income (or loss) of Company and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP; provided -------- that there shall be excluded (i) the income (or loss) of any Person (other than a Subsidiary of Company) in which any other Person (other than Company or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to Company or any of its Subsidiaries by such Person during such period, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Company or is merged into or consolidated with Company or any of its Subsidiaries or that Person's assets are acquired by Company or any of its Subsidiaries, (iii) the income of any Subsidiary of Company to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (iv) any after-tax gains or losses attributable to Asset Sales or returned surplus assets of any Pension Plan, and (v) (to the extent not included in clauses (i) through (iv) above) any net extraordinary gains or net non-cash extraordinary losses. "Consolidated Net Worth" means, as at any date of determination, the sum of the capital stock and additional paid-in capital plus retained earnings (or minus accumulated deficits) of Company and its Subsidiaries on a consolidated basis determined in conformity with GAAP. "Consolidated Rental Payments" means, for any period, the aggregate amount of all rents paid or payable by Company and its Subsidiaries on a consolidated basis during that period under all Capital Leases and Operating Leases to which Company or any of its Subsidiaries is a party as lessee (in each case net of any sublease income received or receivable by Company and its Subsidiaries on a consolidated basis during that period with respect thereto), excluding, --------- however, (i) any amount of rent for which Company or any ------- Subsidiary of Company is contingently liable under any lease as a result of the assignment thereof by Company or such Subsidiary to any Person and (ii) any tax, insurance, maintenance and similar expenses that Company or any Subsidiary of Company is obligated to pay as lessee under the terms of the applicable lease. "Consolidated Tangible Net Worth" means, as at any date of determination, an amount equal to (i) Consolidated Net Worth minus (ii) the total amount of all assets of Company and ----- its Subsidiaries, on a consolidated basis determined in conformity with GAAP, consisting of goodwill, patents, trade names, trademarks, copyrights, franchises, unamortized research and development expense, unamortized organization expense, unamortized debt discount and expense, deferred assets (other than prepaid insurance, workers' compensation insurance and prepaid Taxes), the excess of cost of shares acquired over book value of related assets, and such other assets as are properly classified as "intangible assets" in accordance with GAAP. "Consolidated Total Debt" means, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness of Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Contingent Obligation", as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person (i) with respect to any Indebtedness, lease, dividend or other obligation of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof, (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings, or (iii) under Interest Rate Agreements and Currency Agreements. Contingent Obligations shall include, without limitation, (a) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement, and (c) any liability of such Person for the obligation of another through any agreement (contingent or otherwise) (X) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (Y) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is as de- scribed in the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if less, the amount to which such Contingent Obligation is specifically limited. "Contractual Obligation", as applied to any Person, means any provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. "Covered Real Property" means, at any time, any Real Property Asset now owned or hereafter acquired by Company or any of its Subsidiaries other than (i) any Real Property Asset listed in Schedule 7.2 annexed hereto that is, at such time, -------- --- subject to Liens permitted under subsection 7.2 securing Indebtedness (other than the Obligations) of Company or any of its Subsidiaries permitted under subsection 7.1 and (ii) any Real Property Asset located in the State of New York. "Currency Agreement" means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement designed to protect Company or any of its Subsidiaries against fluctuations in currency values. "Default Period" has the meaning assigned to that term in subsection 2.10. "Defaulting Lender" has the meaning assigned to that term in subsection 2.10. "Deposit Account" means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. "Dollars" and the sign "$" mean the lawful money of the United States of America. "Eligible Assignee" means (A) (i) a commercial bank organized under the laws of the United States or any state thereof; (ii) a savings and loan association or savings bank organized under the laws of the United States or any state thereof; (iii) a commercial bank organized under the laws of any other country, or a political subdivision thereof; provided that (x) such bank is acting through a branch or -------- agency located in the United States or (y) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country; and (iv) any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act) which extends credit or buys loans as one of its businesses including, but not limited to, insurance companies, mutual funds and lease financing companies, in each case (under clauses (i) through (iv) above) that is reasonably acceptable to Agent; and (B) any Lender and any Affiliate of any Lender; provided that no Affiliate of -------- Company shall be an Eligible Assignee. "Eligible Inventory" means, as at any date of determination, the Dollar value for Company, using a first-in, first-out method of accounting, all in conformity with GAAP, and increased to reflect the amount of any discounts granted by suppliers to Company for payment in advance of normal trade terms, of all Inventory which: (i) does not constitute perishable items, including without limitation (A) perishable fruit, vegetables and other produce, (B) refrigerated items, including dairy, delicatessen and meat products, (C) frozen items, and (D) fresh baked goods; (ii) is owned by Company, is subject to a valid and perfected first priority security interest in favor of Agent on behalf of Lenders, and is free and clear of all other Liens (other than Permitted Encumbrances); (iii) (A) is located on Company's premises in the United States of America and is not in transit or (B) is located in any warehouse (a "Third Party Warehouse") owned and operated by any Person other than Company (a "Third Party Warehouseman"), is not in transit, and either is not covered by any negotiable document of title issued by such Third Party Warehouseman or is covered by a negotiable document of title issued by such Third Party Warehouseman that is in Agent's or Collateral Agent's possession, so long as, in each case described in this clause (iii)(B), (1) the only goods, merchandise or other personal property stored or warehoused in such Third Party Warehouse are Inventory or, if goods, merchandise or other personal property other than Inventory are stored or warehoused in such Third Party Warehouse, all Inventory stored or warehoused therein is at all times segregated, pursuant to arrangements satisfactory to Agent and CO-AGENT, from all other -------- goods, merchandise or other personal property stored or warehoused therein and (2) such Third Party Warehouseman has executed an acknowledgement and consent, in form and substance satisfactory to Agent and CO-AGENT, acknowledging Agent's security -------- interest in the Inventory located in such Third Party Warehouse, waiving any rights in or claims against such Inventory, and consenting to Agent's or Collateral Agent's entering into and remaining in such Third Party Warehouse and/or removing such Inventory from such Third Party Warehouse, in either case in connection with the enforcement of Agent's security interest in such Inventory and addressing such other matters as may be reasonably required by Agent or Collateral Agent (any such Inventory that is in compliance with all of the requirements set forth in this clause (iii)(B) being referred to herein as the "Qualified Third Party Warehouse Inventory"); (iv) is not on lease or consignment from any Person to Company; (v) is not on lease or consignment to any Person from Company; (vi) is not (except in the case of Qualified Third Party Warehouse Inventory) stored with a bailee, warehouseman or similar party; (vii) is not packaging or shipping material, raw materials, components or work-in- progress; (viii) is not obsolete, damaged, unsalable or otherwise unfit for use or sale; provided that -------- salvage Inventory shall not be excluded to the extent it may be returned to the vendor or manufacturer thereof for a full refund; and (ix) is not, in Agent's or Collateral Agent's opinion, unacceptable in the exercise of its sole discretion. "Employee Benefit Plan" means any "employee benefit plan" as defined in Section 3(3) of ERISA which is, or was at any time, maintained or contributed to by Company or any of its ERISA Affiliates. "Environmental Claim" means any written notice of material violation, claim, demand or abatement order by any governmental authority or any Person for any damage, including, without limitation, personal injury (including sickness, disease or death), tangible or intangible property damage, contribution, indemnity, indirect or consequential damages, damage to the environment, nuisance, pollution, contamination or other adverse effects on the environment, or for fines, penalties or restrictions, in each case relating to, resulting from or in connection with Hazardous Materials and relating to Company, any of its Subsidiaries, or any of their respective Affiliates. "Environmental Laws" means all statutes, ordinances, orders, rules, regulations, plans, policies or decrees and the like relating to (i) environmental matters, including, without limitation, those relating to fines, injunctions, penalties, damages, contribution, cost recovery compensation, losses or injuries resulting from the Release or threatened Release of Hazardous Materials, or (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, in any manner applicable to Company or any of its Subsidiaries or any of the Facilities. "Equipment" means all equipment (including without limitation all distribution, retailing, data processing, office and motor vehicle equipment) owned or leased by Company or any of its Subsidiaries. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute. "ERISA Affiliate", as applied to any Person, means (i) any corporation which is, or was at any time, a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is, or was at any time, a member; (ii) any trade or business (whether or not incorporated) which is, or was at any time, a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is, or was at any time, a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is, or was at any time, a member. "ERISA Event" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Company or any of its ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Sections 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Company or any of its ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal by Company or any of its ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by Company or any of its ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could reasonably be expected to give rise to the imposition on Company or any of its ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409 or 502(c), (i) or (l) or 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against Company or any of its ERISA Affiliates in connection with any such Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan. "Eurodollar Rate Loans" means Loans bearing interest at rates determined by reference to the Adjusted Eurodollar Rate as provided in subsection 2.2A. "Event of Default" means each of the events set forth in Section 8. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute. "Extension Assignment and Acceptance" has the meaning assigned to that term in subsection 2.1E. "Facilities" means any and all real property (including, without limitation, all buildings, fixtures or other improvements located thereon) now or hereafter during the term of this Agreement owned, leased or operated or heretofore owned by (i) Company or any of its Subsidiaries, (ii) any of Company's or any such Subsidiary's predecessors by merger or consolidation, or (iii) any of Company's Affiliates that are directly or indirectly controlled by Company. "Federal Funds Effective Rate" means, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Agent from three Federal funds brokers of recognized standing selected by Agent. "Fiscal Year" means the fiscal year of Company and its Subsidiaries ending on the Saturday closest to January 31 of each calendar year. For purposes of this Agreement, any particular Fiscal Year shall be designated by reference to the calendar year in which such Fiscal Year commences. "Funding Date" means the date of the funding of a Loan. "GAAP" means, subject to the limitations on the application thereof set forth in subsection 1.2, generally accepted accounting principles set forth in opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, in each case as the same are applicable to the circumstances as of the date of determination. "Governmental Authorization" means any permit, license, authorization, plan, directive, consent order or consent decree of or from any federal, state or local governmental authority, agency or court. "Hazardous Materials" means (i) any chemical, material or substance at any time defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous waste", "restricted hazardous waste", "infectious waste", "toxic substances" or any other terms intended to define, list or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of similar import under any applicable Environmental Laws or publications promulgated pursuant thereto; (ii) any oil, petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iv) any flammable substances or explosives; (v) any radioactive materials; (vi) asbestos in any form that is or may become friable; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty parts per million; (ix) pesticides; and (x) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority. "Heller" means Heller Financial, Inc., a Delaware corporation. "Holdings" means Supermarkets General Holdings Corporation, a Delaware corporation. "Indebtedness", as applied to any Person, means (i) all indebtedness for borrowed money, (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA), which purchase price is (A) due more than six months (or a longer period up to one year, if such terms are available from suppliers in the ordinary course of business) from the date of incurrence of the obligation in respect thereof or (B) evidenced by a note or similar written instrument, and (v) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person. Obligations under Interest Rate Agreements and Currency Agreements constitute Contingent Obligations and not Indebtedness. "Indemnitee" has the meaning assigned to that term in subsection 10.3. "Intellectual Property" means all patents, trademarks, tradenames, copyrights, technology, know-how and processes used in or necessary for the conduct of the business of Company and its Subsidiaries as currently conducted that are material to the condition (financial or otherwise), business or operations of Company and its Subsidiaries, taken as a whole. "Interest Payment Date" means (i) with respect to any Base Rate Loan, each January 15, April 15, July 15 and October 15 of each year, commencing on the first such date to occur after the Closing Date, and (ii) with respect to any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan; provided that in the case of each -------- Interest Period of six months, "Interest Payment Date" shall also include the date that is three months after the commencement of such Interest Period. "Interest Period" has the meaning assigned to that term in subsection 2.2B. "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement. "Interest Rate Determination Date" means, in respect of an Interest Period, the second Business Day prior to the first day of such Interest Period. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter. "Inventory" means all goods, merchandise and other personal property which are held by Company for sale or lease, including those held for display or demonstration. "Investment" means (i) any direct or indirect purchase or other acquisition by Company or any of its Subsidiaries of, or of a beneficial interest in, stock or other Securities of any other Person, or (ii) any direct or indirect loan, advance (other than advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution by Company or any of its Subsidiaries to any other Person, including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales to that other Person in the ordi- nary course of business. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. "Issuing Lender" means, with respect to any Letter of Credit, the Lender which agrees or is otherwise obligated to issue such Letter of Credit, determined as provided in subsection 3.1B(ii). "Joint Venture" means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided that in no event -------- shall any corporate Subsidiary of any Person be considered to be a Joint Venture to which such Person is a party. "Lender" and "Lenders" means the persons identified as "Lenders" and listed on the signature pages of this Agree- ment, together with their successors and permitted assigns pursuant to subsection 10.1, and the term "Lenders" shall include Swing Line Lender unless the context otherwise requires; provided that the term "Lenders", when used in the -------- context of a particular Commitment, shall mean Lenders having that Commitment. "Letter of Credit" or "Letters of Credit" means Commercial Letters of Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders for the account of Company pursuant to subsection 3.1. "Letter of Credit Usage" means, as at any date of determination, the sum of (i) the maximum aggregate amount which is or at any time thereafter may, pursuant to the terms thereof, become available for drawing under all Letters of Credit then outstanding plus (ii) the aggregate amount of all ---- drawings under Letters of Credit honored by Issuing Lenders and not theretofore reimbursed by Company (including any such reimbursement out of the proceeds of Revolving Loans pursuant to subsection 3.3B). "Lien" means any lien, mortgage, pledge, assignment (to the extent such assignment is intended to secure an obligation of any Person), security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing. "Loan" or "Loans" means one or more of the Revolving Loans or Swing Line Loans or any combination thereof. "Loan Documents" means this Agreement, the Notes, the Letters of Credit (and any applications for, or reimbursement agreements or other documents or certificates executed by Company in favor of an Issuing Lender relating to, the Letters of Credit), the Subsidiary Guaranty and the Collateral Documents. "Loan Party" means each of Company and any of Company's Subsidiaries from time to time executing a Loan Document, and "Loan Parties" means all such Persons, collectively. "Margin Stock" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Material Adverse Effect" means (i) a material adverse effect upon the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company and its Subsidiaries, taken as a whole, (ii) the impairment of the ability of any Loan Party to perform any Obligations of a monetary nature, or (iii) the impairment of the rights of Agent or Lenders to enforce any Obligations of a monetary nature. "Mortgage" means an instrument (whether designated as a deed of trust, a trust deed or a mortgage or by any similar title) executed and delivered by Company or any of its Subsidiaries substantially in the form of Exhibit XXII annexed ------- ---- hereto encumbering a fee or leasehold interest in Real Property Assets, as such instrument may be amended, supplemented or otherwise modified from time to time, and "Mortgages" means all such instruments, including the Closing Date Mortgages (as defined in subsection 4.1B) and any Additional Mortgages (as defined in subsection 6.9), collectively. "Multiemployer Plan" means a "multiemployer plan", as defined in Section 3(37) of ERISA, to which Company or any of its ERISA Affiliates is contributing, or ever has contributed, or to which Company or any of its ERISA Affiliates has, or ever has had, an obligation to contribute. "Net Cash Proceeds of Asset Sale" means, with respect to any Asset Sale, Cash payments (including any Cash received by way of deferred payment pursuant to, or monetization of, a note receivable or otherwise, but only as and when so received) actually received from such Asset Sale net of bona fide direct costs incurred in connection with such Asset Sale, including without limitation (i) reasonable brokerage commissions, underwriting fees and discounts, legal fees and expenses, finder's fees and other similar fees, expenses and commissions, (ii) taxes reasonably estimated to be actually payable as a result of such Asset Sale within two years of the date of such Asset Sale, (iii) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) secured by a Lien on the assets in question that is required to be repaid under the terms thereof as a result of such Asset Sale, and (iv) the costs and expenses of any repairs, alterations or improvements made to the property sold in connection with such Asset Sale to the extent such repairs, alterations or improvements are required pursuant to the terms of such Asset Sale. "Non-Recourse Indebtedness" means, as applied to any Person, all Indebtedness of that Person secured by Liens on specified assets of that Person under the terms of which (i) no recourse may be had against that or any other Person for the payment of the principal of or interest or premium on such Indebtedness or for any claim based thereon and (ii) the enforcement of all obligations relating to such Indebtedness is limited to foreclosure or other actions with respect to such specified assets. "Notes" means one or more of the Revolving Notes or Swing Line Note or any combination thereof. "Notice of Borrowing" means a notice substantially in the form of Exhibit I annexed hereto delivered by Company ------- - to Agent pursuant to subsection 2.1B with respect to a proposed borrowing. "Notice of Conversion/Continuation" means a notice substantially in the form of Exhibit II annexed hereto ------- -- delivered by Company to Agent pursuant to subsection 2.2D with respect to a proposed conversion or continuation of the applicable basis for determining the interest rate with respect to the Loans specified therein. "Notice of Issuance of Letter of Credit" means a notice substantially in the form of Exhibit III annexed hereto ------- --- delivered by Company to the proposed Issuing Lender pursuant to subsection 3.1B(i) with respect to the proposed issuance of a Letter of Credit. "Obligations" means all obligations of every nature of each Loan Party from time to time owed to Agent, Lenders or any of them under the Loan Documents, whether for principal, interest, reimbursement of amounts drawn under Letters of Credit, fees, expenses, indemnification or otherwise. "Officers' Certificate" means, as applied to any corporation, a certificate executed on behalf of such corporation by its chairman of the board (if an officer) or its president or one of its vice presidents and by its chief financial officer or its treasurer or its controller; provided -------- that every Officers' Certificate with respect to the compliance with a condition precedent to the making of any Loans hereunder shall include (i) a statement that the officer or officers making or giving such Officers' Certificate have read such condition and any definitions or other provisions contained in this Agreement relating thereto, (ii) a statement that, in the opinion of the signers, they have made or have caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such condition has been complied with, and (iii) a statement as to whether, in the opinion of the signers, such condition has been complied with. "Operating Lease" means, as applied to any Person, any lease (including, without limitation, leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) that is not a Capital Lease other than any such lease under which that Person is the lessor. "Pathmark" means Pathmark Stores, Inc., a Delaware corporation. "Pathmark Credit Agreement" means that certain Credit Agreement dated as of even date herewith among Pathmark, the lenders party thereto and Bankers, as agent for such lenders, as such agreement may hereafter be amended, supplemented or otherwise modified from time to time. "Pathmark Loan Documents" means the "Loan Documents" as defined in the Pathmark Credit Agreement. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor thereto). "Pension Plan" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA. "Permitted Encumbrances" means the following types of Liens (other than any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA): (i) Liens for taxes, assessments or governmental charges or claims the payment of which is not, at the time, required by subsection 6.3; (ii) statutory Liens of landlords and Liens of carriers, workmen, repairmen, warehousemen, mechanics and materialmen and other Liens imposed by law, in each case incurred in the ordinary course of business and securing obligations that are not overdue for a period of more than 30 days or securing obligations that are overdue for a period of more than 30 days that are being contested in good faith, if (with respect to any such obligations that are overdue for a period of more than 30 days) such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or securing liability to insurance carriers under insurance or self-insurance arrangements, or obtaining utility service, or to secure the perfor- mance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (iv) any attachment or judgment Lien not consti- tuting an Event of Default under subsection 8.8; (v) leases or subleases granted to others not interfering in any material respect with the ordinary conduct of the business of Company or any of its Subsidi- aries; (vi) easements, rights-of-way, restrictions, minor defects, encroachments or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries; (vii) any (a) interest or title of a lessor or sublessor under any lease permitted by subsection 7.9, (b) restriction or encumbrance that the interest or title of such lessor or sublessor may be subject to, or (c) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the preceding clause (b); (viii) Liens arising from filing UCC financing statements relating solely to leases permitted by this Agreement; and (ix) Liens in favor of customs and revenue author- ities arising as a matter of law to secure payment of customs duties in connection with the importation of goods. "Person" means and includes natural persons, corporations, limited partnerships, general partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof. "Potential Event of Default" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default. "Prime Rate" means the rate that Bankers announces from time to time as its prime lending rate, as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Bankers or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. "Pro Rata Share" means, with respect to each Lender, the percentage obtained by dividing (x) the Revolving Loan -------- Exposure of that Lender by (y) the aggregate Revolving Loan -- Exposure of all Lenders, as such percentage may be adjusted by assignments permitted pursuant to subsection 10.1. The initial Pro Rata Share of each Lender is set forth opposite the name of that Lender in Schedule 2.1 annexed hereto. -------- --- "PTKH" means PTK Holdings, Inc., a Delaware corporation. "Qualified Sale and Lease-back" means the sale, pursuant to a Sale and Lease-back, of any Equipment within 180 days after the acquisition of such Equipment by Company or any of its Subsidiaries. "Real Property Assets" means interests in land, buildings, improvements, and fixtures attached thereto or used in the operation thereof, in each case owned or leased (as lessee) by Company or any of its Subsidiaries. "Refunded Swing Line Loans" has the meaning given to that term in subsection 2.1A(ii). "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Reimbursement Date" has the meaning assigned to that term in subsection 3.3B. "Release" means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge or dumping of Hazardous Materials into the environment (including, without limitation, the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials). "Requisite Lenders" means Lenders having or holding 51% or more of the aggregate Revolving Loan Exposure of all Lenders. "Restricted Junior Payment" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Company now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Company now or hereafter outstanding, and (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Company now or hereafter outstanding. "Revolving Loan Commitment" or "Revolving Loan Commitments" means the commitment or commitments of a Lender or Lenders to make Revolving Loans pursuant to subsection 2.1A(i). "Revolving Loan Commitment Termination Date" means October 31, 1996, or such later date as shall be determined from time to time pursuant to subsection 2.1E. "Revolving Loan Exposure" means, with respect to any Lender as of any date of determination (i) prior to the termination of the Revolving Loan Commitments, that Lender's Revolving Loan Commitment and (ii) after the termination of the Revolving Loan Commitments, the sum of (a) the aggregate outstanding principal amount of the Revolving Loans of that Lender plus (b) in the event that Lender is an Issuing Lender, ---- the aggregate amount of all drawings under Letters of Credit honored by that Lender and not theretofore reimbursed by Company (in each case net of any participations purchased by other Lenders in the applicable Letters of Credit) plus ---- (c) the aggregate amount of all participations purchased by that Lender in any drawings under Letters of Credit honored by Issuing Lenders and not theretofore reimbursed by Company plus ---- (d) the aggregate amount of all participations purchased by that Lender in any outstanding Swing Line Loans plus (e) in ---- the case of Swing Line Lender, the aggregate outstanding principal amount of all Swing Line Loans (net of any participations therein purchased by other Lenders). "Revolving Loans" means the Loans made by Lenders to Company pursuant to subsection 2.1A(i). "Revolving Notes" means the promissory notes of Company issued pursuant to subsection 2.1D on the Closing Date or issued pursuant to subsection 2.1E or the last sentence of subsection 10.1B(i) from time to time after the Closing Date, in each case substantially in the form of Exhibit V annexed ------- - hereto, as they may be amended, supplemented or otherwise modified from time to time. "Sale and Lease-back" means any arrangement between Company or any of its Subsidiaries and any other Person providing for the leasing by Company or such Subsidiary of personal property which has been or is to be sold or transferred by Company or such Subsidiary to such other Person. "Securities" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "Securities Act" means the Securities Act of 1933, as amended from time to time, and any successor statute. "SMG-II" means SMG-II Holdings Corporation, a Delaware corporation. "Solvent" means, with respect to any Person, that as of the date of determination both (A) (i) the then fair saleable value of the property of such Person is (y) greater than the total amount of liabilities (including contingent liabilities) of such Person and (z) not less than the amount that will be required to pay the probable liabilities on such Person's then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to such Person; (ii) such Person's capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (iii) such Person does not intend to incur, or believe that it will incur, debts beyond its ability to pay such debts as they become due; and (B) such Person is "solvent" within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Spin-Off" means, collectively, (i) the contribution by Pathmark to Company of the Rickel home center business of Pathmark, certain warehouse, distribution and transportation operations and facilities, and certain other real and personal property assets of Pathmark on or prior to the Closing Date, (ii) the distribution by Pathmark to PTKH of the capital stock of Company after the contributions of assets described in clause (i) above but on or prior to the Closing Date, and (iii) to the extent not covered by clauses (i) and (ii) above, the entering into of the Spin-Off Agreements by the parties thereto and the consummation of the transactions contemplated thereby. "Spin-Off Agreements" means (i) that certain Distribution and Transfer Agreement dated as of October 26, 1993, among Company, PTKH and Pathmark, (ii) that certain Tax Indemnity Agreement dated as of October 26, 1993, between Company and Pathmark, (iii) that certain Rickel Services Agreement dated as of October 26, 1993, between Company and Pathmark, (iv) that certain Logistical Services Agreement dated as of October 26, 1993, between Company and Pathmark, and (v) that certain Blair Services Agreement dated as of October 26, 1993, between Company and Pathmark, in each case in the form approved by Agent, CO-AGENT and Requisite Lenders -------- pursuant to subsection 4.1P, and in each case as such agreement may be amended from time to time after the Closing Date to the extent permitted under subsection 7.15. "Standby Letter of Credit" means any standby letter of credit or similar instrument issued for the purpose of supporting (i) Indebtedness of Company or any of its Subsidiaries in respect of industrial revenue or development bonds or financings, (ii) workers' compensation liabilities of Company or any of its Subsidiaries, (iii) the obligations of third party insurers of Company or any of its Subsidiaries arising by virtue of the laws of any jurisdiction requiring third party insurers, (iv) obligations with respect to Capital Leases or Operating Leases of Company or any of its Subsidiaries, (v) performance, payment, deposit or surety obligations of Company or any of its Subsidiaries, in any case if required by law or governmental rule or regulation or in accordance with custom and practice in the industry, and (vi) other obligations of Company and its Subsidiaries to the extent consistent with past practices of Company and its Subsidiaries or otherwise consistent with custom and practice in the industry; provided that Standby Letters of Credit -------- (other than Standby Letters of Credit with face amounts that in the aggregate do not exceed $5,000,000 that are issued to support Indebtedness in respect of Capital Leases that were assigned by Pathmark to Company) may not be issued for the purpose of supporting (a) trade payables or (b) Indebtedness existing on the Closing Date that is not supported by a previously issued Standby Letter of Credit. "Stuart" means Eatontown Stuart, Inc., a New Jersey corporation. "Subsidiary" means, with respect to any Person, any corporation, partnership, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. "Subsidiary Guaranty" means the Subsidiary Guaranty executed and delivered by Subsidiaries of Company on the Closing Date and to be executed and delivered by Subsidiaries of Company from time to time in accordance with subsection 6.8, substantially in the form of Exhibit XVIII annexed ------- ----- hereto, as such Subsidiary Guaranty may be amended, supplemented or otherwise modified from time to time. "Subsidiary Pledge Agreement" means each Subsidiary Pledge Agreement executed and delivered by Subsidiaries of Company on the Closing Date or to be executed and delivered by Subsidiaries of Company from time to time in accordance with subsection 6.8, in each case substantially in the form of Exhibit XIX annexed hereto, as such Subsidiary Pledge ------- --- Agreement may be amended, supplemented or otherwise modified from time to time, and "Subsidiary Pledge Agreements" means all such Subsidiary Pledge Agreements, collectively. "Subsidiary Security Agreement" means each Subsidiary Security Agreement executed and delivered by Subsidiaries of Company on the Closing Date or to be executed and delivered by Subsidiaries of Company from time to time in accordance with subsection 6.8, in each case substantially in the form of Exhibit XX annexed hereto, as such Subsidiary ------- -- Security Agreement may be amended, supplemented or otherwise modified from time to time, and "Subsidiary Security Agreements" means all such Subsidiary Security Agreements, collectively. "Subsidiary Trademark Security Agreement" means each Subsidiary Trademark Collateral Security Agreement and Conditional Assignment executed and delivered by Subsidiaries of Company on the Closing Date or to be executed and delivered by Subsidiaries of Company from time to time in accordance with subsection 6.8, in each case substantially in the form of Exhibit XXI annexed hereto, as such Subsidiary Trademark ------- --- Collateral Security Agreement and Conditional Assignment may be amended, supplemented or otherwise modified from time to time, and "Subsidiary Trademark Security Agreements" means all such Subsidiary Trademark Collateral Security Agreements and Conditional Assignments, collectively. "Supplemental Collateral Agent" has the meaning assigned to that term in subsection 9.1D. "Swing Line Lender" means Bankers, or any Person serving as a successor Agent hereunder, in its capacity as Swing Line Lender hereunder. "Swing Line Loan Commitment" means the commitment of Swing Line Lender to make Swing Line Loans pursuant to subsection 2.1A(ii). "Swing Line Loans" means the Swing Line Loans made by Swing Line Lender to Company pursuant to subsection 2.1A(ii). "Swing Line Note" means (i) the promissory note of Company issued pursuant to subsection 2.1D on the Closing Date and (ii) any promissory note issued by Company to any successor Agent and Swing Line Lender pursuant to subsection 2.1E or the last sentence of subsection 9.6B, in each case substantially in the form of Exhibit VI annexed hereto, as it ------- -- may be amended, supplemented or otherwise modified from time to time. "Tax" or "Taxes" means any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided that "Tax on the overall net income" of a Person -------- shall be construed as a reference to a tax imposed by the jurisdiction in which that Person's principal office (and/or, in the case of a Lender, its lending office) is located or in which that Person is deemed to be doing business on all or part of the net income, profits or gains of that Person (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise). "Total Utilization of Revolving Loan Commitments" means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Revolving Loans plus (ii) the aggregate principal amount of all outstanding ---- Swing Line Loans plus (iii) the Letter of Credit Usage. ---- 1.2 Accounting Terms; Utilization of GAAP for Purposes of ---------- ------ ----------- -- ---- --- -------- -- Calculations Under Agreement. ------------ ----- --------- Except as otherwise expressly provided in this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. Financial statements and other information required to be delivered by Company to Lenders pursuant to clauses (i), (ii), (iii) and (xiv) of subsection 6.1 shall be prepared in accordance with GAAP as in effect at the time of such preparation (and delivered together with the reconciliation statements provided for in subsection 6.1(vi)). Calculations in connection with the definitions, covenants and other provisions of this Agreement shall utilize accounting principles and policies in conformity with those used to prepare the financial statements referred to in subsection 5.3. 1.3 Other Definitional Provisions. ----- ------------ ---------- References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided. Any of the terms defined in subsection 1.1 may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS 2.1 Commitments; Loans. ------------ ----- A. Commitments. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, each Lender hereby severally agrees to make the Revolving Loans described in subsection 2.1A(i) and Swing Line Lender hereby agrees to make the Swing Line Loans described in subsection 2.1A(ii). (i) Revolving Loans. Each Lender severally agrees, --------- ----- subject to the limitations set forth below with respect to the maximum amount of Revolving Loans permitted to be outstanding from time to time, to lend to Company from time to time during the period from the Closing Date to but excluding the Revolving Loan Commitment Termination Date an aggregate amount not exceeding its Pro Rata Share of the aggregate amount of the Revolving Loan Commitments to be used for the purposes identified in subsection 2.5A. The original amount of each Lender's Revolving Loan Commitment is set forth opposite its name on Schedule 2.1 annexed hereto and the aggregate original -------- --- amount of the Revolving Loan Commitments is $50,000,000; provided that the Revolving Loan Commitments of Lenders -------- shall be adjusted to give effect to any assignments of the Revolving Loan Commitments pursuant to subsection 10.1B; and provided, further that the amount of the -------- ------- Revolving Loan Commitments shall be reduced from time to time by the amount of any reductions thereto made pursuant to subsections 2.4A(ii) and 2.4A(iii). Each Lender's Revolving Loan Commitment shall expire on the Revolving Loan Commitment Termination Date and all Revolving Loans and all other amounts owed hereunder with respect to the Revolving Loans and the Revolving Loan Commitments shall be paid in full no later than that date; provided that each Lender's Revolving Loan -------- Commitment shall expire immediately and without further action on October 29, 1993 if the Closing Date has not occurred on or before that date. Amounts borrowed under this subsection 2.1A(i) may be repaid and reborrowed to but excluding the Revolving Loan Commitment Termination Date. Anything contained in this Agreement to the contrary notwithstanding, the Revolving Loans and the Revolving Loan Commitments shall be subject to the following limitations in the amounts and during the periods indicated: (a) the amount otherwise available to be borrowed or maintained as Revolving Loans under the Revolving Loan Commitments as of any time of determination (other than to repay Swing Line Loans or to reimburse any Issuing Lender for the amount of any drawings under any Letters of Credit honored by such Issuing Lender and not theretofore reimbursed by Company) shall be reduced by (1) the aggregate principal amount of Swing Line Loans outstanding as of such time of determination plus (2) the Letter of ---- Credit Usage as of such time of determination; (b) in no event shall the Total Utilization of Revolving Loan Commitments at any time exceed the Borrowing Base then in effect; and (c) for 30 consecutive days during each consecutive twelve-month period, there shall be no Revolving Loans or Swing Line Loans outstanding. (ii) Swing Line Loans. Swing Line Lender hereby ----- ---- ----- agrees, subject to the limitations set forth below with respect to the maximum amount of Swing Line Loans permitted to be outstanding from time to time, to make a portion of the Revolving Loan Commitments available to Company from time to time during the period from the Closing Date to but excluding the Revolving Loan Commit- ment Termination Date by making Swing Line Loans to Company in an aggregate amount not exceeding the amount of the Swing Line Loan Commitment to be used for the purposes identified in subsection 2.5A, notwithstanding the fact that such Swing Line Loans, when aggregated with Swing Line Lender's outstanding Revolving Loans and Swing Line Lender's Pro Rata Share of the Letter of Credit Usage then in effect, may exceed Swing Line Lender's Revolving Loan Commitment. The original amount of the Swing Line Loan Commitment is $10,000,000; provided that -------- the amount of the Swing Line Loan Commitment is subject to reduction as provided in clause (c) of the next paragraph. The Swing Line Loan Commitment shall expire on the Revolving Loan Commitment Termination Date and all Swing Line Loans and all other amounts owed hereunder with respect to the Swing Line Loans shall be paid in full no later than that date; provided that the Swing -------- Line Loan Commitment shall expire immediately and without further action on October 29, 1993 if the Closing Date has not occurred on or before that date. Amounts borrowed under this subsection 2.1A(ii) may be repaid and reborrowed to but excluding the Revolving Loan Commitment Termination Date. Anything contained in this Agreement to the contrary notwithstanding, the Swing Line Loans and the Swing Line Loan Commitment shall be subject to the following limitations in the amounts and during the periods indicated: (a) in no event shall the Total Utilization of Revolving Loan Commitments at any time exceed the lesser of (1) the Revolving Loan Commitments then in effect and (2) the Borrowing Base then in effect; (b) for 30 consecutive days during each consecutive twelve-month period, there shall be no Revolving Loans or Swing Line Loans outstanding; and (c) any reduction of the Revolving Loan Commitments made pursuant to subsection 2.4A which reduces the aggregate Revolving Loan Commitments to an amount less than the then current amount of the Swing Line Loan Commitment shall result in an automatic corresponding reduction of the Swing Line Loan Commitment to the amount of the Revolving Loan Commitments, as so reduced, without any further action on the part of Agent or Swing Line Lender. With respect to any Swing Line Loans which have not been voluntarily prepaid by Company pursuant to subsection 2.4A(i), Swing Line Lender (i) shall, so long as any Swing Line Loans are outstanding as of 1:00 P.M. (New York time) on the first Business Day of any week, deliver to Agent (with a copy to Company), no later than 2:00 P.M. (New York time) on the first Business Day in advance of the second Business Day of such week (which shall be the proposed Funding Date), and (ii) may, at any other time in its sole and absolute discretion, deliver to Agent (with a copy to Company), no later than 12:00 Noon (New York time) on the first Business Day in advance of the proposed Funding Date, a notice (which shall be deemed to be a Notice of Borrowing given by Company) requesting Lenders to make Revolving Loans that are Base Rate Loans on such Funding Date in an amount equal to the amount of such Swing Line Loans (the "Refunded Swing Line Loans") (a) in the case of clause (i) above, outstanding as of 1:00 P.M. (New York time) on the date such notice is given and (b) in the case of clause (ii) above, outstanding on the date such notice is given which Swing Line Lender requests Lenders to prepay. Anything contained in this Agreement to the contrary notwithstanding, (i) the proceeds of such Revolving Loans made by Lenders other than Swing Line Lender shall be immediately delivered by Agent to Swing Line Lender (and not to Company) and applied to repay a corresponding portion of the Refunded Swing Line Loans and (ii) on the day such Revolving Loans are made, Swing Line Lender's Pro Rata Share of the Refunded Swing Line Loans shall be deemed to be paid with the proceeds of a Revolving Loan made by Swing Line Lender and such portion of the Swing Line Loans deemed to be so paid shall no longer be outstanding as Swing Line Loans, shall no longer be due under the Swing Line Note of Swing Line Lender and shall be due under the Revolving Note of Swing Line Lender. Company hereby authorizes Agent and Swing Line Lender to charge Company's accounts with Agent and Swing Line Lender (up to the amount available in each such account) in order to immediately pay Swing Line Lender the amount of the Refunded Swing Line Loans to the extent the proceeds of such Revolving Loans made by Lenders, including the Revolving Loan deemed to be made by Swing Line Lender, are not sufficient to repay in full the Refunded Swing Line Loans. If any portion of any such amount paid (or deemed to be paid) to Swing Line Lender should be recovered by or on behalf of Company from Swing Line Lender in bankruptcy, by assignment for the benefit of creditors or otherwise, the loss of the amount so recovered shall be ratably shared among all Lenders in the manner contemplated by subsection 10.5. If, as a result of any bankruptcy or similar proceeding with respect to Company, Revolving Loans are not made pursuant to this subsection 2.1A(ii) in an amount sufficient to repay any amounts owed to Swing Line Lender in respect of any outstanding Swing Line Loans, each Lender shall be deemed to, and hereby agrees to, have purchased a participation in such outstanding Swing Line Loans in an amount equal to its Pro Rata Share of the unpaid amount together with accrued interest thereon. Upon one Business Day's notice from Swing Line Lender, each Lender shall deliver to Swing Line Lender an amount equal to its respective participation in same day funds at the office of Swing Line Lender located at One Bankers Trust Plaza, New York, New York. In order to evidence such participation each Lender agrees to enter into a participation agreement at the request of Swing Line Lender in form and substance reasonably satisfactory to all parties. In the event any Lender fails to make available to Swing Line Lender the amount of such Lender's participation as provided in this paragraph, Swing Line Lender shall be entitled to recover such amount on demand from such Lender together with interest thereon at the rate customarily used by Swing Line Lender for the correction of errors among banks for three Business Days and thereafter at the Base Rate. Anything contained herein to the contrary notwithstanding, (i) each Lender's obligation to make Revolving Loans for the purpose of repaying any Refunded Swing Line Loans pursuant to the second preceding paragraph and each Lender's obligation to purchase a participation in any unpaid Swing Line Loans pursuant to the immediately preceding paragraph shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (a) any set- off, counterclaim, recoupment, defense or other right which such Lender may have against Swing Line Lender, Company or any other Person for any reason whatsoever; (b) the occurrence or continuance of an Event of Default or a Potential Event of Default; (c) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any of its Subsidiaries; (d) any breach of this Agreement or any other Loan Document by any party thereto; or (e) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided that such obligations of each Lender -------- are subject to the condition that (X) Swing Line Lender believed in good faith that all conditions under Section 4 to the making of the applicable Refunded Swing Line Loans or other unpaid Swing Line Loans, as the case may be, were satisfied at the time such Refunded Swing Line Loans or unpaid Swing Line Loans were made, (Y) such Lender had actual knowledge, by receipt of any notices required to be delivered to Lenders pursuant to subsection 6.1(x) or otherwise, that any such condition had not been satisfied and such Lender failed to notify Swing Line Lender and Agent in writing that it had no obligation to make Revolving Loans until such condition was satisfied (any such notice to be effective as of the date of receipt thereof by Swing Line Lender and Agent), or (Z) the satisfaction of any such condition not satisfied had been waived by Requisite Lenders prior to or at the time such Refunded Swing Line Loans or other unpaid Swing Line Loans were made; and (ii) Swing Line Lender shall not be obligated to make any Swing Line Loans if it has elected not to do so after the occurrence and during the continuation of a Potential Event of Default or Event of Default. B. Borrowing Mechanics. Revolving Loans made on any Funding Date (other than Revolving Loans made pursuant to a request by Swing Line Lender pursuant to subsection 2.1A(ii) for the purpose of repaying any Refunded Swing Line Loans or Revolving Loans made pursuant to subsection 3.3B for the purpose of reimbursing any Issuing Lender for the amount of a drawing under a Letter of Credit issued by it) shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount; provided that -------- Revolving Loans made on any Funding Date as Eurodollar Rate Loans with a particular Interest Period shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount. Swing Line Loans made on any Funding Date shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $500,000 in excess of that amount. Whenever Company desires that Lenders make Revolving Loans under subsection 2.1A(i), it shall deliver to Agent a Notice of Borrowing no later than 12:00 Noon (New York time) at least three Business Days in advance of the proposed Funding Date (in the case of a Eurodollar Rate Loan) or at least one Business Day in advance of the proposed Funding Date (in the case of a Base Rate Loan). Whenever Company desires that Swing Line Lender make a Swing Line Loan under subsection 2.1A(ii), it shall deliver to Agent a Notice of Borrowing no later than 12:00 Noon (New York time) on the proposed Funding Date. The Notice of Borrowing shall specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the amount and type of Loans requested, (iii) in the case of Swing Line Loans, that such Loans shall be Base Rate Loans, (iv) in the case of Revolving Loans, whether such Loans shall be Base Rate Loans or Eurodollar Rate Loans, (v) in the case of any Loans requested to be made as Eurodollar Rate Loans, the initial Interest Period requested therefor, and (vi) that the amount of the proposed borrowing will not cause the Total Utilization of Revolving Loan Commitments to exceed the Borrowing Base then in effect. Revolving Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided in subsection 2.2D. In lieu of delivering the above-described Notice of Borrowing, Company may give Agent telephonic notice by the required time of any proposed borrowing under this subsection 2.1B; provided that such -------- notice shall be promptly confirmed in writing by delivery of a Notice of Borrowing to Agent on or before the applicable Funding Date. Neither Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of Company or for otherwise acting in good faith under this subsection 2.1B, and upon receipt by Company of the proceeds of Loans made by Lenders in accordance with this Agreement pursuant to any such telephonic notice Company shall have effected Loans hereunder. Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to make a borrowing in accordance therewith. C. Disbursement of Funds. All Revolving Loans under this Agreement shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares of the Revolving Loan Commitments, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make a Loan requested hereunder nor shall the Revolving Loan Commitment of any Lender be increased or decreased as a result of a default by any other Lender in that other Lender's obligation to make a Loan requested hereunder. Promptly after receipt by Agent of a Notice of Borrowing pursuant to subsection 2.1B (or tele- phonic notice in lieu thereof), Agent shall notify each Lender or Swing Line Lender, as the case may be, of the proposed borrowing. Each Lender shall make the amount of its Loan available to Agent not later than 12:00 Noon (New York time) on the applicable Funding Date and Swing Line Lender shall make the amount of its Swing Line Loan available to Agent not later than 2:00 P.M. (New York time) on the applicable Funding Date, in each case in same day funds, at the office of Agent located at One Bankers Trust Plaza, New York, New York. Except as provided in subsection 2.1A(ii) or subsection 3.3B with respect to Revolving Loans used to repay Swing Line Loans or to reimburse any Issuing Lender for the amount of a drawing under a Letter of Credit issued by it, upon satisfaction or waiver of the conditions precedent specified in subsections 4.1 (in the case of Loans made on the Closing Date) and 4.2 (in the case of all Loans), Agent shall make the proceeds of such Loans available to Company on the applicable Funding Date by causing an amount of same day funds equal to the proceeds of all such Loans received by Agent from Lenders or Swing Line Lender, as the case may be, to be credited to the account of Company at the office of Agent specified in the preceding sentence. Unless Agent shall have been notified by any Lender prior to the Funding Date for any Loans that such Lender does not intend to make available to Agent the amount of such Lender's Loan requested on such Funding Date, Agent may assume that such Lender has made such amount available to Agent on such Funding Date and Agent may, in its sole discretion, but shall not be obligated to, make available to Company a corresponding amount on such Funding Date. If such corre- sponding amount is not in fact made available to Agent by such Lender, Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Funding Date until the date such amount is paid to Agent, at the customary rate set by Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon Agent's demand therefor, Agent shall promptly notify Company and Company shall immediately pay such corresponding amount to Agent together with interest thereon, for each day from such Funding Date until the date such amount is paid to Agent, at the rate payable under this Agreement for Base Rate Loans. Nothing in this subsection 2.1C shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Company may have against any Lender as a result of any default by such Lender hereunder. D. Notes. Company shall execute and deliver on the Closing Date (i) to each Lender (or to Agent for that Lender) a Revolving Note substantially in the form of Exhibit V ------- - annexed hereto to evidence that Lender's Revolving Loans, in the principal amount of that Lender's Revolving Loan Commitment and with other appropriate insertions, and (ii) to Swing Line Lender (or to Agent for Swing Line Lender) a Swing Line Note substantially in the form of Exhibit VI annexed ------- -- hereto to evidence Swing Line Lender's Swing Line Loans, in the principal amount of the Swing Line Loan Commitment and with other appropriate insertions. E. Extension of Revolving Loan Commitment Termination Date. On or before the 90th day prior to each anniversary of the Closing Date (the "Current Anniversary Date"), commencing on the 90th day prior to the first anniversary of the Closing Date, and prior to the termination of each Lender's Commitment, Company may, at its option, deliver to Agent a signed copy of an extension request (an "Extension Request"), substantially in the form of Exhibit IV annexed hereto, ------- -- requesting an extension of the Revolving Loan Commitment Termination Date for a period (each an "Extension Period") of one year from the current Revolving Loan Commitment Termination Date (or, in the case of an Extension Request requesting an extension of the Revolving Loan Commitment Termination Date beyond the fourth anniversary of the Closing Date, for a period commencing on the date immediately following such fourth anniversary and ending on July 31, 1998); provided that in no event shall the Revolving Loan -------- Commitment Termination Date be extended beyond July 31, 1998. Agent shall promptly notify each Lender of its receipt of such Extension Request. On or before the 60th day prior to the Current Anniversary Date (the "First Determination Date"), each Lender shall have the right, in its sole discretion, subject to the provisions of this subsection 2.1E, to (i) consent to the extension of the Revolving Loan Commitment Termination Date with respect to all of such Lender's Revolving Loan Commitment (and, in the case of Swing Line Lender, the Swing Line Loan Commitment) for the Extension Period or (ii) reject the extension of the Revolving Loan Commitment Termination Date with respect to all of such Lender's Revolving Loan Commitment (and, in the case of Swing Line Lender, the Swing Line Loan Commitment) for the Extension Period. If a Lender has replied in writing to Company consenting to the Extension Request, such Lender may not withdraw such consent for the Extension Period. If a Lender has not replied in writing to Company with respect to the Extension Request by the First Determination Date, such Lender shall be deemed to have rejected the extension of the Revolving Loan Commitment Termination Date for the Extension Period. If one or more Lenders (each a "Rejecting Lender") shall have rejected or shall be deemed to have rejected such extension for the Extension Period, then Company may request that the Loans, Commitments, participations in Letters of Credit and all other rights and obligations of each Rejecting Lender be assumed, as of the Current Anniversary Date, by (i) one or more Lenders (each a "Remaining Lender") consenting to such extension for the Extension Period and/or (ii) one or more other Eligible Assignees (each a "New Lender") satisfactory to Company and Agent (or, if Agent is a Rejecting Lender, the successor Agent). Each Remaining Lender notified in writing of such request shall have the right to accept or reject such request on or before the earlier of (a) the 30th day prior to the Current Anniversary Date (the "Second Determination Date") and (b) the date that Company notifies such Remaining Lender that such request has been withdrawn because one or more New Lenders have accepted such request. If a Remaining Lender has not replied in writing to Company with respect to such request by the Second Determination Date, such Remaining Lender shall be deemed to have rejected such request. Anything contained in this subsection 2.1E to the contrary notwithstanding, in no event shall the Revolving Loan Commitment Termination Date be extended pursuant to this subsection 2.1E for any proposed Extension Period unless (i) all Lenders shall have consented to such extension in accordance with the provisions of this subsection 2.1E or (ii) if there shall be one or more Rejecting Lenders, then on or before the Second Determination Date (a) one or more Remaining Lenders and/or New Lenders shall have agreed to assume and/or purchase, as of the Current Anniversary Date, all of the Revolving Loans, Revolving Loan Commitments, participations in Letters of Credit and other rights and obligations of all Rejecting Lenders with respect to the Revolving Loan Commitments by executing and delivering to Agent a counterpart of an Extension Assignment and Acceptance (the "Extension Assignment and Acceptance") substantially in the form of Exhibit XIII annexed hereto and (b) if Agent is a ------- ---- Rejecting Lender, then a Remaining Lender or a New Lender satisfactory to Requisite Lenders (determined as if the transactions contemplated by the Extension Assignment and Acceptance had been consummated) shall have agreed to (1) become a successor Agent under the Loan Documents as of the Current Anniversary Date pursuant to subsection 9.6A and (2) become a successor Swing Line Lender under the Loan Documents as of the Current Anniversary Date pursuant to subsection 9.6B. If the Revolving Loan Commitment Termination Date is extended in accordance with clause (ii) set forth in the immediately preceding sentence, within 15 days after the Second Determination Date, Company and each Rejecting Lender shall execute and deliver to Agent a counterpart of the Extension Assignment and Acceptance and upon receipt thereof and any certificates, documents or other evidence with respect to United States federal income tax withholding matters that any New Lender may be required to deliver pursuant to subsection 2.7B(iii), Agent shall, if such Extension Assignment and Acceptance has been completed and is in substantially the form of Exhibit XIII annexed hereto, accept ------- ---- such Extension Assignment and Acceptance by executing a counterpart thereof as provided therein. Anything contained in this Agreement to the contrary notwithstanding, if an Extension Assignment and Acceptance shall have been executed and delivered by each party thereto as contemplated by the provisions of the immediately preceding paragraph, in order to effect the transactions contemplated by such Extension Assignment and Assignment, (i) during the period commencing on the third Business Day immediately preceding the Current Anniversary Date and ending on the Current Anniversary Date, (a) no Loans shall be made or prepaid, (b) no Letters of Credit shall be issued, and (c) no Commitments shall be reduced or terminated by Company, and (ii) during the period commencing on the date of execution and delivery by each party thereto of such Extension Assignment and Acceptance and ending on the Current Anniversary Date, none of the Loans, Commitments, Letters of Credit or participations therein or other Obligations may be assigned by any Lender except pursuant to an assignment or a pledge permitted under subsection 10.1D. Unless the Revolving Loan Commitment Termination Date is extended in accordance with the immediately preceding paragraph, the Commitments of all Lenders shall terminate on the current Revolving Loan Commitment Termination Date. Subject to the immediately following paragraph, if the Revolving Loan Commitment Termination Date is extended in accordance with the provisions of this subsection 2.1E, then the maturity date of the Note or Notes held by each Remaining Lender shall be automatically extended for the applicable Extension Period without any further action by Company, Agent or Lenders. In the event the Commitments of some or all of the Rejecting Lenders are reallocated among one or more Remaining Lenders pursuant to this subsection 2.1E, Company shall, on or before the Current Anniversary Date, deliver to Agent, on behalf of each such Remaining Lender, (i) a new Revolving Note of such Remaining Lender evidencing the increased total Revolving Loan Commitment of such Remaining Lender and (ii) if such Remaining Lender shall be a successor Swing Line Lender, a Swing Line Note evidencing the Swing Line Loan Commitment of such Remaining Lender. Upon receipt by each Remaining Lender of a new Revolving Note as provided in this paragraph, such Remaining Lender shall promptly cancel and return to Company the Revolving Note evidencing its former allocation of the Revolving Commitments. In the event one or more New Lenders become parties to this Agreement pursuant to this subsection 2.1E, Company shall, on or before the Current Anniversary Date, deliver to Agent, on behalf of each such New Lender, (i) a Revolving Note evidencing the Revolving Loan Commitment of such New Lender and (ii) if such New Lender shall be a successor Swing Line Lender, a Swing Line Note evidencing the total Swing Line Loan Commitment of such New Lender. Upon receipt by each Rejecting Lender of all amounts payable to such Rejecting Lender under any applicable Extension Assignment and Acceptance, such Rejecting Lender shall promptly cancel and return to Company the Revolving Note evidencing its former allocation of the Revolving Loan Commitments. 2.2 Interest on the Loans. -------- -- --- ----- A. Rate of Interest. Subject to the provisions of subsections 2.6 and 2.7, each Revolving Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Base Rate or the Adjusted Eurodollar Rate, as the case may be. Subject to the provisions of subsection 2.7, each Swing Line Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Base Rate. The applicable basis for determining the rate of interest with respect to any Revolving Loan shall be selected by Company initially at the time a Notice of Borrowing is given with respect to such Loan pursuant to subsection 2.1B. The basis for determining the interest rate with respect to any Revolving Loan may be changed from time to time pursuant to subsection 2.2D. If on any day a Revolving Loan is outstanding with respect to which notice has not been delivered to Agent in accordance with the terms of this Agreement specifying the applicable basis for determining the rate of interest, then for that day that Loan shall bear interest determined by reference to the Base Rate. Subject to the provisions of subsections 2.2E and 2.7, the Revolving Loans shall bear interest through maturity as follows: (i) if a Base Rate Loan, then at the sum of the Base Rate plus 1.50% per annum; or ---- (ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted Eurodollar Rate plus 2.50% per annum. ---- Subject to the provisions of subsections 2.2E and 2.7, the Swing Line Loans shall bear interest through maturity at the sum of the Base Rate plus 1.00% per annum. ---- B. Interest Periods. In connection with each Eurodollar Rate Loan, Company may, pursuant to the applicable Notice of Borrowing or Notice of Conversion/Continuation, as the case may be, select an interest period (each an "Interest Period") to be applicable to such Loan, which Interest Period shall be, at Company's option, a one, two, three or six month period; provided that: -------- (i) the initial Interest Period for any Eurodollar Rate Loan shall commence on the Funding Date in respect of such Loan, in the case of a Loan initially made as a Eurodollar Rate Loan, or on the date specified in the applicable Notice of Conversion/Continuation, in the case of a Loan converted to a Eurodollar Rate Loan; (ii) in the case of immediately successive Interest Periods applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice of Conversion/Continuation, each successive Interest Period shall commence on the day on which the next preceding Interest Period expires; (iii) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that if any Interest Period would otherwise -------- expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iv) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (v) of this subsection 2.2B, end on the last Business Day of a calendar month; (v) no Interest Period shall extend beyond the Revolving Loan Commitment Termination Date; (vi) there shall be no more than 5 Interest Periods outstanding at any time; and (vii) in the event Company fails to specify an Interest Period for any Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of Conversion/ Continuation, Company shall be deemed to have selected an Interest Period of one month. C. Interest Payments. Subject to the provisions of subsection 2.2E, interest on each Loan shall be payable in arrears on and to each Interest Payment Date applicable to that Loan, upon any prepayment of that Loan (to the extent accrued on the amount being prepaid) and at maturity (including final maturity). D. Conversion or Continuation. Subject to the provisions of subsection 2.6, Company shall have the option (i) to convert at any time after the Closing Date all or any part of its outstanding Revolving Loans equal to $5,000,000 and integral multiples of $1,000,000 in excess of that amount from Loans bearing interest at a rate determined by reference to one basis to Loans bearing interest at a rate determined by reference to an alternative basis, or (ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any portion of such Loan equal to $5,000,000 and integral multiples of $1,000,000 in excess of that amount as a Eurodollar Rate Loan; provided, however, that -------- ------- a Eurodollar Rate Loan may only be converted into a Loan bearing interest at a rate determined by reference to an alternative basis on the expiration date of an Interest Period applicable thereto; and provided, further that no Loan may be -------- ------- made as or converted into a Base Rate Loan during the period from December 24 of any year to and including January 7 of the immediately succeeding year for the purpose of investing in securities bearing interest at a rate determined by reference to any other basis for the purpose of arbitrage or speculation. Company shall deliver a Notice of Conversion/ Continuation to Agent no later than 12:00 Noon (New York time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation shall specify (i) the proposed conversion/continuation date (which shall be a Business Day), (ii) the amount of the Loan to be converted/ continued, (iii) the nature of the proposed conversion/ continuation, (iv) in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan, the requested Interest Period, and (v) in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan, that no Potential Event of Default or Event of Default has occurred and is continuing. In lieu of delivering the above-described Notice of Conversion/Continuation, Company may give Agent telephonic notice by the required time of any proposed conversion/ continuation under this subsection 2.2D; provided that such -------- notice shall be promptly confirmed in writing by delivery of a Notice of Conversion/Continuation to Agent on or before the proposed conversion/continuation date. Neither Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Agent believes in good faith to have been given by a duly authorized officer or other person authorized to act on behalf of Company or for otherwise acting in good faith under this subsection 2.2D, and upon conversion or continuation of the applicable basis for determining the interest rate with respect to any Loans in accordance with this Agreement pursuant to any such telephonic notice Company shall have effected a conversion or continuation, as the case may be, hereunder. Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Conversion/Continuation for conversion to, or continuation of, a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to effect a conversion or continuation in accordance therewith. E. Post-Maturity Interest. Any principal payments on the Loans not paid when due and, to the extent permitted by applicable law, any interest payments on the Loans or any fees or other amounts owed hereunder not paid when due, in each case whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable on demand at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans); provided that, in the case of -------- Eurodollar Rate Loans, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interest payable upon demand at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this subsection 2.2E is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Agent or any Lender. F. Computation of Interest. Interest on the Loans shall be computed on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded; provided that if -------- a Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Loan. 2.3 Fees. ---- A. Commitment Fees. (i) Company agrees to pay to Agent, for distribution to each Lender, a commitment fee for the period commencing on the earlier of the date of delivery to Agent of an executed commitment letter of such Lender with respect to the Revolving Loan Commitment of such Lender hereunder and August 23, 1993 to and excluding the Closing Date, equal to the aggregate amount of the Revolving Loan Commitment of such Lender as set forth in Schedule 2.1 annexed -------- --- hereto multiplied by 1/2 of 1% per annum, such commitment fees ---------- -- to be calculated on the basis of a 360-day year and the actual number of days elapsed and to be payable in arrears on the earlier of the Closing Date or the termination of the Commitments; and (ii) Company agrees to pay to Agent, for distribution to each Lender in proportion to that Lender's Pro Rata Share, commitment fees for the period from and including the Closing Date to and excluding the Revolving Loan Commitment Termination Date equal to the average of the daily excess of the Revolving Loan Commitments over the sum of the aggregate principal amount of Revolving Loans outstanding (but not any Swing Line Loans outstanding) plus the Letter of ---- Credit Usage (other than the Letter of Credit Usage in respect of Standby Letters of Credit) multiplied by 1/2 of 1% per annum, ---------- -- such commitment fees to be calculated on the basis of a 360- day year and the actual number of days elapsed and to be payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, commencing on January 15, 1994, and on the Revolving Loan Commitment Termination Date. B. Other Fees. Company agrees to pay to Agent such other fees in the amounts and at the times separately agreed upon between Company and Agent, as set forth in that certain letter dated August 19, 1993 from Agent to Company. 2.4 Prepayments and Reductions in Commitments; General ----------- --- ---------- -- ------------ ------- Provisions Regarding Payments. ---------- --------- -------- A. Prepayments and Reductions in Commitments. (i) Voluntary Prepayments. Company may, upon --------- ----------- written or telephonic notice to Agent on or prior to 12:00 Noon (New York time) on the date of prepayment, which notice, if telephonic, shall be promptly confirmed in writing, at any time and from time to time prepay any Swing Line Loan in whole or in part on any Business Day in an aggregate minimum amount of $1,000,000 and integral multiples of $500,000 in excess of that amount (or such lesser amount as shall constitute the aggregate amount of all outstanding Swing Line Loans). Company may, upon not less than one Business Day's prior written or telephonic notice, in the case of Base Rate Loans, and three Business Days' prior written or telephonic notice, in the case of Eurodollar Rate Loans, in each case confirmed in writing to Agent (which notice Agent will promptly transmit by telecopy or telephone to each Lender), at any time and from time to time prepay any Revolving Loans in whole or in part on any Business Day in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount (or, in each such case, such lesser amount as shall constitute the aggregate amount of all outstanding Revolving Loans); provided, however, that a Eurodollar Rate Loan may only -------- ------- be prepaid on the expiration of the Interest Period applicable thereto. Notice of prepayment having been given as aforesaid, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein. Any such voluntary prepayment shall be applied as specified in subsection 2.4A(iv). (ii) Voluntary Reductions of Revolving Loan --------- ---------- -- --------- ---- Commitments. Company may, upon not less than three ----------- Business Days' prior written or telephonic notice confirmed in writing to Agent (which notice Agent will promptly transmit by telecopy or telephone to each Lender), at any time and from time to time terminate in whole or permanently reduce in part, without premium or penalty, the Revolving Loan Commitments in an amount up to the amount by which the Revolving Loan Commitments exceed the Total Utilization of Revolving Loan Commitments at the time of such proposed termination or reduction; provided that any such partial reduction of -------- the Revolving Loan Commitments shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount. Company's notice to Agent shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of the Revolving Loan Commitments shall be effective on the date specified in Company's notice and shall reduce the Revolving Loan Commitment of each Lender proportionately to its Pro Rata Share. (iii) Mandatory Prepayments of Loans and --------- ----------- -- ----- --- Mandatory Reductions of Revolving Loan Commitments. --------- ---------- -- --------- ---- ----------- (a) Prepayments and Reductions from Asset ----------- --- ---------- ---- ----- Sales. No later than the second Business Day ----- following the date of receipt by Company or any of its Subsidiaries or, in the case of insurance proceeds paid to Agent pursuant to subsection 6.4, Agent of any Net Cash Proceeds of Asset Sale (other than any Net Cash Proceeds of Asset Sale from any Qualified Sale and Lease-back), (1) Company shall prepay first the Swing Line Loans to the full extent thereof and second the Revolving Loans to the full extent thereof in an amount equal to such Net Cash Proceeds of Asset Sale minus any such Net Cash ----- Proceeds of Asset Sale (the "Proposed Reinvestment Amount") received by Company or such Subsidiary or, in the case of insurance proceeds paid to Agent pursuant to subsection 6.4, Agent in connection with (X) any taking of assets described in clause (iii) of the definition of the term "Asset Sale" or (Y) any loss, damage or destruction of assets described in clause (iv) of the definition of the term "Asset Sale," in either case that Company or such Subsidiary intends to use within 180 days of such date of receipt to repair or restore the portion of the assets so taken, lost, damaged or destroyed that is remaining after such taking, loss, damage or destruction or to replace the assets so taken, lost, damaged or destroyed; provided that -------- Company shall have delivered to Agent on or before such second Business Day an Officers' Certificate setting forth the proposed use of the Proposed Reinvestment Amount and such other information with respect to such proposed use as Agent may reasonably request, and (2) to the extent such Net Cash Proceeds of Asset Sale minus the Proposed ----- Reinvestment Amount, if any, exceed the aggregate outstanding principal amount of the Loans, Company shall cash collateralize outstanding Letters of Credit pursuant to the Collateral Account Agreement in an amount equal to the lesser of (y) such excess and (z) (I) if no Event of Default or Potential Event of Default shall have occurred and be continuing on the date of such cash collateralization, then the amount by which the Letter of Credit Usage then in effect exceeds the Revolving Loan Commitments then in effect (after giving effect to the permanent reduction in the Revolving Loan Commitments in an amount equal to such Net Cash Proceeds of Asset Sale as provided below) or (II) if an Event of Default or Potential Event of Default shall have occurred and be continuing on the date of such cash collateralization, then the Letter of Credit Usage then in effect, and, in any event, the Revolving Loan Commitments shall be permanently reduced in an amount equal to such Net Cash Proceeds of Asset Sale; provided, however, that the first $10,000,000 -------- ------- of Net Cash Proceeds of Asset Sale (other than any Net Cash Proceeds of Asset Sale from any Qualified Sale and Lease-back and other than any Proposed Reinvestment Amount to the extent such Proposed Reinvestment Amount is used to repair, restore or replace assets of Company or any of its Subsidiaries as provided above) received by Company or any of its Subsidiaries in any Fiscal Year shall not be required to be applied to prepay any Loans or cash collateralize any outstanding Letters of Credit or reduce the Revolving Loan Commitments pursuant to this subsection 2.4A(iii)(a). With respect to any Proposed Reinvestment Amount, on the one hundred and eighty-first day after receipt thereof by Company or any of its Subsidiaries, subject to the last proviso in the immediately preceding sentence, (1) Company shall prepay first the Swing Line Loans to the full ----- extent thereof and second the Revolving Loans to the ------ full extent thereof in an amount (the "Unused Reinvestment Amount") equal to 100% of any portion of such Proposed Reinvestment Amount that has not been used to repair, restore or replace the assets of Company or such Subsidiary as provided above and (2) to the extent the Unused Reinvestment Amount exceeds the aggregate outstanding principal amount of the Loans, Company shall cash collateralize outstanding Letters of Credit pursuant to the Collateral Account Agreement in an amount equal to the lesser of (y) such excess and (z) (I) if no Event of Default or Potential Event of Default shall have occurred and be continuing on the date of such cash collateralization, then the amount by which the Letter of Credit Usage then in effect exceeds the Revolving Loan Commitments then in effect (after giving effect to the permanent reduction in the Revolving Loan Commitments in an amount equal to the Unused Reinvestment Amount as provided below) or (II) if an Event of Default or a Potential Event of Default shall have occurred and be continuing on the date of such cash collateralization, then the Letter of Credit Usage then in effect, and, in any event, the Revolving Loan Commitments shall be permanently reduced in an amount equal to the Unused Reinvestment Amount. Concurrently with any prepayment of the Loans, cash collateralization of outstanding Letters of Credit and/or reduction of the Revolving Loan Commitments pursuant to this subsection 2.4A(iii)(a), Company shall deliver to Agent an Officers' Certificate demonstrating the derivation of the Net Cash Proceeds of Asset Sale of the correlative Asset Sale from the gross sales price thereof. In the event that Company shall, at any time after receipt of any Net Cash Proceeds of Asset Sale in connection with any Asset Sale, determine that the prepayments, cash collateralization of Letters of Credit and/or reductions of the Revolving Loan Commitments, if any, previously made in respect of such Asset Sale were in an aggregate amount less than that required by the terms of this subsection 2.4A(iii)(a), Company shall promptly make an additional prepayment of the Swing Line Loans or Revolving Loans or cash collateralize outstanding Letters of Credit pursuant to the Collateral Account Agreement, as the case may be (and the Revolving Loan Commitments shall be permanently reduced), in the manner described above in an amount equal to the amount of any such deficit, and Company shall concurrently therewith deliver to Agent an Officers' Certificate demonstrating the derivation of the additional Net Cash Proceeds of Asset Sale resulting in such deficit. Any mandatory prepayments pursuant to this subsection 2.4A(iii)(a) shall be applied as specified in subsection 2.4A(iv). (b) Prepayments and Reductions Due to ----------- --- ---------- --- -- Reversion of Surplus Assets of Pension Plans. No --------- -- ------- ------ -- ------- ----- later than the second Business Day following the date of return to Company or any of its Subsidiaries of any surplus assets of any pension plan of Company or any of its Subsidiaries, (1) Company shall prepay in an amount (the "Net Reversion Amount") equal to 100% of such returned surplus assets, net of transaction costs and expenses incurred in obtaining such return, including incremental taxes payable as a result thereof, first the Swing Line Loans to the ----- full extent thereof and second the Revolving Loans ------ to the full extent thereof and (2) to the extent such Net Reversion Amount exceeds the aggregate outstanding principal amount of the Loans, Company shall cash collateralize outstanding Letters of Credit pursuant to the Collateral Account Agreement in an amount equal to the lesser of (y) such excess and (z) (I) if no Event of Default or Potential Event of Default shall have occurred and be continuing on the date of such cash collateralization, then the amount by which the Letter of Credit Usage then in effect exceeds the Revolving Loan Commitments then in effect (after giving effect to the permanent reduction in the Revolving Loan Commitments in an amount equal to such Net Reversion Amount as provided below) or (II) if an Event of Default or Potential Event of Default shall have occurred and be continuing on the date of such cash collateralization, then the Letter of Credit Usage then in effect, and, in any event, the Revolving Loan Commitments shall be permanently reduced in an amount equal to such Net Reversion Amount. Any such mandatory prepayments shall be applied as specified in subsection 2.4A(iv). (c) Prepayments Due to Reductions or ----------- --- -- ---------- -- Restrictions of Revolving Loan Commitments or Due to ------------ -- --------- ---- ----------- -- --- -- Insufficient Borrowing Base. Company shall from ------------ --------- ---- time to time first prepay the Swing Line Loans, ----- second prepay the Revolving Loans and third cash ------ ----- collateralize outstanding Letters of Credit to the extent necessary (1) so that the Total Utilization of Revolving Loan Commitments then in effect minus ----- the aggregate amount of cash collateral then on deposit pursuant to the Collateral Account Agreement as collateral for outstanding Letters of Credit shall not at any time exceed the lesser of (X) the Revolving Loan Commitments then in effect and (Y) the Borrowing Base then in effect and (2) to give effect to the limitations set forth in clause (c) of the second paragraph of subsection 2.1A(i) and in clause (b) of the second paragraph of subsection 2.1A(ii). Any such mandatory prepayments shall be applied as specified in subsection 2.4A(iv). (iv) Application of Prepayments. ----------- -- ----------- (a) Application of Voluntary Prepayments by ----------- -- --------- ----------- -- Type of Loans and Order of Maturity. Any voluntary ---- -- ----- --- ----- -- -------- prepayments pursuant to subsection 2.4A(i) shall be applied as specified by Company in the applicable notice of prepayment; provided that in the event -------- Company fails to specify the Loans to which any such prepayment shall be applied, such prepayment shall be applied first to repay outstanding Swing Line ----- Loans to the full extent thereof, second to repay ------ outstanding Revolving Loans to the full extent thereof, and third to cash collateralize outstanding ----- Letters of Credit to the full extent thereof pursuant to the Collateral Account Agreement. (b) Application of Prepayments to Base Rate ----------- -- ----------- -- ---- ---- Loans and Eurodollar Rate Loans. Considering ----- --- ---------- ---- ----- Revolving Loans and Swing Line Loans being prepaid separately, any prepayment shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by Company pursuant to subsection 2.6D. B. General Provisions Regarding Payments. (i) Manner and Time of Payment. All payments by ------ --- ---- -- ------- Company of principal, interest, fees and other Obligations hereunder, under the Notes and under the other Loan Documents shall be made in same day funds and without defense, set-off or counterclaim, free of any restriction or condition, and delivered to Agent not later than 1:00 P.M. (New York time) on the date due at its office located at One Bankers Trust Plaza, New York, New York, for the account of Lenders; funds received by Agent after that time on such due date shall be deemed to have been paid by Company on the next succeeding Business Day. Company hereby authorizes Agent to charge its accounts with Agent in order to cause timely payment to be made to Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose). (ii) Application of Payments to Principal and ----------- -- -------- -- --------- --- Interest. All payments in respect of the principal -------- amount of any Loan shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments shall be applied to the payment of interest before application to principal. (iii) Apportionment of Payments. Aggregate ------------- -- -------- principal and interest payments shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to Lenders' respective Pro Rata Shares. Agent shall promptly distribute to each Lender, at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request, its Pro Rata Share of all such payments received by Agent and the commitment fees of such Lender when received by Agent pursuant to subsection 2.3. Notwithstanding the foregoing provisions of this subsection 2.4B(iii), if, pursuant to the provisions of subsection 2.6C, any Notice of Conversion/Continuation is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Agent shall give effect thereto in apportioning payments received thereafter. (iv) Payments on Business Days. Whenever any -------- -- -------- ---- payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the commitment fees hereunder, as the case may be. (v) Notation of Payment. Each Lender agrees that -------- -- ------- before disposing of any Note held by it, or any part thereof (other than by granting participations therein), that Lender will make a notation thereon of all Loans evidenced by that Note and all principal payments previously made thereon and of the date to which interest thereon has been paid; provided that the failure to make -------- (or any error in the making of) a notation of any Loan made under such Note shall not limit or otherwise affect the obligations of Company hereunder or under such Note with respect to any Loan or any payments of principal or interest on such Note. 2.5 Use of Proceeds. --- -- -------- A. Loans. The proceeds of any Loans shall be applied by Company for working capital purposes, which may include the repayment of the Swing Line Loans pursuant to subsection 2.1A(ii), the reimbursement to any Issuing Lender of any amounts drawn under any Letters of Credit issued by such Issuing Lender as provided in subsection 3.3 and the making of intercompany loans to any of Company's wholly-owned Subsidiaries, in accordance with subsection 7.1(iv), for their own working capital purposes. B. Margin Regulations. No portion of the proceeds of any borrowing under this Agreement shall be used by Company or any of its Subsidiaries in any manner that might cause the borrowing or the application of such proceeds to violate Regulation G, Regulation U, Regulation T or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of such Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds. 2.6 Special Provisions Governing Eurodollar Rate Loans. ------- ---------- --------- ---------- ---- ----- Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to Eurodollar Rate Loans as to the matters covered: A. Determination of Applicable Interest Rate. As soon as practicable after 10:00 A.M. (New York time) on each Inter- est Rate Determination Date, Agent shall determine (which determination shall, absent manifest error (including arithmetical error), be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Company and each Lender. B. Inability to Determine Applicable Interest Rate. In the event that Agent shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that by reason of circumstances affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Adjusted Eurodollar Rate, Agent shall on such date give notice (by telecopy or by telephone confirmed in writing) to Company and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Loans until such time as Agent notifies Company and Lenders that the circumstances giving rise to such notice no longer exist and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by Company with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by Company. C. Illegality or Impracticability of Eurodollar Rate Loans. In the event that on any date any Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with Company and Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause such Lender material hardship, as a result of contingencies occurring after the date of this Agreement which materially and adversely affect the interbank Eurodollar market or the position of such Lender in that market, then, and in any such event, such Lender shall be an "Affected Lender" and it shall on that day give notice (by telecopy or by telephone confirmed in writing) to Company and Agent of such determination (which notice Agent shall promptly transmit to each other Lender). Thereafter (a) the obligation of the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (b) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/ Continuation, the Affected Lender shall make such Loan as (or convert such Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans (the "Affected Loans"), shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (d) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, Company shall have the option, subject to the provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of Conversion/Continuation as to all Lenders by giving notice (by telecopy or by telephone confirmed in writing) to Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above (which notice of rescission Agent shall promptly transmit to each other Lender). Except as provided in the immediately preceding sentence, nothing in this subsection 2.6C shall affect the obligation of any Lender other than an Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms of this Agreement. D. Compensation For Breakage or Non-Commencement of Interest Periods. Company shall compensate each Lender, upon written request by that Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including, without limitation, any interest paid by that Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by that Lender in connection with the liquidation or re-employment of such funds) which that Lender may sustain: (i) if for any reason (other than a default by that Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Borrowing or a telephonic request for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Conversion/Continuation or a tele- phonic request for conversion or continuation, (ii) if any prepayment or conversion of any of its Eurodollar Rate Loans occurs on a date that is not the last day of an Interest Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Company, or (iv) as a consequence of any other default by Company to repay its Eurodollar Rate Loans when required by the terms of this Agreement. E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of that Lender. F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of all amounts payable to a Lender under this subsection 2.6 and under subsection 2.7A shall be made as though that Lender had actually funded each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of that Lender to a domestic office of that Lender in the United States of America; provided, however, -------- ------- that each Lender may fund each of its Eurodollar Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this subsection 2.6 and under subsection 2.7A. G. Eurodollar Rate Loans After Default. After the occurrence of and during the continuation of a Potential Event of Default or an Event of Default, (i) Company may not elect to have a Loan be made or maintained as, or converted to, a Eurodollar Rate Loan after the expiration of any Interest Period then in effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any Notice of Borrowing or Notice of Conversion/Continuation given by Company with respect to a requested borrowing or conversion/continuation that has not yet occurred shall be deemed to be rescinded by Company. 2.7 Increased Costs; Taxes; Capital Adequacy. --------- ------ ------ ------- -------- A. Compensation for Increased Costs and Taxes. Subject to the provisions of subsection 2.7B(iii), in the event that any Lender shall determine (which determination shall, absent manifest error (including arithmetical error), be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Lender (or its applicable lending office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to this Agreement or any of the Loans or any of its obligations hereunder; (ii) imposes, modifies or holds applicable any reserve (including without limitation any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Adjusted Eurodollar Rate); or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the interbank Eurodollar market; and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Loans hereunder or to reduce any amount received or receivable by such Lender (or its applicable lending office) with respect thereto; then, in any such case, Company shall promptly pay to such Lender, upon receipt of the statement referred to in the immediately succeeding sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder. Such Lender shall deliver to Company a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Lender under this subsection 2.7A, which statement shall be conclusive and binding upon all parties hereto absent manifest error (including arithmetical error). B. Withholding of Taxes. (i) Payments to Be Free and Clear. All sums -------- -- -- ---- --- ----- payable by Company under this Agreement and the other Loan Documents shall be paid free and clear of and (except to the extent required by law) without any deduction or withholding on account of any Tax imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other jurisdiction from or to which a payment is made by or on behalf of Company or by any federation or organization of which the United States of America or any such jurisdiction is a member at the time of payment (other than a Tax on the overall net income of a Lender). (ii) Grossing-up of Payments. If Company or any ----------- -- -------- other Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by Company to Agent or any Lender under any of the Loan Documents: (a) Company shall notify Agent of any such requirement or any change in any such requirement as soon as Company becomes aware of it; (b) Company shall pay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on Company) for its own account or (if that liability is imposed on Agent or such Lender, as the case may be) on behalf of and in the name of Agent or such Lender; (c) the sum payable by Company in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Agent or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and (d) within 30 days after paying any sum from which it is required by law to make any deduction or withholding, and within 30 days after the due date of payment of any Tax which it is required by clause (b) above to pay, Company shall deliver to Agent, to the extent reasonably available, evidence reasonably satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority; provided that no such additional amount shall be required -------- to be paid to any Lender under clause (c) above except to the extent that any change after the date hereof (in the case of each Lender listed on the signature pages hereof) or after the date of the Assignment and Acceptance pursuant to which such Lender became a Lender (in the case of each other Lender) in any such requirement for a deduction, withholding or payment as is mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect at the date of this Agreement or at the date of such Assignment and Acceptance, as the case may be, in respect of payments to such Lender. (iii) U.S. Tax Certificates. Each Lender that ---- --- ------------ is organized under the laws of any jurisdiction other than the United States or any state or other political subdivision thereof shall deliver to Agent for transmission to Company, on or prior to the Closing Date (in the case of each Lender listed on the signature pages hereof) or on the date of the Assignment and Acceptance pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of Company or Agent (each in the reasonable exercise of its discretion), such certificates, documents or other evidence, properly completed and duly executed by such Lender (including, without limitation, Internal Revenue Service Form 1001 or Form 4224 or any other certificate or statement of exemption required by Treasury Regulations Section 1.1441-4(a) or Section 1.1441-6(c) or any successor thereto) to establish that such Lender is not subject to deduction or withholding of United States federal income tax under Section 1441 or 1442 of the Internal Revenue Code or otherwise (or under any comparable provisions of any successor statute) with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Loan Documents. Company shall not be required to pay any additional amount to any such Lender under clause (c) of subsection 2.7B(ii) if such Lender shall have failed to satisfy the requirements of the immediately preceding sentence; provided that if such -------- Lender shall have satisfied such requirements on the Closing Date (in the case of each Lender listed on the signature pages hereof) or on the date of the Assignment and Acceptance pursuant to which it became a Lender (in the case of each other Lender), nothing in this subsection 2.7B(iii) shall relieve Company of its obligation to pay any additional amounts pursuant to clause (c) of subsection 2.7B(ii) in the event that, as a result of any change in applicable law, such Lender is no longer properly entitled to deliver certificates, documents or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described in the immediately preceding sentence. (iv) Notice of Assessment. In the event that any ------ -- ---------- Lender or Agent receives any written communication from any taxing authority with respect to an assessment or proposed assessment of any Taxes in respect of which Company is obligated to make any payments pursuant to this subsection 2.7B, such Lender or Agent, as the case may be, shall promptly so notify Company in writing and provide a copy of such communication to Company. C. Capital Adequacy Adjustment. If any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the date hereof of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its applicable lending office) with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender's Loans or Commitments or Letters of Credit or participations therein or other obligations hereunder with respect to the Loans or the Letters of Credit to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by Company from such Lender of the statement referred to in the immediately succeeding sentence, Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction. Each Lender, upon determining in good faith that any additional amounts will be payable pursuant to this subsection 2.7C, will give a written statement thereof to Company (with a copy of such statement to Agent), which statement shall set forth in reasonable detail the basis of the calculation of such additional amounts. 2.8 Obligation of Lenders and Issuing Lenders to Mitigate. ---------- -- ------- --- ------- ------- -- -------- Each Lender and Issuing Lender agrees that, as promptly as practicable after the officer of such Lender or Issuing Lender responsible for administering the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may be, becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender or Issuing Lender to receive payments under subsection 2.7 or subsection 3.6, it will, to the extent not inconsistent with the internal policies of such Lender or Issuing Lender and any applicable legal or regulatory restrictions, use reasonable efforts (i) to make, issue, fund or maintain the Commitments of such Lender or the affected Loans or Letters of Credit of such Lender or Issuing Lender through another lending or letter of credit office of such Lender or Issuing Lender, or (ii) take such other measures as such Lender or Issuing Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender or Issuing Lender pursuant to subsection 2.7 or subsection 3.6 would be materially reduced and if, as determined by such Lender or Issuing Lender in its sole discretion, the making, issuing, funding or maintaining of such Commitments or Loans or Letters of Credit through such other lending or letter of credit office or in accordance with such other measures, as the case may be, would not otherwise materially adversely affect such Commitments or Loans or Letters of Credit or the interests of such Lender or Issuing Lender; provided that such Lender or -------- Issuing Lender will not be obligated to utilize such other lending or letter of credit office pursuant to this subsection 2.8 unless Company agrees to pay all incremental expenses incurred by such Lender or Issuing Lenders as a result of utilizing such other lending or letter of credit office as described in clause (i) above. A certificate as to the amount of any such expenses payable by Company pursuant to this subsection 2.8 (setting forth in reasonable detail the basis for requesting such amount) submitted by such Lender or Issuing Lender to Company shall be conclusive absent manifest error (including arithmetical error). 2.9 Removal of a Lender. ------- -- - ------ A. In the event that any Lender shall give notice to Company that such Lender is an Affected Lender or that such Lender is entitled to receive payments under subsection 2.7 or subsection 3.6, and unless the circumstances which have caused such Lender to be an Affected Lender or which entitle such Lender to receive such payments are no longer in effect, Company may, if such Lender is not then an Issuing Lender and such Lender shall fail to withdraw such notice within 5 Business Days after Company's request for such withdrawal, upon thirty days' prior written notice by Company to Agent and such Lender, elect (i) to terminate the Commitments of such Lender upon receipt by such Lender of such notice and prepay on the date of such termination any outstanding Loans made by such Lender, together with accrued and unpaid interest thereon and any other amounts payable to such Lender hereunder pursuant to subsection 2.7 or subsection 3.6 or otherwise; provided that if there are any Loans of such Lender -------- outstanding at the time of such termination, the written consent of Agent and Requisite Lenders, which consent shall not be unreasonably withheld, shall be required in order for Company to make the foregoing election; or (ii) to cause such Lender to assign its Loans and Commitments in full to an Eligible Assignee in accordance with the provisions of subsection 10.1B. B. In the event that any Lender is a Defaulting Lender, and unless the Default Period for such Defaulting Lender is no longer continuing, Company may, if such Lender is not then an Issuing Lender and such Lender shall fail to cure the default as a result of which it has become a Defaulting Lender within five Business Days after Company's request that it cure such default, elect to cause such Lender to assign its Loans and Commitments in full to an Eligible Assignee in accordance with the provisions of subsection 10.1B. 2.10 Defaulting Lenders. ---------- ------- Anything contained herein to the contrary notwithstanding, in the event that any Lender (a "Defaulting Lender") defaults (a "Funding Default") in its obligation to fund any Revolving Loan (a "Defaulted Revolving Loan") in accordance with subsection 2.1, then (i) during any Default Period (as defined below) with respect to such Defaulting Lender, such Defaulting Lender shall be deemed not to be a "Lender" for purposes of voting on any matters (including without limitation the granting of any consents or waivers) with respect to any of the Loan Documents; (ii) to the extent permitted by applicable law, until such time as the Default Excess (as defined below) with respect to such Defaulting Lender shall have been reduced to zero (a) any voluntary prepayment of the Revolving Loans pursuant to subsection 2.4A(i) shall, if Company so directs at the time of making such voluntary prepayment, be applied to the Revolving Loans of other Lenders as if such Defaulting Lender had no Revolving Loans outstanding and the Revolving Loan Exposure of such Defaulting Lender were zero and (b) any mandatory prepayment of the Revolving Loans pursuant to subsection 2.4A(iii) shall, if Company so directs at the time of making such mandatory prepayment, be applied to the Revolving Loans of other Lenders (but not to the Revolving Loans of such Defaulting Lender) as if such Defaulting Lender had funded all Defaulted Revolving Loans of such Defaulting Lender, it being understood and agreed that Company shall be entitled to retain any portion of any mandatory prepayment of the Revolving Loans that is not paid to such Defaulting Lender solely as a result of the operation of the provisions of this clause (b); provided that -------- the provisions of this clause (b) shall not affect any mandatory reductions of the Revolving Loan Commitment of such Defaulting Lender pursuant to subsection 2.4A(iii); (iii) such Defaulting Lender's Revolving Loan Commitment and outstanding Revolving Loans and such Defaulting Lender's Pro Rata Share of the Letter of Credit Usage in respect of Commercial Letters of Credit shall be excluded for purposes of calculating the commitment fee payable to Lenders pursuant to subsection 2.3A in respect of any day during any Default Period with respect to such Defaulting Lender, and such Defaulting Lender shall not be entitled to receive any commitment fee pursuant to subsection 2.3A with respect to such Defaulting Lender's Revolving Loan Commitment in respect of any Default Period with respect to such Defaulting Lender; and (iv) the Total Utilization of Revolving Loan Commitments as at any date of determination shall be calculated as if such Defaulting Lender had funded all Defaulted Revolving Loans of such Defaulting Lender. For purposes of this Agreement (A) "Default Period" means, with respect to any Defaulting Lender, the period commencing on the date of the applicable Funding Default and ending on the earliest of the following dates: (a) the date on which all Revolving Loan Commitments are cancelled or terminated and/or the Obligations are declared or become immediately due and payable, (b) the date on which (1) the Default Excess with respect to such Defaulting Lender shall have been reduced to zero (whether by the funding by such Defaulting Lender of any Defaulted Revolving Loans of such Defaulting Lender or by the non-pro rata application of any voluntary or mandatory prepayments of the Revolving Loans in accordance with the terms of this subsection 2.10 or by a combination thereof) and (2) such Defaulting Lender shall have delivered to Company and Agent a written reaffirmation of its intention to honor its obligations under this Agreement with respect to its Revolving Loan Commitment, and (c) the date on which Company, Agent and Requisite Lenders waive all Funding Defaults of such Defaulting Lender in writing, and (B) "Default Excess" means, with respect to any Defaulting Lender, the excess, if any, of such Defaulting Lender's Pro Rata Share of the aggregate outstanding principal amount of Revolving Loans of all Lenders (calculated as if all Defaulting Lenders (other than such Defaulting Lender) had funded all of their respective Defaulted Revolving Loans) over the aggregate outstanding principal amount of Revolving Loans of such Defaulting Lender. No Commitment of any Lender shall be increased or otherwise affected, and, except as otherwise expressly provided in this subsection 2.10, performance by Company of its obligations under this Agreement and the other Loan Documents shall not be excused or otherwise modified, as a result of any Funding Default or the operation of this subsection 2.10. The rights and remedies against a Defaulting Lender under this subsection 2.10 are in addition to other rights and remedies which Company may have against such Defaulting Lender with respect to any Funding Default and which Agent or any Lender may have against such Defaulting Lender with respect to any Funding Default. Section 3. LETTERS OF CREDIT 3.1 Issuance of Letters of Credit and Lenders' Purchase of -------- -- ------- -- ------ --- -------- -------- -- Participations Therein. -------------- ------- A. Letters of Credit. In addition to Company requesting that Lenders make Revolving Loans pursuant to subsection 2.1A(i) and that Swing Line Lender make Swing Line Loans pursuant to subsection 2.1A(ii), Company may request, in accordance with the provisions of this subsection 3.1, from time to time during the period from the Closing Date to but excluding the Revolving Loan Commitment Termination Date, that one or more Lenders issue Letters of Credit for the account of Company for the purposes specified in the definitions of Commercial Letters of Credit and Standby Letters of Credit. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, any one or more Lenders may, but (except as provided in subsection 3.1B(ii)) shall not be obligated to, issue such Letters of Credit in accordance with the provisions of this subsection 3.1; provided that Company shall not -------- request that any Lender issue (and no Lender shall issue): (i) any Letter of Credit if, after giving effect to such issuance, the Total Utilization of Revolving Loan Commitments would exceed the lesser of (a) the Revolving Loan Commitments then in effect and (b) the Borrowing Base then in effect; (ii) any Letter of Credit if, after giving effect to such issuance, (a) the Letter of Credit Usage would exceed $35,000,000 or (b) the Letter of Credit Usage in respect of Commercial Letters of Credit would exceed $10,000,000; (iii) any Standby Letter of Credit having an expiration date later than the earlier of (a) the Revolving Loan Commitment Termination Date and (b) the date which is one year from the date of issuance of such Standby Letter of Credit; provided that the immediately -------- preceding clause (b) shall not prevent any Issuing Lender from agreeing that a Standby Letter of Credit will automatically be extended for one or more successive periods not to exceed one year each unless such Issuing Lender elects not to extend for any such additional period; provided, further that such Issuing Lender shall -------- ------- deliver a written notice to Agent setting forth the last day on which such Issuing Lender may give notice that it will not extend such Standby Letter of Credit (the "Notification Date" with respect to such Standby Letter of Credit) at least ten Business Days prior to such Notification Date; and provided, further that, unless -------- ------- Requisite Lenders otherwise consent, such Issuing Lender shall give notice that it will not extend such Standby Letter of Credit if it has knowledge that an Event of Default has occurred and is continuing on such Notification Date; (iv) any Commercial Letter of Credit having an expiration date (a) later than the earlier of (X) the Revolving Loan Commitment Termination Date and (Y) the date which is 180 days from the date of issuance of such Commercial Letter of Credit or (b) that is otherwise unacceptable to the applicable Issuing Lender in its reasonable discretion; or (v) any Letter of Credit denominated in a currency other than Dollars. B. Mechanics of Issuance. (i) Notice of Issuance. Whenever Company desires ------ -- -------- the issuance of a Letter of Credit, it shall deliver to the proposed Issuing Lender (with a copy to Agent if Agent is not the proposed Issuing Lender) a Notice of Issuance of Letter of Credit no later than 12:00 Noon (New York time) at least five Business Days (or such shorter period as may be agreed to by the Issuing Lender in any particular instance) in advance of the proposed date of issuance. The Notice of Issuance of Letter of Credit shall specify (a) the Lender requested to issue the Letter of Credit, (b) the proposed date of issuance (which shall be a Business Day), (c) the face amount of the Letter of Credit, (d) the expiration date of the Letter of Credit, (e) the name and address of the beneficiary, (f) that the proposed issuance will not cause the Total Utilization of Revolving Loan Commitments to exceed the Borrowing Base then in effect, and (g) the verbatim text of the proposed Letter of Credit or the proposed terms and conditions, including a precise description of any documents and the verbatim text of any certificates to be presented by the beneficiary which, if presented by the beneficiary prior to the expiration date of the Letter of Credit, would require the Issuing Lender to make payment under the Letter of Credit; provided that -------- the Issuing Lender, in its reasonable discretion, may require changes in the text of the proposed Letter of Credit or any such documents or certificates; and provided, further that no Letter of Credit shall require -------- ------- payment against a conforming draft to be made thereunder on the same business day (under the laws of the jurisdiction in which the office of the Issuing Lender to which such draft is required to be presented is located) that such draft is presented if such presentation is made after 10:00 A.M. (in the time zone of such office of the Issuing Lender) on such business day. (ii) Determination of Issuing Lender. Upon receipt ------------- -- ------- ------ by a proposed Issuing Lender of a Notice of Issuance of Letter of Credit pursuant to subsection 3.1B(i) requesting the issuance of a Letter of Credit, (a) in the event Agent is the proposed Issuing Lender, Agent shall be the Issuing Lender with respect to such Letter of Credit, notwithstanding the fact that the Letter of Credit Usage with respect to such Letter of Credit and with respect to all other Letters of Credit issued by Agent, when aggregated with Agent's outstanding Revolving Loans and Swing Line Loans, may exceed Agent's Revolving Loan Commitment then in effect, and (b) in the event any other Lender is the proposed Issuing Lender, such Lender shall promptly notify Company and Agent whether or not, in its sole discretion, it has elected to issue such Letter of Credit, and (1) if such Lender so elects to issue such Letter of Credit it shall be the Issuing Lender with respect thereto and (2) if such Lender fails to so promptly notify Company and Agent or declines to issue such Letter of Credit, Company may request Agent or another Lender to be the Issuing Lender with respect to such Letter of Credit in accordance with the provisions of this subsection 3.1B. (iii) Notification to Lenders. Promptly after ------------ -- ------- receipt of a Notice of Issuance of Letter of Credit and the determination of the Issuing Lender with respect to the proposed Letter of Credit, (a) Agent shall notify each Lender of the proposed issuance of such Letter of Credit, the Issuing Lender and the amount of such Lender's respective participation therein, determined in accordance with subsection 3.1C, and (b) the Issuing Lender shall deliver to each other Lender a copy of such Notice of Issuance of Letter of Credit. (iv) Issuance of Letter of Credit. Upon -------- -- ------ -- ------ satisfaction or waiver (in accordance with subsection 10.6) of the conditions set forth in subsection 4.3, the Issuing Lender shall issue the requested Letter of Credit in accordance with the Issuing Lender's standard operating procedures, and upon its issuance of such Letter of Credit the Issuing Lender shall promptly notify Agent and each Lender of such issuance, which notice shall be accompanied by a copy of such Letter of Credit. (v) Report to Lenders. Within 15 days after the ------ -- ------- end of each calendar quarter ending after the Closing Date, so long as any Letter of Credit shall have been outstanding during such calendar quarter, each Issuing Lender shall deliver to each other Lender a report setting forth the average for such calendar quarter of the daily maximum amount available to be drawn under the Letters of Credit issued by such Issuing Lender that were outstanding during such calendar quarter. C. Lenders' Purchase of Participations in Letters of Credit. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby agrees to, have irrevocably purchased from the Issuing Lender a participation in such Letter of Credit and drawings thereunder in an amount equal to such Lender's Pro Rata Share of the maximum amount which is or at any time may become available to be drawn thereunder. 3.2 Letter of Credit Fees. ------ -- ------ ---- Company agrees to pay the following amounts to each Issuing Lender with respect to Letters of Credit issued by it: (i) with respect to each Standby Letter of Credit, (a) a fronting fee equal to 0.25% per annum of the average daily maximum amount available to be drawn under such Standby Letter of Credit; provided that in any event -------- the minimum fronting fee for any Standby Letter of Credit shall be $500 (it being agreed that, at the time of any cancellation or expiration of a Standby Letter of Credit, if $500 exceeds the amount of fronting fees theretofore paid or then accrued with respect to such Standby Letter of Credit, the amount of such excess shall be payable on the next date upon which accrued fronting fees in respect of Standby Letters of Credit are otherwise payable as provided in this sentence); and (b) a letter of credit fee equal to 1.75% per annum multiplied by the average ---------- -- daily maximum amount available to be drawn under such Standby Letter of Credit, in each case payable in arrears on and through each January 15, April 15, July 15 and October 15 of each year and computed on the basis of a 360-day year for the actual number of days elapsed; (ii) with respect to each Commercial Letter of Credit, (a) a fronting fee equal to 0.25% per annum of the average daily maximum amount available to be drawn under such Commercial Letter of Credit and (b) a letter of credit fee equal to 0.25% per annum of the average daily maximum amount available to be drawn under such Commercial Letter of Credit, in each case payable in arrears on and through each January 15, April 15, July 15 and October 15 of each year and computed on the basis of a 360-day year for the actual number of days elapsed; and (iii) with respect to the issuance, amendment or transfer of each Letter of Credit and each drawing made thereunder (without duplication of the fees payable under clauses (i) and (ii) above), documentary and processing charges in accordance with such Issuing Lender's standard schedule for such charges in effect at the time of such issuance, amendment, transfer or drawing, as the case may be. Promptly upon receipt by such Issuing Lender of any amount described in clause (i)(b) or (ii)(b) of this subsection 3.2, such Issuing Lender shall distribute to each other Lender its Pro Rata Share of such amount. 3.3 Drawings and Reimbursement of Amounts Drawn Under Letters -------- --- ------------- -- ------- ----- ----- ------- of Credit. -- ------ A. Responsibility of Issuing Lender With Respect to Requests For Drawings. In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they strictly comply on their face with the requirements of such Letter of Credit. B. Reimbursement by Company of Amounts Drawn Under Letters of Credit. In the event an Issuing Lender has determined to honor a request for drawing under a Letter of Credit issued by it, such Issuing Lender shall immediately notify Company and Agent, and Company shall reimburse such Issuing Lender on or before the Business Day immediately following the date on which such drawing is honored (the "Reimbursement Date") in an amount in Dollars in same day funds equal to the amount of such drawing; provided that, -------- anything contained in this Agreement to the contrary notwithstanding, (i) unless Company shall have notified Agent and such Issuing Lender prior to 12:00 Noon (New York time) on the date of such drawing that Company intends to reimburse such Issuing Lender for the amount of such drawing with funds other than the proceeds of Revolving Loans, Company shall be deemed to have given a timely Notice of Borrowing to Agent requesting Lenders to make Revolving Loans that are Base Rate Loans on the Reimbursement Date in an amount in Dollars equal to the amount of such drawing and (ii) subject to satisfaction or waiver of the conditions specified in subsection 4.2B, Lenders shall, on the Reimbursement Date, make Revolving Loans that are Base Rate Loans in the amount of such drawing, the proceeds of which shall be applied directly by Agent to reimburse such Issuing Lender for the amount of such drawing; and provided, further that if for any reason proceeds of -------- ------- Revolving Loans are not received by such Issuing Lender on the Reimbursement Date in an amount equal to the amount of such drawing, Company shall reimburse such Issuing Lender, on demand, in an amount in same day funds equal to the excess of the amount of such drawing over the aggregate amount of such Revolving Loans, if any, which are so received. Nothing in this subsection 3.3B shall be deemed to relieve any Lender from its obligation to make Revolving Loans on the terms and conditions set forth in this Agreement, and Company shall retain any and all rights it may have against any Lender resulting from the failure of such Lender to make such Revolving Loans under this subsection 3.3B. C. Payment by Lenders of Unreimbursed Drawings Under Letters of Credit. (i) Payment by Lenders. In the event that Company ------- -- ------- shall fail for any reason to reimburse any Issuing Lender as provided in subsection 3.3B in an amount equal to the amount of any drawing honored by such Issuing Lender under a Letter of Credit issued by it, such Issuing Lender shall promptly notify each other Lender of the unreimbursed amount of such drawing and of such other Lender's respective participation therein based on such Lender's Pro Rata Share. Each Lender shall make available to such Issuing Lender an amount equal to its respective participation, in Dollars and in same day funds, at the office of such Issuing Lender specified in such notice, not later than 12:00 Noon (New York time) on the first business day (under the laws of the jurisdiction in which such office of such Issuing Lender is located) after the date notified by such Issuing Lender. In the event that any Lender fails to make available to such Issuing Lender on such business day the amount of such Lender's participation in such Letter of Credit as provided in this subsection 3.3C, such Issuing Lender shall be entitled to recover such amount on demand from such Lender together with interest thereon at the rate customarily used by such Issuing Lender for the correction of errors among banks for three Business Days and thereafter at the Base Rate. Nothing in this subsection 3.3C shall be deemed to prejudice the right of any Lender to recover from any Issuing Lender any amounts made available by such Lender to such Issuing Lender pursuant to this subsection 3.3C in the event that it is determined by the final judgment of a court of competent jurisdiction that the payment with respect to a Letter of Credit by such Issuing Lender in respect of which payment was made by such Lender constituted gross negligence or willful misconduct on the part of such Issuing Lender. (ii) Distribution to Lenders of Reimbursements ------------ -- ------- -- -------------- Received From Company. In the event any Issuing Lender -------- ---- ------- shall have been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any portion of any drawing honored by such Issuing Lender under a Letter of Credit issued by it, such Issuing Lender shall distribute to each other Lender which has paid all amounts payable by it under subsection 3.3C(i) with respect to such drawing such other Lender's Pro Rata Share of all payments subsequently received by such Issuing Lender from Company in reimbursement of such drawing when such payments are received. Any such distribution shall be made to a Lender at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request. D. Interest on Amounts Drawn Under Letters of Credit. (i) Payment of Interest by Company. Company agrees ------- -- -------- -- ------- to pay to each Issuing Lender, with respect to drawings made under any Letters of Credit issued by it, interest on the amount paid by such Issuing Lender in respect of each such drawing from the date of such drawing to but excluding the date such amount is reimbursed by Company (including any such reimbursement out of the proceeds of Revolving Loans pursuant to subsection 3.3B) at a rate equal to (a) for the period from the date of such drawing to but excluding the Reimbursement Date, the rate then in effect under this Agreement with respect to Revolving Loans that are Base Rate Loans and (b) thereafter, a rate which is 2% per annum in excess of the rate of interest otherwise payable under this Agreement with respect to Revolving Loans that are Base Rate Loans. Interest payable pursuant to this subsection 3.3D(i) shall be computed on the basis of a 360-day year for the actual number of days elapsed in the period during which it accrues and shall be payable on demand or, if no demand is made, on the date on which the related drawing under a Letter of Credit is reimbursed in full. (ii) Distribution of Interest Payments by Issuing ------------ -- -------- -------- -- ------- Lender. Promptly upon receipt by any Issuing Lender of ------ any payment of interest pursuant to subsection 3.3D(i), (a) such Issuing Lender shall distribute to each other Lender, out of the interest received by such Issuing Lender in respect of the period from the date of the applicable drawing under a Letter of Credit issued by such Issuing Lender to but excluding the date on which such Issuing Lender is reimbursed for the amount of such drawing (including any such reimbursement out of the proceeds of Revolving Loans pursuant to subsection 3.3B), the amount that such other Lender would have been entitled to receive in respect of the letter of credit fee that would have been payable in respect of such Letter of Credit for such period pursuant to subsection 3.2 if no drawing had been made under such Letter of Credit, and (b) in the event such Issuing Lender shall have been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any portion of such drawing, such Issuing Lender shall distribute to each other Lender which has paid all amounts payable by it under subsection 3.3C(i) with respect to such drawing such other Lender's Pro Rata Share of any interest received by such Issuing Lender in respect of that portion of such drawing so reimbursed by other Lenders for the period from the date on which such Issuing Lender was so reimbursed by other Lenders to and including the date on which such portion of such drawing is reimbursed by Company. Any such distribution shall be made to a Lender at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request. 3.4 Obligations Absolute. ----------- -------- The obligation of Company to reimburse each Issuing Lender for drawings made under the Letters of Credit issued by it and to repay any Revolving Loans made by Lenders pursuant to subsection 3.3B and the obligations of Lenders under subsection 3.3C(i) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including, without limitation, the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, set-off, defense or other right which Company or any Lender may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), any Issuing Lender or other Lender or any other Person or, in the case of a Lender, against Company, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between Company or one of its Subsidiaries and the beneficiary for which any Letter of Credit was procured); (iii) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by the applicable Issuing Lender under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not strictly comply with the terms of such Letter of Credit; (v) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any of its Subsidiaries; (vi) any breach of this Agreement or any other Loan Document by any party thereto; (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; or (viii) the fact that an Event of Default or a Potential Event of Default shall have occurred and be continuing; provided, in each case, that payment by the applicable Issuing -------- Lender under the applicable Letter of Credit shall not have constituted gross negligence or willful misconduct of such Issuing Lender under the circumstances in question (as deter- mined by a final judgment of a court of competent jurisdiction). 3.5 Indemnification; Nature of Issuing Lenders' Duties. ---------------- ------ -- ------- -------- ------ A. Indemnification. In addition to amounts payable as provided in subsection 3.6, Company hereby agrees to protect, indemnify, pay and save harmless each Issuing Lender from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which such Issuing Lender may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing Lender, other than as a result of (a) the gross negligence or willful misconduct of such Issuing Lender as determined by a final judgment of a court of competent jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor by such Issuing Lender of a proper demand for payment made under any Letter of Credit issued by it; or (ii) the failure of such Issuing Lender to honor a drawing under any such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions herein called "Governmental Acts"). B. Nature of Issuing Lenders' Duties. As between Company and any Issuing Lender, Company assumes all risks of the acts and omissions of, or misuse of the Letters of Credit issued by such Issuing Lender by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, such Issuing Lender shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of such Issuing Lender, including without limitation any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of such Issuing Lender's rights or powers hereunder. In furtherance and extension and not in limitation of the specific provisions set forth in the first paragraph of this subsection 3.5B, any action taken or omitted by any Issuing Lender under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not put such Issuing Lender under any resulting liability to Company. Notwithstanding anything to the contrary contained in this subsection 3.5 (including without limitation the last sentence of the second preceding paragraph), Company shall retain any and all rights it may have against any Issuing Lender for any liability arising solely out of the gross negligence or willful misconduct of such Issuing Lender, as determined by a final judgment of a court of competent jurisdiction. 3.6 Increased Costs and Taxes Relating to Letters of Credit. --------- ----- --- ----- -------- -- ------- -- ------ In the event that any Issuing Lender or Lender shall determine (which determination shall, absent manifest error (including arithmetical error), be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by any Issuing Lender or Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Issuing Lender or Lender (or its applicable lending or letter of credit office) to any additional Tax (other than any Tax on the overall net income of such Issuing Lender or Lender) with respect to the issuing or maintaining of any Letters of Credit or the purchasing or maintaining of any participations therein or any other obligations under this Section 3, whether directly or by such being imposed on or suffered by any particular Issuing Lender; (ii) imposes, modifies or holds applicable any reserve (including without limitation any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement in respect of any Letters of Credit issued by any Issuing Lender or participations therein purchased by any Lender; or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Issuing Lender or Lender (or its applicable lending or letter of credit office) regarding this Section 3 or any Letter of Credit or any participation therein; and the result of any of the foregoing is to increase the cost to such Issuing Lender or Lender of agreeing to issue, issuing or maintaining any Letter of Credit or agreeing to purchase, purchasing or maintaining any participation therein or to reduce any amount received or receivable by such Issuing Lender or Lender (or its applicable lending or letter of credit office) with respect thereto; then, in any case, Company shall promptly pay to such Issuing Lender or Lender, upon receipt of the statement referred to in the immediately succeeding sentence, such additional amount or amounts as may be necessary to compensate such Issuing Lender or Lender for any such increased cost or reduction in amounts received or receivable hereunder. Such Issuing Lender or Lender shall deliver to Company a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Issuing Lender or Lender under this subsection 3.6, which statement shall be conclusive and binding upon all parties hereto absent manifest error (including arithmetical error). Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT The obligations of Lenders to make Loans and the issuance of Letters of Credit hereunder are subject to the satisfaction of the following conditions. 4.1 Conditions to Initial Revolving Loans and Swing Line ---------- -- ------- --------- ----- --- ----- ---- Loans. ----- The obligations of Lenders to make the Revolving Loans and Swing Line Loans to be made on the Closing Date are, in addition to the conditions precedent specified in subsection 4.2, subject to prior or concurrent satisfaction of the following conditions: A. Company Documents. On or before the Closing Date, Company shall deliver or cause to be delivered to Lenders (or to Agent for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel) the following, each, unless otherwise noted, dated the Closing Date: (i) Certified copies of its Certificate of Incorporation, together with a good standing certificate from the Secretary of State of the State of Delaware and each other state in which it is qualified as a foreign corporation to do business, each dated a recent date prior to the Closing Date; (ii) Copies of its Bylaws, certified as of the Closing Date by its corporate secretary or an assistant secretary; (iii) Resolutions of its Board of Directors approving and authorizing the execution, delivery and performance of this Agreement, the other Loan Documents and the Spin-Off Agreements and authorizing the consummation of the transactions contemplated hereby and thereby, certified as of the Closing Date by its corporate secretary or an assistant secretary as being in full force and effect without modification or amendment; (iv) Signature and incumbency certificates of its officers executing this Agreement and the other Loan Documents; and (v) Executed originals of this Agreement, the Notes (duly executed in accordance with subsection 2.1D, drawn to the order of each Lender and the Swing Line Lender and with appropriate insertions), the Company Security Agreement, the Company Trademark Security Agreement, the Company Pledge Agreement, the Collateral Account Agreement and the other Loan Documents to which it is a party. B. Subsidiary Documents. On or before the Closing Date, Company shall cause each of its Subsidiaries (other than Stuart) to deliver to Lenders (or to Agent for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel) the following, each, unless otherwise noted, dated the Closing Date: (i) Certified copies of such Subsidiary's Certificate of Incorporation, together with a good standing certificate from the Secretary of State of the state of such Subsidiary's incorporation and each other state in which such Subsidiary is qualified as a foreign corporation to do business, each dated a recent date prior to the Closing Date; (ii) Copies of such Subsidiary's Bylaws, certified as of the Closing Date by such Subsidiary's corporate secretary or an assistant secretary; (iii) Resolutions of such Subsidiary's Board of Directors approving and authorizing the execution, delivery and performance of the Loan Documents to which such Subsidiary is a party, certified as of the Closing Date by such Subsidiary's corporate secretary or an assistant secretary as being in full force and effect without modification or amendment; (iv) Signature and incumbency certificates of such Subsidiary's officers executing the Loan Documents to which such Subsidiary is a party; and (v) Executed originals of the Subsidiary Guaranty, the Subsidiary Security Agreement, the Subsidiary Trademark Security Agreement, the Subsidiary Pledge Agreement and other Loan Documents to which such Subsidiary is a party. C. Delivery of Closing Date Mortgages; Closing Date Mortgage Policies. Agent shall have received from Company and its Subsidiaries (i) fully executed and notarized Mortgages (each a "Closing Date Mortgage" and collectively the "Closing Date Mortgages") encumbering the fee interest and/or leasehold interest of Company and its Subsidiaries in each Real Property Asset designated in Part I of Schedule 4.1C annexed hereto -------- ---- (each a "Closing Date Mortgaged Property" and collectively the "Closing Date Mortgaged Properties"); (ii) a title report obtained by Company in respect of any Closing Date Mortgaged Property consisting of fee interests in Real Property Assets and a title report obtained by Company in respect of any Closing Date Mortgaged Property consisting of leasehold interests in Real Property Assets and designated in Part II of Schedule 4.1C annexed hereto; (iii) an opinion of counsel -------- ---- (which counsel shall be reasonably satisfactory to Agent and CO-AGENT) in the state in which each Closing Date Mortgaged -------- Property is located with respect to the enforceability of the form of Closing Date Mortgage to be recorded in such state and such other matters as Agent or CO-AGENT may reasonably -------- request, in form and substance reasonably satisfactory to Agent and CO-AGENT; (iv) in the case of each real property -------- leasehold interest of Company or any of its Subsidiaries constituting Closing Date Mortgaged Property, (a) such estoppel letters, consents and waivers from the landlords on such real property as may be required by Agent or CO-AGENT, -------- which estoppel letters shall be in form and substance reasonably satisfactory to Agent and CO-AGENT and which -------- consents and waivers shall consent to the Closing Date Mortgage relating to such leasehold interest and to the assignment of such leasehold interest to the successful bidder at a foreclosure or similar sale (and to a subsequent third party assignee by Agent or any Lender to the extent Agent or such Lender is the successful bidder at such sale) in the event of a foreclosure or similar action pursuant to such Closing Date Mortgage and (b) evidence that the applicable lease, a memorandum of lease with respect thereto, or other evidence of such lease in form and substance reasonably satisfactory to Agent, has been or will be recorded in all places to the extent necessary or desirable, in the reasonable judgment of Agent, so as to enable the Closing Date Mortgage encumbering such leasehold interest to effectively create a valid and enforceable first priority lien (subject to Permitted Encumbrances) on such leasehold interest in favor of Agent (or such other Person as may be required or desired under local law) for the benefit of Lenders; (v) ALTA mortgagee title insurance policies issued by First American Title Insurance Company of New York or other title insurers reasonably satisfactory to Agent (the "Closing Date Mortgage Policies"), in amounts not less than the respective amounts designated in Schedule 4.1C annexed hereto with respect to any -------- ---- particular Closing Date Mortgaged Properties, assuring Agent that the applicable Closing Date Mortgages create valid and enforceable first priority mortgage liens on the respective Closing Date Mortgaged Properties, free and clear of all defects and encumbrances except Permitted Encumbrances and subject to a standard survey exception, which Closing Date Mortgage Policies shall be in form and substance reasonably satisfactory to Agent and CO-AGENT and shall include an -------- endorsement for mechanics' liens, for future advances under this Agreement, the Notes and the other Loan Documents, and for any other matters that Agent or CO-AGENT may reasonably -------- request, and shall provide for affirmative insurance and such reinsurance as Agent or CO-AGENT may reasonably request, all -------- of the foregoing in form and substance reasonably satisfactory to Agent and CO-AGENT; (vi) evidence, which may be in the form -------- of a letter from an insurance broker, a municipal engineer, Charles Jones, Inc. or Transamerica Flood Hazard Certification, as to whether (a) any Closing Date Mortgaged Property (``Closing Date Flood Hazard Property'') is in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards and (b) the community in which such Closing Date Flood Hazard Property is located is participating in the National Flood Insurance Program; and (vii) if there are any Closing Date Flood Hazard Properties, Company's written acknowledgement of receipt of written notification from Agent (a) as to the existence of each such Closing Date Flood Hazard Property and (b) as to whether the community in which each such Closing Date Flood Hazard Property is located is participating in the National Flood Insurance Program. D. Security Interests. To the extent not otherwise satisfied pursuant to subsection 4.1C, Company and its Subsidiaries shall have taken or caused to be taken (and Agent shall have received satisfactory evidence thereof) such actions (other than the filing or recording of items described in clauses (ii), (iii) and (iv) below) in such a manner so that Agent has a valid and perfected first priority security interest as of such date in the entire Collateral (except to the extent any such security interest cannot be granted under applicable laws). Such actions shall include, without limitation, (i) delivery to Agent of certificates (which certificates shall be registered in the name of Agent or properly endorsed in blank for transfer or accompanied by irrevocable undated stock powers duly endorsed in blank, all in form and substance satisfactory to Agent and CO-AGENT) -------- representing the capital stock pledged pursuant to the Company Pledge Agreement and the Subsidiary Pledge Agreements and delivery to Agent of all other instruments (duly endorsed where appropriate) evidencing the Collateral, (ii) delivery to Agent of Uniform Commercial Code financing statements as to the Collateral for all jurisdictions as may be necessary or desirable to perfect the security interests in the Collateral, (iii) delivery to Agent of the Company Trademark Security Agreement and the Subsidiary Trademark Security Agreements together with the cover sheets required for filing with the United States Patent and Trademark Office and (iv) delivery to Agent of such other documents and instruments that Agent or CO-AGENT reasonably deems necessary or advisable to establish, -------- preserve and perfect the first priority Liens granted to Agent on behalf of Lenders under the Collateral Documents. E. Arrangements with SMG-II, Holdings, PTKH and Pathmark. On or prior to the Closing Date, (i) each of Company, SMG-II, Holdings, PTKH, Pathmark and Chefmark shall have entered into each of the Spin-Off Agreements to which such Person is a party, in each case in form and substance satisfactory to Agent and Lenders, (ii) Agent shall have received evidence satisfactory to Agent and CO-AGENT that the -------- transfer of assets contemplated by the agreement described in clause (i) of the definition of the term "Spin-Off Agreements" has been consummated, and (iii) all other arrangements among Company, SMG-II, Holdings, PTKH and Pathmark shall be satisfactory in form and substance to Agent, CO-AGENT and -------- Requisite Lenders. F. Appraisals. Agent shall have received appraisals, in form, scope and substance satisfactory to Agent and satisfying the requirements of any applicable laws and regulations, concerning any real property fee interests of Company or any of its Subsidiaries constituting Closing Date Mortgaged Properties (in each case to the extent required under such laws and regulations as determined by Agent in its discretion). G. Environmental Matters. Agent shall have received reports and other information, in form, scope and substance satisfactory to Agent, concerning environmental liabilities of Company and its Subsidiaries with respect to the Facilities listed on Schedule 4.1G annexed hereto. -------- ---- H. Pathmark Credit Agreement. On or prior to the Closing Date, Pathmark shall have entered into the Pathmark Credit Agreement with the other parties thereto and all conditions precedent to the funding of the initial loans thereunder shall have been satisfied or waived with the consent of Agent, CO-AGENT and Requisite Lenders. -------- I. Opinions of Company's Counsel. Lenders and their respective counsel shall have received (i) originally executed copies of one or more favorable written opinions of Shearman & Sterling, counsel for Company and its Subsidiaries, in form and substance reasonably satisfactory to Agent and its counsel and CO-AGENT, dated as of the Closing Date and setting forth -------- substantially the matters in the opinions designated in Exhibit IX annexed hereto and as to such other matters as ------- -- Agent acting on behalf of Lenders may reasonably request, together with evidence satisfactory to Agent that Company and such Subsidiaries requested such counsel to deliver such opinions to Lenders, (ii) originally executed copies of one or more favorable written opinions of Marc A. Strassler, vice president and general counsel of Company and its Subsidiaries, in form and substance reasonably satisfactory to Agent and its counsel and CO-AGENT, dated as of the Closing Date and setting -------- forth substantially the matters in the opinions designated in Exhibit X annexed hereto and as to such other matters as Agent ------- - acting on behalf of Lenders may reasonably request, and (iii) copies of all opinions (other than the opinions described in the immediately preceding clauses (i) and (ii)) required to be delivered by Shearman & Sterling, counsel for SMG-II, Holdings, PTKH, Pathmark, Company, Company's Subsidiaries and Chefmark, and Marc A. Strassler, vice president and general counsel of SMG-II, Holdings, PTKH, Pathmark, Company, Company's Subsidiaries and Chefmark, to the lenders party to the Pathmark Credit Agreement pursuant to clauses (i), (ii) and (iii) of subsection 4.1M of the Pathmark Credit Agreement. J. Opinions of Agent's Counsel. Lenders shall have received originally executed copies of one or more favorable written opinions of O'Melveny & Myers, counsel to Agent, dated as of the Closing Date, substantially in the form of Exhibit XI annexed hereto and as to such other matters as ------- -- Agent acting on behalf of Lenders may reasonably request. K. Audit of Inventory and Accounts Receivable. On or prior to the Closing Date, Agent and Lenders shall have received reports and other information, in form, scope and substance satisfactory to Agent and Lenders, resulting from an audit of all Inventory and all accounts receivable of Company. L. Estimate of Stand-Alone Expenses. On or prior to the Closing Date, Agent and Lenders shall have received a certificate from Pathmark executed by its chief financial officer, in form and substance satisfactory to Agent and Lenders, setting forth an estimate of stand-alone expenses that would be incurred by Company and its Subsidiaries with respect to certain items designated by Agent and Lenders, including without limitation legal, tax, accounting and cash management services and the information systems supporting such items, if such items were provided by a third party other than Pathmark (on an arms-length basis), and an explanation of the assumptions on which such estimate is based. M. Borrowing Base Certificate. Company shall have delivered to Agent and Lenders a Borrowing Base Certificate substantially in the form of Exhibit VII annexed hereto, ------- --- prepared as of a recent date prior to the Closing Date. N. Fees. Company shall have paid to Agent, for distribution (as appropriate) to Agent and Lenders, the fees payable on the Closing Date referred to in subsection 2.3. O. No Material Adverse Effect. Since January 30, 1993, no material adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company and its Subsidiaries, taken as a whole, or in the Transferred Businesses, Transferred Assets or Assumed Liabilities (as each such term is defined in the Spin- Off Agreement described in clause (i) of the definition of Spin-Off Agreements), shall have occurred. P. Certain Related Documents. On the Closing Date, (i) Agent shall have received executed or conformed copies of the Spin-Off Agreements (in each case as amended through and including the Closing Date), the terms and conditions of which shall be in all respects satisfactory to Agent, CO-AGENT and -------- Requisite Lenders, (ii) except as otherwise disclosed to and agreed to in writing by Agent, CO-AGENT and Requisite Lenders, -------- (a) the Spin-Off Agreements shall be in full force and effect and no term or condition thereof shall have been amended, modified or waived after the execution thereof, (b) Company shall not have failed in any material respect to perform any material obligation or covenant required by the Spin-Off Agreements to be performed or complied with by it on or before the Closing Date, and (c) all conditions to the Spin-Off (including, without limitation, any necessary third party consents and approvals) shall have been satisfied or waived pursuant to all applicable terms and proceedings and by Agent and CO-AGENT, and (iii) Agent shall have received an Officers' -------- Certificate from Company, in form and substance satisfactory to Agent and CO-AGENT, to the effect set forth in clause (ii) -------- above. Q. Representations and Warranties; Performance of Agreements. Company shall have delivered to Agent an Officers' Certificate, in form and substance satisfactory to Agent and CO-AGENT, to the effect that the representations and -------- warranties in Section 5 hereof are true, correct and complete in all material respects on and as of the Closing Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date, and that Company shall have performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by it on or before the Closing Date except as otherwise disclosed to and agreed to in writing by Agent and Requisite Lenders. R. Completion of Proceedings. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby, by the other Loan Documents and by the Spin-Off Agreements and all documents incidental thereto not previously found acceptable by Agent, acting on behalf of Lenders, and its counsel or CO-AGENT shall be -------- satisfactory in form and substance to Agent and such counsel and CO-AGENT, and Agent and such counsel shall have received -------- all such counterpart originals or certified copies of such documents as Agent or CO-AGENT may reasonably request. -------- S. Pro Forma Unaudited Consolidated Balance Sheet. Company shall have delivered to Agent, CO-AGENT and Lenders a -------- pro forma unaudited consolidated balance sheet of Company and its Subsidiaries as at the Closing Date prepared on the basis that the Spin-Off had been consummated. 4.2 Conditions to All Loans. ---------- -- --- ----- The obligations of Lenders to make Loans on each Funding Date are subject to the following further conditions precedent: A. Agent shall have received before that Funding Date, in accordance with the provisions of subsection 2.1B, an originally executed Notice of Borrowing, in each case signed by the chief executive officer, the chief financial officer, the treasurer or the controller of Company or by any other officer or cash management personnel of Company designated by any of the above-described officers on behalf of Company in a writing delivered to Agent. B. As of that Funding Date the following statements shall be true (and each of the giving of the applicable Notice of Borrowing and the acceptance by Company of the proceeds of such Loan shall constitute a representation and warranty by Company that such statements (other than statements as to matters of opinion of Agent or of Requisite Lenders) are true as of that Funding Date): (i) The representations and warranties contained herein and in the other Loan Documents are true, correct and complete in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties were true, correct and complete in all material respects on and as of such earlier date; (ii) No event has occurred and is continuing or would result from the consummation of the borrowing contemplated by such Notice of Borrowing that would constitute an Event of Default or a Potential Event of Default; (iii) Each Loan Party has performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by it on or before that Funding Date; (iv) The amount of the proposed borrowing of Loans contemplated by such Notice of Borrowing does not cause the Total Utilization of Revolving Loan Commitments to exceed the Borrowing Base in effect on that Funding Date; (v) No order, judgment or decree of any court, arbitrator or governmental authority has purported to enjoin or restrain any Lender from making the Loans to be made by it on that Funding Date; (vi) The making of the Loans requested on such Funding Date does not violate any law including, without limitation, Regulation G, Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System; and (vii) There is not pending or, to the knowledge of Company, threatened, any action, suit, proceeding, governmental investigation or arbitration against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries that has not been disclosed by Company in writing pursuant to subsection 5.6 or 6.1(xi) prior to the making of the last preceding Loans (or, in the case of the initial Loans, prior to the execution of this Agreement), and there has occurred no development not so disclosed in any such action, suit, proceeding, governmental investigation or arbitration so disclosed, that, in either event, in the opinion of Agent, of CO-AGENT or of Requisite Lenders, -------- could reasonably be expected to have a Material Adverse Effect; and no injunction or other restraining order has been issued and no hearing to cause an injunction or other restraining order to be issued is pending or noticed with respect to any action, suit or proceeding seeking to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the Spin-Off, the transactions contemplated by this Agreement or any of the other Loan Documents or the making of Loans hereunder. 4.3 Conditions to Letters of Credit. ---------- -- ------- -- ------ The issuance of any Letter of Credit hereunder (whether or not the applicable Issuing Bank is obligated to issue such Letter of Credit) is subject to the following conditions precedent: A. On or before the date of issuance of the initial Letter of Credit pursuant to this Agreement, the initial Loans shall have been made. B. On or before the date of issuance of such Letter of Credit, Agent shall have received, in accordance with the provisions of subsection 3.1B(i), an originally executed Notice of Issuance of Letter of Credit, in each case signed by the chief executive officer, the chief financial officer, the treasurer or the controller of Company or by any other officer or cash management personnel of Company designated by any of the above-described officers on behalf of Company in a writing delivered to Agent, together with all other information specified in subsection 3.1B(i) and such other documents or information as the applicable Issuing Lender may reasonably require in connection with the issuance of such Letter of Credit. C. On the date of issuance of such Letter of Credit, all conditions precedent described in subsection 4.2B shall be satisfied to the same extent as if the issuance of such Letter of Credit were the making of a Loan and the date of issuance of such Letter of Credit were a Funding Date. Section 5. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Agree- ment and to make the Loans, to induce Issuing Lenders to issue Letters of Credit and to induce other Lenders to purchase participations therein, Company represents and warrants to each Lender, on the date of this Agreement, on each Funding Date and on the date of issuance of each Letter of Credit, that the following statements are true, correct and complete (it being agreed that each such statement which expressly refers to a particular date shall be understood to continue to refer to such particular date each time that the representation and warranty of Company set forth in this paragraph is made): 5.1 Organization, Powers, Qualification, Good Standing, ------------- ------- -------------- ---- --------- Business and Subsidiaries. -------- --- ------------ A. Organization and Powers. Each Loan Party is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. Each Loan Party has all requisite corporate power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents and the Spin-Off Agreements, to carry out the transactions contemplated thereby and to issue and pay the Notes, in each case to the extent it is a party thereto. B. Qualification and Good Standing. Each Loan Party is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had and could not reasonably be expected to have a Material Adverse Effect. C. Conduct of Business. Company and its Subsidiaries are engaged only in the businesses permitted to be engaged in pursuant to subsection 7.14. D. Subsidiaries. All of the Subsidiaries of Company as of the Closing Date are identified in Schedule 5.1 annexed -------- --- hereto. The capital stock of each of the Subsidiaries of Company identified in Schedule 5.1 annexed hereto is duly -------- --- authorized, validly issued, fully paid and nonassessable and none of such capital stock constitutes Margin Stock. Each of the Subsidiaries of Company identified in Schedule 5.1 annexed -------- --- hereto is validly existing and in good standing under the laws of its respective jurisdiction of incorporation set forth therein, has full corporate power and authority to own its assets and properties and to operate its business as presently owned and conducted, and is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, in each case except where failure to be so qualified or in good standing or a lack of such corporate power and authority has not had and could not reasonably be expected to have a Material Adverse Effect. Schedule 5.1 -------- --- annexed hereto correctly sets forth, as of the Closing Date, the ownership interest of Company in each of its Subsidiaries identified therein. 5.2 Authorization of Borrowing, etc. ------------- -- ---------- ---- A. Authorization of Borrowing. The execution, delivery and performance of the Loan Documents and the Spin-Off Agreements and the issuance, delivery and payment of the Notes have been duly authorized by all necessary corporate action on the part of each Loan Party that is a party thereto. B. No Conflict. The execution, delivery and perfor- mance by Company and its Subsidiaries of the Loan Documents and the Spin-Off Agreements, the issuance, delivery and payment of the Notes and the consummation of the Spin-Off and the other transactions contemplated by the Loan Documents and the Spin-Off Agreements do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Company or any of its Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Company or any of its Subsidiaries or any order, judgment or decree of any court or other agency of government binding on Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Company or any of its Subsidiaries (other than any Liens created under any of the Loan Documents in favor of Agent on behalf of Lenders), or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company or any of its Subsidiaries, except for such approvals or consents which will be obtained on or before the Closing Date and those set forth on Schedule 5.2B annexed hereto. -------- ---- C. Governmental Consents. The execution, delivery and performance by Company and its Subsidiaries of the Loan Documents and the Spin-Off Agreements, the issuance, delivery and payment of the Notes and the consummation of the Spin-Off and the transactions contemplated by the Loan Documents and the Spin-Off Agreements do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body, except for ------ (i) filings and recordings required in connection with the perfection of the security interests granted pursuant to the Loan Documents, (ii) registrations, consents, approvals, notices or other actions set forth on Schedule 5.2C annexed -------- ---- hereto, and (iii) registrations, consents, approvals, notices or other actions the absence of which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. D. Binding Obligation. Each of the Loan Documents and the Spin-Off Agreements has been duly executed and delivered by each Loan Party that is a party thereto and is the legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). 5.3 Financial Condition. --------- --------- Company has heretofore (or, in the case of the balance sheet described in clause (ii) below, Company has as of the Closing Date) delivered to Lenders, at Lenders' request, the following financial statements and information: (i) the pro forma unaudited consolidated balance sheet of Company and its Subsidiaries as at January 30, 1993 and the related pro forma unaudited consolidated statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for the Fiscal Year then ended and (ii) the pro forma unaudited consolidated balance sheet of Company and its Subsidiaries described in subsection 4.1S, each prepared on the basis that the Spin-Off had been consummated at the beginning of such Fiscal Year. All such statements were prepared on a pro forma basis in conformity with GAAP and fairly present, on a pro forma basis as described above, the financial position (on a consolidated basis) of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows (on a consolidated basis) of the entities described therein for the Fiscal Year then ended, subject to changes resulting from audit and year-end adjustments. Company does not (and will not following the funding of the initial Loans) have any Contingent Obligation, contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not (but should in conformity with GAAP be) reflected in the foregoing financial statements or the notes thereto and which in any such case is material in relation to the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any of its Subsidiaries. 5.4 No Material Adverse Change; No Restricted Junior Payments. -- -------- ------- ------- -- ---------- ------ -------- As of the Closing Date, no material adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company and its Subsidiaries, taken as a whole, or in the Transferred Businesses, Transferred Assets or Assumed Liabilities (as each such term is defined in the Spin-Off Agreement described in clause (i) of the definition of Spin-Off Agreements), has occurred since January 30, 1993. As of any time after the Closing Date, no event or change has occurred since the Closing Date that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect. Neither Company nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made, or set apart any sum or property for, any Restricted Junior Payment or agreed to do so except as permitted by subsection 7.5. 5.5 Title to Properties; Liens. ----- -- ----------- ----- Company and its Subsidiaries have (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective properties and assets reflected in the financial statements referred to in subsection 5.3 or in the most recent financial statements delivered pursuant to subsection 6.1, in each case except for assets disposed of since the date of such financial statements in the ordinary course of business or as otherwise permitted under subsection 7.7. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens. 5.6 Litigation; Adverse Facts. ----------- ------- ----- Except as set forth in Schedule 5.6 annexed hereto, -------- --- there is no action, suit, proceeding, arbitration or governmental investigation (whether or not purportedly on behalf of Company or any of its Subsidiaries) at law or in equity or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, pending or, to the knowledge of Company, threatened against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries that has had, or could reasonably be expected to result in, a Material Adverse Effect. Neither Company nor any of its Subsidiaries is (i) in violation of any applicable law that has had, or could reasonably be expected to result in, a Material Adverse Effect or (ii) subject to or in default with respect to any final judgment, writ, injunction, decree, rule or regulation of any court or any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that has had, or could reasonably be expected to result in, a Material Adverse Effect. 5.7 Payment of Taxes. ------- -- ----- Except to the extent permitted by subsection 6.3, all tax returns and reports of Company and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes, assessments, fees and other governmental charges upon Company and its Subsidiaries and upon their respective properties, assets, income, businesses and fran- chises which are shown thereon to be due and payable have been paid when due and payable. Company knows of no proposed tax assessment against Company or any of its Subsidiaries which is not being contested by Company or such Subsidiary in good faith and by appropriate proceedings; provided that such -------- reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. 5.8 Performance of Agreements; Materially Adverse Agreements. ----------- -- ----------- ---------- ------- ---------- A. Neither Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to result in a Material Adverse Effect. B. Neither Company nor any of its Subsidiaries is a party to or is otherwise subject to any agreement or instrument or any charter or other internal restriction which has had, or could reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect. 5.9 Governmental Regulation. ------------ ---------- Neither Company nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable, except that Pauls Trucking Corp. is licensed by the Interstate Commerce Commission as a "common carrier." 5.10 Securities Activities. ---------- ---------- Neither Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. 5.11 Employee Benefit Plans. -------- ------- ----- A. Company and each of its ERISA Affiliates are in compliance in all material respects with all applicable provisions and requirements of ERISA and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed all their obligations under each Employee Benefit Plan. B. No ERISA Event has occurred with respect to which Company or any of its ERISA Affiliates is subject to any unsatisfied liability in excess of $1,000,000 or with respect to which Company or any of its ERISA Affiliates could reasonably be expected to incur liability in excess of $1,000,000, and no ERISA Event is reasonably expected to occur after the date hereof which could reasonably be expected to result in a liability to Company or any of its ERISA Affiliates in excess of $500,000. C. Except as set forth on Schedule 5.11 annexed hereto, as of the most recent valuation date for any Pension Plan, the amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), does not exceed $0. 5.12 Certain Fees. ------- ---- No broker's or finder's fee or commission (other than any such fees or commissions that may be payable to Persons engaged by Agent or any Lender in connection with such engagement by Agent or such Lender) will be payable with respect to this Agreement or the Spin-Off, and Company hereby indemnifies Lenders against, and agrees that it will hold Lenders harmless from, any claim, demand or liability for any such broker's or finder's fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable fees, expenses and disbursements of counsel) arising in connection with any such claim, demand or liability. 5.13 Environmental Protection. ------------- ---------- Except as set forth in Schedule 5.13 annexed hereto: -------- ---- (i) the operations of Company and each of its Subsidiaries (including, without limitation, all operations and conditions at or in the Facilities that are presently owned, leased or operated by Company or any of its Subsidiaries) comply with all Environmental Laws except where the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect; (ii) Company and each of its Subsidiaries have obtained all Governmental Authorizations under Environmental Laws necessary to their respective operations, and all such Governmental Authorizations are in effect, and Company and each of its Subsidiaries are in compliance with such Governmental Authorizations except where the failure to obtain or comply with any such Governmental Authorization individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect; (iii) neither Company nor any of its Subsidiaries has received (a) any notice or claim to the effect that it is or may be liable to any Person as a result of or in connection with any Hazardous Materials or (b) any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Sec. 9604) or comparable state laws, and, to the best of Company's knowledge, none of the operations of Company or any of its Subsidiaries is the subject of any federal or state investigation relating to or in connection with any Hazardous Materials at any Facility or at any other location; (iv) none of the operations of Company or any of its Subsidiaries is subject to any judicial or administrative proceeding alleging the violation of or liability under any Environmental Laws which if adversely determined could reasonably be expected to have a Material Adverse Effect; (v) other than provisions in leases entered into by Company or any of its Subsidiaries in the ordinary course of business which individually or in the aggregate would not create a liability that could reasonably be expected to have a Material Adverse Effect, neither Company nor any of its Subsidiaries nor any of their respective Facilities that are presently owned, leased or operated by Company or any of its Subsidiaries nor any of their respective operations are subject to any outstanding written order or agreement with any governmental authority or private party relating to (a) any Environ- mental Laws or (b) any Environmental Claims which, in the case of clause (a) or (b), individually or in the aggregate could reasonably be expected to have a Material Adverse Effect; (vi) neither Company nor any of its Subsidiaries nor, to the best knowledge of Company, any of their respective predecessors by merger or consolidation has filed any notice under any Environmental Law indicating past or present treatment or Release of Hazardous Materials at any Facility, and none of Company's or any of its Subsidiaries' operations involves the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent; (vii) no Hazardous Materials exist on, under or about any Facility in a manner that could reasonably be expected to give rise to an Environmental Claim having a Material Adverse Effect; (viii) neither Company nor any of its Subsidiaries nor, to the best knowledge of Company, any of their respective predecessors by merger or consolidation has disposed of any Hazardous Materials in a manner that could reasonably be expected to give rise to an Environmental Claim having a Material Adverse Effect; (ix) to the best knowledge of Company, no underground storage tanks are on or at any Facility that is presently owned, leased or operated by Company or any of its Subsidiaries; (x) neither Company nor any of its Subsidiaries bears any liability in connection with underground storage tanks on or at Facilities heretofore owned, leased or operated by Company or any of its Subsidiaries that individually or in the aggregate could reasonably be expected to have a Material Adverse Effect; and (xi) to the best knowledge of Company, no Lien in favor of any Person relating to or in connection with any Environmental Claim involving in the aggregate at any time an amount in excess of $500,000 has been filed or has been attached to one or more Facilities that are presently owned, leased or operated by Company or any of its Subsidiaries. 5.14 Employee Matters. -------- ------- There is no strike or work stoppage in existence or threatened involving Company or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect. 5.15 Solvency. -------- Company and each of its Subsidiaries is and, upon the incurrence of any Obligations by Company on any date on which this representation is made, will be, Solvent. 5.16 Disclosure. ---------- No representation or warranty of Company or any of its Subsidiaries contained in any Loan Document, in any Spin- Off Agreement or in any other document, certificate or written statement furnished to Lenders by or on behalf of Company or any of its Subsidiaries for use in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact (known to Company, in the case of any document not furnished by it) necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. There is no fact known (or which should upon the reasonable exercise of diligence be known) to Company (other than matters of a general economic nature) that has had, or could reasonably be expected to result in, a Material Adverse Effect and that has not been disclosed herein or in such other documents, certificates and statements furnished to Lenders for use in connection with the transactions contemplated hereby. 5.17 Intellectual Property. ------------ -------- A. Company and its Subsidiaries own, or are licensed (to the extent required to be so licensed) to use, the Intellectual Property and all such Intellectual Property is fully protected and duly and properly registered, filed or issued in the appropriate office and jurisdictions for such registrations, filing or issuances, and Company owns all of the right, title and interest in and to the "Rickel" trademark under the applicable laws of the United States free and clear of any Lien (other than Permitted Encumbrances and Liens created in favor of Agent on behalf of Lenders pursuant to the Loan Documents). B. Except as disclosed in Schedule 5.17, no material -------- ---- claim has been asserted by any Person with respect to the use of any such Intellectual Property, or challenging or questioning the validity or effectiveness of any such Intellectual Property. Except as disclosed in Schedule 5.17, -------- ---- the use of such Intellectual Property by Company or any of its Subsidiaries does not infringe on the rights of any Person, subject to such claims and infringements as do not, in the aggregate, give rise to any liabilities on the part of Company or any of its Subsidiaries that are material to Company or any of its Subsidiaries. The consummation of the transactions contemplated by this Agreement or the Spin-Off will not in any material manner or to any material extent impair the ownership of (or the license to use, as the case may be) any of such Intellectual Property by Company or any of its Subsidiaries. 5.18 Spin-Off Agreements. -------- ---------- Company has delivered to Lenders complete and correct copies of the Spin-Off Agreements and of all exhibits and schedules thereto. Section 6. COMPANY'S AFFIRMATIVE COVENANTS Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 6. 6.1 Financial Statements and Other Reports. --------- ---------- --- ----- ------- Company will maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP. Company will deliver to Lenders: (i) Monthly Reports: as soon as available and in ------- ------- any event within 30 days after the end of each month ending after the Closing Date, the weekly "EBIT" report for such month for each of the Blair and Rickel divisions of Company and the corporate weekly reports for the weeks ending during such month for each of such divisions, in each case substantially in the form of the pro forma "EBIT" report and corporate weekly reports delivered to Lenders prior to the Closing Date; (ii) Quarterly Financials: as soon as available and --------- ---------- in any event within 45 days after the end of each of the first three fiscal quarters of each Fiscal Year, (a) the consolidated and consolidating balance sheets of Company and its Subsidiaries as at the end of such fiscal quarter and the related consolidated and consolidating statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current Fiscal Year to the end of such fiscal quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year (but only if such corresponding periods begin after the Closing Date), and the corresponding figures from the consolidated plan and financial forecast for the current Fiscal Year delivered pursuant to subsection 6.1(xiv), all in reasonable detail and certified by the chairman, president, chief financial officer or controller of Company that they fairly present the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and year-end adjustments, and (b) a narrative report describing the operations of Company and its Subsidiaries in the form prepared for presentation to senior management for such fiscal quarter and for the period from the beginning of the then current Fiscal Year to the end of such fiscal quarter; (iii) Year-End Financials: as soon as available -------- ---------- and in any event within 90 days after the end of each Fiscal Year, (a) the consolidated and consolidating balance sheets of Company and its Subsidiaries as at the end of such Fiscal Year and the related consolidated and consolidating statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for such Fiscal Year and for the fourth fiscal quarter of such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year or the fourth fiscal quarter thereof, as the case may be (but only if such previous Fiscal Year or the fourth fiscal quarter thereof, as the case may be, begins after the Closing Date), and the corresponding figures from the consolidated plan and financial forecast delivered pursuant to subsection 6.1(xiv) for the Fiscal Year covered by such financial statements, all in reasonable detail and certified by the chairman, president, chief financial officer or controller of Company that they fairly present the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, (b) a narrative report describing the operations of Company and its Subsidiaries in the form prepared for presentation to senior management for such Fiscal Year, and (c) in the case of such consolidated financial statements with respect to such Fiscal Year, a report thereon of Deloitte & Touche or other independent certified public accountants of recognized national standing selected by Company and satisfactory to Agent and CO-AGENT, which report shall be -------- unqualified, shall express no doubts about the ability of Company and its Subsidiaries to continue as a going concern, and shall state that such consolidated financial statements fairly present the consolidated financial position of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (iv) Officers' and Compliance Certificates: --------- --- ---------- ------------ together with each delivery of financial statements of Company and its Subsidiaries pursuant to subdivisions (ii) and (iii) above, (a) an Officers' Certificate of Company stating that the signers have reviewed the terms of this Agreement and have made, or caused to be made under their supervision, a review in reasonable detail of the transactions and condition of Company and its Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that the signers do not have knowledge of the existence as at the date of such Officers' Certificate, of any condition or event that constitutes an Event of Default or Potential Event of Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action Company has taken, is taking and proposes to take with respect thereto; and (b) a Compliance Certificate demonstrating in reasonable detail compliance during and at the end of the applicable accounting periods with the restrictions contained in Section 7; (v) Borrowing Base Certificates: as soon as --------- ---- ------------ available and in any event within 20 days after the end of each month ending after the Closing Date, a Borrowing Base Certificate dated as of the last day of such month together with an Inventory report substantially in the form of Exhibit XXIII annexed hereto and such other ------- ----- information as Agent or CO-AGENT may reasonably request; -------- (vi) Reconciliation Statements: if, as a result of -------------- ---------- any change in accounting principles and policies from those used in the preparation of the audited financial statements referred to in subsection 5.3, the consolidated financial statements of Company and its Subsidiaries delivered pursuant to subdivisions (ii), (iii) or (xiv) of this subsection 6.1 will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such subdivisions had no such change in accounting principles and policies been made, then (a) together with the first delivery of financial statements pursuant to subdivision (i), (ii), (iii) or (xiv) of this subsection 6.1 following such change, consolidated financial statements of Company and its Subsidiaries for (y) the current Fiscal Year to the effective date of such change and (z) the one full Fiscal Year immediately preceding the Fiscal Year in which such change is made, in each case prepared on a pro forma basis as if such change had been in effect during such periods, and (b) together with each delivery of financial statements pursuant to subdivision (ii), (iii) or (xiv) of this subsection 6.1 following such change, a written statement of the chairman, president, chief financial officer or controller of Company setting forth the differences which would have resulted if such financial statements had been prepared without giving effect to such change; (vii) Accountants' Certification: together with ------------ ------------- each delivery of consolidated financial statements of Company and its Subsidiaries pursuant to subdivision (iii) above, a written statement by the independent certified public accountants giving the report thereon (a) stating that their audit examination has included a review of the terms of subsections 7.1, 7.2, 7.3, 7.6, 7.7, 7.8, 7.9 and 7.16 of this Agreement and any definitions set forth in this Agreement relating thereto, in each case as they relate to accounting matters, and (b) stating whether, in connection with their audit examination, any condition or event (including without limitation any condition or event relating to the subsections of this Agreement specified in the immediately preceding clause (a) or relating to subsection 7.4 of this Agreement) that constitutes an Event of Default or Potential Event of Default has come to their attention and, if such a condition or event has come to their attention, specifying the nature and period of existence thereof; provided that such accountants -------- shall not be liable by reason of any failure to obtain knowledge of any such Event of Default or Potential Event of Default that would not be disclosed in the course of their audit examination; (viii) Accountants' Reports: promptly upon ------------ ------- receipt thereof (unless restricted by applicable professional standards), copies of all reports submitted to Company by independent certified public accountants in connection with each annual, interim or special audit of the financial statements of Company and its Subsidiaries made by such accountants, including, without limitation, any comment letter submitted by such accountants to management in connection with their annual audit; (ix) SEC Filings and Press Releases: promptly upon --- ------- --- ----- -------- their becoming available, copies of (a) all financial statements, reports, notices and proxy statements sent or made available generally by Company to its security holders or by any Subsidiary of Company to its security holders other than Company or another Subsidiary of Company, (b) all regular and periodic reports and all registration statements (other than on Form S-8 or a similar form) containing initial preliminary and final (but not, unless otherwise requested by Agent, intermediate draft) prospectuses, if any, filed by Company or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority, and (c) all press releases and other statements made available generally by Company or any of its Subsidiaries to the public concerning material developments in the business of Company or any of its Subsidiaries; (x) Events of Default, etc.: promptly upon any ------ -- -------- ---- officer of Company obtaining knowledge (a) of any condition or event that constitutes an Event of Default or Potential Event of Default, or becoming aware that any Lender has given any notice (other than to Agent) or taken any other action with respect to a claimed Event of Default or Potential Event of Default, (b) that any Person has given any notice to Company or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in subsection 8.2, (c) of any condition or event that would be required to be disclosed in a current report filed by Company with the Securities and Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date hereof) if Company were required to file such reports under the Exchange Act, or (d) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, an Officers' Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given or action taken by any such Person and the nature of such claimed Event of Default, Potential Event of Default, default, event or condition, and what action Company has taken, is taking and proposes to take with respect thereto; (xi) Litigation or Other Proceedings: promptly upon ---------- -- ----- ----------- any officer of Company obtaining knowledge of (X) the institution of, or non-frivolous threat of, any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries (collectively, "Proceedings") not previously disclosed in writing by Company to Lenders or (Y) any material development in any Proceeding that, in any case: (1) after giving effect to coverage and policy limits of insurance policies maintained by Company and its Subsidiaries issued by unaffiliated insurers, has a reasonable possibility of giving rise to a Material Adverse Effect; or (2) seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby or by the Spin-Off Agreements; written notice thereof together with such other information as may be reasonably available to Company to enable Lenders and their counsel to evaluate such matters; (xii) ERISA Events: within 20 days of becoming ----- ------ aware of the occurrence of or forthcoming occurrence of any ERISA Event, a written notice specifying the nature thereof, what action Company or any of its ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Depart- ment of Labor or the PBGC with respect thereto; (xiii) ERISA Notices: with reasonable ----- ------- promptness, copies of (a) if requested by any Lender, each Schedule B (Actuarial Information) to the annual -------- - report (Form 5500 Series) filed by Company or any of its ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan; (b) all notices received by Company or any of its ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (c) such other documents or governmental reports or filings relating to any Employee Benefit Plan as Agent shall reasonably request; (xiv) Financial Plans: as soon as practicable --------- ----- and in any event no later than February 28 of each Fiscal Year, a consolidated plan and financial forecast for such Fiscal Year and the next four succeeding Fiscal Years, including without limitation (a) forecasted consolidated balance sheets and forecasted consolidated statements of income and cash flows of Company and its Subsidiaries for each of such five Fiscal Years, together with an explanation of the assumptions on which such forecasts are based, (b) forecasted consolidated balance sheets and forecasted consolidated statements of income and cash flows of Company and its Subsidiaries for each fiscal quarter of the first such Fiscal Year, together with an explanation of the assumptions on which such forecasts are based, and (c) such other information as any Lender may reasonably request; (xv) Insurance: as soon as practicable and in any --------- event by the last day of each Fiscal Year, a report in form and substance reasonably satisfactory to Agent and CO-AGENT outlining all material insurance coverage -------- maintained as of the date of such report by Company and its Subsidiaries and all material insurance coverage planned to be maintained by Company and its Subsidiaries in the immediately succeeding Fiscal Year; (xvi) Environmental Audits and Reports: as soon ------------- ------ --- ------- as practicable following receipt thereof by Company, copies of all environmental audits and reports, whether prepared by personnel of Company or any of its Subsidiaries or by independent consultants, with respect to significant environmental matters at any Facility or which relate to an Environmental Claim which has a reasonable possibility of giving rise to a Material Adverse Effect; (xvii) Board of Directors: with reasonable ----- -- --------- promptness, written notice of any change in the Board of Directors of Company; (xviii) Audited Consolidated Balance Sheet: as ------- ------------ ------- ----- soon as available and in any event within 90 days after the Closing Date, the consolidated balance sheet of Company and its Subsidiaries as at the Closing Date, together with a report thereon of Deloitte & Touche, which report shall state that such consolidated balance sheet fairly presents the consolidated financial position of Company and its Subsidiaries as at the Closing Date in conformity with GAAP and that the examination by Deloitte & Touche in connection with such consolidated balance sheet has been made in accordance with generally accepted auditing standards; and (xix) Other Information: with reasonable ----- ----------- promptness, such other information and data with respect to Company or any of its Subsidiaries as from time to time may be reasonably requested by any Lender. 6.2 Corporate Existence, etc. --------- ---------- ---- Except to the extent permitted under subsection 7.7, Company will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its corporate existence and all rights and franchises material to its business; provided, however, that neither Company nor any -------- ------- of its Subsidiaries shall be required to preserve any such right or franchise if the Board of Directors of Company or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of Company or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to Company, such Subsidiary or Lenders. 6.3 Payment of Taxes and Claims; Tax Consolidation. ------- -- ----- --- ------- --- ------------- A. Company will, and will cause each of its Subsidiar- ies to, pay all taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any penalty accrues thereon, and all claims (including, without limitation, claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided that no such charge or -------- claim need be paid if being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor. B. Company will not, nor will it permit any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person (other than SMG-II, Holdings or PTKH so long as the filing of such consolidated income tax return is required by applicable law and other than Company or any of its Subsidiaries). 6.4 Maintenance of Properties; Insurance. ----------- -- ----------- --------- Company will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Company and its Subsidiaries (including, without limitation, Intellectual Property) and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof. Company will maintain or cause to be maintained, with financially sound and reputable insurers, insurance with respect to its properties and business and the properties and businesses of its Subsidiaries against loss or damage of the kinds customarily carried or maintained under similar circumstances by corporations of established reputation engaged in similar businesses, in such amounts (giving effect to self-insurance), with such deductibles and by such methods as shall be customary for corporations similarly situated in the industry. Each such policy of insurance that insures against loss or damage with respect to any Collateral shall name Agent for the benefit of Lenders as the loss payee thereunder for amounts in excess of $5,000,000 per occurrence and shall provide for at least 30 days prior written notice to Agent of any modification or cancellation of such policy. Upon receipt by Agent of any insurance proceeds as loss payee, (i) to the extent that Company or any of its Subsidiaries intends to use any such insurance proceeds that are Net Cash Proceeds of Asset Sale to repair, restore or replace assets of Company or any of its Subsidiaries as provided in subsection 2.4A(iii)(a), Agent shall, subject to the provisions of subsection 2.4A(iii)(a), deliver such insurance proceeds to Company and (ii) otherwise, Agent shall, and Company hereby authorizes Agent to, apply such insurance proceeds that are Net Cash Proceeds of Asset Sale to prepay the Loans in accordance with subsection 2.4A(iii)(a). 6.5 Inspection; Lender Meeting. ----------- ------ ------- Company shall, and shall cause each of its Subsidiaries to, permit (i) any authorized representatives designated by any Lender to visit and inspect any of the properties of Company or any of its Subsidiaries, including its and their financial and accounting records, and to make copies and take extracts therefrom, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants (provided that Company may, if it so chooses, be present at or participate in any such discussion), and (ii) any authorized representatives designated by CO-AGENT to conduct (a) during the first twelve -------- month period following the Closing Date, two audits of all Inventory and all accounts receivable of Company in scope and substance substantially similar to the audit of Inventory and accounts receivable of Company that was conducted by authorized representatives of Agent in April, 1993 and (b) during each succeeding twelve month period thereafter, one such audit of all Inventory and accounts receivable of Company, all upon reasonable notice and at such reasonable times during normal business hours and as often as may be reasonably requested. Without in any way limiting the foregoing, Company will, upon the request of Agent, CO-AGENT -------- or Requisite Lenders, participate in a meeting of Agent and Lenders once during each Fiscal Year to be held at Company's corporate offices (or such other location as may be agreed to by Company, CO-AGENT and Agent) at such time as may be agreed -------- to by Company, CO-AGENT and Agent. -------- 6.6 Compliance with Laws, etc. ---------- ---- ----- ---- Company shall, and shall cause each of its Subsidiaries to, comply with the requirements of all applicable laws, rules, regulations and orders of any governmental authority, noncompliance with which could reasonably be expected to cause, individually or in the aggregate at any one time, a Material Adverse Effect, in each case except to the extent that Company's or such Subsidiary's requirement to comply therewith is being contested in good faith by Company or such Subsidiary, as the case may be, and such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor. 6.7 Environmental Disclosure and Inspection. ------------- ---------- --- ---------- A. Company shall, and shall cause each of its Subsidiaries to, exercise reasonable due diligence in order to comply and cause (i) all tenants under any leases or occupancy agreements affecting any portion of the Facilities that are presently owned, leased or operated by Company or any of its Subsidiaries and (ii) all other Persons on or occupying such property, to comply in all material respects with all Environmental Laws. B. Company shall, promptly after obtaining knowledge thereof, advise Lenders in writing and in reasonable detail of (i) any Release of any Hazardous Materials required to be reported to any federal, state or local governmental or regulatory agency under any applicable Environmental Laws, (ii) any and all written communications with respect to any Environmental Claims that could reasonably be expected to give rise to a Material Adverse Effect or with respect to any Release of Hazardous Materials required to be reported to any federal, state or local governmental or regulatory agency that could reasonably be expected to give rise to a Material Adverse Effect, (iii) any remedial action taken by Company or any other Person in response to (x) any Hazardous Materials on, under or about any Facility, the existence of which could reasonably be expected to result in an Environmental Claim which could reasonably be expected to have a Material Adverse Effect, or (y) any Environmental Claim that could reasonably be expected to have a Material Adverse Effect, (iv) Company's discovery of any occurrence or condition on any real property adjoining or in the vicinity of any Facility that is presently owned, leased or operated by Company or any of its Subsidiaries that could reasonably be expected to cause such Facility or any part thereof to be subject to any material restrictions on the ownership, occupancy, transferability or use thereof under any Environmental Laws, and (v) any request for information from any governmental agency that suggests such agency is investigating whether Company or any of its Subsidiaries may be potentially responsible for a material Release of Hazardous Materials. C. Company shall promptly notify Lenders of any proposed acquisition of stock, assets, or property by Company or any of its Subsidiaries that could reasonably be expected to expose Company or any of its Subsidiaries to, or result in, Environmental Claims that could have a reasonable possibility of giving rise to a Material Adverse Effect. D. Company shall, at its own expense, provide copies of such documents or written information as Agent may reasonably request in relation to any matters disclosed pursuant to this subsection 6.7. 6.8 Execution of Subsidiary Guaranty and Collateral Documents --------- -- ---------- -------- --- ---------- --------- by Certain Subsidiaries and Future Subsidiaries. -- ------- ------------ --- ------ ------------ In the event that any Subsidiary of Company existing as of the date hereof (other than any such Subsidiary that has executed and delivered the Subsidiary Guaranty and, so long as Stuart remains liable with respect to Indebtedness which prohibits Stuart from entering into the Subsidiary Guaranty and the Collateral Documents, other than Stuart) hereafter owns or acquires assets with an aggregate fair market value (without netting such fair market value against any liability of such Subsidiary) exceeding $25,000 or in the event that any Person becomes a Subsidiary of Company after the date hereof, Company will promptly notify Agent and CO-AGENT of that fact -------- and cause such Subsidiary to execute and deliver to Agent a counterpart of the Subsidiary Guaranty and a Subsidiary Security Agreement, a Subsidiary Pledge Agreement, a Subsidiary Trademark Security Agreement and Additional Mortgages and to take all such further action and execute all such further documents and instruments as may be reasonably required to grant and perfect in favor of Agent, for the benefit of Lenders, a first-priority security interest in all of the Covered Real Property and all of the personal property assets of such Subsidiary described in the applicable Collateral Documents. Company shall deliver to Agent, together with such Collateral Documents, (i) certified copies of such Subsidiary's Articles or Certificate of Incorporation, together with a good standing certificate from the Secretary of State of the jurisdiction of its incorporation, each to be dated a recent date prior to their delivery to Agent, (ii) a copy of such Subsidiary's Bylaws, certified by its corporate secretary or an assistant corporate secretary as of a recent date prior to their delivery to Agent, (iii) a certificate executed by the secretary or an assistant secretary of such Subsidiary as to (a) the incumbency and signatures of the officers of such Subsidiary executing the Subsidiary Guaranty and the Collateral Documents to which such Subsidiary is a party and (b) the fact that the attached resolutions of the Board of Directors of such Subsidiary authorizing the execution, delivery and performance of the Subsidiary Guaranty and such Collateral Documents are in full force and effect and have not been modified or rescinded, and (iv) a favorable opinion of counsel to such Subsidiary, in form and substance satisfactory to Agent and its counsel and CO-AGENT, as to -------- (a) the due organization and good standing of such Subsidiary, (b) the due authorization, execution and delivery by such Subsidiary of the Subsidiary Guaranty and such Collateral Documents, (c) the enforceability of the Subsidiary Guaranty and such Collateral Documents against such Subsidiary, and (d) such other matters as Agent may reasonably request, all of the foregoing to be satisfactory in form and substance to Agent and its counsel and CO-AGENT. -------- 6.9 Additional Mortgages; Release of Mortgages. ---------- ---------- ------- -- --------- A. On and after the Closing Date, Company shall, and shall cause its Subsidiaries to, (i) with respect to each leasehold interest in Real Property Assets listed in Part I of Schedule 6.9 annexed hereto or hereafter acquired by Company -------- --- or any of its Subsidiaries, use its best efforts (which shall not be deemed to include, in the good faith judgment of Company, the material modification of any rights or obligations, or the incurrence of any material obligations, under the applicable lease or the expenditure of money in excess of nominal amounts or the payment of monetary consideration other than nominal monetary consideration) until the end of the applicable three month period described below to obtain the consent of the lessor under each related lease to the encumbrancing of Company's or such Subsidiary's leasehold interest under such lease pursuant to an Additional Mortgage (as defined below) and to the assignment of such leasehold interest to the successful bidder at a foreclosure or similar sale (and to a subsequent third party assignee by Agent or any Lender to the extent Agent or such Lender is the successful bidder at such sale) in the event of a foreclosure or similar action pursuant to such Additional Mortgage as soon as practicable but in any event within three months after the commencement of the lease term under the applicable lease (or, in the case of Company's leasehold interests in Real Property Assets listed in Part I of Schedule 6.9 annexed hereto, as -------- --- soon as practicable but in any event within three months after the Closing Date) (ii) with respect to each leasehold interest in Real Property Assets listed in Part II of Schedule 6.9 -------- --- annexed hereto, use its best efforts (which shall not be deemed to include, in the good faith judgment of Company, the material modification of any rights or obligations, or the incurrence of any material obligations, under the applicable lease or the expenditure of money in excess of nominal amounts or the payment of monetary consideration other than nominal monetary consideration) until the end of the three month period after the Closing Date to record the applicable lease, or a memorandum of lease with respect thereto, or other evidence of such lease in form and substance reasonably satisfactory to Agent in all places to the extent necessary or desirable, in the reasonable judgment of Agent, so as to enable the Additional Mortgage encumbering such leasehold interest to effectively create a valid and enforceable first priority lien (subject to Permitted Encumbrances) on such leasehold interest in favor of Agent (or such other Person as may be required or desired under local law) for the benefit of Lenders), and (iii) with respect to each Covered Real Property (other than any leasehold interest for which Company or any of its Subsidiaries was unable to obtain the applicable lessor's consent pursuant to clause (i) above or to record the applicable instrument pursuant to clause (ii) above), as soon as practicable and in any event within three months after the applicable Real Property Asset becomes Covered Real Property (or, in the case of Company's leasehold interest in Real Property Assets listed in Schedule 6.9 annexed hereto for -------- --- which Company was able to obtain the applicable lessor's consent pursuant to clause (i) above or was able to record the applicable instrument pursuant to clause (ii) above, as the case may be, as soon as practicable but in any event within three months after the Closing Date), deliver (a) fully executed counterparts of Mortgages (each an "Additional Mortgage" and collectively the "Additional Mortgages") encumbering such Covered Real Property, together with evidence that counterparts of such Additional Mortgages have been recorded in all places to the extent necessary or desirable, in the reasonable judgment of Agent and CO-AGENT, so as to -------- effectively create a valid and enforceable first priority lien (or such other priority lien as may be specified in the applicable Additional Mortgage), subject to Permitted Encumbrances, on such Covered Real Property in favor of Agent (or such other trustee as may be required or desired under local law) for the benefit of Lenders; (b) a title report obtained by Company in respect of any such Covered Real Property consisting of fee interests in Real Property Assets and, if reasonably required by Agent or CO-AGENT, a title -------- report obtained by Company in respect of any such Covered Real Property consisting of material leasehold interests in Real Property Assets; (c) if required by Agent or CO-AGENT, an -------- opinion of counsel (which counsel shall be reasonably satisfactory to Agent and CO-AGENT) in the state in which such -------- Covered Real Property is located with respect to the enforceability of the form of Additional Mortgage recorded in such state and such other matters as Agent may reasonably request, in form and substance reasonably satisfactory to Agent and CO-AGENT; (d) in the case of each such Covered Real -------- Property consisting of leasehold interests in Real Property Assets, such estoppel letters from the landlords on such real property as may be reasonably requested by Agent or CO-AGENT, -------- in form and substance reasonably satisfactory to Agent and CO- --- AGENT; (e) if required by Agent or CO-AGENT, in the case of ----- -------- each such Covered Real Property consisting of fee interests in Real Property Assets, environmental audits prepared by professional consultants mutually acceptable to Company, CO- --- AGENT and Agent, in form, scope and substance satisfactory to ----- Agent in its reasonable discretion; (f) if required by Agent or CO-AGENT, in the case of each such Covered Real Property -------- consisting of fee interests in Real Property Assets, ALTA mortgagee title insurance policies issued by title insurers reasonably satisfactory to Agent and CO-AGENT (the "Additional -------- Mortgage Policies"), in amounts reasonably satisfactory to Agent and CO-AGENT, assuring Agent that the applicable -------- Additional Mortgages create valid and enforceable first priority mortgage liens (or such other priority liens as may be specified in the applicable Additional Mortgage) on such Covered Real Property, free and clear of all defects and encumbrances except Permitted Encumbrances and subject to a standard survey exception, which Additional Mortgage Policies shall be in form and substance reasonably satisfactory to Agent and CO-AGENT and shall include an endorsement for -------- mechanics' liens, for future advances under this Agreement, the Notes and the other Loan Documents, and for any other matters that Agent or CO-AGENT may reasonably request, and -------- shall provide for affirmative insurance and such reinsurance as Agent or CO-AGENT may reasonably request, all of the -------- foregoing in form and substance reasonably satisfactory to Agent and CO-AGENT; (g) evidence, which may be in the form of -------- a letter from an insurance broker, a municipal engineer, Charles Jones, Inc. or Transamerica Flood Hazard Certification, as to whether (1) any such Covered Real Property ("Additional Flood Hazard Property") is in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards and (2) the community in which each Additional Flood Hazard Property is located is participating in the National Flood Insurance Program; and (h) if there are any Additional Flood Hazard Properties, Company's written acknowledgement of receipt of written notification from Agent (1) as to the existence of each such Additional Flood Hazard Property and (2) as to whether the community in which each such Flood Hazard Property is located is participating in the National Flood Insurance Program. Company shall, and shall cause each of its Subsidiaries to, permit any authorized representatives designated by Agent and CO-AGENT, upon reasonable notice, to -------- visit and inspect any fee interests in Real Property Assets and, if reasonably required by Agent and CO-AGENT, any -------- material leasehold interests in Real Property Assets, in each case to be subject to the Lien of an Additional Mortgage, for the purpose of obtaining an appraisal of value, conducted by consultants retained by Agent and CO-AGENT in compliance with -------- all applicable banking regulations, with respect to such real property fee or leasehold interest. B. At least 30 days prior to the making by Company or any of its Subsidiaries of any sale or disposition of assets permitted under clause (iv), (v), (vii), (viii) or (ix) of subsection 7.7 of any assets of Company or any of its Subsidiaries encumbered by any Collateral Document, Company shall, to the extent necessary to make such sale or disposition of assets, request that Agent execute and deliver to Company reconveyance documents and/or releases (including without limitation amendments to the UCC-1 financing statements that have been filed or recorded in connection with such Collateral Document) releasing any Liens on the assets being sold pursuant to such sale or disposition of assets that were granted in favor of Agent pursuant to such Collateral Document. Upon receiving any such request, Agent shall, at Company's expense, execute and deliver to Company such reconveyance documents and/or releases, in recordable form, on the date of such sale or disposition of assets; provided that, -------- at the time of Agent's execution and delivery to Company of such reconveyance documents and/or releases, (i) no Event of Default or Potential Event of Default shall have occurred and be continuing or shall be caused thereby, (ii) Agent shall have received evidence satisfactory to it that such sale or disposition of assets shall be permitted under clause (iv), (v), (vii), (viii) or (ix) of subsection 7.7, and (iii) Company shall have (a) paid Agent, for application to the prepayment of the Loans or to the cash collateralization of the Letters of Credit pursuant to subsection 2.4A(iii)(a), an amount (the "Required Prepayment Amount") equal to the Net Cash Proceeds of Asset Sale of such sale or disposition of assets that are required to be applied to the prepayment of the Loans or to the cash collateralization of the Letters of Credit pursuant to subsection 2.4A(iii)(a), or (b) provided Agent with evidence satisfactory to it that irrevocable arrangements, in form and substance satisfactory to Agent, have been made to transfer the Required Prepayment Amount to Agent. 6.10 Assignability of Lease Agreements. ------------- -- ----- ---------- Company shall, and shall cause each of its Subsidiaries to, use its best efforts (which shall not be deemed to include, in the good faith judgement of Company, the material modification of any rights or obligations, or the incurrence of any material obligations, under the applicable lease or the expenditure of money in excess of nominal amounts or the payment of monetary consideration other than nominal monetary consideration) in entering into any lease as a lessee, whether such lease is an Operating Lease or a Capital Lease, to obtain lease terms permitting (or not expressly prohibiting) the encumbrancing of the leasehold interest of Company or such Subsidiary, as the case may be, in the property that is the subject of such lease pursuant to an Additional Mortgage and the assignment of such leasehold interest to the successful bidder at a foreclosure or similar sale (and to a subsequent third party assignee by Agent or any Lender to the extent Agent or such Lender is the successful bidder at such sale) in the event of a foreclosure or similar action pursuant to such Additional Mortgage. Section 7. COMPANY'S NEGATIVE COVENANTS Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 7. 7.1 Indebtedness. ------------ Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: (i) Company may become and remain liable with respect to the Obligations; (ii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations permitted by subsection 7.4 and, upon any matured obligations actually arising pursuant thereto, the Indebtedness corresponding to the Contingent Obligations so extinguished; (iii) Company and its Subsidiaries may become and remain liable with respect to Indebtedness in respect of Capital Leases; provided that such Capital Leases are -------- permitted under the terms of subsection 7.9; (iv) Company may become and remain liable with respect to Indebtedness to any of its wholly-owned Subsidiaries, and any wholly-owned Subsidiary of Company may become and remain liable with respect to Indebtedness to Company or any other wholly-owned Subsidiary of Company; provided that (a) all such intercompany -------- Indebtedness shall be evidenced by promissory notes that are pledged to Agent pursuant to the terms of the Company Pledge Agreement or the applicable Subsidiary Pledge Agreement, as the case may be, (b) all such intercompany Indebtedness owed by Company to any of its Subsidiaries shall be subordinated in right of payment to the payment in full of the Obligations pursuant to the terms of the applicable promissory notes or an intercompany subordination agreement, and (c) any payment by any Subsidiary of Company under the Subsidiary Guaranty shall result in a pro tanto reduction of the amount of any --- ----- intercompany Indebtedness owed by such Subsidiary to Company or to any of its Subsidiaries for whose benefit such payment is made; (v) Company and its Subsidiaries, as applicable, may remain liable with respect to Indebtedness described in Schedule 7.1 annexed hereto; -------- --- (vi) Company and its Subsidiaries may become and remain liable with respect to Indebtedness incurred to refinance, in whole or in part, any outstanding Indebtedness of Company or any of its Subsidiaries permitted under subdivision (v) of this subsection 7.1; provided, however, that in each case (a) the principal -------- ------- amount of such refinancing Indebtedness does not exceed the principal amount of the Indebtedness so refinanced and (b) the interest rates, maturities, amortization schedules, covenants, defaults, remedies, and other terms of such refinancing Indebtedness are in each case (1) the same as those in the Indebtedness being refinanced or (2) otherwise satisfactory to Agent, CO-AGENT and -------- Requisite Lenders; provided that interest rates that are -------- less than, maturities that are longer than, and amortization schedules that result in a longer average life to maturity than, the comparable provisions of the Indebtedness being refinanced shall be deemed satisfactory to Agent and Requisite Lenders for purposes of this clause (2); and (vii) Company and its Subsidiaries may become and remain liable with respect to other Indebtedness in an aggregate principal amount not to exceed $5,000,000 at any time outstanding. 7.2 Liens and Related Matters. ----- --- ------- ------- A. Prohibition on Liens. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Company or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any Lien with respect to any such property, asset, income or profits under the Uniform Commercial Code of any State or under any similar recording or notice statute, except: (i) Permitted Encumbrances; (ii) Liens granted pursuant to the Collateral Documents; (iii) Liens described in Schedule 7.2 annexed -------- --- hereto; (iv) Liens securing Indebtedness of Company or any of its Subsidiaries incurred to refinance any outstanding Indebtedness of Company or such Subsidiary that is secured by Liens on Real Property Assets permitted under subdivision (iii) of this subsection 7.2; provided, however, that in each case (a) such refinancing Indebtedness is permitted under subsection 7.1(vi), (b) the Liens securing such refinancing Indebtedness are limited to the Real Property Assets that were subject to the Liens securing the Indebtedness so refinanced, (c) the Indebtedness secured by such Lien is Non-Recourse Indebtedness to the extent that the Indebtedness so refinanced was Non-Recourse Indebtedness, and (d) the principal amount of such refinancing Indebtedness shall not be (1) less than 60% of the fair market value of such Real Property Assets as of the date of such refinancing or (2) if such refinancing Indebtedness is not Non- Recourse Indebtedness, greater than 80% of the fair market value of such Real Property Assets as of the date of such refinancing; and (v) Other Liens (other than consensual Liens encumbering any of the Collateral) securing Indebtedness or other obligations in an aggregate amount not exceeding $2,000,000 at any time outstanding. B. Equitable Lien in Favor of Lenders. If Company or any of its Subsidiaries shall create or assume any Lien upon any of its properties or assets, whether now owned or here- after acquired, other than Liens excepted by the provisions of subsection 7.2A, it shall make or cause to be made effective provision whereby the Obligations will be secured by such Lien equally and ratably with any and all other Indebtedness secured thereby as long as any such Indebtedness shall be so secured; provided that, notwithstanding the foregoing, this -------- covenant shall not be construed as a consent by Requisite Lenders to the creation or assumption of any such Lien not permitted by the provisions of subsection 7.2A. C. No Further Negative Pledges. Except with respect to specific property encumbered to secure payment of particular Indebtedness or to be sold pursuant to an executed agreement with respect to an Asset Sale, neither Company nor any of its Subsidiaries shall enter into any agreement prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired. D. No Restrictions on Subsidiary Distributions to Company or Other Subsidiaries. Except as provided herein, Company will not, and will not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Subsidiary to (i) pay dividends or make any other distributions on any of such Subsidiary's capital stock owned by Company or any other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or advances to Company or any other Subsidiary of Company, or (iv) transfer any of its property or assets to Company or any other Subsidiary of Company. 7.3 Investments; Joint Ventures. ------------ ----- -------- Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, make or own any Investment in any Person, including any Joint Venture, except: (i) Company and its Subsidiaries may make and own Investments in Cash Equivalents; (ii) Company and its Subsidiaries may make inter- company loans to the extent permitted under subsection 7.1(iv); (iii) Company may continue to own its existing Investments in its Subsidiaries as of the Closing Date; (iv) Company and its Subsidiaries may continue to own the Investments owned by them and described in Schedule 7.3 annexed hereto; -------- --- (v) Company and its Subsidiaries may make loans and advances to employees in the ordinary course of business in an aggregate amount not to exceed at any time outstanding $500,000; (vi) Company and its Subsidiaries may make and own Investments in an aggregate amount not to exceed at any time outstanding $3,000,000 consisting of any deferred portion of the sales price received by Company or any of its Subsidiaries in connection with any Asset Sale permitted under subsection 7.7(iv); (vii) Company may make and own Investments in an aggregate amount not to exceed $5,000,000 in a community organization established for the purpose of developing a single store in an urban area which is to be managed or operated by Company and which engages exclusively in businesses permitted under subsection 7.14; and (viii) Company or any of its Subsidiaries may make and own Investments in respect of Securities of another Person received by Company or such Subsidiary in connection with a plan of reorganization of such Person or a readjustment of its debts. 7.4 Contingent Obligations. ---------- ----------- Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or become or remain liable with respect to any Contingent Obligation, except: (i) Company may become and remain liable with respect to Contingent Obligations in respect of Letters of Credit; (ii) Subsidiaries of Company may become and remain liable with respect to Contingent Obligations under the Subsidiary Guaranty; (iii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of indemnification and purchase price adjustment obligations incurred in connection with Asset Sales or other sales of assets so long as such indemnification and purchase price adjustment obligations are customary in light of the type of Asset Sales or other sales of assets in connection with which they were incurred; (iv) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of any Indebtedness or other obligation (other than any Non-Recourse Indebtedness) of Company or any of its Subsidiaries not prohibited by the Loan Documents; (v) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations under guarantees in the ordinary course of business of the obligations of suppliers, customers, franchisees and licensees of Company and its Subsidiaries in an aggregate amount not to exceed at any time $1,500,000; (vi) Company or any of its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of leasehold interests assigned by Company or such Subsidiary after the Closing Date to any Person other than Company or any of its Subsidiaries; (vii) Company and its Subsidiaries, as applicable, may remain liable with respect to Contingent Obligations described in Schedule 7.4 annexed hereto; and -------- --- (viii) Company and its Subsidiaries may become and remain liable with respect to other Contingent Obligations; provided that the maximum aggregate -------- liability, contingent or otherwise, of Company and its Subsidiaries in respect of all such other Contingent Obligations permitted by this clause (viii) shall at no time exceed $2,000,000. 7.5 Restricted Junior Payments. ---------- ------ -------- Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Junior Payment. 7.6 Financial Covenants. --------- --------- A. Minimum Interest Coverage Ratio. Company shall not permit the ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for any four-fiscal quarter period ending as of the last day of any fiscal quarter of Company ending as of the dates set forth below (or, in the case of the fiscal quarter of Company ending on April 30, 1994 or July 30, 1994, for the two- or three-fiscal quarter period, respectively, ending as of such date) to be less than the cor- relative ratio indicated: Minimum Fiscal Quarter Ending Interest Coverage Ratio ------ ------- ------ -------- -------- ----- April 30, 1994 1.10:1.00 July 30, 1994 1.30:1.00 October 29, 1994 2.00:1.00 January 28, 1995 2.00:1.00 Minimum Fiscal Quarter Ending Interest Coverage Ratio ------ ------- ------ -------- -------- ----- April 29, 1995 2.00:1.00 July 29, 1995 2.25:1.00 October 28, 1995 2.25:1.00 February 3, 1996 2.25:1.00 May 4, 1996 2.25:1.00 August 3, 1996 2.25:1.00 November 2, 1996 2.50:1.00 February 1, 1997 2.50:1.00 May 3, 1997 2.50:1.00 August 2, 1997 2.50:1.00 November 4, 1997 2.50:1.00 January 31, 1998 2.50:1.00 May 2, 1998 2.50:1.00 August 1, 1998 and thereafter 2.50:1.00 B. Maximum Leverage Ratio. Company shall not permit the ratio of (i) Consolidated Total Debt to (ii) Consolidated Net Worth as of the last day of any fiscal quarter of Company to exceed 0.50:1.00. C. Minimum Consolidated Tangible Net Worth. Company shall not permit Consolidated Tangible Net Worth at any time during any of the periods set forth below to be less than the correlative amount indicated: Minimum Consolidated Period Tangible Net Worth ------ -------- --- ----- Closing Date to the last day of Fiscal Year 1993 $168,150,000 Fiscal Year 1994 $168,150,000 Fiscal Year 1995 $168,150,000 Fiscal Year 1996 $169,250,000 Fiscal Year 1997 $171,500,000 Fiscal Year 1998 and thereafter $175,000,000 7.7 Restriction on Fundamental Changes; Asset Sales. ----------- -- ----------- -------- ----- ----- Company shall not, and shall not permit any of its Subsidiaries to, enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, sub-lease, transfer or otherwise dispose of all or any part of its business, property or fixed assets, whether now owned or hereafter acquired, except: (i) any Subsidiary of Company may be merged with or into Company or any wholly-owned Subsidiary of Company, or be liquidated, wound up or dissolved, or all or any substantial part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to Company or any wholly-owned Subsidiary of Company; provided that, in the case of such a merger, -------- Company or such wholly-owned Subsidiary shall be the continuing or surviving corporation; (ii) Company and its Subsidiaries may make Con- solidated Capital Expenditures permitted under subsection 7.8; (iii) Company and its Subsidiaries may sell inventory in the ordinary course of business; (iv) Company and its Subsidiaries may make Asset Sales; provided that the aggregate assets sold pursuant -------- to Asset Sales in any Fiscal Year shall not have accounted for more than 20% of the consolidated revenues of Company and its Subsidiaries for the immediately preceding Fiscal Year as shown on the consolidated financial statements of Company and its Subsidiaries for such immediately preceding Fiscal Year; provided further -------- ------- that (a) the consideration received for the related assets (other than the related assets taken pursuant to any taking of assets described in clause (iii) of the definition of the term "Asset Sale") shall be in an amount at least equal to (1) the fair market value thereof or (2) a lower amount if the Board of Directors of Company or the applicable Subsidiary, as the case may be, shall determine that the sale of such related assets for such lower amount is desirable in order to minimize losses being incurred by Company or such Subsidiary, as the case may be, with respect to such related assets and that such sale for such lower amount is in the best interest of Company or such Subsidiary, as the case may be; (b) at least 50% of the consideration received (excluding any consideration received in the form of the assumption of liability under any lease pertaining to such related assets by the purchaser thereof) for the related assets (other than the related assets taken pursuant to any taking of assets described in clause (iii) of the definition of the term "Asset Sale") shall be cash; and (c) the Net Cash Proceeds of Asset Sale of such Asset Sales shall be applied in the manner and to the extent required by subsection 2.4A(iii)(a); (v) Company and its Subsidiaries may dispose of obsolete, worn out or surplus property disposed of in the ordinary course of business; (vi) Company and its Subsidiaries may, as lessor or sub-lessor, lease or sub-lease any Real Property Assets in the ordinary course of business; (vii) Company and its Subsidiaries may make asset sales described in clause (i)(b)(2) of the definition of the term "Asset Sale"; (viii) Company and its Subsidiaries may transfer their respective assets pursuant to any taking of assets described in clause (iii) of the definition of the term "Asset Sale" to the extent that the aggregate net cash proceeds received by Company and its Subsidiaries in connection with such taking and all other takings related to such taking are equal to or less than $100,000; and (ix) Company or any Subsidiary of Company may, in the ordinary course of business, terminate any lease to which it is a party as lessee. 7.8 Consolidated Capital Expenditures. ------------ ------- ------------ Company shall not, and shall not permit its Subsidiaries to, make or incur Consolidated Capital Expenditures, in any Fiscal Year indicated below, in an aggregate amount in excess of the corresponding amount (the "Maximum Consolidated Capital Expenditures Amount") set forth below opposite such Fiscal Year; provided that the Maximum -------- Consolidated Capital Expenditures Amount for any Fiscal Year shall be increased by an amount equal to the excess, if any (but in no event more than $5,000,000), of the Maximum Consolidated Capital Expenditures Amount for the previous Fiscal Year (as adjusted in accordance with this proviso) over the actual amount of Consolidated Capital Expenditures for such previous Fiscal Year: Maximum Consolidated Fiscal Year Capital Expenditures ------ ---- ------- ------------ Amount ------ 1993 $25,000,000 1994 $30,000,000 1995 $25,000,000 1996 $21,000,000 1997 $22,000,000 1998 and thereafter $22,000,000 7.9 Restriction on Leases. ----------- -- ------ Company shall not, and shall not permit any of its Subsidiaries to, become liable in any way, whether directly or by assignment or as a guarantor or other surety, for the obligations of the lessee under any lease, whether an Operating Lease or a Capital Lease (other than intercompany leases between Company and its wholly-owned Subsidiaries), unless, immediately after giving effect to the incurrence of liability with respect to such lease, the Consolidated Rental Payments at the time in effect during the then current Fiscal Year shall not exceed the corresponding amount set forth below opposite such Fiscal Year: Maximum Consolidated Fiscal Year Rental Payments ------ ---- ------ -------- 1993 $17,296,000 1994 $18,833,000 1995 $23,478,000 1996 $28,364,000 1997 $32,082,000 1998 and thereafter $34,220,000 7.10 Sales and Lease-backs. ----- --- ----------- Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, become or remain liable as lessee or as guarantor or other surety with respect to any lease, whether an Operating Lease or a Capital Lease, of any property (whether real, personal or mixed), whether now owned or hereafter acquired, (i) which Company or any of its Subsidiaries has sold or transferred or is to sell or transfer to any other Person (other than Company or any of its Subsidiaries) or (ii) which Company or any of its Subsidiaries intends to use for substantially the same purpose as any other property which has been or is to be sold or transferred by Company or any of its Subsidiaries to any Person (other than Company or any of its Subsidiaries) in connection with such lease; provided that Company and its Subsidiaries may enter -------- into Sale and Lease-backs of Equipment so long as (a) the sale or transfer by Company or any of its Subsidiaries of any property in connection with such Sale and Lease-backs are permitted under subsection 7.7 and (b) the leases entered into in connection with such Sale and Lease-backs are permitted under subsection 7.9. 7.11 Sale or Discount of Receivables. ---- -- -------- -- ----------- Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, sell with recourse, or discount or otherwise sell for less than the face value thereof, any of its notes or accounts receivable. 7.12 Transactions with Shareholders and Affiliates. ------------ ---- ------------ --- ---------- Company shall not, and shall not permit any of its Sub- sidiaries to, directly or indirectly, enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 5% or more of any class of equity Securities of Company or with any Affiliate of Company or of any such holder, on terms that are less favorable to Company or that Subsidiary, as the case may be, than those that might be obtained at the time from Persons who are not such a holder or Affiliate; provided that the -------- foregoing restriction shall not apply to (i) any transaction between Company and any of its wholly-owned Subsidiaries or between any of its wholly-owned Subsidiaries, (ii) transactions entered into or existing pursuant to and in accordance with the Spin-Off Agreements, or (iii) reasonable and customary fees paid to members of the Boards of Directors of Company and its Subsidiaries. 7.13 Disposal of Subsidiary Stock. -------- -- ---------- ----- Except for any sale of 100% of the capital stock or other equity Securities of any of its Subsidiaries in compliance with the provisions of subsection 7.7(iv) and except pursuant to the Collateral Documents, Company shall not: (i) directly or indirectly sell, assign, pledge or otherwise encumber or dispose of any shares of capital stock or other equity Securities of any of its Subsidi- aries, except to qualify directors if required by applicable law; or (ii) permit any of its Subsidiaries directly or indirectly to sell, assign, pledge or otherwise encumber or dispose of any shares of capital stock or other equity Securities of any of its Subsidiaries (including such Subsidiary), except to Company, another Subsidiary of Company, or to qualify directors if required by applica- ble law. 7.14 Conduct of Business. ------- -- -------- From and after the Closing Date, Company shall not, and shall not permit any of its Subsidiaries to, engage in any business other than (i) the businesses engaged in by Company and its Subsidiaries on the Closing Date and similar or related businesses and (ii) such other lines of business as may be consented to by Requisite Lenders. 7.15 Amendments of Certain Documents. ---------- -- ------- --------- A. Company shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change the terms of any of the Spin-Off Agreements in any material respect or waive any of its material rights thereunder without the prior written consent of the Requisite Lenders. B. Company shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change the terms of any Indebtedness of Company or any of its Subsidiaries permitted to be incurred under subsection 7.1(vi) ("Specified Refinancing Indebtedness"), or make any payment consistent with an amendment thereof or change thereto, if the effect of such amendment or change is to increase the interest rate on such Specified Refinancing Indebtedness, change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any event of default or condition to an event of default with respect thereto (other than to eliminate any such event of default or to increase any grace period with respect thereto), change the redemption, prepayment or defeasance provisions thereof, change the subordination provisions thereof (or of any guaranty thereof), or change any collateral therefor (other than to release such collateral), or if the effect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder or to confer any additional rights on the holders of such Specified Refinancing Indebtedness which would be adverse to Company or Lenders. 7.16 Fiscal Year. ------ ---- Company shall not change its Fiscal Year-end from the Saturday closest to January 31. Section 8. EVENTS OF DEFAULT If any of the following conditions or events ("Events of Default") shall occur: 8.1 Failure to Make Payments When Due. ------- -- ---- -------- ---- --- Failure to pay any installment of principal of any Loan when due, whether at stated maturity, by acceleration, by notice of prepayment or otherwise; failure to pay when due any amount payable to an Issuing Lender in reimbursement of any drawing under a Letter of Credit; or failure to pay any interest on any Loan or any fee or any other amount due under this Agreement within five days after the date due; or 8.2 Default in Other Agreements. ------- -- ----- ---------- (i) Failure of Company or any of its Subsidiaries to pay when due (a) any principal of or interest on any Indebtedness (other than Indebtedness referred to in subsection 8.1) in an individual principal amount of $1,000,000 or more or any items of Indebtedness with an aggre- gate principal amount of $5,000,000 or more or (b) any Contingent Obligation in an individual principal amount of $1,000,000 or more or any Contingent Obligations with an aggregate principal amount of $5,000,000 or more, in each case beyond the end of any grace period provided therefor; or (ii) breach or default by Company or any of its Subsidiaries with respect to any other material term of (a) any evidence of any Indebtedness in an individual principal amount of $1,000,000 or more or any items of Indebtedness with an aggre- gate principal amount of $5,000,000 or more or any Contingent Obligation in an individual principal amount of $1,000,000 or more or any Contingent Obligations with an aggregate principal amount of $5,000,000 or more or (b) any loan agreement, mortgage, indenture or other agreement relating to such Indebtedness or Contingent Obligation(s), if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that Indebtedness or Contingent Obligation(s) to become or be declared due and payable prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be, in each case after the end of any grace period provided therefor; or 8.3 Breach of Certain Covenants. ------ -- ------- --------- Failure of Company to perform or comply with any term or condition contained in subsection 2.5 or 6.2 or Section 7 of this Agreement or any other material term of any Loan Document (other than this Agreement); or 8.4 Breach of Warranty. ------ -- -------- Any representation, warranty, certification or other statement made by Company or any of its Subsidiaries in any Loan Document or in any statement or certificate at any time given by Company or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect on the date as of which made; or 8.5 Other Defaults Under Loan Documents. ----- -------- ----- ---- --------- Company or any of its Subsidiaries shall default in the performance of or compliance with any term contained in this Agreement or any of the other Loan Documents, other than any such term referred to in any other subsection of this Section 8, and such default shall not have been remedied or waived within 30 days after receipt by Company of notice from Agent or any Lender of such default; or 8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. ----------- ----------- ----------- -- --------- ---- (i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of Company or any of its Subsidiaries in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or (ii) an involuntary case shall be commenced against Company or any of its Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Company or any of its Subsidiaries, or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of Company or any of its Subsidiaries for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Company or any of its Subsidiaries, and any such event described in this clause (ii) shall continue for 60 days unless dismissed, bonded or discharged; or 8.7 Voluntary Bankruptcy; Appointment of Receiver, etc. --------- ----------- ----------- -- --------- ---- (i) Company or any of its Subsidiaries shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or Company or any of its Subsidiaries shall make any general assignment for the benefit of creditors; or (ii) Company or any of its Subsidiaries shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the Board of Directors of Company or any of its Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (i) above or this clause (ii); or 8.8 Judgments and Attachments. --------- --- ----------- Any money judgment, writ or warrant of attachment or similar process involving in the aggregate at any time an amount in excess of $2,000,000 (to the extent not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against Company or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any event later than five days prior to the date of any proposed sale thereunder); or 8.9 Dissolution. ----------- Any order, judgment or decree shall be entered against Company or any of its Subsidiaries decreeing the dissolution or split up of Company or that Subsidiary and such order shall remain undischarged or unstayed for a period in excess of 30 days; or 8.10 Employee Benefit Plans. -------- ------- ----- There shall occur one or more ERISA Events which individually or in the aggregate results in or might reasonably be expected to result in liability of Company or any of its ERISA Affiliates in excess of $2,000,000 during the term of this Agreement; or there shall exist an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), which exceeds $2,000,000; or 8.11 Change in Control. ------ -- ------- Merrill Lynch Capital Partners, Inc. ("MLCP") or its Affiliates shall cease to beneficially own and control, directly or indirectly, at least 51% of the issued and outstanding shares of capital stock of Company entitled (without regard to the occurrence of any contingency) to vote for the election of members of the Board of Directors of Company; or 8.12 Invalidity of Subsidiary Guaranty. ---------- -- ---------- -------- Upon execution and delivery thereof, the Subsidiary Guaranty for any reason, other than the satisfaction in full of all Obligations, ceases to be in full force and effect (other than in accordance with its terms) or is declared to be null and void, or any Loan Party denies in writing that it has any further liability, including without limitation with respect to future advances by Lenders, under any Loan Document to which it is a party; or 8.13 Failure of Security. ------- -- -------- Upon execution and delivery thereof, any Collateral Document shall, at any time, cease to be in full force and effect (other than by reason of a release of Collateral thereunder in accordance with the terms hereof or thereof, the satisfaction in full of the Obligations or any other termination of such Collateral Document in accordance with the terms hereof or thereof) or shall be declared null and void, or the validity or enforceability thereof shall be contested in writing by any Loan Party, or the Agent shall not have or shall cease to have a valid and perfected first priority security interest (subject to Permitted Encumbrances) in any Collateral purported to be covered thereby having a fair market value individually or in the aggregate exceeding $1,000,000, in each case for any reason other than the failure of Agent or any Lender to take any action within its control; or 8.14 Failure to Consummate Spin-Off. ------- -- ---------- -------- The Spin-Off shall not be consummated in accordance with this Agreement concurrently with the making of the initial Loans or the Spin-Off shall be unwound, reversed or otherwise rescinded in whole or in part for any reason; or 8.15 Termination of Logistical Services Agreement. ----------- -- ---------- -------- --------- The Spin-Off Agreement described in clause (iv) of the definition thereof shall terminate as a result of any reason whatsoever; or 8.16 Incurrence of Liability Relating to Spin-Off. ---------- -- --------- -------- -- -------- Company shall incur any liability as a result of the incurrence by Pathmark of any liability for any Tax for which Company has agreed to indemnify Pathmark pursuant to the Spin- Off Agreement described in clause (ii) of the definition of the term "Spin-Off Agreements" and the incurrence of such liability by Company would reasonably be expected to result in a Material Adverse Effect; or 8.17 Material Difference in Closing Date Balance Sheets. -------- ---------- -- ------- ---- ------- ------ The inventory line item set forth in the pro forma unaudited consolidated balance sheet of Company and its Subsidiaries as at the Closing Date delivered pursuant to subsection 4.1S shall exceed the corresponding inventory line item set forth in the consolidated balance sheet of Company and its Subsidiaries as at the Closing Date delivered pursuant to subsection 6.1(xviii) by more than $30,000,000: THEN (i) upon the occurrence of any Event of Default described in subsection 8.6 or 8.7, each of (a) the unpaid principal amount of and accrued interest on the Loans, (b) an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letter of Credit), and (c) all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Company, and the obligation of each Lender to make any Loan, the obligation of Agent to issue any Letter of Credit and the right of any Lender to issue any Letter of Credit hereunder shall thereupon terminate, and (ii) upon the occurrence and during the continuation of any other Event of Default, Agent shall, upon the written request of Requisite Lenders, by written notice to Company, declare all or any portion of the amounts described in clauses (a) through (c) above to be, and the same shall forthwith become, immediately due and payable, and the obligation of each Lender to make any Loan, the obligation of Agent to issue any Letter of Credit and the right of any Lender to issue any Letter of Credit hereunder shall thereupon terminate; provided that the foregoing shall -------- not affect in any way the obligations of Lenders under subsection 3.3C(i) or the obligations of Lenders to repay Swing Line Loans or purchase participations therein as provided in subsection 2.1A(ii). Any amounts described in clause (b) above, when received by Agent, shall be held by Agent pursuant to the terms of the Collateral Account Agreement and shall be applied as therein provided. Notwithstanding anything contained in the second preceding paragraph, if at any time within 60 days after an acceleration of the Loans pursuant to such paragraph Company shall pay all arrears of interest and all payments on account of principal which shall have become due otherwise than as a result of such acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement) and all Events of Default and Potential Events of Default (other than non-payment of the principal of and accrued interest on the Loans, in each case which is due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to subsection 10.6, then Requisite Lenders, by written notice to Company, may at their option rescind and annul such acceleration and its consequences; but such action shall not affect any subsequent Event of Default or Potential Event of Default or impair any right consequent thereon. The provisions of this paragraph are intended merely to bind Lenders to a decision which may be made at the election of Requisite Lenders and are not intended to benefit Company and do not grant Company the right to require Lenders to rescind or annul any acceleration hereunder, even if the conditions set forth herein are met. Section 9. AGENT, CO-AGENT, COLLATERAL AGENT AND -------- SUPPLEMENTAL COLLATERAL AGENTS 9.1 Appointment. ----------- A. Agent. Bankers is hereby appointed Agent hereunder and under the other Loan Documents and each Lender hereby authorizes Agent to act as its agent in accordance with the terms of this Agreement and the other Loan Documents. Agent agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable. B. CO-AGENT. Heller is hereby appointed as CO-AGENT -------- -------- hereunder and under the other Loan Documents (in such capacity, "CO-AGENT") and each Lender hereby authorizes CO- -------- --- AGENT to act as CO-AGENT in accordance with the terms of this ----- -------- Agreement and the other Loan Documents. CO-AGENT agrees to -------- act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable. C. Collateral Agent. Heller is hereby appointed as collateral agent hereunder and under the other Loan Documents (in such capacity, "Collateral Agent") and Agent and each Lender hereby authorize Collateral Agent to act as collateral agent in accordance with the terms of this Agreement and the other Loan Documents. Collateral Agent agrees to act upon the express conditions in this Agreement and the other Loan Documents, as applicable. Anything contained in any of the Loan Documents to the contrary notwithstanding, each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to Agent with respect to any Collateral shall be exercisable by and vest in Collateral Agent to the extent necessary to enable Collateral Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Loan Documents and necessary to the exercise or performance thereof by Collateral Agent shall run to and be enforceable by either of Collateral Agent and Agent; provided that Agent and Collateral Agent -------- shall consult with each other regarding the exercise by either of such parties of any such right, power or privilege or the performance by either of such parties of any such duty. In furtherance of the foregoing, (i) Agent hereby appoints Collateral Agent as Agent's attorney-in-fact, with full authority in the place and stead of Agent and in the name of Agent or Collateral Agent, to exercise such rights, powers and privileges and to perform such duties, and (ii) should any instrument in writing from Agent or Company be reasonably required by Collateral Agent for more fully and certainly vesting in and confirming to it such rights, powers, privileges and duties, any and all such instruments in writing shall, promptly upon request by Collateral Agent, be executed, acknowledged and delivered by Agent or Company, as the case may be. The power of attorney granted by Agent in the immediately preceding sentence shall be irrevocable; provided -------- that, in the event Collateral Agent shall resign or be removed in accordance with subsection 9.6A, such power of attorney shall immediately terminate and all the rights, powers, privileges and duties of Collateral Agent shall thereafter be exercisable solely by Agent. D. Supplemental Collateral Agents. It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case Agent or Collateral Agent deems that by reason of any present or future law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents, or take any other action which may be desirable or necessary in connection therewith, it may be necessary that Agent or Collateral Agent appoint an additional individual or institution (including without limitation Bankers Trust Company New Jersey Limited) as a separate trustee, co-trustee, separate collateral agent or collateral CO-AGENT (any such additional individual or -------- institution being referred to herein individually as a "Supplemental Collateral Agent" and collectively as "Supplemental Collateral Agents"). In the event that Agent or Collateral Agent appoints a Supplemental Collateral Agent with respect to any Collateral, each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Collateral Agent to the extent, and only to the extent, necessary to enable such Supplemental Collateral Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Loan Documents and necessary to the exercise or performance thereof by such Supplemental Collateral Agent shall run to and be enforceable by either such Supplemental Collateral Agent or Agent or Collateral Agent. Should any instrument in writing from Company be required by any Supplemental Collateral Agent so appointed by Agent or Collateral Agent for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties, any and all such instruments in writing shall, promptly upon request by Agent or Collateral Agent, be executed, acknowledged and delivered by Company. In case any Supplemental Collateral Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Collateral Agent, to the extent permitted by law, shall vest in and be exercised by Agent and Collateral Agent until the appointment of a new Supplemental Collateral Agent. E. Generally. The provisions of this Section 9 are solely for the benefit of Agent, CO-AGENT, Collateral Agent, -------- Supplemental Collateral Agents and Lenders, and Company shall have no rights as a third party beneficiary of any of the provisions thereof. In performing their functions and duties under this Agreement or any of the other Loan Documents, Agent, CO-AGENT, Collateral Agent and Supplemental Collateral -------- Agents shall act solely as agents of Lenders (and, in the case of Collateral Agent and Supplemental Collateral Agents, as agents of Agent) and do not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Company or any of its Subsidiaries. 9.2 Powers; General Immunity. ------- ------- -------- A. Duties Specified. Each Lender irrevocably author- izes Agent, CO-AGENT, Collateral Agent and each Supplemental -------- Collateral Agent to take such action on such Lender's behalf and to exercise such powers hereunder and under the other Loan Documents as are specifically delegated to Agent, CO-AGENT, -------- Collateral Agent or such Supplemental Collateral Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. Agent, CO-AGENT, Collateral -------- Agent and each Supplemental Collateral Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Loan Documents and they may perform such duties by or through their respective agents or employees. Neither Agent nor CO-AGENT nor Collateral Agent -------- nor any Supplemental Collateral Agent shall have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon Agent, CO-AGENT, Collateral Agent or any Supplemental -------- Collateral Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein. B. No Responsibility for Certain Matters. Neither Agent nor CO-AGENT nor Collateral Agent nor any Supplemental -------- Collateral Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by Agent, CO-AGENT, Collateral Agent or any Supplemental -------- Collateral Agent to Lenders or by or on behalf of Company to Agent, CO-AGENT, Collateral Agent or any Supplemental -------- Collateral Agent or any Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of Company or any other Person liable for the payment of any Obligations, nor shall Agent nor CO-AGENT nor Collateral Agent nor any -------- Supplemental Collateral Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as to the use of the proceeds of the Loans or the use of the Letters of Credit or as to the existence or possible existence of any Event of Default or Potential Event of Default. Anything contained in this Agreement to the contrary notwithstanding, Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the Letter of Credit Usage or the component amounts thereof. C. Exculpatory Provisions. Neither Agent nor CO-AGENT -------- nor Collateral Agent nor any Supplemental Collateral Agent nor any of their respective officers, directors, employees or agents shall be liable to Lenders for any action taken or omitted by Agent, CO-AGENT, Collateral Agent or such -------- Supplemental Collateral Agent hereunder or under any of the other Loan Documents or in connection herewith or therewith except to the extent caused by Agent's or CO-AGENT's or -------- Collateral Agent's or such Supplemental Collateral Agent's gross negligence or willful misconduct. If Agent or CO-AGENT -------- or Collateral Agent or any Supplemental Collateral Agent shall request instructions from Lenders with respect to any act or action (including the failure to take an action) in connection with this Agreement or any of the other Loan Documents, Agent or CO-AGENT or Collateral Agent or such Supplemental -------- Collateral Agent shall be entitled to refrain from such act or taking such action unless and until Agent or CO-AGENT or -------- Collateral Agent or such Supplemental Collateral Agent shall have received instructions from Requisite Lenders. Without prejudice to the generality of the foregoing, (i) each of Agent, CO-AGENT, Collateral Agent and Supplemental Collateral -------- Agents shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Company and its Subsidiaries), accountants, experts and other profes- sional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against Agent or CO-AGENT or -------- Collateral Agent or any Supplemental Collateral Agent as a result of Agent or CO-AGENT or Collateral Agent or such -------- Supplemental Collateral Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of Requisite Lenders. Each of Agent, CO-AGENT, Collateral Agent -------- and Supplemental Collateral Agents shall be entitled to refrain from exercising any power, discretion or authority vested in it under this Agreement or any of the other Loan Documents unless and until it has obtained the instructions of Requisite Lenders. D. Agent, CO-AGENT, Collateral Agent and Supplemental -------- Collateral Agents Entitled to Act as Lenders. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, Agent or CO-AGENT or Collateral Agent or, if any -------- Supplemental Collateral Agent is or becomes a Lender, such Supplemental Collateral Agent, in its individual capacity as a Lender hereunder. With respect to its participation in the Loans and the Letters of Credit, Agent, CO-AGENT, Collateral -------- Agent and, if any Supplemental Collateral Agent is or becomes a Lender, such Supplemental Collateral Agent, shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless the context clearly otherwise indicates, include Agent, CO-AGENT, -------- Collateral Agent and, if any Supplemental Collateral Agent is or becomes a Lender, such Supplemental Collateral Agent, in its individual capacity. Agent, CO-AGENT, Collateral Agent -------- and, if any Supplemental Collateral Agent is or becomes a Lender, such Supplemental Collateral Agent, and their respective Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with Company or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from Company for services in connection with this Agreement and otherwise without having to account for the same to Lenders. 9.3 Representations and Warranties; No Responsibility For --------------- --- ----------- -- -------------- --- Appraisal of Creditworthiness. --------- -- ---------------- Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with the making of the Loans and the issuance of Letters of Credit hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Company. Neither Agent nor CO-AGENT nor Collateral Agent nor any Supplemental -------- Collateral Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investi- gation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and neither Agent nor CO-AGENT nor Collateral Agent nor any -------- Supplemental Collateral Agent shall have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders. 9.4 Right to Indemnity. ----- -- --------- Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify Agent, CO-AGENT, Collateral -------- Agent and each Supplemental Collateral Agent, to the extent that Agent, CO-AGENT, Collateral Agent and such Supplemental -------- Collateral Agent shall not have been reimbursed by Company, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, counsel fees and disbursements) or disbursements of any kind or nature what- soever which may be imposed on, incurred by or asserted against Agent, CO-AGENT, Collateral Agent or such Supplemental -------- Collateral Agent in performing its duties hereunder or under the other Loan Documents or otherwise in their respective capacities as Agent, CO-AGENT, Collateral Agent and -------- Supplemental Collateral Agent in any way relating to or arising out of this Agreement or the other Loan Documents; provided that no Lender shall be liable for any portion of -------- such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent's or CO-AGENT's or Collateral Agent's or -------- such Supplemental Collateral Agent's gross negligence or willful misconduct. If any indemnity furnished to Agent, CO- --- AGENT, Collateral Agent or any Supplemental Collateral Agent ----- for any purpose shall, in the opinion of Agent, CO-AGENT, -------- Collateral Agent or such Supplemental Collateral Agent, be insufficient or become impaired, Agent, CO-AGENT, Collateral -------- Agent or such Supplemental Collateral Agent may call for addi- tional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. 9.5 Payee of Note Treated as Owner. ----- -- ---- ------- -- ----- Agent, CO-AGENT, Collateral Agent and Supplemental -------- Collateral Agents may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with Agent. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of that Note or of any Note or Notes issued in exchange therefor. 9.6 Successor Agent and Swing Line Lender. --------- ----- --- ----- ---- ------ A. Successor Agent, etc. Agent, CO-AGENT, -------- Collateral Agent or any Supplemental Collateral Agent may resign at any time by giving 30 days' prior written notice thereof to Lenders and Company, and Agent, CO-AGENT, -------- Collateral Agent or any Supplemental Collateral Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Company and Agent, CO-AGENT, Collateral Agent or such Supplemental -------- Collateral Agent, as the case may be, and signed by Requisite Lenders. Upon any such notice of resignation or any such removal (i) in the case of a resignation or removal of CO- --- AGENT or Collateral Agent, there shall be no successor CO- ----- --- AGENT or Collateral Agent, (ii) in the case of a resignation ----- or removal of any Supplemental Collateral Agent, Agent or Collateral Agent may appoint a successor Supplemental Collateral Agent as contemplated by subsection 9.1D, and (iii) in the case of a resignation or removal of Agent, Requisite Lenders shall have the right, upon five Business Days' notice to Company, to appoint a successor Agent. Upon the acceptance of any appointment as Agent or Supplemental Collateral Agent hereunder by a successor Agent or Supplemental Collateral Agent, that successor Agent or Supplemental Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Agent or Supplemental Collateral Agent and the retiring or removed Agent or Supplemental Collateral Agent shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Agent's, CO-AGENT's, -------- Collateral Agent's or Supplemental Collateral Agent's resignation or removal hereunder as Agent, CO-AGENT, -------- Collateral Agent or Supplemental Collateral Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent, CO-AGENT, Collateral Agent or Supplemental Collateral -------- Agent under this Agreement. B. Successor Swing Line Lender. Any resignation or removal of Agent pursuant to subsection 9.6A shall also constitute the resignation or removal of Bankers or its successor as Swing Line Lender, and any successor Agent appointed pursuant to subsection 9.6A shall, upon its acceptance of such appointment, become the successor Swing Line Lender for all purposes hereunder. In such event (i) Company shall prepay any outstanding Swing Line Loans made by the retiring or removed Agent in its capacity as Swing Line Lender, (ii) upon such prepayment, the retiring or removed Agent and Swing Line Lender shall surrender the Swing Line Note held by it to Company for cancellation, and (iii) Company shall issue a new Swing Line Note to the successor Agent and Swing Line Lender substantially in the form of Exhibit VI ------- -- annexed hereto, in the principal amount of the Swing Line Loan Commitment then in effect and with other appropriate insertions. 9.7 Collateral Documents. ---------- --------- Each Lender hereby further authorizes Agent and, to the extent directed to do so by Agent or Collateral Agent, each Supplemental Collateral Agent to enter into the Collateral Documents as secured party on behalf of and for the benefit of Lenders and agrees to be bound by the terms of the Collateral Documents; provided that neither Agent nor -------- Collateral Agent nor any Supplemental Collateral Agent shall enter into or consent to any amendment, modification, termination or waiver of any provision contained in the Collateral Documents without the prior consent of Requisite Lenders. Each Lender agrees that no Lender shall have any right individually to realize upon the Subsidiary Guaranty or any of the Collateral under the Collateral Documents, it being understood and agreed that all rights and remedies under the Collateral Documents may be exercised solely by Agent, Collateral Agent and Supplemental Collateral Agents for the benefit of Lenders and the other beneficially interested parties under the Collateral Documents and the other Loan Documents in accordance with the terms thereof. Section 10. MISCELLANEOUS 10.1 Assignments and Participations in Loans and Letters of ----------- --- -------------- -- ----- --- ------- -- Credit. ------ A. General. Each Lender shall have the right at any time to (i) sell, assign, transfer or negotiate to any Eligible Assignee, or (ii) sell participations to any Person in, all or any part of any Loan or Loans made by it or its Commitments or its Letters of Credit or participations therein or any other interest herein or in any other Obligations owed to it; provided that no such assignment or participation -------- shall, without the consent of Company, require Company to file a registration statement with the Securities and Exchange Commission or apply to qualify such assignment or participation of the Loans, the Letters of Credit or participations therein or the other Obligations under the securities laws of any state. Except as otherwise provided in this subsection 10.1, no Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or any granting of participations in, all or any part of the Loans, the Commitments, the Letters of Credit or participations therein or the other Obligations owed to such Lender. B. Assignments. (i) Amounts and Terms of Assignments. Each Loan, ------- --- ----- -- ----------- Commitment, Letter of Credit or participation therein or other Obligation may (a) be assigned in any amount (of a constant and not a varying percentage) to another Lender, or to an Affiliate of the assigning Lender or another Lender, with the giving of notice to Company and Agent and, in the case of an assignment to an Affiliate of the assigning Lender where the assigning Lender can reasonably foresee that such assignment would result in a requirement on the part of Company to pay any greater amount pursuant to subsection 2.6D or 2.7 than Company would have been required to pay to the assigning Lender in respect of the amount of the assignment effected by such assigning Lender to such Affiliate had no such assignment occurred, with the consent of Company to such assignment (which consent shall not be unreasonably withheld), (b) be assigned in an amount (of a constant and not a varying percentage) of not less than $5,000,000 (or such lesser amount as shall constitute the aggregate amount of all Loans, Commitments, Letters of Credit and participations therein and other Obligations of the assigning Lender) to any other Eligible Assignee with the consent of Company and Agent (which consent of Company and Agent shall not be unreasonably withheld), or (c) be assigned in accordance with the provisions of subsection 2.1E. To the extent of any such assignment in accordance with clause (a), (b) or (c) above, the assigning Lender shall be relieved of its obligations with respect to its Loans, Commitments, Letters of Credit or participations therein or other Obligations or the portion thereof so assigned. The parties to each such assignment described in clause (a) or (b) above shall execute and deliver to Agent, for its acceptance, an Assignment and Acceptance in substantially the form of Exhibit XII annexed hereto, ------- --- together with (1) a processing fee of $1,500 in the case of an assignment to another Lender or (2) a processing fee of $2,500 in the case of an assignment to any other Eligible Assignee and such certificates, documents or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment and Acceptance may be required to deliver to Agent pursuant to subsection 2.7B(iii). The parties to each such assignment described in clause (c) above shall execute and deliver to Agent, and Agent shall accept, an Extension Assignment and Acceptance in substantially the form of Exhibit XIII annexed hereto in ------- ---- accordance with the provisions of subsection 2.1E. Upon such execution, delivery and acceptance, from and after the effective date of the assignments and assumptions contemplated by such Assignment and Acceptance or such Extension Assignment and Acceptance, as the case may be, (y) each assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance or such Extension Assignment and Acceptance, as the case may be, shall have the rights and obligations of a Lender hereunder and (z) each assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance or such Extension Assignment and Acceptance, as the case may be, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance or an Extension Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). The Commitments hereunder shall be modified to reflect the Commitment of such assignee and any remaining Commitment of such assigning Lender and, if any such assignment pursuant to an Assignment and Acceptance occurs after the issuance of the Notes hereunder, new Notes shall, upon surrender of such assigning Lender's Notes, be issued to such assignee and to such assigning Lender as necessary to reflect the new Commitments of such assignee and such assigning Lender. (ii) Acceptance by Agent. Upon its receipt of an ---------- -- ----- Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with the processing fee referred to in subsection 10.1B(i) and any certificates, documents or other evidence with respect to United States federal income tax withholding matters that such assignee may be required to deliver to Agent pursuant to subsection 2.7B(iii), Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit XII annexed hereto and if Company and Agent have ------- --- consented to the assignment evidenced thereby (in each case to the extent such consent is required pursuant to subsection 10.1B(i)), (a) accept such Assignment and Acceptance by executing a counterpart thereof as provided therein (which acceptance shall evidence any required consent of Agent to such assignment), and (b) give prompt notice thereof to Company. Agent shall maintain a copy of each Assignment and Acceptance delivered to and accepted by it as provided in this subsection 10.1B(ii). C. Participations. The holder of any participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except action directly affecting (i) the extension of the scheduled final maturity date of any Loan allocated to such participation or (ii) a reduction of the principal amount of or the rate of interest payable on any Loan allocated to such participation, and all amounts payable by Company hereunder (including without limitation amounts payable to such Lender pursuant to subsections 2.6D, 2.7 and 3.6) shall be determined as if such Lender had not sold such participation. Company and each Lender hereby acknowledge and agree that, solely for purposes of subsections 10.4 and 10.5, (a) any participation will give rise to a direct obligation of Company to the participant and (b) the participant shall be considered to be a "Lender". D. Assignments to Federal Reserve Bank. In addition to the assignments and participations permitted under the foregoing provisions of this subsection 10.1, any Lender may assign and pledge all or any portion of its Loans, the other Obligations owed to such Lender and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank. No Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any such assignment and pledge. E. Information. Each Lender may furnish any informa- tion concerning Company and its Subsidiaries in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants); provided, -------- however, that prior to being furnished with any such ------- information which is non-public information obtained pursuant to the requirements of this Agreement which has been identified as confidential by Company, the assignee or participant or prospective assignee or participant shall agree to preserve the confidentiality of such information in accordance with subsection 10.19. 10.2 Expenses. -------- Whether or not the transactions contemplated hereby shall be consummated, Company agrees to pay promptly (i) all the actual and reasonable costs and expenses of preparation of the Loan Documents; (ii) all the costs of furnishing all opinions by counsel for Company (including without limitation any opinions requested by Lenders as to any legal matters arising hereunder) and of Company's performance of and compliance with all agreements and conditions on its part to be performed or complied with under this Agreement and the other Loan Documents including, without limitation, with respect to confirming compliance with environmental and insurance requirements; (iii) the reasonable fees, expenses and disbursements of counsel to Agent (including allocated costs of internal counsel) in connection with the negotiation, preparation, execution and administration of the Loan Docu- ments and the Loans and any consents, amendments, waivers or other modifications hereto or thereto and any other documents or matters requested by Company or any of its Subsidiaries; (iv) all the actual costs and reasonable expenses of creating and perfecting Liens in favor of Agent on behalf of Lenders pursuant to any Loan Document, including filing and recording fees and expenses, title insurance, fees and expenses of counsel for providing such opinions as Agent or Requisite Lenders may reasonably request and fees and expenses of legal counsel to Agent; (v) all the actual costs and reasonable expenses of obtaining and reviewing any appraisals provided for under subsection 4.1F or 6.9, any environmental audits or reports provided for under subsection 4.1G or 6.9 and any audits or reports provided for under subsection 4.1K or 6.5 with respect to Inventory and accounts receivable of Company; (vi) the reasonable fees, expenses and disbursements of any accountants retained by Agent in connection with the review and analysis prior to the Closing Date of any financial statements of Company and its Subsidiaries or any other reports furnished to Agent by or on behalf of Company or any of its Subsidiaries pursuant to or for use in connection with this Agreement; (vii) all other actual and reasonable costs and expenses incurred by Agent in connection with the negotia- tion, preparation and execution of the Loan Documents and the transactions contemplated hereby and thereby; and (viii) after the occurrence of an Event of Default, all costs and expenses, including reasonable attorneys' fees (including allocated costs of internal counsel) and costs of settlement, incurred by Agent and Lenders in enforcing any Obligations of or in collecting any payments due from Company or any of its Subsidiaries hereunder or under the other Loan Documents by reason of such Event of Default or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or pursuant to any insolvency or bankruptcy proceedings. 10.3 Indemnity. --------- In addition to the payment of expenses pursuant to subsection 10.2, whether or not the transactions contemplated hereby shall be consummated, Company agrees to defend, indemnify, pay and hold harmless Agent, CO-AGENT, Collateral -------- Agent, Supplemental Collateral Agents and Lenders, and the officers, directors, employees, agents and affiliates of Agent, CO-AGENT, Collateral Agent, Supplemental Collateral -------- Agents and Lenders (collectively called the "Indemnitees") from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including without limitation the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including without limitation securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of this Agreement or the other Loan Documents or any Spin-Off Agreements or the transactions contemplated hereby or thereby (including without limitation Lenders' agreement to make the Loans hereunder or the use or intended use of the proceeds of any of the Loans or the issuance of Letters of Credit hereunder or the use or intended use of any of the Letters of Credit) or the statements contained in the commitment letter delivered by any Lender to Company with respect thereto (collectively called the "Indemnified Liabilities"); provided -------- that Company shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise solely from the gross negligence or willful misconduct of that Indemnitee as determined by a final judgment of a court of competent jurisdiction; and provided, further that in connection with investigating, preparing to defend, or defending against any Indemnified Liability of, to or against more than one Indemnitee, such investigation, preparation or defense shall be conducted by the same legal counsel on behalf of all such Indemnitees except to the extent that one or more of such Indemnitees determines in good faith that there is a conflict of interests between such Indemnitee or Indemnitees and some or all of the remaining Indemnitees. To the extent that the undertaking to defend, indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, Company shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. 10.4 Set Off; Security Interest in Deposit Accounts. --- ---- -------- -------- -- ------- -------- In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default each Lender is hereby authorized by Company at any time or from time to time, without notice to Company or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, Indebt- edness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by that Lender to or for the credit or the account of Company against and on account of the obligations and liabilities of Company to that Lender under this Agreement, the Notes, the Letters of Credit and participations therein, including, but not limited to, all claims of any nature or description arising out of or connected with this Agreement, the Notes, the Letters of Credit and participations therein or any other Loan Document, irrespective of whether or not (i) that Lender shall have made any demand hereunder or (ii) the principal of or the interest on the Loans or any amounts in respect of the Letters of Credit or any other amounts due hereunder shall have become due and payable pursuant to Section 8 and although said obligations and liabilities, or any of them, may be contingent or unmatured. Company hereby further grants to Agent and each Lender a security interest in all deposits and accounts maintained with Agent or such Lender as security for the Obligations. 10.5 Ratable Sharing. ------- ------- Lenders hereby agree among themselves that if any of them shall, whether by voluntary payment, by realization upon security, through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts payable in respect of Letters of Credit, fees and other amounts then due and owing to that Lender hereunder or under the other Loan Documents (collec- tively, the "Aggregate Amounts Due" to such Lender) which is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (i) notify Agent and each other Lender of the receipt of such payment and (ii) apply a portion of such payment to purchase participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided that if all or part of such -------- proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of Company or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. Company expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all monies owing by Company to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder. 10.6 Amendments and Waivers. ---------- --- ------- No amendment, modification, termination or waiver of any provision of this Agreement or of the Notes, or consent to any departure by Company therefrom, shall in any event be effective without the written concurrence of Requisite Lenders; provided that any amendment, modification, termina- -------- tion or waiver which: increases the amount of the Commitments or reduces the principal amount of the Loans; changes each Lender's Pro Rata Share; changes the definition of "Requisite Lenders"; changes in any manner any provision of the Agreement which, by its terms, expressly requires the approval or concurrence of all Lenders; postpones the scheduled final maturity dates of the Loans or the dates on which interest or any fees are payable (other than any waiver of the requirement that any Eurodollar Rate Loan may not be voluntarily prepaid prior to the expiration of the Interest Period applicable thereto); decreases the interest rates borne by the Loans or the amount of any fees payable hereunder; increases the maximum duration of Interest Periods; reduces the amount or postpones the due date of any amount payable in respect of, or postpones the required expiration date of, any Letters of Credit; changes in any manner the obligations of Lenders relating to the purchase of participations in Letters of Credit; increases the percentage set forth in the definition of the term "Borrowing Base"; releases any Lien granted in favor of Agent with respect to any Collateral consisting of Inventory other than in accordance with the terms of the Loan Documents; or changes in any manner the provisions contained in subsection 8.1 or this subsection 10.6 shall be effective only if evidenced by a writing signed by or on behalf of all Lenders. In addition, (i) any amendment, modification, termination or waiver of any of the provisions contained in Section 4 shall be effective only if evidenced by a writing signed by or on behalf of Agent and CO-AGENT and Requisite -------- Lenders, (ii) no amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the Lender which is the holder of that Note, (iii) no amendment, modification, termination or waiver of any provision of Section 9 or of any other provision of this Agreement which, by its terms, expressly requires the approval or concurrence of Agent and/or CO-AGENT shall be -------- effective without the written concurrence of Agent and/or CO- --- AGENT, as the case may be, and (iv) no amendment, ----- modification, termination or waiver of any provision of subsection 2.1A(ii) or any other provision of this Agreement relating to the Swing Line Loan Commitment or the Swing Line Loans shall be effective without the written concurrence of Swing Line Lender. Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Company in any case shall entitle Company to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termi- nation, waiver or consent effected in accordance with this subsection 10.6 shall be binding upon each holder of the Notes at the time outstanding, each future holder of the Notes and, if signed by Company, on Company. 10.7 Independence of Covenants. ------------ -- --------- All covenants hereunder 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 would otherwise be within the limitations of, another covenant shall not avoid the occur- rence of an Event of Default or Potential Event of Default if such action is taken or condition exists. 10.8 Notices. ------- Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telecopied or sent by United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service, upon receipt of telecopy, or four Business Days after depositing it in the United States mail, registered or certified, with postage prepaid and properly addressed; provided that notices to Agent and CO- -------- --- AGENT shall not be effective until received. For the purposes ----- hereof, the address of each party hereto shall be as set forth under such party's name on the signature pages hereof or (i) as to Company and Agent, such other address as shall be designated by such Person in a written notice delivered to the other parties hereto and (ii) as to each other party, such other address as shall be designated by such party in a written notice delivered to Agent. 10.9 Survival of Representations, Warranties and Agreements. -------- -- ---------------- ---------- --- ---------- A. All representations, warranties and agreements made herein shall survive the execution and delivery of this Agreement and the making of the Loans and the issuance of the Letters of Credit hereunder. B. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A, 3.6, 10.2 and 10.3 and the agreements of Lenders set forth in subsections 9.2C, 9.4, 10.4 and 10.5 shall survive the payment of the Loans, the cancellation or expiration of the Letters of Credit and the reimbursement of any amounts drawn thereunder, and the termination of this Agreement. 10.10 Failure or Indulgence Not Waiver; Remedies ------- -- ---------- --- ------- -------- Cumulative. ---------- No failure or delay on the part of Agent or any Lender in the exercise of any power, right or privilege hereunder or under any Note or Letter of Credit shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement, the Notes, the Letters of Credit and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. 10.11 Marshalling; Payments Set Aside. ------------ -------- --- ----- None of Agent, CO-AGENT, Collateral Agent, any -------- Supplemental Collateral Agent or any Lender shall be under any obligation to marshal any assets in favor of Company or any other party or against or in payment of any or all of the Obligations. To the extent that Company makes a payment or payments to Agent, CO-AGENT, Collateral Agent, Supplemental -------- Collateral Agents or Lenders (or to Agent, CO-AGENT, -------- Collateral Agent or Supplemental Collateral Agents for the benefit of Lenders), or Agent, CO-AGENT, Collateral Agent, -------- Supplemental Collateral Agents or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred. 10.12 Severability. ------------ In case any provision in or obligation under this Agreement or the Notes shall be invalid, illegal or un- enforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 10.13 Obligations Several; Independent Nature of Lenders' ----------- -------- ----------- ------ -- -------- Rights. ------ The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Commit- ments of any other Lender hereunder. Nothing contained herein or in any other Loan Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 10.14 Headings. -------- Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 10.15 Applicable Law. ---------- --- THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 10.16 Successors and Assigns. ---------- --- ------- This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and permitted assigns of Lenders (it being understood that Lenders' rights of assignment are subject to subsection 10.1). Neither Company's rights or obligations hereunder nor any interest therein may be assigned or delegated by Company without the prior written consent of all Lenders. 10.17 Consent to Jurisdiction and Service of Process. ------- -- ------------ --- ------- -- ------- ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OBLIGATION MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE CITY AND STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPER- TIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURIS- DICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN DOCUMENT OR SUCH OBLIGATION. Company hereby agrees that service of all process in any such proceedings in any such court may be made by registered or certified mail, return receipt requested, to Company at its address provided in subsection 10.8, such service being hereby acknowledged by Company to be sufficient for personal jurisdiction in any action against Company in the State of New York and to be otherwise effective and binding service in every respect. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of any Lender to bring proceedings against Company in the courts of any other jurisdiction. 10.18 Waiver of Jury Trial. ------ -- ---- ----- EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each party hereto acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this Agreement, and that each will continue to rely on this waiver in their related future dealings. Each party hereto further warrants and represents that it has reviewed this waiver with its legal counsel and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 10.19 Confidentiality. --------------- Each Lender shall hold all non-public information obtained pursuant to the requirements of this Agreement which has been identified as confidential by Company in accordance with such Lender's customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, it being understood and agreed by Company that in any event a Lender may make disclosures reasonably required by any bona fide assignee or participant in connection with the contemplated assignment by such Lender of any Loans or any participation therein or as required or requested by any governmental agency or repre- sentative thereof or pursuant to legal process; provided that, -------- unless specifically prohibited by applicable law or court order, each Lender shall notify Company of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; and provided, further -------- ------- that in no event shall any Lender be obligated or required to return any materials furnished by Company or any of its Subsidiaries. 10.20 Counterparts; Effectiveness. ------------- ------------- This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by Company and Agent of written or tele- phonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. COMPANY: PLAINBRIDGE, INC. By: Title: Notice Address: Plainbridge, Inc. 301 Blair Road P.O. Box 5021 Woodbridge, New Jersey 07095-5021 Attention: Chief Executive Officer with a copy to: Plainbridge, Inc. 301 Blair Road P.O. Box 5021 Woodbridge, New Jersey 07095-5021 Attention: Corporate Secretary LENDERS: BANKERS TRUST COMPANY, individually and as Agent By: Title: Notice Address: Bankers Trust Company 280 Park Avenue New York, New York 10017 Attention: Mary Jo Jolly with a copy to: Bankers Trust Company 300 South Grand Avenue, 41st Floor Los Angeles, California 90071 Attention: Michael R. Duckworth HELLER FINANCIAL, INC. By: Title: Notice Address: 101 Park Avenue 10th Floor New York, New York 10178 Attention: HBC Portfolio Manager THE MITSUBISHI TRUST AND BANKING CORPORATION By: Title: Notice Address: 520 Madison Avenue 39th Floor New York, New York 10022 Attention: Patricia Loret de Mola NATIONAL CANADA FINANCE CORPORATION By: Title: Notice Address: 85 Livingston Avenue Roseland, New Jersey 07068 Attention: John Leifer John Richter CREDIT AGREEMENT DATED AS OF OCTOBER 26, 1993 AMONG PLAINBRIDGE, INC., as Borrower, THE LENDERS LISTED HEREIN, as Lenders, and BANKERS TRUST COMPANY, as Agent PLAINBRIDGE, INC. CREDIT AGREEMENT TABLE OF CONTENTS ----- -- -------- Page ---- Section 1. DEFINITIONS1 1.1 Certain Defined Terms1 1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement26 1.3 Other Definitional Provisions26 Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS26 2.1 Commitments; Loans26 2.2 Interest on the Loans36 2.3 Fees39 2.4 Prepayments and Reductions in Commitments; General Provisions Regarding Payments40 2.5 Use of Proceeds46 2.6 Special Provisions Governing Eurodollar Rate Loans46 2.7 Increased Costs; Taxes; Capital Adequacy49 2.8 Obligation of Lenders and Issuing Lenders to Mitigate53 2.9 Removal of a Lender53 2.10 Defaulting Lenders54 Section 3. LETTERS OF CREDIT56 3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations Therein56 3.2 Letter of Credit Fees59 3.3 Drawings and Reimbursement of Amounts Drawn Under Letters of Credit.60 3.4 Obligations Absolute62 3.5 Indemnification; Nature of Issuing Lenders' Duties63 3.6 Increased Costs and Taxes Relating to Letters of Credit65 Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT66 4.1 Conditions to Initial Revolving Loans and Swing Line Loans66 4.2 Conditions to All Loans72 4.3 Conditions to Letters of Credit74 Section 5. COMPANY'S REPRESENTATIONS AND WARRANTIES74 5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries75 5.2 Authorization of Borrowing, etc.75 5.3 Financial Condition77 5.4 No Material Adverse Change; No Restricted Junior Payments77 5.5 Title to Properties; Liens77 5.6 Litigation; Adverse Facts78 5.7 Payment of Taxes78 5.8 Performance of Agreements; Materially Adverse Agreements78 5.9 Governmental Regulation79 5.10 Securities Activities79 5.11 Employee Benefit Plans79 5.12 Certain Fees80 5.13 Environmental Protection80 5.14 Employee Matters82 5.15 Solvency82 5.16 Disclosure82 5.17 Intellectual Property82 5.18 Spin-Off Agreements83 Section 6. COMPANY'S AFFIRMATIVE COVENANTS83 6.1 Financial Statements and Other Reports83 6.2 Corporate Existence, etc.89 6.3 Payment of Taxes and Claims; Tax Consolidation89 6.4 Maintenance of Properties; Insurance90 6.5 Inspection; Lender Meeting90 6.6 Compliance with Laws, etc91 6.7 Environmental Disclosure and Inspection91 6.8 Execution of Subsidiary Guaranty and Collateral Documents by Certain Subsidiaries and Future Subsidiaries92 6.9 Additional Mortgages; Release of Mortgages93 6.10 Assignability of Lease Agreements96 Section 7. COMPANY'S NEGATIVE COVENANTS96 7.1 Indebtedness96 7.2 Liens and Related Matters98 7.3 Investments; Joint Ventures99 7.4 Contingent Obligations100 7.5 Restricted Junior Payments101 7.6 Financial Covenants101 7.7 Restriction on Fundamental Changes; Asset Sales103 7.8 Consolidated Capital Expenditures104 7.9 Restriction on Leases105 7.10 Sales and Lease-backs105 7.11 Sale or Discount of Receivables106 7.12 Transactions with Shareholders and Affiliates106 7.13 Disposal of Subsidiary Stock106 7.14 Conduct of Business107 7.15 Amendments of Certain Documents107 7.16 Fiscal Year107 Section 8. EVENTS OF DEFAULT108 8.1 Failure to Make Payments When Due108 8.2 Default in Other Agreements108 8.3 Breach of Certain Covenants108 8.4 Breach of Warranty109 8.5 Other Defaults Under Loan Documents109 8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.109 8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.109 8.8 Judgments and Attachments110 8.9 Dissolution110 8.10 Employee Benefit Plans110 8.11 Change in Control110 8.12 Invalidity of Subsidiary Guaranty111 8.13 Failure of Security111 8.14 Failure to Consummate Spin-Off111 8.15 Termination of Logistical Services Agreement111 8.16 Incurrence of Liability Relating to Spin-Off111 8.17 Material Difference in Closing Date Balance Sheets112 Section 9. AGENT, CO-AGENT, COLLATERAL AGENT -------- AND SUPPLEMENTAL COLLATERAL AGENTS113 9.1 Appointment113 9.2 Powers; General Immunity115 9.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness117 9.4 Right to Indemnity118 9.5 Payee of Note Treated as Owner118 9.6 Successor Agent and Swing Line Lender118 9.7 Collateral Documents119 Section 10. MISCELLANEOUS120 10.1 Assignments and Participations in Loans and Letters of Credit120 10.2 Expenses123 10.3 Indemnity123 10.4 Set Off; Security Interest in Deposit Accounts124 10.5 Ratable Sharing125 10.6 Amendments and Waivers126 10.7 Independence of Covenants127 10.8 Notices127 10.9 Survival of Representations, Warranties and Agreements127 10.10 Failure or Indulgence Not Waiver; Remedies Cumulative127 10.11 Marshalling; Payments Set Aside128 10.12 Severability128 10.13 Obligations Several; Independent Nature of Lenders' Rights128 10.14 Headings129 10.15 Applicable Law129 10.16 Successors and Assigns129 10.17 Consent to Jurisdiction and Service of Process129 10.18 Waiver of Jury Trial130 10.19 Confidentiality130 10.20 Counterparts; Effectiveness131 Signature pages S-1 EXHIBITS I FORM OF NOTICE OF BORROWING II FORM OF NOTICE OF CONVERSION/CONTINUATION III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT IV FORM OF EXTENSION REQUEST V FORM OF REVOLVING NOTE VI FORM OF SWING LINE NOTE VII FORM OF BORROWING BASE CERTIFICATE VIII FORM OF COMPLIANCE CERTIFICATE IX FORM OF OPINION OF SHEARMAN & STERLING X FORM OF OPINION OF GENERAL COUNSEL OF COMPANY XI FORM OF OPINION OF O'MELVENY & MYERS XII FORM OF ASSIGNMENT AND ACCEPTANCE XIII FORM OF EXTENSION ASSIGNMENT AND ACCEPTANCE XIV FORM OF COLLATERAL ACCOUNT AGREEMENT XV FORM OF COMPANY PLEDGE AGREEMENT XVI FORM OF COMPANY SECURITY AGREEMENT XVII FORM OF COMPANY TRADEMARK SECURITY AGREEMENT XVIII FORM OF SUBSIDIARY GUARANTY XIX FORM OF SUBSIDIARY PLEDGE AGREEMENT XX FORM OF SUBSIDIARY SECURITY AGREEMENT XXI FORM OF SUBSIDIARY TRADEMARK SECURITY AGREEMENT XXII FORM OF MORTGAGE XXIII FORM OF INVENTORY REPORT SCHEDULES 2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES 4.1C REAL PROPERTY COVERED BY CLOSING DATE MORTGAGES 4.1G REAL PROPERTY COVERED BY ENVIRONMENTAL REPORTS 5.1 SUBSIDIARIES OF COMPANY 5.2B CERTAIN APPROVALS AND CONSENTS 5.2C CERTAIN GOVERNMENTAL CONSENTS 5.6 LITIGATION 5.11 CERTAIN EMPLOYEE BENEFIT PLANS 5.13 ENVIRONMENTAL MATTERS 5.17 INTELLECTUAL PROPERTY MATTERS 6.9 REAL PROPERTY REQUIRING LANDLORD CONSENT 7.1 CERTAIN EXISTING INDEBTEDNESS 7.2 CERTAIN EXISTING LIENS 7.3 CERTAIN EXISTING INVESTMENTS 7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS EX-4.5 6 PATHMARK STORES, INC. CREDIT AGREEMENT This CREDIT AGREEMENT is dated as of October 26, 1993 and entered into by and among PATHMARK STORES, INC., a Delaware corporation ("Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to herein as a "Lender" and collectively as "Lenders"), and BANKERS TRUST COMPANY ("Bankers"), as agent for Lenders (in such capacity, "Agent"). R E C I T A L S WHEREAS, Company proposes to engage in a series of transactions, including the issuance of the New Subordinated Debt (this and other capitalized terms used in these recitals without definition being used as defined in subsection 1.1), in connection with the Restructuring; WHEREAS, Company desires that Lenders extend certain credit facilities to Company to provide a portion of the financing necessary to consummate the Restructuring and to provide financing for working capital and other general corporate purposes of Company and its Subsidiaries; WHEREAS, Company proposes to use a portion of the proceeds from the Loans and from the issuance of the Senior Subordinated Notes and the Junior Subordinated Notes to repay all amounts outstanding under the Existing Credit Agreement, to repay all amounts owing to Holdings under the Holdings Intercompany Notes related to the Holdings Senior Subordinated Notes and the Holdings Discount Debentures and to repay a portion of the amount owing to Holdings under the Holdings Intercompany Note related to the Holdings Subordinated Debentures, and Holdings proposes to use the proceeds from the repayment of the Holdings Intercompany Notes related to the Holdings Senior Subordinated Notes and the Holdings Discount Debentures to redeem all of the Holdings Senior Subordinated Notes and the Holdings Discount Debentures and to use the proceeds from the repayment of the Holdings Intercompany Note related to the Holdings Subordinated Debentures to purchase a corresponding portion of the Holdings Subordinated Debentures; WHEREAS, Company proposes to issue Subordinated Debentures in exchange for a portion of the Holdings Subordinated Debentures pursuant to the Subordinated Debenture Exchange Offer and to deliver the Holdings Subordinated Debentures tendered in such exchange to Holdings in satisfaction of a corresponding portion of Company's obligations under the Holdings Intercompany Note related to the Holdings Subordinated Debentures; WHEREAS, PTKH proposes to issue the PTKH Bonds to Holdings in satisfaction of a corresponding portion of Company's obligations under the Holdings Intercompany Note related to the Holdings Subordinated Debentures and Holdings proposes to sell the PTKH Bonds to Equitable or its Affiliates pursuant to the PTKH Private Placement in exchange for a corresponding portion of the Holdings Subordinated Debentures held by Equitable or its Affiliates; WHEREAS, Company proposes to issue Subordinated Notes in exchange for Holdings Subordinated Notes pursuant to the Subordinated Note Exchange Offer and to deliver the Holdings Subordinated Notes tendered in such exchange to Holdings in satisfaction of a corresponding portion of Company's obligations under the Holdings Intercompany Note related to the Holdings Subordinated Notes; WHEREAS, in connection with the transactions pursuant to which the Holdings Subordinated Debentures are to be exchanged or purchased, Holdings proposes to obtain the consent of the requisite number of holders of the Holdings Subordinated Debentures to the execution of the Supplemental Holdings Subordinated Debenture Indenture which, among other things, will remove substantially all of the restrictive covenants contained in the indenture pursuant to which the Holdings Subordinated Debentures were issued; WHEREAS, in connection with the Subordinated Note Exchange Offer, Holdings proposes to obtain the consent of the requisite number of holders of the Holdings Subordinated Notes to the execution of the Supplemental Holdings Subordinated Note Indenture which, among other things, will remove substantially all of the restrictive covenants contained in the indenture pursuant to which the Holdings Subordinated Notes were issued; WHEREAS, in connection with the Restructuring, Company has spun off certain of its assets to Chefmark and has entered into certain of the Spin-Off Agreements with Chefmark; WHEREAS, in connection with the Restructuring, Company proposes to spin off certain of its assets to Plainbridge and to enter into certain of the Spin-Off Agreements and certain other arrangements with Plainbridge, Chefmark, PTKH, Holdings and SMG- II; WHEREAS, concurrently with the execution of this Agreement, Plainbridge is entering into the Plainbridge Credit Agreement; and WHEREAS, Company desires to secure all of the Obligations hereunder and under the other Loan Documents by granting to Agent, on behalf of Lenders, a first priority Lien on certain unencumbered real, personal and mixed property of Company; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Company, Lenders and Agent agree as follows: Section 1. DEFINITIONS 1.1 Certain Defined Terms. --------------------- The following terms used in this Agreement shall have the following meanings: "Adjusted Eurodollar Rate" means, for any Interest Rate Determination Date with respect to a Eurodollar Rate Loan, the rate per annum obtained by dividing (i) the arithmetic average -------- (rounded upward to the nearest 1/16 of one percent) of the offered quotation, if any, to first class banks in the interbank Eurodollar market by each of the Reference Lenders for U.S. dollar deposits of amounts in same day funds comparable to the principal amount of the Eurodollar Rate Loan of that Reference Lender for which the Adjusted Eurodollar Rate is then being determined with maturities comparable to the Interest Period for which such Adjusted Eurodollar Rate will apply as of approximately 10:00 A.M. (New York time) on such Interest Rate Determination Date by (ii) a percentage equal to 100% minus the -- ----- stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable on such Interest Rate Determination Date to any member bank of the Federal Reserve System in respect of "Eurocurrency liabilities" as defined in Regulation D (or any successor category of liabilities under Regulation D); provided that if any Reference Lender fails to -------- provide Agent with its aforementioned quotation then the Adjusted Eurodollar Rate shall be determined based on the quotation(s) provided to Agent by the other Reference Lender(s). "Affected Lender" has the meaning assigned to that term in subsection 2.6C. "Affiliate", as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. "Agent" has the meaning assigned to that term in the introduction to this Agreement and also means and includes any successor Agent appointed pursuant to subsection 9.6A. "Agreement" means this Credit Agreement dated as of October 26, 1993, as it may be amended, supplemented or otherwise modified from time to time. "Applicable Pricing Discount" means, during any Pricing Discount Period, (i) with respect to interest payable on the Term A Loans and the Revolving Loans and letter of credit fees payable under clause (b) of subsection 3.2(i), (a) 0.25% per annum if the Consolidated Interest Coverage Ratio (as such term is defined in the definition of Pricing Discount Period) set forth in the applicable APD Certificate (as such term is defined in the definition of Pricing Discount Period) for each of the two four-fiscal quarter periods covered by such APD Certificate is equal to or greater than 2.50:1.00 but less than 3.00:1.00 or (b) 0.50% per annum if the Consolidated Interest Coverage Ratio set forth in the applicable APD Certificate for each of such two four-fiscal quarter periods is equal to or greater than 3.00:1.00 and (ii) with respect to commitment fees payable under clause (ii) of subsection 2.3A, 0.125% per annum. "Asset Sale" means (i) the sale by Company or any of its Subsidiaries to any Person other than Company or any of its wholly-owned Subsidiaries of (a) any of the stock of any of Company's Subsidiaries or (b) any other assets (whether tangible or intangible) of Company or any of its Subsidiaries other than (1) inventory sold in the ordinary course of business and (2) any other assets to the extent that the aggregate fair market value of such assets sold in any single transaction or related series of transactions is equal to $1,000 or less, (ii) the assignment by Company or any of its Subsidiaries to any Person other than Company or any of its wholly-owned Subsidiaries of any lease, whether a Capital Lease or an Operating Lease, to which it is a party as lessee, (iii) the taking of any assets of Company or any of its Subsidiaries, or any part thereof or interest therein, for public or quasi-public use under the power of eminent domain, condemnation or otherwise, other than any such taking to the extent that the aggregate net cash proceeds received by Company and its Subsidiaries in connection with such taking and all other takings related to such taking are equal to or less than $100,000, or (iv) the occurrence of any loss, damage or destruction of any assets of Company or any of its Subsidiaries giving rise to insurance proceeds, other than any such occurrence to the extent that the aggregate insurance proceeds received by Company and its Subsidiaries in connection with such occurrence are equal to or less than $5,000,000. "Assignment and Acceptance" means an Assignment and Acceptance entered into by a Lender and an Eligible Assignee, and accepted by Agent, in substantially the form of Exhibit XI ---------- annexed hereto. "Bankers" has the meaning assigned to that term in the introduction to this Agreement. "Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute. "Base Rate" means, at any time, the higher of (x) the Prime Rate or (y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate. "Base Rate Loans" means Loans bearing interest at rates determined by reference to the Base Rate as provided in subsection 2.2A. "Business Day" means (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close, and (ii) with respect to all notices, determinations, fundings and payments in connection with the Adjusted Eurodollar Rate or any Eurodollar Rate Loans, any day that is a Business Day described in clause (i) above and that is also a day for trading by and between banks in Dollar deposits in the applicable interbank Eurodollar market. "Capital Lease", as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "Cash" means money, currency or a credit balance in a Deposit Account. "Cash Equivalents" means (i) marketable securities issued or directly and unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof (a) maturing within one year from the date of acquisition thereof and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's") or (b) in the case of tax exempt securities referred to as "Variable Rate Demand Notes", maturing within 90 days from the date of acquisition thereof and, at the time of acquisition, having a rating of at least A from S&P or at least A2 from Moody's; (iii) commercial paper maturing no more than six months from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any Lender or any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia having unimpaired capital and surplus of not less than $250,000,000 (each Lender and each such commercial bank herein called a "Cash Equivalent Bank"); and (v) Eurodollar time deposits having a maturity of less than one year purchased directly from any Cash Equivalent Bank (whether such deposit is with such Cash Equivalent Bank or any other Cash Equivalent Bank). "Chefmark" means Chefmark, Inc., a Delaware corporation. "Class" means, with respect to Lenders, (i) Lenders having Term A Loan Exposure, (ii) Lenders having Term B Loan Exposure, or (iii) Lenders having Revolving Loan Exposure, as the case may be. "Closing Date" means the date on or before October 29, 1993, on which the initial Loans are made. "Collateral" means, collectively, all real, personal and mixed property collateral securing the Obligations pursuant to the Collateral Documents. "Collateral Account" has the meaning assigned to that term in the Collateral Account Agreement. "Collateral Account Agreement" means the Collateral Account Agreement executed and delivered by Company and Agent on the Closing Date, substantially in the form of Exhibit XII ----------- annexed hereto, as such Collateral Account Agreement may hereafter be amended, supplemented or otherwise modified from time to time. "Collateral Co-Agent" has the meaning assigned to that term in subsection 9.1. "Collateral Documents" means the Company Pledge Agreement, the Company Security Agreement, the Company Trademark Security Agreement, the Collateral Account Agreement, the Subsidiary Pledge Agreements, the Subsidiary Security Agreements, the Subsidiary Trademark Security Agreements, the Mortgages and all other instruments or documents delivered by any Loan Party pursuant to this Agreement or any of the other Loan Documents in order to grant to Agent, on behalf of Lenders, Liens in real, personal or mixed property of that Loan Party as security for the Obligations. "Commercial Letter of Credit" means any letter of credit or similar instrument issued for the purpose of providing the primary payment mechanism in connection with the purchase of any materials, goods or services by Company or any of its Subsidiaries in the ordinary course of business of Company or such Subsidiary. "Commitments" means the commitments of Lenders to make Loans as set forth in subsection 2.1A. "Company" has the meaning assigned to that term in the introduction to this Agreement. "Company Pledge Agreement" means the Pledge Agreement executed and delivered by Company on the Closing Date, substantially in the form of Exhibit XIII annexed hereto, as such ------------ Pledge Agreement may hereafter be amended, supplemented or otherwise modified from time to time. "Company Security Agreement" means the Security Agreement executed and delivered by Company on the Closing Date, substantially in the form of Exhibit XIV annexed hereto, as such ----------- Security Agreement may hereafter be amended, supplemented or otherwise modified from time to time. "Company Trademark Security Agreement" means the Trademark Collateral Security Agreement and Conditional Assignment executed and delivered by Company on the Closing Date, substantially in the form of Exhibit XV annexed hereto, as such ---------- Trademark Collateral Security Agreement and Conditional Assignment may hereafter be amended, supplemented or otherwise modified from time to time. "Compliance Certificate" means a certificate substan- tially in the form annexed hereto as Exhibit VII delivered to ----------- Lenders by Company pursuant to subsection 6.1(iv). "Consolidated Adjusted EBITDA" means, for any period, the sum of the amounts for such period of (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) provisions for taxes based on income, (iv) total depreciation and amortization expense, (v) provisions for expenses related to the Restructuring, (vi) total non-cash interest expense of Company with respect to the Junior Subordinated Notes, and (vii) other non-cash items (including without limitation LIFO charges) reducing Consolidated Net Income less other non-cash items ---- increasing Consolidated Net Income, all of the foregoing as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP. "Consolidated Capital Expenditures" means, for any period, an amount equal to (i) the sum of (a) the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases which is capitalized on the consolidated balance sheet of Company and its Subsidiaries) by Company and its Subsidiaries during that period that, in conformity with GAAP, are included in "additions to property, plant or equipment" or comparable items reflected in the consolidated statement of cash flows of Company and its Subsidiaries plus (b) to the extent not covered by clause ---- (a) hereof, the aggregate of all expenditures by Company and its Subsidiaries during that period to acquire (by purchase or otherwise) the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person minus ----- (ii) the aggregate amount of all Net Cash Proceeds of Asset Sale received by Company and its Subsidiaries during that period in connection with Sale and Lease-backs of any property all or a portion of the purchase price of which was included in the calculation of Consolidated Capital Expenditures for that period or any prior period. For purposes of this definition (1) the purchase price of any Equipment that is purchased simultaneously with the trade-in or other disposition in the ordinary course of business of existing Equipment or with insurance proceeds received by Company and its Subsidiaries in respect of the actual or constructive total loss of any Equipment shall be included in Consolidated Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the ---- seller of such Equipment for the Equipment being traded in at such time or the amount of proceeds from such other disposition or the amount of such insurance proceeds, as the case may be, and (2) the amount of any expenditure for any Equipment (the "New Equipment") that replaces existing leased Equipment (the "Leased Equipment") that was purchased at the end of the applicable lease term and then subsequently sold for a greater amount shall be included in Consolidated Capital Expenditures only to the extent of the gross amount of the expenditure for the New Equipment less ---- the excess of the proceeds received by Company or any of its Subsidiaries from the sale of the Leased Equipment over the gross amount of the purchase price of the Leased Equipment. "Consolidated Current Assets" means, as at any date of determination, the total assets of Company and its Subsidiaries on a consolidated basis which may properly be classified as current assets in conformity with GAAP, excluding Cash and Cash --------- Equivalents. "Consolidated Current Liabilities" means, as at any date of determination, the total liabilities of Company and its Subsidiaries on a consolidated basis which may properly be classified as current liabilities in conformity with GAAP, excluding the current portions of Funded Debt and Capital Leases. --------- "Consolidated Excess Cash Flow" means, for any Fiscal Year, an amount equal to (i) the sum (without duplication) of the amounts for such Fiscal Year of (a) Consolidated Net Income, (b) any after-tax gains attributable to returned surplus assets of any Pension Plan, (c) the aggregate amount of Net Cash Proceeds of Asset Sale that are not otherwise included in Consolidated Net Income, (d) the aggregate amount of Cash proceeds (net of underwriting discounts and commissions and other reasonable fees, commissions and costs associated therewith) from the issuance after the Closing Date of any debt or equity Securities of Company, (e) total depreciation and amortization expense, (f) total non-cash interest expense of Company with respect to the Junior Subordinated Notes, (g) other non-cash charges reducing Consolidated Net Income, and (h) the Consolidated Working Capital Adjustment minus (ii) the sum ----- (without duplication) of the amounts for such Fiscal Year of (a) Consolidated Capital Expenditures permitted under subsection 7.8 to the extent paid in Cash during such Fiscal Year, (b) payments of principal on the Term Loans (other than mandatory prepayments pursuant to clause (e) of subsection 2.4A(iii)), (c) payments of principal or premium or other similar payments made in respect of any outstanding Subordinated Indebtedness to the extent such payments are permitted pursuant to subsection 7.5, (d) payments of principal or premium or other similar payments made in respect of any outstanding Holdings Intercompany Notes to the extent such payments are permitted pursuant to subsection 7.5, (e) payments of principal on the Revolving Loans (other than mandatory prepayments pursuant to clause (e) of subsection 2.4A(iii)) to the extent such payments are accompanied by a permanent reduction in the Revolving Loan Commitments, (f) to the extent not included in subclauses (b) through (e) of this clause (ii), scheduled payments and mandatory prepayments of principal made in respect of any outstanding Funded Debt, (g) other non-cash credits increasing Consolidated Net Income, and (h) $25,000,000, all of the foregoing as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP. "Consolidated Interest Expense" means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) of Company and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Company and its Subsidiaries, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Agreements, but excluding, however, (i) any amounts referred to in subsection 2.3 payable to Agent and Lenders on or before the Closing Date, (ii) any deferred financing expenses amortized by Company and its Subsidiaries during such period, and (iii) any non-cash interest expense of Company for such period with respect to the Junior Subordinated Notes. "Consolidated Net Income" means, for any period, the net income (or loss) of Company and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP; provided that there -------- shall be excluded (i) the income (or loss) of any Person (other than a Subsidiary of Company) in which any other Person (other than Company or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to Company or any of its Subsidiaries by such Person during such period, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Company or is merged into or consolidated with Company or any of its Subsidiaries or that Person's assets are acquired by Company or any of its Subsidiaries, (iii) the income of any Subsidiary of Company to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (iv) any after-tax gains or losses attributable to Asset Sales or returned surplus assets of any Pension Plan, and (v) (to the extent not included in clauses (i) through (iv) above) any net extraordinary gains or net non-cash extraordinary losses. "Consolidated Rental Payments" means, for any period, the aggregate amount of all rents paid or payable by Company and its Subsidiaries on a consolidated basis during that period under all Capital Leases and Operating Leases to which Company or any of its Subsidiaries is a party as lessee (in each case net of any sublease income received or receivable by Company and its Subsidiaries on a consolidated basis during that period with respect thereto), excluding, however, (i) any amount of rent for --------- ------- which Company or any Subsidiary of Company is contingently liable under any lease as a result of the assignment thereof by Company or such Subsidiary to any Person and (ii) any tax, insurance, maintenance and similar expenses that Company or any Subsidiary of Company is obligated to pay as lessee under the terms of the applicable lease. "Consolidated Total Debt" means, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness of Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Consolidated Working Capital" means, as at any date of determination, the excess of Consolidated Current Assets over Consolidated Current Liabilities. "Consolidated Working Capital Adjustment" means, for any period on a consolidated basis, the amount (which may be a negative number) by which the Consolidated Working Capital of Company and its Subsidiaries as of the beginning of such period exceeds (or is less than) the Consolidated Working Capital of Company and its Subsidiaries as of the end of such period. "Contingent Obligation", as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person (i) with respect to any Indebtedness, lease, dividend or other obligation of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof, (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings, or (iii) under Interest Rate Agreements and Currency Agreements. Contingent Obligations shall include, without limitation, (a) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement, and (c) any liability of such Person for the obligation of another through any agreement (contingent or otherwise) (X) to purchase, repurchase or other- wise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (Y) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if less, the amount to which such Contingent Obligation is specifically limited. "Contractual Obligation", as applied to any Person, means any provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. "Covered Real Property" means, at any time, (i) any Real Property Asset listed in Schedule 7.2 annexed hereto that is ------------ not, at such time, subject to Liens permitted under subsection 7.2 securing Indebtedness (other than the Obligations) of Company or any of its Subsidiaries permitted under subsection 7.1, (ii) any Real Property Asset (other than any Real Property Asset listed in Schedule 7.2 annexed hereto) consisting of a leasehold ------------ interest in real property now owned or hereafter acquired by Company or any of its Subsidiaries, and (iii) any Real Property Asset (other than any Real Property Asset listed in Schedule 7.2 ------------ annexed hereto) consisting of a fee interest in real property now owned or hereafter acquired by Company or any of its Subsidiaries excluding, however, (a) any fee interest in undeveloped land held --------- ------- by Company or any of its Subsidiaries for the development of a Related Store, provided that construction of such Related Store -------- has commenced thereon not later than six months following the acquisition of such fee interest in undeveloped land by Company or such Subsidiary, (b) any fee interest in any Real Property Asset consisting of a Related Store that is under construction, provided that (X) such construction has not been continuing for -------- longer than one year and (Y) such fee interest was not, prior to the commencement of such construction, required to be encumbered by a Mortgage pursuant to subsection 6.9, (c) any fee interest in any Real Property Asset consisting of a Related Store the construction of which is complete, provided that (X) no more than -------- six months have elapsed since the later of the date of completion of such construction and the date on which Company or any of its Subsidiaries acquired such fee interest and (Y) such fee interest was not previously required to be encumbered by a Mortgage pursuant to subsection 6.9, (d) any fee interest in any Real Property Asset consisting of a Related Store (whether fully constructed or under construction) that is subject to a Lien permitted under subsection 7.2A(iv), and (e) any Real Property Asset from and after such time as such Real Property Asset becomes subject to a Lien permitted under subsection 7.2A(v) or subsection 7.2A(vi); provided that if an Unavoidable Delay (as -------- defined below) occurs during any time period specified with respect to any Related Store in clause (a), (b) or (c) above, such time period for such Related Store shall be extended for a period equal to the duration of such Unavoidable Delay plus 5 ---- days. For purposes of this definition, the term "Unavoidable Delay" means the temporary prevention of, or delay in, the performance of any obligation or the satisfaction of any condition set forth in the proviso to clause (a), (b) or (c) above as a result of the occurrence of any unforeseeable condition beyond the reasonable control of Company or any of its Subsidiaries, including any strike, lockout, labor dispute, inability to obtain labor or materials or reasonable substitutes therefor, act of God, governmental restriction, regulation or control, enemy or hostile governmental action, civil commotion, insurrection, sabotage, or fire or other casualty; provided that -------- if at any time it becomes reasonably likely that the condition giving rise to any such temporary prevention or delay will result in a permanent prevention of the performance or satisfaction of the obligation or condition in question, the related Unavoidable Delay shall be deemed to terminate immediately. "Currency Agreement" means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement designed to protect Company or any of its Subsidiaries against fluctuations in currency values. "Default Period" has the meaning assigned to that term in subsection 2.10. "Defaulting Lender" has the meaning assigned to that term in subsection 2.10. "Deposit Account" means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. "Dollars" and the sign "$" mean the lawful money of the United States of America. "Eligible Assignee" means (A) (i) a commercial bank organized under the laws of the United States or any state thereof; (ii) a savings and loan association or savings bank organized under the laws of the United States or any state thereof; (iii) a commercial bank organized under the laws of any other country, or a political subdivision thereof; provided that -------- (x) such bank is acting through a branch or agency located in the United States or (y) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country; (iv) any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act) which extends credit or buys loans as one of its businesses including, but not limited to, insurance companies, mutual funds and lease financing companies; and (v) Restructured Obligations Backed By Senior Assets B.V. (or any pledgee of its assets generally), in each case (under clauses (i) through (iv) above) that is reasonably acceptable to Agent; and (B) any Lender and any Affiliate of any Lender; provided that no Affiliate of Company -------- shall be an Eligible Assignee. "Employee Benefit Plan" means any "employee benefit plan" as defined in Section 3(3) of ERISA which is, or was at any time, maintained or contributed to by Company or any of its ERISA Affiliates. "Environmental Claim" means any written notice of material violation, claim, demand or abatement order by any governmental authority or any Person for any damage, including, without limitation, personal injury (including sickness, disease or death), tangible or intangible property damage, contribution, indemnity, indirect or consequential damages, damage to the environment, nuisance, pollution, contamination or other adverse effects on the environment, or for fines, penalties or restrictions, in each case relating to, resulting from or in connection with Hazardous Materials and relating to Company, any of its Subsidiaries, or any of their respective Affiliates. "Environmental Laws" means all statutes, ordinances, orders, rules, regulations, plans, policies or decrees and the like relating to (i) environmental matters, including, without limitation, those relating to fines, injunctions, penalties, damages, contribution, cost recovery compensation, losses or injuries resulting from the Release or threatened Release of Hazardous Materials, or (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, in any manner applicable to Company or any of its Subsidiaries or any of the Facilities. "Equipment" means all equipment (including without limitation all distribution, retailing, data processing, office and motor vehicle equipment) owned or leased by Company or any of its Subsidiaries. "Equitable" means The Equitable Life Assurance Society of the United States. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute. "ERISA Affiliate", as applied to any Person, means (i) any corporation which is, or was at any time, a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is, or was at any time, a member; (ii) any trade or business (whether or not incorporated) which is, or was at any time, a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is, or was at any time, a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is, or was at any time, a member. "ERISA Event" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Company or any of its ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Sections 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Company or any of its ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal by Company or any of its ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by Company or any of its ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could reasonably be expected to give rise to the imposition on Company or any of its ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409 or 502(c), (i) or (l) or 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against Company or any of its ERISA Affiliates in connection with any such Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan. "Eurodollar Rate Loans" means Loans bearing interest at rates determined by reference to the Adjusted Eurodollar Rate as provided in subsection 2.2A. "Event of Default" means each of the events set forth in Section 8. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute. "Existing Credit Agreement" means that certain Working Capital Agreement dated as of June 15, 1987, as amended, by and among Company (as successor in interest to SMG Acquisition Corporation), the banks listed therein as lenders, and Bankers and Chemical Bank (as successor in interest to Manufacturers Hanover Trust Company), as co-agents. "Facilities" means any and all real property (including, without limitation, all buildings, fixtures or other improvements located thereon) now or hereafter during the term of this Agreement owned, leased or operated or heretofore owned by (i) Company or any of its Subsidiaries, (ii) any of Company's or any such Subsidiary's predecessors by merger or consolidation, or (iii) any of Company's Affiliates that are directly or indirectly controlled by Company. "Federal Funds Effective Rate" means, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Agent from three Federal funds brokers of recognized standing selected by Agent. "Fiscal Year" means the fiscal year of Company and its Subsidiaries ending on the Saturday closest to January 31 of each calendar year. For purposes of this Agreement, any particular Fiscal Year shall be designated by reference to the calendar year in which such Fiscal Year commences. "Funded Debt", as applied to any Person, means all Indebtedness of that Person (including any current portions thereof) which by its terms or by the terms of any instrument or agreement relating thereto matures more than one year from, or is directly renewable or extendable at the option of the debtor to a date more than one year from (including an option of the debtor under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of one year or more from), the date of the creation thereof. "Funding Date" means the date of the funding of a Loan. "GAAP" means, subject to the limitations on the application thereof set forth in subsection 1.2, generally accepted accounting principles set forth in opinions and pro- nouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, in each case as the same are applicable to the circumstances as of the date of determination. "Governmental Authorization" means any permit, license, authorization, plan, directive, consent order or consent decree of or from any federal, state or local governmental authority, agency or court. "Hazardous Materials" means (i) any chemical, material or substance at any time defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous waste", "restricted hazardous waste", "infectious waste", "toxic substances" or any other terms intended to define, list or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of similar import under any applicable Environmental Laws or publications promulgated pursuant thereto; (ii) any oil, petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iv) any flammable substances or explosives; (v) any radioactive materials; (vi) asbestos in any form that is or may become friable; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty parts per million; (ix) pesticides; and (x) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority. "Holdings" means Supermarkets General Holdings Corporation, a Delaware corporation. "Holdings Discount Debentures" means the 13 1/8% Junior Subordinated Discount Debentures due 2003 issued by Holdings in an aggregate original face amount equal to $312,655,000, which debentures have an aggregate outstanding principal amount (including up to $32,800,000 of unamortized original issue discount) not exceeding $217,271,000 as of immediately prior to the Closing Date. "Holdings Existing Credit Agreement" means that certain Credit Agreement dated as of May 29, 1987, as amended, by and among Holdings (formerly SMG Holdings Corporation), the banks listed therein as lenders, Bankers and Chemical Bank (as successor in interest to Manufacturers Hanover Trust Company), as co-agents, and Chemical Bank, as collateral co-agent. "Holdings Intercompany Notes" means, collectively, (i) that certain Promissory Note dated as of December 17, 1991, made by Company to Holdings in the original principal amount of $90,820,000, (ii) that certain Promissory Note dated as of December 17, 1991, made by Company to Holdings in the original principal amount of $41,218,673, (iii) that certain Promissory Note dated as of December 17, 1991, made by Company to Holdings in the original principal amount of $43,020,000, (iv) that certain Promissory Note dated as of May 28, 1992, made by Company to Holdings in the original principal amount of $200,000,000, (v) that certain Promissory Note dated as of April 27, 1993, made by Company to Holdings in the original principal amount of $24,000,000, (vi) that certain Promissory Note dated as of November 7, 1989, made by Company to Holdings in the original principal amount of $251,644,387, (vii) that certain Promissory Note dated as of November 7, 1989, made by Company to Holdings in the original principal amount of $181,980,000, (viii) that certain Promissory Note dated as of November 7, 1989 made by Company to Holdings in the original principal amount of $384,180,000, and (ix) that certain Promissory Note dated as of November 7, 1989, made by Company to Holdings in the original principal amount of $425,772,540. "Holdings Senior Subordinated Notes" means the 14 1/2% Senior Subordinated Notes due 1997 issued by Holdings in an aggregate original principal amount equal to $475,000,000, which notes have an aggregate outstanding principal amount equal to approximately $388,192,000 as of immediately prior to the Closing Date. "Holdings Subordinated Debenture Trustee" means the trustee under the indenture pursuant to which the Holdings Subordinated Debentures were issued. "Holdings Subordinated Debentures" means the 12 5/8% Subordinated Debentures due 2002 issued by Holdings in an aggregate original principal amount equal to $415,000,000, which debentures have an aggregate outstanding principal amount equal to approximately $414,979,000 as of immediately prior to the Closing Date. "Holdings Subordinated Note Trustee" means the trustee under the indenture pursuant to which the Holdings Subordinated Notes were issued. "Holdings Subordinated Notes" means the 11 5/8% Subordinated Notes due 2002 issued by Holdings in an aggregate original principal amount of $200,000,000, which notes have an aggregate outstanding principal amount equal to approximately $200,000,000 as of immediately prior to the Closing Date. "Indebtedness", as applied to any Person, means (i) all indebtedness for borrowed money, (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA), which purchase price is (A) due more than six months (or a longer period up to one year, if such terms are available from suppliers in the ordinary course of business) from the date of incurrence of the obligation in respect thereof or (B) evidenced by a note or similar written instrument, and (v) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person. Obligations under Interest Rate Agreements and Currency Agreements constitute Contingent Obligations and not Indebtedness. "Indemnitee" has the meaning assigned to that term in subsection 10.3. "Intellectual Property" means all patents, trademarks, tradenames, copyrights, technology, know-how and processes used in or necessary for the conduct of the business of Company and its Subsidiaries as currently conducted that are material to the condition (financial or otherwise), business or operations of Company and its Subsidiaries, taken as a whole. "Interest Payment Date" means (i) with respect to any Base Rate Loan, each January 15, April 15, July 15 and October 15 of each year, commencing on the first such date to occur after the Closing Date, and (ii) with respect to any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan; provided that in the case of each Interest Period of six -------- months, "Interest Payment Date" shall also include the date that is three months after the commencement of such Interest Period. "Interest Period" has the meaning assigned to that term in subsection 2.2B. "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement. "Interest Rate Determination Date" means, in respect of an Interest Period, the second Business Day prior to the first day of such Interest Period. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter. "Investment" means (i) any direct or indirect purchase or other acquisition by Company or any of its Subsidiaries of, or of a beneficial interest in, stock or other Securities of any other Person, or (ii) any direct or indirect loan, advance (other than advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution by Company or any of its Subsidiaries to any other Person, including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales to that other Person in the ordinary course of business. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. "Issuing Lender" means, with respect to any Letter of Credit, the Lender which agrees or is otherwise obligated to issue such Letter of Credit, determined as provided in subsection 3.1B(ii). "Joint Venture" means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided that in no event shall any corporate -------- Subsidiary of any Person be considered to be a Joint Venture to which such Person is a party. "Junior Subordinated Note Indenture" means the indenture pursuant to which the Junior Subordinated Notes are issued, as such indenture may be amended from time to time to the extent permitted under subsection 7.14A. "Junior Subordinated Notes" means the up to $225,250,000 principal amount at final maturity of 10 3/4 % Junior Subordinated Deferred Coupon Notes due 2003 of Company issued pursuant to the Junior Subordinated Note Indenture on the Closing Date. "Lender" and "Lenders" means the persons identified as "Lenders" and listed on the signature pages of this Agreement, together with their successors and permitted assigns pursuant to subsection 10.1, and the term "Lenders" shall include Swing Line Lender unless the context otherwise requires; provided that the -------- term "Lenders", when used in the context of a particular Commitment, shall mean Lenders having that Commitment. "Letter of Credit" or "Letters of Credit" means Commercial Letters of Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders for the account of Company pursuant to subsection 3.1. "Letter of Credit Usage" means, as at any date of determination, the sum of (i) the maximum aggregate amount which is or at any time thereafter may, pursuant to the terms thereof, become available for drawing under all Letters of Credit then outstanding plus (ii) the aggregate amount of all drawings under ---- Letters of Credit honored by Issuing Lenders and not theretofore reimbursed by Company (including any such reimbursement out of the proceeds of Revolving Loans pursuant to subsection 3.3B). "Lien" means any lien, mortgage, pledge, assignment (to the extent such assignment is intended to secure an obligation of any Person), security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing. "Loan" or "Loans" means one or more of (i) the Term A Loans, (ii) the Term B Loans, (iii) the Revolving Loans, or (iv) the Swing Line Loans, or any combination thereof, and each of the different types of Loans identified in clauses (i) through (iv) above shall be a "Type" of Loan. "Loan Documents" means this Agreement, the Notes, the Letters of Credit (and any applications for, or reimbursement agreements or other documents or certificates executed by Company in favor of an Issuing Lender relating to, the Letters of Credit), the Subsidiary Guaranty and the Collateral Documents. "Loan Party" means each of Company and any of Company's Subsidiaries from time to time executing a Loan Document, and "Loan Parties" means all such Persons, collectively. "Margin Stock" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Material Adverse Effect" means (i) a material adverse effect upon the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company and its Subsidiaries, taken as a whole, (ii) the impairment of the ability of any Loan Party to perform any Obligations of a monetary nature, or (iii) the impairment of the rights of Agent or Lenders to enforce any Obligations of a monetary nature. "Mortgage" means an instrument (whether designated as a deed of trust, a trust deed or a mortgage or by any similar title) executed and delivered by Company or any of its Subsidiaries substantially in the form of Exhibit XX annexed ---------- hereto encumbering a fee or leasehold interest in Real Property Assets, as such instrument may be amended, supplemented or otherwise modified from time to time, and "Mortgages" means all such instruments, including the Closing Date Mortgages (as defined in subsection 4.1B) and any Additional Mortgages (as defined in subsection 6.9), collectively. "Multiemployer Plan" means a "multiemployer plan", as defined in Section 3(37) of ERISA, to which Company or any of its ERISA Affiliates is contributing, or ever has contributed, or to which Company or any of its ERISA Affiliates has, or ever has had, an obligation to contribute. "Net Cash Proceeds of Asset Sale" means, with respect to any Asset Sale, Cash payments (including any Cash received by way of deferred payment pursuant to, or monetization of, a note receivable or otherwise, but only as and when so received) actually received from such Asset Sale net of bona fide direct costs incurred in connection with such Asset Sale, including without limitation (i) reasonable brokerage commissions, underwriting fees and discounts, legal fees and expenses, finder's fees and other similar fees, expenses and commissions, (ii) taxes reasonably estimated to be actually payable as a result of such Asset Sale within two years of the date of such Asset Sale, (iii) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) secured by a Lien on the assets in question that is required to be repaid under the terms thereof as a result of such Asset Sale, and (iv) the costs and expenses of any repairs, alterations or improvements made to the property sold in connection with such Asset Sale to the extent such repairs, alterations or improvements are required pursuant to the terms of such Asset Sale. "New Subordinated Debt" means, collectively, the Indebtedness of Company evidenced by the Senior Subordinated Notes, the Subordinated Notes, the Subordinated Debentures and the Junior Subordinated Notes. "New Subordinated Debt Indentures" means, collectively, the Senior Subordinated Note Indenture, the Subordinated Note Indenture, the Subordinated Debenture Indenture and the Junior Subordinated Note Indenture. "Non-Recourse Indebtedness" means, as applied to any Person, all Indebtedness of that Person secured by Liens on specified assets of that Person under the terms of which (i) no recourse may be had against that or any other Person for the payment of the principal of or interest or premium on such Indebtedness or for any claim based thereon and (ii) the enforcement of all obligations relating to such Indebtedness is limited to foreclosure or other actions with respect to such specified assets. "Notes" means one or more of the Term A Notes, Term B Notes, Revolving Notes or Swing Line Note or any combination thereof. "Notice of Borrowing" means a notice substantially in the form of Exhibit I annexed hereto delivered by Company to --------- Agent pursuant to subsection 2.1B with respect to a proposed borrowing. "Notice of Conversion/Continuation" means a notice substantially in the form of Exhibit II annexed hereto delivered ---------- by Company to Agent pursuant to subsection 2.2D with respect to a proposed conversion or continuation of the applicable basis for determining the interest rate with respect to the Loans specified therein. "Notice of Issuance of Letter of Credit" means a notice substantially in the form of Exhibit III annexed hereto delivered ----------- by Company to the proposed Issuing Lender pursuant to subsection 3.1B(i) with respect to the proposed issuance of a Letter of Credit. "Obligations" means all obligations of every nature of each Loan Party from time to time owed to Agent, Lenders or any of them under the Loan Documents, whether for principal, interest, reimbursement of amounts drawn under Letters of Credit, fees, expenses, indemnification or otherwise. "Officers' Certificate" means, as applied to any corporation, a certificate executed on behalf of such corporation by its chairman of the board (if an officer) or its president or one of its vice presidents and by its chief financial officer or its treasurer; provided that every Officers' Certificate with -------- respect to the compliance with a condition precedent to the making of any Loans hereunder shall include (i) a statement that the officer or officers making or giving such Officers' Certif- icate have read such condition and any definitions or other provisions contained in this Agreement relating thereto, (ii) a statement that, in the opinion of the signers, they have made or have caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such condition has been complied with, and (iii) a statement as to whether, in the opinion of the signers, such condition has been complied with. "Operating Lease" means, as applied to any Person, any lease (including, without limitation, leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) that is not a Capital Lease other than any such lease under which that Person is the lessor. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor thereto). "Pension Plan" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA. "Permitted Encumbrances" means the following types of Liens (other than any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA): (i) Liens for taxes, assessments or governmental charges or claims the payment of which is not, at the time, required by subsection 6.3; (ii) statutory Liens of landlords and Liens of carriers, workmen, repairmen, warehousemen, mechanics and materialmen and other Liens imposed by law, in each case incurred in the ordinary course of business and securing obligations that are not overdue for a period of more than 30 days or securing obligations that are overdue for a period of more than 30 days that are being contested in good faith, if (with respect to any such obligations that are overdue for a period of more than 30 days) such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or securing liability to insurance carriers under insurance or self-insurance arrangements, or obtaining utility service or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (iv) any attachment or judgment Lien not constituting an Event of Default under subsection 8.8; (v) leases or subleases granted to others not interfering in any material respect with the ordinary conduct of the business of Company or any of its Subsidi- aries; (vi) easements, rights-of-way, restrictions, minor defects, encroachments or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries; (vii) any (a) interest or title of a lessor or sublessor under any lease permitted by subsection 7.9, (b) restriction or encumbrance that the interest or title of such lessor or sublessor may be subject to, or (c) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the preceding clause (b); (viii) Liens arising from filing UCC financing statements relating solely to leases permitted by this Agreement; (ix) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; and (x) Liens in favor of issuers of Commercial Letters of Credit encumbering any goods or documents covered by such Commercial Letters of Credit and securing obligations that are not overdue for a period of more than 15 days. "Person" means and includes natural persons, corpora- tions, limited partnerships, general partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof. "Plainbridge" means Plainbridge, Inc., a Delaware corporation. "Plainbridge Credit Agreement" means that certain Credit Agreement dated as of even date herewith among Plainbridge, the lenders party thereto and Bankers, as agent for such lenders, as such agreement may hereafter be amended, supplemented or otherwise modified from time to time. "Plainbridge Loan Documents" means the "Loan Documents" as defined in the Plainbridge Credit Agreement. "Potential Event of Default" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default. "Pricing Discount Period" means any period (i) during which the aggregate outstanding principal amount of the Term Loans is equal to or less than $322,000,000 and (ii) which is an APD Certification Period (as defined below). For purposes of this definition: (A) "APD Certificate" means an Officers' Certificate of Company delivered within the first forty-five days of any fiscal quarter of Company certifying that the Consolidated Interest Coverage Ratio for each of the four- fiscal quarter periods ending as of the last day of each of the two consecutive fiscal quarters of Company immediately preceding the fiscal quarter during which such Officers' Certificate is delivered is equal to or greater than 2.50:1.00 and setting forth the calculation of the Consolidated Interest Coverage Ratio for each such four-fiscal quarter period in reasonable detail, (B) "APD Certification Period" means the period commencing on the fifth day after the receipt of an APD Certificate by Agent and ending on the earlier of (x) the forty-fifth day after the end of the fiscal quarter of Company during which such APD Certificate was delivered and (y) the fifth day after the next APD Certificate, if any, is delivered to Agent, and (C) "Consolidated Interest Coverage Ratio" means, for any period, the ratio of (1) Consolidated Adjusted EBITDA to (2) Consolidated Interest Expense. "Prime Rate" means the rate that Bankers announces from time to time as its prime lending rate, as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Bankers or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. "Pro Rata Share" means (i) with respect to all payments, computations and other matters relating to the Term A Loan Commitment or the Term A Loan of any Lender, the percentage obtained by dividing (x) the Term A Loan Exposure of that Lender -------- by (y) the aggregate Term A Loan Exposure of all Lenders, -- (ii) with respect to all payments, computations and other matters relating to the Term B Loan Commitment or the Term B Loan of any Lender, the percentage obtained by dividing (x) the Term B Loan -------- Exposure of that Lender by (y) the aggregate Term B Loan Exposure -- of all Lenders, (iii) with respect to all payments, computations and other matters relating to the Revolving Loan Commitment or the Revolving Loans of any Lender or any Letters of Credit issued or participations therein purchased by any Lender or any participations in any Swing Line Loans purchased by any Lender, the percentage obtained by dividing (x) the Revolving Loan -------- Exposure of that Lender by (y) the aggregate Revolving Loan -- Exposure of all Lenders, and (iv) for all other purposes with respect to each Lender, the percentage obtained by dividing -------- (x) the sum of the Term A Loan Exposure of that Lender plus the ---- Term B Loan Exposure of that Lender plus the Revolving Loan ---- Exposure of that Lender by (y) the sum of the aggregate Term A -- Loan Exposure of all Lenders plus the aggregate Term B Loan ---- Exposure of all Lenders plus the aggregate Revolving Loan ---- Exposure of all Lenders, in any such case as the applicable percentage may be adjusted by assignments permitted pursuant to subsection 10.1. The initial Pro Rata Share of each Lender for purposes of each of clauses (i), (ii), (iii) and (iv) of the preceding sentence is set forth opposite the name of that Lender in Schedule 2.1 annexed hereto. ------------ "PTKH" means PTK Holdings, Inc., a Delaware corporation. "PTKH Bond Indenture" means the indenture dated as of October 26, 1993 between PTKH and Nations Bank of Georgia, National Association, as trustee, pursuant to which the PTKH Bonds are issued, as such indenture may be amended from time to time (other than pursuant to an amendment that would result in an Event of Default under subsection 8.17). "PTKH Bonds" means the $130,000,000 original principal amount of 10 1/4% Exchangeable Guaranteed Debentures due 2003 of PTKH issued pursuant to the PTKH Bond Indenture on the Closing Date. "PTKH Private Placement" means (i) the issuance by PTKH of the PTKH Bonds to Holdings in satisfaction of a corresponding portion of Company's obligations under the Holdings Intercompany Note related to the Holdings Subordinated Debentures, (ii) the sale by Holdings of the PTKH Bonds to Equitable or its Affiliates in exchange for Holdings Subordinated Debentures held by Equitable or its Affiliates with an aggregate outstanding principal amount equal to $130,000,000 as of immediately prior to the Closing Date, and (iii) the payment by Holdings of all accrued interest on the Holdings Subordinated Debentures so exchanged and all premium in connection with such exchange to Equitable or its Affiliates. "Qualified Sale and Lease-back" means the sale, pursuant to a Sale and Lease-back, of (i) any fee interest in any Real Property Asset consisting of a Related Store the construction of which is complete; provided that such sale occurs -------- no more than six months after the later of the date of completion of such construction and the date on which Company or any of its Subsidiaries acquired such fee interest; or (ii) any Equipment within 180 days after the acquisition of such Equipment by Company or any of its Subsidiaries. "Real Estate Subsidiary" means each wholly-owned Subsidiary of Company listed in Part A of Schedule 5.1 annexed ------------ hereto so long as such wholly-owned Subsidiary remains liable with respect to Indebtedness which prohibits such wholly-owned Subsidiary from entering into the Subsidiary Guaranty and the Collateral Documents. "Real Property Assets" means interests in land, buildings, improvements, and fixtures attached thereto or used in the operation thereof, in each case owned or leased (as lessee) by Company or any of its Subsidiaries. "Redemption Agreement" means the Redemption Agreement dated as of October 26, 1993, among Holdings, PTKH and the holders of the PTKH Bonds, as such Redemption Agreement is in effect on the Closing Date and as such Redemption Agreement may thereafter be amended from time to time (other than pursuant to an amendment that would result in an Event of Default under subsection 8.17). "Reference Lenders" means Bankers, LTCB Trust Company and The Bank of Nova Scotia. "Refunded Swing Line Loans" has the meaning given to that term in subsection 2.1A(iv). "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Reimbursement Date" has the meaning assigned to that term in subsection 3.3B. "Related Store" means any store or facility (including without limitation any grocery store, drug store or supermarket) that is or is intended to be used by Company or any of its Subsidiaries in connection with the businesses permitted under subsection 7.13. "Release" means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge or dumping of Hazardous Materials into the environment (including, without limitation, the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials). "Requisite Class Lenders" means, at any time, (i) for the Class of Lenders having Term A Loan Exposure, Lenders having or holding 51% or more of the aggregate Term A Loan Exposure of all Lenders, (ii) for the Class of Lenders having Term B Loan Exposure, Lenders having or holding 51% or more of the aggregate Term B Loan Exposure of all Lenders, and (iii) for the Class of Lenders having Revolving Loan Exposure, Lenders having or holding 51% or more of the aggregate Revolving Loan Exposure of all Lenders. "Requisite Lenders" means Lenders having or holding 51% or more of the sum of the aggregate Term A Loan Exposure of all Lenders plus the aggregate Term B Loan Exposure of all Lenders ---- plus the aggregate Revolving Loan Exposure of all Lenders. ---- "Restricted Junior Payment" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Company now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Company now or hereafter outstanding, (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Company now or hereafter outstanding, and (iv) any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, any Subordinated Indebtedness or any Indebtedness in respect of any of the Holdings Intercompany Notes. "Restructuring" means, collectively, (i) the Spin-Off, (ii) the issuance of the Subordinated Notes in exchange for Holdings Subordinated Notes tendered pursuant to the Subordinated Note Exchange Offer, the issuance of the Subordinated Debentures in exchange for Holdings Subordinated Debentures tendered pursuant to the Subordinated Debenture Exchange Offer, and the issuance of the Senior Subordinated Notes and the Junior Subordinated Notes, in each case as contemplated by subsection 4.1E, (iii) the issuance of the PTKH Bonds to Holdings and the sale by Holdings of the PTKH Bonds to Equitable or its Affiliates in exchange for a portion of the Holdings Subordinated Debentures held by Equitable or its Affiliates pursuant to the PTKH Private Placement as contemplated by subsection 4.1D, (iv) the repayment by Company of Indebtedness of Company under the Existing Credit Agreement and the repayment by Company or other satisfaction by Company or PTKH of Indebtedness of Company under the Holdings Intercompany Notes, in each case as contemplated by subsections 4.1D, 4.1F and 4.1G, (v) the redemption by Holdings of the Holdings Senior Subordinated Notes and the Holdings Discount Debentures, the purchase by Holdings of a portion of the Holdings Subordinated Debentures, and the surrender for cancellation by Holdings of all of the Holdings Subordinated Debentures and Holdings Subordinated Notes purchased or exchanged by Holdings or delivered to Holdings by Company, in each case as contemplated by subsection 4.1G, and (vi) the transactions contemplated by this Agreement and the Plainbridge Credit Agreement, all as consummated in accordance with the Restructuring Documents. "Restructuring Documents" means the Loan Documents, the Plainbridge Loan Documents, the New Subordinated Debt Indentures, the New Subordinated Debt, the PTKH Bond Indenture, the PTKH Bonds, the Redemption Agreement and the Spin-Off Agreements. "Revolving Loan Commitment" or "Revolving Loan Commit- ments" means the commitment or commitments of a Lender or Lenders to make Revolving Loans pursuant to subsection 2.1A(iii). "Revolving Loan Commitment Termination Date" means July 31, 1998. "Revolving Loan Exposure" means, with respect to any Lender as of any date of determination (i) prior to the termination of the Revolving Loan Commitments, that Lender's Revolving Loan Commitment and (ii) after the termination of the Revolving Loan Commitments, the sum of (a) the aggregate outstanding principal amount of the Revolving Loans of that Lender plus (b) in the event that Lender is an Issuing Lender, ---- the aggregate amount of all drawings under Letters of Credit honored by that Lender and not theretofore reimbursed by Company (in each case net of any participations purchased by other Lenders in the applicable Letters of Credit) plus (c) the ---- aggregate amount of all participations purchased by that Lender in any drawings under Letters of Credit honored by Issuing Lenders and not theretofore reimbursed by Company plus (d) the ---- aggregate amount of all participations purchased by that Lender in any outstanding Swing Line Loans plus (e) in the case of Swing ---- Line Lender, the aggregate outstanding principal amount of all Swing Line Loans (net of any participations therein purchased by other Lenders). "Revolving Loans" means the Loans made by Lenders to Company pursuant to subsection 2.1A(iii). "Revolving Notes" means the promissory notes of Company issued pursuant to subsection 2.1D on the Closing Date or issued pursuant to the last sentence of subsection 10.1B(i) from time to time after the Closing Date, in each case substantially in the form of Exhibit V annexed hereto, as they may be amended, --------- supplemented or otherwise modified from time to time. "Sale and Lease-back" means any arrangement between Company or any of its Subsidiaries and any other Person providing for the leasing by Company or such Subsidiary of real or personal or mixed property which has been or is to be sold or transferred by Company or such Subsidiary to such other Person. "Securities" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "Securities Act" means the Securities Act of 1933, as amended from time to time, and any successor statute. "Senior Subordinated Note Indenture" means the indenture pursuant to which the Senior Subordinated Notes are issued, as such indenture may be amended from time to time to the extent permitted under subsection 7.14A. "Senior Subordinated Notes" means the up to $440,000,000 principal amount of 9 5/8% Senior Subordinated Notes due 2003 of Company issued pursuant to the Senior Subordinated Note Indenture. "SMG-II" means SMG-II Holdings Corporation, a Delaware corporation. "Solvent" means, with respect to any Person, that as of the date of determination both (A) (i) the then fair saleable value of the property of such Person is (y) greater than the total amount of liabilities (including contingent liabilities) of such Person and (z) not less than the amount that will be required to pay the probable liabilities on such Person's then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to such Person; (ii) such Person's capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (iii) such Person does not intend to incur, or believe that it will incur, debts beyond its ability to pay such debts as they become due; and (B) such Person is "solvent" within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Spin-Off" means, collectively, (i) the contribution by Company to Plainbridge of the Rickel home center business of Company, certain warehouse, distribution and transportation operations and facilities, and certain other real and personal property assets of Company on or prior to the Closing Date, (ii) the contribution by Company to Chefmark of assets consisting of a banana ripening warehouse and the Chef Mark deli food preparation operations of Company on or prior to the Closing Date, (iii) the distribution by Company to Holdings of the capital stock of Chefmark prior to the Closing Date, (iv) the distribution by Company to PTKH of the capital stock of Plainbridge after the contribution of assets described in clause (i) above but on or prior to the Closing Date, and (v) to the extent not covered by clauses (i) through (iv) above, the entering into of the Spin-Off Agreements by the parties thereto and the consummation of the transactions contemplated thereby. "Spin-Off Agreements" means (i) that certain Distribution and Transfer Agreement dated as of October 26, 1993, among Company, PTKH and Plainbridge, (ii) that certain Distribution and Transfer Agreement dated as of May 3, 1993, among Company, Holdings and Chefmark, (iii) that certain Tax Indemnity Agreement dated as of October 26, 1993, between Company and Plainbridge, (iv) that certain Tax Sharing Agreement dated as of October 26, 1993, between Company and SMG-II, (v) that certain Logistical Services Agreement dated as of October 26, 1993, between Company and Plainbridge, (vi) that certain Blair Services Agreement dated as of October 26, 1993, between Company and Plainbridge, (vii) that certain Rickel Services Agreement dated as of October 26, 1993, between Company and Plainbridge, (viii) that certain Chefmark Services Agreement dated as of May 3, 1993, between Company and Chefmark, and (ix) that certain letter agreement dated as of May 3, 1993 between Company and Chefmark filed as Exhibit 10.5 to the Registration Statement of Company and Holdings (Registration No. 33-59616) filed with the Securities and Exchange Commission on March 16, 1993, as amended by Amendment No. 1 to Post-Effective Amendment No. 1 thereto, in each case in the form approved by Agent and Requisite Lenders pursuant to subsection 4.1R, and in each case as such agreement may be amended from time to time after the Closing Date to the extent permitted under subsection 7.14B. "Standby Letter of Credit" means any standby letter of credit or similar instrument issued for the purpose of supporting (i) Indebtedness of Company or any of its Subsidiaries in respect of industrial revenue or development bonds or financings, (ii) workers' compensation liabilities of Company or any of its Subsidiaries, (iii) the obligations of third party insurers of Company or any of its Subsidiaries arising by virtue of the laws of any jurisdiction requiring third party insurers, (iv) obligations with respect to Capital Leases or Operating Leases of Company or any of its Subsidiaries, (v) performance, payment, deposit or surety obligations of Company or any of its Subsidiaries, in any case if required by law or governmental rule or regulation or in accordance with custom and practice in the industry, and (vi) other obligations of Company and its Subsidiaries to the extent consistent with past practices of Company and its Subsidiaries or otherwise consistent with custom and practice in the industry; provided that Standby Letters of -------- Credit may not be issued for the purpose of supporting (a) trade payables or (b) Indebtedness existing on the Closing Date that is not supported by a previously issued Standby Letter of Credit. "Subordinated Debenture Exchange Offer" means the offer by Company to exchange Subordinated Debentures for Holdings Subordinated Debentures, as more fully described in the Registration Statement of Company and Holdings on Form S-1 (Registration No. 33-50053) as amended by Amendment No. 1 thereto filed with the Securities and Exchange Commission on September 21, 1993 and as declared effective by the Securities and Exchange Commission on September 22, 1993. "Subordinated Debenture Indenture" means the indenture pursuant to which the Subordinated Debentures are issued, as such indenture may be amended from time to time to the extent permitted under subsection 7.14A. "Subordinated Debentures" means the up to $100,000,000 principal amount of 12 5/8% Subordinated Debentures due 2002 of Company issued pursuant to the Subordinated Debenture Indenture. "Subordinated Indebtedness" means (i) the New Subordinated Debt and (ii) any other Indebtedness of Company subordinated in right of payment to the Obligations pursuant to documentation containing maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other material terms in form and substance satisfactory to Agent and Requisite Lenders. "Subordinated Note Exchange Offer" means the offer by Company to exchange Subordinated Notes for Holdings Subordinated Notes, as more fully described in the Registration Statement of Company and Holdings on Form S-1 (Registration No. 33-59616) filed with the Securities and Exchange Commission on March 16, 1993, as amended by Amendment Nos. 1, 2 and 3 thereto and Post- Effective Amendment No. 1 filed with the Securities and Exchange Commission on August 23, 1993, as amended by Amendment No. 1 thereto. "Subordinated Note Indenture" means the indenture pursuant to which the Subordinated Notes are issued, as such indenture may be amended from time to time to the extent permitted under subsection 7.14A. "Subordinated Notes" means the up to $200,000,000 principal amount of 11 5/8% Subordinated Notes due 2002 of Company issued pursuant to the Subordinated Note Indenture. "Subsidiary" means, with respect to any Person, any corporation, partnership, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. "Subsidiary Guaranty" means the Subsidiary Guaranty to be executed and delivered by Subsidiaries of Company from time to time in accordance with subsection 6.8, substantially in the form of Exhibit XVI annexed hereto, as such Subsidiary Guaranty may be ----------- amended, supplemented or otherwise modified from time to time. "Subsidiary Pledge Agreement" means each Subsidiary Pledge Agreement to be executed and delivered by Subsidiaries of Company from time to time in accordance with subsection 6.8, substantially in the form of Exhibit XVII annexed hereto, as such ------------ Subsidiary Pledge Agreement may be amended, supplemented or otherwise modified from time to time, and "Subsidiary Pledge Agreements" means all such Subsidiary Pledge Agreements, collectively. "Subsidiary Security Agreement" means each Subsidiary Security Agreement to be executed and delivered by Subsidiaries of Company from time to time in accordance with subsection 6.8, substantially in the form of Exhibit XVIII annexed hereto, as ------------- such Subsidiary Security Agreement may be amended, supplemented or otherwise modified from time to time, and "Subsidiary Security Agreements" means all such Subsidiary Security Agreements, collectively. "Subsidiary Trademark Security Agreement" means each Subsidiary Trademark Collateral Security Agreement and Conditional Assignment to be executed and delivered by Subsidiaries of Company from time to time in accordance with subsection 6.8, substantially in the form of Exhibit XIX annexed ----------- hereto, as such Subsidiary Trademark Collateral Security Agreement and Conditional Assignment may be amended, supplemented or otherwise modified from time to time, and "Subsidiary Trademark Security Agreements" means all such Subsidiary Trademark Collateral Security Agreements and Conditional Assignments, collectively. "Supermajority Lenders" means Lenders having or holding 66 and 2/3% or more of the sum of the aggregate Term A Loan Exposure of all Lenders plus the aggregate Term B Loan Exposure ---- of all Lenders plus the aggregate Revolving Loan Exposure of all ---- Lenders. "Supplemental Holdings Subordinated Debenture Indenture" means the supplemental indenture in the form of Exhibit 4.4 to the Registration Statement of Company and Holdings on Form S-1 (Registration No. 33-50053) filed with the Securities and Exchange Commission on August 23, 1993, as amended by Amendment No. 1 thereto. "Supplemental Holdings Subordinated Note Indenture" means the supplemental indenture in the form of Exhibit 4.2 to the Registration Statement of Company and Holdings on Form S-1 (Registration No. 33-59616) filed with the Securities and Exchange Commission on March 16, 1993, as amended by Amendment Nos. 1, 2 and 3 thereto and Post-Effective Amendment No. 1 filed with the Securities and Exchange Commission on August 23, 1993, as amended by Amendment No. 1 thereto. "Swing Line Lender" means Bankers, or any Person serving as a successor Agent hereunder, in its capacity as Swing Line Lender hereunder. "Swing Line Loan Commitment" means the commitment of Swing Line Lender to make Swing Line Loans pursuant to subsection 2.1A(iv). "Swing Line Loans" means the Swing Line Loans made by Swing Line Lender to Company pursuant to subsection 2.1A(iv). "Swing Line Note" means (i) the promissory note of Company issued pursuant to subsection 2.1D on the Closing Date and (ii) any promissory note issued by Company to any successor Agent and Swing Line Lender pursuant to the last sentence of subsection 9.6B, in each case substantially in the form of Exhibit VI annexed hereto, as it may be amended, supplemented or ---------- otherwise modified from time to time. "Tax" or "Taxes" means any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided that -------- "Tax on the overall net income" of a Person shall be construed as a reference to a tax imposed by the jurisdiction in which that Person's principal office (and/or, in the case of a Lender, its lending office) is located or in which that Person is deemed to be doing business on all or part of the net income, profits or gains of that Person (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise). "Tender Offer" means the offer by Holdings to purchase for cash up to $100,000,000 aggregate outstanding principal amount of Holdings Subordinated Debentures (other than Holdings Subordinated Debentures held by Equitable or any of its Affiliates or Holdings Subordinated Debentures tendered for exchange pursuant to the Subordinated Debenture Exchange Offer), as more fully described in the Registration Statement of Company and Holdings on Form S-1 (Registration No. 33-50053) filed with the Securities and Exchange Commission on August 23, 1993, as amended by Amendment No. 1 thereto. "Term A Loan Commitment" or "Term A Loan Commitments" means the commitment or commitments of a Lender or Lenders to make Term A Loans pursuant to subsection 2.1A(i). "Term A Loan Exposure" means, with respect to any Lender as of any date of determination (i) prior to the funding of the Term A Loans, that Lender's Term A Loan Commitment and (ii) after the funding of the Term A Loans, the outstanding principal amount of the Term A Loan of that Lender. "Term A Loans" means the Loans made by Lenders to Company pursuant to subsection 2.1A(i). "Term A Notes" means the promissory notes of Company issued pursuant to subsection 2.1D on the Closing Date or issued pursuant to the last sentence of subsection 10.1B(i) from time to time after the Closing Date, in each case substantially in the form of Exhibit IV-A annexed hereto, as they may be amended, ------------ supplemented or otherwise modified from time to time. "Term B Loan Commitment" or "Term B Loan Commitments" means the commitment or commitments of a Lender or Lenders to make Term B Loans pursuant to subsection 2.1A(ii). "Term B Loan Exposure" means, with respect to any Lender as of any date of determination (i) prior to the funding of the Term B Loans, that Lender's Term B Loan Commitment and (ii) after the funding of the Term B Loans, the outstanding principal amount of the Term B Loan of that Lender. "Term B Loans" means the Loans made by Lenders to Company pursuant to subsection 2.1A(ii). "Term B Notes" means the promissory notes of Company issued pursuant to subsection 2.1D on the Closing Date or issued pursuant to the last sentence of subsection 10.1B(i) from time to time after the Closing Date, in each case substantially in the form of Exhibit IV-B annexed hereto, as they may be amended, ------------ supplemented or otherwise modified from time to time. "Term Loans" means one or more of the Term A Loans or Term B Loans or any combination thereof. "Total Utilization of Revolving Loan Commitments" means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Revolving Loans plus (ii) the aggregate principal amount of all outstanding Swing ---- Line Loans plus (iii) the Letter of Credit Usage. ---- "Transaction Costs" means the fees, costs and expenses payable by Company pursuant hereto and other fees, costs and expenses payable by Company in connection with the Restructuring. 1.2 Accounting Terms; Utilization of GAAP for Purposes of ----------------------------------------------------- Calculations Under Agreement. ---------------------------- Except as otherwise expressly provided in this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. Financial statements and other information required to be delivered by Company to Lenders pursuant to clauses (i), (ii), (iii) and (xiii) of subsection 6.1 shall be prepared in accordance with GAAP as in effect at the time of such preparation (and delivered together with the reconciliation statements provided for in subsection 6.1(v)). Calculations in connection with the definitions, covenants and other provisions of this Agreement shall utilize accounting principles and policies in conformity with those used to prepare the financial statements referred to in subsection 5.3. 1.3 Other Definitional Provisions. ----------------------------- References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided. Any of the terms defined in subsection 1.1 may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS 2.1 Commitments; Loans. ------------------ A. Commitments. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, each Lender hereby severally agrees to make the Loans described in subsections 2.1A(i), 2.1A(ii) and 2.1A(iii) and Swing Line Lender hereby agrees to make the Swing Line Loans described in subsection 2.1A(iv). (i) Term A Loans. Each Lender severally agrees to ------------ lend to Company on the Closing Date an amount not exceeding its Pro Rata Share of the aggregate amount of the Term A Loan Commitments to be used for the purposes identified in subsection 2.5A. The amount of each Lender's Term A Loan Commitment is set forth opposite its name on Schedule 2.1 ------------ annexed hereto and the aggregate amount of the Term A Loan Commitments is $225,000,000; provided that the Term A Loan -------- Commitments of Lenders shall be adjusted to give effect to any assignments of the Term A Loan Commitments pursuant to subsection 10.1B. Each Lender's Term A Loan Commitment shall expire immediately and without further action on October 29, 1993 if the Term A Loans are not made on or before that date. Company may make only one borrowing under the Term A Loan Commitments. Amounts borrowed under this subsection 2.1A(i) and subsequently repaid or prepaid may not be reborrowed. (ii) Term B Loans. Each Lender severally agrees to ------------ lend to Company on the Closing Date an amount not exceeding its Pro Rata Share of the aggregate amount of the Term B Loan Commitments to be used for the purposes identified in subsection 2.5A. The amount of each Lender's Term B Loan Commitment is set forth opposite its name on Schedule 2.1 ------------ annexed hereto and the aggregate amount of the Term B Loan Commitments is $175,000,000; provided that the Term B Loan -------- Commitments of Lenders shall be adjusted to give effect to any assignments of the Term B Loan Commitments pursuant to subsection 10.1B. Each Lender's Term B Loan Commitment shall expire immediately and without further action on October 29, 1993 if the Term B Loans are not made on or before that date. Company may make only one borrowing under the Term B Loan Commitments. Amounts borrowed under this subsection 2.1A(ii) and subsequently repaid or prepaid may not be reborrowed. (iii) Revolving Loans. Each Lender severally --------------- agrees, subject to the limitations set forth below with respect to the maximum amount of Revolving Loans permitted to be outstanding from time to time, to lend to Company from time to time during the period from the Closing Date to but excluding the Revolving Loan Commitment Termination Date an aggregate amount not exceeding its Pro Rata Share of the aggregate amount of the Revolving Loan Commitments to be used for the purposes identified in subsection 2.5B. The original amount of each Lender's Revolving Loan Commitment is set forth opposite its name on Schedule 2.1 annexed ------------ hereto and the aggregate original amount of the Revolving Loan Commitments is $175,000,000; provided that the -------- Revolving Loan Commitments of Lenders shall be adjusted to give effect to any assignments of the Revolving Loan Commitments pursuant to subsection 10.1B; and provided, -------- further that the amount of the Revolving Loan Commitments ------- shall be reduced from time to time by the amount of any reductions thereto made pursuant to subsections 2.4A(ii) and 2.4A(iii). Each Lender's Revolving Loan Commitment shall expire on the Revolving Loan Commitment Termination Date and all Revolving Loans and all other amounts owed hereunder with respect to the Revolving Loans and the Revolving Loan Commitments shall be paid in full no later than that date; provided that each Lender's Revolving Loan Commitment shall -------- expire immediately and without further action on October 29, 1993 if the Term Loans and the initial Revolving Loans are not made on or before that date. Amounts borrowed under this subsection 2.1A(iii) may be repaid and reborrowed to but excluding the Revolving Loan Commitment Termination Date. Anything contained in this Agreement to the contrary notwithstanding, the Revolving Loans and the Revolving Loan Commitments shall be subject to the following limitations in the amounts and during the periods indicated: (a) the amount otherwise available to be borrowed or maintained as Revolving Loans under the Revolving Loan Commitments as of any time of determination (other than to repay Swing Line Loans or to reimburse any Issuing Lender for the amount of any drawings under any Letters of Credit honored by such Issuing Lender and not theretofore reimbursed by Company) shall be reduced by (1) the aggregate principal amount of Swing Line Loans outstanding as of such time of determination plus ---- (2) the Letter of Credit Usage as of such time of determination; and (b) for 30 consecutive days during each consecutive twelve-month period (other than any such period that includes any month prior to February 1, 1994), the sum of (1) the aggregate outstanding principal amount of all Revolving Loans plus (2) the ---- aggregate outstanding principal amount of all Swing Line Loans shall not exceed $50,000,000. (iv) Swing Line Loans. Swing Line Lender hereby ---------------- agrees, subject to the limitations set forth below with respect to the maximum amount of Swing Line Loans permitted to be outstanding from time to time, to make a portion of the Revolving Loan Commitments available to Company from time to time during the period from the Closing Date to but excluding the Revolving Loan Commitment Termination Date by making Swing Line Loans to Company in an aggregate amount not exceeding the amount of the Swing Line Loan Commitment to be used for the purposes identified in subsection 2.5B, notwithstanding the fact that such Swing Line Loans, when aggregated with Swing Line Lender's outstanding Revolving Loans and Swing Line Lender's Pro Rata Share of the Letter of Credit Usage then in effect, may exceed Swing Line Lender's Revolving Loan Commitment. The original amount of the Swing Line Loan Commitment is $30,000,000; provided that -------- the amount of the Swing Line Loan Commitment is subject to reduction as provided in clause (c) of the next paragraph. The Swing Line Loan Commitment shall expire on the Revolving Loan Commitment Termination Date and all Swing Line Loans and all other amounts owed hereunder with respect to the Swing Line Loans shall be paid in full no later than that date; provided that the Swing Line Loan Commitment shall -------- expire immediately and without further action on October 29, 1993 if the Term Loans and the initial Revolving Loans are not made on or before that date. Amounts borrowed under this subsection 2.1A(iv) may be repaid and reborrowed to but excluding the Revolving Loan Commitment Termination Date. Anything contained in this Agreement to the contrary notwithstanding, the Swing Line Loans and the Swing Line Loan Commitment shall be subject to the following limitations in the amounts and during the periods indicated: (a) in no event shall the Total Utilization of Revolving Loan Commitments at any time exceed the Revolving Loan Commitments then in effect; (b) for 30 consecutive days during each consecutive twelve-month period (other than any such period that includes any month prior to February 1, 1994), the sum of (1) the aggregate outstanding principal amount of all Revolving Loans plus (2) the ---- aggregate outstanding principal amount of all Swing Line Loans shall not exceed $50,000,000; and (c) any reduction of the Revolving Loan Commitments made pursuant to subsection 2.4A which reduces the aggregate Revolving Loan Commitments to an amount less than the then current amount of the Swing Line Loan Commitment shall result in an automatic corresponding reduction of the Swing Line Loan Commitment to the amount of the Revolving Loan Commitments, as so reduced, without any further action on the part of Agent or Swing Line Lender. With respect to any Swing Line Loans which have not been voluntarily prepaid by Company pursuant to subsection 2.4A(i), Swing Line Lender may, at any time in its sole and absolute discretion, deliver to Agent (with a copy to Company), no later than 12:00 Noon (New York time) on the first Business Day in advance of the proposed Funding Date, a notice (which shall be deemed to be a Notice of Borrowing given by Company) requesting Lenders to make Revolving Loans that are Base Rate Loans on such Funding Date in an amount equal to the amount of such Swing Line Loans (the "Refunded Swing Line Loans") outstanding on the date such notice is given which Swing Line Lender requests Lenders to prepay. Anything contained in this Agreement to the contrary notwithstanding, (i) the proceeds of such Revolving Loans made by Lenders other than Swing Line Lender shall be immediately delivered by Agent to Swing Line Lender (and not to Company) and applied to repay a corresponding portion of the Refunded Swing Line Loans and (ii) on the day such Revolving Loans are made, Swing Line Lender's Pro Rata Share of the Refunded Swing Line Loans shall be deemed to be paid with the proceeds of a Revolving Loan made by Swing Line Lender and such portion of the Swing Line Loans deemed to be so paid shall no longer be outstanding as Swing Line Loans, shall no longer be due under the Swing Line Note of Swing Line Lender and shall be due under the Revolving Note of Swing Line Lender. Company hereby authorizes Agent and Swing Line Lender to charge Company's accounts with Agent and Swing Line Lender (up to the amount available in each such account) in order to immediately pay Swing Line Lender the amount of the Refunded Swing Line Loans to the extent the proceeds of such Revolving Loans made by Lenders, including the Revolving Loan deemed to be made by Swing Line Lender, are not sufficient to repay in full the Refunded Swing Line Loans. If any portion of any such amount paid (or deemed to be paid) to Swing Line Lender should be recovered by or on behalf of Company from Swing Line Lender in bankruptcy, by assignment for the benefit of creditors or otherwise, the loss of the amount so recovered shall be ratably shared among all Lenders in the manner contemplated by subsection 10.5. If, as a result of any bankruptcy or similar proceeding with respect to Company, Revolving Loans are not made pursuant to this subsection 2.1A(iv) in an amount sufficient to repay any amounts owed to Swing Line Lender in respect of any outstanding Swing Line Loans, each Lender shall be deemed to, and hereby agrees to, have purchased a participation in such outstanding Swing Line Loans in an amount equal to its Pro Rata Share of the unpaid amount together with accrued interest thereon. Upon one Business Day's notice from Swing Line Lender, each Lender shall deliver to Swing Line Lender an amount equal to its respective participation in same day funds at the office of Swing Line Lender located at One Bankers Trust Plaza, New York, New York. In order to evidence such participation each Lender agrees to enter into a participation agreement at the request of Swing Line Lender in form and substance reasonably satisfactory to all parties. In the event any Lender fails to make available to Swing Line Lender the amount of such Lender's participation as provided in this paragraph, Swing Line Lender shall be entitled to recover such amount on demand from such Lender together with interest thereon at the rate customarily used by Swing Line Lender for the correction of errors among banks for three Business Days and thereafter at the Base Rate. Anything contained herein to the contrary notwithstanding, (i) each Lender's obligation to make Revolving Loans for the purpose of repaying any Refunded Swing Line Loans pursuant to the second preceding paragraph and each Lender's obligation to purchase a participation in any unpaid Swing Line Loans pursuant to the immediately preceding paragraph shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against Swing Line Lender, Company or any other Person for any reason whatsoever; (b) the occurrence or continuance of an Event of Default or a Potential Event of Default; (c) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any of its Subsidiaries; (d) any breach of this Agreement or any other Loan Document by any party thereto; or (e) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided that such obligations of each Lender are subject to -------- the condition that (X) Swing Line Lender believed in good faith that all conditions under Section 4 to the making of the applicable Refunded Swing Line Loans or other unpaid Swing Line Loans, as the case may be, were satisfied at the time such Refunded Swing Line Loans or unpaid Swing Line Loans were made, (Y) such Lender had actual knowledge, by receipt of any notices required to be delivered to Lenders pursuant to subsection 6.1(ix) or otherwise, that any such condition had not been satisfied and such Lender failed to notify Swing Line Lender and Agent in writing that it had no obligation to make Revolving Loans until such condition was satisfied (any such notice to be effective as of the date of receipt thereof by Swing Line Lender and Agent), or (Z) the satisfaction of any such condition not satisfied had been waived by Requisite Lenders prior to or at the time such Refunded Swing Line Loans or other unpaid Swing Line Loans were made; and (ii) Swing Line Lender shall not be obligated to make any Swing Line Loans if it has elected not to do so after the occurrence and during the continuation of a Potential Event of Default or Event of Default. B. Borrowing Mechanics. Term A Loans or Term B Loans made on the Closing Date as Eurodollar Rate Loans with a particular Interest Period shall be in an aggregate minimum amount of $25,000,000 and integral multiples of $5,000,000 in excess of that amount. Revolving Loans made on any Funding Date (other than Revolving Loans made pursuant to a request by Swing Line Lender pursuant to subsection 2.1A(iv) for the purpose of repaying any Refunded Swing Line Loans or Revolving Loans made pursuant to subsection 3.3B for the purpose of reimbursing any Issuing Lender for the amount of a drawing under a Letter of Credit issued by it) shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount; provided that Revolving Loans made on any Funding Date as -------- Eurodollar Rate Loans with a particular Interest Period shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount. Swing Line Loans made on any Funding Date shall be in an aggregate minimum amount of $2,000,000 and integral multiples of $1,000,000 in excess of that amount. Whenever Company desires that Lenders make Term Loans or Revolving Loans under subsection 2.1A(i), 2.1A(ii) or 2.1A(iii), as the case may be, it shall deliver to Agent a Notice of Borrowing no later than 12:00 Noon (New York time) at least three Business Days in advance of the proposed Funding Date (in the case of a Eurodollar Rate Loan) or at least one Business Day in advance of the proposed Funding Date (in the case of a Base Rate Loan). Whenever Company desires that Swing Line Lender make a Swing Line Loan under subsection 2.1A(iv), it shall deliver to Agent a Notice of Borrowing no later than 12:00 Noon (New York time) on the proposed Funding Date. The Notice of Borrowing shall specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the amount and Type of Loans requested, (iii) in the case of Swing Line Loans, that such Loans shall be Base Rate Loans, (iv) in the case of Term Loans and Revolving Loans, whether such Loans shall be Base Rate Loans or Eurodollar Rate Loans, and (v) in the case of any Loans requested to be made as Eurodollar Rate Loans, the initial Interest Period requested therefor. Term Loans and Revolving Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided in subsection 2.2D. In lieu of delivering the above-described Notice of Borrowing, Company may give Agent telephonic notice by the required time of any proposed borrowing under this subsection 2.1B; provided that such notice -------- shall be promptly confirmed in writing by delivery of a Notice of Borrowing to Agent on or before the applicable Funding Date. Neither Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of Company or for otherwise acting in good faith under this subsection 2.1B, and upon receipt by Company of the proceeds of Loans made by Lenders in accordance with this Agreement pursuant to any such telephonic notice Company shall have effected Loans hereunder. Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to make a borrowing in accordance therewith. C. Disbursement of Funds. All Term Loans and Revolving Loans under this Agreement shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares of the Commitments for the particular Type of Loans requested, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make a Loan requested hereunder nor shall the Commitment of any Lender to make the particular Type of Loan requested be increased or decreased as a result of a default by any other Lender in that other Lender's obligation to make a Loan requested hereunder. Promptly after receipt by Agent of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu thereof), Agent shall notify each Lender or Swing Line Lender, as the case may be, of the proposed borrowing. Each Lender shall make the amount of its Loan available to Agent not later than 12:00 Noon (New York time) on the applicable Funding Date and Swing Line Lender shall make the amount of its Swing Line Loan available to Agent not later than 2:00 P.M. (New York time) on the applicable Funding Date, in each case in same day funds, at the office of Agent located at One Bankers Trust Plaza, New York, New York. Except as provided in subsection 2.1A(iv) or subsection 3.3B with respect to Revolving Loans used to repay Swing Line Loans or to reimburse any Issuing Lender for the amount of a drawing under a Letter of Credit issued by it, upon satisfaction or waiver of the conditions precedent specified in subsections 4.1 (in the case of Loans made on the Closing Date) and 4.2 (in the case of all Loans), Agent shall make the proceeds of such Loans available to Company on the applicable Funding Date by causing an amount of same day funds equal to the proceeds of all such Loans received by Agent from Lenders or Swing Line Lender, as the case may be, to be credited to the account of Company at the office of Agent specified in the preceding sentence. Unless Agent shall have been notified by any Lender prior to the Funding Date for any Loans that such Lender does not intend to make available to Agent the amount of such Lender's Loan requested on such Funding Date, Agent may assume that such Lender has made such amount available to Agent on such Funding Date and Agent may, in its sole discretion, but shall not be obligated to, make available to Company a corresponding amount on such Funding Date. If such corresponding amount is not in fact made available to Agent by such Lender, Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Funding Date until the date such amount is paid to Agent, at the customary rate set by Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon Agent's demand therefor, Agent shall promptly notify Company and Company shall immediately pay such corresponding amount to Agent together with interest thereon, for each day from such Funding Date until the date such amount is paid to Agent, at the rate payable under this Agreement for Base Rate Loans. Nothing in this subsection 2.1C shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Company may have against any Lender as a result of any default by such Lender hereunder. D. Notes. Company shall execute and deliver on the Closing Date (i) to each Lender (or to Agent for that Lender) (a) a Term A Note substantially in the form of Exhibit IV-A ------------ annexed hereto to evidence that Lender's Term A Loan, in the principal amount of that Lender's Term A Loan and with other appropriate insertions, (b) a Term B Note substantially in the form of Exhibit IV-B annexed hereto to evidence that Lender's ------------ Term B Loan, in the principal amount of that Lender's Term B Loan and with other appropriate insertions, and (c) a Revolving Note substantially in the form of Exhibit V annexed hereto to evidence --------- that Lender's Revolving Loans, in the principal amount of that Lender's Revolving Loan Commitment and with other appropriate insertions, and (ii) to Swing Line Lender (or to Agent for Swing Line Lender) a Swing Line Note substantially in the form of Exhibit VI annexed hereto to evidence Swing Line Lender's Swing ---------- Line Loans, in the principal amount of the Swing Line Loan Commitment and with other appropriate insertions. E. Scheduled Payments of Term Loans. (i) Scheduled Payments of Term A Loans. Company shall ---------------------------------- make principal payments on the Term A Loans in installments on the dates and in the amounts set forth below: Scheduled Repayment Date of Term A Loans ------ ------------------------- January 15, 1994 $15,000,000 April 15, 1994 $ 8,750,000 July 15, 1994 $ 8,750,000 October 15, 1994 $ 8,750,000 January 15, 1995 $ 8,750,000 April 15, 1995 $ 8,750,000 July 15, 1995 $ 8,750,000 October 15, 1995 $ 8,750,000 January 15, 1996 $ 8,750,000 April 15, 1996 $11,250,000 July 15, 1996 $11,250,000 October 15, 1996 $11,250,000 January 15, 1997 $11,250,000 April 15, 1997 $13,750,000 July 15, 1997 $13,750,000 October 15, 1997 $13,750,000 January 15, 1998 $13,750,000 April 15, 1998 $20,000,000 July 31, 1998 $20,000,000 ; provided that the scheduled installments of principal of the -------- Term A Loans set forth above shall be reduced in connection with any voluntary or mandatory prepayments of the Term A Loans in accordance with subsection 2.4A(iv); and provided, further that -------- ------- the Term A Loans and all other amounts owed hereunder with respect to the Term A Loans shall be paid in full no later than July 31, 1998, and the final installment payable by Company in respect of the Term A Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by Company under this Agreement with respect to the Term A Loans. (ii) Scheduled Payments of Term B Loans. ---------------------------------- Company shall make principal payments on the Term B Loans in installments on the dates and in the amounts set forth below: Scheduled Repayment Date of Term B Loans ------ ------------------------- January 15, 1995 $ 1,750,000 January 15, 1996 $ 1,750,000 January 15, 1997 $ 1,750,000 January 15, 1998 $ 1,750,000 October 15, 1998 $15,000,000 January 15, 1999 $15,000,000 April 15, 1999 $20,000,000 July 15, 1999 $20,000,000 October 31, 1999 $98,000,000 ; provided that the scheduled installments of principal of the -------- Term B Loans set forth above shall be reduced in connection with any voluntary or mandatory prepayments of the Term B Loans in accordance with subsection 2.4A(iv); and provided, further that -------- ------- the Term B Loans and all other amounts owed hereunder with respect to the Term B Loans shall be paid in full no later than October 31, 1999, and the final installment payable by Company in respect of the Term B Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by Company under this Agreement with respect to the Term B Loans. 2.2 Interest on the Loans. --------------------- A. Rate of Interest. Subject to the provisions of subsections 2.6 and 2.7, each Term Loan and each Revolving Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Base Rate or the Adjusted Eurodollar Rate, as the case may be. Subject to the provisions of subsection 2.7, each Swing Line Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Base Rate. The applicable basis for determining the rate of interest with respect to any Loan shall be selected by Company initially at the time a Notice of Borrowing is given with respect to such Loan pursuant to sub- section 2.1B. The basis for determining the interest rate with respect to any Term Loan or any Revolving Loan may be changed from time to time pursuant to subsection 2.2D. If on any day a Term Loan or Revolving Loan is outstanding with respect to which notice has not been delivered to Agent in accordance with the terms of this Agreement specifying the applicable basis for determining the rate of interest, then for that day that Loan shall bear interest determined by reference to the Base Rate. Subject to the provisions of subsections 2.2E and 2.7, the Term A Loans and Revolving Loans shall bear interest through maturity as follows: (i) if a Base Rate Loan, then at the sum of the Base Rate plus 1.50% per annum, less the Applicable ---- ---- Pricing Discount, if any; or (ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted Eurodollar Rate plus 2.50% per ---- annum, less the Applicable Pricing Discount, if any. ---- Subject to the provisions of subsections 2.2E and 2.7, the Term B Loans shall bear interest through maturity as follows: (i) if a Base Rate Loan, then at the sum of the Base Rate plus 2.00% per annum; or ---- (ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted Eurodollar Rate plus 3.00% per ---- annum. Subject to the provisions of subsections 2.2E and 2.7, the Swing Line Loans shall bear interest through maturity at the sum of the Base Rate plus 1.00% per annum, less the ---- ---- Applicable Pricing Discount, if any. B. Interest Periods. In connection with each Eurodollar Rate Loan, Company may, pursuant to the applicable Notice of Borrowing or Notice of Conversion/Continuation, as the case may be, select an interest period (each an "Interest Period") to be applicable to such Loan, which Interest Period shall be, at Company's option, a one, two, three or six month period; provided that: -------- (i) the initial Interest Period for any Eurodollar Rate Loan shall commence on the Funding Date in respect of such Loan, in the case of a Loan initially made as a Eurodollar Rate Loan, or on the date specified in the applicable Notice of Conversion/ Continuation, in the case of a Loan converted to a Eurodollar Rate Loan; (ii) in the case of immediately successive Interest Periods applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice of Conversion/ Continuation, each successive Interest Period shall commence on the day on which the next preceding Inter- est Period expires; (iii) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that if any Interest Period -------- would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iv) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (v) of this subsection 2.2B, end on the last Business Day of a calendar month; (v) no Interest Period with respect to any Term A Loan shall extend beyond July 31, 1998, no Interest Period with respect to any Term B Loan shall extend beyond October 31, 1999, and no Interest Period with respect to any Revolving Loan shall extend beyond the Revolving Loan Commitment Termination Date; (vi) (a) no Interest Period with respect to any Term A Loan shall extend beyond a date on which Company is required to make a scheduled payment of principal of the Term A Loans unless the aggregate principal amount of Term A Loans that are Base Rate Loans plus the aggregate principal amount of Term A ---- Loans that are Eurodollar Rate Loans with Interest Periods expiring on or before such date equals or exceeds the principal amount required to be paid on the Term A Loans on such date; and (b) no Interest Period with respect to any Term B Loan shall extend beyond a date on which Company is required to make a scheduled payment of principal of the Term B Loans unless the aggregate principal amount of Term B Loans that are Base Rate Loans plus the aggregate principal amount of Term B ---- Loans that are Eurodollar Rate Loans with Interest Periods expiring on or before such date equals or exceeds the principal amount required to be paid on the Term B Loans on such date; (vii) there shall be no more than 20 Interest Periods outstanding at any time; and (viii) in the event Company fails to specify an Interest Period for any Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of Conversion/Continuation, Company shall be deemed to have selected an Interest Period of one month. C. Interest Payments. Subject to the provisions of subsection 2.2E, interest on each Loan shall be payable in arrears on and to each Interest Payment Date applicable to that Loan, upon any prepayment of that Loan (to the extent accrued on the amount being prepaid) and at maturity (including final maturity). D. Conversion or Continuation. Subject to the provisions of subsection 2.6, Company shall have the option (i) to convert at any time after the Closing Date (a) all or any part of its outstanding Term A Loans or Term B Loans, in each case equal to $25,000,000 (subject to the first proviso to this sentence) and integral multiples of $5,000,000 in excess of that amount or (b) all or any part of its outstanding Revolving Loans equal to $5,000,000 and integral multiples of $1,000,000 in excess of that amount, in each case from Loans bearing interest at a rate determined by reference to one basis to Loans bearing interest at a rate determined by reference to an alternative basis, or (ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate Loan, to continue (a) with respect to any such Loan that is a Term A Loan or a Term B Loan, all or any portion of such Loan equal to $25,000,000 (subject to the first proviso to this sentence) and integral multiples of $5,000,000 in excess of that amount or (b) with respect to any such Loan that is a Revolving Loan, all or any portion of such Loan equal to $5,000,000 and integral multiples of $1,000,000 in excess of that amount, in each case as a Eurodollar Rate Loan; provided that the minimum amount of outstanding Term A Loans or -------- Term B Loans that may be converted to, or continued as, a Eurodollar Rate Loan shall be modified to the extent necessary to permit Company to maintain at any time one (but not more than one) amount of Term A Loans and one (but not more than one) amount of Term B Loans, in each case equal to less than $25,000,000 but at least equal to $10,000,000 and, if desired by Company, integral multiples of $1,000,000 in excess of that amount, as a Eurodollar Rate Loan; provided further, however, -------- ------- ------- that a Eurodollar Rate Loan may only be converted into a Loan bearing interest at a rate determined by reference to an alternative basis on the expiration date of an Interest Period applicable thereto; and provided, further that no Loan may be -------- ------- made as or converted into a Base Rate Loan during the period from December 24 of any year to and including January 7 of the immediately succeeding year for the purpose of investing in securities bearing interest at a rate determined by reference to any other basis for the purpose of arbitrage or speculation. Company shall deliver a Notice of Conversion/ Continuation to Agent no later than 12:00 Noon (New York time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed conversion/contin- uation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation shall specify (i) the proposed conversion/continuation date (which shall be a Business Day), (ii) the amount and Type of the Loan to be converted/continued, (iii) the nature of the proposed conversion/continuation, (iv) in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan, the requested Interest Period, and (v) in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan, that no Potential Event of Default or Event of Default has occurred and is continuing. In lieu of delivering the above-described Notice of Conversion/Continuation, Company may give Agent telephonic notice by the required time of any proposed conversion/continuation under this subsection 2.2D; provided that such notice shall be promptly confirmed in writing -------- by delivery of a Notice of Conversion/Continuation to Agent on or before the proposed conversion/continuation date. Neither Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Agent believes in good faith to have been given by a duly authorized officer or other person authorized to act on behalf of Company or for otherwise acting in good faith under this subsection 2.2D, and upon conversion or continuation of the applicable basis for determining the interest rate with respect to any Loans in accordance with this Agreement pursuant to any such telephonic notice Company shall have effected a conversion or continuation, as the case may be, hereunder. Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Conversion/Continuation for conversion to, or continuation of, a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to effect a conversion or continuation in accordance there- with. E. Post-Maturity Interest. Any principal payments on the Loans not paid when due and, to the extent permitted by applicable law, any interest payments on the Loans or any fees or other amounts owed hereunder not paid when due, in each case whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable on demand at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans); provided that, in the case of Eurodollar Rate Loans, -------- upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interest payable upon demand at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this subsection 2.2E is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Agent or any Lender. F. Computation of Interest. Interest on the Loans shall be computed on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded; provided that if a Loan is repaid on the same day on -------- which it is made, one day's interest shall be paid on that Loan. 2.3 Fees. ---- A. Commitment Fees. (i) Company agrees to pay to Agent, for distribution to each Lender, a commitment fee for the period commencing on the earlier of the date of delivery to Agent of an executed commitment letter of such Lender with respect to the Commitments of such Lender hereunder and August 23, 1993 to and excluding the Closing Date, equal to the aggregate amount of the Commitments of such Lender as set forth in Schedule 2.1 ------------ annexed hereto multiplied by 1/2 of 1% per annum, such commitment ------------- fees to be calculated on the basis of a 360-day year and the actual number of days elapsed and to be payable in arrears on the earlier of the Closing Date or the termination of the Commitments; and (ii) Company agrees to pay to Agent, for distribution to each Lender in proportion to that Lender's Pro Rata Share, commitment fees for the period from and including the Closing Date to and excluding the Revolving Loan Commitment Termination Date equal to the average of the daily excess of the Revolving Loan Commitments over the sum of the aggregate principal amount of Revolving Loans outstanding (but not any Swing Line Loans outstanding) plus the Letter of Credit Usage ---- (other than the Letter of Credit Usage in respect of Standby Letters of Credit) multiplied by a rate per annum equal to 1/2 of ------------- 1% minus the Applicable Pricing Discount, if any, such commitment ----- fees to be calculated on the basis of a 360-day year and the actual number of days elapsed and to be payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, commencing on January 15, 1994, and on the Revolving Loan Commitment Termination Date. B. Other Fees. Company agrees to pay to Agent such other fees in the amounts and at the times separately agreed upon between Company and Agent, as set forth in that certain letter dated August 19, 1993 from Agent to Company. 2.4 Prepayments and Reductions in Commitments; General -------------------------------------------------- Provisions Regarding Payments. ----------------------------- A. Prepayments and Reductions in Commitments. (i) Voluntary Prepayments. Company may, upon --------------------- written or telephonic notice to Agent on or prior to 12:00 Noon (New York time) on the date of prepayment, which notice, if telephonic, shall be promptly confirmed in writing, at any time and from time to time prepay any Swing Line Loan in whole or in part on any Business Day in an aggregate minimum amount of $2,000,000 and integral multiples of $1,000,000 in excess of that amount (or such lesser amount as shall constitute the aggregate amount of all outstanding Swing Line Loans). Company may, upon not less than one Business Day's prior written or telephonic notice, in the case of Base Rate Loans, and three Business Days' prior written or telephonic notice, in the case of Eurodollar Rate Loans, in each case confirmed in writing to Agent (which notice Agent will promptly transmit by telecopy or telephone to each Lender), at any time and from time to time prepay any Revolving Loans or Term Loans in whole or in part on any Business Day in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount (or, in each such case, such lesser amount as shall constitute the aggregate amount of all outstanding Term Loans or Revolving Loans, as the case may be); provided, however, that a Eurodollar -------- ------- Rate Loan may only be prepaid on the expiration of the Interest Period applicable thereto. Notice of prepay- ment having been given as aforesaid, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein. Any such voluntary prepayment shall be applied as specified in subsection 2.4A(iv). (ii) Voluntary Reductions of Revolving Loan -------------------------------------- Commitments. Company may, upon not less than three ----------- Business Days' prior written or telephonic notice confirmed in writing to Agent (which notice Agent will promptly transmit by telecopy or telephone to each Lender), at any time and from time to time terminate in whole or permanently reduce in part, without premium or penalty, the Revolving Loan Commitments in an amount up to the amount by which the Revolving Loan Commitments exceed the Total Utilization of Revolving Loan Commitments at the time of such proposed termination or reduction; provided that any such -------- partial reduction of the Revolving Loan Commitments shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount. Company's notice to Agent shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of the Revolving Loan Commitments shall be effective on the date specified in Company's notice and shall reduce the Revolving Loan Commitment of each Lender proportionately to its Pro Rata Share. (iii) Mandatory Prepayments of Loans and ---------------------------------- Mandatory Reductions of Revolving Loan Commitments. -------------------------------------------------- (a) Prepayments and Reductions from Asset ------------------------------------- Sales. No later than the second Business Day ----- following the date of receipt by Company or any of its Subsidiaries or, in the case of insurance proceeds paid to Agent pursuant to subsection 6.4, Agent of any Net Cash Proceeds of Asset Sale (other than any Net Cash Proceeds of Asset Sale from any Qualified Sale and Lease-back), (1) Company shall prepay the Term Loans in an amount equal to such Net Cash Proceeds of Asset Sale minus any such Net Cash Proceeds of Asset ----- Sale (the "Proposed Reinvestment Amount") received by Company or such Subsidiary or, in the case of insurance proceeds paid to Agent pursuant to subsection 6.4, Agent in connection with (X) any taking of assets described in clause (iii) of the definition of the term "Asset Sale" or (Y) any loss, damage or destruction of assets described in clause (iv) of the definition of the term "Asset Sale," in either case that Company or such Subsidiary intends to use within 180 days of such date of receipt to repair or restore the portion of the assets so taken, lost, damaged or destroyed that is remaining after such taking, loss, damage or destruction or to replace the assets so taken, lost, damaged or destroyed; provided that Company shall have delivered to -------- Agent on or before such second Business Day an Officers' Certificate setting forth the proposed use of the Proposed Reinvestment Amount and such other information with respect to such proposed use as Agent may reasonably request, and (2) to the extent such Net Cash Proceeds of Asset Sale minus the Proposed Reinvestment Amount, if any, ----- exceed the aggregate outstanding principal amount of the Term Loans, Company shall prepay in an amount equal to such excess first the Swing Line ----- Loans to the full extent thereof and second the ------ Revolving Loans to the full extent thereof, and the Revolving Loan Commitments shall be permanently reduced in an amount equal to such excess; provided, however, that the first -------- ------- $25,000,000 of Net Cash Proceeds of Asset Sale (other than any Net Cash Proceeds of Asset Sale from any Qualified Sale and Lease-back and other than any Proposed Reinvestment Amount to the extent such Proposed Reinvestment Amount is used to repair, restore or replace assets of Company or any of its Subsidiaries as provided above) received by Company or any of its Subsidiaries in any Fiscal Year shall not be required to be applied to prepay any Loans or result in any reduction of the Revolving Loan Commitments pursuant to this subsection 2.4A(iii)(a). With respect to any Proposed Reinvestment Amount, on the one hundred and eighty-first day after receipt thereof by Company or any of its Subsidiaries, subject to the last proviso in the immediately preceding sentence, (1) Company shall prepay the Term Loans in an amount (the "Unused Reinvestment Amount") equal to 100% of any portion of such Proposed Reinvestment Amount that has not been used to repair, restore or replace the assets of Company or such Subsidiary as provided above and (2) to the extent the Unused Reinvestment Amount exceeds the aggregate outstanding principal amount of the Term Loans, Company shall prepay in an amount equal to such excess first the Swing Line Loans to the full ----- extent thereof and second the Revolving Loans to ------ the full extent thereof, and the Revolving Loan Commitments shall be permanently reduced in an amount equal to such excess. Concurrently with any prepayment of the Loans and/or reduction of the Revolving Loan Commitments pursuant to this subsection 2.4A(iii)(a), Company shall deliver to Agent an Officers' Certificate demonstrating the derivation of the Net Cash Proceeds of Asset Sale of the correlative Asset Sale from the gross sales price thereof. In the event that Company shall, at any time after receipt of any Net Cash Proceeds of Asset Sale in connection with any Asset Sale, determine that the prepayments and/or reductions of the Revolving Loan Commitments, if any, previously made in respect of such Asset Sale were in an aggregate amount less than that required by the terms of this subsection 2.4A(iii)(a), Company shall promptly make an additional prepayment of the Term Loans, Swing Line Loans or Revolving Loans, as the case may be (and, if applicable, the Revolving Loan Commit- ments shall be permanently reduced), in the manner described above in an amount equal to the amount of any such deficit, and Company shall concurrently therewith deliver to Agent an Officers' Certificate demonstrating the derivation of the additional Net Cash Proceeds of Asset Sale resulting in such deficit. Any mandatory prepayments pursuant to this subsection 2.4A(iii)(a) shall be applied as specified in subsection 2.4A(iv). (b) Prepayments and Reductions Due to --------------------------------- Reversion of Surplus Assets of Pension Plans. No -------------------------------------------- later than the second Business Day following the date of return to Company or any of its Subsidiaries of any surplus assets of any pension plan of Company or any of its Subsidiaries, (1) Company shall prepay the Term Loans in an amount (the "Net Reversion Amount") equal to 100% of such returned surplus assets, net of transaction costs and expenses incurred in obtaining such return, including incremental taxes payable as a result thereof, and (2) to the extent the Net Reversion Amount exceeds the aggregate outstanding principal amount of the Term Loans, Company shall prepay in an amount equal to such excess first the Swing Line Loans ----- to the full extent thereof and second the ------ Revolving Loans to the full extent thereof, and the Revolving Loan Commitments shall be permanently reduced in an amount equal to such excess. Any such mandatory prepayments shall be applied as specified in subsection 2.4A(iv). (c) Prepayments and Reductions Due to --------------------------------- Issuance of Equity Securities of Company. No ---------------------------------------- later than the second Business Day following the date of receipt by Company or any of its Affiliates of the Cash proceeds (net of under- writing discounts and commissions and other reasonable costs and expenses associated therewith, including without limitation reasonable legal fees and expenses) from the issuance after the Closing Date of any equity Securities of Company (1) Company shall prepay the Term Loans in an amount equal to 100% of (A) such net Cash proceeds minus (B) any such net ----- Cash proceeds (the "Proposed Redemption Amount") that PTKH intends to use within 35 days of such date of receipt to redeem all or any portion of the PTKH Bonds (together with the applicable prepayment premium required to be paid under the PTKH Bond Indenture, as such indenture is in effect as of the Closing Date) in an aggregate amount of principal (including any principal representing payment of deferred interest on any PTKH Bonds) and interest not to exceed (y) $180,000,000 minus (z) the aggregate amount ----- of principal (including any principal representing payment of deferred interest on any PTKH Bonds) of PTKH Bonds and interest thereon theretofore purchased, redeemed, defeased or paid by PTKH (whether in accordance with this subsection 2.3A(iii)(c) or otherwise) or for which an irrevocable notice of purchase, redemption or defeasance had theretofore been given by PTKH (whether in accordance with this subsection 2.4A(iii)(c) or otherwise); provided -------- that no Event of Default or Potential Event of Default shall have occurred and be continuing or shall be caused by such proposed redemption; and provided, further that PTKH shall have given -------- ------- irrevocable notice of such redemption on or before such second Business Day to the trustee under the PTKH Bond Indenture, and (2) to the extent such amount equal to 100% of (A) such net Cash proceeds minus (B) the Proposed Redemption ----- Amount, if any, exceeds the aggregate outstanding principal amount of the Term Loans, Company shall prepay in an amount equal to such excess first ----- the Swing Line Loans to the full extent thereof and second the Revolving Loans to the full extent ------ thereof, and the Revolving Loan Commitments shall be permanently reduced in an amount equal to such excess. With respect to any Proposed Redemption Amount, on the thirty-fifth day after receipt thereof by Company or any of its Affiliates (1) Company shall prepay the Term Loans in an amount (the "Unused Redemption Amount") equal to 100% of any portion of such Proposed Redemption Amount that has not been used to redeem all or any portion of the PTKH Bonds and accrued interest thereon and any applicable prepayment premium, in each case in accordance with this subsection 2.4A(iii)(c) and subsection 7.5, and (2) to the extent the Unused Redemption Amount exceeds the aggregate outstanding principal amount of the Term Loans, Company shall prepay in an amount equal to such excess first the Swing ----- Line Loans to the full extent thereof and second ------ the Revolving Loans to the full extent thereof, and the Revolving Loan Commitments shall be permanently reduced in an amount equal to such excess. Any such mandatory prepayments shall be applied as specified in subsection 2.4A(iv). (d) Prepayments and Reductions Due to --------------------------------- Issuance of Equity Securities of Certain ---------------------------------------- Affiliates of Company. In the event that an --------------------- Event of Default or a Potential Event of Default shall have occurred and be continuing as of the date of any issuance after the Closing Date of any equity Securities of PTKH or any other entity that directly or indirectly owns 100% of the outstanding capital stock of Company or an Event of Default or a Potential Event of Default shall be caused by such issuance, no later than the second Business Day following the date of receipt by PTKH or any of its Affiliates of the Cash proceeds (net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including without limitation reasonable legal fees and expenses) from such issuance (1) Company shall prepay the Term Loans in an amount equal to 100% of such net Cash proceeds and (2) to the extent such amount equal to 100% of such net Cash proceeds exceeds the aggregate outstanding principal amount of the Term Loans, Company shall prepay in an amount equal to such excess first the Swing Line Loans ----- to the full extent thereof and second the ------ Revolving Loans to the full extent thereof, and the Revolving Loan Commitments shall be permanently reduced in an amount equal to such excess. Any such mandatory prepayments shall be applied as specified in subsection 2.4A(iv). (e) Prepayments and Reductions from ------------------------------- Consolidated Excess Cash Flow. In the event that ----------------------------- there shall be Consolidated Excess Cash Flow for any Fiscal Year, within 90 days after the last day of such Fiscal Year (1) Company shall prepay the Term Loans in an amount equal to 50% of such Consolidated Excess Cash Flow and (2) to the extent such amount equal to 50% of such Consolidated Excess Cash Flow exceeds the aggregate outstanding principal amount of the Term Loans, Company shall prepay in an amount equal to such excess first the Swing Line Loans ----- to the full extent thereof and second the ------ Revolving Loans to the full extent thereof, and the Revolving Loan Commitments shall be permanently reduced in an amount equal to such excess. Any such mandatory prepayments shall be applied as specified in subsection 2.4A(iv). (f) Prepayments and Reductions Due to --------------------------------- Incurrence of Certain Non-Recourse Indebtedness. ----------------------------------------------- No later than the second Business Day following the date of incurrence by Company or any of its Subsidiaries of any Indebtedness permitted under subsection 7.1(ix), (1) Company shall prepay the Term Loans in an amount (the "Net Principal Amount") equal to 100% of the principal amount of such Indebtedness, net of any reasonable costs and expenses associated therewith, including without limitation reasonable legal fees and expenses, and (2) to the extent the Net Principal Amount exceeds the aggregate outstanding principal amount of the Term Loans, Company shall prepay in an amount equal to such excess first ----- the Swing Line Loans to the full extent thereof and second the Revolving Loans to the full extent ------ thereof, and the Revolving Loan Commitments shall be permanently reduced in an amount equal to such excess. Any such mandatory prepayments shall be applied as specified in subsection 2.4A(iv). (g) Prepayments Due to Reductions or -------------------------------- Restrictions of Revolving Loan Commitments. ------------------------------------------ Company shall from time to time prepay first the ----- Swing Line Loans and second the Revolving Loans ------ to the extent necessary (1) so that the Total Utilization of Revolving Loan Commitments shall not at any time exceed the Revolving Loan Commitments then in effect and (2) to give effect to the limitations set forth in clause (b) of the second paragraph of subsection 2.1A(iii). Any such mandatory prepayments shall be applied as specified in subsection 2.4A(iv). (iv) Application of Prepayments. -------------------------- (a) Application of Voluntary Prepayments by --------------------------------------- Type of Loans and Order of Maturity. Subject to ----------------------------------- the last sentence of this subsection 2.4A(iv)(a), any voluntary prepayments pursuant to subsection 2.4A(i) shall be applied as specified by Company in the applicable notice of prepayment; provided -------- that in the event Company fails to specify the Loans to which any such prepayment shall be applied, such prepayment shall be applied first ----- to repay outstanding Swing Line Loans to the full extent thereof, second to repay outstanding ------ Revolving Loans to the full extent thereof, and third to repay outstanding Term Loans to the full ----- extent thereof. Any voluntary prepayment of the Term Loans pursuant to subsection 2.4A(i) shall be applied first to the prepayment of the Term A ----- Loans in an amount equal to any installments of principal of the Term A Loans set forth in subsection 2.1E(i) that are scheduled to be paid within 12 months of the date of such voluntary prepayment and which remain unpaid at the time of such voluntary prepayment, such prepayment of the Term A Loans to be applied to reduce such scheduled installments of principal of the Term A Loans in forward order of maturity and second, to ------ the extent of any excess, pro rata to the prepayment of the Term A Loans and Term B Loans then outstanding, such prepayments to be applied to reduce the scheduled installments of principal of the Term A Loans set forth in subsection 2.1E(i) in inverse order of maturity and to reduce the scheduled installments of principal of the Term B Loans set forth in subsection 2.1E(ii) in inverse order of maturity. (b) Application of Mandatory Prepayments of --------------------------------------- Term Loans by Order of Maturity. Any mandatory ------------------------------- prepayments of the Term Loans pursuant to subsection 2.4A(iii) shall be applied pro rata to each scheduled installment of principal of the Term A Loans and the Term B Loans set forth in subsection 2.1E(i) and subsection 2.1E(ii), respectively, that is unpaid at the time of such prepayment. (c) Application of Prepayments to Base Rate --------------------------------------- Loans and Eurodollar Rate Loans. Considering ------------------------------- Term A Loans, Term B Loans, Revolving Loans and Swing Line Loans being prepaid separately, any prepayment shall be applied first to Base Rate Loans to the full extent thereof before applica- tion to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by Company pursuant to subsection 2.6D. B. General Provisions Regarding Payments. (i) Manner and Time of Payment. All payments by -------------------------- Company of principal, interest, fees and other Obligations hereunder, under the Notes and under the other Loan Documents shall be made in same day funds and without defense, setoff or counterclaim, free of any restriction or condition, and delivered to Agent not later than 1:00 P.M. (New York time) on the date due at its office located at One Bankers Trust Plaza, New York, New York, for the account of Lenders; funds received by Agent after that time on such due date shall be deemed to have been paid by Company on the next succeeding Business Day. Company hereby authorizes Agent to charge its accounts with Agent in order to cause timely payment to be made to Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose). (ii) Application of Payments to Principal and ---------------------------------------- Interest. All payments in respect of the principal -------- amount of any Loan shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments shall be applied to the payment of interest before application to principal. (iii) Apportionment of Payments. Aggregate ------------------------- principal and interest payments shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to Lenders' respective Pro Rata Shares. Agent shall promptly distribute to each Lender, at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request, its Pro Rata Share of all such payments received by Agent and the commitment fees of such Lender when received by Agent pursuant to subsection 2.3. Notwithstanding the foregoing provisions of this subsection 2.4B(iii), if, pursuant to the provisions of subsection 2.6C, any Notice of Conversion/Continu- ation is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Agent shall give effect thereto in apportioning payments received thereafter. (iv) Payments on Business Days. Whenever any ------------------------- payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the commitment fees hereunder, as the case may be. (v) Notation of Payment. Each Lender agrees ------------------- that before disposing of any Note held by it, or any part thereof (other than by granting participations therein), that Lender will make a notation thereon of all Loans evidenced by that Note and all principal payments previously made thereon and of the date to which interest thereon has been paid; provided that -------- the failure to make (or any error in the making of) a notation of any Loan made under such Note shall not limit or otherwise affect the obligations of Company hereunder or under such Note with respect to any Loan or any payments of principal or interest on such Note. 2.5 Use of Proceeds. --------------- A. Term Loans; Initial Revolving Loans. The proceeds of the Term Loans, together with up to $95,000,000 in proceeds of the initial Revolving Loans and other funds available to Company, shall be applied by Company to (i) repay the Holdings Intercompany Notes, (ii) repay Company's obligations under the Existing Credit Agreement, and (iii) pay Transaction Costs in an amount not exceeding $50,000,000. B. Subsequent Revolving Loans; Swing Line Loans. The proceeds of any subsequent Revolving Loans and the proceeds of any Swing Line Loans shall be applied by Company for working capital or general corporate purposes, which may include (i) the repayment of the Swing Line Loans pursuant to subsection 2.1A(iv), (ii) the reimbursement to any Issuing Lender of any amounts drawn under any Letters of Credit issued by such Issuing Lender as provided in subsection 3.3, (iii) the making of inter- company loans to any of Company's wholly-owned Subsidiaries, in accordance with subsection 7.1(iv), for their own working capital or general corporate purposes, (iv) the making of Restricted Junior Payments permitted by subsections 7.5(ii) and 7.5(iii), and (iv) the payment of Transaction Costs in an amount not exceeding $50,000,000 minus the amount of Transaction Costs paid ----- or to be paid out of the proceeds of the Term Loans and the initial Revolving Loans. C. Margin Regulations. No portion of the proceeds of any borrowing under this Agreement shall be used by Company or any of its Subsidiaries in any manner that might cause the borrowing or the application of such proceeds to violate Regulation G, Regulation U, Regulation T or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of such Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds. 2.6 Special Provisions Governing Eurodollar Rate Loans. -------------------------------------------------- Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to Eurodollar Rate Loans as to the matters covered: A. Determination of Applicable Interest Rate. As soon as practicable after 10:00 A.M. (New York time) on each Interest Rate Determination Date, Agent shall determine (which determination shall, absent manifest error (including arithmetical error), be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Company and each Lender. B. Inability to Determine Applicable Interest Rate. In the event that Agent shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that by reason of circum- stances affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Adjusted Eurodollar Rate, Agent shall on such date give notice (by telecopy or by telephone confirmed in writing) to Company and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Loans until such time as Agent notifies Company and Lenders that the circumstances giving rise to such notice no longer exist and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by Company with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by Company. C. Illegality or Impracticability of Eurodollar Rate Loans. In the event that on any date any Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with Company and Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause such Lender material hardship, as a result of contingencies occurring after the date of this Agreement which materially and adversely affect the interbank Eurodollar market or the position of such Lender in that market, then, and in any such event, such Lender shall be an "Affected Lender" and it shall on that day give notice (by telecopy or by telephone confirmed in writing) to Company and Agent of such determination (which notice Agent shall promptly transmit to each other Lender). Thereafter (a) the obligation of the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (b) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, the Affected Lender shall make such Loan as (or convert such Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans (the "Affected Loans"), shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (d) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, Company shall have the option, subject to the provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of Conversion/Continuation as to all Lenders by giving notice (by telecopy or by telephone confirmed in writing) to Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above (which notice of rescission Agent shall promptly transmit to each other Lender). Except as provided in the immediately preceding sentence, nothing in this subsection 2.6C shall affect the obligation of any Lender other than an Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms of this Agreement. D. Compensation For Breakage or Non-Commencement of Interest Periods. Company shall compensate each Lender, upon written request by that Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including, without limitation, any interest paid by that Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by that Lender in connection with the liquidation or re-employment of such funds) which that Lender may sustain: (i) if for any reason (other than a default by that Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Borrowing or a telephonic request for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Conversion/Continuation or a telephonic request for conversion or continuation, (ii) if any prepayment or conversion of any of its Eurodollar Rate Loans occurs on a date that is not the last day of an Interest Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Company, or (iv) as a consequence of any other default by Company to repay its Eurodollar Rate Loans when required by the terms of this Agreement. E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of that Lender. F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of all amounts payable to a Lender under this subsection 2.6 and under subsection 2.7A shall be made as though that Lender had actually funded each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of that Lender to a domestic office of that Lender in the United States of America; provided, however, that each Lender may fund -------- ------- each of its Eurodollar Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this subsection 2.6 and under subsection 2.7A. G. Eurodollar Rate Loans After Default. After the occurrence of and during the continuation of a Potential Event of Default or an Event of Default, (i) Company may not elect to have a Loan be made or maintained as, or converted to, a Eurodollar Rate Loan after the expiration of any Interest Period then in effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any Notice of Borrowing or Notice of Conversion/ Continuation given by Company with respect to a requested borrowing or conversion/continuation that has not yet occurred shall be deemed to be rescinded by Company. 2.7 Increased Costs; Taxes; Capital Adequacy. ---------------------------------------- A. Compensation for Increased Costs and Taxes. Subject to the provisions of subsection 2.7B(iii), in the event that any Lender shall determine (which determination shall, absent manifest error (including arithmetical error), be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi- governmental authority (whether or not having the force of law): (i) subjects such Lender (or its applicable lending office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to this Agreement or any of the Loans or any of its obligations hereunder; (ii) imposes, modifies or holds applicable any reserve (including without limitation any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Adjusted Eurodollar Rate); or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the interbank Eurodollar market; and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Loans hereunder or to reduce any amount received or receivable by such Lender (or its applicable lending office) with respect thereto; then, in any such case, Company shall promptly pay to such Lender, upon receipt of the statement referred to in the immediately succeeding sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder. Such Lender shall deliver to Company a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Lender under this subsection 2.7A, which statement shall be conclusive and binding upon all parties hereto absent manifest error (including arithmetical error). B. Withholding of Taxes. (i) Payments to Be Free and Clear. All sums ----------------------------- payable by Company under this Agreement and the other Loan Documents shall be paid free and clear of and (except to the extent required by law) without any deduction or withholding on account of any Tax imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other jurisdiction from or to which a payment is made by or on behalf of Company or by any federation or organization of which the United States of America or any such jurisdiction is a member at the time of payment (other than a Tax on the overall net income of a Lender). (ii) Grossing-up of Payments. If Company or ----------------------- any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by Company to Agent or any Lender under any of the Loan Documents: (a) Company shall notify Agent of any such requirement or any change in any such requirement as soon as Company becomes aware of it; (b) Company shall pay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on Company) for its own account or (if that liability is imposed on Agent or such Lender, as the case may be) on behalf of and in the name of Agent or such Lender; (c) the sum payable by Company in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Agent or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and (d) within 30 days after paying any sum from which it is required by law to make any deduction or withholding, and within 30 days after the due date of payment of any Tax which it is required by clause (b) above to pay, Company shall deliver to Agent, to the extent reasonably available, evidence reasonably satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority; provided that no such additional amount shall be -------- required to be paid to any Lender under clause (c) above except to the extent that any change after the date hereof (in the case of each Lender listed on the signature pages hereof) or after the date of the Assignment and Acceptance pursuant to which such Lender became a Lender (in the case of each other Lender) in any such requirement for a deduction, withholding or payment as is mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect at the date of this Agreement or at the date of such Assignment and Acceptance, as the case may be, in respect of payments to such Lender. (iii) U.S. Tax Certificates. Each Lender that --------------------- is organized under the laws of any jurisdiction other than the United States or any state or other political subdivision thereof shall deliver to Agent for transmission to Company, on or prior to the Closing Date (in the case of each Lender listed on the signature pages hereof) or on the date of the Assignment and Acceptance pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of Company or Agent (each in the reasonable exercise of its discretion), such certifi- cates, documents or other evidence, properly completed and duly executed by such Lender (including, without limitation, Internal Revenue Service Form 1001 or Form 4224 or any other certificate or statement of exemption required by Treasury Regulations Section 1.1441-4(a) or Section 1.1441-6(c) or any successor thereto) to establish that such Lender is not subject to deduction or withholding of United States federal income tax under Section 1441 or 1442 of the Internal Revenue Code or otherwise (or under any comparable provisions of any successor statute) with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Loan Documents. Company shall not be required to pay any additional amount to any such Lender under clause (c) of subsection 2.7B(ii) if such Lender shall have failed to satisfy the requirements of the immediately preceding sentence; provided that if such Lender shall -------- have satisfied such requirements on the Closing Date (in the case of each Lender listed on the signature pages hereof) or on the date of the Assignment and Acceptance pursuant to which it became a Lender (in the case of each other Lender), nothing in this subsection 2.7B(iii) shall relieve Company of its obligation to pay any additional amounts pursuant to clause (c) of subsection 2.7B(ii) in the event that, as a result of any change in applicable law, such Lender is no longer properly entitled to deliver certificates, documents or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described in the immediately preceding sentence. (iv) Notice of Assessment. In the event that -------------------- any Lender or Agent receives any written communication from any taxing authority with respect to an assessment or proposed assessment of any Taxes in respect of which Company is obligated to make any payments pursuant to this subsection 2.7B, such Lender or Agent, as the case may be, shall promptly so notify Company in writing and provide a copy of such communication to Company. C. Capital Adequacy Adjustment. If any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the date hereof of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its applicable lending office) with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender's Loans or Commitments or Letters of Credit or participations therein or other obligations hereunder with respect to the Loans or the Letters of Credit to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by Company from such Lender of the statement referred to in the immediately succeeding sentence, Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction. Each Lender, upon determining in good faith that any additional amounts will be payable pursuant to this subsection 2.7C, will give a written statement thereof to Company (with a copy of such statement to Agent), which statement shall set forth in reasonable detail the basis of the calculation of such additional amounts. 2.8 Obligation of Lenders and Issuing Lenders to Mitigate. ----------------------------------------------------- Each Lender and Issuing Lender agrees that, as promptly as practicable after the officer of such Lender or Issuing Lender responsible for administering the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may be, becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender or Issuing Lender to receive payments under subsection 2.7 or subsection 3.6, it will, to the extent not inconsistent with the internal policies of such Lender or Issuing Lender and any applicable legal or regulatory restrictions, use reasonable efforts (i) to make, issue, fund or maintain the Commitments of such Lender or the affected Loans or Letters of Credit of such Lender or Issuing Lender through another lending or letter of credit office of such Lender or Issuing Lender, or (ii) take such other measures as such Lender or Issuing Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender or Issuing Lender pursuant to subsection 2.7 or subsection 3.6 would be materially reduced and if, as determined by such Lender or Issuing Lender in its sole discretion, the making, issuing, funding or maintaining of such Commitments or Loans or Letters of Credit through such other lending or letter of credit office or in accordance with such other measures, as the case may be, would not otherwise materially adversely affect such Commitments or Loans or Letters of Credit or the interests of such Lender or Issuing Lender; provided that such Lender or Issuing Lender will not be obligated -------- to utilize such other lending or letter of credit office pursuant to this subsection 2.8 unless Company agrees to pay all incremental expenses incurred by such Lender or Issuing Lenders as a result of utilizing such other lending or letter of credit office as described in clause (i) above. A certificate as to the amount of any such expenses payable by Company pursuant to this subsection 2.8 (setting forth in reasonable detail the basis for requesting such amount) submitted by such Lender or Issuing Lender to Company shall be conclusive absent manifest error (including arithmetical error). 2.9 Removal of a Lender. ------------------- A. In the event that any Lender shall give notice to Company that such Lender is an Affected Lender or that such Lender is entitled to receive payments under subsection 2.7 or subsection 3.6, and unless the circumstances which have caused such Lender to be an Affected Lender or which entitle such Lender to receive such payments are no longer in effect, Company may, if such Lender is not then an Issuing Lender and such Lender shall fail to withdraw such notice within 5 Business Days after Company's request for such withdrawal, upon thirty days' prior written notice by Company to Agent and such Lender, elect (i) to terminate the Commitments of such Lender upon receipt by such Lender of such notice and prepay on the date of such termination any outstanding Loans made by such Lender, together with accrued and unpaid interest thereon and any other amounts payable to such Lender hereunder pursuant to subsection 2.7 or subsection 3.6 or otherwise; provided that if there are any Loans of such Lender -------- outstanding at the time of such termination, the written consent of Agent and Requisite Lenders, which consent shall not be unreasonably withheld, shall be required in order for Company to make the foregoing election; or (ii) to cause such Lender to assign its Loans and Commitments in full to an Eligible Assignee in accordance with the provisions of subsection 10.1B. B. In the event that any Lender is a Defaulting Lender, and unless the Default Period for such Defaulting Lender is no longer continuing, Company may, if such Lender is not then an Issuing Lender and such Lender shall fail to cure the default as a result of which it has become a Defaulting Lender within five Business Days after Company's request that it cure such default, elect to cause such Lender to assign its Loans and Commitments in full to an Eligible Assignee in accordance with the provisions of subsection 10.1B. 2.10 Defaulting Lenders. ------------------ Anything contained herein to the contrary notwithstanding, in the event that any Lender (a "Defaulting Lender") defaults (a "Funding Default") in its obligation to fund any Revolving Loan (a "Defaulted Revolving Loan") in accordance with subsection 2.1, then (i) during any Default Period (as defined below) with respect to such Defaulting Lender, such Defaulting Lender shall be deemed not to be a "Lender" for purposes of voting on any matters (including without limitation the granting of any consents or waivers) with respect to any of the Loan Documents; (ii) to the extent permitted by applicable law, until such time as the Default Excess (as defined below) with respect to such Defaulting Lender shall have been reduced to zero (a) any voluntary prepayment of the Revolving Loans pursuant to subsection 2.4A(i) shall, if Company so directs at the time of making such voluntary prepayment, be applied to the Revolving Loans of other Lenders as if such Defaulting Lender had no Revolving Loans outstanding and the Revolving Loan Exposure of such Defaulting Lender were zero and (b) any mandatory prepayment of the Revolving Loans pursuant to subsection 2.4A(iii) shall, if Company so directs at the time of making such mandatory prepayment, be applied to the Revolving Loans of other Lenders (but not to the Revolving Loans of such Defaulting Lender) as if such Defaulting Lender had funded all Defaulted Revolving Loans of such Defaulting Lender, it being understood and agreed that Company shall be entitled to retain any portion of any mandatory prepayment of the Revolving Loans that is not paid to such Defaulting Lender solely as a result of the operation of the provisions of this clause (b); provided that the provisions of --------- this clause (b) shall not affect any mandatory reductions of the Revolving Loan Commitment of such Defaulting Lender pursuant to subsection 2.4A(iii); (iii) such Defaulting Lender's Revolving Loan Commitment and outstanding Revolving Loans and such Defaulting Lender's Pro Rata Share of the Letter of Credit Usage in respect of Commercial Letters of Credit shall be excluded for purposes of calculating the commitment fee payable to Lenders pursuant to subsection 2.3A in respect of any day during any Default Period with respect to such Defaulting Lender, and such Defaulting Lender shall not be entitled to receive any commitment fee pursuant to subsection 2.3A with respect to such Defaulting Lender's Revolving Loan Commitment in respect of any Default Period with respect to such Defaulting Lender; and (iv) the Total Utilization of Revolving Loan Commitments as at any date of determination shall be calculated as if such Defaulting Lender had funded all Defaulted Revolving Loans of such Defaulting Lender. For purposes of this Agreement (A) "Default Period" means, with respect to any Defaulting Lender, the period commencing on the date of the applicable Funding Default and ending on the earliest of the following dates: (a) the date on which all Revolving Loan Commitments are cancelled or terminated and/or the Obligations are declared or become immediately due and payable, (b) the date on which (1) the Default Excess with respect to such Defaulting Lender shall have been reduced to zero (whether by the funding by such Defaulting Lender of any Defaulted Revolving Loans of such Defaulting Lender or by the non-pro rata application of any voluntary or mandatory prepayments of the Revolving Loans in accordance with the terms of this subsection 2.10 or by a combination thereof) and (2) such Defaulting Lender shall have delivered to Company and Agent a written reaffirmation of its intention to honor its obligations under this Agreement with respect to its Revolving Loan Commitment, and (c) the date on which Company, Agent and Requisite Lenders waive all Funding Defaults of such Defaulting Lender in writing, and (B) "Default Excess" means, with respect to any Defaulting Lender, the excess, if any, of such Defaulting Lender's Pro Rata Share of the aggregate outstanding principal amount of Revolving Loans of all Lenders (calculated as if all Defaulting Lenders (other than such Defaulting Lender) had funded all of their respective Defaulted Revolving Loans) over the aggregate outstanding principal amount of Revolving Loans of such Defaulting Lender. No Commitment of any Lender shall be increased or otherwise affected, and, except as otherwise expressly provided in this subsection 2.10, performance by Company of its obligations under this Agreement and the other Loan Documents shall not be excused or otherwise modified, as a result of any Funding Default or the operation of this subsection 2.10. The rights and remedies against a Defaulting Lender under this subsection 2.10 are in addition to other rights and remedies which Company may have against such Defaulting Lender with respect to any Funding Default and which Agent or any Lender may have against such Defaulting Lender with respect to any Funding Default. Section 3. LETTERS OF CREDIT 3.1 Issuance of Letters of Credit and Lenders' Purchase of ------------------------------------------------------ Participations Therein. ---------------------- A. Letters of Credit. In addition to Company requesting that Lenders make Revolving Loans pursuant to subsection 2.1A(iii) and that Swing Line Lender make Swing Line Loans pursuant to subsection 2.1A(iv), Company may request, in accordance with the provisions of this subsection 3.1, from time to time during the period from the Closing Date to but excluding the Revolving Loan Commitment Termination Date, that one or more Lenders issue Letters of Credit for the account of Company for the purposes specified in the definitions of Commercial Letters of Credit and Standby Letters of Credit. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, any one or more Lenders may, but (except as provided in subsection 3.1B(ii)) shall not be obligated to, issue such Letters of Credit in accordance with the provisions of this subsection 3.1; provided that Company shall not request that any Lender issue -------- (and no Lender shall issue): (i) any Letter of Credit if, after giving effect to such issuance, the Total Utilization of Revolving Loan Commitments would exceed the Revolving Loan Commitments then in effect; (ii) any Letter of Credit if, after giving effect to such issuance, the Letter of Credit Usage would exceed $100,000,000; (iii) any Standby Letter of Credit having an expiration date later than the earlier of (a) the Revolving Loan Commitment Termination Date and (b) the date which is one year from the date of issuance of such Standby Letter of Credit; provided that the -------- immediately preceding clause (b) shall not prevent any Issuing Lender from agreeing that a Standby Letter of Credit will automatically be extended for one or more successive periods not to exceed one year each unless such Issuing Lender elects not to extend for any such additional period; provided, further that such Issuing -------- ------- Lender shall deliver a written notice to Agent setting forth the last day on which such Issuing Lender may give notice that it will not extend such Standby Letter of Credit (the "Notification Date" with respect to such Standby Letter of Credit) at least ten Business Days prior to such Notification Date; and provided, further that, unless Requisite Lenders -------- ------- otherwise consent, such Issuing Lender shall give notice that it will not extend such Standby Letter of Credit if it has knowledge that an Event of Default has occurred and is continuing on such Notification Date; (iv) any Commercial Letter of Credit having an expiration date (a) later than the earlier of (X) the Revolving Loan Commitment Termination Date and (Y) the date which is 180 days from the date of issuance of such Commercial Letter of Credit or (b) that is otherwise unacceptable to the applicable Issuing Lender in its reasonable discretion; or (v) any Letter of Credit denominated in a currency other than Dollars. B. Mechanics of Issuance. (i) Notice of Issuance. Whenever Company ------------------ desires the issuance of a Letter of Credit, it shall deliver to the proposed Issuing Lender (with a copy to Agent if Agent is not the proposed Issuing Lender) a Notice of Issuance of Letter of Credit no later than 12:00 Noon (New York time) at least five Business Days (or such shorter period as may be agreed to by the Issuing Lender in any particular instance) in advance of the proposed date of issuance. The Notice of Issuance of Letter of Credit shall specify (a) the Lender requested to issue the Letter of Credit, (b) the proposed date of issuance (which shall be a Business Day), (c) the face amount of the Letter of Credit, (d) the expiration date of the Letter of Credit, (e) the name and address of the beneficiary, and (f) the verbatim text of the proposed Letter of Credit or the proposed terms and conditions, including a precise description of any documents and the verbatim text of any certificates to be presented by the beneficiary which, if presented by the beneficiary prior to the expiration date of the Letter of Credit, would require the Issuing Lender to make payment under the Letter of Credit; provided that the Issuing -------- Lender, in its reasonable discretion, may require changes in the text of the proposed Letter of Credit or any such documents or certificates; and provided, -------- further that no Letter of Credit shall require payment ------- against a conforming draft to be made thereunder on the same business day (under the laws of the jurisdiction in which the office of the Issuing Lender to which such draft is required to be presented is located) that such draft is presented if such presentation is made after 10:00 A.M. (in the time zone of such office of the Issuing Lender) on such business day. (ii) Determination of Issuing Lender. Upon ------------------------------- receipt by a proposed Issuing Lender of a Notice of Issuance of Letter of Credit pursuant to subsection 3.1B(i) requesting the issuance of a Letter of Credit, (a) in the event Agent is the proposed Issuing Lender, Agent shall be the Issuing Lender with respect to such Letter of Credit, notwithstanding the fact that the Letter of Credit Usage with respect to such Letter of Credit and with respect to all other Letters of Credit issued by Agent, when aggregated with Agent's outstanding Revolving Loans and Swing Line Loans, may exceed Agent's Revolving Loan Commitment then in effect, and (b) in the event any other Lender is the proposed Issuing Lender, such Lender shall promptly notify Company and Agent whether or not, in its sole discretion, it has elected to issue such Letter of Credit, and (1) if such Lender so elects to issue such Letter of Credit it shall be the Issuing Lender with respect thereto and (2) if such Lender fails to so promptly notify Company and Agent or declines to issue such Letter of Credit, Company may request Agent or another Lender to be the Issuing Lender with respect to such Letter of Credit in accordance with the provisions of this subsection 3.1B. (iii) Notification to Lenders. Promptly after ----------------------- receipt of a Notice of Issuance of Letter of Credit and the determination of the Issuing Lender with respect to the proposed Letter of Credit, (a) Agent shall notify each Lender of the proposed issuance of such Letter of Credit, the Issuing Lender and the amount of such Lender's respective participation therein, determined in accordance with subsection 3.1C, and (b) the Issuing Lender shall deliver to each other Lender a copy of such Notice of Issuance of Letter of Credit. (iv) Issuance of Letter of Credit. Upon ---------------------------- satisfaction or waiver (in accordance with subsection 10.6) of the conditions set forth in subsection 4.3, the Issuing Lender shall issue the requested Letter of Credit in accordance with the Issuing Lender's standard operating procedures, and upon its issuance of such Letter of Credit the Issuing Lender shall promptly notify Agent and each Lender of such issuance, which notice shall be accompanied by a copy of such Letter of Credit. (v) Report to Lenders. Within 15 days after the ----------------- end of each calendar quarter ending after the Closing Date, so long as any Letter of Credit shall have been outstanding during such calendar quarter, each Issuing Lender shall deliver to each other Lender a report setting forth the average for such calendar quarter of the daily maximum amount available to be drawn under the Letters of Credit issued by such Issuing Lender that were outstanding during such calendar quarter. C. Lenders' Purchase of Participations in Letters of Credit. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby agrees to, have irrevocably purchased from the Issuing Lender a participation in such Letter of Credit and drawings thereunder in an amount equal to such Lender's Pro Rata Share of the maximum amount which is or at any time may become available to be drawn thereunder. 3.2 Letter of Credit Fees. --------------------- Company agrees to pay the following amounts to each Issuing Lender with respect to Letters of Credit issued by it: (i) with respect to each Standby Letter of Credit, (a) a fronting fee equal to 0.25% per annum of the average daily maximum amount available to be drawn under such Standby Letter of Credit; provided that in -------- any event the minimum fronting fee for any Standby Letter of Credit shall be $500 (it being agreed that, at the time of any cancellation or expiration of a Standby Letter of Credit, if $500 exceeds the amount of fronting fees theretofore paid or then accrued with respect to such Standby Letter of Credit, the amount of such excess shall be payable on the next date upon which accrued fronting fees in respect of Standby Letters of Credit are otherwise payable as provided in this sentence); and (b) a letter of credit fee equal to 1.75% per annum minus the Applicable Pricing ----- Discount, if any, multiplied by the average daily ------------- maximum amount available to be drawn under such Standby Letter of Credit, in each case payable in arrears on and through each January 15, April 15, July 15 and October 15 of each year and computed on the basis of a 360-day year for the actual number of days elapsed; (ii) with respect to each Commercial Letter of Credit, (a) a fronting fee equal to 0.25% per annum of the average daily maximum amount available to be drawn under such Commercial Letter of Credit and (b) a letter of credit fee equal to 0.50% per annum of the average daily maximum amount available to be drawn under such Commercial Letter of Credit, in each case payable in arrears on and through each January 15, April 15, July 15 and October 15 of each year and computed on the basis of a 360-day year for the actual number of days elapsed; and (iii) with respect to the issuance, amendment or transfer of each Letter of Credit and each drawing made thereunder (without duplication of the fees payable under clauses (i) and (ii) above), documentary and processing charges in accordance with such Issuing Lender's standard schedule for such charges in effect at the time of such issuance, amendment, transfer or drawing, as the case may be. Promptly upon receipt by such Issuing Lender of any amount described in clause (i)(b) or (ii)(b) of this subsection 3.2, such Issuing Lender shall distribute to each other Lender its Pro Rata Share of such amount. 3.3 Drawings and Reimbursement of Amounts Drawn Under ------------------------------------------------- Letters of Credit. ----------------- A. Responsibility of Issuing Lender With Respect to Requests For Drawings. In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they strictly comply on their face with the requirements of such Letter of Credit. B. Reimbursement by Company of Amounts Drawn Under Letters of Credit. In the event an Issuing Lender has determined to honor a request for drawing under a Letter of Credit issued by it, such Issuing Lender shall immediately notify Company and Agent, and Company shall reimburse such Issuing Lender on or before the Business Day immediately following the date on which such drawing is honored (the "Reimbursement Date") in an amount in Dollars in same day funds equal to the amount of such drawing; provided that, anything contained in this Agreement to the -------- contrary notwithstanding, (i) unless Company shall have notified Agent and such Issuing Lender prior to 12:00 Noon (New York time) on the date of such drawing that Company intends to reimburse such Issuing Lender for the amount of such drawing with funds other than the proceeds of Revolving Loans, Company shall be deemed to have given a timely Notice of Borrowing to Agent requesting Lenders to make Revolving Loans that are Base Rate Loans on the Reimbursement Date in an amount in Dollars equal to the amount of such drawing and (ii) subject to satisfaction or waiver of the conditions specified in subsection 4.2B, Lenders shall, on the Reimbursement Date, make Revolving Loans that are Base Rate Loans in the amount of such drawing, the proceeds of which shall be applied directly by Agent to reimburse such Issuing Lender for the amount of such drawing; and provided, -------- further that if for any reason proceeds of Revolving Loans are ------- not received by such Issuing Lender on the Reimbursement Date in an amount equal to the amount of such drawing, Company shall reimburse such Issuing Lender, on demand, in an amount in same day funds equal to the excess of the amount of such drawing over the aggregate amount of such Revolving Loans, if any, which are so received. Nothing in this subsection 3.3B shall be deemed to relieve any Lender from its obligation to make Revolving Loans on the terms and conditions set forth in this Agreement, and Company shall retain any and all rights it may have against any Lender resulting from the failure of such Lender to make such Revolving Loans under this subsection 3.3B. C. Payment by Lenders of Unreimbursed Drawings Under Letters of Credit. (i) Payment by Lenders. In the event that ------------------ Company shall fail for any reason to reimburse any Issuing Lender as provided in subsection 3.3B in an amount equal to the amount of any drawing honored by such Issuing Lender under a Letter of Credit issued by it, such Issuing Lender shall promptly notify each other Lender of the unreimbursed amount of such drawing and of such other Lender's respective participation therein based on such Lender's Pro Rata Share. Each Lender shall make available to such Issuing Lender an amount equal to its respective participation, in Dollars and in same day funds, at the office of such Issuing Lender specified in such notice, not later than 12:00 Noon (New York time) on the first business day (under the laws of the jurisdiction in which such office of such Issuing Lender is located) after the date notified by such Issuing Lender. In the event that any Lender fails to make available to such Issuing Lender on such business day the amount of such Lender's participation in such Letter of Credit as provided in this subsection 3.3C, such Issuing Lender shall be entitled to recover such amount on demand from such Lender together with interest thereon at the rate customarily used by such Issuing Lender for the correction of errors among banks for three Business Days and thereafter at the Base Rate. Nothing in this subsection 3.3C shall be deemed to prejudice the right of any Lender to recover from any Issuing Lender any amounts made available by such Lender to such Issuing Lender pursuant to this subsection 3.3C in the event that it is determined by the final judgment of a court of competent jurisdiction that the payment with respect to a Letter of Credit by such Issuing Lender in respect of which payment was made by such Lender constituted gross negligence or willful misconduct on the part of such Issuing Lender. (ii) Distribution to Lenders of -------------------------- Reimbursements Received From Company. In the event ------------------------------------ any Issuing Lender shall have been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any portion of any drawing honored by such Issuing Lender under a Letter of Credit issued by it, such Issuing Lender shall distribute to each other Lender which has paid all amounts payable by it under subsection 3.3C(i) with respect to such drawing such other Lender's Pro Rata Share of all payments subsequently received by such Issuing Lender from Company in reim- bursement of such drawing when such payments are received. Any such distribution shall be made to a Lender at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request. D. Interest on Amounts Drawn Under Letters of Credit. (i) Payment of Interest by Company. Company ------------------------------ agrees to pay to each Issuing Lender, with respect to drawings made under any Letters of Credit issued by it, interest on the amount paid by such Issuing Lender in respect of each such drawing from the date of such drawing to but excluding the date such amount is reimbursed by Company (including any such reimbursement out of the proceeds of Revolving Loans pursuant to subsection 3.3B) at a rate equal to (a) for the period from the date of such drawing to but excluding the Reimbursement Date, the rate then in effect under this Agreement with respect to Revolving Loans that are Base Rate Loans and (b) thereafter, a rate which is 2% per annum in excess of the rate of interest otherwise payable under this Agreement with respect to Revolving Loans that are Base Rate Loans. Interest payable pursuant to this subsection 3.3D(i) shall be computed on the basis of a 360-day year for the actual number of days elapsed in the period during which it accrues and shall be payable on demand or, if no demand is made, on the date on which the related drawing under a Letter of Credit is reimbursed in full. (ii) Distribution of Interest Payments by ------------------------------------ Issuing Lender. Promptly upon receipt by any Issuing -------------- Lender of any payment of interest pursuant to subsection 3.3D(i), (a) such Issuing Lender shall distribute to each other Lender, out of the interest received by such Issuing Lender in respect of the period from the date of the applicable drawing under a Letter of Credit issued by such Issuing Lender to but excluding the date on which such Issuing Lender is reimbursed for the amount of such drawing (including any such reimbursement out of the proceeds of Revolving Loans pursuant to subsection 3.3B), the amount that such other Lender would have been entitled to receive in respect of the letter of credit fee that would have been payable in respect of such Letter of Credit for such period pursuant to subsection 3.2 if no drawing had been made under such Letter of Credit, and (b) in the event such Issuing Lender shall have been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any portion of such drawing, such Issuing Lender shall distribute to each other Lender which has paid all amounts payable by it under subsection 3.3C(i) with respect to such drawing such other Lender's Pro Rata Share of any interest received by such Issuing Lender in respect of that portion of such drawing so reimbursed by other Lenders for the period from the date on which such Issuing Lender was so reimbursed by other Lenders to and including the date on which such portion of such drawing is reimbursed by Company. Any such distri- bution shall be made to a Lender at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request. 3.4 Obligations Absolute. -------------------- The obligation of Company to reimburse each Issuing Lender for drawings made under the Letters of Credit issued by it and to repay any Revolving Loans made by Lenders pursuant to subsection 3.3B and the obligations of Lenders under subsection 3.3C(i) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including, without limitation, the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, set-off, defense or other right which Company or any Lender may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), any Issuing Lender or other Lender or any other Person or, in the case of a Lender, against Company, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between Company or one of its Subsidiaries and the beneficiary for which any Letter of Credit was procured); (iii) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by the applicable Issuing Lender under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not strictly comply with the terms of such Letter of Credit; (v) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any of its Subsidiaries; (vi) any breach of this Agreement or any other Loan Document by any party thereto; (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; or (viii) the fact that an Event of Default or a Potential Event of Default shall have occurred and be continuing; provided, in each case, that payment by the applicable Issuing -------- Lender under the applicable Letter of Credit shall not have constituted gross negligence or willful misconduct of such Issuing Lender under the circumstances in question (as determined by a final judgment of a court of competent jurisdiction). 3.5 Indemnification; Nature of Issuing Lenders' Duties. -------------------------------------------------- A. Indemnification. In addition to amounts payable as provided in subsection 3.6, Company hereby agrees to protect, indemnify, pay and save harmless each Issuing Lender from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which such Issuing Lender may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing Lender, other than as a result of (a) the gross negligence or willful misconduct of such Issuing Lender as determined by a final judgment of a court of competent jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor by such Issuing Lender of a proper demand for payment made under any Letter of Credit issued by it; or (ii) the failure of such Issuing Lender to honor a drawing under any such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions herein called "Governmental Acts"). B. Nature of Issuing Lenders' Duties. As between Company and any Issuing Lender, Company assumes all risks of the acts and omissions of, or misuse of the Letters of Credit issued by such Issuing Lender by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, such Issuing Lender shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of such Issuing Lender, including without limitation any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of such Issuing Lender's rights or powers hereunder. In furtherance and extension and not in limitation of the specific provisions set forth in the first paragraph of this subsection 3.5B, any action taken or omitted by any Issuing Lender under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not put such Issuing Lender under any resulting liability to Company. Notwithstanding anything to the contrary contained in this subsection 3.5 (including without limitation the last sentence of the second preceding paragraph), Company shall retain any and all rights it may have against any Issuing Lender for any liability arising solely out of the gross negligence or willful misconduct of such Issuing Lender, as determined by a final judgment of a court of competent jurisdiction. 3.6 Increased Costs and Taxes Relating to Letters of ------------------------------------------------ Credit. ------ In the event that any Issuing Lender or Lender shall determine (which determination shall, absent manifest error (including arithmetical error), be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by any Issuing Lender or Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Issuing Lender or Lender (or its applicable lending or letter of credit office) to any additional Tax (other than any Tax on the overall net income of such Issuing Lender or Lender) with respect to the issuing or maintaining of any Letters of Credit or the purchasing or maintaining of any participations therein or any other obligations under this Section 3, whether directly or by such being imposed on or suffered by any particular Issuing Lender; (ii) imposes, modifies or holds applicable any reserve (including without limitation any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement in respect of any Letters of Credit issued by any Issuing Lender or participations therein purchased by any Lender; or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Issuing Lender or Lender (or its applicable lending or letter of credit office) regarding this Section 3 or any Letter of Credit or any participation therein; and the result of any of the foregoing is to increase the cost to such Issuing Lender or Lender of agreeing to issue, issuing or maintaining any Letter of Credit or agreeing to purchase, purchasing or maintaining any participation therein or to reduce any amount received or receivable by such Issuing Lender or Lender (or its applicable lending or letter of credit office) with respect thereto; then, in any case, Company shall promptly pay to such Issuing Lender or Lender, upon receipt of the statement referred to in the immediately succeeding sentence, such additional amount or amounts as may be necessary to compensate such Issuing Lender or Lender for any such increased cost or reduction in amounts received or receivable hereunder. Such Issuing Lender or Lender shall deliver to Company a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Issuing Lender or Lender under this subsection 3.6, which statement shall be conclusive and binding upon all parties hereto absent manifest error (including arithmetical error). Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT The obligations of Lenders to make Loans and the issuance of Letters of Credit hereunder are subject to the satisfaction of the following conditions. 4.1 Conditions to Term Loans and Initial Revolving Loans ---------------------------------------------------- and Swing Line Loans. -------------------- The obligations of Lenders to make the Term Loans and any Revolving Loans and Swing Line Loans to be made on the Closing Date are, in addition to the conditions precedent specified in subsection 4.2, subject to prior or concurrent satisfaction of the following conditions: A. Company Documents. On or before the Closing Date, Company shall deliver or cause to be delivered to Lenders (or to Agent for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel) the following, each, unless otherwise noted, dated the Closing Date: (i) Certified copies of its Certificate of Incorporation, together with a good standing certificate from the Secretary of State of the State of Delaware and each other state in which it is qualified as a foreign corporation to do business, each dated a recent date prior to the Closing Date; (ii) Copies of its Bylaws, certified as of the Closing Date by its corporate secretary or an assistant secretary; (iii) Resolutions of its Board of Directors approving and authorizing the execution, delivery and performance of this Agreement, the other Loan Documents and the other Restructuring Documents to which Company is a party and authorizing the consummation of the Restructuring in accordance with and in the manner contemplated by the Restructuring Documents, certified as of the Closing Date by its corporate secretary or an assistant secretary as being in full force and effect without modification or amendment; (iv) Signature and incumbency certificates of its officers executing this Agreement and the other Loan Documents; and (v) Executed originals of this Agreement, the Notes (duly executed in accordance with subsection 2.1D, drawn to the order of each Lender and the Swing Line Lender and with appropriate insertions), the Company Security Agreement, the Company Trademark Security Agreement, the Company Pledge Agreement, the Collateral Account Agreement and the other Loan Documents to which it is a party. B. Delivery of Closing Date Mortgages; Closing Date Mortgage Policies. Agent shall have received from Company (i) fully executed and notarized Mortgages (each a "Closing Date Mortgage" and collectively the "Closing Date Mortgages") encumbering the fee interest and/or leasehold interest of Company in each Real Property Asset designated on Schedule 4.1B annexed ------------- hereto (each a "Closing Date Mortgaged Property" and collectively the "Closing Date Mortgaged Properties"); (ii) a title report obtained by Company in respect of each real property fee interest of Company constituting Closing Date Mortgaged Property; (iii) an opinion of counsel (which counsel shall be reasonably satisfactory to Agent) in the state in which each Closing Date Mortgaged Property is located with respect to the enforceability of the form of Closing Date Mortgage to be recorded in such state and such other matters as Agent may reasonably request, in form and substance reasonably satisfactory to Agent; (iv) in the case of each real property leasehold interest of Company constituting Closing Date Mortgaged Property, (a) such estoppel letters, consents and waivers from the landlords on such real property as may be required by Agent, which estoppel letters shall be in form and substance reasonably satisfactory to Agent and which consents and waivers shall consent to the Closing Date Mortgage relating to such leasehold interest and to the assignment of such leasehold interest to the successful bidder at a foreclosure or similar sale (and to a subsequent third party assignee by Agent or any Lender to the extent Agent or such Lender is the successful bidder at such sale) in the event of a foreclosure or similar action pursuant to such Closing Date Mortgage and (b) evidence that the applicable lease, a memorandum of lease with respect thereto, or other evidence of such lease in form and substance reasonably satisfactory to Agent, has been or will be recorded in all places to the extent necessary or desirable, in the reasonable judgment of Agent, so as to enable the Closing Date Mortgage encumbering such leasehold interest to effectively create a valid and enforceable first priority lien (subject to Permitted Encumbrances) on such leasehold interest in favor of Agent (or such other Person as may be required or desired under local law) for the benefit of Lenders; (v) ALTA mortgagee title insurance policies issued by First American Title Insurance Company of New York or other title insurers reasonably satisfactory to Agent (the "Closing Date Mortgage Policies"), in amounts not less than the respective amounts designated in Schedule 4.1B annexed hereto with respect to any particular ------------- Closing Date Mortgaged Properties, assuring Agent that the applicable Closing Date Mortgages create valid and enforceable first priority mortgage liens on the respective Closing Date Mortgaged Properties, free and clear of all defects and encumbrances except Permitted Encumbrances and subject to a standard survey exception, which Closing Date Mortgage Policies shall be in form and substance reasonably satisfactory to Agent and shall include an endorsement for mechanics' liens, for any other matters that Agent may reasonably request and, with respect to Closing Date Mortgage Policies that are issued for Closing Date Mortgaged Properties located outside the State of New York, for future advances under this Agreement, the Notes and the other Loan Documents, and shall provide for affirmative insurance and such reinsurance as Agent may reasonably request, all of the foregoing in form and substance reasonably satisfactory to Agent; (vi) evidence, which may be in the form of a letter from an insurance broker, a municipal engineer, Charles Jones, Inc. or Transamerica Flood Hazard Certification, as to whether (a) any Closing Date Mortgaged Property (``Closing Date Flood Hazard Property'') is in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards and (b) the community in which such Closing Date Flood Hazard Property is located is participating in the National Flood Insurance Program; and (vii) if there are any Closing Date Flood Hazard Properties, Company's written acknowledgement of receipt of written notification from Agent (a) as to the existence of each such Closing Date Flood Hazard Property and (b) as to whether the community in which each such Closing Date Flood Hazard Property is located is participating in the National Flood Insurance Program. C. Security Interests. To the extent not otherwise satisfied pursuant to subsection 4.1B, Company shall have taken or caused to be taken (and Agent shall have received satisfactory evidence thereof) such actions (other than the filing or recording of items described in clauses (ii), (iii) and (iv) below) in such a manner so that Agent has a valid and perfected first priority security interest as of such date in the entire Collateral (except to the extent any such security interest cannot be granted under applicable laws). Such actions shall include, without limitation, (i) delivery to Agent of certificates (which certificates shall be registered in the name of Agent or properly endorsed in blank for transfer or accompanied by irrevocable undated stock powers duly endorsed in blank, all in form and substance satisfactory to Agent) representing the capital stock pledged pursuant to the Company Pledge Agreement and delivery to Agent of all other instruments (duly endorsed where appropriate) evidencing the Collateral, (ii) delivery to Agent of Uniform Commercial Code financing statements as to the Collateral for all jurisdictions as may be necessary or desirable to perfect the security interests in the Collateral, (iii) delivery to Agent of the Company Trademark Security Agreement together with the cover sheet required for filing with the United States Patent and Trademark Office and (iv) delivery to Agent of such other documents and instruments that Agent reasonably deems necessary or advisable to establish, preserve and perfect the first priority Liens granted to Agent on behalf of Lenders under the Collateral Documents. D. PTKH Private Placement. On or prior to the Closing Date, (i) PTKH shall have issued PTKH Bonds in an aggregate original principal amount not to exceed $130 million to Holdings in satisfaction of $130 million in principal amount of Company's obligations under the Holdings Intercompany Note related to the Holdings Subordinated Debentures, (ii) Holdings shall have sold such PTKH Bonds to Equitable or its Affiliates in exchange for Holdings Subordinated Debentures held by Equitable or its Affiliates having an aggregate outstanding principal amount equal to $130 million as of immediately prior to the Closing Date, and (iii) Holdings shall have paid all accrued interest on the Holdings Subordinated Debentures so exchanged and a premium in connection therewith which does not exceed 12.125% of the aggregate outstanding principal amount of the Holdings Subordinated Debentures so exchanged, all pursuant to the PTKH Private Placement. E. New Subordinated Debt. On or prior to the Closing Date, Company shall have (i) issued and sold the Senior Subordinated Notes, the aggregate gross cash proceeds of which shall be no less than $436 million, (ii) issued and sold the Junior Subordinated Notes, the aggregate gross cash proceeds of which shall be $120 million, (iii) issued Subordinated Notes in exchange for all of the Holdings Subordinated Notes that have been tendered for exchange pursuant to the Subordinated Note Exchange Offer, and (iv) issued Subordinated Debentures in exchange for all of the Holdings Subordinated Debentures that have been tendered for exchange pursuant to the Subordinated Debenture Exchange Offer. F. Termination of Existing Credit Agreement and Holdings Existing Credit Agreement. On or prior to the Closing Date, Company shall have repaid in full all amounts outstanding under the Existing Credit Agreement and shall have terminated any commitments to lend or make other extensions of credit thereunder, Holdings shall have repaid in full all amounts outstanding under the Holdings Existing Credit Agreement and shall have terminated any commitments to lend or make other extensions of credit thereunder, and Company shall have made arrangements satisfactory to Agent with respect to any outstanding letters of credit issued pursuant to the Existing Credit Agreement that will remain outstanding after the Closing Date. G. Repayment of Indebtedness and Payment of Other Amounts. On the Closing Date (i) with the proceeds of the Senior Subordinated Notes, the Junior Subordinated Notes, the Term Loans and the initial Revolving Loans hereunder (a) Company shall have repaid in full all amounts outstanding under the Holdings Intercompany Note related to the Holdings Senior Subordinated Notes and repaid in full all amounts (other than a principal amount not exceeding $1,800,000) outstanding under the Holdings Discount Debentures and the Holdings Intercompany Note related to the Holdings Senior Subordinated Notes shall have been cancelled and returned to Company, (b) Company shall have repaid the Holdings Intercompany Note related to the Holdings Subordinated Debentures in an amount equal to the aggregate principal amount of the Holdings Subordinated Debentures purchased by Holdings in accordance with clause (d) of this subsection 4.1G, (c) Holdings (1) shall have redeemed (X) all of the aggregate principal amount of the Holdings Senior Subordinated Notes outstanding as of immediately prior to the Closing Date, together with accrued interest thereon, at a premium which does not exceed 3.63% of such aggregate outstanding principal amount, and (Y) all of the aggregate principal amount (including up to $32,800,000 of unamortized original issue discount) of the Holdings Discount Debentures outstanding as of immediately prior to the Closing Date, together with accrued interest thereon, at a premium which does not exceed 2.50% of the aggregate face amount of the Holdings Discount Debentures so redeemed or (2) shall have placed on deposit amounts sufficient for each such redemption and shall have timely given all necessary notices for each such redemption, in each case pursuant to arrangements, and in form and substance, satisfactory to Agent and Lenders, (d) Holdings shall have (1) purchased for cash (X) all of the Holdings Subordinated Debentures that have been tendered for purchase pursuant to the Tender Offer and (Y) all of the Holdings Subordinated Debentures held by Equitable or its Affiliates (other than Holdings Subordinated Debentures exchanged for PTKH Bonds as described in subsection 4.1D), which shall be in an aggregate outstanding principal amount of approximately $185 million as of immediately prior to the Closing Date, pursuant to the offer by Company to purchase such Holdings Subordinated Debentures from Equitable or its Affiliates, as more fully described in the Registration Statement of Company and Holdings on Form S-1 (Registration No. 33-50053) filed with the Securities and Exchange Commission on August 23, 1993, as amended by Amendment No. 1 thereto, (2) paid all accrued interest on the Holdings Subordinated Debentures so purchased, and (3) paid a premium in connection therewith which does not exceed 12.125% of the aggregate outstanding principal amount of the Holdings Subordinated Debentures so purchased, and Holdings shall have surrendered all of the Holdings Subordinated Debentures so purchased to the Holdings Subordinated Debenture Trustee for cancellation, (e) Holdings shall have paid a consent fee relating to the Supplemental Holdings Subordinated Note Indenture to the holders of the Holdings Subordinated Notes that have validly consented to the Supplemental Holdings Subordinated Note Indenture, the aggregate amount of which consent fee shall not exceed 0.50% of the aggregate principal amount of Holdings Subordinated Notes with respect to which such consent has been given, and (f) Holdings shall have paid a consent fee relating to the Supplemental Holdings Subordinated Debenture Indenture to the holders of the Holdings Subordinated Debentures that have validly consented to the Supplemental Holdings Subordinated Debenture Indenture, the aggregate amount of which consent fee shall not exceed 0.50% of the aggregate principal amount of the Holdings Subordinated Debentures with respect to which such consent has been given, (ii) Company shall have delivered to Holdings the Holdings Subordinated Notes tendered pursuant to the Subordinated Note Exchange Offer in satisfaction of a corresponding portion of Company's obligations under the Holdings Intercompany Note related to the Holdings Subordinated Notes, and Holdings shall have surrendered all of the Holdings Subordinated Notes so delivered to the Holdings Subordinated Note Trustee for cancellation, (iii) Company shall have delivered to Holdings the Holdings Subordinated Debentures tendered pursuant to the Subordinated Debenture Exchange Offer in satisfaction of a corresponding portion of Company's obligations under the Holdings Intercompany Note related to the Holdings Subordinated Debentures, and Holdings shall have surrendered all of the Holdings Subordinated Debentures so delivered to the Holdings Subordinated Debenture Trustee for cancellation, (iv) Holdings shall have surrendered all of the Holdings Subordinated Debentures exchanged pursuant to the PTKH Private Placement to the Holdings Subordinated Debenture Trustee for cancellation, and (v) Company shall have provided evidence satisfactory to Agent that the obligations of Company under each of the Holdings Intercompany Notes remaining outstanding after giving effect to the Restructuring have been subordinated to the Obligations pursuant to an amendment thereto containing subordination provisions and other terms in form and substance satisfactory to Agent. H. Consent of Holders of Holdings Subordinated Notes and Holdings Subordinated Debentures. On or prior to the Closing Date, Company shall have provided evidence satisfactory to Agent that (i) Holdings has obtained all consents from the holders of the Holdings Subordinated Notes and the holders of the Holdings Subordinated Debentures necessary to permit the effectiveness of the Supplemental Holdings Subordinated Note Indenture and the Supplemental Holdings Subordinated Debenture Indenture, respectively, and (ii) the Supplemental Holdings Subordinated Note Indenture and the Supplemental Holdings Subordinated Debenture Indenture shall be in full force and effect. I. Arrangements with SMG-II, Holdings, PTKH, Plainbridge and Chefmark. On or prior to the Closing Date, each of Company, SMG-II, Holdings, PTKH, Plainbridge and Chefmark shall have entered into each of the Spin-Off Agreements to which such Person is a party, in each case in form and substance satisfactory to Agent and Lenders, and all other arrangements among Company, SMG-II, Holdings, PTKH, Plainbridge and Chefmark shall be satisfactory in form and substance to Agent and Requisite Lenders. J. Appraisals. Agent shall have received appraisals, in form, scope and substance satisfactory to Agent and satisfying the requirements of any applicable laws and regulations, concerning any real property fee interests of Company constituting Closing Date Mortgaged Properties (in each case to the extent required under such laws and regulations as determined by Agent in its discretion). K. Environmental Matters. Agent shall have received reports and other information, in form, scope and substance satisfactory to Agent, concerning environmental liabilities of Company and its Subsidiaries with respect to the Facilities listed on Schedule 4.1K annexed hereto. ------------- L. Plainbridge Credit Agreement. On or prior to the Closing Date, Plainbridge shall have entered into the Plainbridge Credit Agreement with the other parties thereto and all conditions precedent to the funding of the initial loans or the issuance of the initial letters of credit thereunder shall have been satisfied or waived with the consent of Agent and Requisite Lenders. M. Opinions of Company's Counsel. Lenders and their respective counsel shall have received (i) originally executed copies of one or more favorable written opinions of Shearman & Sterling, counsel for Company, in form and substance reasonably satisfactory to Agent and its counsel, dated as of the Closing Date and setting forth substantially the matters in the opinions designated in Exhibit VIII annexed hereto and as to such other ------------ matters as Agent acting on behalf of Lenders may reasonably request, together with evidence satisfactory to Agent that Company has requested such counsel to deliver such opinions to Lenders, (ii) originally executed copies of one or more favorable written opinions of Marc A. Strassler, vice president and general counsel of Company, in form and substance reasonably satisfactory to Agent and its counsel, dated as of the Closing Date and setting forth substantially the matters in the opinions designated in Exhibit IX annexed hereto and as to such other ---------- matters as Agent acting on behalf of Lenders may reasonably request, and (iii) copies of all opinions delivered by Shearman & Sterling, counsel for SMG-II, Holdings, PTKH, Company, Plainbridge and Chefmark, and Marc A. Strassler, vice president and general counsel of SMG-II, Holdings, PTKH, Company, Plainbridge and Chefmark, in each case in connection with the Restructuring Documents (other than the Loan Documents). N. Opinions of Agent's Counsel. Lenders shall have received originally executed copies of one or more favorable written opinions of O'Melveny & Myers, counsel to Agent, dated as of the Closing Date, substantially in the form of Exhibit X --------- annexed hereto and as to such other matters as Agent acting on behalf of Lenders may reasonably request. O. Solvency. On the Closing Date, Agent and Lenders shall have received a certificate from Company executed by its chief financial officer, in form and substance satisfactory to Agent and Lenders, to the effect that, after giving effect to the Restructuring and the contemplated borrowings of the full amounts which will be available under the Commitments, the Company will be Solvent, and Agent and Lenders shall have received such other factual information supporting the conclusions reached in such certificate as may be available to such chief financial officer and as Agent or any Lender may reasonably request, all in form and substance satisfactory to Agent and Requisite Lenders. P. Fees. Company shall have paid to Agent, for distribution (as appropriate) to Agent and Lenders, the fees payable on the Closing Date referred to in subsection 2.3. Q. No Material Adverse Effect. Since January 30, 1993, no material adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company and its Subsidiaries, taken as a whole, or of Holdings and its Subsidiaries, taken as a whole, shall have occurred. R. Restructuring Documents. On the Closing Date, (i) Agent shall have received executed or conformed copies of the Spin-Off Agreements (in each case as amended through and including the Closing Date), the terms and conditions of which shall be in all respects satisfactory to Agent and Requisite Lenders, (ii) Agent shall have received executed or conformed copies of the New Subordinated Debt Indentures and the PTKH Bond Indenture and (a) the Senior Subordinated Note Indenture shall be in the form of Exhibit 4.1 to the Registration Statement of Company on Form S-1 (Registration No. 33-59612) filed with the Securities and Exchange Commission on March 16, 1993, as amended by Amendment Nos. 1, 2, 3 and 4 thereto, with such changes thereto, if any, that have been approved by Agent and Requisite Lenders or that would otherwise have been permitted to be made pursuant to subsection 7.14A if the Senior Subordinated Notes were issued and outstanding at the time of any such change, (b) the Subordinated Note Indenture shall be in the form of Exhibit 4.1 to the Registration Statement of Company and Holdings on Form S-1 (Registration No. 33-59616) filed with the Securities and Exchange Commission on March 16, 1993, as amended by Amendment Nos. 1, 2 and 3 thereto and Post-Effective Amendment No. 1 filed with the Securities and Exchange Commission on August 23, 1993, as amended by Amendment No. 1 thereto, with such changes thereto, if any, that have been approved by Agent and Requisite Lenders or that would otherwise have been permitted to be made pursuant to subsection 7.14A if the Subordinated Notes were issued and outstanding at the time of any such change, (c) the Junior Subordinated Note Indenture shall be in the form of Exhibit 4.2 to the Registration Statement of Company on Form S-1 (Registration No. 33-59612) filed with the Securities and Exchange Commission on March 16, 1993, as amended by Amendment Nos. 1, 2, 3 and 4 thereto, with such changes thereto, if any, that have been approved by Agent and Requisite Lenders or that would otherwise have been permitted to be made pursuant to subsection 7.14A if the Junior Subordinated Notes were issued and outstanding at the time of any such change, (d) the Subordinated Debenture Indenture shall be in the form of Exhibit 4.3 to the Registration Statement of Company and Holdings on Form S-1 (Registration No. 33-50053) filed with the Securities and Exchange Commission on August 23, 1993, as amended by Amendment No. 1 thereto, with such changes thereto, if any, that have been approved by Agent and Requisite Lenders or that would otherwise have been permitted to be made pursuant to subsection 7.14A if the Subordinated Debentures were issued and outstanding at the time of any such change, (e) the PTKH Bond Indenture and the Redemption Agreement shall be in the form delivered to Agent and Lenders on or prior to the date of execution of this Agreement by Lenders, with such changes thereto, if any, that have been approved by Agent and Requisite Lenders or that would not result in an Event of Default under subsection 8.17 if the PTKH Bonds were issued and outstanding at the time of any such change, (f) the interest rate payable on the Senior Subordinated Notes (taking into account any original issue discount) shall be no more than 10 3/4% per annum, (g) the interest rate payable on the Subordinated Notes shall be no more than 11 5/8% per annum, (h) the interest rate payable on the Junior Subordinated Notes shall be no more than 12 1/4% per annum, (i) the interest rate payable on the Subordinated Debentures shall be no more than 12 5/8% per annum, and (j) the interest rate payable on the PTKH Bonds shall be no more than 12% per annum, (iii) except as otherwise disclosed to and agreed to in writing by Agent and Requisite Lenders, (a) the Restructuring Documents (other than the Loan Documents) shall be in full force and effect and no term or condition thereof shall have been amended, modified or waived after the execution thereof, (b) Company shall not have failed in any material respect to perform any material obligation or covenant required by the Restructuring Documents (other than the Loan Documents) to be performed or complied with by it on or before the Closing Date, and (c) all conditions to the Restructuring (including, without limitation, any necessary third party consents and approvals) shall have been satisfied or waived pursuant to all applicable terms and proceedings and by Agent, and (iv) Agent shall have received an Officers' Certificate from Company, in form and substance satisfactory to Agent, to the effect set forth in clause (iii) above. S. Representations and Warranties; Performance of Agreements. Company shall have delivered to Agent an Officers' Certificate, in form and substance satisfactory to Agent, to the effect that the representations and warranties in Section 5 hereof are true, correct and complete in all material respects on and as of the Closing Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date, and that Company shall have performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by it on or before the Closing Date except as otherwise disclosed to and agreed to in writing by Agent and Requisite Lenders. T. Completion of Proceedings. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and by the other Restructuring Documents and all documents incidental thereto not previously found acceptable by Agent, acting on behalf of Lenders, and its counsel shall be satisfactory in form and substance to Agent and such counsel, and Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Agent may reasonably request. 4.2 Conditions to All Loans. ----------------------- The obligations of Lenders to make Loans on each Funding Date are subject to the following further conditions precedent: A. Agent shall have received before that Funding Date, in accordance with the provisions of subsection 2.1B, an originally executed Notice of Borrowing, in each case signed by the chief executive officer, the chief financial officer or the treasurer of Company or by any other officer or cash management personnel of Company designated by any of the above-described officers on behalf of Company in a writing delivered to Agent. B. As of that Funding Date the following statements shall be true (and each of the giving of the applicable Notice of Borrowing and the acceptance by Company of the proceeds of such Loan shall constitute a representation and warranty by Company that such statements (other than statements as to matters of opinion of Agent or of Requisite Lenders) are true as of that Funding Date): (i) The representations and warranties contained herein and in the other Loan Documents are true, correct and complete in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties were true, correct and complete in all material respects on and as of such earlier date; (ii) No event has occurred and is continuing or would result from the consummation of the borrowing contemplated by such Notice of Borrowing that would constitute an Event of Default or a Potential Event of Default; (iii) Each Loan Party has performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by it on or before that Funding Date; (iv) No order, judgment or decree of any court, arbitrator or governmental authority has purported to enjoin or restrain any Lender from making the Loans to be made by it on that Funding Date; (v) The making of the Loans requested on such Funding Date does not violate any law including, without limitation, Regulation G, Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System; and (vi) There is not pending or, to the knowl- edge of Company, threatened, any action, suit, pro- ceeding, governmental investigation or arbitration against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries that has not been disclosed by Company in writing pursuant to subsection 5.6 or 6.1(x) prior to the making of the last preceding Loans (or, in the case of the initial Loans, prior to the execution of this Agreement), and there has occurred no development not so disclosed in any such action, suit, proceeding, governmental investigation or arbitration so disclosed, that, in either event, in the opinion of Agent or of Requisite Lenders, could reasonably be expected to have a Material Adverse Effect; and no injunction or other restraining order has been issued and no hearing to cause an injunction or other restraining order to be issued is pending or noticed with respect to any action, suit or proceeding seeking to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the Restructuring, the transactions contemplated by this Agreement or the making of Loans hereunder. 4.3 Conditions to Letters of Credit. ------------------------------- The issuance of any Letter of Credit hereunder (whether or not the applicable Issuing Bank is obligated to issue such Letter of Credit) is subject to the following conditions precedent: A. On or before the date of issuance of the initial Letter of Credit pursuant to this Agreement, the Term Loans shall have been made. B. On or before the date of issuance of such Letter of Credit, Agent shall have received, in accordance with the provisions of subsection 3.1B(i), an originally executed Notice of Issuance of Letter of Credit, in each case signed by the chief executive officer, the chief financial officer or the treasurer of Company or by any other officer or cash management personnel of Company designated by any of the above-described officers on behalf of Company in a writing delivered to Agent, together with all other information specified in subsection 3.1B(i) and such other documents or information as the applicable Issuing Lender may reasonably require in connection with the issuance of such Letter of Credit. C. On the date of issuance of such Letter of Credit, all conditions precedent described in subsection 4.2B shall be satisfied to the same extent as if the issuance of such Letter of Credit were the making of a Loan and the date of issuance of such Letter of Credit were a Funding Date. Section 5. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Agreement and to make the Loans, to induce Issuing Lenders to issue Letters of Credit and to induce other Lenders to purchase participations therein, Company represents and warrants to each Lender, on the date of this Agreement, on each Funding Date and on the date of issuance of each Letter of Credit, that the following statements are true, correct and complete (it being agreed that each such statement which expressly refers to a particular date shall be understood to continue to refer to such particular date each time that the representation and warranty of Company set forth in this paragraph is made): 5.1 Organization, Powers, Qualification, Good Standing, --------------------------------------------------- Business and Subsidiaries. ------------------------- A. Organization and Powers. Each Loan Party is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. Each Loan Party has all requisite corporate power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents and the other Restructuring Documents, to carry out the transactions contemplated thereby and to issue and pay the Notes, in each case to the extent it is a party thereto. B. Qualification and Good Standing. Each Loan Party is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had and could not reasonably be expected to have a Material Adverse Effect. C. Conduct of Business. Company and its Subsidiaries are engaged only in the businesses permitted to be engaged in pursuant to subsection 7.13. D. Subsidiaries. All of the Subsidiaries of Company as of the Closing Date are identified in Schedule 5.1 annexed ------------ hereto. The capital stock of each of the Subsidiaries of Company identified in Schedule 5.1 annexed hereto is duly authorized, ------------ validly issued, fully paid and nonassessable and none of such capital stock constitutes Margin Stock. Each of the Subsidiaries of Company identified in Schedule 5.1 annexed hereto is validly ------------ existing and in good standing under the laws of its respective jurisdiction of incorporation set forth therein, has full corporate power and authority to own its assets and properties and to operate its business as presently owned and conducted, and is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, in each case except where failure to be so qualified or in good standing or a lack of such corporate power and authority has not had and could not reasonably be expected to have a Material Adverse Effect. Schedule 5.1 annexed hereto correctly sets forth, as of the ------------ Closing Date, the ownership interest of Company in each of its Subsidiaries identified therein. 5.2 Authorization of Borrowing, etc. -------------------------------- A. Authorization of Borrowing. The execution, delivery and performance of the Loan Documents and the other Restructuring Documents and the issuance, delivery and payment of the Notes have been duly authorized by all necessary corporate action on the part of each Loan Party that is a party thereto. B. No Conflict. The execution, delivery and perfor- mance by Company and its Subsidiaries of the Loan Documents and the other Restructuring Documents, the issuance, delivery and payment of the Notes and the consummation of the Restructuring and the other transactions contemplated by the Loan Documents and the other Restructuring Documents do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Company or any of its Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Company or any of its Subsidiaries or any order, judgment or decree of any court or other agency of government binding on Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Company or any of its Subsidiaries (other than any Liens created under any of the Loan Documents in favor of Agent on behalf of Lenders), or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company or any of its Subsidiaries, except for such approvals or consents which will be obtained on or before the Closing Date and those set forth on Schedule 5.2B annexed hereto. ------------- C. Governmental Consents. The execution, delivery and performance by Company and its Subsidiaries of the Loan Documents and the other Restructuring Documents, the issuance, delivery and payment of the Notes and the consummation of the Restructuring and the other transactions contemplated by the Loan Documents and the other Restructuring Documents do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body, except for ------ (i) filings and recordings required in connection with the perfection of the security interests granted pursuant to the Loan Documents, (ii) registrations, consents, approvals, notices or other actions set forth on Schedule 5.2C annexed hereto, and ------------- (iii) registrations, consents, approvals, notices or other actions the absence of which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. D. Binding Obligation. Each of the Loan Documents and the other Restructuring Documents to which any Loan Party is a party has been duly executed and delivered by each Loan Party that is a party thereto and is the legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). E. Valid Issuance of New Subordinated Debt and PTKH Bonds. (i) New Subordinated Debt. Company has the --------------------- corporate power and authority to issue the New Subordinated Debt. The New Subordinated Debt, when issued and paid for, will be the legal, valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). The subordination provisions of the New Subordinated Debt will be enforceable against the holders thereof, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity), and the Loans and all other monetary Obligations hereunder are and will be within the definition of "Senior Indebtedness" included in such provisions. The New Subordinated Debt, when issued and sold, will either (a) have been registered or qualified under applicable federal and state securities laws or (b) be exempt therefrom. (ii) PTKH Bonds. PTKH has the corporate power ---------- and authority to issue the PTKH Bonds. The PTKH Bonds, when issued and paid for, will be the legal, valid and binding obligations of PTKH, enforceable against PTKH in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). The PTKH Bonds, when issued and sold, will either (a) have been registered or qualified under applicable federal and state securities laws or (b) be exempt therefrom. 5.3 Financial Condition. ------------------- Company has heretofore delivered to Lenders, at Lenders' request, the following financial statements and information: (i) the audited consolidated balance sheet of Company and its Subsidiaries as at January 30, 1993, and the related consolidated statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for the Fiscal Year then ended and (ii) the unaudited consolidated balance sheet of Company and its Subsidiaries as at July 31, 1993 and the related unaudited consolidated statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for the six months then ended. All such statements were prepared in conformity with GAAP and fairly present the financial position (on a consolidated basis) of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows (on a consolidated basis) of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and year-end adjustments. Company does not (and will not following the funding of the initial Loans) have any Contingent Obligation, contingent liability or liability for taxes, long- term lease or unusual forward or long-term commitment that is not (but should in conformity with GAAP be) reflected in the foregoing financial statements or the notes thereto and which in any such case is material in relation to the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any of its Subsidiaries. 5.4 No Material Adverse Change; No Restricted Junior ------------------------------------------------ Payments. -------- Since January 30, 1993, no event or change has occurred that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect. Neither Company nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made, or set apart any sum or property for, any Restricted Junior Payment or agreed to do so except as permitted by subsection 7.5. 5.5 Title to Properties; Liens. -------------------------- Company and its Subsidiaries have (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective properties and assets reflected in the financial statements referred to in subsection 5.3 or in the most recent financial statements delivered pursuant to subsection 6.1, in each case except for assets disposed of since the date of such financial statements in the ordinary course of business, pursuant to the Spin-Off Agreements or as otherwise permitted under subsection 7.7. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens. 5.6 Litigation; Adverse Facts. ------------------------- Except as set forth in Schedule 5.6 annexed ------------ hereto, there is no action, suit, proceeding, arbitration or governmental investigation (whether or not purportedly on behalf of Company or any of its Subsidiaries) at law or in equity or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, pending or, to the knowledge of Company, threatened against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidi- aries that has had, or could reasonably be expected to result in, a Material Adverse Effect. Neither Company nor any of its Subsidiaries is (i) in violation of any applicable law that has had, or could reasonably be expected to result in, a Material Adverse Effect or (ii) subject to or in default with respect to any final judgment, writ, injunction, decree, rule or regulation of any court or any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that has had, or could reasonably be expected to result in, a Material Adverse Effect. 5.7 Payment of Taxes. ---------------- Except to the extent permitted by subsection 6.3, all tax returns and reports of Company and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes, assessments, fees and other governmental charges upon Company and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are shown thereon to be due and payable have been paid when due and payable. Company knows of no proposed tax assessment against Company or any of its Subsidiaries which is not being contested by Company or such Subsidiary in good faith and by appropriate proceedings; provided that such reserves or other appropriate -------- provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. 5.8 Performance of Agreements; Materially Adverse --------------------------------------------- Agreements. ---------- A. Neither Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to result in a Material Adverse Effect. B. Neither Company nor any of its Subsidiaries is a party to or is otherwise subject to any agreement or instrument or any charter or other internal restriction which has had, or could reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect. 5.9 Governmental Regulation. ----------------------- Neither Company nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable. 5.10 Securities Activities. --------------------- Neither Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. 5.11 Employee Benefit Plans. ---------------------- A. Company and each of its ERISA Affiliates are in compliance in all material respects with all applicable provisions and requirements of ERISA and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed all their obligations under each Employee Benefit Plan. B. No ERISA Event has occurred with respect to which Company or any of its ERISA Affiliates is subject to any unsatisfied liability in excess of $2,000,000 or with respect to which Company or any of its ERISA Affiliates could reasonably be expected to incur liability in excess of $2,000,000, and no ERISA Event is reasonably expected to occur after the date hereof which could reasonably be expected to result in a liability to Company or any of its ERISA Affiliates in excess of $1,000,000. C. Except as set forth on Schedule 5.11 annexed ------------- hereto, as of the most recent valuation date for any Pension Plan, the amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), does not exceed $0. 5.12 Certain Fees. ------------ Except as disclosed in the Registration Statement of Company and Holdings on Form S-1 (Registration No. 33-59616) filed with the Securities and Exchange Commission on March 16, 1993, as amended by Amendment Nos. 1, 2 and 3 thereto and Post- Effective Amendment No. 1 filed with the Securities and Exchange Commission on August 23, 1993, as amended by Amendment No. 1 thereto, no broker's or finder's fee or commission (other than any such fees or commissions that may be payable to Persons engaged by Agent or any Lender in connection with such engagement by Agent or such Lender) will be payable with respect to this Agreement or the Restructuring, and Company hereby indemnifies Lenders against, and agrees that it will hold Lenders harmless from, any claim, demand or liability for any such broker's or finder's fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable fees, expenses and disbursements of counsel) arising in connection with any such claim, demand or liability. 5.13 Environmental Protection. ------------------------ Except as set forth in Schedule 5.13 annexed ------------- hereto: (i) the operations of Company and each of its Subsidiaries (including, without limitation, all operations and conditions at or in the Facilities that are presently owned, leased or operated by Company or any of its Subsidiaries) comply with all Environmental Laws except where the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect; (ii) Company and each of its Subsidiaries have obtained all Governmental Authorizations under Environmental Laws necessary to their respective operations, and all such Governmental Authorizations are in effect, and Company and each of its Subsidiaries are in compliance with such Governmental Authorizations except where the failure to obtain or comply with any such Governmental Authorization individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect; (iii) neither Company nor any of its Subsidiaries has received (a) any notice or claim to the effect that it is or may be liable to any Person as a result of or in connection with any Hazardous Materials or (b) any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Sec. 9604) or comparable state laws, and, to the best of Company's knowledge, none of the operations of Company or any of its Subsidiaries is the subject of any federal or state investigation relating to or in connection with any Hazardous Materials at any Facility or at any other location; (iv) none of the operations of Company or any of its Subsidiaries is subject to any judicial or administrative proceeding alleging the violation of or liability under any Environmental Laws which if adversely determined could reasonably be expected to have a Material Adverse Effect; (v) other than provisions in leases entered into by Company or any of its Subsidiaries in the ordinary course of business which individually or in the aggregate would not create a liability that could reasonably be expected to have a Material Adverse Effect, neither Company nor any of its Subsidiaries nor any of their respective Facilities that are presently owned, leased or operated by Company or any of its Subsidiaries nor any of their respective operations are subject to any outstanding written order or agreement with any governmental authority or private party relating to (a) any Environmental Laws or (b) any Environmental Claims which, in the case of clause (a) or (b), individually or in the aggregate could reasonably be expected to have a Material Adverse Effect; (vi) neither Company nor any of its Subsidiaries nor, to the best knowledge of Company, any of their respective predecessors by merger or consolidation has filed any notice under any Environmental Law indicating past or present treatment or Release of Hazardous Materials at any Facility, and none of Company's or any of its Subsidiaries' operations involves the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent; (vii) no Hazardous Materials exist on, under or about any Facility in a manner that could reasonably be expected to give rise to an Environmental Claim having a Material Adverse Effect; (viii) neither Company nor any of its Subsidiaries nor, to the best knowledge of Company, any of their respective predecessors by merger or consolidation has disposed of any Hazardous Materials in a manner that could reasonably be expected to give rise to an Environmental Claim having a Material Adverse Effect; (ix) to the best knowledge of Company, no underground storage tanks are on or at any Facility that is presently owned, leased or operated by Company or any of its Subsidiaries; (x) neither Company nor any of its Subsidiaries bears any liability in connection with underground storage tanks on or at Facilities heretofore owned, leased or operated by Company or any of its Subsidiaries that individually or in the aggregate could reasonably be expected to have a Material Adverse Effect; and (xi) to the best knowledge of Company, no Lien in favor of any Person relating to or in connection with any Environmental Claim involving in the aggregate at any time an amount in excess of $1,000,000 has been filed or has been attached to one or more Facilities that are presently owned, leased or operated by Company or any of its Subsidiaries. 5.14 Employee Matters. ---------------- There is no strike or work stoppage in existence or threatened involving Company or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect. 5.15 Solvency. -------- Company and each of its Subsidiaries is and, upon the incurrence of any Obligations by Company on any date on which this representation is made, will be, Solvent. 5.16 Disclosure. ---------- No representation or warranty of Company or any of its Subsidiaries contained in any Loan Document, in any other Restructuring Document or in any other document, certificate or written statement furnished to Lenders by or on behalf of Company or any of its Subsidiaries for use in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact (known to Company, in the case of any document not furnished by it) necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made, it being recognized by Lenders that such projec- tions as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. There is no fact known (or which should upon the reasonable exercise of diligence be known) to Company (other than matters of a general economic nature) that has had, or could reasonably be expected to result in, a Material Adverse Effect and that has not been disclosed herein or in such other documents, certificates and statements furnished to Lenders for use in connection with the transactions contemplated hereby. 5.17 Intellectual Property. --------------------- A. Company and its Subsidiaries own, or are licensed (to the extent required to be so licensed) to use, the Intellectual Property and all such Intellectual Property is fully protected and duly and properly registered, filed or issued in the appropriate office and jurisdictions for such registrations, filing or issuances, and Company owns all of the right, title and interest in and to the "Pathmark" trademark under the applicable laws of the United States free and clear of any Lien (other than Permitted Encumbrances and Liens created in favor of Agent on behalf of Lenders pursuant to the Loan Documents). B. Except as disclosed in Schedule 5.17, no material ------------- claim has been asserted by any Person with respect to the use of any such Intellectual Property, or challenging or questioning the validity or effectiveness of any such Intellectual Property. Except as disclosed in Schedule 5.17, the use of such ------------- Intellectual Property by Company or any of its Subsidiaries does not infringe on the rights of any Person, subject to such claims and infringements as do not, in the aggregate, give rise to any liabilities on the part of Company or any of its Subsidiaries that are material to Company or any of its Subsidiaries. The consummation of the transactions contemplated by this Agreement or the Restructuring will not in any material manner or to any material extent impair the ownership of (or the license to use, as the case may be) any of such Intellectual Property by Company or any of its Subsidiaries. 5.18 Restructuring Documents. ----------------------- Company has delivered to Lenders complete and correct copies of the Restructuring Documents and of all exhibits and schedules thereto. Section 6. COMPANY'S AFFIRMATIVE COVENANTS Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 6. 6.1 Financial Statements and Other Reports. -------------------------------------- Company will maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP. Company will deliver to Lenders: (i) Monthly Reports: as soon as available and --------------- in any event within 30 days after the end of each month ending after the Closing Date, the weekly "EBIT" report for such month and the corporate weekly reports for the weeks ending during such month, in each case substantially in the form delivered to Lenders prior to the Closing Date with respect to the month of August, 1993; (ii) Quarterly Financials: as soon as -------------------- available and in any event within 45 days after the end of each of the first three fiscal quarters of each Fiscal Year, the consolidated and (if prepared) consolidating balance sheets of Company and its Subsidiaries as at the end of such fiscal quarter and the related consolidated and (if prepared) consolidating statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current Fiscal Year to the end of such fiscal quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year (but only if such corresponding periods begin after the Closing Date), and the corresponding figures from the consolidated plan and financial forecast for the current Fiscal Year delivered pursuant to subsection 6.1(xiii), all in reasonable detail and certified by the chief financial officer of Company that they fairly present the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and year-end adjustments; (iii) Year-End Financials: as soon as ------------------- available and in any event within 90 days after the end of each Fiscal Year, (a) the consolidated and (if prepared) consolidating balance sheets of Company and its Subsidiaries as at the end of such Fiscal Year and the related consolidated and (if prepared) consolidating statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for such Fiscal Year and for the fourth fiscal quarter of such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year or the fourth fiscal quarter thereof, as the case may be (but only if such previous Fiscal Year or the fourth fiscal quarter thereof, as the case may be, begins after the Closing Date), and the corresponding figures from the consolidated plan and financial forecast delivered pursuant to subsection 6.1(xiii) for the Fiscal Year covered by such financial statements, all in reasonable detail and certified by the chief financial officer of Company that they fairly present the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, and (b) in the case of such consolidated financial statements with respect to such Fiscal Year, a report thereon of Deloitte & Touche or other independent certified public accountants of recognized national standing selected by Company and satisfactory to Agent, which report shall be unqualified, shall express no doubts about the ability of Company and its Subsidiaries to continue as a going concern, and shall state that such consolidated financial statements fairly present the consolidated financial position of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (iv) Officers' and Compliance Certificates: ------------------------------------- (a) together with each delivery of financial statements of Company and its Subsidiaries pursuant to subdivisions (ii) and (iii) above, (1) an Officers' Certificate of Company stating that the signers have reviewed the terms of this Agreement and have made, or caused to be made under their supervision, a review in reasonable detail of the transactions and condition of Company and its Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that the signers do not have knowledge of the existence as at the date of such Officers' Certificate, of any condition or event that constitutes an Event of Default or Potential Event of Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action Company has taken, is taking and proposes to take with respect thereto; and (2) a Compliance Certificate demonstrating in reasonable detail compliance during and at the end of the applicable accounting periods with the restrictions contained in Section 7; and (b) together with each delivery of financial statements of Company and its Subsidiaries pursuant to subdivision (iii) above, an Officers' Certificate of Company setting forth the Consolidated Excess Cash Flow for the Fiscal Year covered by such financial statements and demonstrating in reasonable detail the derivation of such Consolidated Excess Cash Flow; (v) Reconciliation Statements: if, as a result ------------------------- of any change in accounting principles and policies from those used in the preparation of the audited financial statements referred to in subsection 5.3, the consolidated financial statements of Company and its Subsidiaries delivered pursuant to subdivisions (ii), (iii) or (xiii) of this subsection 6.1 will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such subdivisions had no such change in accounting principles and policies been made, then (a) together with the first delivery of financial statements pursuant to subdivision (i), (ii), (iii) or (xiii) of this subsection 6.1 following such change, consolidated financial statements of Company and its Subsidiaries for (y) the current Fiscal Year to the effective date of such change and (z) the one full Fiscal Year immediately preceding the Fiscal Year in which such change is made, in each case prepared on a pro forma basis as if such change had been in effect during such periods, and (b) together with each delivery of financial statements pursuant to subdivision (ii), (iii) or (xiii) of this subsection 6.1 following such change, a written statement of the chief accounting officer or chief financial officer of Company setting forth the differences which would have resulted if such financial statements had been prepared without giving effect to such change; (vi) Accountants' Certification: together -------------------------- with each delivery of consolidated financial statements of Company and its Subsidiaries pursuant to subdivision (iii) above, a written statement by the independent certified public accountants giving the report thereon (a) stating that their audit examination has included a review of the terms of subsections 7.1, 7.2, 7.3, 7.6, 7.7, 7.8, 7.9 and 7.15 of this Agreement and any definitions set forth in this Agreement relating thereto, in each case as they relate to accounting matters, and (b) stating whether, in connection with their audit examination, any condi- tion or event (including without limitation any condition or event relating to the subsections of this Agreement specified in the immediately preceding clause (a) or relating to subsection 7.4 of this Agreement) that constitutes an Event of Default or Potential Event of Default has come to their attention and, if such a condition or event has come to their attention, specifying the nature and period of exis- tence thereof; provided that such accountants shall -------- not be liable by reason of any failure to obtain knowledge of any such Event of Default or Potential Event of Default that would not be disclosed in the course of their audit examination; (vii) Accountants' Reports: promptly upon -------------------- receipt thereof (unless restricted by applicable professional standards), copies of all reports submitted to Company by independent certified public accountants in connection with each annual, interim or special audit of the financial statements of Company and its Subsidiaries made by such accountants, includ- ing, without limitation, any comment letter submitted by such accountants to management in connection with their annual audit; (viii) SEC Filings and Press Releases: ------------------------------ promptly upon their becoming available, copies of (a) all financial statements, reports, notices and proxy statements sent or made available generally by Company to its security holders or by any Subsidiary of Company to its security holders other than Company or another Subsidiary of Company, (b) all regular and periodic reports and all registration statements (other than on Form S-8 or a similar form) containing initial preliminary and final (but not, unless otherwise requested by Agent, intermediate draft) prospectuses, if any, filed by Company or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority, and (c) all press releases and other statements made available generally by Company or any of its Subsidiaries to the public concerning material developments in the business of Company or any of its Subsidiaries; (ix) Events of Default, etc.: promptly upon ----------------------- any officer of Company obtaining knowledge (a) of any condition or event that constitutes an Event of Default or Potential Event of Default, or becoming aware that any Lender has given any notice (other than to Agent) or taken any other action with respect to a claimed Event of Default or Potential Event of Default, (b) that any Person has given any notice to Company or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in subsection 8.2, (c) of any condition or event that would be required to be disclosed in a current report filed by Company with the Securities and Exchange Commission on Form 8- K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date hereof) if Company were required to file such reports under the Exchange Act, or (d) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, an Officers' Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given or action taken by any such Person and the nature of such claimed Event of Default, Potential Event of Default, default, event or condition, and what action Company has taken, is taking and proposes to take with respect thereto; (x) Litigation or Other Proceedings: promptly ------------------------------- upon any officer of Company obtaining knowledge of (X) the institution of, or non-frivolous threat of, any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries (collectively, "Proceedings") not previously disclosed in writing by Company to Lenders or (Y) any material development in any Proceeding that, in any case: (1) after giving effect to coverage and policy limits of insurance policies maintained by Company and its Subsidiaries issued by unaffiliated insurers, has a reasonable possibility of giving rise to a Material Adverse Effect; or (2) seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby or by the Restructuring Documents; written notice thereof together with such other information as may be reasonably available to Company to enable Lenders and their counsel to evaluate such matters; (xi) ERISA Events: within 20 days of ------------ becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event, a written notice specifying the nature thereof, what action Company or any of its ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; (xii) ERISA Notices: with reasonable ------------- promptness, copies of (a) if requested by any Lender, each Schedule B (Actuarial Information) to the annual ---------- report (Form 5500 Series) filed by Company or any of its ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan; (b) all notices received by Company or any of its ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (c) such other documents or governmental reports or filings relating to any Employee Benefit Plan as Agent shall reasonably request; (xiii) Financial Plans: as soon as practicable --------------- and in any event no later than February 28 of each Fiscal Year, a consolidated plan and financial forecast for such Fiscal Year and the next four succeeding Fiscal Years, including without limitation (a) forecasted consolidated balance sheets and forecasted consolidated statements of income and cash flows of Company and its Subsidiaries for each of such five Fiscal Years, together with an explanation of the assumptions on which such forecasts are based, (b) forecasted consolidated balance sheets and forecasted consolidated statements of income and cash flows of Company and its Subsidiaries for each fiscal quarter of the first such Fiscal Year, together with an explanation of the assumptions on which such forecasts are based, and (c) such other information as any Lender may reasonably request; (xiv) Insurance: as soon as practicable and --------- in any event by the last day of each Fiscal Year, a report in form and substance reasonably satisfactory to Agent outlining all material insurance coverage maintained as of the date of such report by Company and its Subsidiaries and all material insurance coverage planned to be maintained by Company and its Subsidiaries in the immediately succeeding Fiscal Year; (xv) Environmental Audits and Reports: as -------------------------------- soon as practicable following receipt thereof by Company, copies of all environmental audits and reports, whether prepared by personnel of Company or any of its Subsidiaries or by independent consultants, with respect to significant environmental matters at any Facility or which relate to an Environmental Claim which has a reasonable possibility of giving rise to a Material Adverse Effect; (xvi) Board of Directors: with reasonable ------------------ promptness, written notice of any change in the Board of Directors of Company; and (xvii) Other Information: with reasonable ----------------- promptness, such other information and data with respect to Company or any of its Subsidiaries as from time to time may be reasonably requested by any Lender. 6.2 Corporate Existence, etc. ------------------------- Except to the extent permitted under subsection 7.7, Company will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its corporate existence and all rights and franchises material to its business; provided, however, that neither Company nor any of its -------- ------- Subsidiaries shall be required to preserve any such right or franchise if the Board of Directors of Company or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of Company or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to Company, such Subsidiary or Lenders. 6.3 Payment of Taxes and Claims; Tax Consolidation. ---------------------------------------------- A. Company will, and will cause each of its Subsidiaries to, pay all taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any penalty accrues thereon, and all claims (including, without limitation, claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided that no such -------- charge or claim need be paid if being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor. B. Company will not, nor will it permit any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person (other than SMG- II, Holdings or PTKH so long as the filing of such consolidated income tax return is required by applicable law and other than Company or any of its Subsidiaries). 6.4 Maintenance of Properties; Insurance. ------------------------------------ Company will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Company and its Subsidiaries (including, without limitation, Intellectual Property) and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof. Company will maintain or cause to be maintained, with financially sound and reputable insurers, insurance with respect to its properties and business and the properties and businesses of its Subsidiaries against loss or damage of the kinds customarily carried or maintained under similar circumstances by corporations of established reputation engaged in similar businesses, in such amounts (giving effect to self-insurance), with such deductibles and by such methods as shall be customary for corporations similarly situated in the industry. Each such policy of insurance that insures against loss or damage with respect to any Collateral shall name Agent for the benefit of Lenders as the loss payee thereunder for amounts in excess of $5,000,000 per occurrence and shall provide for at least 30 days prior written notice to Agent of any modification or cancellation of such policy. Upon receipt by Agent of any insurance proceeds as loss payee, (i) to the extent that Company or any of its Subsidiaries intends to use any such insurance proceeds that are Net Cash Proceeds of Asset Sale to repair, restore or replace assets of Company or any of its Subsidiaries as provided in subsection 2.4A(iii)(a), Agent shall, subject to the provisions of subsection 2.4A(iii)(a), deliver such insurance proceeds to Company and (ii) otherwise, Agent shall, and Company hereby authorizes Agent to, apply such insurance proceeds that are Net Cash Proceeds of Asset Sale to prepay the Loans in accordance with subsection 2.4A(iii)(a). 6.5 Inspection; Lender Meeting. -------------------------- Company shall, and shall cause each of its Subsidiaries to, permit any authorized representatives designated by any Lender to visit and inspect any of the properties of Company or any of its Subsidiaries, including its and their financial and accounting records, and to make copies and take extracts therefrom, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants (provided that Company may, if it so chooses, be present at or participate in any such discussion), all upon reasonable notice and at such reasonable times during normal business hours and as often as may be reasonably requested. Without in any way limiting the foregoing, Company will, upon the request of Agent or Requisite Lenders, participate in a meeting of Agent and Lenders once during each Fiscal Year to be held at Company's corporate offices (or such other location as may be agreed to by Company and Agent) at such time as may be agreed to by Company and Agent. 6.6 Compliance with Laws, etc. -------------------------- Company shall, and shall cause each of its Subsidiaries to, comply with the requirements of all applicable laws, rules, regulations and orders of any governmental authority, noncompliance with which could reasonably be expected to cause, individually or in the aggregate at any one time, a Material Adverse Effect, in each case except to the extent that Company's or such Subsidiary's requirement to comply therewith is being contested in good faith by Company or such Subsidiary, as the case may be, and such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor. 6.7 Environmental Disclosure and Inspection. --------------------------------------- A. Company shall, and shall cause each of its Subsidiaries to, exercise reasonable due diligence in order to comply and cause (i) all tenants under any leases or occupancy agreements affecting any portion of the Facilities that are presently owned, leased or operated by Company or any of its Subsidiaries and (ii) all other Persons on or occupying such property, to comply in all material respects with all Environmental Laws. B. Company shall, promptly after obtaining knowledge thereof, advise Lenders in writing and in reasonable detail of (i) any Release of any Hazardous Materials required to be reported to any federal, state or local governmental or regulatory agency under any applicable Environmental Laws, (ii) any and all written communications with respect to any Environmental Claims that could reasonably be expected to give rise to a Material Adverse Effect or with respect to any Release of Hazardous Materials required to be reported to any federal, state or local governmental or regulatory agency that could reasonably be expected to give rise to a Material Adverse Effect, (iii) any remedial action taken by Company or any other Person in response to (x) any Hazardous Materials on, under or about any Facility, the existence of which could reasonably be expected to result in an Environmental Claim which could reasonably be expected to have a Material Adverse Effect, or (y) any Environmental Claim that could reasonably be expected to have a Material Adverse Effect, (iv) Company's discovery of any occurrence or condition on any real property adjoining or in the vicinity of any Facility that is presently owned, leased or operated by Company or any of its Subsidiaries that could reasonably be expected to cause such Facility or any part thereof to be subject to any material restrictions on the ownership, occupancy, transferability or use thereof under any Environmental Laws, and (v) any request for information from any governmental agency that suggests such agency is investigating whether Company or any of its Subsidiaries may be potentially responsible for a material Release of Hazardous Materials. C. Company shall promptly notify Lenders of any proposed acquisition of stock, assets, or property by Company or any of its Subsidiaries that could reasonably be expected to expose Company or any of its Subsidiaries to, or result in, Environmental Claims that have a reasonable possibility of giving rise to a Material Adverse Effect. D. Company shall, at its own expense, provide copies of such documents or written information as Agent may reasonably request in relation to any matters disclosed pursuant to this subsection 6.7. 6.8 Execution of Subsidiary Guaranty and Collateral ----------------------------------------------- Documents by Subsidiaries and Future Subsidiaries. ------------------------------------------------- In the event that any Subsidiary of Company existing as of the date hereof (other than any Real Estate Subsidiary) hereafter owns or acquires assets with an aggregate fair market value (without netting such fair market value against any liability of such Subsidiary) exceeding $25,000 or in the event that any Person becomes a Subsidiary of Company after the date hereof, Company will promptly notify Agent of that fact and cause such Subsidiary to execute and deliver to Agent a counterpart of the Subsidiary Guaranty and a Subsidiary Security Agreement, a Subsidiary Pledge Agreement, a Subsidiary Trademark Security Agreement and Additional Mortgages and to take all such further action and execute all such further documents and instruments as may be required to grant and perfect in favor of Agent, for the benefit of Lenders, a first-priority security interest in all of the Covered Real Property and all of the personal property assets of such Subsidiary described in the applicable Collateral Documents. Company shall deliver to Agent, together with such Collateral Documents, (i) certified copies of such Subsidiary's Articles or Certificate of Incorporation, together with a good standing certificate from the Secretary of State of the jurisdiction of its incorporation, each to be dated a recent date prior to their delivery to Agent, (ii) a copy of such Subsidiary's Bylaws, certified by its corporate secretary or an assistant corporate secretary as of a recent date prior to their delivery to Agent, (iii) a certificate executed by the secretary or an assistant secretary of such Subsidiary as to (a) the incumbency and signatures of the officers of such Subsidiary executing the Subsidiary Guaranty and the Collateral Documents to which such Subsidiary is a party and (b) the fact that the attached resolutions of the Board of Directors of such Subsidiary authorizing the execution, delivery and performance of the Subsidiary Guaranty and such Collateral Documents are in full force and effect and have not been modified or rescinded, and (iv) a favorable opinion of counsel to such Subsidiary, in form and substance satisfactory to Agent and its counsel, as to (a) the due organization and good standing of such Subsidiary, (b) the due authorization, execution and delivery by such Subsidiary of the Subsidiary Guaranty and such Collateral Documents, (c) the enforceability of the Subsidiary Guaranty and such Collateral Documents against such Subsidiary, and (d) such other matters as Agent may reasonably request, all of the foregoing to be satisfactory in form and substance to Agent and its counsel. 6.9 Additional Mortgages; Release of Mortgages. ------------------------------------------ A. On and after the Closing Date, Company shall, and shall cause its Subsidiaries to, (i) with respect to each leasehold interest in Real Property Assets listed in Part I of Schedule 6.9 annexed hereto or hereafter acquired by Company or ------------ any of its Subsidiaries, use its best efforts (which shall not be deemed to include, in the good faith judgment of Company, the material modification of any rights or obligations, or the incurrence of any material obligations, under the applicable lease or the expenditure of money in excess of nominal amounts or the payment of monetary consideration other than nominal monetary consideration) until the end of the applicable three month period described below to obtain the consent of the lessor under each related lease to the encumbrancing of Company's or such Subsidiary's leasehold interest under such lease pursuant to an Additional Mortgage (as defined below) and to the assignment of such leasehold interest to the successful bidder at a foreclosure or similar sale (and to a subsequent third party assignee by Agent or any Lender to the extent Agent or such Lender is the successful bidder at such sale) in the event of a foreclosure or similar action pursuant to such Additional Mortgage as soon as practicable but in any event within three months after the commencement of the lease term under the applicable lease (or, in the case of Company's leasehold interests in Real Property Assets listed in Part I of Schedule 6.9 annexed hereto, as soon as ------------ practicable but in any event within three months after the Closing Date), (ii) with respect to each leasehold interest in Real Property Assets listed in Part II of Schedule 6.9 annexed ------------ hereto, use its best efforts (which shall not be deemed to include, in the good faith judgment of Company, the material modification of any rights or obligations, or the incurrence of any material obligations, under the applicable lease or the expenditure of money in excess of nominal amounts or the payment of monetary consideration other than nominal monetary consideration) until the end of the three month period after the Closing Date to record the applicable lease, or a memorandum of lease with respect thereto, or other evidence of such lease in form and substance reasonably satisfactory to Agent in all places to the extent necessary or desirable, in the reasonable judgment of Agent, so as to enable the Additional Mortgage encumbering such leasehold interest to effectively create a valid and enforceable first priority lien (subject to Permitted Encumbrances) on such leasehold interest in favor of Agent (or such other Person as may be required or desired under local law) for the benefit of the Lenders), and (iii) with respect to each Covered Real Property (other than any leasehold interest for which Company or any of its Subsidiaries was unable to obtain the applicable lessor's consent pursuant to clause (i) above or to record the applicable instrument pursuant to clause (ii) above), as soon as practicable and in any event within three months after the applicable Real Property Asset becomes Covered Real Property (or, in the case of Company's leasehold interest in Real Property Assets listed in Schedule 6.9 annexed hereto for which Company ------------ was able to obtain the applicable lessor's consent pursuant to clause (i) above or was able to record the applicable instrument pursuant to clause (ii) above, as the case may be, as soon as practicable but in any event within three months after the Closing Date), deliver (a) fully executed counterparts of Mortgages (each an "Additional Mortgage" and collectively the "Additional Mortgages") encumbering such Covered Real Property, together with evidence that counterparts of such Additional Mortgages have been recorded in all places to the extent necessary or desirable, in the reasonable judgment of Agent, so as to effectively create a valid and enforceable first priority lien (or such other priority lien as may be specified in the applicable Additional Mortgage), subject to Permitted Encumbrances, on such Covered Real Property in favor of Agent (or such other trustee as may be required or desired under local law) for the benefit of Lenders; (b) a title report obtained by Company in respect of any such Covered Real Property consisting of fee interests in Real Property Assets and, if reasonably required by Agent, a title report obtained by Company in respect of any such Covered Real Property consisting of material leasehold interests in Real Property Assets; (c) if required by Agent, an opinion of counsel (which counsel shall be reasonably satisfactory to Agent) in the state in which such Covered Real Property is located with respect to the enforceability of the form of Additional Mortgage recorded in such state and such other matters as Agent may reasonably request, in form and substance reasonably satisfactory to Agent; (d) in the case of each such Covered Real Property consisting of leasehold interests in Real Property Assets, such estoppel letters from the landlords on such real property as may be reasonably requested by Agent, in form and substance reasonably satisfactory to Agent; (e) if required by Agent, in the case of each such Covered Real Property consisting of fee interests in Real Property Assets, environmental audits prepared by professional consultants mutually acceptable to Company and Agent, in form, scope and substance satisfactory to Agent in its reasonable discretion; (f) if required by Agent, in the case of each such Covered Real Property consisting of fee interests in Real Property Assets, ALTA mortgagee title insurance policies issued by title insurers reasonably satisfactory to Agent (the "Additional Mortgage Policies"), in amounts reasonably satisfactory to Agent, assuring Agent that the applicable Additional Mortgages create valid and enforceable first priority mortgage liens (or such other priority liens as may be specified in the applicable Additional Mortgage) on such Covered Real Property, free and clear of all defects and encumbrances except Permitted Encumbrances and subject to a standard survey exception, which Additional Mortgage Policies shall be in form and substance reasonably satisfactory to Agent and shall include an endorsement for mechanics' liens, for any other matters that Agent may reasonably request and, with respect to Additional Mortgage Policies that are issued for Covered Real Property located outside the State of New York, for future advances under this Agreement, the Notes and the other Loan Documents, and shall provide for affirmative insurance and such reinsurance as Agent may reasonably request, all of the foregoing in form and substance reasonably satisfactory to Agent; (g) evidence, which may be in the form of a letter from an insurance broker, a municipal engineer, Charles Jones, Inc. or Transamerica Flood Hazard Certification, as to whether (1) any such Covered Real Property ("Additional Flood Hazard Property") is in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards and (2) the community in which each Additional Flood Hazard Property is located is participating in the National Flood Insurance Program; and (h) if there are any Additional Flood Hazard Properties, Company's written acknowledgement of receipt of written notification from Agent (1) as to the existence of each such Additional Flood Hazard Property and (2) as to whether the community in which each such Flood Hazard Property is located is participating in the National Flood Insurance Program. Company shall, and shall cause each of its Subsidiaries to, permit any authorized representatives designated by Agent, upon reasonable notice, to visit and inspect any fee interests in Real Property Assets and, if reasonably required by Agent, any material leasehold interests in Real Property Assets, in each case to be subject to the Lien of an Additional Mortgage, for the purpose of obtaining an appraisal of value, conducted by consultants retained by Agent in compliance with all applicable banking regulations, with respect to such real property fee or leasehold interest. B. At least 30 days prior to the incurrence by Company or any of its Subsidiaries of any Non-Recourse Indebtedness secured by Liens on any Real Property Assets permitted under subsection 7.2(A)(v), Company shall, to the extent necessary to incur such Indebtedness and to grant such Liens, request that Agent execute and deliver to Company reconveyance documents and/or releases releasing any Liens on such Real Property Assets that were granted in favor of Agent pursuant to any Mortgage. Upon receiving any such request, Agent shall execute and deliver to Company such reconveyance documents and/or releases, in recordable form, on the date of incurrence of such Indebtedness; provided that, at the time of Agent's -------- execution and delivery to Company of such reconveyance documents and/or releases, (i) no Event of Default or Potential Event of Default shall have occurred and be continuing or shall be caused thereby, (ii) Agent shall have received evidence satisfactory to it that the granting of the Liens securing such Indebtedness shall be permitted under subsection 7.2A(v), and (iii) Company shall have (a) paid Agent an amount equal to the Net Principal Amount (as defined in subsection 2.4A(iii)(f)) of such Indebtedness for application to the prepayment of the Loans pursuant to subsection 2.4A(iii)(f), or (b) provided Agent with evidence satisfactory to it that irrevocable arrangements, in form and substance satisfactory to Agent, have been made to transfer such Net Principal Amount to Agent. C. At least 30 days prior to the making by Company or any of its Subsidiaries of any sale or disposition of assets permitted under clause (iv), (v), (vii), (viii) or (ix) of subsection 7.7 of any assets of Company or any of its Subsidiaries encumbered by any Collateral Document, Company shall, to the extent necessary to make such sale or disposition of assets, request that Agent execute and deliver to Company reconveyance documents and/or releases (including without limitation amendments to the UCC-1 financing statements that have been filed or recorded in connection with such Collateral Document) releasing any Liens on the assets being sold pursuant to such sale or disposition of assets that were granted in favor of Agent pursuant to such Collateral Document. Upon receiving any such request, Agent shall, at Company's expense, execute and deliver to Company such reconveyance documents and/or releases, in recordable form, on the date of such sale or disposition of assets; provided that, at the time of Agent's execution and -------- delivery to Company of such reconveyance documents and/or releases, (i) no Event of Default or Potential Event of Default shall have occurred and be continuing or shall be caused thereby, (ii) Agent shall have received evidence satisfactory to it that such sale or disposition of assets shall be permitted under clause (iv), (v), (vii), (viii) or (ix) of subsection 7.7, and (iii) Company shall have (a) paid Agent, for application to the prepayment of the Loans pursuant to subsection 2.4A(iii)(a), an amount (the "Required Prepayment Amount") equal to the Net Cash Proceeds of Asset Sale of such sale or disposition of assets that are required to be applied to the prepayment of the Loans pursuant to subsection 2.4A(iii)(a), or (b) provided Agent with evidence satisfactory to it that irrevocable arrangements, in form and substance satisfactory to Agent, have been made to transfer the Required Prepayment Amount to Agent. 6.10 Assignability of Lease Agreements. --------------------------------- Company shall, and shall cause each of its Subsidiaries to, use its best efforts (which shall not be deemed to include, in the good faith judgement of Company, the material modification of any rights or obligations, or the incurrence of any material obligations, under the applicable lease or the expenditure of money in excess of nominal amounts or the payment of monetary consideration other than nominal monetary consideration) in entering into any lease as a lessee (including without limitation any such lease entered into in connection with any Sale and Lease-back), whether such lease is an Operating Lease or a Capital Lease, to obtain lease terms permitting (or not expressly prohibiting) the encumbrancing of the leasehold interest of Company or such Subsidiary, as the case may be, in the property that is the subject of such lease pursuant to an Additional Mortgage and the assignment of such leasehold interest to the successful bidder at a foreclosure or similar sale (and to a subsequent third party assignee by Agent or any Lender to the extent Agent or such Lender is the successful bidder at such sale) in the event of a foreclosure or similar action pursuant to such Additional Mortgage. Section 7. COMPANY'S NEGATIVE COVENANTS Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 7. 7.1 Indebtedness. ------------ Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: (i) Company may become and remain liable with respect to the Obligations; (ii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations permitted by subsection 7.4 and, upon any matured obligations actually arising pursuant thereto, the Indebtedness corresponding to the Contingent Obligations so extinguished; (iii) Company and its Subsidiaries may become and remain liable with respect to Indebtedness in respect of Capital Leases; provided that such Capital -------- Leases are permitted under the terms of subsection 7.9; (iv) Company may become and remain liable with respect to Indebtedness to any of its wholly- owned Subsidiaries, and any wholly-owned Subsidiary of Company (other than any Real Estate Subsidiary) may become and remain liable with respect to Indebtedness to Company or any other wholly-owned Subsidiary of Company; provided that (a) all such intercompany -------- Indebtedness shall be evidenced by promissory notes that are pledged to Agent pursuant to the terms of the Company Pledge Agreement or the applicable Subsidiary Pledge Agreement, as the case may be, (b) all such intercompany Indebtedness owed by Company to any of its Subsidiaries shall be subordinated in right of payment to the payment in full of the Obligations pursuant to the terms of the applicable promissory notes or an intercompany subordination agreement, and (c) any payment by any Subsidiary of Company under the Subsidiary Guaranty shall result in a pro tanto --- ----- reduction of the amount of any intercompany Indebtedness owed by such Subsidiary to Company or to any of its Subsidiaries for whose benefit such payment is made; (v) Company and its Subsidiaries, as applicable, may remain liable with respect to Indebtedness described in Schedule 7.1 annexed hereto; ------------ (vi) Company may become and remain liable with respect to the New Subordinated Debt; (vii) Company and its Subsidiaries may become and remain liable with respect to Indebtedness incurred to refinance, in whole or in part, any outstanding Indebtedness of Company or any of its Subsidiaries permitted under subdivisions (v) and (vi) of this subsection 7.1; provided, however, that in -------- ------- each case (a) the principal amount of such refinancing Indebtedness does not exceed the principal amount of the Indebtedness so refinanced and (b) the interest rates, maturities, amortization schedules, covenants, defaults, remedies, subordination provisions (in the event the Indebtedness being refinanced is Subordinated Indebtedness) and other terms of such refinancing Indebtedness are in each case (1) the same as those in the Indebtedness being refinanced or (2) otherwise satisfactory to Agent and Requisite Lenders; provided that interest rates that are less -------- than, maturities that are longer than, and amortization schedules that result in a longer average life to maturity than, the comparable provisions of the Indebtedness being refinanced shall be deemed satisfactory to Agent and Requisite Lenders for purposes of this clause (2); and provided further, -------- ------- however, that in no event shall any such refinancing ------- Indebtedness which refinances Subordinated Indebtedness have any required amortization prior to the earliest scheduled amortization of the Subordinated Indebtedness being refinanced without the consent of Agent and Requisite Lenders; (viii) Company and its Subsidiaries may become and remain liable with respect to Indebtedness secured by Liens permitted under subsection 7.2A(iv); (ix) Company and its Subsidiaries may become and remain liable with respect to Indebtedness secured by Liens permitted under subsection 7.2A(v); (x) Company and its Subsidiaries may become and remain liable with respect to Indebtedness secured by Liens permitted under subsection 7.2A(vi); and (xi) Company and its Subsidiaries may become and remain liable with respect to other Indebtedness in an aggregate principal amount not to exceed $30,000,000 at any time outstanding. 7.2 Liens and Related Matters. ------------------------- A. Prohibition on Liens. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Company or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any Lien with respect to any such property, asset, income or profits under the Uniform Commercial Code of any State or under any similar recording or notice statute, except: (i) Permitted Encumbrances; (ii) Liens granted pursuant to the Collateral Documents; (iii) Liens described in Schedule 7.2 annexed ------------ hereto; (iv) (a) Liens on Real Property Assets consisting of fee interests in Related Stores (whether fully constructed or under construction) or Liens on Equipment (including rights of vendors under purchase contracts whereby title is retained for the purpose of securing the purchase price thereof), in each case securing the purchase price or cost of construction or improvement thereof or Indebtedness incurred to finance such purchase price or cost of construction or improvement, (b) Liens on Real Property Assets consisting of fee interests in Related Stores, in each case which Liens were in existence at the time of acquisition of such Real Property Assets by Company or any of its Subsidiaries, and (c) Liens on Real Property Assets consisting of fee interests in Related Stores that are owned by any Subsidiaries of Company (other than any Subsidiaries of Company as of the Closing Date), in each case which Liens were in existence at the time such Subsidiaries became Subsidiaries of Company; provided, however, that in -------- ------- each case (1) with respect to any such Lien described in clause (a) above, no Event of Default shall have occurred and be continuing at the time of incurrence of such Lien, (2) with respect to any such Lien described in clause (a) above encumbering any Real Property Assets, such Lien was granted and the Indebtedness secured by such Lien was incurred at a time when such Real Property Assets were excluded from the definition of Covered Real Property pursuant to clause (iii)(b) or (iii)(c) of such definition, (3) with respect to any such Lien on Equipment, the Indebtedness secured by such Lien was incurred within 180 days after the acquisition thereof, (4) such Lien is limited to such Real Property Assets or Equipment and any fixed improvements thereafter erected thereon, (5) with respect to any such Lien described in clause (a) above, the Indebtedness secured by such Lien is Non-Recourse Indebtedness, (6) with respect to any such Lien described in clause (b) or (c) above, the Indebtedness secured by such Lien was not incurred in contemplation of the acquisition by Company or any of its Subsidiaries of the applicable Real Property Assets or the transaction pursuant to which the applicable Subsidiary of Company became such a Subsidiary, as the case may be, and (7) the principal amount of the Indebtedness secured by such Lien (X) shall not exceed the cost of such property to Company or any of its Subsidiaries and (Y) shall not be less than 60% of the fair market value of such property at the time of incurrence of such Indebtedness (in the case of any such Lien described in clause (a) above), 40% of the fair market value of such property at the time of acquisition of the applicable Real Property Assets (in the case of any such Lien described in clause (b) above), or 40% of the fair market value of such property at the time when the Subsidiary of Company which owns the applicable Real Property Assets became a Subsidiary of Company (in the case of any such Lien described in clause (c) above); (v) Liens on any Real Property Assets which immediately prior to the incurrence of such Liens constitute Covered Real Property, which Liens secure Non-Recourse Indebtedness of Company or any of its Subsidiaries; provided, however, that in each case -------- ------- (a) such Lien is limited to such Real Property Assets, (b) the principal amount of the Indebtedness secured by such Lien shall not be less than 60% of the fair market value of such Real Property Assets at the time of incurrence of such Indebtedness, and (c) the Net Principal Amount (as defined in subsection 2.4A(iii)(f)) of the Indebtedness secured by such Lien shall be applied to prepay the Loans in accordance with subsection 2.4A(iii)(f); (vi) Liens securing Non-Recourse Indebtedness of Company or any of its Subsidiaries incurred to refinance, in whole or in part, any outstanding Indebtedness of Company or such Subsidiary that is secured by Liens on Real Property Assets permitted under subdivision (iv) or (v) of this subsection 7.2A; provided, however, that in each case (a) the Liens -------- ------- securing such refinancing Indebtedness are limited to the Real Property Assets that were subject to the Liens securing the Indebtedness so refinanced and (b) the principal amount of such refinancing Indebtedness shall not be less than 60% of the fair market value of such Real Property Assets as of the date of such refinancing; (vii) Liens securing Indebtedness of Company or any of its Subsidiaries incurred to refinance any outstanding Indebtedness of Company or such Subsidiary that is secured by Liens on Real Property Assets permitted under subdivision (iii) of this subsection 7.2; provided, however, that in each case (a) such -------- ------- refinancing Indebtedness is permitted under subsection 7.1(vii), (b) the Liens securing such refinancing Indebtedness are limited to the Real Property Assets that were subject to the Liens securing the Indebtedness so refinanced, (c) the Indebtedness secured by such Lien is Non-Recourse Indebtedness to the extent that the Indebtedness so refinanced was Non-Recourse Indebtedness, and (d) the principal amount of such refinancing Indebtedness shall not be (1) less than 60% of the fair market value of such Real Property Assets as of the date of such refinancing or (2) if such refinancing Indebtedness is not Non-Recourse Indebtedness, greater than 80% of the fair market value of such Real Property Assets as of the date of such refinancing; and (viii) Other Liens securing Indebtedness or other obligations in an aggregate amount not exceeding $10,000,000 at any time outstanding. B. Equitable Lien in Favor of Lenders. If Company or any of its Subsidiaries shall create or assume any Lien upon any of its properties or assets, whether now owned or hereafter acquired, other than Liens excepted by the provisions of subsection 7.2A, it shall make or cause to be made effective provision whereby the Obligations will be secured by such Lien equally and ratably with any and all other Indebtedness secured thereby as long as any such Indebtedness shall be so secured; provided that, notwithstanding the foregoing, this covenant shall -------- not be construed as a consent by Requisite Lenders to the creation or assumption of any such Lien not permitted by the provisions of subsection 7.2A. C. No Further Negative Pledges. Except with respect to specific property encumbered to secure payment of particular Indebtedness or to be sold pursuant to an executed agreement with respect to an Asset Sale, neither Company nor any of its Subsidiaries shall enter into any agreement (other than the New Subordinated Debt Indentures and any replacement indenture entered into in connection with any refinancing of any of the New Subordinated Debt permitted under subsection 7.1(vii)) prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired. D. No Restrictions on Subsidiary Distributions to Company or Other Subsidiaries. Except as provided herein, Company will not, and will not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Subsidiary to (i) pay dividends or make any other distributions on any of such Subsidiary's capital stock owned by Company or any other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or advances to Company or any other Subsidiary of Company, or (iv) transfer any of its property or assets to Company or any other Subsidiary of Company. 7.3 Investments; Joint Ventures. --------------------------- Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, make or own any Investment in any Person, including any Joint Venture, except: (i) Company and its Subsidiaries may make and own Investments in Cash Equivalents; (ii) Company and its Subsidiaries may make intercompany loans to the extent permitted under subsection 7.1(iv); (iii) Company may continue to own its existing Investments in its Subsidiaries as of the Closing Date and may make and own Investments in Persons that, as a result of such Investments, become additional wholly- owned Subsidiaries of Company; provided, however, that -------- ------- no such additional wholly-owned Subsidiary shall directly or indirectly (a) create, incur, assume or guarantee, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness (other than Indebtedness secured by Liens permitted under clause (c) of subsection 7.2(iv)), (b) create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind of such additional wholly-owned Subsidiary (other than Permitted Encumbrances and Liens granted pursuant to the Collateral Documents or permitted under clause (c) of subsection 7.2(iv)), or (c) create or become or remain liable with respect to any Contingent Obligation (other than Contingent Obligations under the Subsidiary Guaranty); (iv) Company and its Subsidiaries may continue to own the Investments owned by them and described in Schedule 7.3 annexed hereto; ------------ (v) Company and its Subsidiaries may make loans and advances to employees in the ordinary course of business in an aggregate amount not to exceed at any time outstanding $1,000,000; (vi) Company and its Subsidiaries may make and own Investments in an aggregate amount not to exceed at any time outstanding $10,000,000 consisting of any deferred portion of the sales price received by Company or any of its Subsidiaries in connection with any Asset Sale permitted under subsection 7.7(iv); (vii) Company or any of its Subsidiaries may make and own Investments in respect of Securities of another Person received by Company or such Subsidiary in connection with a plan of reorganization of such Person or a readjustment of its debts; and (viii) Company and its Subsidiaries may make and own other Investments in an aggregate amount not to exceed at any time outstanding $30,000,000. 7.4 Contingent Obligations. ---------------------- Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or become or remain liable with respect to any Contingent Obligation, except: (i) Company may become and remain liable with respect to Contingent Obligations in respect of (a) Letters of Credit, (b) letters of credit issued under the Existing Credit Agreement and outstanding on the Closing Date and described in Part I of Schedule -------- 7.4 annexed hereto (but not any extensions or renewals --- thereof), (c) other Commercial Letters of Credit in an aggregate amount not to exceed at any time $10,000,000, and (d) other Standby Letters of Credit in an aggregate amount not to exceed at any time $25,000,000; (ii) Subsidiaries of Company may become and remain liable with respect to Contingent Obligations under the Subsidiary Guaranty; (iii) Company may become and remain liable with respect to Contingent Obligations under Interest Rate Agreements; provided that Company shall not enter -------- into any Interest Rate Agreement pursuant to which Company would assume any floating interest rate exposure if the ratio of (a) the aggregate principal amount of that portion of Consolidated Total Debt for which Company has floating interest rate exposure (after giving effect to such Interest Rate Agreement and all Interest Rate Agreements then in effect) to (b) the aggregate principal amount of Consolidated Total Debt exceeds 0.50:1.00; (iv) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of indemnification and purchase price adjustment obligations incurred in connection with Asset Sales or other sales of assets so long as such indemnification and purchase price adjustment obligations are customary in light of the type of Asset Sales or other sales of assets in connection with which they were incurred; (v) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations under guarantees in the ordinary course of business of the obligations of suppliers, customers, franchisees and licensees of Company and its Subsidiaries in an aggregate amount not to exceed at any time $10,000,000; (vi) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of any Indebtedness or other obligation (other than any Non-Recourse Indebtedness) of Company or any of its Subsidiaries not prohibited by the Loan Documents; (vii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations under guarantees of trade credit extended to Plainbridge, Chefmark or Pauls Trucking Corp. in the ordinary course of business for the purchase of goods by Plainbridge, Chefmark or Pauls Trucking Corp., as the case may be, for or on behalf of Company; (viii) Company or any of its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of leasehold interests assigned by Company or such Subsidiary on or after the Closing Date to any Person other than Company or any of its Subsidiaries; (ix) Company and its Subsidiaries, as applicable, may remain liable with respect to Contingent Obligations described in Part II of Schedule 7.4 annexed hereto; and ------------ (x) Company and its Subsidiaries may become and remain liable with respect to other Contingent Obligations; provided that the maximum aggregate -------- liability, contingent or otherwise, of Company and its Subsidiaries in respect of all such other Contingent Obligations permitted by this clause (x) shall at no time exceed $10,000,000. 7.5 Restricted Junior Payments. -------------------------- Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Junior Payment; provided that Company may (i) make regularly scheduled payments -------- of principal and interest in respect of any Subordinated Indebtedness in accordance with the terms of, and only to the extent required by, and subject to the subordination provisions contained in, the indenture or other agreement pursuant to which such Subordinated Indebtedness was issued, as such indenture or other agreement may be amended from time to time to the extent permitted under subsection 7.14A; (ii) so long as no Event of Default shall have occurred and be continuing or shall be caused thereby, make payments to Holdings in satisfaction of a corresponding portion of Company's obligations under the Holdings Intercompany Note related to the Holdings Subordinated Notes at such times, in such amounts and to such extent (and only at such times, in such amounts and to such extent) necessary to allow Holdings to make regularly scheduled payments of principal and interest in respect of any Holdings Subordinated Notes not tendered pursuant to the Subordinated Note Exchange Offer in accordance with the terms of, and only to the extent required by, and subject to the subordination provisions contained in, the indenture pursuant to which the Holdings Subordinated Notes were issued, as such indenture is in effect as of the Closing Date, as amended by the Supplemental Holdings Subordinated Note Indenture; (iii) so long as no Event of Default shall have occurred and be continuing or shall be caused thereby, make payments in an aggregate principal amount not exceeding $1,800,000 to Holdings in satisfaction of a corresponding portion of Company's obligations under the Holdings Intercompany Note related to the Holdings Discount Debentures at such times, in such amounts and to such extent (and only at such times, in such amounts and to such extent) necessary to allow Holdings to make required payments of principal and interest in respect of any Holdings Discount Debentures in accordance with the terms of, and only to the extent required by, and subject to the subordination provisions contained in, the indenture pursuant to which the Holdings Discount Debentures were issued, as such indenture is in effect as of the Closing Date; and (iv) so long as no Event of Default or Potential Event of Default shall have occurred and be continuing or shall be caused thereby, make payments to PTKH with any Cash proceeds (net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including without limitation reasonable legal fees and expenses) from the issuance after the Closing Date of any equity Securities of Company to the extent any such net Cash proceeds are not required to be applied to prepay the Loans pursuant to subsection 2.4(A)(iii)(c) to allow PTKH to purchase or redeem for cash, or defease in a manner satisfactory to Agent, all or any portion of the PTKH Bonds together with accrued interest thereon and the applicable prepayment premium required to be paid under the PTKH Bond Indenture, as such indenture is in effect as of the Closing Date. 7.6 Financial Covenants. ------------------- A. Minimum Interest Coverage Ratio. Company shall not permit the ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for any four-fiscal quarter period ending as of the last day of any fiscal quarter of Company ending as of the dates set forth below (or, in the case of the fiscal quarter of Company ending on January 29, 1994, April 30, 1994 or July 30, 1994, for the one-, two- or three-fiscal quarter period, respectively, ending as of such date) to be less than the correlative ratio indicated: Minimum Fiscal Quarter Ending Interest Coverage Ratio --------------------------- ----------------------- January 29, 1994 1.65:1.00 April 30, 1994 1.65:1.00 July 30, 1994 1.70:1.00 October 29, 1994 1.75:1.00 January 28, 1995 1.80:1.00 April 29, 1995 1.85:1.00 July 29, 1995 1.90:1.00 October 28, 1995 1.95:1.00 February 3, 1996 2.00:1.00 May 4, 1996 2.00:1.00 August 3, 1996 2.00:1.00 November 2, 1996 2.00:1.00 February 1, 1997 2.00:1.00 May 3, 1997 2.00:1.00 August 2, 1997 2.00:1.00 November 4, 1997 2.05:1.00 January 31, 1998 2.05:1.00 May 2, 1998 2.05:1.00 August 1, 1998 2.05:1.00 October 31, 1998 2.10:1.00 January 30, 1999 2.15:1.00 May 1, 1999 2.15:1.00 July 31, 1999 2.15:1.00 October 30, 1999 and thereafter 2.20:1.00 B. Maximum Leverage Ratio. Company shall not permit the ratio of (i) Consolidated Total Debt as of the last day of any fiscal quarter of Company ending as of the dates set forth below to (ii) Consolidated Adjusted EBITDA for the four-fiscal quarter period ending as of the last day of such fiscal quarter of Company to exceed the correlative ratio indicated: Fiscal Quarter Ending Maximum Leverage Ratio ------------------------- -------------------------- January 29, 1994 6.40:1.00 April 30, 1994 6.40:1.00 July 30, 1994 5.90:1.00 October 29, 1994 5.85:1.00 January 28, 1995 5.65:1.00 April 29, 1995 5.50:1.00 July 29, 1995 5.30:1.00 October 28, 1995 5.15:1.00 February 3, 1996 5.00:1.00 May 4, 1996 5.00:1.00 August 3, 1996 4.95:1.00 November 2, 1996 4.90:1.00 February 1, 1997 4.80:1:00 May 3, 1997 4.75:1.00 August 2, 1997 4.70:1.00 November 4, 1997 4.65:1.00 January 31, 1998 4.60:1.00 May 2, 1998 4.55:1.00 August 1, 1998 4.50:1.00 October 31, 1998 4.45:1.00 January 30, 1999 4.35:1.00 May 1, 1999 4.25:1.00 July 31, 1999 4.20:1.00 October 30, 1999 and thereafter 3.85:1.00 C. Minimum Consolidated Adjusted EBITDA. Company shall not permit Consolidated Adjusted EBITDA for any four-fiscal quarter period ending as of the last day of any fiscal quarter of Company ending as of the dates set forth below (or, in the case of the fiscal quarter of Company ending on January 29, 1994, April 30, 1994 or July 30, 1994, for the one-, two- or three- fiscal quarter period, respectively, ending as of such date) to be less than the correlative amount indicated: Minimum Consolidated Fiscal Quarter Ending Adjusted EBITDA ---------------------------- ---------------------- January 29, 1994 $ 68,700,000 April 30, 1994 $122,000,000 July 30, 1994 $188,200,000 October 29, 1994 $261,600,000 January 28, 1995 $270,000,000 April 29, 1995 $276,500,000 July 29, 1995 $284,500,000 October 28, 1995 $291,800,000 February 3, 1996 $300,000,000 May 4, 1996 $300,000,000 August 3, 1996 $300,300,000 November 2, 1996 $303,700,000 February 1, 1997 $307,800,000 May 3, 1997 $307,800,000 August 2, 1997 $309,500,000 November 4, 1997 $312,200,000 January 31, 1998 $312,200,000 May 2, 1998 $312,200,000 August 1, 1998 $313,300,000 October 31, 1998 $316,100,000 January 30, 1999 $319,400,000 May 1, 1999 $321,900,000 July 31, 1999 $325,100,000 October 30, 1999 and thereafter $327,900,000 7.7 Restriction on Fundamental Changes; Asset Sales. ----------------------------------------------- Company shall not, and shall not permit any of its Subsidiaries to, enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, sub-lease, transfer or otherwise dispose of all or any part of its business, property or fixed assets, whether now owned or hereafter acquired, except: (i) any Subsidiary of Company may be merged with or into Company or any wholly-owned Subsidiary of Company, or be liquidated, wound up or dissolved, or all or any substantial part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to Company or any wholly-owned Subsidiary of Company (other than any Real Estate Subsidiary); provided that, in the case of such a -------- merger, Company or such wholly-owned Subsidiary shall be the continuing or surviving corporation; (ii) Company and its Subsidiaries may make Consolidated Capital Expenditures permitted under subsection 7.8; (iii) Company and its Subsidiaries may sell inventory in the ordinary course of business; (iv) Company and its Subsidiaries may make Asset Sales; provided that the aggregate assets sold -------- pursuant to Asset Sales in any Fiscal Year shall not have accounted for more than 20% of the consolidated revenues of Company and its Subsidiaries for the immediately preceding Fiscal Year as shown on the consolidated financial statements of Company and its Subsidiaries for such immediately preceding Fiscal Year; provided further that (a) the consideration -------- ------- received for the related assets (other than (1) the related assets to be sold pursuant to the Asset Sale (the "Western Pennsylvania Stores Asset Sale") by Company of the Real Property Assets designated on Schedule 7.7 annexed hereto and any personal property ------------ of Company located on and used in connection with such Real Property Assets and (2) the related assets taken pursuant to any taking of assets described in clause (iii) of the definition of the term "Asset Sale") shall be in an amount at least equal to (y) the fair market value thereof (taking into account any restrictions on the use of such related assets which Company or any such Subsidiary may require in connection with the Asset Sale in question) or (z) a lower amount if the Board of Directors of Company or such Subsidiary, as the case may be, shall determine that the sale of such related assets for such lower amount is desirable in order to minimize losses being incurred by Company or such Subsidiary, as the case may be, with respect to such related assets and that such sale for such lower amount is in the best interest of Company or such Subsidiary, as the case may be; (b) at least 75% of the consideration received (excluding any consideration received in the form of the assumption of liability under any lease pertaining to such related assets by the purchaser thereof) for the related assets (other than (1) the related assets sold pursuant to the Western Pennsylvania Stores Asset Sale and (2) the related assets taken pursuant to any taking of assets described in clause (iii) of the definition of the term "Asset Sale") shall be cash; and (c) the Net Cash Proceeds of Asset Sale of such Asset Sales shall be applied in the manner and to the extent required by subsection 2.4A(iii)(a); (v) Company and its Subsidiaries may dispose of obsolete, worn out or surplus property disposed of in the ordinary course of business; (vi) Company and its Subsidiaries may, as lessor or sub-lessor, lease or sub-lease any Real Property Assets in the ordinary course of business; (vii) Company and its Subsidiaries may make asset sales described in clause (i)(b)(2) of the definition of the term "Asset Sale"; (viii) Company and its Subsidiaries may transfer their respective assets pursuant to any taking of assets described in clause (iii) of the term "Asset Sale" to the extent that the aggregate net cash proceeds received by Company and its Subsidiaries in connection with such taking and all other takings related to such taking are equal to or less than $100,000; and (ix) Company or any Subsidiary of Company may, in the ordinary course of business, terminate any lease to which it is a party as lessee. 7.8 Consolidated Capital Expenditures. --------------------------------- Company shall not, and shall not permit its Subsidiaries to, make or incur Consolidated Capital Expenditures, in any Fiscal Year indicated below, in an aggregate amount in excess of the corresponding amount (the "Maximum Consolidated Capital Expenditures Amount") set forth below opposite such Fiscal Year; provided that the Maximum Consolidated Capital -------- Expenditures Amount for any Fiscal Year shall be increased by an amount equal to the excess, if any (but in no event more than $20,000,000), of the Maximum Consolidated Capital Expenditures Amount for the previous Fiscal Year (as adjusted in accordance with this proviso) over the actual amount of Consolidated Capital Expenditures for such previous Fiscal Year: Maximum Consolidated Fiscal Year ---------------------------------- Capital Expenditures Amount --------------------------- 1993 $115,000,000 1994 $120,000,000 1995 $120,000,000 1996 $120,000,000 1997 and thereafter $125,000,000 7.9 Restriction on Leases. --------------------- Company shall not, and shall not permit any of its Subsidiaries to, become liable in any way, whether directly or by assignment or as a guarantor or other surety, for the obligations of the lessee under any lease, whether an Operating Lease or a Capital Lease (other than intercompany leases between Company and its wholly-owned Subsidiaries), unless, immediately after giving effect to the incurrence of liability with respect to such lease, the Consolidated Rental Payments at the time in effect during the then current Fiscal Year shall not exceed the corresponding amount set forth below opposite such Fiscal Year: Maximum Consolidated Fiscal Year ---------------------------------- ---- Rental Payments ------------------- 1993 $ 67,252,000 1994 $ 79,659,000 1995 $ 89,836,000 1996 $100,075,000 1997 $111,376,000 1998 $116,034,000 1999 and thereafter $121,118,000 7.10 Sale or Discount of Receivables. ------------------------------- Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, sell with recourse, or discount or otherwise sell for less than the face value thereof, any of its notes or accounts receivable. 7.11 Transactions with Shareholders and Affiliates. --------------------------------------------- Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 5% or more of any class of equity Securities of Company or with any Affiliate of Company or of any such holder, on terms that are less favorable to Company or that Subsidiary, as the case may be, than those that might be obtained at the time from Persons who are not such a holder or Affiliate; provided that the foregoing restriction -------- shall not apply to (i) any transaction between Company and any of its wholly-owned Subsidiaries or between any of its wholly-owned Subsidiaries (other than any transaction entered into on or after the Closing Date by and between Company or any of its wholly- owned Subsidiaries (other than a Real Estate Subsidiary) and any Real Estate Subsidiary to the extent that the terms thereof are more favorable to such Real Estate Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of Company), (ii) transactions entered into or existing pursuant to and in accordance with the Spin-Off Agreements, or (iii) reasonable and customary fees paid to members of the Boards of Directors of Company and its Subsidiaries. 7.12 Disposal of Subsidiary Stock. ---------------------------- Except for any sale of 100% of the capital stock or other equity Securities of any of its Subsidiaries in compliance with the provisions of subsection 7.7(iv) and except pursuant to the Collateral Documents, Company shall not: (i) directly or indirectly sell, assign, pledge or otherwise encumber or dispose of any shares of capital stock or other equity Securities of any of its Subsidiaries, except to qualify directors if required by applicable law; or (ii) permit any of its Subsidiaries directly or indirectly to sell, assign, pledge or otherwise encumber or dispose of any shares of capital stock or other equity Securities of any of its Subsidiaries (including such Subsidiary), except to Company, another Subsidiary of Company, or to qualify directors if required by applicable law. 7.13 Conduct of Business. ------------------- From and after the Closing Date, Company shall not, and shall not permit any of its Subsidiaries to, engage in any business other than (i) the businesses engaged in by Company and its Subsidiaries on the Closing Date and similar or related businesses and (ii) such other lines of business as may be consented to by Requisite Lenders. 7.14 Amendments of Certain Documents; Designation of ----------------------------------------------- Specified Senior Indebtedness. ----------------------------- A. Company shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change the terms of any Subordinated Indebtedness or any Indebtedness of Company or any of its Subsidiaries permitted to be incurred under subsection 7.1(vii) ("Specified Refinancing Indebtedness"), or make any payment consistent with an amendment thereof or change thereto, if the effect of such amendment or change is to increase the interest rate on such Subordinated Indebtedness or such Specified Refinancing Indebtedness, change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any event of default or condition to an event of default with respect thereto (other than to eliminate any such event of default or to increase any grace period with respect thereto), change the redemption, prepayment or defeasance provisions thereof, change the subordination provisions thereof (or of any guaranty thereof), or change any collateral therefor (other than to release such collateral), or if the effect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder or to confer any additional rights on the holders of such Subordinated Indebtedness or such Specified Refinancing Indebtedness (or a trustee or other representative on their behalf) which would be adverse to Company or Lenders. B. Company shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change the terms of any of the Spin-Off Agreements in any material respect or waive any of its material rights thereunder without the prior written consent of the Requisite Lenders. C. Company shall not amend or otherwise change the terms of any of the Holdings Intercompany Notes without the prior written consent of Requisite Lenders. D. Company shall not designate any Indebtedness as "Specified Senior Indebtedness" (as defined in any of the New Subordinated Debt Indentures) for purposes of any of the New Subordinated Debt Indentures without the prior written consent of Requisite Lenders. 7.15 Fiscal Year. ----------- Company shall not change its Fiscal Year-end from the Saturday closest to January 31. Section 8. EVENTS OF DEFAULT If any of the following conditions or events ("Events of Default") shall occur: 8.1 Failure to Make Payments When Due. --------------------------------- Failure to pay any installment of principal of any Loan when due, whether at stated maturity, by acceleration, by notice of prepayment or otherwise; failure to pay when due any amount payable to an Issuing Lender in reimbursement of any drawing under a Letter of Credit; or failure to pay any interest on any Loan or any fee or any other amount due under this Agreement within five days after the date due; or 8.2 Default in Other Agreements. --------------------------- (i) Failure of Company or any of its Subsidiaries to pay when due (a) any principal of or interest on any Indebtedness (other than Indebtedness referred to in subsection 8.1) in an individual principal amount of $5,000,000 or more or any items of Indebtedness with an aggregate principal amount of $10,000,000 or more or (b) any Contingent Obligation in an individual principal amount of $5,000,000 or more or any Contingent Obligations with an aggregate principal amount of $10,000,000 or more, in each case beyond the end of any grace period provided therefor; or (ii) breach or default by Company or any of its Subsidiaries with respect to any other material term of (a) any evidence of any Indebtedness in an individual principal amount of $5,000,000 or more or any items of Indebtedness with an aggregate principal amount of $10,000,000 or more or any Contingent Obligation in an individual principal amount of $5,000,000 or more or any Contingent Obligations with an aggregate principal amount of $10,000,000 or more or (b) any loan agreement, mortgage, indenture or other agreement relating to such Indebtedness or Contingent Obligation(s), if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that Indebtedness or Contingent Obligation(s) to become or be declared due and payable prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be, in each case after the end of any grace period provided therefor; or 8.3 Breach of Certain Covenants. --------------------------- Failure of Company to perform or comply with any term or condition contained in subsection 2.5 or 6.2 or Section 7 of this Agreement or any other material term of any Loan Document (other than this Agreement); or 8.4 Breach of Warranty. ------------------ Any representation, warranty, certification or other statement made by Company or any of its Subsidiaries in any Loan Document or in any statement or certificate at any time given by Company or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect on the date as of which made; or 8.5 Other Defaults Under Loan Documents. ----------------------------------- Company or any of its Subsidiaries shall default in the performance of or compliance with any term contained in this Agreement or any of the other Loan Documents, other than any such term referred to in any other subsection of this Section 8, and such default shall not have been remedied or waived within 30 days after receipt by Company of notice from Agent or any Lender of such default; or 8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. ----------------------------------------------------- (i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of Company or any of its Subsidiaries in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or (ii) an involuntary case shall be commenced against Company or any of its Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Company or any of its Subsidiaries, or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of Company or any of its Subsidiaries for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Company or any of its Subsidiaries, and any such event described in this clause (ii) shall continue for 60 days unless dismissed, bonded or discharged; or 8.7 Voluntary Bankruptcy; Appointment of Receiver, etc. --------------------------------------------------- (i) Company or any of its Subsidiaries shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or Company or any of its Subsidiaries shall make any general assign- ment for the benefit of creditors; or (ii) Company or any of its Subsidiaries shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the Board of Directors of Company or any of its Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (i) above or this clause (ii); or 8.8 Judgments and Attachments. ------------------------- Any money judgment, writ or warrant of attachment or similar process involving in the aggregate at any time an amount in excess of $10,000,000 (to the extent not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against Company or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any event later than five days prior to the date of any proposed sale thereunder); or 8.9 Dissolution. ----------- Any order, judgment or decree shall be entered against Company or any of its Subsidiaries decreeing the dissolution or split up of Company or that Subsidiary and such order shall remain undischarged or unstayed for a period in excess of 30 days; or 8.10 Employee Benefit Plans. ---------------------- There shall occur one or more ERISA Events which individually or in the aggregate results in or might reasonably be expected to result in liability of Company or any of its ERISA Affiliates in excess of $10,000,000 during the term of this Agreement; or there shall exist an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), which exceeds $10,000,000; or 8.11 Change in Control. ----------------- (i) At any time that SMG-II has beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Exchange Act ("Beneficial Ownership")), directly or indirectly, of Securities of Company (or other Securities convertible into such Securities) representing 20% or more of the combined voting power of all Securities of Company entitled to vote in the election of directors, other than Securities having such power only by reason of the happening of a contingency, any Person or any two or more Persons acting in concert (other than Merrill Lynch Capital Partners, Inc. ("MLCP") or any of its Affiliates or Equitable or any of its Affiliates) shall have or shall have acquired Beneficial Ownership, directly or indirectly, of Securities of SMG-II (or other Securities convertible into such Securities) representing 25% or more of the combined voting power of all Securities of SMG-II entitled to vote in the election of directors, other than Securities having such power only by reason of the happening of a contingency; (ii) at any time that Holdings has Beneficial Ownership, directly or indirectly, of Securities of Company (or other Securities convertible into such Securities) representing 20% or more of the combined voting power of all Securities of Company entitled to vote in the election of directors, other than Securities having such power only by reason of the happening of a contingency, any Person or any two or more Persons acting in concert (other than MLCP or any of its Affiliates, Equitable or any of its Affiliates, or SMG-II) shall have or shall have acquired Beneficial Ownership, directly or indirectly, of Securities of Holdings (or other Securities convertible into such Securities) representing 25% or more of the combined voting power of all Securities of Holdings entitled to vote in the election of directors, other than Securities having such power only by reason of the happening of a contingency; (iii) at any time that PTKH has Beneficial Ownership, directly or indirectly, of Securities of Company (or other Securities convertible into such Securities) representing 20% or more of the combined voting power of all Securities of Company entitled to vote in the election of directors, other than Securities having such power only by reason of the happening of a contingency, any Person or any two or more Persons acting in concert (other than MLCP or any of its Affiliates, Equitable or any of its Affiliates, SMG-II or Holdings) shall have or shall have acquired Beneficial Ownership, directly or indirectly, of Securities of PTKH (or other Securities convertible into such Securities) representing 25% or more of the combined voting power of all Securities of PTKH entitled to vote in the election of directors, other than Securities having such power only by reason of the happening of a contingency; (iv) any Person or any two or more Persons acting in concert (other than MLCP or any of its Affiliates or Equitable or any of its Affiliates (including SMG- II, Holdings or PTKH, in each case so long as such Person is an Affiliate of MLCP or Equitable)) shall have acquired Beneficial Ownership, directly or indirectly, of Securities of Company (or other Securities convertible into such Securities) representing 25% or more of the combined voting power of all Securities of Company entitled to vote in the election of directors, other than Securities having such power only by reason of the happening of a contingency; or (v) a "Change in Control" (as defined in the Supplemental Holdings Subordinated Note Indenture, the Supplemental Holdings Subordinated Debenture Indenture or any of the New Subordinated Debt Indentures) shall occur; or 8.12 Invalidity of Subsidiary Guaranty. --------------------------------- Upon execution and delivery thereof, the Subsidiary Guaranty for any reason, other than the satisfaction in full of all Obligations, ceases to be in full force and effect (other than in accordance with its terms) or is declared to be null and void, or any Loan Party denies in writing that it has any further liability, including without limitation with respect to future advances by Lenders, under any Loan Document to which it is a party; or 8.13 Failure of Security. ------------------- Upon execution and delivery thereof, any Collateral Document shall, at any time, cease to be in full force and effect (other than by reason of a release of Collateral thereunder in accordance with the terms hereof or thereof, the satisfaction in full of the Obligations or any other termination of such Collateral Document in accordance with the terms hereof or thereof) or shall be declared null and void, or the validity or enforceability thereof shall be contested in writing by any Loan Party, or the Agent shall not have or shall cease to have a valid and perfected first priority security interest (subject to Permitted Encumbrances) in any Collateral purported to be covered thereby having a fair market value individually or in the aggregate exceeding $1,000,000, in each case for any reason other than the failure of Agent or any Lender to take any action within its control; or 8.14 Failure to Consummate Restructuring. ----------------------------------- The Restructuring shall not be consummated in accordance with this Agreement concurrently with the making of the initial Loans or the Restructuring shall be unwound, reversed or otherwise rescinded in whole or in part for any reason; or 8.15 Termination or Breach of Logistical Services -------------------------------------------- Agreement. --------- The Spin-Off Agreement described in clause (v) of the definition thereof shall terminate as a result of any reason whatsoever or Plainbridge shall fail to perform its obligations under such Spin-Off Agreement and such failure would reasonably be expected to have a Material Adverse Effect, and, in either case, Company shall not have made arrangements satisfactory to Requisite Lenders for obtaining any services that are required to be provided by Plainbridge to Company under such Spin-Off Agreement that are not being so provided as a result of such termination or failure to perform; or 8.16 Incurrence of Tax Liability Relating to Spin-Off. ------------------------------------------------ Company shall incur any liability for any Tax for which Plainbridge has agreed to indemnify Company pursuant to the Spin-Off Agreement described in clause (iii) of the definition of the term "Spin-Off Agreements" and the incurrence of such liability would reasonably be expected to have a Material Adverse Effect; or 8.17 Amendments of Certain Documents Relating to PTKH ------------------------------------------------ Bonds. ----- The terms of the PTKH Bond Indenture, the PTKH Bonds or the Redemption Agreement shall be amended or changed, or any payment consistent with an amendment thereof or change thereto shall be made, and (i) the effect of such amendment or change is to increase the interest rate on the PTKH Bonds, change (to earlier dates) any dates upon which payments of principal or interest, or any cash payments of interest, are due thereon, change any event of default or condition to an event of default with respect thereto (other than to eliminate any such event of default or to increase any grace period with respect thereto), change the redemption, prepayment or defeasance provisions thereof, or change any collateral therefor (other than to release such collateral), or (ii) the effect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder or to confer any additional rights on the holders of the PTKH Bonds (or a trustee or other representative on their behalf) which would be adverse to Holdings, PTKH, Company or Lenders: THEN (i) upon the occurrence of any Event of Default described in subsection 8.6 or 8.7, each of (a) the unpaid principal amount of and accrued interest on the Loans, (b) an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letter of Credit), and (c) all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Company, and the obligation of each Lender to make any Loan, the obligation of Agent to issue any Letter of Credit and the right of any Lender to issue any Letter of Credit hereunder shall thereupon terminate, and (ii) upon the occurrence and during the continuation of any other Event of Default, Agent shall, upon the written request of Requisite Lenders, by written notice to Company, declare all or any portion of the amounts described in clauses (a) through (c) above to be, and the same shall forthwith become, immediately due and payable, and the obligation of each Lender to make any Loan, the obligation of Agent to issue any Letter of Credit and the right of any Lender to issue any Letter of Credit hereunder shall thereupon terminate; provided that the foregoing shall not affect in any -------- way the obligations of Lenders under subsection 3.3C(i) or the obligations of Lenders to repay Swing Line Loans or purchase participations therein as provided in subsection 2.1A(iv). Any amounts described in clause (b) above, when received by Agent, shall be held by Agent pursuant to the terms of the Collateral Account Agreement and shall be applied as therein provided. Section 9. AGENT AND COLLATERAL CO-AGENTS 9.1 Appointment. ----------- Bankers is hereby appointed Agent hereunder and under the other Loan Documents and each Lender hereby authorizes Agent to act as its agent in accordance with the terms of this Agreement and the other Loan Documents. Agent agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable. The provisions of this Section 9 are solely for the benefit of Agent and Lenders and Company shall have no rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties under this Agreement, Agent shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Company or any of its Subsidiaries. It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case Agent deems that by reason of any present or future law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents, or take any other action which may be desirable or necessary in connection therewith, it may be necessary that Agent appoint an additional individual or institution (including without limitation Bankers Trust Company New Jersey Limited) as a separate trustee, co-trustee, separate collateral agent or collateral co-agent (any such additional individual or institution being referred to herein individually as a "Collateral Co-Agent" and collectively as "Collateral Co- Agents"). In the event that Agent appoints a Collateral Co- Agent with respect to any Collateral, each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to Agent with respect to such Collateral shall be exercisable by and vest in such Collateral Co-Agent to the extent, and only to the extent, necessary to enable such Collateral Co-Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Loan Documents and necessary to the exercise or performance thereof by such Collateral Co-Agent shall run to and be enforceable by either of such Collateral Co-Agent and Agent. Should any instrument in writing from Company be required by any Collateral Co-Agent so appointed by Agent for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties, any and all such instruments in writing shall, promptly upon request by Agent, be executed, acknowledged and delivered by Company. In case any Collateral Co-Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Collateral Co-Agent, to the extent permitted by law, shall vest in and be exercised by Agent until the appointment of a new Collateral Co-Agent. 9.2 Powers; General Immunity. ------------------------ A. Duties Specified. Each Lender irrevocably authorizes Agent and each Collateral Co-Agent to take such action on such Lender's behalf and to exercise such powers hereunder and under the other Loan Documents as are specifically delegated to Agent and such Collateral Co-Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. Agent and each Collateral Co-Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Loan Documents and they may perform such duties by or through their respective agents or employees. Neither Agent nor any Collateral Co-Agent shall have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon Agent or any Collateral Co-Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein. B. No Responsibility for Certain Matters. Neither Agent nor any Collateral Co-Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectability or sufficiency of this Agreement or any other Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by Agent or any Collateral Co-Agent to Lenders or by or on behalf of Company to Agent or any Collateral Co-Agent or any Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of Company or any other Person liable for the payment of any Obligations, nor shall Agent or any Collateral Co-Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as to the use of the proceeds of the Loans or the use of the Letters of Credit or as to the existence or possible existence of any Event of Default or Potential Event of Default. Anything contained in this Agreement to the contrary not- withstanding, Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the Letter of Credit Usage or the component amounts thereof. C. Exculpatory Provisions. Neither Agent nor any Collateral Co-Agent nor any of their respective officers, directors, employees or agents shall be liable to Lenders for any action taken or omitted by Agent or such Collateral Co-Agent hereunder or under any of the other Loan Documents or in connection herewith or therewith except to the extent caused by Agent's or such Collateral Co-Agent's gross negligence or willful misconduct. If Agent or any Collateral Co-Agent shall request instructions from Lenders with respect to any act or action (including the failure to take an action) in connection with this Agreement or any of the other Loan Documents, Agent or such Collateral Co-Agent shall be entitled to refrain from such act or taking such action unless and until Agent or such Collateral Co- Agent shall have received instructions from Requisite Lenders. Without prejudice to the generality of the foregoing, (i) each of Agent and Collateral Co-Agents shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Company and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against Agent or any Collateral Co-Agent as a result of Agent or such Collateral Co- Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of Requisite Lenders. Each of Agent and Collateral Co-Agents shall be entitled to refrain from exercising any power, discretion or authority vested in it under this Agreement or any of the other Loan Documents unless and until it has obtained the instructions of Requisite Lenders. D. Agent and Collateral Co-Agents Entitled to Act as Lenders. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, Agent or, if any Collateral Co-Agent is or becomes a Lender, such Collateral Co-Agent, in its individual capacity as a Lender hereunder. With respect to its par- ticipation in the Loans and the Letters of Credit, Agent and, if any Collateral Co-Agent is or becomes a Lender, such Collateral Co-Agent, shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless the context clearly otherwise indicates, include Agent and, if any Collateral Co-Agent is or becomes a Lender, such Collateral Co-Agent, in its individual capacity. Agent and, if any Collateral Co-Agent is or becomes a Lender, such Collateral Co-Agent, and their respective Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with Company or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from Company for services in connection with this Agreement and otherwise without having to account for the same to Lenders. 9.3 Representations and Warranties; No Responsibility For ----------------------------------------------------- Appraisal of Creditworthiness. ----------------------------- Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with the making of the Loans and the issuance of Letters of Credit hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Company. Neither Agent nor any Collateral Co-Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and neither Agent nor any Collateral Co-Agent shall have any responsibility with respect to the accuracy of or the complete- ness of any information provided to Lenders. 9.4 Right to Indemnity. ------------------ Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify Agent and each Collateral Co-Agent, to the extent that Agent and such Collateral Co-Agent shall not have been reimbursed by Company, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Agent or such Collateral Co-Agent in performing its duties hereunder or under the other Loan Documents or otherwise in their respective capacities as Agent and Collateral Co-Agent in any way relating to or arising out of this Agreement or the other Loan Documents; provided that no Lender shall be -------- liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent's or such Collateral Co- Agent's gross negligence or willful misconduct. If any indemnity furnished to Agent or any Collateral Co-Agent for any purpose shall, in the opinion of Agent or such Collateral Co-Agent, be insufficient or become impaired, Agent or such Collateral Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. 9.5 Payee of Note Treated as Owner. ------------------------------ Agent and Collateral Co-Agents may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with Agent. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of that Note or of any Note or Notes issued in exchange therefor. 9.6 Successor Agent, Collateral Co-Agent and Swing Line --------------------------------------------------- Lender. ------ A. Successor Agent and Collateral Co-Agent. Agent or any Collateral Co-Agent may resign at any time by giving 30 days' prior written notice thereof to Lenders and Company, and Agent or any Collateral Co-Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Company and Agent or such Collateral Co- Agent, as the case may be, and signed by Requisite Lenders. Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, upon five Business Days' notice to Company, to appoint a successor Agent or Collateral Co-Agent, as the case may be. Upon the acceptance of any appointment as Agent or Collateral Co-Agent hereunder by a successor Agent or Collateral Co-Agent, that successor Agent or Collateral Co-Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Agent or Collateral Co-Agent and the retiring or removed Agent or Collateral Co-Agent shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Agent's or Collateral Co-Agent's resignation or removal hereunder as Agent or Collateral Co-Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent or Collateral Co-Agent under this Agreement. B. Successor Swing Line Lender. Any resignation or removal of Agent pursuant to subsection 9.6A shall also constitute the resignation or removal of Bankers or its successor as Swing Line Lender, and any successor Agent appointed pursuant to subsection 9.6A shall, upon its acceptance of such appointment, become the successor Swing Line Lender for all purposes hereunder. In such event (i) Company shall prepay any outstanding Swing Line Loans made by the retiring or removed Agent in its capacity as Swing Line Lender, (ii) upon such prepayment, the retiring or removed Agent and Swing Line Lender shall surrender the Swing Line Note held by it to Company for cancellation, and (iii) Company shall issue a new Swing Line Note to the successor Agent and Swing Line Lender substantially in the form of Exhibit VI annexed hereto, in the principal amount of the ---------- Swing Line Loan Commitment then in effect and with other appropriate insertions. 9.7 Collateral Documents. -------------------- Each Lender hereby further authorizes Agent and each Collateral Co-Agent to enter into the Collateral Documents as secured party on behalf of and for the benefit of Lenders and agrees to be bound by the terms of the Collateral Documents; provided that neither Agent nor any Collateral Co-Agent shall -------- enter into or consent to any amendment, modification, termination or waiver of any provision contained in the Collateral Documents without the prior consent of Requisite Lenders. Each Lender agrees that no Lender shall have any right individually to realize upon the Subsidiary Guaranty or any of the Collateral under the Collateral Documents, it being understood and agreed that all rights and remedies under the Collateral Documents may be exercised solely by Agent and Collateral Co-Agents for the benefit of Lenders and the other beneficially interested parties under the Collateral Documents and the other Loan Documents in accordance with the terms thereof. Section 10. MISCELLANEOUS 10.1 Assignments and Participations in Loans and Letters of ------------------------------------------------------ Credit. ------ A. General. Each Lender shall have the right at any time to (i) sell, assign, transfer or negotiate to any Eligible Assignee, or (ii) sell participations to any Person in, all or any part of any Loan or Loans made by it or its Commitments or its Letters of Credit or participations therein or any other interest herein or in any other Obligations owed to it; provided -------- that no such assignment or participation shall, without the consent of Company, require Company to file a registration statement with the Securities and Exchange Commission or apply to qualify such assignment or participation of the Loans, the Letters of Credit or participations therein or the other Obligations under the securities laws of any state. Except as otherwise provided in this subsection 10.1, no Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or any granting of participations in, all or any part of the Loans, the Commitments, the Letters of Credit or participations therein or the other Obligations owed to such Lender. B. Assignments. (i) Amounts and Terms of Assignments. Each -------------------------------- Loan, Commitment, Letter of Credit or participation therein or other Obligation may (a) be assigned in any amount (of a constant and not a varying percentage) to another Lender, or to an Affiliate of the assigning Lender or another Lender, with the giving of notice to Company and Agent and, in the case of an assignment to an Affiliate of the assigning Lender where the assigning Lender can reasonably foresee that such assignment would result in a requirement on the part of Company to pay any greater amount pursuant to subsection 2.6D or 2.7 than Company would have been required to pay to the assigning Lender in respect of the amount of the assignment effected by such assigning Lender to such Affiliate had no such assignment occurred, with the consent of Company to such assignment (which consent shall not be unreasonably withheld), or (b) be assigned in an amount (of a constant and not a varying percentage) of not less than $10,000,000 (or such lesser amount as shall constitute the aggregate amount of all Loans, Commitments, Letters of Credit and participations therein and other Obligations of the assigning Lender) to any other Eligible Assignee with the consent of Company and Agent (which consent of Company and Agent shall not be unreasonably withheld). To the extent of any such assignment in accordance with either clause (a) or (b) above, the assigning Lender shall be relieved of its obligations with respect to its Loans, Commitments, Letters of Credit or participations therein or other Obligations or the portion thereof so assigned. The parties to each such assignment shall execute and deliver to Agent, for its acceptance, one or more Assignment and Acceptances (depending on whether such assignment includes one or more of the assigning Lender's Term A Loan, Term B Loan and/or Revolving Loan Commitment and Revolving Loans) in substantially the form of Exhibit XI, annexed hereto, ---------- together with (1) a processing fee of $1,500 in the case of an assignment to another Lender or (2) a processing fee of $2,500 in the case of an assignment to any other Eligible Assignee and such certificates, documents or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment and Acceptances may be required to deliver to Agent pursuant to subsection 2.7B(iii). Upon such execution, delivery and acceptance, from and after the effective date of the assignments and assumptions contemplated by such Assignment and Acceptances, (y) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptances, shall have the rights and obligations of a Lender hereunder and (z) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptances, relinquish its rights and be released from its obligations under this Agreement (and, in the case of one or more Assignment and Acceptances covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). The Commitments hereunder shall be modified to reflect the Commitment of such assignee and any remaining Commitment of such assigning Lender and, if any such assignment occurs after the issuance of the Notes hereunder, new Notes shall, upon surrender of the assigning Lender's Notes, be issued to the assignee and to the assigning Lender pursuant to subsection 2.1D as necessary to reflect the new Commitments of the assignee and the assigning Lender. (ii) Acceptance by Agent. Upon its receipt ------------------- of one or more Assignment and Acceptances executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with the processing fee referred to in subsection 10.1B(i) and any certificates, documents or other evidence with respect to United States federal income tax withholding matters that such assignee may be required to deliver to Agent pursuant to subsection 2.7B(iii), Agent shall, if such Assignment and Acceptances have been completed and are in substantially the form of Exhibit XI, annexed hereto, and if Company and Agent ---------- have consented to the assignment evidenced thereby (in each case to the extent such consent is required pursuant to subsection 10.1B(i)), (a) accept each such Assignment and Acceptance by executing a counterpart thereof as provided therein (which acceptance shall evidence any required consent of Agent to such assignment), and (b) give prompt notice thereof to Company. Agent shall maintain a copy of each Assignment and Acceptance delivered to and accepted by it as provided in this subsection 10.1B(ii). C. Participations. The holder of any participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except action directly affecting (i) the extension of the scheduled final maturity date of any Loan allocated to such participation or (ii) a reduction of the principal amount of or the rate of interest payable on any Loan allocated to such participation, and all amounts payable by Company hereunder (including without limitation amounts payable to such Lender pursuant to subsections 2.6D, 2.7 and 3.6) shall be determined as if such Lender had not sold such participation. Company and each Lender hereby acknowledge and agree that, solely for purposes of subsections 10.4 and 10.5, (a) any participation will give rise to a direct obligation of Company to the participant and (b) the participant shall be considered to be a "Lender". D. Assignments to Federal Reserve Bank. In addition to the assignments and participations permitted under the foregoing provisions of this subsection 10.1, any Lender may assign and pledge all or any portion of its Loans, the other Obligations owed to such Lender and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank. No Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any such assignment and pledge. E. Information. Each Lender may furnish any information concerning Company and its Subsidiaries in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants); provided, however, that prior to being furnished with any such -------- ------- information which is non-public information obtained pursuant to the requirements of this Agreement which has been identified as confidential by Company, the assignee or participant or prospective assignee or participant shall agree to preserve the confidentiality of such information in accordance with subsection 10.19. 10.2 Expenses. -------- Whether or not the transactions contemplated hereby shall be consummated, Company agrees to pay promptly (i) all the actual and reasonable costs and expenses of prepara- tion of the Loan Documents; (ii) all the costs of furnishing all opinions by counsel for Company (including without limitation any opinions requested by Lenders as to any legal matters arising hereunder) and of Company's performance of and compliance with all agreements and conditions on its part to be performed or complied with under this Agreement and the other Loan Documents including, without limitation, with respect to confirming compliance with environmental and insurance requirements; (iii) the reasonable fees, expenses and disbursements of counsel to Agent (including allocated costs of internal counsel) in connection with the negotiation, preparation, execution and administration of the Loan Documents and the Loans and any consents, amendments, waivers or other modifications hereto or thereto and any other documents or matters requested by Company or any of its Subsidiaries; (iv) all the actual costs and reasonable expenses of creating and perfecting Liens in favor of Agent on behalf of Lenders pursuant to any Loan Document, including filing and recording fees and expenses, title insurance, fees and expenses of counsel for providing such opinions as Agent or Requisite Lenders may reasonably request and fees and expenses of legal counsel to Agent; (v) all the actual costs and reasonable expenses of obtaining and reviewing any appraisals provided for under subsection 4.1J or 6.9 and any environmental audits or reports provided for under subsection 4.1K or 6.9; (vi) the reasonable fees, expenses and disbursements of any accountants retained by Agent in connection with the review and analysis prior to the Closing Date of any financial statements of Company and its Subsidiaries or any other reports furnished to Agent by or on behalf of Company or any of its Subsidiaries pursuant to or for use in connection with this Agreement; (vii) all other actual and reasonable costs and expenses incurred by Agent in connection with the negotiation, preparation and execution of the Loan Documents and the transactions contemplated hereby and thereby; and (viii) after the occurrence of an Event of Default, all costs and expenses, including reasonable attorneys' fees (including allocated costs of internal counsel) and costs of settlement, incurred by Agent and Lenders in enforcing any Obligations of or in collecting any payments due from Company or any of its Subsidiaries hereunder or under the other Loan Documents by reason of such Event of Default or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or pursuant to any insolvency or bankruptcy proceedings. 10.3 Indemnity. --------- In addition to the payment of expenses pursuant to subsection 10.2, whether or not the transactions contemplated hereby shall be consummated, Company agrees to defend, indemnify, pay and hold harmless Agent, Collateral Co-Agents and Lenders, and the officers, directors, employees, agents and affiliates of Agent, Collateral Co-Agents and Lenders (collectively called the "Indemnitees") from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including without limitation the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including without limitation securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of this Agreement or the other Loan Documents or any other Restructuring Documents or the transactions contemplated hereby or thereby (including without limitation Lenders' agreement to make the Loans hereunder or the use or intended use of the proceeds of any of the Loans or the issuance of Letters of Credit hereunder or the use or intended use of any of the Letters of Credit) or the statements contained in the commitment letter delivered by any Lender to Company with respect thereto (collectively called the "Indemnified Liabilities"); provided -------- that Company shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise solely from the gross negligence or willful misconduct of that Indemnitee as determined by a final judgment of a court of competent jurisdiction; and provided, further that in connection with investigating, -------- ------- preparing to defend, or defending against any Indemnified Liability of, to or against more than one Indemnitee, such investigation, preparation or defense shall be conducted by the same legal counsel on behalf of all such Indemnitees except to the extent that one or more of such Indemnitees determines in good faith that there is a conflict of interests between such Indemnitee or Indemnitees and some or all of the remaining Indemnitees. To the extent that the undertaking to defend, indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, Company shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. 10.4 Set Off; Security Interest in Deposit Accounts. ---------------------------------------------- In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default each Lender is hereby authorized by Company at any time or from time to time, without notice to Company or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by that Lender to or for the credit or the account of Company against and on account of the obligations and liabilities of Company to that Lender under this Agreement, the Notes, the Letters of Credit and participations therein, including, but not limited to, all claims of any nature or description arising out of or connected with this Agreement, the Notes, the Letters of Credit and participations therein or any other Loan Document, irrespective of whether or not (i) that Lender shall have made any demand hereunder or (ii) the principal of or the interest on the Loans or any amounts in respect of the Letters of Credit or any other amounts due hereunder shall have become due and payable pursuant to Section 8 and although said obligations and liabilities, or any of them, may be contingent or unmatured. Company hereby further grants to Agent and each Lender a security interest in all deposits and accounts maintained with Agent or such Lender as security for the Obligations. 10.5 Ratable Sharing. --------------- Lenders hereby agree among themselves that if any of them shall, whether by voluntary payment, by realization upon security, through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts payable in respect of Letters of Credit, fees and other amounts then due and owing to that Lender hereunder or under the other Loan Documents (collectively, the "Aggregate Amounts Due" to such Lender) which is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (i) notify Agent and each other Lender of the receipt of such payment and (ii) apply a portion of such payment to purchase participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided that if all or part of such proportionately greater -------- payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of Company or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. Company expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all monies owing by Company to that holder with respect thereto as fully as if that holder were owed the amount of the partic- ipation held by that holder. 10.6 Amendments and Waivers. ---------------------- No amendment, modification, termination or waiver of any provision of this Agreement or of the Notes, or consent to any departure by Company therefrom, shall in any event be effective without the written concurrence of Requisite Lenders; provided that any amendment, modification, termination or waiver -------- which: postpones any scheduled payment date (other than any scheduled final maturity date) of the Loans; reduces the amount of any scheduled payment (other than the final payment at maturity) of the Loans; or postpones the date or reduces the aggregate amount of any mandatory prepayment of the Loans shall be effective only if evidenced by a writing signed by or on behalf of Supermajority Lenders; provided further that any -------- ------- amendment, modification, termination or waiver which: increases the amount of the Commitments or reduces the principal amount of the Loans; changes each Lender's Pro Rata Share; changes the definition of "Requisite Lenders" or the definition of "Supermarjority Lenders"; changes in any manner any provision of the Agreement which, by its terms, expressly requires the approval or concurrence of all Lenders; postpones the scheduled final maturity dates of the Loans or the dates on which interest or any fees are payable (other than any waiver of the requirement that any Eurodollar Rate Loan may not be voluntarily prepaid prior to the expiration of the Interest Period applicable thereto); decreases the interest rates borne by the Loans or the amount of any fees payable hereunder; increases the maximum duration of Interest Periods; reduces the amount or postpones the due date of any amount payable in respect of, or postpones the required expiration date of, any Letters of Credit; changes in any manner the obligations of Lenders relating to the purchase of participations in Letters of Credit; releases the Liens granted in favor of Agent with respect to all or substantially all of the Collateral other than in accordance with the terms of the Loan Documents; or changes in any manner the provisions contained in subsection 8.1 or this subsection 10.6 shall be effective only if evidenced by a writing signed by or on behalf of all Lenders. In addition, (i) any amendment, modification, termination or waiver of any of the provisions contained in Section 4 shall be effective only if evidenced by a writing signed by or on behalf of Agent and Requisite Lenders, (ii) no amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the Lender which is the holder of that Note, (iii) no amendment, modification, termi- nation or waiver of any provision of Section 9 or of any other provision of this Agreement which, by its terms, expressly requires the approval or concurrence of Agent shall be effective without the written concurrence of Agent, (iv) no amendment, modification, termination or waiver of any provision of subsection 2.1A(iv) or any other provision of this Agreement relating to the Swing Line Loan Commitment or the Swing Line Loans shall be effective without the written concurrence of Swing Line Lender, and (v) no amendment, modification, termination or waiver of any provision of subsection 2.1E or subsection 2.4 which has the effect of postponing or reducing the aggregate scheduled payments, voluntary or mandatory prepayments or Commitment reductions applicable to any Class (an "Affected Class") in a manner that is proportionately greater than the corresponding postponement or reduction applicable to any other Class shall be effective without the written concurrence of the Requisite Class Lenders of such Affected Class. Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Company in any case shall entitle Company to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this subsection 10.6 shall be binding upon each holder of the Notes at the time outstanding, each future holder of the Notes and, if signed by Company, on Company. 10.7 Independence of Covenants. ------------------------- All covenants hereunder 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 would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is taken or condition exists. 10.8 Notices. ------- Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telecopied or sent by United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service, upon receipt of telecopy, or four Business Days after depositing it in the United States mail, registered or certified, with postage prepaid and properly addressed; provided -------- that notices to Agent shall not be effective until received. For the purposes hereof, the address of each party hereto shall be as set forth under such party's name on the signature pages hereof or (i) as to Company and Agent, such other address as shall be designated by such Person in a written notice delivered to the other parties hereto and (ii) as to each other party, such other address as shall be designated by such party in a written notice delivered to Agent. 10.9 Survival of Representations, Warranties and ------------------------------------------- Agreements. ---------- A. All representations, warranties and agreements made herein shall survive the execution and delivery of this Agreement and the making of the Loans and the issuance of the Letters of Credit hereunder. B. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A, 3.6, 10.2 and 10.3 and the agreements of Lenders set forth in subsections 9.2C, 9.4, 10.4 and 10.5 shall survive the payment of the Loans, the cancellation or expiration of the Letters of Credit and the reimbursement of any amounts drawn thereunder, and the termination of this Agreement. 10.10 Failure or Indulgence Not Waiver; Remedies Cumulative. ----------------------------------------------------- No failure or delay on the part of Agent or any Lender in the exercise of any power, right or privilege hereunder or under any Note or Letter of Credit shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement, the Notes, the Letters of Credit and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. 10.11 Marshalling; Payments Set Aside. ------------------------------- Neither Agent nor any Lender shall be under any obligation to marshal any assets in favor of Company or any other party or against or in payment of any or all of the Obligations. To the extent that Company makes a payment or payments to Agent or Lenders (or to Agent for the benefit of Lenders), or Agent or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred. 10.12 Severability. ------------ In case any provision in or obligation under this Agreement or the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 10.13 Obligations Several; Independent Nature of Lenders' --------------------------------------------------- Rights. ------ The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Commit- ments of any other Lender hereunder. Nothing contained herein or in any other Loan Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 10.14 Headings. -------- Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 10.15 Applicable Law. -------------- THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 10.16 Successors and Assigns. ---------------------- This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and permitted assigns of Lenders (it being understood that Lenders' rights of assignment are subject to subsection 10.1). Neither Company's rights or obligations hereunder nor any interest therein may be assigned or delegated by Company without the prior written consent of all Lenders. 10.17 Consent to Jurisdiction and Service of Process. ---------------------------------------------- ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OBLIGATION MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE CITY AND STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL AND NONAPPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN DOCUMENT OR SUCH OBLIGATION. Company hereby agrees that service of all process in any such proceedings in any such court may be made by registered or certified mail, return receipt requested, to Company at its address provided in subsection 10.8, such service being hereby acknowledged by Com- pany to be sufficient for personal jurisdiction in any action against Company in the State of New York and to be otherwise effective and binding service in every respect. Nothing herein shall affect the right to serve process in any other manner per- mitted by law or shall limit the right of any Lender to bring proceedings against Company in the courts of any other juris- diction. 10.18 Waiver of Jury Trial. -------------------- EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all- encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each party hereto acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this Agreement, and that each will continue to rely on this waiver in their related future dealings. Each party hereto further warrants and represents that it has reviewed this waiver with its legal counsel and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 10.19 Confidentiality. --------------- Each Lender shall hold all non-public information obtained pursuant to the requirements of this Agreement which has been identified as confidential by Company in accordance with such Lender's customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, it being understood and agreed by Company that in any event a Lender may make disclosures reasonably required by any bona fide assignee or participant in connection with the contemplated assignment by such Lender of any Loans or any participation therein or as required or requested by any govern- mental agency or representative thereof or pursuant to legal process; provided that, unless specifically prohibited by -------- applicable law or court order, each Lender shall notify Company of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; and provided, further that in no event shall any Lender be obligated -------- ------- or required to return any materials furnished by Company or any of its Subsidiaries. 10.20 Counterparts; Effectiveness. --------------------------- This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by Company and Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. COMPANY: PATHMARK STORES, INC. By: Title: Notice Address: Pathmark Stores, Inc. 301 Blair Road P.O. Box 5301 Woodbridge, New Jersey 07095- 0915 Attention: Chief Executive Officer with a copy to: Pathmark Stores, Inc. 301 Blair Road P.O. Box 5301 Woodbridge, New Jersey 07095- 0915 Attention: Corporate Secretary LENDERS: BANKERS TRUST COMPANY, individually and as Agent By: Title: Notice Address: Bankers Trust Company 280 Park Avenue New York, New York 10017 Attention: Mary Jo Jolly with a copy to: Bankers Trust Company 300 South Grand Avenue, 41st Floor Los Angeles, California 90071 Attention: Michael R. Duckworth PRIME INCOME TRUST By: Title: Notice Address: Dean Witter Intercapital 2 World Trade Center, 72nd Floor New York, New York 10048 Attention: Raphael Scolari THE BANK OF NOVA SCOTIA By: Title: Notice Address: 165 Broadway 26th Floor New York, New York 10006 Attention: Stephen Lockhart BANQUE FRANCAISE DU COMMERCE EXTERIEUR By: Title: Notice Address: 645 Fifth Avenue 20th Floor New York, New York 10022 Attention: David Kopp Jean Richard COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By: Title: Notice Address: 520 Madison Avenue 37th Floor New York, New York 10022 Attention: Alain Merle d'Aubigne EATON VANCE PRIME RATE RESERVES By: Title: Notice Address: 24 Federal Street Boston, Massachusetts 02110 Attention: Jeffrey S. Garner FIRST FIDELITY BANK, N.A., NEW JERSEY By: Title: Notice Address: 550 Broad Street 5th Floor Newark, New Jersey 07102 Attention: Joseph DiFrancesco THE FIRST NATIONAL BANK OF BOSTON By: Title: Notice Address: 100 Federal Street 01-08-05 Boston, Massachusetts 02110 Attention: Gordon L. Nelson LTCB TRUST COMPANY By: Title: Notice Address: 165 Broadway 50th Floor New York, New York 10006 Attention: Fumihiko Kamoshida MIDLANTIC NATIONAL BANK By: Title: Notice Address: 499 Thornall Street 9th Floor Edison, New Jersey 08818 Attention: Edward M. Tessalone THE MITSUBISHI TRUST AND BANKING CORPORATION By: Title: Notice Address: 520 Madison Avenue 39th Floor New York, New York 10022 Attention: Patricia Loret de Mola CORESTATES BANK, N.A. By: Title: Notice Address: 1345 Chestnut Street Philadelphia, Pennsylvania 19101 F.C. 1-8-12-3 Attention: Thomas J. McDonnell PILGRIM PRIME RATE TRUST By: Title: Notice Address: 10100 Santa Monica Boulevard 21st Floor Los Angeles, California 90067 Attention: Michael Hatley UNION BANK OF FINLAND, LTD. -- GRAND CAYMAN BRANCH By: Title: Notice Address: 437 Madison Avenue 22nd Floor New York, New York 10022 Attention: James Kyprios Durval Araujo UNITED JERSEY BANK By: Title: Notice Address: 25 East Salem Street 2nd Floor Hackensack, New Jersey 07602 Attention: Jeffrey L. Knoop VAN KAMPEN MERRITT PRIME RATE INCOME TRUST By: Title: Notice Address: One Parkview Plaza Oakbrook Terrace, Illinois 60181 Attention: Jeffrey W. Maillet CREDIT AGREEMENT DATED AS OF OCTOBER 26, 1993 AMONG PATHMARK STORES, INC., as Borrower, THE LENDERS LISTED HEREIN, as Lenders, and BANKERS TRUST COMPANY, as Agent PATHMARK STORES, INC. CREDIT AGREEMENT TABLE OF CONTENTS ----------------- Page ---- Section 1. DEFINITIONS . . . . . . . . . . . . . . . 3 1.1 Certain Defined Terms . . . . . . . . . . 3 --------------------- 1.2 Accounting Terms; Utilization of -------------------------------- GAAP for Purposes of Calculations --------------------------------- Under Agreement . . . . . . . . . . . . . 35 --------------- 1.3 Other Definitional Provisions . . . . . . 36 ----------------------------- Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS . . . . 36 2.1 Commitments; Loans . . . . . . . . . . . 36 ------------------ 2.2 Interest on the Loans . . . . . . . . . . 45 --------------------- 2.3 Fees . . . . . . . . . . . . . . . . . . 50 ---- 2.4 Prepayments and Reductions in ----------------------------- Commitments; General Provisions ------------------------------- Regarding Payments . . . . . . . . . . . 50 ------------------ 2.5 Use of Proceeds . . . . . . . . . . . . . 58 --------------- 2.6 Special Provisions Governing Euro- ---------------------------------- dollar Rate Loans . . . . . . . . . . . . 59 ----------------- 2.7 Increased Costs; Taxes; Capital ------------------------------- Adequacy . . . . . . . . . . . . . . . . 61 -------- 2.8 Obligation of Lenders and Issuing --------------------------------- Lenders to Mitigate . . . . . . . . . . . 65 ------------------- 2.9 Removal of a Lender. . . . . . . . . . . 66 ------------------- 2.10 Defaulting Lenders . . . . . . . . . . . 66 ------------------ Section 3. LETTERS OF CREDIT . . . . . . . . . . . . . . . . 68 3.1 Issuance of Letters of Credit and --------------------------------- Lenders' Purchase of -------------------- Participations Therein . . . . . . . . . 68 ---------------------- 3.2 Letter of Credit Fees . . . . . . . . . . 71 --------------------- 3.3 Drawings and Reimbursement of ----------------------------- Amounts Drawn Under Letters of ------------------------------ Credit. . . . . . . . . . . . . . . . . . 72 ------ 3.4 Obligations Absolute . . . . . . . . . . 75 -------------------- 3.5 Indemnification; Nature of Issuing ---------------------------------- Lenders' Duties . . . . . . . . . . . . . 76 --------------- 3.6 Increased Costs and Taxes Relating ---------------------------------- to Letters of Credit . . . . . . . . . . 77 -------------------- Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT . . . . 78 4.1 Conditions to Term Loans and ---------------------------- Initial Revolving Loans and Swing --------------------------------- Line Loans . . . . . . . . . . . . . . . 78 ---------- 4.2 Conditions to All Loans . . . . . . . . . 87 ----------------------- 4.3 Conditions to Letters of Credit . . . . . 88 ------------------------------- Section 5. COMPANY'S REPRESENTATIONS AND WARRANTIES . . . . . 89 5.1 Organization, Powers, --------------------- Qualification, Good Standing, ----------------------------- Business and Subsidiaries . . . . . . . . 89 ------------------------- 5.2 Authorization of Borrowing, etc. . . . . 90 -------------------------------- 5.3 Financial Condition . . . . . . . . . . . 92 ------------------- 5.4 No Material Adverse Change; No ------------------------------ Restricted Junior Payments . . . . . . . 92 -------------------------- 5.5 Title to Properties; Liens . . . . . . . 92 -------------------------- 5.6 Litigation; Adverse Facts . . . . . . . . 93 ------------------------- 5.7 Payment of Taxes . . . . . . . . . . . . 93 ---------------- 5.8 Performance of Agreements; -------------------------- Materially Adverse Agreements . . . . . . 93 ----------------------------- 5.9 Governmental Regulation . . . . . . . . . 94 ----------------------- 5.10 Securities Activities . . . . . . . . . . 94 --------------------- 5.11 Employee Benefit Plans . . . . . . . . . 94 ---------------------- 5.12 Certain Fees . . . . . . . . . . . . . . 95 ------------ 5.13 Environmental Protection . . . . . . . . 95 ------------------------ 5.14 Employee Matters . . . . . . . . . . . . 97 ---------------- 5.15 Solvency . . . . . . . . . . . . . . . . 97 -------- 5.16 Disclosure . . . . . . . . . . . . . . . 97 ---------- 5.17 Intellectual Property . . . . . . . . . . 97 --------------------- 5.18 Restructuring Documents . . . . . . . . . 98 ----------------------- Section 6. COMPANY'S AFFIRMATIVE COVENANTS . . . . . . . . . 98 6.1 Financial Statements and Other ------------------------------ Reports . . . . . . . . . . . . . . . . . 98 ------- 6.2 Corporate Existence, etc. . . . . . . . . 104 ------------------------- 6.3 Payment of Taxes and Claims; Tax -------------------------------- Consolidation . . . . . . . . . . . . . . 104 ------------- 6.4 Maintenance of Properties; -------------------------- Insurance . . . . . . . . . . . . . . . . 104 --------- 6.5 Inspection; Lender Meeting . . . . . . . 105 -------------------------- 6.6 Compliance with Laws, etc. . . . . . . . 105 -------------------------- 6.7 Environmental Disclosure and ---------------------------- Inspection . . . . . . . . . . . . . . . 106 ---------- 6.8 Execution of Subsidiary Guaranty -------------------------------- and Collateral Documents by --------------------------- Subsidiaries and Future ----------------------- Subsidiaries . . . . . . . . . . . . . . 107 ------------ 6.9 Additional Mortgages; Release of -------------------------------- Mortgages . . . . . . . . . . . . . . . . 107 --------- 6.10 Assignability of Lease Agreements . . . . 111 --------------------------------- Section 7. COMPANY'S NEGATIVE COVENANTS . . . . . . . . . . . 111 7.1 Indebtedness . . . . . . . . . . . . . . 111 ------------ 7.2 Liens and Related Matters . . . . . . . . 113 ------------------------- 7.3 Investments; Joint Ventures . . . . . . . 116 --------------------------- 7.4 Contingent Obligations . . . . . . . . . 117 ---------------------- 7.5 Restricted Junior Payments . . . . . . . 119 -------------------------- 7.6 Financial Covenants . . . . . . . . . . . 120 ------------------- 7.7 Restriction on Fundamental -------------------------- Changes; Asset Sales . . . . . . . . . . 123 -------------------- 7.8 Consolidated Capital Expenditures . . . . 124 --------------------------------- 7.9 Restriction on Leases . . . . . . . . . . 125 --------------------- 7.10 Sale or Discount of Receivables . . . . . 125 ------------------------------- 7.11 Transactions with Shareholders and ---------------------------------- Affiliates . . . . . . . . . . . . . . . 126 ---------- 7.12 Disposal of Subsidiary Stock . . . . . . 126 ---------------------------- 7.13 Conduct of Business . . . . . . . . . . . 126 ------------------- 7.14 Amendments of Certain Documents; -------------------------------- Designation of Specified Senior ------------------------------- Indebtedness . . . . . . . . . . . . . . 127 ------------ 7.15 Fiscal Year . . . . . . . . . . . . . . . 127 ----------- Section 8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . 128 8.1 Failure to Make Payments When Due . . . . 128 --------------------------------- 8.2 Default in Other Agreements . . . . . . . 128 --------------------------- 8.3 Breach of Certain Covenants . . . . . . . 128 --------------------------- 8.4 Breach of Warranty . . . . . . . . . . . 129 ------------------ 8.5 Other Defaults Under Loan ------------------------- Documents . . . . . . . . . . . . . . . . 129 --------- 8.6 Involuntary Bankruptcy; ----------------------- Appointment of Receiver, etc. . . . . . . 129 ----------------------------- 8.7 Voluntary Bankruptcy; Appointment --------------------------------- of Receiver, etc. . . . . . . . . . . . . 129 ----------------- 8.8 Judgments and Attachments . . . . . . . . 130 ------------------------- 8.9 Dissolution . . . . . . . . . . . . . . . 130 ----------- 8.10 Employee Benefit Plans . . . . . . . . . 130 ---------------------- 8.11 Change in Control . . . . . . . . . . . . 130 ----------------- 8.12 Invalidity of Subsidiary Guaranty . . . . 131 --------------------------------- 8.13 Failure of Security . . . . . . . . . . . 132 ------------------- 8.14 Failure to Consummate --------------------- Restructuring . . . . . . . . . . . . . . 132 ------------- 8.15 Termination or Breach of ------------------------ Logistical Services Agreement . . . . . . 132 ----------------------------- 8.16 Incurrence of Tax Liability --------------------------- Relating to ------------ Spin-Off. . . . . . . . . . . . . . . . . 132 -------- 8.17 Amendments of Certain Documents ------------------------------- Relating to PTKH Bonds. . . . . . . . . . 133 ---------------------- Section 9. AGENT AND COLLATERAL CO-AGENTS . . . . . . . . . . 134 9.1 Appointment . . . . . . . . . . . . . . . 134 ----------- 9.2 Powers; General Immunity . . . . . . . . 135 ------------------------ 9.3 Representations and Warranties; No ---------------------------------- Responsibility For Appraisal of -------------------------------- Creditworthiness . . . . . . . . . . . . 137 ---------------- 9.4 Right to Indemnity . . . . . . . . . . . 137 ------------------ 9.5 Payee of Note Treated as Owner . . . . . 137 ------------------------------ 9.6 Successor Agent, Collateral Co- ------------------------------- Agent ------ and Swing Line Lender . . . . . . . . . . 138 --------------------- 9.7 Collateral Documents . . . . . . . . . . 138 -------------------- Section 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . 139 10.1 Assignments and Participations in --------------------------------- Loans and Letters of Credit . . . . . . . 139 --------------------------- 10.2 Expenses . . . . . . . . . . . . . . . . 142 -------- 10.3 Indemnity . . . . . . . . . . . . . . . . 142 --------- 10.4 Set Off; Security Interest in ----------------------------- Deposit -------- Accounts . . . . . . . . . . . . . . . . 143 -------- 10.5 Ratable Sharing . . . . . . . . . . . . . 144 --------------- 10.6 Amendments and Waivers . . . . . . . . . 145 ---------------------- 10.7 Independence of Covenants . . . . . . . . 146 ------------------------- 10.8 Notices . . . . . . . . . . . . . . . . . 146 ------- 10.9 Survival of Representations, ---------------------------- Warranties and Agreements . . . . . . . . 146 ------------------------- 10.10 Failure or Indulgence Not Waiver; --------------------------------- Remedies Cumulative . . . . . . . . . . . 147 ------------------- 10.11 Marshalling; Payments Set Aside . . . . . 147 ------------------------------- 10.12 Severability . . . . . . . . . . . . . . 147 ------------ 10.13 Obligations Several; Independent -------------------------------- Nature of Lenders' Rights . . . . . . . . 147 ------------------------- 10.14 Headings . . . . . . . . . . . . . . . . 148 -------- 10.15 Applicable Law . . . . . . . . . . . . . 148 -------------- 10.16 Successors and Assigns . . . . . . . . . 148 ---------------------- 10.17 Consent to Jurisdiction and --------------------------- Service of Process . . . . . . . . . . . 148 ------------------ 10.18 Waiver of Jury Trial . . . . . . . . . . 149 -------------------- 10.19 Confidentiality . . . . . . . . . . . . . 149 --------------- 10.20 Counterparts; Effectiveness . . . . . . . 150 --------------------------- EXHIBITS I FORM OF NOTICE OF BORROWING II FORM OF NOTICE OF CONVERSION/CONTINUATION III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT IV-A FORM OF TERM A NOTE IV-B FORM OF TERM B NOTE V FORM OF REVOLVING NOTE VI FORM OF SWING LINE NOTE VII FORM OF COMPLIANCE CERTIFICATE VIII FORM OF OPINION OF SHEARMAN & STERLING IX FORM OF OPINION OF GENERAL COUNSEL OF COMPANY X FORM OF OPINION OF O'MELVENY & MYERS XI FORM OF ASSIGNMENT AND ACCEPTANCE XII FORM OF COLLATERAL ACCOUNT AGREEMENT XIII FORM OF COMPANY PLEDGE AGREEMENT XIV FORM OF COMPANY SECURITY AGREEMENT XV FORM OF COMPANY TRADEMARK SECURITY AGREEMENT XVI FORM OF SUBSIDIARY GUARANTY XVII FORM OF SUBSIDIARY PLEDGE AGREEMENT XVIII FORM OF SUBSIDIARY SECURITY AGREEMENT XIX FORM OF SUBSIDIARY TRADEMARK SECURITY AGREEMENT XX FORM OF MORTGAGE SCHEDULES 2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES 4.1B REAL PROPERTY COVERED BY CLOSING DATE MORTGAGES 4.1K REAL PROPERTY COVERED BY ENVIRONMENTAL REPORTS 5.1 SUBSIDIARIES OF COMPANY 5.2B CERTAIN APPROVALS AND CONSENTS 5.2C CERTAIN GOVERNMENTAL CONSENTS 5.6 LITIGATION 5.11 CERTAIN EMPLOYEE BENEFIT PLANS 5.13 ENVIRONMENTAL MATTERS 5.17 INTELLECTUAL PROPERTY MATTERS 6.9 REAL PROPERTY REQUIRING LANDLORD CONSENT 7.1 CERTAIN EXISTING INDEBTEDNESS 7.2 CERTAIN EXISTING LIENS 7.3 CERTAIN EXISTING INVESTMENTS 7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS 7.7 REAL PROPERTY TO BE SOLD PURSUANT TO WESTERN PENNSYLVANIA STORES ASSETS EX-4.6 7 DRAFT - 8/23/93 8882H/8883H/ 6862M/6863M PATHMARK STORES, INC., Issuer, and UNITED STATES TRUST COMPANY OF NEW YORK, Trustee INDENTURE Dated as of October 26, 1993 9 5/8% Senior Subordinated Notes due 2003 Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of October 26, 1993* Trust Indenture Indenture Act Section Section Sec. 310(a)(1) ............................. 608 (a)(2) ............................. 608 (b) ............................. 607, 609 Sec. 312(c) ............................. 701 Sec. 314(a) ............................. 703 (a)(4) ............................. 1018 (c)(1) ............................. 103 (c)(2) ............................. 103 (e) ............................. 103 Sec. 315(b) ............................. 601 Sec. 316(a)(last sentence) ............................. 101 ("Out- standing") (a)(1)(A) ............................. 502, 512 (a)(1)(B) ............................. 513 (b) ............................. 508 (c) ............................. 105 Sec. 317(a)(1) ............................. 503 (a)(2) ............................. 504 Sec. 318(a) ............................. 108 * This reconciliation and tie shall not, for any purpose, be deemed to be part of the Indenture. TABLE OF CONTENTS PAGE ARTICLE ONE Definitions and Other Provisions of General Application Section 101. Definitions ............................ 1 Acquired Indebtedness .................. 2 Acquisition ............................ 2 Affiliate .............................. 2 Applicable Premium ..................... 3 Average Life to Stated Maturity ........ 3 Bank Credit Agreement .................. 3 Board of Directors ..................... 3 Board Resolution ....................... 3 Business Day ........................... 3 Capital Lease Obligation ............... 4 Capital Stock .......................... 4 Change in Control ...................... 4 Chefmark ............................... 4 Commission ............................. 4 Company ................................ 4 Company Request or Company Order ....... 5 Consolidated Adjusted Net Income (Loss). 5 Consolidated Assets .................... 5 Consolidated Capital Expenditures ...... 6 Consolidated Fixed Charge Coverage Ratio ....................... 6 Consolidated Interest Expense .......... 6 Consolidated Non-cash Charges .......... 6 Consolidated Tax Expense ............... 6 Corporate Trust Office ................. 7 Corporation ............................ 7 Day Count Fraction ..................... 7 Default ................................ 7 Deferred Coupon Notes .................. 7 Equitable Investors .................... 7 Event of Default ....................... 7 Exchange Act ........................... 7 Note: This table of contents shall not, for any purpose, be deemed to be a part of this Indenture. PAGE Existing Assets ........................ 7 Fair Market Value ...................... 7 Federal Bankruptcy Code ................ 7 Generally Accepted Accounting Principles or GAAP ................... 8 Guaranteed Debt ........................ 8 Holder ................................. 8 Holdings ............................... 8 Holdings Intercompany Notes............. 8 Holdings Preferred Stock ............... 8 Indebtedness ........................... 9 Indenture .............................. 9 Intercompany Agreement ................. 10 Interest Payment Date .................. 10 Interest Rate Hedge Arrangement ........ 10 Investments ............................ 10 Lien ................................... 10 Logistical Services Agreement .......... 10 Majority-owned Subsidiary .............. 10 Management Investors ................... 11 Material Subsidiary .................... 11 Maturity ............................... 11 ML Funds ............................... 11 Newco................................... 11 Officers' Certificate .................. 12 Opinion of Counsel ..................... 12 Outstanding ............................ 12 Pari Passu Indebtedness ................ 13 Paying Agent ........................... 13 Permitted Holders ...................... 13 Permitted Indebtedness ................. 13 Permitted Investment ................... 15 Permitted Payment ...................... 15 Person ................................. 16 Plainbridge ............................ 16 Predecessor Security ................... 16 Preferred Stock ........................ 16 Purchase Money Mortgages ............... 16 Qualified Capital Stock ................ 16 Recapitalization ....................... 16 Redeemable Capital Stock ............... 16 Redemption Date ........................ 17 Redemption Price ....................... 17 Regular Record Date .................... 17 Representative ......................... 17 Responsible Officer .................... 17 Restricted Payments .................... 17 Security and Securities ................ 17 -ii- PAGE Senior Indebtedness .................... 17 Senior Subordinated Notes............... 18 SMG-II ................................. 18 Special Record Date .................... 18 Specified Senior Indebtedness .......... 18 Spin-Off Agreements .................... 19 Spin-Off .............................. 19 Stated Maturity ........................ 19 Subordinated Debentures ................ 19 Subordinated Indebtedness .............. 19 Subordinated Notes ..................... 19 Subsidiary ............................. 20 Tax Sharing Agreement .................. 20 Temporary Cash Investment .............. 20 Treasury Rate .......................... 20 Trust Indenture Act .................... 21 Trustee ................................ 21 Unrestricted Subsidiary ................ 21 Unrestricted Subsidiary Indebtedness ... 21 Voting Stock ........................... 22 Section 102. Other Definitions ...................... 22 Section 103. Compliance Certificates and Opinions ... 23 Section 104. Form of Documents Delivered to Trustee . 23 Section 105. Acts of Holders ........................ 24 Section 106. Notices, etc., to Trustee and Company .......................... 25 Section 107. Notice to Holders; Waiver .............. 26 Section 108. Conflict of any Provision of Indenture with Trust Indenture Act ... 27 Section 109. Effect of Headings and Table of Contents ............................. 27 Section 110. Successors and Assigns ................. 27 Section 111. Separability Clause .................... 27 Section 112. Benefits of Indenture .................. 27 Section 113. Governing Law .......................... 27 Section 114. Legal Holidays ......................... 28 Section 115. No Recourse Against Others ............. 28 ARTICLE TWO Security Forms Section 201. Forms Generally ........................ 28 Section 202. Form of Face of Security ............... 29 Section 203. Form of Reverse of Security ............ 31 Section 204. Form of Trustee's Certificate of Authentication ....................... 35 -iii- PAGE ARTICLE THREE The Securities Section 301. Title and Terms ........................ 36 Section 302. Denominations .......................... 36 Section 303. Execution, Authentication, Delivery and Dating ............................... 36 Section 304. Temporary Securities ................... 38 Section 305. Registration, Registration of Transfer and Exchange ......................... 38 Section 306. Mutilated, Destroyed, Lost and Stolen Securities ........................... 40 Section 307. Payment of Interest; Interest Rights Preserved ............................ 41 Section 308. Persons Deemed Owners .................. 42 Section 309. Cancellation ........................... 42 Section 310. Computation of Interest ................ 43 ARTICLE FOUR Satisfaction and Discharge Section 401. Satisfaction and Discharge of Indenture ......................... 43 Section 402. Application of Trust Money ............. 44 ARTICLE FIVE Remedies Section 501. Events of Default ...................... 45 Section 502. Acceleration of Maturity; Rescission ... 47 Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee ........... 48 Section 504. Trustee May File Proofs of Claim ....... 49 Section 505. Trustee May Enforce Claims Without Possession of Securities ............. 50 Section 506. Application of Money Collected ......... 50 Section 507. Limitation on Suits .................... 51 Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest ............................. 52 Section 509. Restoration of Rights and Remedies ..... 52 Section 510. Rights and Remedies Cumulative ......... 52 Section 511. Delay or Omission Not Waiver ........... 52 Section 512. Control by Holders ..................... 53 Section 513. Waiver of Past Defaults ................ 53 -iv- PAGE Section 514. Undertaking for Costs .................. 53 Section 515. Waiver of Stay, Extension or Usury Laws ........................... 54 Section 516. Unconditional Right of Holders to Institute Certain Suits ........... 54 ARTICLE SIX The Trustee Section 601. Notice of Defaults ..................... 55 Section 602. Certain Rights of Trustee .............. 55 Section 603. Not Responsible for Recitals or Issuance of Securities ............... 57 Section 604. Trustee and Agents May Hold Securities; Collections; etc. ........ 57 Section 605. Money Held in Trust .................... 58 Section 606. Compensation and Reimbursement ......... 58 Section 607. Conflicting Interests .................. 60 Section 608. Corporate Trustee Required; Eligibility .......................... 60 Section 609. Resignation and Removal; Appointment of Successor ......................... 60 Section 610. Acceptance of Appointment by Successor ............................ 62 Section 611. Merger, Conversion, Consolidation or Succession to Business ............... 63 Section 612. Preferential Collection of Claims Against Company ...................... 63 ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company Section 701. Disclosure of Names and Addresses of Holders ........................... 63 Section 702. Reports by Trustee ..................... 64 Section 703. Reports by Company ..................... 64 ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease Section 801. Company May Consolidate, etc., Only on Certain Terms ................ 65 Section 802. Successor Substituted .................. 66 -v- PAGE ARTICLE NINE Supplemental Indentures Section 901. Supplemental Indentures without Consent of Holders ........... 66 Section 902. Supplemental Indentures with Consent of Holders .............. 67 Section 903. Execution of Supplemental Indentures ... 68 Section 904. Effect of Supplemental Indentures ...... 69 Section 905. Conformity with Trust Indenture Act .... 69 Section 906. Reference in Securities to Supplemental Indentures ........................... 69 Section 907. Effect on Senior Indebtedness .......... 69 ARTICLE TEN Covenants Section 1001. Payment of Principal, Premium and Interest ............................. 70 Section 1002. Maintenance of Office or Agency ........ 70 Section 1003. Money for Security Payments to Be Held in Trust ........................ 70 Section 1004. Corporate Existence .................... 72 Section 1005. Payment of Taxes and Other Claims ...... 73 Section 1006. Maintenance of Properties .............. 73 Section 1007. Limitation on Indebtedness ............. 74 Section 1008. Limitation on Restricted Payments ...... 74 Section 1009. Limitation on Transactions with Affiliates ........................... 79 Section 1010. Limitation on Liens .................... 81 Section 1011. Purchase of Securities Upon Change in Control .............................. 81 Section 1012. Restrictions on Preferred Stock of Subsidiaries ......................... 85 Section 1013. Limitations on Issuances of Guarantees of Indebtedness ...................... 85 Section 1014. Restriction on Transfer of Assets ...... 86 Section 1015. Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries ......................... 87 -vi- PAGE Section 1016. Limitation on Unrestricted Subsidiaries ......................... 87 Section 1017. Limitation on Other Senior Subordinated Indebtedness ............ 88 Section 1018. Statement as to Compliance; Notice of Default; Provision of Financial Statements ........................... 88 Section 1019. Waiver of Certain Covenants ............ 89 ARTICLE ELEVEN Redemption of Securities Section 1101. Right of Redemption .................... 89 Section 1102. Applicability of Article ............... 90 Section 1103. Election to Redeem; Notice to Trustee .. 90 Section 1104. Selection by Trustee of Securities to Be Redeemed .......................... 90 Section 1105. Notice of Redemption ................... 90 Section 1106. Deposit of Redemption Price ............ 91 Section 1107. Securities Payable on Redemption Date .. 92 Section 1108. Securities Redeemed in Part ............ 92 ARTICLE TWELVE [Intentionally Omitted] ARTICLE THIRTEEN Subordination of Securities Section 1301. Securities Subordinate to Senior Indebtedness ......................... 93 Section 1302. Payment Over of Proceeds Upon Dissolution, etc. .................... 93 Section 1303. No Payment When Specified Senior Indebtedness in Default .............. 95 Section 1304. Payment Permitted if No Default ........ 97 Section 1305. Subrogation to Rights of Holders of Senior Indebtedness ............... 97 Section 1306. Provisions Solely to Define Relative Rights ...................... 97 Section 1307. Trustee to Effectuate Subordination .... 98 Section 1308. No Waiver of Subordination Provisions .. 98 Section 1309. Notice to Trustee ...................... 99 Section 1310. Reliance on Judicial Order or Certificate of Liquidating Agent ..... 100 -vii- PAGE Section 1311. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights ..................... 100 Section 1312. Article Applicable to Paying Agents .... 100 Section 1313. Rescission ............................. 101 Section 1314. Application by Trustee of Assets Deposited With It .................... 101 ARTICLE FOURTEEN Defeasance and Covenant Defeasance Section 1401. Option to Effect Defeasance or Covenant Defeasance ............... 101 Section 1402. Defeasance and Discharge ............... 101 Section 1403. Covenant Defeasance..................... 102 Section 1404. Conditions to Defeasance or Covenant Defeasance .................. 103 Section 1405. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions ....... 105 Section 1406. Reinstatement .......................... 106 TESTIMONIUM........................................... 107 SIGNATURES AND SEALS.................................. 107 ACKNOWLEDGMENTS EXISTING INDEBTEDNESS..............................SCHEDULE I FORM OF INTERCOMPANY AGREEMENT.....................APPENDIX A FORM OF HOLDINGS INTERCOMPANY NOTE.................APPENDIX B -viii- INDENTURE, dated as of October 26, 1993, between PATHMARK STORES, INC., a Delaware corporation (hereinafter called the "Company"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking corporation, as trustee (hereinafter called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the creation of an issue of its 9 5/8% Senior Subordinated Notes due 2003 (hereinafter called the "Securities"), of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture; This Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act that are required to be part of and to govern indentures qualified under the Trust Indenture Act; All acts and things necessary have been done to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid, binding and legal obligations of the Company, and to make this Indenture a valid agreement of the Company in accordance with its terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (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 generally accepted accounting principles and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States as of the date hereof; and (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Articles Five, Six, Ten, Thirteen and Fourteen are defined in those Articles. "Acquired Indebtedness" means Indebtedness of a Person (including an Unrestricted Subsidiary) (i) existing at the time such Person becomes a Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person, other than Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Subsidiary or such acquisition, as the case may be. "Acquisition" means the acquisition of the Company by Holdings completed in October 1987 pursuant to the Agreement and Plan of Merger dated as of April 22, 1987 among Holdings, SMG Acquisition Corporation and the Company, as amended. "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 or (ii) for purposes of Section l009 only, any other Person that owns, directly or indirectly, 10% or more of such Person's Capital Stock or any officer or director of any such Person or other Person or with respect to any natural Person, any person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. 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 the ownership of Voting Stock, - 2- by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Applicable Premium" means the greater of (i) 1.0% of the then outstanding principal amount of the Securities and (ii) (a) the sum of the present values, discounted for all full semiannual periods at a discount rate equal to one-half multiplied by the Treasury Rate plus 125 basis points (provided, however, that the discount rate for the period from the Redemption Date to the next Interest Payment Date shall equal the result of multiplying the Treasury Rate plus 125 basis points by the Day Count Fraction) of (I) the remaining payments of interest on such Securities and (II) the payment of such principal amount that, but for such redemption, would have been payable on such Securities at Stated Maturity, minus (b) the unpaid principal amount of the Securities to be redeemed, minus (c) accrued and unpaid interest paid on the Redemption Date. "Average Life to Stated Maturity" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from the date of determination to the date or dates of each successive scheduled principal payment of such Indebtedness multiplied by (b) the amount of each such principal payment by (ii) the sum of all such principal payments. "Bank Credit Agreement" means the Credit Agreement dated as of the date hereof among the Company and the lenders thereunder and Bankers Trust Company, as agent, as in effect on the date hereof, and as such agreement may be amended, renewed, extended, supplemented or otherwise modified from time to time, and any agreement or successive agreements governing Indebtedness incurred to refund, refinance, restructure or replace the Indebtedness and commitments then outstanding or permitted to be outstanding under such Credit Agreement or other agreement. "Board of Directors" means the board of directors of the Company 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 to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking - 3- institutions in The City of New York or the State of Delaware are authorized or obligated by law, regulation or executive order to close. "Capital Lease Obligation" of any Person means any obligations of such Person and its Subsidiaries on a consolidated basis under any capital lease of real or personal property which, in accordance with GAAP, has been recorded as a capitalized lease obligation. "Capital Stock" of any Person means any and all shares, interests, participations, or other equivalents (however designated) of such Person's capital stock whether now outstanding or issued after the date hereof. "Change in Control" means an event as a result of which: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than Permitted Holders is or becomes the "beneficial owner" (as defined in Rules 13d-3 and l3d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total Voting Stock of the Company and (ii) such person succeeds in having its nominees constitute a majority of the Company's Board of Directors. "Chefmark" means Chefmark, Inc., a corporation incorporated under the laws of the State of Delaware, and any successor thereto. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this instrument, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. To the extent necessary to comply with the requirements of the provisions of Trust Indenture Act Sections 3l0 through 317 as they are applicable to the Company, the term "Company" shall include any other obligor with respect to the Securities for the purposes of complying with such provisions. - 4- "Company Request" or "Company Order" means a written request or order signed in the name of the Company (i) by its Chairman, a Vice Chairman, its President or a Vice President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee; provided, however, that such written request or order may be signed by any two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "Consolidated Adjusted Net Income (Loss)" of the Company means, for any period, the consolidated net income (loss) of the Company and its consolidated Subsidiaries for such period as determined in accordance with GAAP, adjusted by excluding (i) net after-tax extraordinary gains or losses (less all fees and expenses relating thereto), as the case may be, (ii) net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset sales, (iii) any depreciation and amortization expense incurred by the Company and its consolidated Subsidiaries from the date of the Acquisition to the date of determination resulting from (a) any write-up in the book value of any assets due to the Acquisition and (b) any goodwill due to the Acquisition (including any write-off or accelerated amortization of goodwill), (iv) any expenses incurred in connection with the Acquisition and the financing thereof and the Recapitalization, (v) any expenses relating to the incurrence or refinancing of Indebtedness, (vi) the net income (or loss) of any Person (including any Unrestricted Subsidiary and excluding the Company or a Subsidiary) in which the Company or any of its Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or its Subsidiaries by such other Person during such period, (vii) net income (or net loss) of any Person combined with the Company or any of its Subsidiaries in a "pooling of interests" basis attributable to any period prior to the date of combination and (viii) non-cash charges of the Company and its Subsidiaries resulting from the application of Statement of Financial Accounting Standards No. 106 ("SFAS 106") to the extent such charges exceed the cash payments for benefits covered by SFAS 106 for the relevant period. "Consolidated Assets" means the net book value of the Existing Assets shown on the balance sheet of the Company, as determined in accordance with GAAP consistently applied, as of the last day of the Company's last fiscal quarter prior to the date hereof. - 5- "Consolidated Capital Expenditures" means cash capital expenditures reflected in the consolidated statement of cash flows of the Company and Capital Lease Obligations that are on the consolidated balance sheet of the Company and its Subsidiaries, in each case in conformity with GAAP. "Consolidated Fixed Charge Coverage Ratio" of the Company means, for any period, the ratio of (i) the sum of Consolidated Adjusted Net Income, Consolidated Interest Expense, Consolidated Tax Expense and Consolidated Non-cash Charges deducted in computing Consolidated Adjusted Net Income, in each case, for such period, of the Company and its Subsidiaries on a consolidated basis, all determined in accordance with GAAP, to (ii) the sum of such Consolidated Interest Expense for such period; provided that, in making such computation, the Consolidated Interest Expense attributable to interest on any Indebtedness computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period; provided, further, that in making any calculation prior to the first anniversary date of the Recapitalization, the Recapitalization shall be deemed to have taken place on the first day of such period. "Consolidated Interest Expense" means, for any period, the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on a consolidated statement of earnings of the Company and its Subsidiaries for such period minus the aggregate amount for such period of interest imputed on future liabilities of the Company and its Subsidiaries, other than Indebtedness, recorded at present value. Consolidated Interest Expense shall include accruals in respect of Interest Rate Hedge Arrangements (but shall exclude any such accruals in the nature of amortization of front-end fees or other similar payments). "Consolidated Non-cash Charges" of the Company means, for any period, the aggregate depreciation, amortization and other non-cash charges of the Company and its consolidated Subsidiaries for such period, as determined in accordance with GAAP (excluding any such non-cash charge which requires an accrual of or reserve for cash charges for any future period). "Consolidated Tax Expense" of the Company means, for any period, as applied to the Company, the provision for federal, state, local and foreign income taxes of the Company and its consolidated Subsidiaries for such period as determined in accordance with GAAP. - 6- "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 114 West 47th Street, New York, New York 10036. "Corporation" includes corporations, associations, partnerships, companies and business trusts. "Day Count Fraction" means the number of days from the Redemption Date to (but excluding) the next scheduled Interest Payment Date divided by 360 (which assumes a year composed of twelve 30-day months). "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Deferred Coupon Notes" means the Junior Subordinated Deferred Coupon Notes due 2003 of the Company in aggregate principal amount at final maturity of $225,250,000. "Equitable Investors" means The Equitable Life Assurance Society of the United States and any of its Affiliates that beneficially own, directly or indirectly, shares of Capital Stock of SMG-II, Holdings, Newco or the Company. "Event of Default" has the meaning specified in Article Five. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Existing Assets" means the assets and other property held by the Company (and not its subsidiaries) as of the last day of the Company's last fiscal quarter prior to the date hereof, adjusted by excluding any assets and other property transferred to Newco in the Spin-Off, plus any assets held by the Company (and not its subsidiaries) irrevocably designated from time to time by the Company as Existing Assets. "Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer. "Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the United States Code, as amended from time to time. - 7- "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect from time to time; provided, however, that with respect to the obligations of any Person under Articles Eight and Ten and the definitions applicable thereto, "GAAP" means generally accepted accounting principles in the United States as in effect on the date hereof. "Guaranteed Debt" of any Person means, without duplication, all Indebtedness of any other Person referred to in the definition of Indebtedness contained in this Section 101 guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) other than with respect to the Logistical Services Agreement or any Spin-Off Agreement, to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (iii) other than with respect to the Logistical Services Agreement or any Spin-Off Agreement, to supply funds to, or in any other manner invest in, the debtor (including any agreement to pay for property or services to be acquired by such debtor irrespective of whether such property is received or such services are rendered), (iv) to maintain working capital or equity capital of the debtor, or otherwise to maintain the net worth, solvency or other financial condition of the debtor or (v) otherwise to assure a creditor against loss; provided that the term "guarantee" shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or any obligation or liability of such Person in respect of leasehold interests assigned by such Person to any other Person. "Holder" means a Person in whose name a Security is registered in the Security Register. "Holdings" means Supermarkets General Holdings Corporation, a Delaware corporation, and any successor thereto. "Holdings Intercompany Notes" means the 11-5/8% subordinated note and the 12-5/8% subordinated debenture each issued by the Company to Holdings in the forms attached hereto as Appendix B and in aggregate principal amount not in excess of the principal amounts outstanding on the date hereof. "Holdings Preferred Stock" means Holdings' Cumulative Exchangeable Redeemable Preferred Stock, par value $.01 per - 8- share, having a liquidation preference of $25 per share and maturing on December 31, 2007, that is outstanding on the date hereof. "Indebtedness" means with respect to any Person, without duplication, (i) all indebtedness of such Person for borrowed money (including overdrafts) or for the deferred purchase price of property or services, excluding any trade payables, import letters of credit and other accrued current liabilities incurred in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any standby letters of credit and acceptances issued under letter of credit facilities, acceptance facilities or other similar facilities, (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness 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 accounts payable arising in the ordinary course of business, (iv) all Capital Lease Obligations of such Person, (v) all Indebtedness referred to in (but not excluded from) clause (i), (ii), (iii) or (iv) above of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien, upon or in 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 Guaranteed Debt of such Person, (vii) 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 and (viii) all obligations under interest rate hedge contracts of such Person. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Redeemable Capital Stock, such fair market value to be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock. "Indenture" means this instrument as originally executed (including all exhibits and schedules hereto) and as it may from time to time be supplemented or amended by one or - 9- more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Intercompany Agreement" means the agreement in the form attached hereto as Appendix A, as amended or modified in accordance with the terms of this Indenture. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Securities. "Interest Rate Hedge Arrangement" means any rate swap transaction under a rate swap agreement to which the Company is a party or beneficiary, or becomes a party or beneficiary, and any interest rate protection agreement, interest rate future, interest rate option or other interest rate hedge arrangement to or under which the Company is a party or a beneficiary, or becomes a party or a beneficiary, or to or under which any Subsidiary of the Company is or becomes such a party or beneficiary if the obligations of such Subsidiary thereunder are guaranteed by the Company. "Investments" of any Person means, directly or indirectly, any advance, loan or other extension of credit or capital contribution by such Person 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) any other Person, or any purchase or acquisition by such Person of any stock, bonds, notes, debentures or other securities issued or owned by any other Person. For the purpose of making any calculations hereunder, (i) Investment shall include the Fair Market Value of the net assets of any Subsidiary at the time that such Subsidiary is designated an Unrestricted Subsidiary and shall exclude the Fair Market Value of the net assets of any Unrestricted Subsidiary that is designated a Subsidiary and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at Fair Market Value at the time of such transfer; provided that in each case, the Fair Market Value of an asset or property shall be as determined by the Board of Directors of the Company in good faith. "Lien" means any mortgage, charge, pledge, lien, privilege, security interest or encumbrance of any kind. "Logistical Services Agreement" means the Logistical Services Agreement dated as of October 26, 1993 between Plainbridge and the Company, as amended or modified in accordance with the provisions hereof. "Majority-owned Subsidiary" means a Subsidiary at least 50% of the equity ownership or the Voting Stock of which - 10- is at the time owned, directly or indirectly, by the Company or by one or more of the Subsidiaries, or the Company and one or more of the Subsidiaries, provided that Majority-owned Subsidiary shall not include any such Subsidiary if the equity ownership or the Voting Stock of such Subsidiary not owned by the Company and/or one or more of the Subsidiaries is owned by Holdings and/or one or more Affiliates of Holdings other than the Company and its Subsidiaries. "Management Investors" means the officers and other members of the management of the Company who at any particular date shall beneficially own, directly or indirectly, Voting Stock of the Company. "Material Subsidiary" means, at any particular time, any Subsidiary of the Company that, together with the Subsidiaries of such Subsidiary, (a) accounted for more than 10% of the consolidated revenues of the Company and its Subsidiaries for the most recently completed fiscal year of the Company or (b) was the owner of more than l0% of the consolidated assets of the Company and its Subsidiaries as at the end of such fiscal year, all as shown on the consolidated financial statements of the Company and its Subsidiaries for such fiscal year. "Maturity" when used with respect to any Security means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at Stated Maturity, Change in Control Purchase Date or Redemption Date and whether by declaration of acceleration, Change in Control, call for redemption or otherwise. "ML Funds" means Merrill Lynch Capital Appreciation Partnership No. IX, L.P., a Delaware partnership, ML Offshore LBO Partnership No. IX, a Cayman Islands partnership, ML Employees LBO Partnership No. I, L.P., a Delaware partnership, Merrill Lynch Interfunding Inc., a Delaware corporation, Merchant Banking L.P. No. I, a Delaware partnership, Merrill Lynch KECALP L.P., a Delaware partnership, Merrill Lynch Capital Appreciation Partnership No. B-X, L.P., a Delaware partnership, ML Offshore LBO Partnership No. B-X, a Cayman Islands partnership, MLCP Associates, L.P. No. II, a Delaware partnership, Merrill Lynch Venture Capital, Inc., a Delaware corporation and any Affiliates of the foregoing that beneficially own, directly or indirectly, shares of Capital Stock of SMG-II. "Newco" means PTK Holdings, Inc., a corporation incorporated under the laws of the State of Delaware, and any successor thereto. - 11- "Officers' Certificate" means a certificate signed by (i) the Chairman, a Vice Chairman, the President, a Vice President or the Treasurer of the Company and (ii) the Secretary or an Assistant Secretary of the Company and delivered to the Trustee; provided, however, that such certificate may be signed by two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee. Each such opinion shall include the statements provided for in Trust Indenture Act Section 314(e) to the extent applicable. "Outstanding" when used with respect to Securities means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (a) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (b) Securities, or portions thereof, for whose payment, redemption or purchase money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities and the Trustee or such Paying Agent is not prohibited from paying such money to the Holders on that date pursuant to the terms of Article Thirteen of this Indenture; provided that, if such Securities 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; (c) Securities, except to the extent provided in Sections 1402 and 1403, with respect to which the Company has effected defeasance or covenant defeasance as provided in Article Fourteen; and (d) Securities in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands the Securities are valid obligations of the Company; - 12- provided, however, that, in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, notice, direction, consent or waiver hereunder, Securities owned by the Company, or any other obligor upon the Securities or any Affiliate of the Company, or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, notice, direction, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor. "Pari Passu Indebtedness" means any Indebtedness of the Company that is pari passu in right of payment to the Securities. "Paying Agent" means any Person authorized by the Company to pay the principal of (or premium, if any) or interest on any Securities on behalf of the Company. "Permitted Holders" means ML Funds, the Management Investors and the Equitable Investors, provided that the Equitable Investors shall not be a Permitted Holder if they are a member of a "group" (as such term is used in Section 13(d) of the Exchange Act) in respect of the Company which does not include the Management Investors and the ML Funds. "Permitted Indebtedness" means any of the following Indebtedness of the Company or any Subsidiary, as the case may be: (i) Indebtedness under the Bank Credit Agreement in an aggregate principal amount at any one time outstanding not to exceed $575,000,000; (ii) Indebtedness under the Securities in an aggregate principal amount at any one time outstanding not to exceed $197,567,000; (iii) Indebtedness outstanding on the date hereof and listed on Schedule I hereto; (iv) Indebtedness under the Subordinated Notes, the Subordinated Debentures, and the Deferred Coupon Notes; - 13- (v) obligations pursuant to interest rate hedge contracts; (vi) (A) Indebtedness under Capital Lease Obligations and (B) Purchase Money Mortgages; (vii) Indebtedness in respect of trade letters of credit and standby letters of credit incurred in the ordinary course of business; (viii) Indebtedness of the Company or any Subsidiary to any one or the other of them; provided that the obligation of the obligor of such Indebtedness is subject to the Intercompany Agreement; (ix) Indebtedness of any Subsidiary made in accordance with the applicable provisions of Section 1013 or Section 1014; (x) Indebtedness consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets; (xi) any obligation or liability in respect of leasehold interests assigned by the Company or any Subsidiary to any other Person; (xii) Indebtedness under the Holdings Intercompany Notes; (xiii) Indebtedness represented by letters of credit not exceeding an aggregate amount of $45,000,000 at any one time outstanding (other than those permitted by clause (vii) above); (xiv) Indebtedness incurred to finance Consolidated Capital Expenditures (including Acquired Indebtedness to the extent that, in conformity with GAAP, assets acquired in conjunction with such Acquired Indebtedness are included in the property, plant or equipment reflected on the Consolidated balance sheet of the Company and its Subsidiaries); (xv) Indebtedness in addition to that described in clauses (i) through (xiv) of this definition of "Permitted Indebtedness", and any renewals, extensions, substitutions, refinancings or replacements of such Indebtedness, not to exceed $75,000,000 outstanding at any one time in the aggregate; and - 14- (xvi) any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") of any Indebtedness described in clauses (ii), (iii), (iv) and (xiv), including any successive refinancings so long as the aggregate amount of Indebtedness represented thereby is in a principal amount that does not exceed the principal amount so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing plus the amount of expenses of the Company incurred in connection with such refinancing; provided that for purposes of this clause, the principal amount of any Indebtedness shall be deemed to mean the principal amount thereof or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination and such refinancing does not reduce the Average Life to Stated Maturity or the final Stated Maturity of such Indebtedness. "Permitted Investment" means any of the following: (i) any Investment in any Majority-owned Subsidiary by the Company or any other Majority-owned Subsidiary, any Investment in any Person by the Company or any Majority-owned Subsidiary as a result of which such Person becomes a Majority-owned Subsidiary or any Investment in the Company by any Majority-owned Subsidiary; (ii) any Temporary Cash Investment; (iii) intercompany Indebtedness to the extent permitted under clause (viii) of the definition of "Permitted Indebtedness" contained in this Section 101; (iv) Investments in existence on the date hereof and any Investment with respect to which the Company or any Subsidiary is legally committed to make, but only if such commitment was in existence on the date hereof in each case, other than any Investment in any Unrestricted Subsidiary; (v) sales of goods on trade credit terms consistent with the Company's past practices or as otherwise consistent with trade credit terms in common use in the industry; (vi) Investments pursuant to the Logistical Services Agreement or Spin-Off Agreements; (vii) any Investment in any Person acquired or retained in connection with any asset sale or other disposition of assets; (viii) loans or advances to employees made in the ordinary course of business; and (ix) in addition to "Permitted Investments" described in the foregoing clauses (i) through (viii), Investments in the aggregate amount of $45,000,000 at any one time outstanding. "Permitted Payment" has the meaning specified in Section 1008. - 15- "Person" means any individual, corporation, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Plainbridge" means Plainbridge, Inc., a corporation incorporated under the laws of the State of Delaware, and any successor thereto. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for a mutilated Security or in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Security. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's preferred or preference stock whether now outstanding or issued after the date hereof, and includes, without limitation, all classes and series of preferred or preference stock. "Purchase Money Mortgages" means Indebtedness of the Company or any Subsidiary (i) issued to finance or refinance the purchase or construction of any assets of the Company or any Subsidiary or (ii) secured by a Lien on any assets of the Company or any Subsidiary where the lender's sole recourse is to the assets so encumbered, in either case (a) to the extent the purchase or construction prices for such assets are or should be included in "addition to property, plant or equipment" in accordance with GAAP and (b) if the purchase or construction of such assets is not part of any acquisition of a Person or business unit. "Qualified Capital Stock" of any Person means any and all Capital Stock of such Person other than Redeemable Capital Stock. "Recapitalization" means the Recapitalization described in the Amended and Restated Prospectus relating to the issuance of the Securities. "Redeemable Capital Stock" means any Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or otherwise, is or upon the happening of an event or passage of time would be required to be redeemed prior to the final Stated Maturity of - 16- the Securities or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date means the April 15 or October 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Representative" means the indenture trustee or other trustee, agent or representative for an issue of Senior Indebtedness. "Responsible Officer", when used with respect to the Trustee, means any officer assigned to the Corporate Trust Administration of the Trustee or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers or assigned by the Trustee to administer corporate trust matters at its Corporate Trust Office and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Payments" has the meaning specified in Section 1008. "Security" and "Securities" have the meaning set forth in the second paragraph of this Indenture. "Senior Indebtedness" means the principal of, premium, if any, and interest on (such interest on Senior Indebtedness, wherever referred to in this Indenture, being deemed to include interest accruing after the filing of a petition initiating any proceeding pursuant to any bankruptcy law in accordance with and at the rate (including any rate applicable upon any default or event of default, to the extent lawful) specified in any document evidencing the Senior Indebtedness, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such bankruptcy law) any Indebtedness of the Company (other than as otherwise provided in this - 17- definition), whether outstanding on the date hereof or thereafter created, incurred or assumed in accordance with the provisions of this Indenture, 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 the Securities. Without limiting the generality of the foregoing, "Senior Indebtedness" shall include the principal of, premium, if any, and interest on (including interest accruing after the occurrence of an event of default) all obligations of every nature of the Company from time to time owed under the Bank Credit Agreement, including, without limitation, principal of and interest on, and all fees, expenses, indemnities, payments for early termination of Interest Rate Hedge Arrangements and reimbursement obligations under letters of credit payable under the Bank Credit Agreement. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) Indebtedness evidenced by the Securities, the Subordinated Notes, the Subordinated Debentures and the Deferred Coupon Notes or Indebtedness that is subordinate or junior in right of payment to any Indebtedness of the Company, except for subordination as a result of intercreditor arrangements with respect to collateral, (ii) Indebtedness that when incurred, and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company, (iii) Indebtedness that is represented by Redeemable Capital Stock, (iv) Indebtedness of the Company to a subsidiary of the Company or any other Affiliate of the Company or any of such Affiliate's subsidiaries, including the Holdings Intercompany Notes and (v) that portion of any Indebtedness (other than any Indebtedness provided by any lender pursuant to the Bank Credit Agreement, except to the extent such Indebtedness is provided with actual knowledge on the part of any such lender that the incurrence thereof by the Company is a violation of this Indenture) which at the time of issuance is issued in violation of this Indenture. "SMG-II" means SMG-II Holdings Corporation, a Delaware corporation, and any successor thereto. "Special Record Date" means a date fixed by the Trustee for the payment of any Defaulted Interest pursuant to Section 307. "Specified Senior Indebtedness" means (i) all Senior Indebtedness under the Bank Credit Agreement, and (ii) any other issue of Senior Indebtedness or refinancings thereof permitted by said definition having a principal amount of at least $100,000,000 and is specifically designated in the - 18- instrument evidencing such Senior Indebtedness as "Specified Senior Indebtedness" by the Company. For purposes of this definition: (a) the amount of the Indebtedness of the Company with respect to any Interest Rate Hedge Arrangement shall be deemed to be the lesser of (x) 25% of the notional amount of such Interest Rate Hedge Arrangement, or (y) the maximum amount the Company could be required to pay under such Interest Rate Hedge Arrangement; and (b) a refinancing of any such Indebtedness shall be treated as such only if it ranks or would rank pari passu with the Indebtedness refinanced. "Spin-Off Agreements" means (i) the Distribution and Transfer Agreement dated as of May 3, 1993 among the Company, Holdings and Chefmark; (ii) the Distribution and Transfer Agreement dated as of October 26, 1993 among the Company, Newco and Plainbridge; (iii) the Blair Services Agreement dated as of October 26, 1993 between the Company and Plainbridge; (iv) the Rickel Services Agreement dated as of October 26, 1993 between the Company and Plainbridge; (v) the Chefmark Services Agreement dated as of May 3, 1993 between the Company and Chefmark; (vi) the Tax Sharing Agreement; (vii) leases between the Company as lessee and Plainbridge as lessor entered into on the date of this Indenture; and (viii) the Chefmark Supply Agreement dated as of May 3, 1993 between Chefmark and the Company, in each case as amended or modified in accordance with the provisions hereof. "Spin-Off" means the contribution by the Company to Plainbridge of the Rickel home center business, the warehouse, distribution and transportation operations and the inventory therein that service the Pathmark supermarkets and drug stores and certain other assets and the distribution of the shares of Plainbridge to Newco. "Stated Maturity", when used with respect to any Indebtedness or any installment of interest thereon, means the date specified in such Indebtedness as the fixed date on which the principal of such Indebtedness or such installment of interest is due and payable. "Subordinated Debentures" means the Company's 12-5/8% Subordinated Debentures due 2002 in aggregate principal amount not in excess of the aggregate principal amount outstanding on the date of this Indenture. "Subordinated Indebtedness" means Indebtedness of the Company subordinated in right of payment to the Securities. "Subordinated Notes" means the Company's 11-5/8% Subordinated Notes due 2002 in aggregate principal amount not in excess of the aggregate principal amount outstanding on the date of this Indenture. - 19- "Subsidiary" means any Person a majority of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries; provided that an Unrestricted Subsidiary shall not be deemed to be a Subsidiary for purposes of this Indenture. "Tax Sharing Agreement" means the Tax Sharing Agreement dated as of the date of the Spin-off by and between SMG-II and the Company, as amended or modified in accordance with the provisions hereof. "Temporary Cash Investment" means (i) any evidence of Indebtedness, maturing not more than 180 days after the date of acquisition, issued by the United States of America, or an instrumentality or agency thereof and guaranteed fully as to principal, premium, if any, and interest by the United States of America, (ii) any certificate of deposit, maturing not more than 180 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution that has combined capital and surplus of not less than $300,000,000, whose debt is rated at the time as of which any investment therein is made, of "A" (or higher) according to Moody's Investors Service, Inc. ("Moody's"), or "A" (or higher) according to Standard & Poor's Corporation ("S&P"), (iii) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Company) organized and existing under the laws of the United States of America, with a rating, at the time as of which any investment therein is made, of "P-2" (or higher) according to Moody's or "A-2" (or higher) according to S&P, (iv) any short-term, tax-exempt investment in indebtedness issued by a municipality existing under the laws of the United States of America with a rating, at the time as of which any investment therein is made, of "A" (or higher) according to Moody's or "A" (or higher) according to S&P, and (v) any money market deposit accounts issued or offered by any domestic commercial bank having capital and surplus in excess of $300,000,000. "Treasury Rate" means the yield to maturity at the time of computation of United States Treasury securities with a constant mauturity (as compiled by, and published in, the most recent Federal Reserve Statistical Release H.15 (5-19) which has become publicly available at least two business days prior to the date fixed for redemption of the Securities following a Change in Control (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the then remaining Average Life to Stated Maturity of the Securities; provided, however, that if - 20- the Average Life to Stated Maturity of the Securities is not equal to the constant maturity of a United States Tresury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (rounded, if necessary, to four decimal places) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the Average Life to Stated Maturity of the Securities is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, and as in force at the date as of which this instrument was executed, except as provided in Section 905. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument, 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 Subsidiary" means (i) any subsidiary of the Company that at the time of determination shall be an Unrestricted Subsidiary (as designated by the Board of Directors of the Company, as provided below) and (ii) any subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company may designate any subsidiary of the Company (including any newly acquired or newly formed subsidiary) to be an Unrestricted Subsidiary if all of the following conditions apply: (a) such subsidiary is not liable, directly or indirectly, with respect to any Indebtedness other than Unrestricted Subsidiary Indebtedness and (b) any Investment in such subsidiary made as a result of designating such subsidiary an Unrestricted Subsidiary shall not violate the provisions of Section 1016. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complies with the foregoing conditions. The Board of Directors of the Company may designate any Unrestricted Subsidiary as a Subsidiary; provided that immediately after giving effect to such designation, the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the restrictions of Section 1007. "Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary means Indebtedness of such Unrestricted Subsidiary (i) as to which neither the Company nor any - 21- Subsidiary is directly or indirectly liable (by virtue of the Company or any such Subsidiary being the primary obligor on, guarantor of, or otherwise liable in any respect to, such Indebtedness), except Guaranteed Debt of the Company or any Subsidiary to any Affiliate, in which case (unless the incurrence of such Guaranteed Debt resulted in a Restricted Payment at the time of incurrence) the Company shall be deemed to have made a Restricted Payment (as defined in Section 1008) equal to the principal amount of any such Indebtedness to the extent guaranteed at the time such Affiliate is designated an Unrestricted Subsidiary and (ii) which, upon the occurrence of a default with respect thereto, does not result in, or permit any holder of any Indebtedness of the Company or any Subsidiary to declare, a default on such Indebtedness of the Company or any Subsidiary or cause the payment thereof to be accelerated or payable prior to its Stated Maturity. "Voting Stock" means stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). Section 102. Other Definitions. Defined in Term Section "Act"............................................. 105 "Change in Control Notice" ....................... 1011 "Change in Control Offer" ........................ 1011 "Change in Control Purchase Date" ................ 1011 "Change in Control Purchase Notice" .............. 1011 "Change in Control Purchase Price" ............... 1011 "covenant defeasance" ............................ 1403 "Defaulted Interest" ............................. 307 "defeasance" ..................................... l402 "incorporated provision" ......................... 108 "Notice of Default" .............................. 501 "Security Register" .............................. 305 "Security Registrar" ............................. 305 "Surviving Entity" ............................... 801 "U.S. Government Obligations" .................... 1404 - 22- Section 103. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion (other than the certificates required by Section 1018(a)) with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 104. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, - 23- and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 105. 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 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 of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Trust Indenture Act Section 315) 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 Securities shall be proved by the Security Register. - 24- (d) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of such Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding Trust Indenture Act Section 316(c), any such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not more than 30 days prior to the first solicitation of Holders generally in connection therewith and no later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Securities then Outstanding have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for this purpose the Securities then Outstanding shall be computed as of such record date; provided that no such request, demand, authorization, direction, notice, consent, waiver or other Act by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act by the Holder of any Security shall bind every future Holder of the same Security or the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, suffered or omitted to be done by the Trustee, any Paying Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Security. Section 106. Notices, etc., to Trustee and Company. 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, any Representative or the Company shall be sufficient for every purpose hereunder if made, given, furnished or delivered, in writing, to or - 25- with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration; or (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or delivered in writing or mailed, first-class postage prepaid, to the Company addressed to it c/o Pathmark Stores, Inc., 301 Blair Road, Woodbridge, New Jersey 07095, Attention: President, or at any other address furnished in writing to the Trustee by the Company. The Company shall provide the Trustee in writing with the name and address of the agent bank under the Bank Credit Agreement as of the effective date of this Indenture and shall promptly provide the Trustee in writing with any change in such information. Section 107. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later that 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. - 26- Section 108. Conflict of any Provision of Indenture with Trust Indenture Act. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 318, inclusive, of the Trust Indenture Act, or conflicts with any provision (an "incorporated provision") required by or deemed to be included in this Indenture by operation of such Trust Indenture Act Sections, such imposed duties or incorporated provision shall control. 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 109. 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 110. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its respective successors and assigns, whether so expressed or not. Section 111. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 112. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person (other than the parties hereto and their successors hereunder, any Paying Agent, the Holders and the holders of Senior Indebtedness) any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 113. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the conflicts of laws principles thereof. - 27- Section 114. Legal Holidays. In any case where any Interest Payment Date, any date established for payment of Defaulted Interest pursuant to Section 307, or any Maturity with respect to any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, or date established for payment of Defaulted Interest pursuant to Section 307, or Maturity, and no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date, or date established for payment of Defaulted Interest pursuant to Section 307, or Maturity, as the case may be, to the next succeeding Business Day. Section 115. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting any of the Securities waives and releases all such liability. ARTICLE TWO SECURITY FORMS Section 201. Forms Generally. The Securities and the Trustee's certificate of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. Any portion of the text of any Security may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Security. - 28- The definitive Securities shall be printed, 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 Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Section 202. Form of Face of Security. The form of the face of the Securities shall be substantially as follows: PATHMARK STORES, INC. 9 5/8% Senior Subordinated Note due 2003 No. $ Pathmark Stores, Inc., a Delaware corporation (herein called the "Company", which term includes any successor entity 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, 2003, at the office or agency of the Company referred to below, and to pay interest thereon on May 1, 1994 and semiannually thereafter on May 1 and November 1 in each year and at Stated Maturity, from October 26, 1993 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 9 5/8% per annum, until the principal hereof is paid or duly provided for. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the April 15 or October 15 (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 Securities, 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 Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or may be paid at any time in any - 29- other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address shall appear on the Security Register. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: PATHMARK STORES, INC. By Attest: By [SEAL] Authorized Signature - 30- Section 203. Form of Reverse of Security. The form of the reverse of the Securities shall be substantially as follows: This Security is one of a duly authorized issue of securities of the Company designated as its 9 5/8% Senior Subordinated Notes due 2003 (herein called the "Securities"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $440,000,000, which may be issued under an indenture (herein called the "Indenture") dated as of October 26, 1993, between the Company and United States Trust Company of New York, 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 and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. The Securities are subject to redemption upon not less than 21 nor more than 60 days' notice, in amounts of $1,000 or an integral multiple of $1,000, at any time on or after , 1998, as a whole or in part, at the election of the Company, at a Redemption Price equal to the percentage of the principal amount set forth below if redeemed during the 12-month period beginning of the years indicated below: Year Redemption Price 1998 104.82% 1999 102.41% and thereafter at 100% of the principal amount, together in the case of any such redemption with accrued interest, if any, to the Redemption Date (subject to the right of Holders of record on relevant Regular Record Dates to receive interest due on a Interest Payment Date), all as provided in the Indenture. Notwithstanding the foregoing, on or prior to November 1, 1996, the Company may redeem, on not less than 21 nor more than 60 days' prior notice in amounts of $1,000 or an integral multiple of $1,000, in the aggregate up to 35% of the initial principal amount of the Securities with the net proceeds of any issuance of Qualified Capital Stock of the Company or Newco at a Redemption Price of 109% of the principal amount thereof, together with accrued interest, if any, to the Redemption Date (subject to the right of Holders of Record on relevant Regular - 31- Record Dates to receive interest due on an Interest Payment Date). The Securities will be subject to redemption, at the option of the Company, prior to November 1, 1998, in whole or in part, at any time within 180 days after a Change in Control on not less than 21 nor more than 60 days' prior notice to each Holder of the Securities to be redeemed in amounts of $1,000 or an integral multiple thereof, at a redemption price equal to the sum of (i) the principal amount thereof plus (ii) accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on relevant record dates to receive interest due on an Interest Payment Date) plus (iii) the Applicable Premium. In the event that a Change in Control occurs, each Holder shall have the right to require that the Company repurchase such Holder's Securities in whole or in part in integral multiples of $1,000 at a purchase price in cash in an amount equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. Within 30 days following a Change in Control, the Company covenants to either (i) repay in full all Indebtedness under the Bank Credit Agreement and permanently reduce the commitments of the lenders thereunder or offer to repay in full all such Indebtedness and permanently reduce such commitments and repay the Indebtedness and permanently reduce the commitment of each lender that accepted such offer or (ii) obtain the requisite consent under the Bank Credit Agreement to permit the repurchase of the Securities. In the case of any redemption of Securities, interest installments whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Date referred to on the face hereof. Securities (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. If an Event of Default shall occur and be continuing, the principal of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. - 32- The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Security and (b) certain restrictive covenants and the related Defaults and Events of Default, upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Security. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security 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 Security. The indebtedness evidenced by the Securities is subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full of all Senior Indebtedness of the Company whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by his acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on his behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee his attorney-in-fact for such purpose; provided that the indebtedness evidenced by this Security shall cease to be so subordinate and subject in right of payment upon any defeasance of this Security as provided in the Indenture. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place, and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is - 33- registrable on the Security Register of the Company, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for such purpose in The City of New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities 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 Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any registration of transfer or exchange or redemption of Securities, but the Company may require payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charges payable in connection with any registration of transfer or exchange. Prior to the time of due presentment of this Security 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 Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any agent shall be affected by notice to the contrary. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to Minors Act). - 34- I/We assign and transfer this Security to Insert assignee's soc. sec. or tax ID no. ........ (Print or type assignee's name, address and zip code) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: Signed: (Sign exactly as your name appears on the other side of this Security.) Signature Guaranteed: (Signature must be guaranteed by a member firm of a principal stock exchange or a commercial bank or trust company.) Section 204. Form of Trustee's Certificate of Authentication. TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities referred to in the within-mentioned Indenture. UNITED STATES TRUST COMPANY OF NEW YORK as Trustee By Authorized Signatory - 35- ARTICLE THREE THE SECURITIES Section 301. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $440,000,000, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 303, 304, 305, 306, 906, 1012 or 1108. The Securities shall be known and designated as the "9 5/8% Senior Subordinated Notes due 2003" of the Company. Their Stated Maturity shall be May 1, 2003, and they shall bear interest at the rate of 9 5/8% per annum from October 26, 1993 or the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable on May 1, 1994 and semi-annually thereafter on May 1 and November 1 in each year and at said Stated Maturity, until the principal thereof is paid or duly provided for. Subject to Article Thirteen, interest on any overdue amount of principal, interest (to the extent lawful) or premium, if any, shall be payable on demand. The principal of (and premium, if any) and interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose; provided, however, that, at the option of the Company, interest may be paid by check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Security Register. The Securities shall be redeemable as provided in Article Eleven. The Indebtedness evidenced by the Securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article Thirteen. Section 302. Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. Section 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by any two of the following: its Chairman, one of its - 36- Vice Chairmen, its President or one of its Vice Presidents, under its corporate seal reproduced thereon and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices on the date of such Securities. The Trustee shall (upon Company Order) authenticate and deliver Securities for original issue in an aggregate principal amount of up to $440,000,000. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as provided in this Indenture and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of one of its duly authorized signatories, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. In case the Company, pursuant to Article Eight, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of substantially all of its properties and assets to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company shall have been merged, or the successor Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article Eight, any of the Securities authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Securities executed in - 37- the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Securities surrendered for such exchange and of like principal amount; and the Trustee, upon Company Order of the successor Person, shall authenticate and deliver Securities as specified in such request for the purpose of such exchange. If Securities shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section in exchange or substitution for or upon registration of transfer of any Securities, such successor Person, at the option of any Holder but without expense to such Holder, shall provide for the exchange of all Securities at the time Outstanding held by such Holder for Securities authenticated and delivered in such new name. Section 304. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. Section 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes referred to as - 38- the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee (and any other office or agency so designated) is hereby initially appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at the office or agency of the Company designated pursuant to Section 1002 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denomination or denominations and of a like aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denomination or denominations of a like aggregate principal amount upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer, or for exchange or redemption, shall (if so required by the Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange or redemption of Securities, but the Company may require payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charges that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 303, 304, 306, 906, l0l2 or 1108 not involving any transfer. - 39- The Company shall not be required (a) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business (i) 15 days before the mailing of a notice of redemption of the Securities selected for redemption under Section 1104 and ending at the close of business on the day of such mailing or (ii) 15 days before an Interest Payment Date and ending on the close of business on the Interest Payment Date, or (b) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of Securities being redeemed in part. Section 306. Mutilated, Destroyed, Lost and Stolen Securities. If (a) any mutilated Security is surrendered to the Trustee, or (b) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them and any agent of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a replacement Security of like tenor and principal amount, and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a replacement Security, pay such Security. Upon the issuance of any replacement Securities under this Section, the Company may require the payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charges that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every replacement Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute a contractual obligation of the Company, whether or not the destroyed, lost or stolen Security 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 Securities duly issued hereunder. - 40- The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 307. Payment of Interest; Interest Rights Preserved. Interest on any Security 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 Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security 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 applicable interest rate borne by the Securities, to the extent lawful (such defaulted interest (and such interest thereon) herein collectively called "Defaulted Interest"), shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder; and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Subsection (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) 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 Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Subsection provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date. In the name and at the expense of the Company, the Trustee shall cause notice - 41- 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 his address as it appears in the Security 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 Securities (or their respective Predecessor Securities) are registered at the close of business 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 Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Subsection, such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 308. Persons Deemed Owners. Prior to 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 whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 307) interest on such Security and for all other purposes whatsoever, whether or not such Security 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 309. Cancellation. All Securities surrendered for payment, redemption or registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company shall deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all - 42- Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order. Section 310. Computation of Interest. Interest on the Securities shall be computed on the basis of a year of twelve 30-day months. ARTICLE FOUR SATISFACTION AND DISCHARGE Section 401. Satisfaction and Discharge of Indenture. This Indenture shall, upon Company Request, cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Securities herein expressly provided for) and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (l) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities 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 1003) have been delivered to the Trustee for cancellation; or (2) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the - 43- Trustee in the name, and at the expense, of the Company, and the Company, in the case of (2)(i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount in cash in U.S. Dollars or U.S. Government Obligations sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that (i) all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with and (ii) 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 is a party or by which it is bound. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 606 and, if money shall have been deposited with the Trustee pursuant to subclause (2) of Subsection (a) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section l003 shall survive. Section 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee. Money so held in trust shall not be subject to the provisions of Article Thirteen of this Indenture. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 401 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's - 44- obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 401; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE FIVE REMEDIES Section 501. Events of Default. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether or not it shall be occasioned or prohibited by the provisions of Article Thirteen or be voluntary or involuntary or be effected by the operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administration or governmental body): (a) default in the payment of any interest on any Security when such interest becomes due and payable and continuance of such default for a period of 30 days; or (b) default in the payment of the principal of (or premium, if any, on) any Security at its Maturity; or (c) default in the performance, or breach, of any covenant or agreement of the Company hereunder (other than a default in the performance, or breach, of a covenant or agreement that is specifically dealt with elsewhere in this Section), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default or breach and stating that such notice is a "Notice of Default" hereunder; or (d) (i) an event of default shall have occurred under any mortgage, bond, indenture, loan agreement or other document evidencing any issue of Indebtedness of the Company or any Material Subsidiary for money borrowed, which issue has an aggregate outstanding principal amount of not less than $50,000,000, and such default shall result - 45- in such Indebtedness becoming, whether by declaration or otherwise, due and payable prior to the date on which it would otherwise become due and payable or (ii) a default in any payment when due at final maturity of any such Indebtedness; or (e) final judgments or orders not covered by insurance or a bond rendered against the Company or any Material Subsidiary which require the payment in money, either individually or in an aggregate amount, that is more than $30,000,000 and such judgment or order shall remain unsatisfied or unstayed for 60 days; or (f) the entry of a decree or order by a court having jurisdiction in the premises (i) for relief in respect of the Company or any Material Subsidiary in an involuntary case or proceeding under the Federal Bankruptcy Code or any other federal or state bankruptcy, insolvency, reorganization or similar law or (ii) adjudging the Company or any Material Subsidiary a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or any Material Subsidiary under the Federal Bankruptcy Code or any other applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or any Material Subsidiary or of any substantial part of any of their properties, or ordering the winding up or liquidation of any of their affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (g) the institution by the Company or any Material Subsidiary of a voluntary case or proceeding under the Federal Bankruptcy Code or any other applicable federal or state law or any other case or proceedings to be adjudicated a bankrupt or insolvent, or the consent by the Company or any Material Subsidiary to the entry of a decree or order for relief in respect of the Company or any Material Subsidiary in any involuntary case or proceeding under the Federal Bankruptcy Code or any other applicable federal or state law or to the institution of bankruptcy or insolvency proceedings against the Company or any Material Subsidiary, or the filing by the Company or any Material Subsidiary of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator (or - 46- other similar official) of any of the Company or any Material Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due or taking of corporate action by the Company or any Material Subsidiary in furtherance of any such action; or (h) default in the performance or breach of any of the provisions of Article Eight. Section 502. Acceleration of Maturity; Rescission. If an Event of Default (other than as specified in Section 50l(f) or 501(g)) occurs and is continuing, the Trustee or the Holders of at least 25% of the principal amount of the Securities then Outstanding may, and the Trustee at the request of such Holders shall, declare all unpaid principal of, premium, if any, and accrued interest on all the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders); provided that so long as the Bank Credit Agreement shall be in force and effect, if any such Event of Default shall have occurred and be continuing, any such acceleration shall not be effective until the earlier of (a) five Business Days following a notice of acceleration given to the Company and the agent bank under the Bank Credit Agreement and only if upon such fifth Business Day such Event of Default shall be continuing or (b) the acceleration of any Indebtedness under the Bank Credit Agreement. If an Event of Default specified in Section 501(f) or 501(g) occurs and is continuing, the amounts described above shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder thereof. 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 at least a majority in aggregate principal amount of the Securities outstanding, by written notice to the Company and the Trustee, may annul 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 Securities, (iii) the principal of and premium, if any, on any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, and (iv) to the extent that payment of such interest is lawful, interest upon overdue interest at the - 47- rate borne by the Securities; and (b) all Events of Default, other than the non-payment of principal of the Securities which have become due solely by the declaration of acceleration, have been waived as provided in Section 513 or cured. No such rescission shall affect any subsequent default or impair any right consequent thereon. Notwithstanding the preceding paragraph, in the event of a declaration of acceleration in respect of the Securities, because an Event of Default specified in Section 501(d) shall have occurred and be continuing, such declaration of acceleration shall be automatically annulled if the Indebtedness that is the subject of such Event of Default has been discharged or the holders thereof have rescinded their declaration of acceleration in respect of such Indebtedness, and, if such Indebtedness is not Senior Indebtedness, such rescission has been made without any payment or other transfer or grant, or any promise or other undertaking to pay or otherwise transfer or grant, any tangible or intangible property or right to such holders in connection with such rescission, and written notice of such discharge or rescission, as the case may be, shall have been given to the Trustee by the Company and by the holders of such Indebtedness or a trustee, fiduciary or agent for such holders, within 60 days after such declaration of acceleration in respect of the Securities, and (x) no other Event of Default has occurred during such 60-day period, and (y) no Default arising from such discharge has occurred during such 60-day period, which, in either case, has not been cured or waived during such period. Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (a) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest, with interest upon the overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon overdue installments of interest, at the rate borne by the Securities; - 48- and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders under this Indenture by such appropriate private or judicial proceedings as the Trustee shall deem most effectual to protect and enforce such rights. Section 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; provided that in the event that proof of such claim and such other papers or documents have not been so filed by the thirtieth day prior to the final date on which such claim may be filed, the holders of Specified Senior - 49- Indebtedness or their representatives shall be permitted to file such proof of claim and other papers and documents for and on behalf of the Holders of the Securities; 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, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 606. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any proposal, plan of reorganization, arrangement, adjustment or composition or other similar arrangement affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 506. Application of Money Collected. Subject to Article Thirteen, any money, securities or other property collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation - 50- thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 606; SECOND: To the payment of the amounts then due and unpaid upon the Securities for principal (and premium, if any) and interest, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest; and THIRD: The balance, if any, to the Company. Section 507. Limitation on Suits. No Holder of any Securities shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or the Securities, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or - 51- to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture except in the manner provided in this Indenture and for the equal and ratable benefit of all the Holders. Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 307) interest on such Security on the respective due dates expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, 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 510. Rights and Remedies Cumulative. Except as provided in Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security 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 - 52- acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 512. Control by Holders. The Holders of not less than a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided that (a) such direction shall not be in conflict with any rule of law or with this Indenture or expose the Trustee to personal liability, and (b) subject to the provisions of Trust Indenture Act Section 315, the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 513. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all Outstanding Securities 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 Security, 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 Security affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 514. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security 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 - 53- 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 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 Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). Section 515. Waiver of Stay, Extension or Usury Laws. The Company 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, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 516. Unconditional Right of Holders to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any other provision of any Security, the right of any Holder of any Security to receive payment of the principal of, premium, if any, and interest on such Security on or after the respective due dates expressed in such Security, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. - 54- ARTICLE SIX THE TRUSTEE Section 601. Notice of Defaults. Within 60 days after the occurrence of any Default, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security 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 (or premium, if any) or interest on any Security, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders; and provided further that, in the case of any default or breach of the character specified in Section 501(c), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. Section 602. Certain Rights of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee need perform only those duties as are specifically set forth in this Indenture and no covenants or obligations shall be implied in this Indenture that are adverse to the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided that the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. - 55- (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this subsection (c) does not limit the effect of subsection (b) of this Section 602; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 512; and (iv) 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, and does believe, that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to this Section 602. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense, including such reasonable advances as may be requested by the Trustee. (f) Subject to the foregoing subsections (a) through (e) of this Section 602: (i) The Trustee may rely and shall be protected in acting or in refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. Any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or a Company Order and any resolution by the board of directors of the Company may be sufficiently evidenced by a Board Resolution. - 56- (ii) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. In addition, in determining the Company's compliance with the financial covenants set forth herein, the Trustee may rely on the certificate delivered to the Trustee pursuant to Section 1018(a). (iii) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (iv) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers. (v) The Trustee may consult with counsel, accountants or other experts and any advice of such counsel, accountants or other experts shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice. Section 603. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, 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 Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility and Qualification on Form T-l supplied to the Company are true and accurate, subject to the qualifications set forth therein. Section 604. Trustee and Agents May Hold Securities; Collections; etc. The Trustee, any Paying Agent, Security Registrar or any other agent of the Company, in its individual or any other - 57- capacity, may become the owner or pledgee of Securities with the same rights it would have if it were not the Trustee, Paying Agent, Security Registrar or such other agent and, subject to Trust Indenture Act Sections 310(b) and 311, 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 Trustee, Paying Agent, Security Registrar or such other agent. Section 605. Money Held in Trust. All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust hereunder for the purposes for which they were received and need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. Section 606. Compensation and Reimbursement. The Company covenants and agrees: (a) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee and each of its officers, directors, employees, agents and counsel for, and to hold them harmless against, any loss, liability or expense incurred without negligence or bad faith on their part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. - 58- The obligation of the Company under this Section 606 to compensate the Trustee and to pay and reimburse the Trustee for such expenses, disbursements and advances shall constitute additional Indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture and shall not be subject to the provisions of Article Thirteen. If, and to the extent that, the Trustee, its counsel, and other agents do not receive compensation for services rendered, reimbursement of their advances, expenses and disbursements, or indemnity, as herein provided, as the result of allowances made in any reorganization, bankruptcy, receivership, liquidation or other proceeding or by any plan or reorganization or readjustment of obligations of the Company, the Trustee shall be entitled, in priority to the Holders of the Securities, to receive any distributions of any securities, dividends or other disbursements which would otherwise be made to the Holders of the Securities in any such proceeding or proceedings and the Trustee is hereby constituted and appointed, irrevocably, the attorney-in-fact for the Holders of the Securities and each of them to collect and receive, in their name, place and stead, such distributions, dividends or other disbursements, to deduct therefrom the amounts due to the Trustee, its counsel and other agents on account of services rendered, advances, expenses, and disbursements made or incurred, or indemnity, and to pay and distribute the balance, pro rata, to the Holders of the Securities. The Trustee shall have a lien upon any securities or other consideration to which the Holders of the Securities may become entitled pursuant to any such plan or reorganization or readjustment of obligations, or in any such proceeding or proceedings; and the court or judge in any such proceeding or proceedings may determine the terms and conditions under which any such lien shall exist and be enforced. As security for the performance of the obligations of the Company under this Section, the Trustee shall have a claim prior to the Securities upon all money, securities or other property held or collected by the Trustee as such, except funds held in trust for the benefit of Holders of particular Securities, and the Securities are hereby subordinated to such claim. If the Trustee incurs expenses or renders services after an Event of Default specified in Section 501(f) or 501(g) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under the Federal Bankruptcy Code and any other applicable federal or state bankruptcy Law. - 59- Section 607. Conflicting Interests. The Trustee shall comply with the provisions of Section 3l0(b) of the Trust Indenture Act. Section 608. 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 Section 310(a)(1) and which shall have a combined capital and surplus of at least $100,000,000 and have its Corporate Trust Office located in The City of New York (or, if its Corporate Trust Office shall not be located in The City of New York, the Company shall, pursuant to Section 1002, maintain an office or agency in The City of New York where the Securities may be presented or surrendered and notices and demands hereunder may be made or served) to the extent there is such an institution eligible and willing to serve. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of Federal, State, Territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 609. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 610, at which time the retiring Trustee shall be fully discharged from its obligations hereunder. (b) The Trustee may resign at any time by giving written notice thereof to the Company. 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 30 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 Security for at least six months may, on - 60- 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 Securities, delivered to the Trustee and the Company. (d) If at any time: (1) the Trustee shall fail to comply with the provisions of Trust Indenture Act Section 310(b) after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 608 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 Security for at least six months, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 514, the Holder of any Security who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed - 61- shall, forthwith upon its acceptance of such appointment in accordance with Section 610, 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 Securities and so accepted appointment, the Holder of any Security 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 Securities as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Section 610. 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; provided, however, that the retiring Trustee shall continue to be entitled to the benefit of Section 606(c); but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Upon acceptance of appointment by any successor Trustee as provided in this Section 610, the Company shall give notice thereof to the Holders of the Securities, by mailing such notice to such Holders at their addresses as they shall appear on the Security Register. If the acceptance of - 62- appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 609. If the Company fails to give such notice within 10 days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Company. Section 611. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 612. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor under the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 701. Disclosure of Names and Addresses of Holders. Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee or any agent of either of them shall be held accountable by reason of the disclosure of any - 63- information as to the names and addresses of the Holders in accordance with Trust Indenture Act Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Trust Indenture Act Section 312. Section 702. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Securities, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, as provided in Trust Indenture Act Section 313(c), a brief report dated as of such May 15 if required by Trust Indenture Act Section 313(a). Section 703. Reports by Company. The Company shall: (a) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company is not required to file information, documents or reports pursuant to either of such Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (b) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and - 64- (c) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, in the manner and to the extent provided in Trust Indenture Act Section 313(c), such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 801. Company May Consolidate, etc., Only on Certain Terms. The Company shall not consolidate or merge with or into any other Person, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties and assets (as an entirety or substantially as an entirety in one transaction or series of related transactions) to any Person or permit any of its Subsidiaries to enter into any such transaction or transactions if such transaction or transactions, in the aggregate, would result in a transfer of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis to any Person unless, at the time and after giving effect thereto: (i) either (a) the Company shall be the continuing corporation, or (b) the Person (if other than the Company) formed by such consolidation, or into which the Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or disposition the properties and assets of the Company, substantially as an entirety (the "Surviving Entity") shall be a corporation duly organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and the Surviving Entity shall, in either case, expressly assume, by supplemental indenture hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture and this Indenture shall remain in full force and effect; (ii) immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default shall have occurred and be continuing; - 65- (iii) immediately after giving effect to such transaction on a pro forma basis, the Consolidated Fixed Charge Coverage Ratio of the Company (or the Surviving Entity if the Company is not the continuing obligor under this Indenture), for the Company's four most recently completed full fiscal quarters is at least 1.75 to 1.0; and (iv) the Company shall deliver or cause to be delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, transfer or lease and such supplemental indenture, if one is required by this Section 801, comply with this Section 801 and that all conditions precedent herein provided for relating to such transaction have been complied with. Section 802. Successor Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease or conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 801, the successor corporation formed by such consolidation or into which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made, shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation had been named as the Company therein. In the event of any transaction (other than a lease) described in and complying with the conditions listed in Section 801 in which the Company is not the continuing corporation, the successor corporation formed or remaining shall succeed to, and be substituted for, and may exercise every right and power of, the Company and the Company would be discharged from all obligations and covenants under this Indenture and the Securities. ARTICLE NINE SUPPLEMENTAL INDENTURES Section 901. Supplemental Indentures without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto in form satisfactory to the Trustee, for any of the following purposes: - 66- (a) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; (b) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein or in the Securities conferred upon the Company; (c) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture; provided that, in each case, such provisions shall not adversely affect the interests of the Holders; (d) to secure the Securities pursuant to the requirements of Section 801 or Section 1010 or otherwise; (e) to provide for the guarantee of payment of the Securities by any Subsidiary pursuant to the requirements of Section 1013 or Section 1014; (f) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act, as contemplated by Section 905 or otherwise; (g) to evidence and provide the acceptance of the appointment of a successor Trustee hereunder; or (h) to make any other change that does not adversely affect the rights of any Holder. Section 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by Act of such Holders delivered to the Company and the Trustee, each when authorized by a Board Resolution, and the Trustee may enter into one or more indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of waiving or modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture, amendment or waiver shall, without the - 67- consent of the Holder of each Outstanding Security affected thereby: (a) change the Stated Maturity of the principal of, or any installment of interest on, any Security or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which the principal of any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date) or modify the obligation of the Company to make and consummate a Change in Control Offer or modify any of the provisions or definitions with respect thereto; or (b) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; or (c) modify any of the provisions of this Section or Section 513 or Section 1019, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby; or (d) modify any of the provisions of Article Thirteen hereof in a manner adverse to the Holders of the Securities; or (e) except as otherwise permitted under Article Eight, consent to the assignment or transfer by the Company of any of its rights and obligations under this Indenture. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and - 68- (subject to Trust Indenture Act Section 315(a) through 315(d) and Section 602 hereof) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 906. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Company, bear a notation in form approved by the Company as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Company, to any such supplemental indenture may be prepared and executed by the Company and shall be authenticated and delivered by the Trustee in exchange for Outstanding Securities. Section 907. Effect on Senior Indebtedness. No supplemental indenture shall adversely affect the rights of any holders of Senior Indebtedness under Article Thirteen unless the requisite holders of each issue of Senior Indebtedness affected thereby shall have consented to such supplemental indenture. - 69- ARTICLE TEN COVENANTS Section 1001. Payment of Principal, Premium and Interest. The Company will duly and punctually pay the principal of (and premium, if any) and interest on the Securities in accordance with the terms of the Securities and this Indenture. Section 1002. Maintenance of Office or Agency. The Company will maintain, in The City of New York, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. If the Corporate Trust Office is located in New York City, then it shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Securities 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 recission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or recission and any change in the location of any such office or agency. Section 1003. Money for Security Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons - 70- entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for the Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any Securities, deposit with a Paying Agent a sum in same day funds (or New York Clearing House funds if such deposit is made prior to the date on which such deposit is required to be made) sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest; (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 respects with the provisions of this Indenture relating to the duties, rights and obligations 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 - 71- Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such 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 (and premium, if any) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 1004. Corporate Existence. Subject to Article Eight, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and that of each Material Subsidiary of the Company and the corporate rights (charter and statutory), corporate licenses and corporate franchises of the Company and its Material Subsidiaries, except where a failure to do so, singly or in the aggregate, is not likely to have a materially adverse effect upon the business, assets, financial conditions or results of operations of the Company and the Material Subsidiaries taken as a whole determined on a consolidated basis in accordance with generally accepted accounting principles; provided that the Company shall not be required to preserve any such existence (except of the Company), right, licenses or franchise if the Board of Directors of the Company, or of the Material Subsidiary concerned, shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company or such Material Subsidiary and that the loss thereof is not disadvantageous in any material respect to the Holders. - 72- Section 1005. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon it or any Subsidiary or upon the income, profits or property of the Company or any of its Subsidiaries and (b) all material lawful claims for labor, materials and supplies, which, if unpaid, might by law become a lien upon the property of the Company or any of its Subsidiaries that could produce a material adverse effect on the consolidated financial condition of the Company; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and in respect of which appropriate reserves (in the good faith judgment of management of the Company) are being maintained in accordance with GAAP. Section l006. Maintenance of Properties. The Company shall cause all material properties owned by or leased to it or any Material Subsidiary of the Company and necessary in the conduct of its business or the business of such Material Subsidiary to be maintained and kept in normal condition, repair and working order, ordinary wear and tear excepted; provided that nothing in this Section shall prevent the Company or any Material Subsidiary of the Company from discontinuing the use, operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Board of Directors of the Company or the Material Subsidiary concerned, or of any officer (or other agent employed by the Company or any Material Subsidiary of the Company) of the Company or such Material Subsidiary having managerial responsibility for any such property, desirable in the conduct of the business of the Company or any Material Subsidiary of the Company and if such discontinuance or disposal is not adverse in any material respect to the Securityholders. The Company shall provide or cause to be provided, for itself and any Material Subsidiaries of the Company, insurance (including appropriate self-insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like properties in the same general areas in which the Company or such Material Subsidiaries operate. - 73- Section 1007. Limitation on Indebtedness. The Company will not, and will not permit any of its Subsidiaries to, create, incur, assume, or directly or indirectly guarantee or in any other manner become directly or indirectly liable for the payment of, any Indebtedness (including any Acquired Indebtedness, but excluding Permitted Indebtedness) unless, at the time of such event and after giving effect thereto on a pro forma basis, the Company's Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding such event, taken as one period and calculated on the assumption that such Indebtedness had been incurred on the first day of such four-quarter period and on the assumption that, in connection with the incurrence of any such Indebtedness, any related acquisition (whether by means of purchase, merger or otherwise) and any related repayment of Indebtedness also had occurred on such date with the appropriate adjustments with respect to such acquisition and repayment being included in such pro forma calculation, would have been at least equal to 1.75 to 1.0. Section 1008. Limitation on Restricted Payments. (a) The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, (i) declare or pay any dividend on, or make any distribution to holders of, any shares of the Company's Capital Stock (other than dividends or distributions payable in shares of its Qualified Capital Stock or in options, warrants or other rights to purchase such Qualified Capital Stock), (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any Affiliate thereof (other than Capital Stock of (x) any Subsidiary held by the Company or any of its Majority-owned Subsidiaries and (y) any Majority-owned Subsidiary of the Company) or any options, warrants or other rights to acquire such Capital Stock, (iii) make any principal payment on or redeem, repurchase, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, scheduled sinking fund payment or maturity, any Indebtedness of the Company which is pari passu with or expressly subordinate in right of payment to the Securities, - 74- (iv) declare or pay any dividend or distribution on any Capital Stock of any Subsidiary to any Person (other than the Company or any of its Majority-owned Subsidiaries) or purchase, redeem or otherwise acquire or retire for value any Capital Stock of any Subsidiary held by any Person (other than the Company or any of its Majority-owned Subsidiaries), or (v) incur, create or assume any guarantee of Indebtedness of any Affiliate of the Company (other than a Majority-owned Subsidiary of the Company) or make any Investment (other than any Permitted Investment) in any Person, including any Unrestricted Subsidiary (such payments or other actions described in the foregoing clauses (i) through (v), other than any such action that is a Permitted Payment, are collectively referred to as "Restricted Payments"), unless at the time of and after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution), (1) no Default or Event of Default shall have occurred and be continuing and (2) the aggregate amount of all Restricted Payments (plus Permitted Payments set forth in Sections 1008(b)(vi), (xi) and (xii) below) declared or made after the date hereof (including Investments in Unrestricted Subsidiaries pursuant to the provisions of Section 1017) shall not exceed the sum of: (A) 50% of the aggregate cumulative Consolidated Adjusted Net Income of the Company accrued on a cumulative basis during the period beginning on October 31, 1993 and ending on the last day of the Company's last fiscal quarter ending prior to the date of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Adjusted Net Income shall be a loss, minus 100% of such loss), plus (B) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, whose determination shall be conclusive), received after the date hereof by the Company as capital contributions to the Company, plus (C) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, - 75- whose determination shall be conclusive), received after the date hereof by the Company from the issuance or sale (other than to any of its Subsidiaries) of shares of Qualified Capital Stock of the Company or warrants, options or rights to purchase shares (other than issuances permitted by clause (v) of the definition of Permitted Payments contained in Section 1008(b)) of Qualified Capital Stock of the Company, plus (D) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, whose determination shall be conclusive), received by the Company (other than from any of its Subsidiaries) upon the exercise of options, warrants or rights to purchase shares of Qualified Capital Stock of the Company, plus (E) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, whose determination shall be conclusive), received after the date hereof by the Company from the issue or sale of debt securities that have been converted into or exchanged for Qualified Capital Stock of the Company, together with the aggregate cash received by the Company at the time of such conversion or exchange. (b) Section 1008(a) to the contrary notwithstanding, the Company and its Subsidiaries may take the following actions (clauses (i) through (xii) being referred to as "Permitted Payments") so long as, in the case of clauses (vi), (ix), (xi) and (xii), no Default or Event of Default has occurred and is continuing: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such declaration date such declaration complied with the provisions of Section 1008(a) (in which event such dividend shall be deemed to have been paid on such date of declaration thereof for purposes of Section 1008(a)); (ii) the repurchase, redemption or other acquisition or retirement of any shares of any class of Capital Stock of the Company or any Affiliate of the Company, in exchange for (including any such exchange pursuant to the exercise of a conversion - 76- 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 (other than to a Subsidiary) of shares of Qualified Capital Stock of the Company; (iii) payments by the Company to SMG-II pursuant to the Tax Sharing Agreement; (iv) dividends or distributions in an aggregate amount not to exceed the amount of dividends or distributions paid to the Company or its Subsidiaries by Unrestricted Subsidiaries since the date of this Indenture; (v) the redemption, defeasance, repurchase or acquisition or retirement for value (each, for purposes of this clause, a "refinancing") of any Indebtedness of the Company (other than Redeemable Capital Stock) which is pari passu with or expressly subordinate in right of payment to the Securities through the issuance of (A) new Indebtedness of the Company or (B) shares of Qualified Capital Stock of the Company or Newco, provided that, with respect to clause (A), any such new Indebtedness (1) has a principal amount that does not exceed the principal amount so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing; provided that for purposes of this clause, the principal amount of any Indebtedness shall be deemed to mean the principal amount thereof or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination, (2) has an Average Life to Stated Maturity that is equal to or greater than the remaining Average Life to Stated Maturity of the Securities, (3) has a final Stated Maturity that exceeds the final Stated Maturity of principal of the Securities, and (4) is pari passu with or expressly subordinated in right of payment to the Securities at least to the same extent as the Indebtedness refinanced; - 77- (vi) dividends, loans or advances by the Company to Holdings or Newco to enable Holdings to pay cash dividends on the Holdings Preferred Stock; provided that on the date of payment of such dividend, the Company, after giving pro forma effect to such dividend, loan or advance, would be able to incur $1.00 of additional Indebtedness under the provisions of Section 1007 (other than Permitted Indebtedness), assuming a market rate of interest on such Indebtedness; (vii) the redemption, repurchase, defeasance or acquisition or retirement for value of any Pari Passu Indebtedness (other than the Subordinated Debentures); provided that the Company shall redeem, pursuant to the optional redemption provisions in Article Eleven and the Securities, the principal amount of Securities bearing the same proportion to the aggregate amount of such Pari Passu Indebtedness being redeemed, repurchased, defeased or acquired or retired for value that the aggregate outstanding principal amount of such Securities bears to the aggregate outstanding principal amount of such Pari Passu Indebtedness (without giving effect to such redemption, repurchase, defeasance, acquisition or retirement); (viii) the declaration or payment of any dividend or distribution on any Capital Stock of any Subsidiary, or the purchase, redemption, acquisition or retirement for value of any Capital Stock of any Subsidiary; provided that such declaration, payment, purchase, redemption, acquisition or retirement is made pro rata among all holders of such Capital Stock of such Subsidiary; (ix) payments or other actions described in clauses (i) through (v) of Section 1008(a) that would otherwise be Restricted Payments in an aggregate amount not to exceed $35,000,000; (x) the dividend or distribution of the capital stock of Plainbridge to Newco; (xi) the repurchase of any Indebtedness of the Company which is pari passu with or expressly subordinate in right of payment to the Securities at a purchase price not greater than 101% of the principal amount of such Indebtedness in the event of a Change in Control (as defined in this Indenture) pursuant to a provision similar to - 78- Section 1011; provided that prior to such repurchase the Company has made the Change in Control Offer as provided in such covenant and has repurchased all Securities validly tendered for payment in connection with such Change in Control Offer; and (xii) the redemption, repurchase, defeasance or acquisition or retirement for value of the Holdings Intercompany Notes remaining outstanding following the Recapitalization (other than a scheduled principal payment, scheduled sinking fund payment or at maturity). Except as provided in this Section 1008(b) and Section 1008(a)(2), nothing in this Section 1008 limits or restricts the making of any Permitted Payment and a Permitted Payment will not be treated as a Restricted Payment. (c) In computing Consolidated Adjusted Net Income of the Company under clause (A) of Section 1008(a), (l) the Company shall use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (2) the Company shall be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment which, at the time of the making of such Restricted Payment would in the good faith determination of the Company be permitted under the requirements of this Section 1008, such Restricted Payment shall be deemed to have been made in compliance with such provisions notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Adjusted Net Income of the Company for any period. Section 1009. Limitation on Transactions with Affiliates. (a) The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with any Affiliate of the Company (other than a wholly owned Subsidiary thereof) unless (i) such transaction or series of transactions is or are on terms that are no less favorable to the Company or such Subsidiary, as the case may be, than those that could have been obtained at the time of such transaction or transactions in a comparable transaction in arm's-length dealings with an unaffiliated third party and (ii) (A) with respect to any transaction or series of transactions involving aggregate payments in excess of $1,000,000, but less than $10,000,000, the Company delivers an Officers' Certificate to the Trustee certifying that such transaction or transactions complies with clause (i) above and - 79- (B) with respect to a transaction or series of transactions, involving aggregate payments equal to or greater than $10,000,000, (1) such transaction or transactions shall have received the approval of a majority of the disinterested directors of the Board of Directors of the Company if Plainbridge is a party to such transaction or series of transactions or (2) if Plainbridge is not a party to such transaction or series of transactions, such transactions or series of transactions shall have received either the approval of a majority of the disinterested directors of the Board of Directors of the Company or the Company shall deliver to the Trustee a written opinion of a nationally recognized investment banking firm stating that such transaction is fair to the Company from a financial point of view; provided, however, that the foregoing restriction shall not apply to (1) the payment of fees to Merrill Lynch Capital Partners, Inc. or Merrill Lynch, Pierce, Fenner & Smith Incorporated or any of their Affiliates for consulting, investment banking or financial advisory services rendered by such Person to the Company or any Subsidiary of the Company, (2) the payment of reasonable and customary regular fees to directors of the Company, Newco, SMG-II, Holdings or any of their respective subsidiaries or parents who are not employees of any of such Persons, (3) the Logistical Services Agreement and transactions pursuant thereto and (4) the Spin-Off Agreements and transactions pursuant thereto. For purposes of this Section 1009(a), any transaction or series of related transactions between the Company or any Subsidiary and any Affiliate of the Company that is approved as being on the terms required by clause (i) in the prior sentence by a majority of the disinterested directors of the Board of Directors of the Company shall be deemed to be on terms as favorable as those that might be obtained at the time of such transaction or series of transactions in a comparable transaction in arm's-length dealings with an unaffiliated third party, and thus shall be permitted under this Section 1009(a). (b) The Company will not, and will not permit any of its Subsidiaries to, amend, modify, or in any way alter the terms of the Intercompany Agreement, the Logistical Services Agreement or the Spin-Off Agreements in a manner materially adverse to the Company other than (i) by adding new Subsidiaries and (ii) in the case of the Logistical Services Agreement and the Spin-Off Agreements, any amendments or modifications that are approved by a majority of the disinterested directors of the Board of Directors of the Company. - 80- Section 1010. Limitation on Liens. The Company will not, and will not permit any Subsidiary to, create, incur, affirm or suffer to exist any Lien of any kind securing any Pari Passu Indebtedness or Subordinated Indebtedness (including any assumption, guarantee or other liability with respect thereto by any Subsidiary) upon any property or assets (including any intercompany notes) of the Company or any Subsidiary owned on the date hereof or acquired after the date hereof, or any income or profits therefrom, unless the Securities are directly secured equally and ratably with (or prior to in the case of Subordinated Indebtedness) the obligation or liability secured by such Lien, and except for any Lien securing Acquired Indebtedness created prior to the incurrence of such Indebtedness by the Company or any Subsidiary, provided that any such Lien only extends to the assets that were subject to such Lien securing such Acquired Indebtedness prior to the related acquisition by the Company or its Subsidiaries. Section 1011. Purchase of Securities Upon Change in Control. (a) If there shall have occurred a Change in Control, Securities shall be purchased by the Company, at the option of the Holder thereof, in whole or in part in integral multiples of $1,000, on a date which shall be a Business Day that is not earlier than 45 days nor later than 60 days from the date the Change in Control Notice referred to below is given to Holders or such later date as may be necessary for the Company to comply with requirements under the Exchange Act (such date, or such later date, being the "Change in Control Purchase Date"), at a purchase price in cash (the "Change in Control Purchase Price") in an amount equal to 101% of the principal amount of such Securities, plus accrued and unpaid interest (including any Defaulted Interest), if any, to the Change in Control Purchase Date, subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 1011(c). (b) Within 30 days following a Change in Control and prior to the mailing of the Change in Control Notice to Holders provided for in paragraph (c) below, the Company covenants to either (1) repay in full all Indebtedness under the Bank Credit Agreement and permanently reduce the commitments of the lenders thereunder or offer to repay in full all such Indebtedness and permanently reduce such commitments and repay the Indebtedness and permanently reduce the commitment of each lender who has accepted such offer or (2) obtain the requisite consent under the Bank Credit Agreement to - 81- permit the repurchase of the Securities as provided for in this Section 1011. The Company shall first comply with the provisions of this subsection (b) before it shall be required to repurchase the Securities pursuant to this Section 1011, and any failure to comply with this subsection (b) shall constitute a default of a covenant for purposes of Section 501(c). (c) Within 30 days after the occurrence of a Change in Control, the Company shall give written notice of such Change in Control (a "Change in Control Notice") and of its offer (the "Change in Control Offer") to purchase Securities as specified herein to the Trustee, and to each Holder of the Securities at his address appearing on the Security Register, by first-class mail, postage prepaid. The Trustee shall be under no obligation to ascertain the occurrence of a Change in Control. The Change in Control Notice shall contain all instructions and materials necessary to enable such Holders to tender Securities, shall include a form of Change in Control Purchase Notice to be completed by the Holder and shall state: (i) (A) the events causing the Change in Control and the date such Change in Control is deemed to have occurred for purposes of this Section 1011, and (B) a description of any material developments in the Company's business since the latest annual or quarterly report filed with the Trustee pursuant to Section 1018(c) or 1018(d) and, if material, any appropriate pro forma financial information; (ii) the date by which a Holder must give a Change in Control Purchase Notice; (iii) the Change in Control Purchase Price; (iv) the Change in Control Purchase Date; (v) that any Security not purchased will continue to accrue interest; (vi) that Securities to be purchased shall, on the Change in Control Purchase Date, become due and payable at the Change in Control Purchase Price and from and after such date (unless the Company shall default in the payment of the Change in Control Purchase Price) such Securities shall cease to bear interest; and (vii) the procedures a holder must follow to exercise rights under this Section 1011 and a brief - 82- description of those rights and the procedures for withdrawing a Change in Control Purchase Notice. (d) A Holder may exercise its rights specified in Section 1011(a) upon (i) delivery to any Paying Agent a written notice (a "Change in Control Purchase Notice") at any time on or prior to one Business Day before the Change in Control Purchase Date, stating (A) the certificate number of the Security that the Holder will deliver to be purchased and (B) the portion of the principal amount of the Security that the holder will deliver to be purchased, which portion must be $1,000 or an integral multiple thereof and (ii) delivery of such Security to such Paying Agent at such office prior to, on or after the Change in Control Purchase Date (together with all necessary endorsements), such delivery being a condition to receipt by the Holder of the Change in Control Purchase Price therefor. If a Holder has elected to deliver to the Company for purchase a portion of a Security, and if the principal amount of such portion is $1,000 or an integral multiple of $1,000, the Company shall purchase such portion from the Holder thereof pursuant to this Section 1011. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of a portion of such Security. Each Paying Agent shall promptly notify the Company of the receipt by the former of any and all Change in Control Purchase Notices and any and all written notices of withdrawal thereof. (e) Upon receipt by any Paying Agent of a Change in Control Purchase Notice, the Holder of the Security in respect of which such Change in Control Purchase Notice was given shall (unless such Change in Control Purchase Notice is withdrawn pursuant to Section 1011(j)) thereafter be entitled to receive solely the Change in Control Purchase Price with respect to such Security. Such Change in Control Purchase Price shall be paid to such Holder promptly following the later of the Business Day following the Change in Control Purchase Date (provided the conditions in Section 1011(d) have been satisfied) and the time of delivery of such Security to the relevant Paying Agent at the office of such Paying Agent by the Holder thereof in the manner required by Section 1011(d). (f) On or prior to the Change in Control Purchase Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in same day funds (or New York Clearing House funds if such deposit is made prior to the Change in Control Purchase Date) sufficient to pay the Change in Control Purchase Price of, and (except if the Change in Control Purchase Date shall be an Interest - 83 - Payment Date) accrued interest on, all the Securities or portions thereof which are to be purchased on that date. (g) Upon a Change in Control Purchase Notice having been given as aforesaid, Securities to be purchased shall, on the Change in Control Purchase Date, become due and payable at the Change in Control Purchase Price and from and after such date (unless the Company shall default in the payment of the Change in Control Purchase Price) such Securities shall cease to bear interest. Upon surrender of any such Security for purchase in accordance with the foregoing provisions, such Security shall be paid by the Company at the Change in Control Purchase Price; provided, however, that installments of interest whose Stated Maturity is on or prior to the Change in Control Purchase Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 307. If any Security tendered for purchase shall not be so paid upon surrender thereof, the principal thereof (and premium, if any, thereon) shall, until paid, bear interest from the Change in Control Purchase Date at the rate borne by such Security. (h) Any Security that is to be purchased only in part shall be surrendered to a Paying Agent at the office of such Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, one or more new Securities of any authorized denomination as requested by such Holder in a principal amount equal to, and in exchange for, the portion of the principal amount of the Security so surrendered that is not purchased. (i) The Company shall comply with the applicable tender offer rules, including Rule l4e-l under the Exchange Act, in connection with a Change in Control Offer. (j) A Change in Control Purchase Notice may be withdrawn before or after delivery by the Holder to the relevant Paying Agent at the office of such Paying Agent of the Security to which such Change in Control Purchase Notice relates, by means of a written notice of withdrawal (by facsimile transmission or letter) received by such Paying Agent at such office not later than one Business Day prior to the Change in Control Purchase Date, specifying, as applicable: - 84 - (i) the certificate number of the Security in respect of which such notice of withdrawal is being submitted; (ii) the principal amount of the Security with respect to which such notice of withdrawal is being submitted; and (iii) the principal amount, if any, of the Security that remains subject to the original Change in Control Purchase Notice and that has been or will be delivered for purchase by the Company. A written notice of withdrawal may be in the form set forth in the preceding paragraph. Each Paying Agent will promptly return to the prospective Holders thereof any Securities with respect to which a Change in Control Purchase Notice has been withdrawn in compliance with this Indenture. Section 1012. Restrictions on Preferred Stock of Subsidiaries. The Company will not permit any of its Subsidiaries to issue any Preferred Stock (other than to the Company or a Majority-owned Subsidiary of the Company), or permit any Person (other than the Company or a Majority-owned Subsidiary of the Company) to own or hold an interest in any Preferred Stock of any such Subsidiary previously held by the Company or a Majority-owned Subsidiary of the Company unless such Subsidiary would be entitled to incur Indebtedness pursuant to the provisions of Section 1007 in the aggregate principal amount equal to the aggregate liquidation value of such Preferred Stock assuming a market rate of interest (as determined by the Company) for such Preferred Stock as of the date of issuance or transfer. Section 1013. Limitations on Issuances of Guarantees of Indebtedness. The Company will not permit any Subsidiary, directly or indirectly, to guarantee, assume or in any other manner become liable with respect to any Pari Passu Indebtedness or Subordinated Indebtedness, unless such Subsidiary simultaneously executes and delivers a supplemental indenture hereto providing for a guarantee of the Securities; provided that, in the case of a Subsidiary's guarantee, assumption or other liability with respect to Subordinated Indebtedness, such guarantee, assumption or other liability shall be subordinated to such Subsidiary's - 85 - guarantee of the Securities to the same extent as such Subordinated Indebtedness is subordinated to the Securities; and provided further that this Section 1014 shall not be applicable to any guarantee, assumption or other liability of any Subsidiary of the Company that (i) existed at the time such Person became a Subsidiary of the Company and (ii) was not incurred in connection with, or in contemplation of, such Person becoming a Subsidiary of the Company. Any such guarantee of the Securities by a Subsidiary shall provide by its terms that it shall be automatically and unconditionally released and discharged upon either (A) the release or discharge of such guarantee of such Pari Passu Indebtedness or Subordinated Indebtedness, as the case may be, except a discharge by or as a result of payment under such guarantee or (B) any sale, exchange or transfer, to any Person not an Affiliate of the Company, of all the Company's stock in, or all or substantially all the assets of, such Subsidiary, which sale, exchange or transfer is made in compliance with the applicable provisions of this Indenture. Section 1014. Restriction on Transfer of Assets. The Company will not sell, convey, transfer or otherwise dispose of its assets or property to any of its Subsidiaries, except for (i) sales, conveyances, transfers or other dispositions of assets or property acquired by the Company after the date hereof; (ii) sales, conveyances, transfers or other dispositions of Existing Assets (a) made in the ordinary course of business; (b) made outside the ordinary course of business with a net book value that, when aggregated with all other such transfers by the Company since the date of this Indenture, less the net book value of Existing Assets transferred to the Company from its Subsidiaries, would not exceed 10% of the Consolidated Assets of the Company; or (c) to any Subsidiary if such Subsidiary simultaneously with such transfer executes and delivers a supplemental indenture hereto providing for the guarantee of payment of the Securities by such Subsidiary, which guarantee shall be subordinated to any guarantee of such Subsidiary of Senior Indebtedness of the Company and shall be subordinated to any other Indebtedness of such Subsidiary (which is not subordinated to any other Indebtedness of such Subsidiary, in each case to the same extent as the Securities are subordinated to Senior Indebtedness of the Company under this Indenture and (iii) sales, conveyances, transfers or other dispositions of Existing Assets made pursuant to the Spin-Off. Notwithstanding the foregoing, any such guarantee of a Subsidiary of the Securities shall provide by its terms that it shall be automatically and unconditionally released and discharged - 86 - (i) on the date that the net book value of the Existing Assets held by the Company is greater than 90% of Consolidated Assets or (ii) upon any sale, exchange or transfer to any Person not an Affiliate of the Company of all of the Company's stock in, or all or substantially all the assets of, such Subsidiary, which sale, exchange or transfer is made in compliance with the terms of this Indenture. Section 1015. Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not permit any Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind, on the ability of any Subsidiary to (a) pay dividends or make any other distribution on its Capital Stock, (b) pay any Indebtedness owed to the Company or any Subsidiary, (c) make loans or advances to the Company or any Subsidiary, or (d) transfer any of its property or assets to the Company or any Subsidiary, except (i) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the date hereof; (ii) any encumbrance or restriction, with respect to a Subsidiary that is not a Subsidiary of the Company on the date hereof, in existence at the time such Person becomes a Subsidiary of the Company or created on the date it becomes a Subsidiary; (iii) any encumbrance or restriction on the ability of any Subsidiary whose assets consist substantially only of fee or leasehold interests in real property and improvements thereon to transfer any such interests which are acquired after the date hereof or any unimproved real property acquired on or prior to the date hereof to the Company or any Subsidiary, which encumbrance or restriction is required by a lender to, or purchaser of any indebtedness of, such Subsidiary in connection with a financing or refinancing permitted hereunder; and (iv) any encumbrance or restriction pursuant to any agreement that extends, refinances, renews or replaces any agreement containing any of the restrictions described in the foregoing clauses (i)-(iii), provided that the terms and conditions of any such restrictions are not materially less favorable to the Holders of the Securities than those under or pursuant to the agreement extended, refinanced, renewed or replaced. Section 1016. Limitation on Unrestricted Subsidiaries. The Company will not make, and will not permit any of its Subsidiaries to make, any Investments in Unrestricted - 87 - Subsidiaries if, at the time thereof, the aggregate amount of such Investments would exceed the amount of Restricted Payments then permitted to be made pursuant to Section 1008. Any Investments in Unrestricted Subsidiaries permitted to be made pursuant to this Section 1016 (i) will be treated as the payment of a Restricted Payment in calculating the amount of Restricted Payments made by the Company and (ii) may be made in cash or property. Section 1017. Limitation on Other Senior Subordinated Indebtedness. The Company will not create, incur, assume, guarantee or in any other manner become liable with respect to any Indebtedness (other than the Securities) that is subordinate in right of payment to any Senior Indebtedness unless such Indebtedness is also pari passu with, or subordinate in right of payment to, the Securities, pursuant to subordination provisions substantially similar to those contained in Article Thirteen. Section 1018. Statement as to Compliance; Notice of Default; Provision of Financial Statements. (a) The Company will deliver to the Trustee, within 120 days after the end of each fiscal year ending after the date hereof, a brief certificate of its principal executive officer, principal financial officer or principal accounting officer stating whether, to such officer's knowledge, the Company is in compliance with all covenants and conditions to be complied with by it under this Indenture. For purposes of this Section 1018, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. (b) If a Default has occurred and is continuing, or if the Trustee, any Holder or the trustee for or the holder of any other evidence of Indebtedness of the Company (other than Indebtedness in the aggregate principal amount of less than $50,000,000) gives any notice or takes any other action with respect to a claimed Default, the Company shall deliver to the Trustee an Officers' Certificate specifying such Default, notice or other action within 5 Business Days of its occurrence. (c) The Company shall supply without cost to each Holder of the Securities, and file with the Trustee within l5 days after the Company is required to file the same with the Commission, copies of the annual reports and quarterly reports and of the information, documents and other reports which the Company may be required to file with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act. - 88 - (d) If the Company is not required to file with the Commission such reports and other information referred to in Section 1018(c), the Company shall furnish without cost to each Holder of the Securities and file with the Trustee (i) within 105 days after the end of each fiscal year, annual reports containing the information required to be contained in Items 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12 and 13 of Form 10-K promulgated under the Exchange Act, or substantially the same information required to be contained in comparable items of any successor form, (ii) within 60 days after the end of each of the first three fiscal quarters of each fiscal year, quarterly reports containing the information required to be contained in Form 10-Q promulgated under the Exchange Act, or substantially the same information required to be contained in any successor form and (iii) promptly from the time after the occurrence of an event required to be therein reported, such other reports containing information required to be contained in Form 8-K promulgated under the Exchange Act, or substantially the same information required to be contained in any successor form. The Company shall also make such reports available to prospective purchasers of the Securities, securities analysts and broker-dealers upon their request. Section 1019. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any covenant or condition set forth in Sections 1007 through 1018 (other than Section 1011) if, before or after the time for such compliance, the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding shall, by Act of such Holders, waive such compliance in such instance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. ARTICLE ELEVEN REDEMPTION OF SECURITIES Section 1101. Right of Redemption. The Securities may be redeemed at the election of the Company, at any time, as a whole or in part subject to the - 89 - conditions and at the Redemption Prices specified in the form of Security, together with accrued interest to the Redemption Date. Section 1102. Applicability of Article. Redemption of Securities at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. Section 1103. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by it (unless a shorter notice period shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed. Section 1104. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed, the particular Securities or portions thereof to be redeemed shall be selected not more than 60 days and not less than 30 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, either pro rata, by lot or, by any other method the Trustee shall deem fair and reasonable, and the amounts to be redeemed may be equal to $1,000 or any integral multiple thereof. The Trustee shall promptly notify the Company and the Security Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. Section ll05. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 21 nor more than 60 - 90 - days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (a) the Redemption Date; (b) the Redemption Price; (c) if less than all Outstanding Securities are to be redeemed, the identification (and, in the case of a Security to be redeemed in part, the principal amount) of the particular Securities to be redeemed; (d) that on the Redemption Date the Redemption Price will become due and payable upon each such Security or portion thereof, and that (unless the Company shall default in payment of the Redemption Price) interest thereon shall cease to accrue on and after said date; (e) the place or places where such Securities are to be surrendered for payment of the Redemption Price; (f) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (g) the CUSIP number, if any, relating to such Securities; and (h) in the case of a Security to be redeemed in part, the principal amount of such Security to be redeemed and that after the Redemption Date upon surrender of such Security, new Security or Securities in the aggregate principal amount equal to the unredeemed portion thereof will be issued. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at its request, by the Trustee in the name and at the expense of the Company. Section 1106. Deposit of Redemption Price. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold - 91 - in trust as provided in Section 1003) an amount of money in same day funds (or New York Clearing House funds if such deposit is made prior to the applicable Redemption Date) sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities or portions thereof which are to be redeemed on that date. Section 1107. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal thereof (and premium, if any, thereon) shall, until paid, bear interest from the Redemption Date at the rate borne by such Security. Section 1108. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 1002 (with, if the Company, the Security Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company, the Security Registrar or the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. - 92 - ARTICLE TWELVE [INTENTIONALLY OMITTED] ARTICLE THIRTEEN SUBORDINATION OF SECURITIES Section 1301. Securities Subordinate to Senior Indebtedness. The Company covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the indebtedness represented by the Securities and the payment of the principal of and premium, if any, and interest on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full, in cash or cash equivalents, of all Senior Indebtedness (including any interest accruing after the occurrence of an Event of Default under Section 501(f) or (g)). This Article Thirteen shall constitute a continuing offer to all persons who become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness, and such holders are made obligees hereunder and any one or more of them may enforce such provisions. Holders of Senior Indebtedness need not prove reliance on the subordination provisions hereof. Section 1302. Payment Over of Proceeds Upon Dissolution, etc. In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its creditors, as such, or to its assets, or (b) any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Company, then and in any such event: (1) the holders of all Senior Indebtedness shall be entitled to receive payment in full, in cash or cash equivalents, of all amounts due or to become due on or in respect of all Senior Indebtedness, or provision shall be made for such payment in cash or cash equivalents, before the Holders of the Securities are entitled to receive any - 93 - payment on account of principal of (or premium, if any) or interest on the Securities; and (2) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the provisions of this Article Thirteen, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities (except, so long as the effect of this parenthetical clause is not to cause the Securities to be treated in any case or proceeding or similar event described in Subsection (a), (b) or (c) of this Section 1302 as part of the same class of claims as the Senior Indebtedness or any class of claims on a parity with or senior to the Senior Indebtedness, for any such payment or distribution (x) authorized by an order or decree giving effect, and stating in such order or decree that effect is given, to the subordination of the Securities to the Senior Indebtedness, and made by a court of competent jurisdiction in a reorganization proceeding under any applicable bankruptcy law, or (y) of securities that (A) are unsecured (except to the extent the Securities are secured), (B) have an Average Life to Stated Maturity and final maturity which are no shorter than the Average Life to Stated Maturity of the Securities or any securities issued to the holders of the Senior Indebtedness under the Bank Credit Agreement pursuant to a plan of reorganization or readjustment, (C) are subordinated, to at least the same extent as the Securities, to the payment of all Senior Indebtedness then outstanding and (D) are not guaranteed by any Subsidiary of the Company (except to the extent the Securities are so guaranteed)), shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their Representative or Representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the principal of, and premium, if any, and interest on, and other amounts due or in connection with, the Senior Indebtedness held or represented by each, to the extent necessary to make - 94 - payment in full, in cash or cash equivalents, of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (3) in the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any such payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities, before all Senior Indebtedness is paid in full, in cash or cash equivalents, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full, in cash or cash equivalents, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance, transfer or lease of its properties and assets substantially as an entirety to another corporation upon the terms and conditions set forth in Article Eight shall not be deemed a dissolution, winding up, liquidation, reorganization, assignment for the benefit of creditors or marshalling of assets and liabilities of the Company for the purposes of this Section if the corporation formed by such consolidation or into which the Company is merged or the corporation which acquires by conveyance, transfer or lease such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance, transfer or lease, comply with the conditions set forth in Article Eight. Section 1303. No Payment When Specified Senior Indebtedness in Default. (a) (i) In the event of and during the continuation of any default in the payment of principal of (or premium, if any) or interest on any Specified Senior Indebtedness beyond any - 95 - applicable grace period with respect thereto, or (ii) in the event that any other event of default with respect to any Specified Senior Indebtedness shall have occurred and be continuing and shall have resulted in such Specified Senior Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, or (b) in the event that any event of default (other than a default described in clause (a)) with respect to any Specified Senior Indebtedness shall have occurred and be continuing permitting the holders of such Specified Senior Indebtedness (or a trustee on behalf of such holders) to declare such Specified Senior Indebtedness due and payable prior to the date on which it would otherwise have become due and payable, then no payment shall be made by the Company on account of the principal of (or premium, if any) or interest on the Securities or on account of the purchase or redemption or other acquisition of Securities (x) in case of any event of default described in subclause (i) of clause (a), or an event of default described in subclause (ii) of clause (a) resulting in an acceleration as specified in clause (a), unless and until such payment event of default shall have been cured or waived or shall have ceased to exist or such acceleration shall have been rescinded or annulled or the holders of such Specified Senior Indebtedness or their agents have waived the benefits of this Section, or (y) in case of any event of default specified in clause (b), from the earlier of the date the Company or the Trustee receives written notice of such event of default (which notice requests that no such payment be made) from the agent with respect to any such event of default under the Bank Credit Agreement or any other Representative of a holder of Specified Senior Indebtedness with respect to any such event of default under such specified Senior Indebtedness until the earlier of (1) 179 days after such date and (2) the date, if any, on which the Specified Senior Indebtedness to which such event of default relates is discharged or such event of default is waived by the holders of such Specified Senior Indebtedness (including, if any Indebtedness under the Bank Credit Agreement is outstanding, lenders under the Bank Credit Agreement) or otherwise cured (provided that further written notice relating to the same or any other event of default specified in clause (b) above with respect to any Specified Senior Indebtedness received by the Company or the Trustee within 12 months after such receipt shall not be effective for purposes of this clause (y)). In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, then and in such event such payment shall be paid over and delivered forthwith to the Company. - 96 - The provisions of this Section shall not apply to any payment with respect to which Section 1302 would be applicable. Section 1304. Payment Permitted if No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent the Company, at any time except during the pendency of any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 1302 or under the conditions described in Section 1303, from making payments at any time of principal of (and premium, if any) or interest on the Securities. Section 1305. Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full, in cash or cash equivalents, of all Senior Indebtedness, the Holders of the Securities shall be subrogated (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated to Senior Indebtedness of the Company to the same extent as the Securities are subordinated and which is entitled to like rights of subrogation) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. Section 1306. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as among the - 97 - Company, its creditors other than holders of Senior Indebtedness and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the express limitations set forth in Article Five and to the rights, if any, under this Article of the holders of Senior Indebtedness (1) in any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 1302, to receive, pursuant to and in accordance with such Section, cash, property and securities otherwise payable or deliverable to the Trustee or such Holder, or (2) under the conditions specified in Section 1303, to prevent any payment prohibited by such Section. Section 1307. Trustee to Effectuate Subordination. Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes. Section 1308. No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or - 98 - more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any Person liable in any manner for the collection of Senior Indebtedness; and (d) exercise or refrain from exercising any rights against the Company and any other Person. Section 1309. Notice to Trustee. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from the Company or a holder of Senior Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least three Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date. Subject to the provisions of Section 601, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate - 99 - in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Section 1310. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 602, and the Holders of the Securities 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 of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. Section 1311. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 606. Section 1312. Article Applicable to Paying Agents. In case at any time 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 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 in addition to or in place of the - 100 - Trustee; provided, however, that Section 1311 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. Section 1313. Rescission. The provisions of this Article Thirteen shall continue to be effective or be reinstated, as the case may be, if at any time any payment in respect of any Senior Indebtedness is rescinded or must otherwise be returned by the holder thereof upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment had not been made. Section 1314. Application by Trustee of Assets Deposited With It. Any cash or U.S. Government Obligations deposited in trust with the Trustee pursuant to and in accordance with Section 1401 shall be for the sole benefit of the Holders and shall not be subject to the subordination provisions of this Article Thirteen. ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE Section 1401. Option to Effect Defeasance or Covenant Defeasance. The Company may, at its option by Board Resolution, at any time, with respect to the Securities, elect to have either Section 1402 or Section 1403 be applied to all Outstanding Securities upon compliance with the conditions set forth below in this Article Fourteen. Section 1402. Defeasance and Discharge. Upon the Company's exercise under Section l401 of the option applicable to this Section 1402, the Company shall be deemed to have been discharged from its obligations with respect to all Outstanding Securities 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 Outstanding Securities, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 1405 and the other Sections of this - 101 - Indenture referred to in (A) and (B) below, and to have satisfied all its other obligations under such Securities and this Indenture, including its obligations under the covenants contained in Article Thirteen (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Securities to receive solely from the trust fund described in Section 1404 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any) and interest on such Securities when such payments are due, (B) the Company's obligations with respect to such Securities under Sections 304, 305, 306, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (D) this Article Fourteen. Subject to compliance with this Article Fourteen, the Company may exercise its option under this Section 1402 notwithstanding the prior exercise of its option under Section 1403 with respect to the Securities. Section 1403. Covenant Defeasance. Upon the Company's exercise under Section 1401 of the option applicable to this Section 1403, the Company shall be released from its obligations under the covenants contained in Articles Eight and Thirteen and in Sections 1007 through 1018 with respect to the Outstanding Securities on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Securities shall thereafter be deemed to be not "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder (it being understood that such Securities shall not be deemed Outstanding for financial accounting purposes). For this purpose, such covenant defeasance means that, with respect to the Outstanding Securities, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a default or an Event of Default under Section 501(c) or Section 501(h), but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. In addition, upon the Company's exercise under Section 1401 of the option applicable to Section 1403, Sections 501(c) - 102 - through 501(h) (other than Sections 501(f) and (g)) shall not constitute Events of Default. Section 1404. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 1402 or Section 1403 to the Outstanding Securities: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 608 who shall agree to comply with the provisions of this Article Fourteen 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 Securities, (A) cash in U.S. Dollars in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, cash in U.S. Dollars in an amount, or (C) a combination thereof, 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 (and premium, if any) and interest on the Outstanding Securities on the Stated Maturity of such principal or installment of principal (and premium, if any) or interest and; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to the Securities. For this purpose, "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (y) 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, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the - 103 - Securities Act of 1933, as amended), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt; (2) In the case of an election under Section 1402, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the date 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 Securities will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (3) In the case of an election under Section 1403, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States to the effect that the Holders of the Outstanding Securities will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; (4) No Default or Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit or, insofar as Subsection 501(f) or 501(g) is concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); - 104 - (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 is a party or by which it is bound; (6) In the case of an election under either Section 1402 or 1403, the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit made by the Company pursuant to its election under Section 1402 or 1403 was not made by the Company with the intent of preferring the Holders over other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (7) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel in the United States, each stating that all conditions precedent provided for relating to either the defeasance under Section 1402 or the covenant defeasance under Section 1403 (as the case may be) have been complied with as contemplated by this Section 1404. On and after the date the conditions set forth above are satisfied, the United States dollars or U.S. Government Obligations so deposited shall not be subject to the rights of the holders of Senior Indebtedness pursuant to the provisions of Article Thirteen. Section 1405. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 1405, the "Trustee") pursuant to Section 1404 in respect of the Outstanding Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. Money and U.S. Government Obligations so held in trust are not subject to Article Thirteen. - 105 - The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or U.S. Government Obligations deposited pursuant to Section 1404 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities. Anything in this Article Fourteen 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 1404 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 1404(l)), are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. Section 1406. Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or U.S. Government Obligations in accordance with Section 1402 or 1403, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 1402 or 1403, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1402 or 1403, as the case may be; provided, however, that, if the Company makes any payment of principal of (or premium, if any) or interest on any Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent. * * * * * - 106 - This Indenture may be signed in any number of counterparts with the same effect as if the signatures to each counterpart were upon a single instrument, and all such counterparts together shall be deemed an original of this Indenture. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. PATHMARK STORES, INC. By: /s/ Anthony Cuti Title: President and Chief Financial Officer Attest: /s/ Title: UNITED STATES TRUST COMPANY OF NEW YORK By: /s/ James E. Logan Title: Vice President Attest: /s/ Cynthia Chaney Title: Assistant Vice President - 107 - STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 25th day of October, 1993, before me personally came James E. Logan, to me known, who, being by me duly sworn, did depose and say that s/he resides at Brooklyn, New York; that s/he is Vice President of PATHMARK STORES, INC., one of the corporations described in and which executed the above instrument; that s/he knows the corporate seal of such corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed pursuant to authority of the Board of Directors of such corporation; and that s/he signed her/his name thereto pursuant to like authority. (NOTARIAL SEAL) /s/ Allison Blunnie ------------------- Notary Public - 108 - STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 26th day of October, 1993, before me personally came Anthony Cuti, to me known, who, being duly sworn, did depose and say that s/he resides at Saddle River, New Jersey; that s/he is President of UNITED STATES TRUST COMPANY OF NEW YORK, one of the corporations described in and which executed the above instrument; that s/he knows the corporate seal of such corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed pursuant to authority of the Board of Directors of such corporation; and that s/he signed her/his name thereto pursuant to like authority. (NOTARIAL SEAL) /s/ Linda Corrigan ------------------- Notary Public - 109 - Schedule I PATHMARK STORES, INC. CERTAIN EXISTING INDEBTEDNESS ----------------------------- (000's OMITTED) INDUSTRIAL REVENUE BONDS (See details on page 2) $ 6,375 OTHER DEBT (PRIMARILY MORTGAGES) (See details on page 2) 41,804 ------- $48,179 ======= Holdings Intercompany Note related to the Holdings Subordinated Notes in an aggregate principal amount equal to or less than $3,361,000. Holdings Intercompany Note related to the 13-1/8 Junior Subordinated Discount Debentures due 2003 of Holdings in an aggregate principal amount equal to or less than $1,800,000.
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Schedule I (cont'd) PATHMARK STORES, INC. CERTAIN EXISTING INDEBTEDNESS ----------------------------- INTEREST MATURITY BALANCE INDEBTEDNESS RATE DATE (IN THOUSANDS) ------------------------ -------- -------- -------------- Massachusetts Mutual Life 9.0% 1999 $ 243 Insurance Company 1295 State Street Springfield, MA 01101 Re: Madison Stuart Properties John Hancock Mutual Life 7.0 1994 1,207 Insurnace Company 200 Berkley Street Boston, MA 02117 Re: Bridge Stuart Properties Massachusetts Mutual Life 7.0-9.0 1993-99 480 Insurance Company 1295 State Street Springfield, MA 01101 Re: Pennsylvania Stuart Properties Connecticut General Life 10.2-10.4 1997-99 855 Insurance Company Hartford, CT 06115 Re: Jersey Stuart Properties Prudential Insurance Company 10.5 1998 37,278 of America 10 Rockefeller Center, 15th Fl. New York, NY Re: SGC Mortgaged Properties Delaware Economic Development 10.875 2003 3,000 Authority c/o Philadelphia National Bank P.O. Box 7010 Philadelphia, PA Re: Lancaster Pike IRB Industrial Revenue Bonds 10.6 2003 3,375 c/o Philadelphia National Bank P.O. Box 7918 Philadelphia, PA Re: Schillington IRB Jacqueline Nallitt 11.0 1999 276 1688 Victory Blvd. Staten Island, NY Re: Forrest Ave. Mall Store Mt. Vernon Urban Renewal Agency 8.0 1995 670 9 South First Ave., 9th Fl. Mt. Vernon, NY 10550 Re: Mt. Vernon Development AFCO 5.5 1994 795 900 Lanidex Plaza Parsippany, NJ 07054 Re: Insurance Policy Premium ______ LONG TERM DEBT $48,179 =======
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Schedule I PATHMARK STORES, INC. CERTAIN EXISTING LIENS ---------------------- The Indebtedness listed hereon is secured only by mortgages on the properties listed opposite such Indebtedness. INTEREST MATURITY BALANCE INDEBTEDNESS PROPERTY RATE DATE (IN THOUSANDS) -------------------------- ------------------------- -------- -------- -------------- Massachusetts Mutual Life Pathmark of Hamilton 9.0% 1999 $ 243 Insurance Company 2735 S. Broad Street 1295 State Street Hamilton Township, NJ 08610 Springfield, MA 01101 Re: Madison Stuart Properties John Hancock Mutual Life Pathmark of Inwood 7.0% 1994 362 Insurance Company 410 W. 207th Street 200 Berkley Street New York, NY 10034 Boston, MA 02117 Re: Bridge Stuart Properties Pathmark & Rickel of 511 Edgewater Park 2110 Rt. 130 & Wood Lane Rd. Beverly, NJ 08010 Pathmark of Ivy Hill .344 1331 Ivy Hill Road Springfield Township Philadelphia, PA 19150 Massachusetts Mutual Life Former Pathmark of Whitaker 7.0-9.0 1993-99 394 Insurance Company 5520 Whitaker Avenue 1295 State Street Philadelphia, PA 19124 Springfield, MA 01101 Re: Pennsylvania Stuart Franklin Township Gas Properties 673 Somerset Street Somerset, NJ 08873 Paramus Gas 34 639 Route 17 South Paramus, NJ 07652 Fairless Hills Gas 28 Route 1 and Atlantic Ave. Fairless Hills, PA 19030 Connecticut General Life Pathmark of Belmont 10.2-10.4 1997-99 855 Insurance Company 115 Belmont Avenue Hartford, CT 06115 Belleville, NJ 07109 Re: Jersey Stuart Properties Prudential Insurance Company Pathmark of Upper Darby 10.5 1998 1,710 of America 421 S. 69th Street 10 Rockefeller Center, Upper Darby, PA 19082 15th Fl. New York, NY Re: SGC Mortgaged Properties Pathmark & Rickel of 4,355 Glenolden 140 N. McDade Blvd. Glenolden, PA 19036 Pathmark & Rickel of 3,078 Shillington 243A W. Lancaster Avenue Shillington, PA 19607
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INTEREST MATURITY BALANCE INDEBTEDNESS PROPERTY RATE DATE (IN THOUSANDS) -------------------------- ------------------------- -------- -------- -------------- Prudential Insurance Company Pathmark of Willow Grove 4,450 of America (continued) 2545 Moreland Road Willow Grove, PA 19090 Pathmark of Lancaster Pike 2,018 3901 Lancaster Pike Wilmington, DE 19805 Pathmark & Rickel of East 9,633 Brunswick 50 Race Track Road East Brunswick, NJ 08615 Rickel of Forrest Avenue 3,135 1520 Forrest Avenue Staten Island, NY 10302 Rickel of Johnson City 2,337 540 Harry L. Drive Johnson City, NY 13790 Pathmark Drug of Danbury 10.5 1996 2,200 100 Danbury - Newtown Road Danbury, CT 06810 Purity Supreme Store 3,762 3375 Berlin Turnpike Newington, CT 06111 Jacqueline Nallitt Pathmark of Forrest 11.0 1999 276 1688 Victory Blvd. Avenue Staten Island, NY 1351 Forrest Avenue Re: Forrest Ave. Mall Store Staten Island, NY 10302 Mt. Vernon Urban Renewal Agency Pathmark Development 8.0 1995 670 9 South First Ave., 9th Fl. One Pathmark Plaza Mt. Vernon, NY 10550 Mt. Vernon, NY 10550 Re: Mt. Vernon Development _______ $41,009 =======
S-I-4 APPENDIX A [Form of Intercompany Agreement] [Indebtedness of the Company or any Majority-owned Subsidiary to any one or the other of them will qualify as Permitted Indebtedness if, and only if, such Indebtedness is made pursuant to and is evidenced by an agreement in the form of a promissory note in substantially the form as follows:] $ , 19 Evidences of all loans or advances ("Loans") 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. All capitalized terms used herein that are defined in, or by reference in, the Indenture between Pathmark Stores, Inc. and United States Trust Company of New York, trustee, dated as of , 1993 (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. Not Forgivable. Unless the Maker of the Loan hereunder is the Company, the Holder may not forgive any amounts owing under this Intercompany Note. Section 1.02. Interest; Prepayment. (a) The interest rate ("Interest Rate") on any Loan 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 shall be payable upon demand of the Holder. A-1 (c) If the principal or accrued interest, if any, on 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 1% per annum from maturity until the principal and interest on such Loans are fully paid. (d) Any amounts owed hereunder may be prepaid at any time by the Maker. Section 1.03. Subordination. All Loans made to the Company shall be subordinated in right of payment to the payment and performance of the obligations of the Company and any Subsidiary under the Indenture, the Securities, and any other Indebtedness ranking senior to or pari passu with the Securities, including, without limitation, any Senior Indebtedness; provided that, with respect to a Subsidiary in any specific instance, such Subsidiary is also an obligor under the Indenture, the Securities or such other senior 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 an Event of Default has occurred under the Indenture, then (x) in the event the Maker is not the Company and not a Subsidiary that is also an obligor under the Indenture or the Securities (in the case where the Holder is not the Company), all amounts owing under the Loans hereunder shall be immediately due and payable (whether or not demand has been made) to the Holder, (y) in the event the Maker is the Company, the amounts owing under the Loans hereunder shall not be payable and (z) in the event the Maker is a Subsidiary that is also an obligor under the Indenture or the Securities and the Holder is not the Company or another Subsidiary that is also an obligor under the Indenture or the Securities, the amounts owing under the Loans hereunder shall not be due and payable; provided, however, that, if such Event of Default or acceleration has been waived, cured or rescinded, such amounts shall no longer be due and payable in the case of clause (x), and such amounts may be paid in the case of clauses (y) and (z). 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 from a Subsidiary that is also an obligor under the Indenture or the Securities, which payments or distributions, pursuant to clause (y) or (z) of the prior sentence, are not payable after any Event of Default has A-2 occurred, is continuing and has not been waived, cured or rescinded, such Holder will pay over and deliver forthwith to the Company or such Subsidiary, 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 Agreement, or consent to depart therefrom 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 Agreement, except to its legal successor-in-interest. Section 3.03. Third Party Beneficiaries. The Holders of the Securities or any other Indebtedness ranking pari passu with, or senior to, the Securities including, without limitation, any Senior Indebtedness, shall be third party beneficiaries to this Agreement and shall have the right to enforce this Agreement against the Company and the Subsidiaries. Section 3.04. Headings. Article and Section headings in this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Section 3.05. Entire Agreement. This Agreement 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. Section 3.06. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 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: A-3 GRID Amount Interest Rate Date of of on the Notation Advance Advance Advance Made By Appendix B-1 [Form of Holdings Intercompany Note] PROMISSORY NOTE U.S. $ Dated as of: , 1993 FOR VALUE RECEIVED, the undersigned, Supermarkets General Corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of Supermarkets General Holdings Corporation (the "Lender") the principal sum of United States Dollars (U.S. $ ) at the times and in the amounts provided for the payment of principal thereof or thereunder (and any premiums) in the Indenture dated as of May 1, 1992 by and between the Lender and Wilmington Trust Company, Trustee (the "Trustee"), as supplemented by the First Supplemental Indenture dated as of , 1993 between the Lender and the Trustee and the 11-5/8% Subordinated Notes due 2002 issued thereunder (such Indenture and Notes, as supplemented, amended, modified or waived from time to time in accordance with the terms thereof being the "Lender Indenture" and "Lender Subordinated Notes", respectively), together with interest on such principal sum from the date hereof at the times and in the amounts provided in the Lender Indenture and the Lender Subordinated Notes for the payment of interest thereunder. Indebtedness evidenced by this Note is subordinated in right of payment to the prior payment in full of (i) all Senior Indebtedness (as defined in the Indenture dated as of , 1993 by and between the Borrower and Wilmington Trust Company, Trustee with respect to the 11-5/8% Subordinated Notes due 2002 (the "Borrower Indenture"), (ii) the Borrower's 11-5/8% Subordinated Notes due 2002 (the "Borrower Subordinated Notes")), (iii) the Subordinated Debentures and the Deferred Coupon Notes (as defined in the Borrower Indenture) and (iv) all other Indebtedness (as defined in the Borrower Indenture) of the Borrower, whether outstanding on the date of the Borrower Indenture or thereafter created, incurred, assumed or guaranteed to the same extent as the Borrower Subordinated Notes are subordinated to Senior Indebtedness (as defined in the Borrower Indenture) of the Borrower under the Borrower Indenture. For purposes of this provision, Article Thirteen and other relevant provisions of the Borrower Indenture are hereby incorporated by reference in this Note with appropriate modifications to the extent required by the terms hereof to effectuate such subordination. The Borrower shall make each payment under this Note not later than 12:00 noon (Eastern Standard time) on the day when due in lawful money of the United States of America (in freely transferable United States dollars) to the Lender at its address c/o Merrill Lynch Capital Partners, Inc., 767 Fifth Avenue, 48th Floor, New York, New York 10153, Attention: Stephen M. McLean, or at such other address of which the Lender may give the Borrower written notice from time to time, in same day funds. Computations of interest shall be made by the Lender in accordance with the terms and conditions contained in the Lender Indenture and the Lender Subordinated Notes. This Note shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its duly authorized representative as of the day and year first above written. SUPERMARKETS GENERAL CORPORATION By Name: Title: Address: 301 Blair Road Woodbridge, NJ 07095 8283e B-1-2 Appendix B-2 [Form of Holdings Intercompany Note] PROMISSORY NOTE U.S. $ Dated as of: , 1993 FOR VALUE RECEIVED, the undersigned, Supermarkets General Corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of Supermarkets General Holdings Corporation (the "Lender") the principal sum of United States Dollars (U.S. $ ) at the times and in the amounts provided for the payment of principal thereof or thereunder (and any premiums) in the Indenture dated as of May 25, 1987 by and between the Lender and Wilmington Trust Company, Trustee (the "Trustee"), as amended and restated as of May 15, 1992 and as supplemented as of June 15, 1992 and the 12-5/8% Subordinated Debentures due 2002 issued thereunder (such Indenture and Notes, as supplemented, amended, modified or waived from time to time in accordance with the terms thereof being the "Lender Indenture" and "Lender Subordinated Debentures", respectively), together with interest on such principal sum from the date hereof at the times and in the amounts provided in the Lender Indenture and the Lender Subordinated Debentures for the payment of interest thereunder. Indebtedness evidenced by this Note is subordinated in right of payment to the prior payment in full of (i) all Senior Indebtedness (as defined in the Indenture dated as of , 1993 by and between the Borrower and Wilmington Trust Company, Trustee with respect to the 12-5/8% Subordinated Debentures due 2002 (the "Borrower Indenture"), (ii) the Borrower's 12-5/8% Subordinated Debentures due 2002 (the "Borrower Subordinated Notes")), (iii) the Subordinated Notes and the Deferred Coupon Notes (as defined in the Borrower Indenture) and (iv) all other Indebtedness (as defined in the Borrower Indenture) of the Borrower, whether outstanding on the date of the Borrower Indenture or thereafter created, incurred, assumed or guaranteed to the same extent as the Borrower Subordinated Notes are subordinated to Senior Indebtedness (as defined in the Borrower Indenture) of the Borrower under the Borrower Indenture. For purposes of this provision, Article Thirteen and other relevant provisions of the Borrower Indenture are hereby incorporated by reference in this Note with appropriate modifications to the extent required by the terms hereof to effectuate such subordination. The Borrower shall make each payment under this Note not later than 12:00 noon (Eastern Standard time) on the day when due in lawful money of the United States of America (in freely transferable United States dollars) to the Lender at its address c/o Merrill Lynch Capital Partners, Inc., 767 Fifth Avenue, 48th Floor, New York, New York 10153, Attention: Stephen M. McLean, or at such other address of which the Lender may give the Borrower written notice from time to time, in same day funds. Computations of interest shall be made by the Lender in accordance with the terms and conditions contained in the Lender Indenture and the Lender Subordinated Notes. This Note shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its duly authorized representative as of the day and year first above written. SUPERMARKETS GENERAL CORPORATION By Name: Title: Address: 301 Blair Road Woodbridge, NJ 07095 8283e B-2-2 EX-4.7 8 DRAFT - 9/15/93 8282e/8283e (0191L/0192L) PATHMARK STORES, INC., Issuer, and NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION, Trustee INDENTURE Dated as of October 26, 1993 Junior Subordinated Deferred Coupon Notes due 2003 Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of October 26, 1993* Trust Indenture Indenture Act Section Section Sec. 310(a)(1) ............................. 608 (a)(2) ............................. 608 (b) ............................. 607, 609 Sec. 312(c) ............................. 701 Sec. 314(a) ............................. 703 (a)(4) ............................. 1018 (c)(1) ............................. 103 (c)(2) ............................. 103 (e) ............................. 103 Sec. 315(b) ............................. 601 Sec. 316(a)(last sentence) ............................. 101 ("Out- standing") (a)(1)(A) ............................. 502, 512 (a)(1)(B) ............................. 513 (b) ............................. 508 (c) ............................. 105 Sec. 317(a)(1) ............................. 503 (a)(2) ............................. 504 Sec. 318(a) ............................. 108 * This reconciliation and tie shall not, for any purpose, be deemed to be part of the Indenture. TABLE OF CONTENTS PAGE ARTICLE ONE Definitions and Other Provisions of General Application Section 101. Definitions ............................ 1 Accreted Amount......................... 2 Acquired Indebtedness .................. 2 Acquisition ............................ 2 Affiliate .............................. 3 Applicable Premium...................... 3 Average Life to Stated Maturity ........ 3 Bank Credit Agreement .................. 3 Board of Directors ..................... 4 Board Resolution ....................... 4 Business Day ........................... 4 Capital Lease Obligation ............... 4 Capital Stock .......................... 4 Change in Control ...................... 4 Chefmark ............................... 4 Commission ............................. 4 Company ................................ 5 Company Request or Company Order ....... 5 Consolidated Adjusted Net Income (Loss). 5 Consolidated Assets .................... 6 Consolidated Capital Expenditures ...... 6 Consolidated Fixed Charge Coverage Ratio ....................... 6 Consolidated Interest Expense .......... 6 Consolidated Non-cash Charges .......... 6 Consolidated Tax Expense ............... 7 Corporate Trust Office ................. 7 Corporation ............................ 7 Day Count Fraction...................... 7 Default ................................ 7 Equitable Investors .................... 7 Event of Default ....................... 7 Exchange Act ........................... 7 Existing Assets ........................ 7 Fair Market Value ...................... 7 Note: This table of contents shall not, for any purpose, be deemed to be a part of this Indenture. PAGE Federal Bankruptcy Code ................ 8 Generally Accepted Accounting Principles or GAAP ................... 8 Guaranteed Debt ........................ 8 Holder ................................. 8 Holdings ............................... 8 Holdings Intercompany Notes............. 8 Holdings Preferred Stock ............... 9 Indebtedness ........................... 9 Indenture .............................. 10 Intercompany Agreement ................. 10 Interest Payment Date .................. 10 Interest Rate Hedge Arrangement ........ 10 Investments ............................ 10 Lien ................................... 10 Logistical Services Agreement .......... 10 Majority-owned Subsidiary .............. 11 Management Investors ................... 11 Material Subsidiary .................... 11 Maturity ............................... 11 ML Funds ............................... 11 Newco................................... 11 Officers' Certificate .................. 12 Opinion of Counsel ..................... 12 Outstanding ............................ 12 Pari Passu Indebtedness ................ 13 Paying Agent ........................... 13 Permitted Holders ...................... 13 Permitted Indebtedness ................. 13 Permitted Investment ................... 15 Permitted Payment ...................... 15 Person ................................. 16 Plainbridge ............................ 16 Predecessor Security ................... 16 Preferred Stock ........................ 16 Purchase Money Mortgages ............... 16 Qualified Capital Stock ................ 16 Recapitalization ....................... 16 Redeemable Capital Stock ............... 16 Redemption Date ........................ 17 Redemption Price ....................... 17 Regular Record Date .................... 17 Representative ......................... 17 Responsible Officer .................... 17 Restricted Payments .................... 17 -ii- PAGE Security and Securities ................ 17 Senior Indebtedness .................... 17 Senior Subordinated Notes............... 18 SMG-II ................................. 18 Special Record Date .................... 18 Specified Senior Indebtedness .......... 18 Spin-Off Agreements .................... 19 Spin-Off ............................... 19 Stated Maturity ........................ 19 Subordinated Debentures ................ 19 Subordinated Indebtedness .............. 19 Subordinated Notes ..................... 20 Subsidiary ............................. 20 Tax Sharing Agreement .................. 20 Temporary Cash Investment .............. 20 Treasury Rate .......................... 20 Trust Indenture Act .................... 21 Trustee ................................ 21 Unrestricted Subsidiary ................ 21 Unrestricted Subsidiary Indebtedness ... 22 Voting Stock ........................... 22 Section 102. Other Definitions ...................... 22 Section 103. Compliance Certificates and Opinions ... 23 Section 104. Form of Documents Delivered to Trustee . 23 Section 105. Acts of Holders ........................ 24 Section 106. Notices, etc., to Trustee and Company .......................... 25 Section 107. Notice to Holders; Waiver .............. 26 Section 108. Conflict of any Provision of Indenture with Trust Indenture Act ... 27 Section 109. Effect of Headings and Table of Contents ............................. 27 Section 110. Successors and Assigns ................. 27 Section 111. Separability Clause .................... 27 Section 112. Benefits of Indenture .................. 27 Section 113. Governing Law .......................... 27 Section 114. Legal Holidays ......................... 28 Section 115. No Recourse Against Others ............. 28 -iii- PAGE ARTICLE TWO Security Forms Section 201. Forms Generally ........................ 28 Section 202. Form of Face of Security ............... 29 Section 203. Form of Reverse of Security ............ 31 Section 204. Form of Trustee's Certificate of Authentication ....................... 36 ARTICLE THREE The Securities Section 301. Title and Terms ........................ 36 Section 302. Denominations .......................... 37 Section 303. Execution, Authentication, Delivery and Dating ............................... 37 Section 304. Temporary Securities ................... 39 Section 305. Registration, Registration of Transfer and Exchange ......................... 39 Section 306. Mutilated, Destroyed, Lost and Stolen Securities ........................... 40 Section 307. Payment of Interest; Interest Rights Preserved ............................ 41 Section 308. Persons Deemed Owners .................. 43 Section 309. Cancellation ........................... 43 Section 310. Computation of Interest ................ 43 ARTICLE FOUR Satisfaction and Discharge Section 401. Satisfaction and Discharge of Indenture ......................... 44 Section 402. Application of Trust Money ............. 45 -iv- PAGE ARTICLE FIVE Remedies Section 501. Events of Default ...................... 46 Section 502. Acceleration of Maturity; Rescission ... 48 Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee ........... 49 Section 504. Trustee May File Proofs of Claim ....... 50 Section 505. Trustee May Enforce Claims Without Possession of Securities ............. 51 Section 506. Application of Money Collected ......... 51 Section 507. Limitation on Suits .................... 52 Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest ............................. 53 Section 509. Restoration of Rights and Remedies ..... 53 Section 510. Rights and Remedies Cumulative ......... 53 Section 511. Delay or Omission Not Waiver ........... 53 Section 512. Control by Holders ..................... 54 Section 513. Waiver of Past Defaults ................ 54 Section 514. Undertaking for Costs .................. 54 Section 515. Waiver of Stay, Extension or Usury Laws ........................... 55 Section 516. Unconditional Right of Holders to Institute Certain Suits ........... 55 ARTICLE SIX The Trustee Section 601. Notice of Defaults ..................... 56 Section 602. Certain Rights of Trustee .............. 56 Section 603. Not Responsible for Recitals or Issuance of Securities ............... 59 Section 604. Trustee and Agents May Hold Securities; Collections; etc. ........ 59 Section 605. Money Held in Trust .................... 59 Section 606. Compensation and Reimbursement ......... 60 Section 607. Conflicting Interests .................. 61 Section 608. Corporate Trustee Required; Eligibility .......................... 61 Section 609. Resignation and Removal; Appointment of Successor ......................... 62 -v- PAGE Section 610. Acceptance of Appointment by Successor ............................ 64 Section 611. Merger, Conversion, Consolidation or Succession to Business ............... 64 Section 612. Preferential Collection of Claims Against Company ...................... 65 ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company Section 701. Disclosure of Names and Addresses of Holders ........................... 65 Section 702. Reports by Trustee ..................... 65 Section 703. Reports by Company ..................... 66 ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease Section 801. Company May Consolidate, etc., Only on Certain Terms ................ 67 Section 802. Successor Substituted .................. 68 ARTICLE NINE Supplemental Indentures Section 901. Supplemental Indentures without Consent of Holders ........... 68 Section 902. Supplemental Indentures with Consent of Holders .............. 69 Section 903. Execution of Supplemental Indentures ... 70 Section 904. Effect of Supplemental Indentures ...... 71 Section 905. Conformity with Trust Indenture Act .... 71 Section 906. Reference in Securities to Supplemental Indentures ........................... 71 Section 907. Effect on Senior Indebtedness .......... 71 -vi- PAGE ARTICLE TEN Covenants Section 1001. Payment of Principal, Premium and Interest ............................. 71 Section 1002. Maintenance of Office or Agency ........ 72 Section 1003. Money for Security Payments to Be Held in Trust ........................ 72 Section 1004. Corporate Existence .................... 74 Section 1005. Payment of Taxes and Other Claims ...... 74 Section 1006. Maintenance of Properties .............. 75 Section 1007. Limitation on Indebtedness ............. 75 Section 1008. Limitation on Restricted Payments ...... 76 Section 1009. Limitation on Transactions with Affiliates ........................... 81 Section 1010. Limitation on Liens .................... 82 Section 1011. Purchase of Securities Upon Change in Control ....... ............ 83 Section 1012. Restrictions on Preferred Stock of Subsidiaries ......................... 87 Section 1013. Limitations on Issuances of Guarantees of Indebtedness ...................... 87 Section 1014. Restriction on Transfer of Assets ...... 88 Section 1015. Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries ......................... 88 Section 1016. Limitation on Unrestricted Subsidiaries ......................... 89 Section 1017. Statement as to Compliance; Notice of Default; Provision of Financial Statements ........................... 89 Section 1018. Waiver of Certain Covenants ............ 90 Section 1019. Calculation of Original Issue Discount; Certain Information Concerning Tax Reporting ............. 91 -vii- PAGE ARTICLE ELEVEN Redemption of Securities Section 1101. Right of Redemption .................... 91 Section 1102. Applicability of Article ............... 92 Section 1103. Election to Redeem; Notice to Trustee .. 92 Section 1104. Selection by Trustee of Securities to Be Redeemed .......................... 92 Section 1105. Notice of Redemption ................... 92 Section 1106. Deposit of Redemption Price ............ 94 Section 1107. Securities Payable on Redemption Date .. 94 Section 1108. Securities Redeemed in Part ............ 94 ARTICLE TWELVE [Intentionally Omitted] ARTICLE THIRTEEN Subordination of Securities Section 1301. Securities Subordinate to Senior Indebtedness ......................... 95 Section 1302. Payment Over of Proceeds Upon Dissolution, etc. .................... 95 Section 1303. No Payment When Specified Senior Indebtedness in Default .............. 98 Section 1304. Payment Permitted if No Default ........ 99 Section 1305. Subrogation to Rights of Holders of Senior Indebtedness ............... 99 Section 1306. Provisions Solely to Define Relative Rights ...................... 100 Section 1307. Trustee to Effectuate Subordination .... 100 Section 1308. No Waiver of Subordination Provisions .. 100 Section 1309. Notice to Trustee ...................... 101 Section 1310. Reliance on Judicial Order or Certificate of Liquidating Agent ..... 102 Section 1311. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights ..................... 102 Section 1312. Article Applicable to Paying Agents .... 103 Section 1313. Rescission ............................. 103 Section 1314. Application by Trustee of Assets Deposited With It .................... 103 Section 1315. Trustee's Relation to Senior Indebtedness ......................... 103 -viii- PAGE ARTICLE FOURTEEN Defeasance and Covenant Defeasance Section 1401. Option to Effect Defeasance or Covenant Defeasance ............... 104 Section 1402. Defeasance and Discharge ............... 104 Section 1403. Covenant Defeasance..................... 105 Section 1404. Conditions to Defeasance or Covenant Defeasance .................. 105 Section 1405. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions ....... 108 Section 1406. Reinstatement .......................... 109 TESTIMONIUM........................................... 110 SIGNATURES AND SEALS.................................. 110 ACKNOWLEDGMENTS EXISTING INDEBTEDNESS..............................SCHEDULE I FORM OF INTERCOMPANY AGREEMENT.....................APPENDIX A FORM OF HOLDINGS INTERCOMPANY NOTE...............APPENDIX B-1 FORM OF HOLDINGS INTERCOMPANY NOTE...............APPENDIX B-2 -ix- INDENTURE, dated as of October 26, 1993, between PATHMARK STORES, INC., a Delaware corporation (hereinafter called the "Company"), and NATIONSBANK of Georgia, National Association, a national banking association, trustee (hereinafter called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the creation of an issue of its Junior Subordinated Deferred Coupon Notes due 2003 (hereinafter called the "Securities"), of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture; This Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act that are required to be part of and to govern indentures qualified under the Trust Indenture Act; All acts and things necessary have been done to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid, binding and legal obligations of the Company, and to make this Indenture a valid agreement of the Company in accordance with its terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (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 generally accepted accounting principles and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States as of the date hereof; and (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Articles Five, Six, Ten, Thirteen and Fourteen are defined in those Articles. "Accreted Amount" means (i) as of any date of determination prior to November 1, 1999, the sum of (a) the initial offering price of each Security and (b) the portion of the excess of the principal amount of each Security over such initial offering price which shall have been amortized through such date, such amount to be so amortized on a daily basis and compounded semiannually on each May 1 and November 1 at the rate of 10 3/4% per annum from the date of issuance of the Securities through the date of determination computed on the basis of a 360-day year of twelve 30-day months and an amortization period ending on November 1, 1999 and (ii) as of any date of determination on or after Novvember 1, 1999, the principal amount at final Maturity of such Security. "Acquired Indebtedness" means Indebtedness of a Person (including an Unrestricted Subsidiary) (i) existing at the time such Person becomes a Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person, other than Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Subsidiary or such acquisition, as the case may be. "Acquisition" means the acquisition of the Company by Holdings completed in October 1987 pursuant to the Agreement and Plan of Merger dated as of April 22, 1987 among Holdings, SMG Acquisition Corporation and the Company, as amended. - 2- "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 or (ii) for purposes of Section l009 only, any other Person that owns, directly or indirectly, 10% or more of such Person's Capital Stock or any officer or director of any such Person or other Person or with respect to any natural Person, any person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. 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 the ownership of Voting Stock, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Applicable Premium" means with respect to any Security to be redeemed the greater of (i) 1.0% of the then outstanding Accreted Amount of such Security and (ii) (a) the sum of the present values, discounted for all full semiannual periods at a discount rate equal to one-half multiplied by the Treasury Rate plus 125 basis points (provided, however, that the discount rate for the period from the Redemption Date to the next Interest Payment Date shall equal the result of multiplying the Treasury Rate plus 125 basis points by the Day Count Fraction), of (I) the remaining payments of [cash] interest on such Security and (II) the payment of the principal amount that, but for such redemption, would have been payable on such Securities at Final Maturity, minus (b) the then outstanding Accreted Amount of such Security, minus (c) accrued and unpaid interest paid on the Redemption Date. "Average Life to Stated Maturity" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from the date of determination to the date or dates of each successive scheduled principal payment of such Indebtedness multiplied by (b) the amount of each such principal payment by (ii) the sum of all such principal payments. "Bank Credit Agreement" means the Credit Agreement dated as of the date hereof among the Company and the lenders thereunder and Bankers Trust Company, as agent, as in effect on the date hereof, and as such agreement may be amended, renewed, extended, supplemented or otherwise modified from time to time, and any agreement or successive agreements governing Indebtedness incurred to refund, refinance, restructure or replace the Indebtedness and commitments then outstanding or permitted to be outstanding under such Credit Agreement or other agreement. - 3- "Board of Directors" means the board of directors of the Company 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 to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York, Atlanta, Georgia or the State of Delaware are authorized or obligated by law, regulation or executive order to close. "Capital Lease Obligation" of any Person means any obligations of such Person and its Subsidiaries on a consolidated basis under any capital lease of real or personal property which, in accordance with GAAP, has been recorded as a capitalized lease obligation. "Capital Stock" of any Person means any and all shares, interests, participations, or other equivalents (however designated) of such Person's capital stock whether now outstanding or issued after the date hereof. "Change in Control" means an event as a result of which: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than Permitted Holders is or becomes the "beneficial owner" (as defined in Rules 13d-3 and l3d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total Voting Stock of the Company and (ii) such person succeeds in having its nominees constitute a majority of the Company's Board of Directors. "Chefmark" means Chefmark, Inc., a corporation incorporated under the laws of the State of Delaware, and any successor thereto. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. - 4- "Company" means the Person named as the "Company" in the first paragraph of this instrument, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. To the extent necessary to comply with the requirements of the provisions of Trust Indenture Act Sections 3l0 through 317 as they are applicable to the Company, the term "Company" shall include any other obligor with respect to the Securities for the purposes of complying with such provisions. "Company Request" or "Company Order" means a written request or order signed in the name of the Company (i) by its Chairman, a Vice Chairman, its President or a Vice President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee; provided, however, that such written request or order may be signed by any two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "Consolidated Adjusted Net Income (Loss)" of the Company means, for any period, the consolidated net income (loss) of the Company and its consolidated Subsidiaries for such period as determined in accordance with GAAP, adjusted by excluding (i) net after-tax extraordinary gains or losses (less all fees and expenses relating thereto), as the case may be, (ii) net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset sales, (iii) any depreciation and amortization expense incurred by the Company and its consolidated Subsidiaries from the date of the Acquisition to the date of determination resulting from (a) any write-up in the book value of any assets due to the Acquisition and (b) any goodwill due to the Acquisition (including any write-off or accelerated amortization of goodwill), (iv) any expenses incurred in connection with the Acquisition and the financing thereof and the Recapitalization, (v) any expenses relating to the incurrence or refinancing of Indebtedness, (vi) the net income (or loss) of any Person (including any Unrestricted Subsidiary and excluding the Company or a Subsidiary) in which the Company or any of its Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or its Subsidiaries by such other Person during such period, (vii) net income (or net loss) of any Person combined with the Company or any of its Subsidiaries in a "pooling of interests" basis attributable to any period prior to the date of combination and (viii) non-cash charges of the Company and its Subsidiaries resulting from the application of Statement of - 5- Financial Accounting Standards No. 106 ("SFAS 106") to the extent such charges exceed the cash payments for benefits covered by SFAS 106 for the relevant period. "Consolidated Assets" means the net book value of the Existing Assets shown on the balance sheet of the Company, as determined in accordance with GAAP consistently applied, as of the last day of the Company's last fiscal quarter prior to the date hereof. "Consolidated Capital Expenditures" means cash capital expenditures reflected in the consolidated statement of cash flows of the Company and Capital Lease Obligations that are on the consolidated balance sheet of the Company and its Subsidiaries, in each case in conformity with GAAP. "Consolidated Fixed Charge Coverage Ratio" of the Company means, for any period, the ratio of (i) the sum of Consolidated Adjusted Net Income, Consolidated Interest Expense, Consolidated Tax Expense and Consolidated Non-cash Charges deducted in computing Consolidated Adjusted Net Income, in each case, for such period, of the Company and its Subsidiaries on a consolidated basis, all determined in accordance with GAAP, to (ii) the sum of such Consolidated Interest Expense for such period; provided that, in making such computation, the Consolidated Interest Expense attributable to interest on any Indebtedness computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period; provided, further, that in making any calculation prior to the first anniversary date of the Recapitalization, the Recapitalization shall be deemed to have taken place on the first day of such period. "Consolidated Interest Expense" means, for any period, the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on a consolidated statement of earnings of the Company and its Subsidiaries for such period minus the aggregate amount for such period of interest imputed on future liabilities of the Company and its Subsidiaries, other than Indebtedness, recorded at present value. Consolidated Interest Expense shall include accruals in respect of Interest Rate Hedge Arrangements (but shall exclude any such accruals in the nature of amortization of front-end fees or other similar payments). "Consolidated Non-cash Charges" of the Company means, for any period, the aggregate depreciation, amortization and other non-cash charges of the Company and its consolidated Subsidiaries for such period, as determined in accordance with - 6- GAAP (excluding any such non-cash charge which requires an accrual of or reserve for cash charges for any future period). "Consolidated Tax Expense" of the Company means, for any period, as applied to the Company, the provision for federal, state, local and foreign income taxes of the Company and its consolidated Subsidiaries for such period as determined in accordance with GAAP. "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 600 Peachtree Street, Suite 900, Atlanta, Georgia 30308. "Corporation" includes corporations, associations, partnerships, companies and business trusts. "Day Count Fraction" means the number of days from the Redemption Date to (but excluding) the next scheduled Interest Payment Date divided by 360 (which assumes a 360-day year composed of twelve 30-day months). "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Equitable Investors" means The Equitable Life Assurance Society of the United States and any of its Affiliates that beneficially own, directly or indirectly, shares of Capital Stock of SMG-II, Holdings, Newco or the Company. "Event of Default" has the meaning specified in Article Five. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Existing Assets" means the assets and other property held by the Company (and not its subsidiaries) as of the last day of the Company's last fiscal quarter prior to the date hereof, adjusted by excluding any assets and other property transferred to Newco in the Spin-Off, plus any assets held by the Company (and not its subsidiaries) irrevocably designated from time to time by the Company as Existing Assets. "Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer. - 7- "Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the United States Code, as amended from time to time. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect from time to time; provided, however, that with respect to the obligations of any Person under Articles Eight and Ten and the definitions applicable thereto, "GAAP" means generally accepted accounting principles in the United States as in effect on the date hereof. "Guaranteed Debt" of any Person means, without duplication, all Indebtedness of any other Person referred to in the definition of Indebtedness contained in this Section 101 guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) other than with respect to the Logistical Services Agreement or any Spin-Off Agreement, to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (iii) other than with respect to the Logistical Services Agreement or any Spin-Off Agreement, to supply funds to, or in any other manner invest in, the debtor (including any agreement to pay for property or services to be acquired by such debtor irrespective of whether such property is received or such services are rendered), (iv) to maintain working capital or equity capital of the debtor, or otherwise to maintain the net worth, solvency or other financial condition of the debtor or (v) otherwise to assure a creditor against loss; provided that the term "guarantee" shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or any obligation or liability of such Person in respect of leasehold interests assigned by such Person to any other Person. "Holder" means a Person in whose name a Security is registered in the Security Register. "Holdings" means Supermarkets General Holdings Corporation, a Delaware corporation, and any successor thereto. "Holdings Intercompany Notes" means the 11-5/8% subordinated note and the 12-5/8% subordinated debenture each issued by the Company to Holdings in the forms attached hereto as Appendix B and in aggregate principal amount not in excess of the principal amounts outstanding on the date hereof. - 8- "Holdings Preferred Stock" means Holdings' Cumulative Exchangeable Redeemable Preferred Stock, par value $.01 per share, having a liquidation preference of $25 per share and maturing on December 31, 2007, that is outstanding on the date hereof. "Indebtedness" means with respect to any Person, without duplication, (i) all indebtedness of such Person for borrowed money (including overdrafts) or for the deferred purchase price of property or services, excluding any trade payables, import letters of credit and other accrued current liabilities incurred in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any standby letters of credit and acceptances issued under letter of credit facilities, acceptance facilities or other similar facilities, (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness 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 accounts payable arising in the ordinary course of business, (iv) all Capital Lease Obligations of such Person, (v) all Indebtedness referred to in (but not excluded from) clause (i), (ii), (iii) or (iv) above of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien, upon or in 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 Guaranteed Debt of such Person, (vii) 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 and (viii) all obligations under interest rate hedge contracts of such Person. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Redeemable Capital Stock, such fair market value to be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock. - 9- "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. "Intercompany Agreement" means the agreement in the form attached hereto as Appendix A, as amended or modified in accordance with the terms of this Indenture. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Securities. "Interest Rate Hedge Arrangement" means any rate swap transaction under a rate swap agreement to which the Company is a party or beneficiary, or becomes a party or beneficiary, and any interest rate protection agreement, interest rate future, interest rate option or other interest rate hedge arrangement to or under which the Company is a party or a beneficiary, or becomes a party or a beneficiary, or to or under which any Subsidiary of the Company is or becomes such a party or beneficiary if the obligations of such Subsidiary thereunder are guaranteed by the Company. "Investments" of any Person means, directly or indirectly, any advance, loan or other extension of credit or capital contribution by such Person 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) any other Person, or any purchase or acquisition by such Person of any stock, bonds, notes, debentures or other securities issued or owned by any other Person. For the purpose of making any calculations hereunder, (i) Investment shall include the Fair Market Value of the net assets of any Subsidiary at the time that such Subsidiary is designated an Unrestricted Subsidiary and shall exclude the Fair Market Value of the net assets of any Unrestricted Subsidiary that is designated a Subsidiary and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at Fair Market Value at the time of such transfer; provided that in each case, the Fair Market Value of an asset or property shall be as determined by the Board of Directors of the Company in good faith. "Lien" means any mortgage, charge, pledge, lien, privilege, security interest or encumbrance of any kind. "Logistical Services Agreement" means the Logistical Services Agreement dated as of , 1993 between Plainbridge and the Company, as amended or modified in accordance with the provisions hereof. - 10- "Majority-owned Subsidiary" means a Subsidiary at least 50% of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more of the Subsidiaries, or the Company and one or more of the Subsidiaries, provided that Majority-owned Subsidiary shall not include any such Subsidiary if the equity ownership or the Voting Stock of such Subsidiary not owned by the Company and/or one or more of the Subsidiaries is owned by Holdings and/or one or more Affiliates of Holdings other than the Company and its Subsidiaries. "Management Investors" means the officers and other members of the management of the Company who at any particular date shall beneficially own, directly or indirectly, Voting Stock of the Company. "Material Subsidiary" means, at any particular time, any Subsidiary of the Company that, together with the Subsidiaries of such Subsidiary, (a) accounted for more than 10% of the consolidated revenues of the Company and its Subsidiaries for the most recently completed fiscal year of the Company or (b) was the owner of more than l0% of the consolidated assets of the Company and its Subsidiaries as at the end of such fiscal year, all as shown on the consolidated financial statements of the Company and its Subsidiaries for such fiscal year. "Maturity" when used with respect to any Security means the date on which the principal of any Security becomes due and payable as therein or herein provided, whether at Stated Maturity, Change in Control Purchase Date or Redemption Date and whether by declaration of acceleration, Change in Control, call for redemption or otherwise. "ML Funds" means Merrill Lynch Capital Appreciation Partnership No. IX, L.P., a Delaware partnership, ML Offshore LBO Partnership No. IX, a Cayman Islands partnership, ML Employees LBO Partnership No. I, L.P., a Delaware partnership, Merrill Lynch Interfunding Inc., a Delaware corporation, Merchant Banking L.P. No. I, a Delaware partnership, Merrill Lynch KECALP L.P., a Delaware partnership, Merrill Lynch Capital Appreciation Partnership No. B-X, L.P., a Delaware partnership, ML Offshore LBO Partnership No. B-X, a Cayman Islands partnership, MLCP Associates, L.P. No. II, a Delaware partnership, Merrill Lynch Venture Capital, Inc., a Delaware corporation and any Affiliates of the foregoing that beneficially own, directly or indirectly, shares of Capital Stock of SMG-II. "Newco" means PTK Holdings, Inc., a corporation incorporated under the laws of the State of Delaware, and any successor thereto. - 11- "Officers' Certificate" means a certificate signed by (i) the Chairman, a Vice Chairman, the President, a Vice President or the Treasurer of the Company and (ii) the Secretary or an Assistant Secretary of the Company and delivered to the Trustee; provided, however, that such certificate may be signed by two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee. Each such opinion shall include the statements provided for in Trust Indenture Act Section 314(e) to the extent applicable. "Outstanding" when used with respect to Securities means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (a) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (b) Securities, or portions thereof, for whose payment, redemption or purchase money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities and the Trustee or such Paying Agent is not prohibited from paying such money to the Holders on that date pursuant to the terms of Article Thirteen of this Indenture; provided that, if such Securities 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; (c) Securities, except to the extent provided in Sections 1402 and 1403, with respect to which the Company has effected defeasance or covenant defeasance as provided in Article Fourteen; and (d) Securities in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands the Securities are valid obligations of the Company; - 12- provided, however, that, in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, notice, direction, consent or waiver hereunder, Securities owned by the Company, or any other obligor upon the Securities or any Affiliate of the Company, or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, notice, direction, consent or waiver, only Securities which the Trustee has actual knowledge are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor. "Pari Passu Indebtedness" means any Indebtedness of the Company that is pari passu in right of payment to the Securities. "Paying Agent" means any Person authorized by the Company to pay the principal of (or premium, if any) or interest on any Securities on behalf of the Company. "Permitted Holders" means ML Funds, the Management Investors and the Equitable Investors, provided that the Equitable Investors shall not be a Permitted Holder if they are a member of a "group" (as such term is used in Section 13(d) of the Exchange Act) in respect of the Company which does not include the Management Investors and the ML Funds. "Permitted Indebtedness" means any of the following Indebtedness of the Company or any Subsidiary, as the case may be: (i) Indebtedness under the Bank Credit Agreement in an aggregate principal amount at any one time outstanding not to exceed $575,000,000; (ii) Indebtedness under the Securities; (iii) Indebtedness outstanding on the date hereof and listed on Schedule I hereto; (iv) Indebtedness under the Subordinated Notes, the Subordinated Debentures and the Senior Subordinated Notes; (v) obligations pursuant to interest rate hedge contracts; - 13- (vi) (A) Indebtedness under Capital Lease Obligations and (B) Purchase Money Mortgages; (vii) Indebtedness in respect of trade letters of credit and standby letters of credit incurred in the ordinary course of business; (viii) Indebtedness of the Company or any Subsidiary to any one or the other of them; provided that the obligation of the obligor of such Indebtedness is subject to the Intercompany Agreement; (ix) Indebtedness of any Subsidiary made in accordance with the applicable provisions of Section 1013 or Section 1014; (x) Indebtedness consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets; (xi) any obligation or liability in respect of leasehold interests assigned by the Company or any Subsidiary to any other Person; (xii) Indebtedness under the Holdings Intercompany Notes; (xiii) Indebtedness represented by letters of credit not exceeding an aggregate amount of $45,000,000 at any one time outstanding (other than those permitted by clause (vii) above); (xiv) Indebtedness incurred to finance Consolidated Capital Expenditures (including Acquired Indebtedness to the extent that, in conformity with GAAP, assets acquired in conjunction with such Acquired Indebtedness are included in the property, plant or equipment reflected on the consolidated balance sheet of the Company and its Subsidiaries); (xv) Indebtedness in addition to that described in clauses (i) through (xiv) of this definition of "Permitted Indebtedness", and any renewals, extensions, substitutions, refinancings or replacements of such Indebtedness, not to exceed $150,000,000 outstanding at any one time in the aggregate; and - 14- (xvi) any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") of any Indebtedness described in clauses (ii), (iii), (iv) and (xiv), including any successive refinancings so long as the aggregate amount of Indebtedness represented thereby is in a principal amount that does not exceed the principal amount so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing plus the amount of expenses of the Company incurred in connection with such refinancing; provided that for purposes of this clause, the principal amount of any Indebtedness shall be deemed to mean the principal amount thereof or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination and such refinancing does not reduce the Average Life to Stated Maturity or the final Stated Maturity of such Indebtedness. "Permitted Investment" means any of the following: (i) any Investment in any Majority-owned Subsidiary by the Company or any other Majority-owned Subsidiary, any Investment in any Person by the Company or any Majority-owned Subsidiary as a result of which such Person becomes a Majority-owned Subsidiary or any Investment in the Company by any Majority-owned Subsidiary; (ii) any Temporary Cash Investment; (iii) intercompany Indebtedness to the extent permitted under clause (viii) of the definition of "Permitted Indebtedness" contained in this Section 101; (iv) Investments in existence on the date hereof and any Investment with respect to which the Company or any Subsidiary is legally committed to make, but only if such commitment was in existence on the date hereof in each case, other than any Investment in any Unrestricted Subsidiary; (v) sales of goods on trade credit terms consistent with the Company's past practices or as otherwise consistent with trade credit terms in common use in the industry; (vi) Investments pursuant to the Logistical Services Agreement or Spin-Off Agreements; (vii) any Investment in any Person acquired or retained in connection with any asset sale or other disposition of assets; (viii) loans or advances to employees made in the ordinary course of business; and (ix) in addition to "Permitted Investments" described in the foregoing clauses (i) through (viii), Investments in the aggregate amount of $45,000,000 at any one time outstanding. "Permitted Payment" has the meaning specified in Section 1008. - 15- "Person" means any individual, corporation, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Plainbridge" means Plainbridge, Inc., a corporation incorporated under the laws of the State of Delaware, and any successor thereto. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for a mutilated Security or in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Security. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's preferred or preference stock whether now outstanding or issued after the date hereof, and includes, without limitation, all classes and series of preferred or preference stock. "Purchase Money Mortgages" means Indebtedness of the Company or any Subsidiary (i) issued to finance or refinance the purchase or construction of any assets of the Company or any Subsidiary or (ii) secured by a Lien on any assets of the Company or any Subsidiary where the lender's sole recourse is to the assets so encumbered, in either case (a) to the extent the purchase or construction prices for such assets are or should be included in "addition to property, plant or equipment" in accordance with GAAP and (b) if the purchase or construction of such assets is not part of any acquisition of a Person or business unit. "Qualified Capital Stock" of any Person means any and all Capital Stock of such Person other than Redeemable Capital Stock. "Recapitalization" means the Recapitalization described in the Prospectus relating to the issuance of the Securities. "Redeemable Capital Stock" means any Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or otherwise, is or upon the happening of an event or passage of time would be required to be redeemed prior to the final Stated Maturity of - 16- the Securities or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date means the or (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Representative" means the indenture trustee or other trustee, agent or representative for an issue of Senior Indebtedness. "Responsible Officer", when used with respect to the Trustee, means any officer assigned to the Corporate Trust Administration of the Trustee or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers or assigned by the Trustee to administer corporate trust matters at its Corporate Trust Office and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Payments" has the meaning specified in Section 1008. "Security" and "Securities" have the meaning set forth in the second paragraph of this Indenture. "Senior Indebtedness" means the principal of, premium, if any, and interest on (such interest on Senior Indebtedness, wherever referred to in this Indenture, being deemed to include interest accruing after the filing of a petition initiating any proceeding pursuant to any bankruptcy law in accordance with and at the rate (including any rate applicable upon any default or event of default, to the extent lawful) specified in any document evidencing the Senior Indebtedness, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such bankruptcy law) any Indebtedness of the Company (other than as otherwise provided in this - 17- definition), whether outstanding on the date hereof or thereafter created, incurred or assumed in accordance with the provisions of this Indenture, 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 the respective Securities. Without limiting the generality of the foregoing, "Senior Indebtedness" shall include the principal of, premium, if any, and interest on (including interest accruing after the occurrence of an event of default) all obligations of every nature of the Company from time to time owed under the Bank Credit Agreement, including, without limitation, principal of and interest on, and all fees, expenses, indemnities, payments for early termination of Interest Rate Hedge Arrangements, reimbursement obligations under letters of credit payable under the Bank Credit Agreement, the Senior Subordinated Notes, the Subordinated Notes and the Subordinated Debentures. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) Indebtedness that when incurred, and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company, (ii) Indebtedness that is represented by Redeemable Capital Stock, (iii) Indebtedness of the Company to a Subsidiary of the Company or any other Affiliate of the Company or any of such Affiliate's subsidiaries, including the Holdings Intercompany Notes, and (iv) that portion of any Indebtedness (other than any Indebtedness provided by any lender pursuant to the Bank Credit Agreement, except to the extent such Indebtedness is provided with actual knowledge on the part of any such lender that the incurrence thereof by the Company is a violation of this Indenture) which at the time of issuance is issued in violation of this Indenture. "Senior Subordinated Notes" means the Company's 9 5/8% Senior Subordinated Notes due 2003 in an aggregate principal amount not in excess of $440,000,000. "SMG-II" means SMG-II Holdings Corporation, a Delaware corporation, and any successor thereto. "Special Record Date" means a date fixed by the Trustee for the payment of any Defaulted Interest pursuant to Section 307. "Specified Senior Indebtedness" means (i) all Senior Indebtedness under the Bank Credit Agreement, (ii) Senior Indebtedness under the Senior Subordinated Notes and (iii) any other issue of Senior Indebtedness or refinancings thereof permitted by said definition having a principal amount of at - 18- least $100,000,000 and is specifically designated in the instrument evidencing such Senior Indebtedness as "Specified Senior Indebtedness" by the Company. For purposes of this definition: (a) the amount of the Indebtedness of the Company with respect to any Interest Rate Hedge Arrangement shall be deemed to be the lesser of (x) 25% of the notional amount of such Interest Rate Hedge Arrangement, or (y) the maximum amount the Company could be required to pay under such Interest Rate Hedge Arrangement; and (b) a refinancing of any such Indebtedness shall be treated as such only if it ranks or would rank pari passu with the Indebtedness refinanced. "Spin-Off Agreements" means (i) the Distribution and Transfer Agreement dated as of May 3, 1993 among the Company, Holdings and Chefmark; (ii) the Distribution and Transfer Agreement dated as of October 26, 1993 among the Company, Newco and Plainbridge; (iii) the Blair Services Agreement dated as of October 26, 1993 between the Company and Plainbridge; (iv) the Rickel Services Agreement dated as of October 26, 1993 between the Company and Plainbridge; (v) the Chefmark Services Agreement dated as of May 3, 1993 between the Company and Chefmark; (vi) the Tax Sharing Agreement; (vii) leases between the Company as lessee and Plainbridge as lessor entered into on the date of this Indenture; and (viii) the Chefmark Supply Agreement dated as of May 3, 1993 between Chefmark and the Company, in each case as amended or modified in accordance with the provisions hereof. "Spin-Off" means the contribution by the Company to Plainbridge of the Rickel home center business, the warehouse, distribution and transportation operations and the inventory therein that service the Pathmark supermarkets and drug stores and certain other assets and the distribution of the shares of Plainbridge to Newco. "Stated Maturity", when used with respect to any Indebtedness or any installment of interest thereon, means the date specified in such Indebtedness as the fixed date on which the principal of such Indebtedness or such installment of interest is due and payable. "Subordinated Debentures" means the Company's 12-5/8% Subordinated Debentures due 2002 in aggregate principal amount not in excess of the aggregate principal amount outstanding on the date of this Indenture. "Subordinated Indebtedness" means Indebtedness of the Company subordinated in right of payment to the Securities. - 19- "Subordinated Notes" means the Company's 11-5/8% Subordinated Notes due 2002 in aggregate principal amount not in excess of the aggregate principal amount outstanding on the date of this Indenture. "Subsidiary" means any Person a majority of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries; provided that an Unrestricted Subsidiary shall not be deemed to be a Subsidiary for purposes of this Indenture. "Tax Sharing Agreement" means the Tax Sharing Agreement dated as of the date of the Spin-Off, 1993 between SMG-II and the Company, as amended or modified in accordance with the provisions hereof. "Temporary Cash Investment" means (i) any evidence of Indebtedness, maturing not more than 180 days after the date of acquisition, issued by the United States of America, or an instrumentality or agency thereof and guaranteed fully as to principal, premium, if any, and interest by the United States of America, (ii) any certificate of deposit, maturing not more than 180 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution that has combined capital and surplus of not less than $300,000,000, whose debt is rated at the time as of which any investment therein is made, of "A" (or higher) according to Moody's Investors Service, Inc. ("Moody's"), or "A" (or higher) according to Standard & Poor's Corporation ("S&P"), (iii) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Company) organized and existing under the laws of the United States of America, with a rating, at the time as of which any investment therein is made, of "P-2" (or higher) according to Moody's or "A-2" (or higher) according to S&P, (iv) any short-term, tax-exempt investment in indebtedness issued by a municipality existing under the laws of the United States of America with a rating, at the time as of which any investment therein is made, of "A" (or higher) according to Moody's or "A" (or higher) according to S&P, and (v) any money market deposit accounts issued or offered by any domestic commercial bank having capital and surplus in excess of $300,000,000. "Treasury Rate" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled by, and published in, the most recent Federal Reserve Statistical Release H.15 (5 - 19) which has become publicly available at least two business days prior - 20- to the Redemption Date of the Securities following a Change in Control (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the then remaining Average Life to Stated Maturity of the Securities; provided, however, that if the Average Life to Stated Maturity of the Securities is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (rounded, if necessary, to four decimal places) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the Average Life to Stated Maturity of the Securities is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, and as in force at the date as of which this instrument was executed, except as provided in Section 905. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument, 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 Subsidiary" means (i) any subsidiary of the Company that at the time of determination shall be an Unrestricted Subsidiary (as designated by the Board of Directors of the Company, as provided below) and (ii) any subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company may designate any subsidiary of the Company (including any newly acquired or newly formed subsidiary) to be an Unrestricted Subsidiary if all of the following conditions apply: (a) such subsidiary is not liable, directly or indirectly, with respect to any Indebtedness other than Unrestricted Subsidiary Indebtedness and (b) any Investment in such subsidiary made as a result of designating such subsidiary an Unrestricted Subsidiary shall not violate the provisions of Section 1016. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complies with the foregoing conditions. The Board of Directors of the Company may designate any Unrestricted Subsidiary as a Subsidiary; provided that immediately after giving effect to such designation, the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the restrictions of Section 1007. - 21- "Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary means Indebtedness of such Unrestricted Subsidiary (i) as to which neither the Company nor any Subsidiary is directly or indirectly liable (by virtue of the Company or any such Subsidiary being the primary obligor on, guarantor of, or otherwise liable in any respect to, such Indebtedness), except Guaranteed Debt of the Company or any Subsidiary to any Affiliate, in which case (unless the incurrence of such Guaranteed Debt resulted in a Restricted Payment at the time of incurrence) the Company shall be deemed to have made a Restricted Payment (as defined in Section 1008) equal to the principal amount of any such Indebtedness to the extent guaranteed at the time such Affiliate is designated an Unrestricted Subsidiary and (ii) which, upon the occurrence of a default with respect thereto, does not result in, or permit any holder of any Indebtedness of the Company or any Subsidiary to declare, a default on such Indebtedness of the Company or any Subsidiary or cause the payment thereof to be accelerated or payable prior to its Stated Maturity. "Voting Stock" means stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). Section 102. Other Definitions. Defined in Term Section "Act"............................................. 105 "Change in Control Notice" ....................... 1011 "Change in Control Offer" ........................ 1011 "Change in Control Purchase Date" ................ 1011 "Change in Control Purchase Notice" .............. 1011 "Change in Control Purchase Price" ............... 1011 "covenant defeasance" ............................ 1403 "Defaulted Interest" ............................. 307 "defeasance" ..................................... l402 "incorporated provision" ......................... 108 "Notice of Default" .............................. 501 "Security Register" .............................. 305 "Security Registrar" ............................. 305 "Surviving Entity" ............................... 801 "U.S. Government Obligations" .................... 1404 - 22- Section 103. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion (other than the certificates required by Section 1017(a)) with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 104. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, - 23- and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 105. 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 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 of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Trust Indenture Act Section 315) 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 Securities shall be proved by the Security Register. - 24- (d) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of such Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding Trust Indenture Act Section 316(c), any such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not more than 30 days prior to the first solicitation of Holders generally in connection therewith and no later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Securities then Outstanding have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for this purpose the Securities then Outstanding shall be computed as of such record date; provided that no such request, demand, authorization, direction, notice, consent, waiver or other Act by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act by the Holder of any Security shall bind every future Holder of the same Security or the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, suffered or omitted to be done by the Trustee, any Paying Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Security. Section 106. Notices, etc., to Trustee and Company. 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, any Representative or the Company shall be sufficient for every purpose hereunder if made, given, furnished or delivered, in writing, to or - 25- with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration; or (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or delivered in writing or mailed, first-class postage prepaid, to the Company addressed to it c/o Pathmark Stores, Inc., 301 Blair Road, Woodbridge, New Jersey 07095, Attention: President, or at any other address furnished in writing to the Trustee by the Company. The Company shall provide the Trustee in writing with the name and address of the agent bank under the Bank Credit Agreement as of the effective date of this Indenture and shall promptly provide the Trustee in writing with any change in such information. The Trustee shall be entitled to assume there has been no change in the identity of such agent until such time as the Trustee receives written notice of such change from the Company. Section 107. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice 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. - 26- Section 108. Conflict of any Provision of Indenture with Trust Indenture Act. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 318, inclusive, of the Trust Indenture Act, or conflicts with any provision (an "incorporated provision") required by or deemed to be included in this Indenture by operation of such Trust Indenture Act Sections, such imposed duties or incorporated provision shall control. 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 109. 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 110. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its respective successors and assigns, whether so expressed or not. Section 111. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 112. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person (other than the parties hereto and their successors hereunder, any Paying Agent, the Holders and the holders of Senior Indebtedness) any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 113. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the conflicts of laws principles thereof. - 27- Section 114. Legal Holidays. In any case where any Interest Payment Date, any date established for payment of Defaulted Interest pursuant to Section 307, or any Maturity with respect to any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, or date established for payment of Defaulted Interest pursuant to Section 307, or Maturity, and no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date, or date established for payment of Defaulted Interest pursuant to Section 307, or Maturity, as the case may be, to the next succeeding Business Day. Section 115. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting any of the Securities waives and releases all such liability. ARTICLE TWO SECURITY FORMS Section 201. Forms Generally. The Securities and the Trustee's certificate of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. Any portion of the text of any Security may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Security. - 28- The definitive Securities shall be printed, 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 Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Section 202. Form of Face of Security. The form of the face of the Securities shall be substantially as follows: PATHMARK STORES, INC. Junior Subordinated Deferred Coupon Note due 2003 No. $ Pathmark Stores, Inc., a Delaware corporation (herein called the "Company", which term includes any successor entity under the Indenture hereinafter referred to), for value received, hereby promises to pay to or registered assigns, the principal sum of Dollars on November 1, 2003, at the office or agency of the Company referred to below, and to pay cash interest thereon on May 1, 2000 and semiannually thereafter on May 1 and November 1 in each year and at Stated Maturity. The issue price of this Security was $ 532.74 per $1,000 principal amount at final Maturity, representing a yield to final Maturity of 10 3/4% (computed on a semiannual bond equivalent basis) calculated from October 26, 1993. Cash interest will accrue from November 1, 1999 or from the most recent Interest Payment Date to which interest has been paid or duly provided for at the rate of 10 3/4% per annum, until principal hereof is paid or duly provided for. The Accreted Amount on this Security shall not accrue cash interest until November 1, 1999, except in the case of a default in payment of the amount due at Maturity, in which case, the amount then due on this Security shall bear cash interest at the rate of 10 3/4% per annum (to the extent lawful) from the date of such default in payment, as provided in the Indenture. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the April 15 or October 15 (whether or not a Business Day), as the case may be, next preceding such - 29- 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 Securities, 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 Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities 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 Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address shall appear on the Security Register. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof or by the authenticating agent appointed as provided in the Indenture by manual signature, this Security shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. - 30- IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: PATHMARK STORES, INC. By Attest: By [SEAL] Authorized Signature Section 203. Form of Reverse of Security. The form of the reverse of the Securities shall be substantially as follows: This Security is one of a duly authorized issue of securities of the Company designated as its Junior Subordinated Deferred Coupon Notes due 2003 (herein called the "Securities"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount at final Maturity to $225,250,000 which may be issued under an indenture (herein called the "Indenture") dated as of October 26, 1993, between the Company and NationsBank of Georgia, National Association, trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Company, the Trustee and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. The Securities are subject to redemption during the 12- month period beginning November 1, 1999, at the option of the Company, in whole or in part, on not less than 21 nor more than 60 days' prior notice, in amounts of $1,000 or an integral multiple of $1,000, at a Redemption Price (expressed as a percentage of the Accreted Amount) of 105% - 31- and thereafter at 100% of the Accreted Amount, together in the case of any such redemption with accrued interest, if any, to the Redemption Date (subject to the right of Holders of record on relevant Regular Record Dates to receive cash interest due on an Interest Payment Date), all as provided in the Indenture. Notwithstanding the foregoing, on or prior to November 1, 1996, the Company may redeem, on not less than 21 nor more than 60 days' prior notice in principal amounts at final Maturity of $1,000, Securities which represent an aggregatte principal amount at final Maturity which shall not exceed the aggregate up to 35% of the original aggregate principal amount at final Maturity of the Securities with the net proceeds of any issuance of Qualified Capital Stock of the Company or Newco at a Redemption Price of 110% of the Accreted Amount thereof. In addition, the Securities will be subject to redemption, at the option of the Company, prior to November 1, 1999, in whole or in part, at any time within 180 days after a Change in Control on not less than 21 nor more than 60 days' prior notice to each Holder of the Securities to be redeemed in principal amounts of $1,000 at final Maturity or an integral multiple thereof, at a redemption price equal to the sum of (i) the Accreted Amount as of the Redemption Date plus (ii) accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on relevant Regular Record Dates to receive cash interest due on an Interest Payment Date) plus (iii) the Applicable Premium. In the event that a Change in Control occurs, each Holder shall have the right to require that the Company repurchase such Holder's Securities in whole or in part in integral multiples of $1,000 at final Maturity at a purchase price in cash in an amount equal to 101% of the Accreted Amount as of the date of repurchase plus accrued and unpaid interest, if any, to the date of purchase. Within 30 days following a Change in Control, the Company covenants to either (i) repay in full all Indebtedness under the Bank Credit Agreement and permanently reduce the commitments of the lenders thereunder or offer to repay in full all such Indebtedness and permanently reduce such commitments and repay the Indebtedness and permanently reduce the commitment of each lender that accepted such offer or (ii) obtain the requisite consent under the Bank Credit Agreement to permit the repurchase of the Securities. - 32- In the case of any redemption of Securities, cash interest installments whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Date referred to on the face hereof. Securities (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to accrete in value or bear interest, as the case may be, from and after the Redemption Date. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. If an Event of Default shall occur and be continuing, the Accreted Amount of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Security and (b) certain restrictive covenants and the related Defaults and Events of Default, upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Security. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security 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 Security. The indebtedness evidenced by the Securities is subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full of all Senior Indebtedness of the Company whether outstanding - 33- on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by his acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on his behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee his attorney-in-fact for such purpose; provided that the indebtedness evidenced by this Security shall cease to be so subordinate and subject in right of payment upon any defeasance of this Security as provided in the Indenture. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place, and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable on the Security Register of the Company, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for such purpose in The City of New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount at final Maturity, will be issued to the designated transferee or transferees. The Securities are issuable only in registered form without coupons in denominations of $1,000 at final Maturity and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Securities are exchangeable for a like aggregate principal amount at final Maturity of Securities of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any registration of transfer or exchange or redemption of Securities, but the Company may require payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charges payable in connection with any registration of transfer or exchange. - 34- Prior to the time of due presentment of this Security 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 Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any agent shall be affected by notice to the contrary. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to Minors Act). I/We assign and transfer this Security to Insert assignee's soc. sec. or tax ID no. ........ (Print or type assignee's name, address and zip code) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: Signed: (Sign exactly as your name appears on the other side of this Security.) Signature Guaranteed: (Signature must be guaranteed by a member firm of a principal stock exchange or a commercial bank or trust company.) - 35- Section 204. Form of Trustee's Certificate of Authentication. TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities referred to in the within-mentioned Indenture. NATIONSBANK of Georgia, National Association, Trustee By Authorized Signatory ARTICLE THREE THE SECURITIES Section 301. Title and Terms. The aggregate principal amount at final Maturity of Securities which may be authenticated and delivered under this Indenture is limited to $225,250,000 except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 303, 304, 305, 306, 906, 1011 or 1108. The Securities shall be known and designated as the "Junior Subordinated Deferred Coupon Notes due 2003" of the Company. Their Stated Maturity shall be November 1, 2003, and they shall bear interest at the rate of 10 3/4% per annum from November 1, 1999 or the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable in cash on May 1, 2000 and semi-annually thereafter on May 1 and November 1 in each year and at said Stated Maturity, until the principal thereof is paid or duly provided for. The issue price of this Security was $532.74 per $1,000 principal amount at final Maturity, representing a yield to final Maturity of 10 3/4% (computed on a semiannual bond equivalent basis) calculated from October 26, 1993. The Accreted Amount of the Securities shall not accrue cash interest until Novemvber 1, 1999 except in the case of a default in payment of the amount due at Maturity, in which case the amount due to the Securities shall bear cash interest at a rate of 10 3/4% per annum (to the extent lawful), - 36- which shall accrue from the date of such default to the date the payment of such amount has been made or duly provided. Subject to Article Thirteen, interest on any overdue amount of principal, interest (to the extent lawful) or premium, if any, shall be payable on demand. The principal of (and premium, if any) and interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose; provided, however, that, at the option of the Company, interest may be paid by check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Security Register. The Securities shall be redeemable as provided in Article Eleven. The Indebtedness evidenced by the Securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article Thirteen. Section 302. Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 at final Maturity and any integral multiple thereof. Section 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by any two of the following: its Chairman, one of its Vice Chairmen, its President or one of its Vice Presidents, under its corporate seal reproduced thereon and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices on the date of such Securities. The Trustee shall (upon Company Order) authenticate and deliver Securities for original issue in an aggregate principal amount at Maturity of up to $ . At any time and from time to time after the execution and delivery - 37- of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as provided in this Indenture and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of one of its duly authorized signatories, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. In case the Company, pursuant to Article Eight, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of substantially all of its properties and assets to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company shall have been merged, or the successor Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article Eight, any of the Securities authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Securities executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Securities surrendered for such exchange and of like principal amount; and the Trustee, upon Company Order of the successor Person, shall authenticate and deliver Securities as specified in such request for the purpose of such exchange. If Securities shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section in exchange or substitution for or upon registration of transfer of any Securities, such successor Person, at the option of any Holder but without expense to such Holder, shall provide for the exchange of all Securities at the time Outstanding held by such Holder for Securities authenticated and delivered in such new name. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities on behalf of the Trustee. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Security Registrar or Paying Agent to deal with the Company and its Affiliates. - 38- Section 304. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. Section 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee (and any other office or agency so designated) is hereby initially appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at the office or agency of the Company designated pursuant to Section 1002 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denomination or denominations and of a like aggregate principal amount. - 39- At the option of the Holder, Securities may be exchanged for other Securities of any authorized denomination or denominations of a like aggregate principal amount upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer, or for exchange or redemption, shall (if so required by the Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange or redemption of Securities, but the Company may require payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charges that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 303, 304, 306, 906, l0l2 or 1108 not involving any transfer. The Company shall not be required (a) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business (i) 15 days before the mailing of a notice of redemption of the Securities selected for redemption under Section 1104 and ending at the close of business on the day of such mailing or (ii) 15 days before an Interest Payment Date and ending on the close of business on the Interest Payment Date, or (b) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of Securities being redeemed in part. Section 306. Mutilated, Destroyed, Lost and Stolen Securities. If (a) any mutilated Security is surrendered to the Trustee, or (b) the Company and the Trustee receive evidence to - 40- their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them and any agent of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a replacement Security of like tenor and principal amount, and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a replacement Security, pay such Security. Upon the issuance of any replacement Securities under this Section, the Company may require the payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charges that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every replacement Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute a contractual obligation of the Company, whether or not the destroyed, lost or stolen Security 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 Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 307. Payment of Interest; Interest Rights Preserved. Interest on any Security 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 Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security 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 applicable interest rate borne by the Securities, to the extent - 41- lawful (such defaulted interest (and such interest thereon) herein collectively called "Defaulted Interest"), shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder; and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Subsection (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) 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 Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Subsection provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date. 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 his address as it appears in the Security 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 Securities (or their respective Predecessor Securities) are registered at the close of business 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 Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the - 42- Company to the Trustee of the proposed payment pursuant to this Subsection, such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 308. Persons Deemed Owners. Prior to 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 whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 307) interest on such Security and for all other purposes whatsoever, whether or not such Security 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 309. Cancellation. All Securities surrendered for payment, redemption or registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company shall deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order. Section 310. Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. - 43- ARTICLE FOUR SATISFACTION AND DISCHARGE Section 401. Satisfaction and Discharge of Indenture. This Indenture shall, upon Company Request, cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Securities herein expressly provided for) and the Trustee, on demand of and at the expense of the Company shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (l) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities 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 1003) have been delivered to the Trustee for cancellation; or (2) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (2)(i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount in cash in U.S. Dollars or U.S. Government Obligations sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and - 44- (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that (i) all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with and (ii) 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 is a party or by which it is bound. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 606 and, if money shall have been deposited with the Trustee pursuant to subclause (2) of Subsection (a) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section l003 shall survive. Section 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee. Money so held in trust shall not be subject to the provisions of Article Thirteen of this Indenture. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 401 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 401; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. - 45- ARTICLE FIVE REMEDIES Section 501. Events of Default. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether or not it shall be occasioned or prohibited by the provisions of Article Thirteen or be voluntary or involuntary or be effected by the operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administration or governmental body): (a) default in the payment of any interest on any Security when such interest becomes due and payable and continuance of such default for a period of 30 days; or (b) default in the payment of the principal of (or premium, if any, on) any Security at its Maturity; or (c) default in the performance, or breach, of any covenant or agreement of the Company hereunder (other than a default in the performance, or breach, of a covenant or agreement that is specifically dealt with elsewhere in this Section), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount at final Maturity of the Outstanding Securities a written notice specifying such default or breach and stating that such notice is a "Notice of Default" hereunder; or (d) (i) an event of default shall have occurred under any mortgage, bond, indenture, loan agreement or other document evidencing any issue of Indebtedness of the Company or any Material Subsidiary for money borrowed, which issue has an aggregate outstanding principal amount of not less than $50,000,000, and such default shall result in such Indebtedness becoming, whether by declaration or otherwise, due and payable prior to the date on which it would otherwise become due and payable or (ii) a default in any payment when due at final maturity of any such Indebtedness; or (e) final judgments or orders not covered by insurance or a bond rendered against the Company or any Material Subsidiary which require the payment in money, - 46- either individually or in an aggregate amount, that is more than $30,000,000 and such judgment or order shall remain unsatisfied or unstayed for 60 days; or (f) the entry of a decree or order by a court having jurisdiction in the premises (i) for relief in respect of the Company or any Material Subsidiary in an involuntary case or proceeding under the Federal Bankruptcy Code or any other federal or state bankruptcy, insolvency, reorganization or similar law or (ii) adjudging the Company or any Material Subsidiary a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or any Material Subsidiary under the Federal Bankruptcy Code or any other applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or any Material Subsidiary or of any substantial part of any of their properties, or ordering the winding up or liquidation of any of their affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (g) the institution by the Company or any Material Subsidiary of a voluntary case or proceeding under the Federal Bankruptcy Code or any other applicable federal or state law or any other case or proceedings to be adjudicated a bankrupt or insolvent, or the consent by the Company or any Material Subsidiary to the entry of a decree or order for relief in respect of the Company or any Material Subsidiary in any involuntary case or proceeding under the Federal Bankruptcy Code or any other applicable federal or state law or to the institution of bankruptcy or insolvency proceedings against the Company or any Material Subsidiary, or the filing by the Company or any Material Subsidiary of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of any of the Company or any Material Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due or taking of corporate action by the Company or any Material Subsidiary in furtherance of any such action; or - 47- (h) default in the performance or breach of any of the provisions of Article Eight. Section 502. Acceleration of Maturity; Rescission. If an Event of Default (other than as specified in Section 50l(f) or 501(g)) occurs and is continuing, the Trustee or the Holders of at least 25% of the aggregate principal amount at final Maturity of the Securities then Outstanding may, and the Trustee at the request of such Holders shall, declare the Accreted Amount of, premium, if any, and accrued interest on the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders); provided that so long as the Bank Credit Agreement shall be in force and effect, if any such Event of Default shall have occurred and be continuing, any such acceleration shall not be effective until the earlier of (a) five Business Days following a notice of acceleration given to the Company and the agent bank under the Bank Credit Agreement and only if upon such fifth Business Day such Event of Default shall be continuing or (b) the acceleration of any Indebtedness under the Bank Credit Agreement. If an Event of Default specified in Section 501(f) or 501(g) occurs and is continuing, then the amounts described above shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder thereof. 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 at least a majority in aggregate principal amount at final Maturity of the Securities Outstanding, by written notice to the Company and the Trustee, may annul 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 Securities, (iii) the unpaid Accreted Amount of and premium, if any, on any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, and (iv) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Securities; and (b) all Events of Default, other than the non-payment of principal of the Securities which have become due solely by the declaration of acceleration, have been waived as provided in Section 513 or cured. No such rescission shall affect any subsequent default or impair any right consequent thereon. - 48- Notwithstanding the preceding paragraph, in the event of a declaration of acceleration in respect of the Securities, because an Event of Default specified in Section 501(d) shall have occurred and be continuing, such declaration of acceleration shall be automatically annulled if the Indebtedness that is the subject of such Event of Default has been discharged or the holders thereof have rescinded their declaration of acceleration in respect of such Indebtedness, and, if such Indebtedness is not Senior Indebtedness, such rescission has been made without any payment or other transfer or grant, or any promise or other undertaking to pay or otherwise transfer or grant, any tangible or intangible property or right to such holders in connection with such rescission, and written notice of such discharge or rescission, as the case may be, shall have been given to the Trustee by the Company and by the holders of such Indebtedness or a trustee, fiduciary or agent for such holders, within 60 days after such declaration of acceleration in respect of the Securities, and (x) no other Event of Default has occurred during such 60-day period, and (y) no Default arising from such discharge has occurred during such 60-day period, which, in either case, has not been cured or waived during such period. Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (a) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest, with interest upon the overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon overdue installments of interest, at the rate borne by the Securities; 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. - 49- If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders under this Indenture by such appropriate private or judicial proceedings as the Trustee shall deem most effectual to protect and enforce such rights. Section 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; provided that in the event that proof of such claim and such other papers or documents have not been so filed by the thirtieth day prior to the final date on which such claim may be filed, the holders of Specified Senior Indebtedness or their representatives shall be permitted to file such proof of claim and other papers and documents for and on behalf of the Holders of the Securities; and - 50- (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, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 606. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any proposal, plan of reorganization, arrangement, adjustment or composition or other similar arrangement affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 506. Application of Money Collected. Subject to Article Thirteen, any money, securities or other property collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 606; - 51 - SECOND: To the payment of the amounts then due and unpaid upon the Securities for principal (and premium, if any) and interest, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest; and THIRD: The balance, if any, to the Company. Section 507. Limitation on Suits. No Holder of any Securities shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or the Securities, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of not less than 25% in aggregate principal amount at final Maturity of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in aggregate principal amount at final Maturity of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture except in the - 52 - manner provided in this Indenture and for the equal and ratable benefit of all the Holders. Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 307) interest on such Security on the respective due dates expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, 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 510. Rights and Remedies Cumulative. Except as provided in Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be - 53 - exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 512. Control by Holders. The Holders of not less than a majority in aggregate principal amount at final Maturity of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided that (a) such direction shall not be in conflict with any rule of law or with this Indenture or expose the Trustee to personal liability, and (b) subject to the provisions of Trust Indenture Act Section 315, the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 513. Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount at final Maturity of the Outstanding Securities may on behalf of the Holders of all Outstanding Securities waive any past Default or Event of Default hereunder and its consequences except a default (a) in the payment of the principal of, premium, if any, or interest on any Security, 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 such Security or Outstanding Security affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 514. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security 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 - 54 - 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 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 aggregate principal amount at final Maturity of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). Section 515. Waiver of Stay, Extension or Usury Laws. The Company 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, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 516. Unconditional Right of Holders to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any other provision of any Security, the right of any Holder of any Security to receive payment of the principal amount (or Accreted Amount) of, premium, if any, and interest on such Security on or after the respective due dates expressed in such Security, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. - 55 - ARTICLE SIX THE TRUSTEE Section 601. Notice of Defaults. Within 60 days after the occurrence of any Default, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security 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 (or premium, if any) or interest on any Security, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders; and provided further that, in the case of any default or breach of the character specified in Section 501(c), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. The Trustee shall not be deemed to have knowledge of any Default or Event of Default except (i) a Default under Section 501(a) or (b) so long as the Trustee is Paying Agent or (ii) any Default or Event of Default which the Trustee shall have received written notification or a Responsible Officer charged with the administration of this Indenture shall have obtained actual knowledge, and such notification shall not be deemed to include receipt of information obtained in any report or other documents furnished under Section 703 or Section 1017(c) or (d) of this Indenture, which reports and documents the Trustee shall have no duty to examine. Section 602. Certain Rights of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee need perform only those duties as are specifically set forth in this Indenture and no covenants or obligations shall be implied in this Indenture that are adverse to the Trustee; and - 56 - (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided that the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this subsection (c) does not limit the effect of subsection (b) of this Section 602; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 512; and (iv) 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, and does believe, that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to this Section 602. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense, including such reasonable advances as may be requested by the Trustee. (f) Subject to the foregoing subsections (a) through (e) of this Section 602: (i) The Trustee may rely and shall be protected in acting or in refraining from acting upon any - 57 - document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. Any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or a Company Order and any resolution by the board of directors of the Company may be sufficiently evidenced by a Board Resolution. (ii) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. In addition, in determining the Company's compliance with the financial covenants set forth herein, the Trustee may rely conclusively on the certificate delivered to the Trustee pursuant to Section 1017(a). (iii) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (iv) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers. (v) The Trustee may consult with counsel, accountants or other experts and any advice of such counsel, accountants or other experts shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice. (vi) 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. (vii) No provision of this Indenture shall require the Trustee to determine the maximum interest rate permissible under applicable law. (viii) The Trustee shall not be deemed to have knowledge of the occurrence of a Change in Control until receipt by the Trustee of written notice thereof from the Company as required in Section 1011 hereof. - 58 - (ix) The Trustee shall not be responsible for calculating the Applicable Premium and shall be entitled to rely on the calculation thereof by the Company. Section 603. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, 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 Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility and Qualification on Form T-l supplied to the Company are true and accurate, subject to the qualifications set forth therein. Section 604. Trustee and Agents May Hold Securities; Collections; etc. The Trustee, any Paying Agent, Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities with the same rights it would have if it were not the Trustee, Paying Agent, Security Registrar or such other agent and, subject to Trust Indenture Act Sections 310(b) and 31l, 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 Trustee, Paying Agent, Security Registrar or such other agent. Section 605. Money Held in Trust. All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust hereunder for the purposes for which they were received and need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. - 59 - Section 606. Compensation and Reimbursement. The Company covenants and agrees: (a) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee and each of its officers, directors, employees, agents and counsel for, and to hold them harmless against, any loss, liability or expense incurred without negligence or bad faith on their part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation of the Company under this Section 606 to compensate the Trustee and to pay and reimburse the Trustee for such expenses, disbursements and advances shall constitute additional Indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture and shall not be subject to the provisions of Article Thirteen. If, and to the extent that, the Trustee, its counsel, and other agents do not receive compensation for services rendered, reimbursement of their advances, expenses and disbursements, or indemnity, as herein provided, as the result of allowances made in any reorganization, bankruptcy, receivership, liquidation or other proceeding or by any plan or reorganization or readjustment of obligations of the Company, the Trustee shall be entitled, in priority to the Holders of the Securities, to receive any distributions of any securities, dividends or other disbursements which would otherwise be made to the Holders of the Securities in any such proceeding or proceedings and the Trustee is hereby constituted and appointed, irrevocably, the attorney-in-fact for the Holders of the Securities and each of them to collect and receive, in their name, place and stead, - 60 - such distributions, dividends or other disbursements, to deduct therefrom the amounts due to the Trustee, its counsel and other agents on account of services rendered, advances, expenses, and disbursements made or incurred, or indemnity, and to pay and distribute the balance, pro rata, to the Holders of the Securities. The Trustee shall have a lien upon any securities or other consideration to which the Holders of the Securities may become entitled pursuant to any such plan or reorganization or readjustment of obligations, or in any such proceeding or proceedings; and the court or judge in any such proceeding or proceedings may determine the terms and conditions under which any such lien shall exist and be enforced. As security for the performance of the obligations of the Company under this Section, the Trustee shall have a claim prior to the Securities upon all money, securities or other property held or collected by the Trustee as such, except funds held in trust for the benefit of Holders of particular Securities, and the Securities are hereby subordinated to such claim. If the Trustee incurs expenses or renders services after an Event of Default specified in Section 501(f) or 501(g) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under the Federal Bankruptcy Code and any other applicable federal or state bankruptcy Law. Section 607. Conflicting Interests. The Trustee shall comply with the provisions of Section 3l0(b) of the Trust Indenture Act. Section 608. 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 Section 310(a)(1) and which shall have a combined capital and surplus of at least $100,000,000 and have its Corporate Trust Office located in The City of New York (or, if its Corporate Trust Office shall not be located in The City of New York, the Company shall, pursuant to Section 1002, maintain an office or agency in The City of New York where the Securities may be presented or surrendered and notices and demands hereunder may be made or served) to the extent there is such an institution eligible and willing to serve. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of Federal, State, Territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of - 61 - such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 609. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 610, at which time the retiring Trustee shall be fully discharged from its obligations hereunder. (b) The Trustee may resign at any time by giving written notice thereof to the Company. 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 30 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 Security 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 Securities, delivered to the Trustee and the Company. (d) If at any time: (l) the Trustee shall fail to comply with the provisions of Trust Indenture Act Section 310(b) after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 608 and shall fail to resign after written request therefor by the Company or by any Holder who - 62 - has been a bona fide Holder of a Security for at least six months, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 514, the Holder of any Security who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with Section 610, 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 Securities and so accepted appointment, the Holder of any Security 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 Securities as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. - 63 - Section 610. 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; provided, however, that the retiring Trustee shall continue to be entitled to the benefit of Section 606(c); but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Upon acceptance of appointment by any successor Trustee as provided in this Section 610, the Company shall give notice thereof to the Holders of the Securities, by mailing such notice to such Holders at their addresses as they shall appear on the Security Register. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 609. If the Company fails to give such notice within 10 days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Company. Section 611. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without - 64 - the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 612. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor under the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 701. Disclosure of Names and Addresses of Holders. Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee or any agent of either of them shall be held accountable by reason of the disclosure of any information as to the names and addresses of the Holders in accordance with Trust Indenture Act Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Trust Indenture Act Section 312. Section 702. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Securities, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, as provided in Trust Indenture Act Section 313(c), a brief report dated as of such May l5 if required by Trust Indenture Act Section 313(a). - 65 - Section 703. Reports by Company. The Company shall: (a) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section l3 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of such Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (b) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (c) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, in the manner and to the extent provided in Trust Indenture Act Section 313(c), such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. - 66 - ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 801. Company May Consolidate, etc., Only on Certain Terms. The Company shall not consolidate or merge with or into any other Person, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties and assets (as an entirety or substantially as an entirety in one transaction or series of related transactions) to any Person or permit any of its Subsidiaries to enter into any such transaction or transactions if such transaction or transactions, in the aggregate, would result in a transfer of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis to any Person unless, at the time and after giving effect thereto: (i) either (a) the Company shall be the continuing corporation, or (b) the Person (if other than the Company) formed by such consolidation, or into which the Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or disposition the properties and assets of the Company, substantially as an entirety (the "Surviving Entity") shall be a corporation duly organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and the Surviving Entity shall, in either case, expressly assume, by supplemental indenture hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture and this Indenture shall remain in full force and effect; (ii) immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction on a pro forma basis, the Consolidated Fixed Charge Coverage Ratio of the Company (or the Surviving Entity if the Company is not the continuing obligor under this Indenture), for the Company's four most recently completed full fiscal quarters is at least 1.75 to 1.0; and (iv) the Company shall deliver, or cause to be delivered to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, - 67 - merger, transfer or lease and such supplemental indenture, if one is required by this Section 801, comply with this Section 801 and that all conditions precedent herein provided for relating to such transaction have been complied with. Section 802. Successor Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease or conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 801, the successor corporation formed by such consolidation or into which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made, shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation had been named as the Company therein. In the event of any transaction (other than a lease) described in and complying with the conditions listed in Section 801 in which the Company is not the continuing corporation, the successor corporation formed or remaining shall succeed to, and be substituted for, and may exercise every right and power of, the Company and the Company would be discharged from all obligations and covenants under this Indenture and the Securities. ARTICLE NINE SUPPLEMENTAL INDENTURES Section 901. Supplemental Indentures without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; (b) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein or in the Securities conferred upon the Company; - 68 - (c) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture; provided that, in each case, such provisions shall not adversely affect the interests of the Holders; (d) to secure the Securities pursuant to the requirements of Section 801 or Section 1010 or otherwise; (e) to provide for the guarantee of payment of the Securities by any Subsidiary pursuant to the requirements of Section 1013 or Section 1014; (f) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act, as contemplated by Section 905 or otherwise; (g) to evidence and provide the acceptance of the appointment of a successor Trustee hereunder; or (h) to make any other change that does not adversely affect the rights of any Holder. Section 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in aggregate principal amount at final Maturity of the Outstanding Securities, by Act of such Holders delivered to the Company and the Trustee, each when authorized by a Board Resolution, and the Trustee may enter into one or more indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of waiving or modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture, amendment or waiver shall, without the consent of the Holder of each Outstanding Security affected thereby: (a) change the Stated Maturity of the principal of, or any installment of interest on, any Security or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which the principal of any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity - 69 - thereof (or, in the case of redemption, on or after the Redemption Date) or modify the obligation of the Company to make and consummate a Change in Control Offer or modify any of the provisions or definitions with respect thereto; or (b) reduce the percentage in principal amount at final Maturity of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; or (c) modify any of the provisions of this Section or Section 513 or Section 1018, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby; or (d) modify any of the provisions of Article Thirteen hereof in a manner adverse to the Holders of the Securities; or (e) except as otherwise permitted under Article Eight, consent to the assignment or transfer by the Company of any of its rights and obligations under this Indenture. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Trust Indenture Act Section 315(a) through 315(d) and Section 602 hereof) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. - 70 - Section 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 906. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Company, bear a notation in form approved by the Company as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Company, to any such supplemental indenture may be prepared and executed by the Company and shall be authenticated and delivered by the Trustee in exchange for Outstanding Securities. Section 907. Effect on Senior Indebtedness. No supplemental indenture shall adversely affect the rights of any holders of Senior Indebtedness under Article Thirteen unless the requisite holders of each issue of Senior Indebtedness affected thereby shall have consented to such supplemental indenture. ARTICLE TEN COVENANTS Section 1001. Payment of Principal, Premium and Interest. The Company will duly and punctually pay the principal of (and premium, if any) and interest on the Securities in accordance with the terms of the Securities and this Indenture. - 71 - Section 1002. Maintenance of Office or Agency. The Company will maintain, in The City of New York, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. If the Corporate Trust Office is located in New York City, then it shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. In addition, the Company hereby appoints the Trustee as the initial Paying Agent hereunder. The Company may from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Securities 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 for such purposes. The Company will give prompt written notice to the Trustee of any such designation or recission and any change in the location of any such office or agency. Section 1003. Money for Security Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for the Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any Securities, deposit with a Paying Agent a sum in same day funds (or New York Clearing House funds if such deposit is made prior - 72 - to the date on which such deposit is required to be made) sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest; (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 respects with the provisions of this Indenture relating to the duties, rights and obligations 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 shall 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 (and premium, if any) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and - 73 - payable shall be paid to the Company on Company Request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 1004. Corporate Existence. Subject to Article Eight, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and that of each Material Subsidiary of the Company and the corporate rights (charter and statutory), corporate licenses and corporate franchises of the Company and its Material Subsidiaries, except where a failure to do so, singly or in the aggregate, is not likely to have a materially adverse effect upon the business, assets, financial conditions or results of operations of the Company and the Material Subsidiaries taken as a whole determined on a consolidated basis in accordance with generally accepted accounting principles; provided that the Company shall not be required to preserve any such existence (except of the Company), right, licenses or franchise if the Board of Directors of the Company, or of the Material Subsidiary concerned, shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company or such Material Subsidiary and that the loss thereof is not disadvantageous in any material respect to the Holders. Section 1005. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon it or any Subsidiary or upon the income, profits or property of the Company or any of its Subsidiaries and (b) all material lawful claims for labor, materials and supplies, which, if unpaid, might by law become a lien upon the property of the Company or any of its Subsidiaries that could produce a material adverse effect on the consolidated financial - 74 - condition of the Company; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and in respect of which appropriate reserves (in the good faith judgment of management of the Company) are being maintained in accordance with GAAP. Section l006. Maintenance of Properties. The Company shall cause all material properties owned by or leased to it or any Material Subsidiary of the Company and necessary in the conduct of its business or the business of such Material Subsidiary to be maintained and kept in normal condition, repair and working order, ordinary wear and tear excepted; provided that nothing in this Section shall prevent the Company or any Material Subsidiary of the Company from discontinuing the use, operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Board of Directors of the Company or the Material Subsidiary concerned, or of any officer (or other agent employed by the Company or any Material Subsidiary of the Company) of the Company or such Material Subsidiary having managerial responsibility for any such property, desirable in the conduct of the business of the Company or any Material Subsidiary of the Company and if such discontinuance or disposal is not adverse in any material respect to the Securityholders. The Company shall provide or cause to be provided, for itself and any Material Subsidiaries of the Company, insurance (including appropriate self-insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like properties in the same general areas in which the Company or such Material Subsidiaries operate. Section 1007. Limitation on Indebtedness. The Company will not, and will not permit any of its Subsidiaries to, create, incur, assume, or directly or indirectly guarantee or in any other manner become directly or indirectly liable for the payment of, any Indebtedness (including any Acquired Indebtedness, but excluding Permitted Indebtedness) unless, at the time of such event and after giving effect thereto on a pro forma basis, the Company's Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding such event, taken as one period and calculated on the assumption that such Indebtedness had been incurred on the first day of such four-quarter period - 75 - and on the assumption that, in connection with the incurrence of any such Indebtedness, any related acquisition (whether by means of purchase, merger or otherwise) and any related repayment of Indebtedness also had occurred on such date with the appropriate adjustments with respect to such acquisition and repayment being included in such pro forma calculation, would have been at least equal to 1.75 to 1.0. Section 1008. Limitation on Restricted Payments. (a) The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, (i) declare or pay any dividend on, or make any distribution to holders of, any shares of the Company's Capital Stock (other than dividends or distributions payable in shares of its Qualified Capital Stock or in options, warrants or other rights to purchase such Qualified Capital Stock), (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any Affiliate thereof (other than Capital Stock of (x) any Subsidiary held by the Company or any of its Majority-owned Subsidiaries and (y) any Majority-owned Subsidiary of the Company) or any options, warrants or other rights to acquire such Capital Stock, (iii) make any principal payment on or redeem, repurchase, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, scheduled sinking fund payment or maturity, any Indebtedness of the Company which is pari passu with or expressly subordinate in right of payment to the Securities, (iv) declare or pay any dividend or distribution on any Capital Stock of any Subsidiary to any Person (other than the Company or any of its Majority-owned Subsidiaries) or purchase, redeem or otherwise acquire or retire for value any Capital Stock of any Subsidiary held by any Person (other than the Company or any of its Majority-owned Subsidiaries), or (v) incur, create or assume any guarantee of Indebtedness of any Affiliate of the Company (other than a Majority-owned Subsidiary of the Company) or make any Investment (other than any Permitted Investment) in any Person, including any Unrestricted Subsidiary - 76 - (such payments or other actions described in the foregoing clauses (i) through (v), other than any such action that is a Permitted Payment, are collectively referred to as "Restricted Payments"), unless at the time of and after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution), (1) no Default or Event of Default shall have occurred and be continuing and (2) the aggregate amount of all Restricted Payments (plus Permitted Payments set forth in Sections 1008(b)(vi), (xi) and (xii) below) declared or made after the date hereof (including Investments in Unrestricted Subsidiaries pursuant to the provisions of Section 1016) shall not exceed the sum of: (A) 50% of the aggregate cumulative Consolidated Adjusted Net Income of the Company accrued on a cumulative basis during the period beginning on October 31, 1993 and ending on the last day of the Company's last fiscal quarter ending prior to the date of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Adjusted Net Income shall be a loss, minus 100% of such loss), plus (B) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, whose determination shall be conclusive), received after the date hereof by the Company as capital contributions to the Company, plus (C) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, whose determination shall be conclusive), received after the date hereof by the Company from the issuance or sale (other than to any of its Subsidiaries) of shares of Qualified Capital Stock of the Company or warrants, options or rights to purchase shares (other than issuances permitted by clause (v) of the definition of Permitted Payments contained in Section l008(b)) of Qualified Capital Stock of the Company, plus (D) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, whose determination shall be conclusive), received by the Company (other than from any of its - 77 - Subsidiaries) upon the exercise of options, warrants or rights to purchase shares of Qualified Capital Stock of the Company, plus (E) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, whose determination shall be conclusive), received after the date hereof by the Company from the issue or sale of debt securities that have been converted into or exchanged for Qualified Capital Stock of the Company, together with the aggregate cash received by the Company at the time of such conversion or exchange. (b) Section 1008(a) to the contrary notwithstanding, the Company and its Subsidiaries may take the following actions (clauses (i) through (xi) being referred to as "Permitted Payments") so long as, in the case of clauses (vi), (ix) and (xi), no Default or Event of Default has occurred and is continuing: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such declaration date such declaration complied with the provisions of Section 1008(a) (in which event such dividend shall be deemed to have been paid on such date of declaration thereof for purposes of Section 1008(a)); (ii) the repurchase, redemption or other acquisition or retirement of any shares of any class of Capital Stock of the Company or any Affiliate 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 (other than to a Subsidiary) of shares of Qualified Capital Stock of the Company; (iii) payments by the Company to SMG-II pursuant to the Tax Sharing Agreement; (iv) dividends or distributions in an aggregate amount not to exceed the amount of dividends or distributions paid to the Company or its Subsidiaries by Unrestricted Subsidiaries since the date of this Indenture; - 78 - (v) the redemption, defeasance, repurchase or acquisition or retirement for value (each, for purposes of this clause, a "refinancing") of any Indebtedness of the Company (other than Redeemable Capital Stock) which is pari passu with or expressly subordinate in right of payment to the Securities through the issuance of (A) new Indebtedness of the Company or (B) shares of Qualified Capital Stock of the Company or Newco, provided that, with respect to clause (A), any such new Indebtedness (1) has a principal amount that does not exceed the principal amount so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing; provided that for purposes of this clause, the principal amount of any Indebtedness shall be deemed to mean the principal amount thereof or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination, (2) has an Average Life to Stated Maturity that is equal to or greater than the remaining Average Life to Stated Maturity of the Securities, (3) has a final Stated Maturity that exceeds the final Stated Maturity of principal of the Securities, and (4) is pari passu with or expressly subordinated in right of payment to the Securities at least to the same extent as the Indebtedness refinanced; (vi) dividends, loans or advances by the Company to Holdings or Newco to enable Holdings to pay cash dividends on the Holdings Preferred Stock; provided that on the date of payment of such dividend, the Company, after giving pro forma effect to such dividend, loan or advance, would be able to incur $1.00 of additional Indebtedness under the provisions of Section 1007 (other than Permitted Indebtedness), assuming a market rate of interest on such Indebtedness; (vii) the redemption, repurchase, defeasance or acquisition or retirement for value of any Pari Passu Indebtedness; provided that the Company shall redeem, pursuant to the optional redemption provisions in Article Eleven and the Securities, the principal - 79 - amount of Securities bearing the same proportion to the aggregate amount of such Pari Passu Indebtedness being redeemed, repurchased, defeased or acquired or retired for value that the aggregate outstanding principal amount of such Securities bears to the aggregate outstanding principal amount of such Pari Passu Indebtedness (without giving effect to such redemption, repurchase, defeasance, acquisition or retirement); (viii) the declaration or payment of any dividend or distribution on any Capital Stock of any Subsidiary, or the purchase, redemption, acquisition or retirement for value of any Capital Stock of any Subsidiary; provided that such declaration, payment, purchase, redemption, acquisition or retirement is made pro rata among all holders of such Capital Stock of such Subsidiary; (ix) payments or other actions described in clauses (i) through (v) of Section 1008(a) that would otherwise be Restricted Payments in an aggregate amount not to exceed $35,000,000; (x) the dividend or distribution of the Capital Stock of Plainbridge to Newco; (xi) the repurchase of any Indebtedness of the Company which is pari passu with or expressly subordinate in right of payment to the Securities at a purchase price not greater than 101% of the principal amount of such Indebtedness in the event of a Change in Control pursuant to a provision similar to Section 1011; provided that prior to such repurchase the Company has made the Change in Control Offer as provided in such covenant and has repurchased all Securities validly tendered for payment in connection with such Change in Control Offer; Except as provided in this Section 1008(b) and Section 1008(a)(2), nothing in this Section 1008 limits or restricts the making of any Permitted Payment and a Permitted Payment will not be treated as a Restricted Payment. (c) In computing Consolidated Adjusted Net Income of the Company under clause (A) of Section 1008(a), (l) the Company shall use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on - 80 - the books and records of the Company for the remaining portion of such period and (2) the Company shall be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment which, at the time of the making of such Restricted Payment would in the good faith determination of the Company be permitted under the requirements of this Section 1008, such Restricted Payment shall be deemed to have been made in compliance with such provisions notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Adjusted Net Income of the Company for any period. Section 1009. Limitation on Transactions with Affiliates. (a) The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with any Affiliate of the Company (other than a wholly owned Subsidiary thereof) unless (i) such transaction or series of transactions is or are on terms that are no less favorable to the Company or such Subsidiary, as the case may be, than those that could have been obtained at the time of such transaction or transactions in a comparable transaction in arm's-length dealings with an unaffiliated third party and (ii) (A) with respect to any transaction or series of transactions involving aggregate payments in excess of $1,000,000, but less than $10,000,000, the Company delivers an Officers' Certificate to the Trustee certifying that such transaction or transactions complies with clause (i) above and (B) with respect to a transaction or series of transactions, involving aggregate payments equal to or greater than $10,000,000, (1) such transaction or transactions shall have received the approval of a majority of the disinterested directors of the Board of Directors of the Company if Plainbridge is a party to such transaction or series of transactions or (2) if Plainbridge is not a party to such transaction or series of transactions, such transactions or series of transactions shall have received either the approval of a majority of the disinterested directors of the Board of Directors of the Company or the Company shall deliver to the Trustee a written opinion of a nationally recognized investment banking firm stating that such transaction is fair to the Company from a financial point of view; provided, however, that the foregoing restriction shall not apply to (1) the payment of fees to Merrill Lynch Capital Partners, Inc. or Merrill Lynch, Pierce, Fenner & Smith Incorporated or any of their Affiliates - 81 - for consulting, investment banking or financial advisory services rendered by such Person to the Company or any Subsidiary of the Company, (2) the payment of reasonable and customary regular fees to directors of the Company, Newco, SMG-II, Holdings or any of their respective subsidiaries or parents who are not employees of any of such Persons, (3) the Logistical Services Agreement and transactions pursuant thereto and (4) the Spin-Off Agreements and transactions pursuant thereto. For purposes of this Section 1009(a), any transaction or series of related transactions between the Company or any Subsidiary and any Affiliate of the Company that is approved as being on the terms required by clause (i) in the prior sentence by a majority of the disinterested directors of the Board of Directors of the Company shall be deemed to be on terms as favorable as those that might be obtained at the time of such transaction or series of transactions in a comparable transaction in arm's-length dealings with an unaffiliated third party, and thus shall be permitted under this Section 1009(a). (b) The Company will not, and will not permit any of its Subsidiaries to, amend, modify, or in any way alter the terms of the Intercompany Agreement, the Logistical Services Agreement or the Spin-Off Agreements in a manner materially adverse to the Company other than (i) by adding new Subsidiaries and (ii) in the case of the Logistical Services Agreement and the Spin-Off Agreements, any amendments or modifications that are approved by a majority of the disinterested directors of the Board of Directors of the Company. Section 1010. Limitation on Liens. The Company will not, and will not permit any Subsidiary to, create, incur, affirm or suffer to exist any Lien of any kind securing any Pari Passu Indebtedness or Subordinated Indebtedness (including any assumption, guarantee or other liability with respect thereto by any Subsidiary) upon any property or assets (including any intercompany notes) of the Company or any Subsidiary owned on the date hereof or acquired after the date hereof, or any income or profits therefrom, unless the Securities are directly secured equally and ratably with (or prior to in the case of Subordinated Indebtedness) the obligation or liability secured by such Lien, and except for any Lien securing Acquired Indebtedness created prior to the incurrence of such Indebtedness by the Company or any Subsidiary, provided that any such Lien only extends to the assets that were subject to such Lien securing such Acquired Indebtedness prior to the related acquisition by the Company or its Subsidiaries. - 82 - Section 1011. Purchase of Securities Upon Change in Control. (a) If there shall have occurred a Change in Control, Securities shall be purchased by the Company, at the option of the Holder thereof, in whole or in part in integral multiples of $1,000 at final Maturity, on a date which shall be a Business Day that is not earlier than 45 days nor later than 60 days from the date the Change in Control Notice referred to below is given to Holders or such later date as may be necessary for the Company to comply with requirements under the Exchange Act (such date, or such later date, being the "Change in Control Purchase Date"), at a purchase price in cash (the "Change in Control Purchase Price") in an amount equal to 101% of the Accreted Amount of such Securities on the Change in Control Purchase Date, subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 1011(c). (b) Within 30 days after the occurrence of a Change in Control and prior to the mailing of the Change in Control Notice to Holders provided for in paragraph (c) below, the Company covenants to either (1) repay in full all Indebtedness under the Bank Credit Agreement and permanently reduce the commitments of the lenders thereunder or offer to repay in full all such Indebtedness and permanently reduce such commitments and repay the Indebtedness and permanently reduce the commitment of each lender who has accepted such offer or (2) obtain the requisite consent under the Bank Credit Agreement to permit the repurchase of the Securities as provided for in this Section 1011. The Company shall first comply with the provisions of this subsection (b) before it shall be required to repurchase the Securities pursuant to this Section 1011, and any failure to comply with this subsection (b) shall constitute a default of a covenant for purposes of Section 501(c). (c) Within 30 days following any Change in Control, the Company shall give written notice of such Change in Control (a "Change in Control Notice") and of its offer (the "Change in Control Offer") to purchase Securities as specified herein to the Trustee, and to each Holder of the Securities at his address appearing on the Security Register, by first-class mail, postage prepaid. The Trustee shall be under no obligation to ascertain the occurrence of a Change in Control. The Change in Control Notice shall contain all instructions and materials necessary to enable such Holders to tender - 83 - Securities, shall include a form of Change in Control Purchase Notice to be completed by the Holder and shall state: (i) (A) the events causing the Change in Control and the date such Change in Control is deemed to have occurred for purposes of this Section 1011, and (B) a description of any material developments in the Company's business since the latest annual or quarterly report filed with the Trustee pursuant to Section 1017(c) or 1017(d) and, if material, any appropriate pro forma financial information; (ii) the date by which a Holder must give a Change in Control Purchase Notice; (iii) the Change in Control Purchase Price; (iv) the Change in Control Purchase Date; (v) that any Security not purchased will continue to accrete in value or accrue interest, as the case may be; (vi) that Securities to be purchased shall, on the Change in Control Purchase Date, become due and payable at the Change in Control Purchase Price and from and after such date (unless the Company shall default in the payment of the Change in Control Purchase Price) such Securities shall cease to accrete in value or accrue interest, as the case may be; and (vii) the procedures a holder must follow to exercise rights under this Section 1011 and a brief description of those rights and the procedures for withdrawing a Change in Control Purchase Notice. (d) A Holder may exercise its rights specified in Section 1011(a) upon (i) delivery to any Paying Agent a written notice (a "Change in Control Purchase Notice") at any time on or prior to one Business Day before the Change in Control Purchase Date, stating (A) the certificate number of the Security that the Holder will deliver to be purchased and (B) the portion of the principal amount at final Maturity of the Security that the holder will deliver to be purchased, which portion must be $1,000 at final Maturity or an integral multiple thereof and (ii) delivery of such Security to such Paying Agent at such office prior to, on or after the Change in Control Purchase Date (together with all necessary endorsements), such delivery being a condition to receipt by the Holder of the Change in Control Purchase Price therefor. - 84 - If a Holder has elected to deliver to the Company for purchase a portion of a Security, and if the principal amount at final Maturity of such portion is $1,000 or an integral multiple of $1,000, the Company shall purchase such portion from the Holder thereof pursuant to this Section 1011. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of a portion of such Security. Each Paying Agent shall promptly notify the Company of the receipt by the former of any and all Change in Control Purchase Notices and any and all written notices of withdrawal thereof. (e) Upon receipt by any Paying Agent of a Change in Control Purchase Notice, the Holder of the Security in respect of which such Change in Control Purchase Notice was given shall (unless such Change in Control Purchase Notice is withdrawn pursuant to Section 1011(j)) thereafter be entitled to receive solely the Change in Control Purchase Price with respect to such Security. Such Change in Control Purchase Price shall be paid to such Holder promptly following the later of the Business Day following the Change in Control Purchase Date (provided the conditions in Section 1011(d) have been satisfied) and the time of delivery of such Security to the relevant Paying Agent at the office of such Paying Agent by the Holder thereof in the manner required by Section 1011(d). (f) On or prior to the Change in Control Purchase Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in same day funds (or New York Clearing House funds if such deposit is made prior to the Change in Control Purchase Date) sufficient to pay the Change in Control Purchase Price of, and (except if the Change in Control Purchase Date shall be an Interest Payment Date) accrued interest on, all the Securities or portions thereof which are to be purchased on that date. (g) Upon a Change in Control Purchase Notice having been given as aforesaid, Securities to be purchased shall, on the Change in Control Purchase Date, become due and payable at the Change in Control Purchase Price and from and after such date (unless the Company shall default in the payment of the Change in Control Purchase Price) such Securities shall cease to accrete in value or bear interest. Upon surrender of any such Security for purchase in accordance with the foregoing provisions, such Security shall be paid by the Company at the Change in Control Purchase Price; provided, however, that installments of interest whose Stated Maturity is on or prior to the Change in Control Purchase Date shall be payable to the Holders of such Securities, or one or more Predecessor - 85 - Securities, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 307. If any Security tendered for purchase shall not be so paid upon surrender thereof, the Accreted Amount thereof (and premium, if any, thereon) shall, until paid, bear interest from the Change in Control Purchase Date at the rate borne by such Security. (h) Any Security that is to be purchased only in part shall be surrendered to a Paying Agent at the office of such Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, one or more new Securities of any authorized denomination as requested by such Holder in a principal amount at final Maturity equal to, and in exchange for, the portion of the principal amount at final Maturity of the Security so surrendered that is not purchased. (i) The Company shall comply with the applicable tender offer rules, including Rule l4e-l under the Exchange Act, in connection with a Change in Control Offer. (j) A Change in Control Purchase Notice may be withdrawn before or after delivery by the Holder to the relevant Paying Agent at the office of such Paying Agent of the Security to which such Change in Control Purchase Notice relates, by means of a written notice of withdrawal (by facsimile transmission or letter) received by such Paying Agent at such office not later than one Business Day prior to the Change in Control Purchase Date, specifying, as applicable: (i) the certificate number of the Security in respect of which such notice of withdrawal is being submitted; (ii) the principal amount at final Maturity of the Security with respect to which such notice of withdrawal is being submitted; and (iii) the principal amount at final Maturity, if any, of the Security that remains subject to the original Change in Control Purchase Notice and that has been or will be delivered for purchase by the Company. - 86 - A written notice of withdrawal may be in the form set forth in the preceding paragraph. Each Paying Agent will promptly return to the prospective Holders thereof any Securities with respect to which a Change in Control Purchase Notice has been withdrawn in compliance with this Indenture. Section 1012. Restrictions on Preferred Stock of Subsidiaries. The Company will not permit any of its Subsidiaries to issue any Preferred Stock (other than to the Company or a Majority-owned Subsidiary of the Company), or permit any Person (other than the Company or a Majority-owned Subsidiary of the Company) to own or hold an interest in any Preferred Stock of any such Subsidiary previously held by the Company or a Majority-owned Subsidiary of the Company unless such Subsidiary would be entitled to incur Indebtedness pursuant to the provisions of Section 1007 in the aggregate principal amount equal to the aggregate liquidation value of such Preferred Stock assuming a market rate of interest (as determined by the Company) for such Preferred Stock as of the date of issuance or transfer. Section 1013. Limitations on Issuances of Guarantees of Indebtedness. The Company will not permit any Subsidiary, directly or indirectly, to guarantee, assume or in any other manner become liable with respect to any Pari Passu Indebtedness or Subordinated Indebtedness, unless such Subsidiary simultaneously executes and delivers a supplemental indenture hereto providing for a guarantee of the Securities; provided that, in the case of a Subsidiary's guarantee, assumption or other liability with respect to Subordinated Indebtedness, such guarantee, assumption or other liability shall be subordinated to such Subsidiary's guarantee of the Securities to the same extent as such Subordinated Indebtedness is subordinated to the Securities; and provided further that this Section 1013 shall not be applicable to any guarantee, assumption or other liability of any Subsidiary of the Company that (i) existed at the time such Person became a Subsidiary of the Company and (ii) was not incurred in connection with, or in contemplation of, such Person becoming a Subsidiary of the Company. Any such guarantee of the Securities by a Subsidiary shall provide by its terms that it shall be automatically and unconditionally released and discharged upon either (A) the release or discharge of such guarantee of such Pari Passu Indebtedness or Subordinated Indebtedness, as the case may be, except a discharge by or as a result of payment under such guarantee or (B) any sale, exchange or transfer, to any Person not an - 87 - Affiliate of the Company, of all the Company's stock in, or all or substantially all the assets of, such Subsidiary, which sale, exchange or transfer is made in compliance with the applicable provisions of this Indenture. Section 1014. Restriction on Transfer of Assets. The Company will not sell, convey, transfer or otherwise dispose of its assets or property to any of its Subsidiaries, except for (i) sales, conveyances, transfers or other dispositions of assets or property acquired by the Company after the date hereof; (ii) sales, conveyances, transfers or other dispositions of Existing Assets (a) made in the ordinary course of business; (b) made outside the ordinary course of business with a net book value that, when aggregated with all other such transfers by the Company since the date of this Indenture, less the net book value of Existing Assets transferred to the Company from its Subsidiaries, would not exceed 10% of the Consolidated Assets of the Company; or (c) to any Subsidiary if such Subsidiary simultaneously with such transfer executes and delivers a supplemental indenture hereto providing for the guarantee of payment of the Securities by such Subsidiary, which guarantee shall be subordinated to any guarantee of such Subsidiary of Senior Indebtedness of the Company and shall be subordinated to any other Indebtedness of such Subsidiary (which is not subordinated to any other Indebtedness of such Subsidiary or which is designated by such Subsidiary as being senior in right of payment to such guarantee), in each case to the same extent as the Securities are subordinated to Senior Indebtedness of the Company under this Indenture and (iii) sales, conveyances, transfers or other dispositions of Existing Assets made pursuant to the Spin-Off. Notwithstanding the foregoing, any such guarantee of a Subsidiary of the Securities shall provide by its terms that it shall be automatically and unconditionally released and discharged (i) on the date that the net book value of the Existing Assets held by the Company is greater than 90% of Consolidated Assets or (ii) upon any sale, exchange or transfer to any Person not an Affiliate of the Company of all of the Company's stock in, or all or substantially all the assets of, such Subsidiary, which sale, exchange or transfer is made in compliance with the terms of this Indenture. Section 1015. Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not permit any Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind, on the ability of any Subsidiary to (a) pay dividends - 88 - or make any other distribution on its Capital Stock, (b) pay any Indebtedness owed to the Company or any Subsidiary, (c) make loans or advances to the Company or any Subsidiary, or (d) transfer any of its property or assets to the Company or any Subsidiary, except (i) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the date hereof; (ii) any encumbrance or restriction, with respect to a Subsidiary that is not a Subsidiary of the Company on the date hereof, in existence at the time such Person becomes a Subsidiary of the Company or created on the date it becomes a Subsidiary; (iii) any encumbrance or restriction on the ability of any Subsidiary whose assets consist substantially only of fee or leasehold interests in real property and improvements thereon to transfer any such interests which are acquired after the date hereof or any unimproved real property acquired on or prior to the date hereof to the Company or any Subsidiary, which encumbrance or restriction is required by a lender to, or purchaser of any indebtedness of, such Subsidiary in connection with a financing or refinancing permitted hereunder; and (iv) any encumbrance or restriction pursuant to any agreement that extends, refinances, renews or replaces any agreement containing any of the restrictions described in the foregoing clauses (i)-(iii), provided that the terms and conditions of any such restrictions are not materially less favorable to the Holders of the Securities than those under or pursuant to the agreement extended, refinanced, renewed or replaced. Section 1016. Limitation on Unrestricted Subsidiaries. The Company will not make, and will not permit any of its Subsidiaries to make, any Investments in Unrestricted Subsidiaries if, at the time thereof, the aggregate amount of such Investments would exceed the amount of Restricted Payments then permitted to be made pursuant to Section 1008. Any Investments in Unrestricted Subsidiaries permitted to be made pursuant to this Section 1016 (i) will be treated as the payment of a Restricted Payment in calculating the amount of Restricted Payments made by the Company and (ii) may be made in cash or property. Section 1017. Statement as to Compliance; Notice of Default; Provision of Financial Statements. (a) The Company will deliver to the Trustee, within 120 days after the end of each fiscal year ending after the date hereof, a brief certificate of its principal executive officer, principal financial officer or principal accounting officer stating whether, to such officer's knowledge, the Company is in compliance with all covenants and conditions to - 89 - be complied with by it under this Indenture. For purposes of this Section 1017, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. (b) If a Default has occurred and is continuing, or if the Trustee, any Holder or the trustee for or the holder of any other evidence of Indebtedness of the Company (other than Indebtedness in the aggregate principal amount of less than $50,000,000) gives any notice or takes any other action with respect to a claimed Default, the Company shall deliver to the Trustee an Officers' Certificate specifying such Default, notice or other action within 5 Business Days of its occurrence. (c) The Company shall supply without cost to each Holder of the Securities, and file with the Trustee within l5 days after the Company is required to file the same with the Commission, copies of the annual reports and quarterly reports and of the information, documents and other reports which the Company may be required to file with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act. (d) If the Company is not required to file with the Commission such reports and other information referred to in Section 1017(c), the Company shall furnish without cost to each Holder of the Securities and file with the Trustee (i) within 105 days after the end of each fiscal year, annual reports containing the information required to be contained in Items 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12 and 13 of Form 10-K promulgated under the Exchange Act, or substantially the same information required to be contained in comparable items of any successor form, (ii) within 60 days after the end of each of the first three fiscal quarters of each fiscal year, quarterly reports containing the information required to be contained in Form 10-Q promulgated under the Exchange Act, or substantially the same information required to be contained in any successor form and (iii) promptly from the time after the occurrence of an event required to be therein reported, such other reports containing information required to be contained in Form 8-K promulgated under the Exchange Act, or substantially the same information required to be contained in any successor form. The Company shall also make such reports available to prospective purchasers of the Securities, securities analysts and broker-dealers upon their request. Section 1018. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any covenant or condition set forth in Sections 1007 through 1017 (other than Section 1011) if, before or after - 90 - the time for such compliance, the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding shall, by Act of such Holders, waive such compliance in such instance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. Section 1019. Calculation of Original Issue Discount; Certain Information Concerning Tax Reporting. The Company will deliver to the Trustee, within 40 days of the date of original issuance of the Securities, an Officer's Certificate, setting forth (i) the amount of the original issue discount on the Securities, expressed as a U.S. Dollar amount per $1,000 of principal amount at final Maturity, (ii) the yield to maturity for the Securities, and (iii) a table of the amount of the original issue discount on the Securities expressed as a U.S. Dollar amount per $1,000 of principal amount at final Maturity accrued for each day from the date of original issuance of the Securities to November 1, 1999. On or before December 15 of each year during which any Securities are Outstanding, the Company shall furnish to the Trustee such information as may be reasonably requested by the Trustee in order that the Trustee may prepare the information which it is required to report for each year on Internal Revenue Service Forms 1096 and 1099 pursuant to Section 6049 of the Internal Revenue Code of 1986, as amended. Such information shall include the amount of original issue discount includable in income for each $1,000 of principal amount at final Maturity of Outstanding Securities during such year. ARTICLE ELEVEN REDEMPTION OF SECURITIES Section 1101. Right of Redemption. The Securities may be redeemed at the election of the Company, at any time, as a whole or in part subject to the conditions and at the Redemption Prices specified in the form of Security, together with accrued interest to the Redemption Date. - 91 - Section 1102. Applicability of Article. Redemption of Securities at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. Section 1103. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by it (unless a shorter notice period shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the Accreted Amount and principal amount at final Maturity of Securities to be redeemed. Section 1104. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed, the particular Securities or portions thereof to be redeemed shall be selected not more than 60 days and not less than 30 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, either pro rata, by lot or, by any other method the Trustee shall deem fair and reasonable, and the amounts to be redeemed may be equal to $1,000 at final Maturity or any integral multiple thereof. The Trustee shall promptly notify the Company and the Security Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount at final Maturity of such Security which has been or is to be redeemed. Section ll05. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 21 nor more than 60 days prior to the Redemption Date, to each Holder - 92 - of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (a) the Redemption Date; (b) the Redemption Price; (c) if less than all Outstanding Securities are to be redeemed, the identification (and, in the case of a Security to be redeemed in part, the principal amount at final Maturity) of the particular Securities to be redeemed; (d) that on the Redemption Date the Redemption Price will become due and payable upon each such Security or portion thereof, and that (unless the Company shall default in payment of the Redemption Price) such Security shall cease to accrete in value or accrue interest, as the case may be, on and after said date; (e) the place or places where such Securities are to be surrendered for payment of the Redemption Price; (f) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (g) the CUSIP number, if any, relating to such Securities; and (h) in the case of a Security to be redeemed in part, the principal amount of such Security to be redeemed and that after the Redemption Date upon surrender of such Security, new Security or Securities in the aggregate principal amount at final Maturity equal to the unredeemed portion thereof will be issued. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at its request, by the Trustee in the name and at the expense of the Company. - 93 - Section 1106. Deposit of Redemption Price. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in same day funds (or New York Clearing House funds if such deposit is made prior to the applicable Redemption Date) sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities or portions thereof which are to be redeemed on that date. Section 1107. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to accrete in value or bear interest, as the case may be. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal thereof (and premium, if any, thereon) shall, until paid, accrete in value or bear interest, as the case may be, from the Redemption Date at the rate borne by such Security. Section 1108. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 1002 (with, if the Company, the Security Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company, the Security Registrar or the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of - 94 - such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount at final Maturity equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE TWELVE [INTENTIONALLY OMITTED] ARTICLE THIRTEEN SUBORDINATION OF SECURITIES Section 1301. Securities Subordinate to Senior Indebtedness. The Company covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the indebtedness represented by the Securities and the payment of the principal of and premium, if any, and interest on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full, in cash or cash equivalents, of all Senior Indebtedness (including any interest accruing after the occurrence of an Event of Default under Section 501(f) or (g)). This Article Thirteen shall constitute a continuing offer to all persons who become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness, and such holders are made obligees hereunder and any one or more of them may enforce such provisions. Holders of Senior Indebtedness need not prove reliance on the subordination provisions hereof. Section 1302. Payment Over of Proceeds Upon Dissolution, etc. In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its creditors, as such, or to its assets, or (b) any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment - 95 - for the benefit of creditors or any other marshalling of assets and liabilities of the Company, then and in any such event: (1) the holders of all Senior Indebtedness shall be entitled to receive payment in full, in cash or cash equivalents, of all amounts due or to become due on or in respect of all Senior Indebtedness, or provision shall be made for such payment in cash or cash equivalents, before the Holders of the Securities are entitled to receive any payment on account of principal of (or premium, if any) or interest on the Securities; and (2) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the provisions of this Article Thirteen, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities (except, so long as the effect of this parenthetical clause is not to cause the Securities to be treated in any case or proceeding or similar event described in Subsection (a), (b) or (c) of this Section 1302 as part of the same class of claims as the Senior Indebtedness or any class of claims on a parity with or senior to the Senior Indebtedness, for any such payment or distribution (x) authorized by an order or decree giving effect, and stating in such order or decree that effect is given, to the subordination of the Securities to the Senior Indebtedness, and made by a court of competent jurisdiction in a reorganization proceeding under any applicable bankruptcy law, or (y) of securities that (A) are unsecured (except to the extent the Securities are secured), (B) have an Average Life to Stated Maturity and final maturity which are no shorter than the Average Life to Stated Maturity of the Securities or any securities issued to the holders of the Senior Indebtedness under the Bank Credit Agreement pursuant to a plan of reorganization or readjustment, (C) are subordinated, to at least the same extent as the Securities, to the payment of all Senior Indebtedness then outstanding and (D) are not guaranteed by any Subsidiary of the Company (except to the extent the Securities are so guaranteed)), shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or - 96 - otherwise, directly to the holders of Senior Indebtedness or their Representative or Representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the principal of, and premium, if any, and interest on, and other amounts due or in connection with, the Senior Indebtedness held or represented by each, to the extent necessary to make payment in full, in cash or cash equivalents, of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (3) in the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any such payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities, before all Senior Indebtedness is paid in full, in cash or cash equivalents, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full, in cash or cash equivalents, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance, transfer or lease of its properties and assets substantially as an entirety to another corporation upon the terms and conditions set forth in Article Eight shall not be deemed a dissolution, winding up, liquidation, reorganization, assignment for the benefit of creditors or marshalling of assets and liabilities of the Company for the purposes of this Section if the corporation formed by such consolidation or into which the Company is merged or the corporation which acquires by conveyance, transfer or lease such properties and assets substantially as an entirety, as the case may be, shall, as a - 97 - part of such consolidation, merger, conveyance, transfer or lease, comply with the conditions set forth in Article Eight. Section 1303. No Payment When Specified Senior Indebtedness in Default. (a) (i) In the event of and during the continuation of any default in the payment of principal of (or premium, if any) or interest on any Specified Senior Indebtedness beyond any applicable grace period with respect thereto, or (ii) in the event that any other event of default with respect to any Specified Senior Indebtedness shall have occurred and be continuing and shall have resulted in such Specified Senior Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, or (b) in the event that any event of default (other than a default described in clause (a)) with respect to any Specified Senior Indebtedness shall have occurred and be continuing permitting the holders of such Specified Senior Indebtedness (or a trustee on behalf of such holders) to declare such Specified Senior Indebtedness due and payable prior to the date on which it would otherwise have become due and payable, then no payment shall be made by the Company on account of the principal of (or premium, if any) or interest on the Securities or on account of the purchase or redemption or other acquisition of Securities (x) in case of any event of default described in subclause (i) of clause (a), or an event of default described in subclause (ii) of clause (a) resulting in an acceleration as specified in clause (a), unless and until such payment event of default shall have been cured or waived or shall have ceased to exist or such acceleration shall have been rescinded or annulled or the holders of such Specified Senior Indebtedness or their agents have waived the benefits of this Section, or (y) in case of any event of default specified in clause (b), from the earlier of the date the Company or the Trustee receives written notice of such event of default (which notice requests that no such payment be made) from the agent with respect to any such event of default under the Bank Credit Agreement or any other Representative of a holder of Specified Senior Indebtedness with respect to any such event of default under such specified Senior Indebtedness until the earlier of (1) 179 days after such date and (2) the date, if any, on which the Specified Senior Indebtedness to which such event of default relates is discharged or such event of default is waived by the holders of such Specified Senior Indebtedness (including, if any Indebtedness under the Bank Credit Agreement is outstanding, lenders under the Bank Credit Agreement) or otherwise cured (provided that further written notice relating to the same or any other event of default specified in clause (b) above with respect to any Specified Senior Indebtedness - 98 - received by the Company or the Trustee within 12 months after such receipt shall not be effective for purposes of this clause (y)). In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, then and in such event such payment shall be paid over and delivered forthwith to the Company. The provisions of this Section shall not apply to any payment with respect to which Section 1302 would be applicable. Section 1304. Payment Permitted if No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent the Company, at any time except during the pendency of any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 1302 or under the conditions described in Section 1303, from making payments at any time of principal of (and premium, if any) or interest on the Securities. Section 1305. Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full, in cash or cash equivalents, of all Senior Indebtedness, the Holders of the Securities shall be subrogated (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated to Senior Indebtedness of the Company to the same extent as the Securities are subordinated and which is entitled to like rights of subrogation) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. - 99 - Section 1306. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the express limitations set forth in Article Five and to the rights, if any, under this Article of the holders of Senior Indebtedness (1) in any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 1302, to receive, pursuant to and in accordance with such Section, cash, property and securities otherwise payable or deliverable to the Trustee or such Holder, or (2) under the conditions specified in Section 1303, to prevent any payment prohibited by such Section. Section 1307. Trustee to Effectuate Subordination. Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes. Section 1308. No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. - 100 - Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any Person liable in any manner for the collection of Senior Indebtedness; and (d) exercise or refrain from exercising any rights against the Company and any other Person. Section 1309. Notice to Trustee. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from the Company or a holder of Senior Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least three Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date. Subject to the provisions of Section 601, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of - 101 - Senior Indebtedness (or a trustee, fiduciary or agent therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Section 1310. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 602, and the Holders of the Securities 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 of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. Section 1311. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 606. - 102 - Section 1312. Article Applicable to Paying Agents. In case at any time 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 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 in addition to or in place of the Trustee; provided, however, that Section 1311 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. Section 1313. Rescission. The provisions of this Article Thirteen shall continue to be effective or be reinstated, as the case may be, if at any time any payment in respect of any Senior Indebtedness is rescinded or must otherwise be returned by the holder thereof upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment had not been made. Section 1314. Application by Trustee of Assets Deposited With It. Any cash or U.S. Government Obligations deposited in trust with the Trustee pursuant to and in accordance with Section 1401 shall be for the sole benefit of the Holders and shall not be subject to the subordination provisions of this Article Thirteen. Section 1315. Trustee's Relation to Senior Indebtedness. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Thirteen, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Article against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness. The Trustee shall not be liable to any holder of Senior Indebtedness if it shall mistakenly pay over or deliver to Holders, the Company or any other Person moneys or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article or otherwise. - 103 - ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE Section 1401. Option to Effect Defeasance or Covenant Defeasance. The Company may, at its option by Board Resolution, at any time, with respect to the Securities, elect to have either Section 1402 or Section 1403 be applied to all Outstanding Securities upon compliance with the conditions set forth below in this Article Fourteen. Section 1402. Defeasance and Discharge. Upon the Company's exercise under Section l401 of the option applicable to this Section 1402, the Company shall be deemed to have been discharged from its obligations with respect to all Outstanding Securities 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 Outstanding Securities, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 1405 and the other Sections of this Indenture referred to in (A) and (B) below, and to have satisfied all its other obligations under such Securities and this Indenture, including its obligations under the covenants contained in Article Thirteen (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Securities to receive solely from the trust fund described in Section 1404 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any) and interest on such Securities when such payments are due, (B) the Company's obligations with respect to such Securities under Sections 304, 305, 306, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (D) this Article Fourteen. Subject to compliance with this Article Fourteen, the Company may exercise its option under this Section 1402 notwithstanding the prior exercise of its option under Section 1403 with respect to the Securities. - 104 - Section 1403. Covenant Defeasance. Upon the Company's exercise under Section 1401 of the option applicable to this Section 1403, the Company shall be released from its obligations under the covenants contained in Articles Eight and Thirteen and in Sections 1007 through 1017 with respect to the Outstanding Securities on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Securities shall thereafter be deemed to be not "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder (it being understood that such Securities shall not be deemed Outstanding for financial accounting purposes). For this purpose, such covenant defeasance means that, with respect to the Outstanding Securities, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a default or an Event of Default under Section 501(c) or Section 501(h), but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. In addition, upon the Company's exercise under Section 1401 of the option applicable to Section 1403, Sections 501(c) through 501(h) (other than Sections 501(f) and (g)) shall not constitute Events of Default. Section 1404. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 1402 or Section 1403 to the Outstanding Securities: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 608 who shall agree to comply with the provisions of this Article Fourteen 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 Securities, (A) cash in U.S. Dollars in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their - 105 - terms will provide, not later than one day before the due date of any payment, cash in U.S. Dollars in an amount, or (C) a combination thereof, 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 (and premium, if any) and interest on the Outstanding Securities on the Stated Maturity of such principal or installment of principal (and premium, if any) or interest and; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to the Securities. For this purpose, "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (y) 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, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt; (2) In the case of an election under Section 1402, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the date hereof, there has been a change in the applicable federal income tax law, in either case to the effect that, and based - 106 - thereon such opinion shall confirm that, the Holders of the Outstanding Securities will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (3) In the case of an election under Section 1403, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States to the effect that the Holders of the Outstanding Securities will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; (4) No Default or Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit or, insofar as Subsection 501(f) or 501(g) is concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); (5) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound; (6) In the case of an election under either Section 1402 or 1403, the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit made by the Company pursuant to its election under Section 1402 or 1403 was not made by the Company with the intent of preferring the Holders over other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (7) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel in the United States, each stating that all conditions precedent provided for relating to either the defeasance under Section 1402 or the covenant defeasance under Section 1403 (as the case may be) - 107 - have been complied with as contemplated by this Section 1404. On and after the date the conditions set forth above are satisfied, the United States dollars or U.S. Government Obligations so deposited shall not be subject to the rights of the holders of Senior Indebtedness pursuant to the provisions of Article Thirteen. Section 1405. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 1405, the "Trustee") pursuant to Section 1404 in respect of the Outstanding Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. Money and U.S. Government Obligations so held in trust are not subject to Article Thirteen. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or U.S. Government Obligations deposited pursuant to Section 1404 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities. Anything in this Article Fourteen 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 1404 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 1404(l)), are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. - 108 - Section 1406. Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or U.S. Government Obligations in accordance with Section 1402 or 1403, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 1402 or 1403, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1402 or 1403, as the case may be; provided, however, that, if the Company makes any payment of principal of (or premium, if any) or interest on any Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent. * * * * * - 109 - This Indenture may be signed in any number of counterparts with the same effect as if the signatures to each counterpart were upon a single instrument, and all such counterparts together shall be deemed an original of this Indenture. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. PATHMARK STORES, INC. By: /s/ Anthony Cuti Title: Attest: /s/ Title: NATIONSBANK of Georgia, National Association By: /s/ Elizabeth Tulley Title: Trust Officer Attest: Title: - 110 - STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 26th day of October, 1993, before me personally came Elizabeth Tulley, to me known, who, being by me duly sworn, did depose and say that s/he resides at Atlanta Georgia; that s/he is Trust Officer of PATHMARK STORES, INC., one of the corporations described in and which executed the above instrument; that s/he knows the corporate seal of such corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed pursuant to authority of the Board of Directors of such corporation; and that s/he signed her/his name thereto pursuant to like authority. (NOTARIAL SEAL) /s/ Linda Corrigan ------------------------- Notary Public - 111 - STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 26th day of October, 1993, before me personally came Anthony Cuti, to me known, who, being duly sworn, did depose and say that s/he resides at Saddle River, New Jersey; that s/he is President of NATIONSBANK of Georgia, National Association, one of the corporations described in and which executed the above instrument; that s/he knows the corporate seal of such corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed pursuant to authority of the Board of Directors of such corporation; and that s/he signed her/his name thereto pursuant to like authority. (NOTARIAL SEAL) /s/ Linda Corrigan ------------------------- Notary Public - 112 - Schedule I PATHMARK STORES, INC. CERTAIN EXISTING INDEBTEDNESS ----------------------------- (000's OMITTED) INDUSTRIAL REVENUE BONDS (See details on page 2) $ 6,375 OTHER DEBT (PRIMARILY MORTGAGES) (See details on page 2) 41,804 ------- $48,179 ======= Holdings Intercompany Note related to the Holdings Subordinated Notes in an aggregate principal amount equal to or less than $3,361,000. Holdings Intercompany Note related to the 13-1/8 Junior Subordinated Discount Debentures due 2003 of Holdings in an aggregate principal amount equal to or less than $1,800,000.
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Schedule I (cont'd) PATHMARK STORES, INC. CERTAIN EXISTING INDEBTEDNESS ----------------------------- INTEREST MATURITY BALANCE INDEBTEDNESS RATE DATE (IN THOUSANDS) ------------------------ -------- -------- -------------- Massachusetts Mutual Life 9.0% 1999 $ 243 Insurance Company 1295 State Street Springfield, MA 01101 Re: Madison Stuart Properties John Hancock Mutual Life 7.0 1994 1,207 Insurnace Company 200 Berkley Street Boston, MA 02117 Re: Bridge Stuart Properties Massachusetts Mutual Life 7.0-9.0 1993-99 480 Insurance Company 1295 State Street Springfield, MA 01101 Re: Pennsylvania Stuart Properties Connecticut General Life 10.2-10.4 1997-99 855 Insurance Company Hartford, CT 06115 Re: Jersey Stuart Properties Prudential Insurance Company 10.5 1998 37,278 of America 10 Rockefeller Center, 15th Fl. New York, NY Re: SGC Mortgaged Properties Delaware Economic Development 10.875 2003 3,000 Authority c/o Philadelphia National Bank P.O. Box 7010 Philadelphia, PA Re: Lancaster Pike IRB Industrial Revenue Bonds 10.6 2003 3,375 c/o Philadelphia National Bank P.O. Box 7918 Philadelphia, PA Re: Schillington IRB Jacqueline Nallitt 11.0 1999 276 1688 Victory Blvd. Staten Island, NY Re: Forrest Ave. Mall Store Mt. Vernon Urban Renewal Agency 8.0 1995 670 9 South First Ave., 9th Fl. Mt. Vernon, NY 10550 Re: Mt. Vernon Development AFCO 5.5 1994 795 900 Lanidex Plaza Parsippany, NJ 07054 Re: Insurance Policy Premium ______ LONG TERM DEBT $48,179 =======
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Schedule I PATHMARK STORES, INC. CERTAIN EXISTING LIENS ---------------------- The Indebtedness listed hereon is secured only by mortgages on the properties listed opposite such Indebtedness. INTEREST MATURITY BALANCE INDEBTEDNESS PROPERTY RATE DATE (IN THOUSANDS) -------------------------- ------------------------- -------- -------- -------------- Massachusetts Mutual Life Pathmark of Hamilton 9.0% 1999 $ 243 Insurance Company 2735 S. Broad Street 1295 State Street Hamilton Township, NJ 08610 Springfield, MA 01101 Re: Madison Stuart Properties John Hancock Mutual Life Pathmark of Inwood 7.0% 1994 362 Insurance Company 410 W. 207th Street 200 Berkley Street New York, NY 10034 Boston, MA 02117 Re: Bridge Stuart Properties Pathmark & Rickel of 511 Edgewater Park 2110 Rt. 130 & Wood Lane Rd. Beverly, NJ 08010 Pathmark of Ivy Hill .344 1331 Ivy Hill Road Springfield Township Philadelphia, PA 19150 Massachusetts Mutual Life Former Pathmark of Whitaker 7.0-9.0 1993-99 394 Insurance Company 5520 Whitaker Avenue 1295 State Street Philadelphia, PA 19124 Springfield, MA 01101 Re: Pennsylvania Stuart Franklin Township Gas Properties 673 Somerset Street Somerset, NJ 08873 Paramus Gas 34 639 Route 17 South Paramus, NJ 07652 Fairless Hills Gas 28 Route 1 and Atlantic Ave. Fairless Hills, PA 19030 Connecticut General Life Pathmark of Belmont 10.2-10.4 1997-99 855 Insurance Company 115 Belmont Avenue Hartford, CT 06115 Belleville, NJ 07109 Re: Jersey Stuart Properties Prudential Insurance Company Pathmark of Upper Darby 10.5 1998 1,710 of America 421 S. 69th Street 10 Rockefeller Center, Upper Darby, PA 19082 15th Fl. New York, NY Re: SGC Mortgaged Properties Pathmark & Rickel of 4,355 Glenolden 140 N. McDade Blvd. Glenolden, PA 19036 Pathmark & Rickel of 3,078 Shillington 243A W. Lancaster Avenue Shillington, PA 19607
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INTEREST MATURITY BALANCE INDEBTEDNESS PROPERTY RATE DATE (IN THOUSANDS) -------------------------- ------------------------- -------- -------- -------------- Prudential Insurance Company Pathmark of Willow Grove 4,450 of America (continued) 2545 Moreland Road Willow Grove, PA 19090 Pathmark of Lancaster Pike 2,018 3901 Lancaster Pike Wilmington, DE 19805 Pathmark & Rickel of East 9,633 Brunswick 50 Race Track Road East Brunswick, NJ 08615 Rickel of Forrest Avenue 3,135 1520 Forrest Avenue Staten Island, NY 10302 Rickel of Johnson City 2,337 540 Harry L. Drive Johnson City, NY 13790 Pathmark Drug of Danbury 10.5 1996 2,200 100 Danbury - Newtown Road Danbury, CT 06810 Purity Supreme Store 3,762 3375 Berlin Turnpike Newington, CT 06111 Jacqueline Nallitt Pathmark of Forrest 11.0 1999 276 1688 Victory Blvd. Avenue Staten Island, NY 1351 Forrest Avenue Re: Forrest Ave. Mall Store Staten Island, NY 10302 Mt. Vernon Urban Renewal Agency Pathmark Development 8.0 1995 670 9 South First Ave., 9th Fl. One Pathmark Plaza Mt. Vernon, NY 10550 Mt. Vernon, NY 10550 Re: Mt. Vernon Development _______ $41,009 =======
S-I-4 APPENDIX A [Form of Intercompany Agreement] [Indebtedness of the Company or any Majority-owned Subsidiary to any one or the other of them will qualify as Permitted Indebtedness if, and only if, such Indebtedness is made pursuant to and is evidenced by an agreement in the form of a promissory note in substantially the form as follows:] $ , 19 Evidences of all loans or advances ("Loans") 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. All capitalized terms used herein that are defined in, or by reference in, the Indenture between Pathmark Stores, Inc. and , trustee, dated as of , 1993 (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. Not Forgivable. Unless the Maker of the Loan hereunder is the Company, the Holder may not forgive any amounts owing under this Intercompany Note. Section 1.02. Interest; Prepayment. (a) The interest rate ("Interest Rate") on any Loan 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 shall be payable upon demand of the Holder. A-1 (c) If the principal or accrued interest, if any, on 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 1% per annum from maturity until the principal and interest on such Loans are fully paid. (d) Any amounts owed hereunder may be prepaid at any time by the Maker. Section 1.03. Subordination. All Loans made to the Company shall be subordinated in right of payment to the payment and performance of the obligations of the Company and any Subsidiary under the Indenture, the Securities, and any other Indebtedness ranking senior to or pari passu with the Securities, including, without limitation, any Senior Indebtedness; provided that, with respect to a Subsidiary in any specific instance, such Subsidiary is also an obligor under the Indenture, the Securities or such other senior 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 an Event of Default has occurred under the Indenture, then (x) in the event the Maker is not the Company and not a Subsidiary that is also an obligor under the Indenture or the Securities (in the case where the Holder is not the Company), all amounts owing under the Loans hereunder shall be immediately due and payable (whether or not demand has been made) to the Holder, (y) in the event the Maker is the Company, the amounts owing under the Loans hereunder shall not be payable and (z) in the event the Maker is a Subsidiary that is also an obligor under the Indenture or the Securities and the Holder is not the Company or another Subsidiary that is also an obligor under the Indenture or the Securities, the amounts owing under the Loans hereunder shall not be due and payable; provided, however, that, if such Event of Default or acceleration has been waived, cured or rescinded, such amounts shall no longer be due and payable in the case of clause (x), and such amounts may be paid in the case of clauses (y) and (z). 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 from a Subsidiary that is also an obligor under the Indenture or the Securities, which payments or distributions, pursuant to clause (y) or (z) of the prior sentence, are not payable after any Event of Default has A-2 occurred, is continuing and has not been waived, cured or rescinded, such Holder will pay over and deliver forthwith to the Company or such Subsidiary, 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 Agreement, or consent to depart therefrom 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 Agreement, except to its legal successor-in-interest. Section 3.03. Third Party Beneficiaries. The Holders of the Securities or any other Indebtedness ranking pari passu with, or senior to, the Securities including, without limitation, any Senior Indebtedness, shall be third party beneficiaries to this Agreement and shall have the right to enforce this Agreement against the Company and the Subsidiaries. Section 3.04. Headings. Article and Section headings in this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Section 3.05. Entire Agreement. This Agreement 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. Section 3.06. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 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: A-3 GRID Amount Interest Rate Date of of on the Notation Advance Advance Advance Made By Appendix B-1 [Form of Holdings Intercompany Note] PROMISSORY NOTE U.S. $ Dated as of: , 1993 FOR VALUE RECEIVED, the undersigned, Pathmark Stores Inc. (the "Borrower"), HEREBY PROMISES TO PAY to the order of Supermarkets General Holdings Corporation (the "Lender") the principal sum of United States Dollars (U.S. $ ) at the times and in the amounts provided for the payment of principal thereof or thereunder (and any premiums) in the Indenture dated as of May 1, 1992 by and between the Lender and Wilmington Trust Company, Trustee (the "Trustee"), as supplemented by the First Supplemental Indenture dated as of October 5, 1993 between the Lender and the Trustee and the 11-5/8% Subordinated Notes due 2002 issued thereunder (such Indenture and Notes, as supplemented, amended, modified or waived from time to time in accordance with the terms thereof being the "Lender Indenture" and "Lender Subordinated Notes", respectively), together with interest on such principal sum from the date hereof at the times and in the amounts provided in the Lender Indenture and the Lender Subordinated Notes for the payment of interest thereunder. Indebtedness evidenced by this Note is subordinated in right of payment to the prior payment in full of (i) all Senior Indebtedness (as defined in the Indenture dated as of October 26, 1993 by and between the Borrower and Wilmington Trust Company, Trustee with respect to the 11-5/8% Subordinated Notes due 2002 (the "Borrower Indenture"), (ii) the Borrower's 11-5/8% Subordinated Notes due 2002 (the "Borrower Subordinated Notes")), (iii) the Subordinated Debentures and the Deferred Coupon Notes (as defined in the Borrower Indenture) and (iv) all other Indebtedness (as defined in the Borrower Indenture) of the Borrower, whether outstanding on the date of the Borrower Indenture or thereafter created, incurred, assumed or guaranteed to the same extent as the Borrower Subordinated Notes are subordinated to Senior Indebtedness (as defined in the Borrower Indenture) of the Borrower under the Borrower Indenture. For purposes of this provision, Article Thirteen and other relevant provisions of the Borrower Indenture are hereby incorporated by reference in this Note with appropriate modifications to the extent required by the terms hereof to effectuate such subordination. The Borrower shall make each payment under this Note not later than 12:00 noon (Eastern Standard time) on the day when due in lawful money of the United States of America (in freely transferable United States dollars) to the Lender at its address c/o Merrill Lynch Capital Partners, Inc., 767 Fifth Avenue, 48th Floor, New York, New York 10153, Attention: Stephen M. McLean, or at such other address of which the Lender may give the Borrower written notice from time to time, in same day funds. Computations of interest shall be made by the Lender in accordance with the terms and conditions contained in the Lender Indenture and the Lender Subordinated Notes. This Note shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its duly authorized representative as of the day and year first above written. PATHMARK STORES, INC. By Name: Title: Address: 301 Blair Road Woodbridge, NJ 07095 8283e B-1-2 Appendix B-2 [Form of Holdings Intercompany Note] PROMISSORY NOTE U.S. $ Dated as of: , 1993 FOR VALUE RECEIVED, the undersigned, Pathmark Stores, Inc. (the "Borrower"), HEREBY PROMISES TO PAY to the order of Supermarkets General Holdings Corporation (the "Lender") the principal sum of United States Dollars (U.S. $ ) at the times and amounts provided for the payment of principal thereof or thereunder (and any premiums) in the Indenture dated as of May 25, 1987 by and between the Lender and Wilmington Trust Company, Trustee (the "Trustee"), as amended and restated as of May 15, 1992 and as supplemented as of June 15, 1992 and the 12-5/8% Subordinated Debentures due 2002 issued thereunder (such Indenture and Notes, as supplemented, amended, modified or waived from time to time in accordance with the terms thereof being the "Lender Indenture" and "Lender Subordinated Debentures", respectively), together with interest on such principal sum from the date hereof at the times and in the amounts provided in the Lender Indenture and the Lender Subordinated Debentures for the payment of interest thereunder. Indebtedness evidenced by this Note is subordinated in right of payment to the prior payment in full of (i) all Senior Indebtedness (as defined in the Indenture dated as of October 5, 1993 by and between the Borrower and Wilmington Trust Company, Trustee with respect to the 12-5/8% Subordinated Debentures due 2002 (the "Borrower Indenture"), (ii) the Borrower's 12-5/8% Subordinated Debentures due 2002 (the "Borrower Subordinated Notes")), (iii) the Subordinated Notes and the Deferred Coupon Notes (as defined in the Borrower Indenture) and (iv) all other Indebtedness (as defined in the Borrower Indenture) of the Borrower, whether outstanding on the date of the Borrower Indenture or thereafter created, incurred, assumed or guaranteed to the same extent as the Borrower Subordinated Notes are subordinated to Senior Indebtedness (as defined in the Borrower Indenture) of the Borrower under the Borrower Indenture. For purposes of this provision, Article Thirteen and other relevant provisions of the Borrower Indenture are hereby incorporated by reference in this Note with appropriate modifications to the extent required by the terms hereof to effectuate such subordination. The Borrower shall make each payment under this Note not later than 12:00 noon (Eastern Standard time) on the day when due in lawful money of the United States of America (in freely transferable United States dollars) to the Lender at its address c/o Merrill Lynch Capital Partners, Inc., 767 Fifth Avenue, 48th Floor, New York, New York 10153, Attention: Stephen M. McLean, or at such other address of which the Lender may give the Borrower written notice from time to time, in same day funds. Computations of interest shall be made by the Lender in accordance with the terms and conditions contained in the Lender Indenture and the Lender Subordinated Notes. This Note shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its duly authorized representative as of the day and year first above written. PATHMARK STORES, INC. By Name: Title: Address: 301 Blair Road Woodbridge, NJ 07095 8283e B-2-2 EX-4.8 9 DRAFT - 8/23/93 5754M/6878M 1260J/1264J PATHMARK STORES, INC., Issuer, and WILMINGTON TRUST COMPANY, Trustee INDENTURE Dated as of October 26, 1993 11-5/8% Subordinated Notes due 2002 Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of October 26, 1993* Trust Indenture Indenture Act Section Section Sec. 310(a)(1) ............................. 608 (a)(2) ............................. 608 (b) ............................. 607, 609 Sec. 312(c) ............................. 701 Sec. 314(a) ............................. 703 (a)(4) ............................. 1018 (c)(1) ............................. 103 (c)(2) ............................. 103 (e) ............................. 103 Sec. 315(b) ............................. 601 Sec. 316(a)(last sentence) ............................. 101 ("Out- standing") (a)(1)(A) ............................. 502, 512 (a)(1)(B) ............................. 513 (b) ............................. 508 (c) ............................. 105 Sec. 317(a)(1) ............................. 503 (a)(2) ............................. 504 Sec. 318(a) ............................. 108 * This reconciliation and tie shall not, for any purpose, be deemed to be part of the Indenture. TABLE OF CONTENTS PAGE ARTICLE ONE Definitions and Other Provisions of General Application Section 101. Definitions ............................ 1 Acquired Indebtedness .................. 2 Acquisition ............................ 2 Affiliate .............................. 2 Average Life to Stated Maturity ........ 3 Bank Credit Agreement .................. 3 Board of Directors ..................... 3 Board Resolution ....................... 3 Business Day ........................... 3 Capital Lease Obligation ............... 3 Capital Stock .......................... 3 Change in Control ...................... 3 Chefmark ............................... 4 Commission ............................. 4 Company ................................ 4 Company Request or Company Order ....... 4 Consolidated Adjusted Net Income (Loss). 4 Consolidated Assets .................... 5 Consolidated Capital Expenditures ...... 5 Consolidated Fixed Charge Coverage Ratio ....................... 5 Consolidated Interest Expense .......... 6 Consolidated Non-cash Charges .......... 6 Consolidated Tax Expense ............... 6 Corporate Trust Office ................. 6 Corporation ............................ 6 Default ................................ 6 Deferred Coupon Notes................... 6 Equitable Investors .................... 6 Event of Default ....................... 7 Exchange Act ........................... 7 Existing Assets ........................ 7 Fair Market Value ...................... 7 Note: This table of contents shall not, for any purpose, be deemed to be a part of this Indenture. PAGE Federal Bankruptcy Code ................ 7 Generally Accepted Accounting Principles or GAAP ................... 7 Guaranteed Debt ........................ 7 Holder ................................. 8 Holdings ............................... 8 Holdings Intercompany Notes ............ 8 Holdings Preferred Stock ............... 8 Indebtedness ........................... 8 Indenture .............................. 9 Intercompany Agreement ................. 9 Interest Payment Date .................. 9 Interest Rate Hedge Arrangement ........ 9 Investments ............................ 9 Lien ................................... 10 Logistical Services Agreement .......... 10 Majority-owned Subsidiary .............. 10 Management Investors ................... 10 Material Subsidiary .................... 10 Maturity ............................... 10 ML Funds ............................... 11 Newco .................................. 11 Officers' Certificate .................. 11 Opinion of Counsel ..................... 11 Outstanding ............................ 11 Pari Passu Indebtedness ................ 12 Paying Agent ........................... 12 Permitted Holders ...................... 13 Permitted Indebtedness ................. 13 Permitted Investment ................... 14 Permitted Payment ...................... 15 Permitted Senior Subordinated Indebtedness ......................... 15 Person ................................. 15 Plainbridge ............................ 16 Predecessor Security ................... 16 Preferred Stock ........................ 16 Purchase Money Mortgages ............... 16 Qualified Capital Stock ................ 16 Recapitalization ....................... 16 Redeemable Capital Stock ............... 16 -ii- PAGE Redemption Date ........................ 17 Redemption Price ....................... 17 Regular Record Date .................... 17 Representative ......................... 17 Responsible Officer .................... 17 Restricted Payments .................... 17 Security and Securities ................ 17 Senior Indebtedness .................... 17 Senior Subordinated Notes .............. 18 SMG-II ................................. 18 Special Record Date .................... 18 Specified Senior Indebtedness .......... 18 Spin-Off Agreements .................... 19 Spin-Off ............................... 19 Stated Maturity ........................ 19 Subordinated Debentures ................ 19 Subordinated Indebtedness .............. 20 Subsidiary ............................. 20 Tax Sharing Agreement .................. 20 Temporary Cash Investment .............. 20 Trust Indenture Act .................... 20 Trustee ................................ 20 Unrestricted Subsidiary ................ 21 Unrestricted Subsidiary Indebtedness ... 21 Voting Stock ........................... 21 Section 102. Other Definitions ...................... 22 Section 103. Compliance Certificates and Opinions ... 22 Section 104. Form of Documents Delivered to Trustee . 23 Section 105. Acts of Holders ........................ 24 Section 106. Notices, etc., to Trustee and Company .......................... 25 Section 107. Notice to Holders; Waiver .............. 25 Section 108. Conflict of any Provision of Indenture with Trust Indenture Act ... 26 Section 109. Effect of Headings and Table of Contents ............................. 26 Section 110. Successors and Assigns ................. 27 Section 111. Separability Clause .................... 27 Section 112. Benefits of Indenture .................. 27 Section 113. Governing Law .......................... 27 Section 114. Legal Holidays ......................... 27 Section 115. No Recourse Against Others ............. 27 -iii- PAGE ARTICLE TWO Security Forms Section 201. Forms Generally ........................ 28 Section 202. Form of Face of Security ............... 28 Section 203. Form of Reverse of Security ............ 30 Section 204. Form of Trustee's Certificate of Authentication ....................... 34 ARTICLE THREE The Securities Section 301. Title and Terms ........................ 35 Section 302. Denominations .......................... 35 Section 303. Execution, Authentication, Delivery and Dating ............................... 36 Section 304. Temporary Securities ................... 37 Section 305. Registration, Registration of Transfer and Exchange ......................... 38 Section 306. Mutilated, Destroyed, Lost and Stolen Securities ........................... 39 Section 307. Payment of Interest; Interest Rights Preserved ............................ 40 Section 308. Persons Deemed Owners .................. 41 Section 309. Cancellation ........................... 41 Section 310. Computation of Interest ................ 42 ARTICLE FOUR Satisfaction and Discharge Section 401. Satisfaction and Discharge of Indenture ......................... 42 Section 402. Application of Trust Money ............. 43 ARTICLE FIVE Remedies Section 501. Events of Default ...................... 44 Section 502. Acceleration of Maturity; Rescission ... 46 Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee ........... 47 -iv- PAGE Section 504. Trustee May File Proofs of Claim ....... 48 Section 505. Trustee May Enforce Claims Without Possession of Securities ............. 49 Section 506. Application of Money Collected ......... 49 Section 507. Limitation on Suits .................... 50 Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest ............................. 51 Section 509. Restoration of Rights and Remedies ..... 51 Section 510. Rights and Remedies Cumulative ......... 51 Section 511. Delay or Omission Not Waiver ........... 51 Section 512. Control by Holders ..................... 52 Section 513. Waiver of Past Defaults ................ 52 Section 514. Undertaking for Costs .................. 52 Section 515. Waiver of Stay, Extension or Usury Laws ........................... 53 Section 516. Unconditional Right of Holders to Institute Certain Suits ........... 53 ARTICLE SIX The Trustee Section 601. Notice of Defaults ..................... 53 Section 602. Certain Rights of Trustee .............. 54 Section 603. Not Responsible for Recitals or Issuance of Securities ............... 56 Section 604. Trustee and Agents May Hold Securities; Collections; etc. ........ 56 Section 605. Money Held in Trust .................... 57 Section 606. Compensation and Reimbursement ......... 57 Section 607. Conflicting Interests .................. 58 Section 608. Corporate Trustee Required; Eligibility .......................... 58 Section 609. Resignation and Removal; Appointment of Successor ......................... 59 Section 610. Acceptance of Appointment by Successor ............................ 61 Section 611. Merger, Conversion, Consolidation or Succession to Business ............... 61 Section 612. Preferential Collection of Claims Against Company ...................... 62 -v- PAGE ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company Section 701. Disclosure of Names and Addresses of Holders ........................... 62 Section 702. Reports by Trustee ..................... 62 Section 703. Reports by Company ..................... 63 ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease Section 801. Company May Consolidate, etc., Only on Certain Terms ................ 63 Section 802. Successor Substituted .................. 64 ARTICLE NINE Supplemental Indentures Section 901. Supplemental Indentures without Consent of Holders ........... 65 Section 902. Supplemental Indentures with Consent of Holders .............. 66 Section 903. Execution of Supplemental Indentures ... 67 Section 904. Effect of Supplemental Indentures ...... 67 Section 905. Conformity with Trust Indenture Act .... 67 Section 906. Reference in Securities to Supplemental Indentures ........................... 67 Section 907. Effect on Senior Indebtedness .......... 68 ARTICLE TEN Covenants Section 1001. Payment of Principal, Premium and Interest ............................. 68 Section 1002. Maintenance of Office or Agency ........ 68 Section 1003. Money for Security Payments to Be Held in Trust ........................ 69 Section 1004. Corporate Existence .................... 70 Section 1005. Payment of Taxes and Other Claims ...... 71 Section 1006. Maintenance of Properties .............. 71 -vi- PAGE Section 1007. Limitation on Indebtedness ............. 72 Section 1008. Limitation on Restricted Payments ...... 72 Section 1009. Limitation on Transactions with Affiliates ........................... 77 Section 1010. Limitation on Liens .................... 79 Section 1011. Limitation on Other Senior Subordinated Indebtedness ............ 79 Section 1012. Purchase of Securities Upon Change in Control .............................. 79 Section 1013. Restrictions on Preferred Stock of Subsidiaries ......................... 83 Section 1014. Limitations on Issuances of Guarantees of Indebtedness ...................... 83 Section 1015. Restriction on Transfer of Assets ...... 84 Section 1016. Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries ......................... 85 Section 1017. Limitation on Unrestricted Subsidiaries ......................... 85 Section 1018. Statement as to Compliance; Notice of Default; Provision of Financial Statements ........................... 86 Section 1019. Waiver of Certain Covenants ............ 87 ARTICLE ELEVEN Redemption of Securities Section 1101. Right of Redemption .................... 87 Section 1102. Applicability of Article ............... 87 Section 1103. Election to Redeem; Notice to Trustee .. 88 Section 1104. Selection by Trustee of Securities to Be Redeemed .......................... 88 Section 1105. Notice of Redemption ................... 88 Section 1106. Deposit of Redemption Price ............ 89 Section 1107. Securities Payable on Redemption Date .. 89 Section 1108. Securities Redeemed in Part ............ 90 ARTICLE TWELVE Sinking Fund Section 1201. Mandatory Sinking Fund Payments ........ 90 Section 1202. Satisfaction of Sinking Fund Payments with Securities ............. 91 Section 1203. Redemption of Securities for Sinking Fund ......................... 91 -vii- PAGE ARTICLE THIRTEEN Subordination of Securities Section 1301. Securities Subordinate to Senior Indebtedness ......................... 92 Section 1302. Payment Over of Proceeds Upon Dissolution, etc. .................... 92 Section 1303. No Payment When Specified Senior Indebtedness in Default .............. 94 Section 1304. Payment Permitted if No Default ........ 96 Section 1305. Subrogation to Rights of Holders of Senior Indebtedness ............... 96 Section 1306. Provisions Solely to Define Relative Rights ...................... 96 Section 1307. Trustee to Effectuate Subordination .... 97 Section 1308. No Waiver of Subordination Provisions .. 97 Section 1309. Notice to Trustee ...................... 98 Section 1310. Reliance on Judicial Order or Certificate of Liquidating Agent ..... 99 Section 1311. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights ..................... 99 Section 1312. Article Applicable to Paying Agents .... 99 Section 1313. Rescission ............................. 100 Section 1314. Application by Trustee of Assets Deposited With It .................... 100 ARTICLE FOURTEEN Defeasance and Covenant Defeasance Section 1401. Option to Effect Defeasance or Covenant Defeasance ............... 100 Section 1402. Defeasance and Discharge ............... 100 Section 1403. Covenant Defeasance..................... 101 Section 1404. Conditions to Defeasance or Covenant Defeasance .................. 102 Section 1405. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions ....... 104 Section 1406. Reinstatement .......................... 105 TESTIMONIUM........................................... 106 SIGNATURES AND SEALS.................................. 106 -viii- ACKNOWLEDGMENTS EXISTING INDEBTEDNESS..............................SCHEDULE I FORM OF INTERCOMPANY AGREEMENT.....................APPENDIX A FORM OF HOLDINGS INTERCOMPANY NOTE.................APPENDIX B -ix- INDENTURE, dated as of October 26, 1993, between PATHMARK STORES, INC., a Delaware corporation (hereinafter called the "Company"), and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as trustee (hereinafter called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the creation of an issue of its 11-5/8% Subordinated Notes due 2002 (hereinafter called the "Securities"), of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture; This Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act that are required to be part of and to govern indentures qualified under the Trust Indenture Act; All acts and things necessary have been done to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid, binding and legal obligations of the Company, and to make this Indenture a valid agreement of the Company in accordance with its terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (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 generally accepted accounting principles and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States as of the date hereof; and (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Articles Five, Six, Ten, Thirteen and Fourteen are defined in those Articles. "Acquired Indebtedness" means Indebtedness of a Person (including an Unrestricted Subsidiary) (i) existing at the time such Person becomes a Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person, other than Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Subsidiary or such acquisition, as the case may be. "Acquisition" means the acquisition of the Company by Holdings completed in October 1987, pursuant to the Agreement and Plan of Merger dated as of April 22, 1987 among the Company, SMG Acquisition Corporation and Holdings, as amended. "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 or (ii) for purposes of Section l009 only, any other Person that owns, directly or indirectly, 10% or more of such Person's Capital Stock or any officer or director of any such Person or other Person or with respect to any natural Person, any person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. 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 the ownership of Voting Stock, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. - 2- "Average Life to Stated Maturity" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from the date of determination to the date or dates of each successive scheduled principal payment of such Indebtedness multiplied by (b) the amount of each such principal payment by (ii) the sum of all such principal payments. "Bank Credit Agreement" means the Credit Agreement dated as of the date hereof among the Company and the lenders thereunder and Bankers Trust Company, as agent, as in effect on the date hereof, and as such agreement may be amended, renewed, extended, supplemented or otherwise modified from time to time, and any agreement or successive agreements governing Indebtedness incurred to refund, refinance, restructure or replace the Indebtedness and commitments then outstanding or permitted to be outstanding under such Credit Agreement or other agreement. "Board of Directors" means the board of directors of the Company 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 to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York or the State of Delaware are authorized or obligated by law, regulation or executive order to close. "Capital Lease Obligation" of any Person means any obligations of such Person and its Subsidiaries on a consolidated basis under any capital lease of real or personal property which, in accordance with GAAP, has been recorded as a capitalized lease obligation. "Capital Stock" of any Person means any and all shares, interests, participations, or other equivalents (however designated) of such Person's capital stock whether now outstanding or issued after the date hereof. "Change in Control" means an event as a result of which: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than Permitted Holders is or becomes the "beneficial owner" (as - 3- defined in Rules 13d-3 and l3d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total Voting Stock of the Company and (ii) such person succeeds in having its nominees constitute a majority of the Company's Board of Directors. "Chefmark" means Chefmark, Inc., a corporation incorporated under the laws of the State of Delaware, and any successor thereto. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this instrument, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. To the extent necessary to comply with the requirements of the provisions of Trust Indenture Act Sections 3l0 through 317 as they are applicable to the Company, the term "Company" shall include any other obligor with respect to the Securities for the purposes of complying with such provisions. "Company Request" or "Company Order" means a written request or order signed in the name of the Company (i) by its Chairman, a Vice Chairman, its President or a Vice President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee; provided, however, that such written request or order may be signed by any two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "Consolidated Adjusted Net Income (Loss)" of the Company means, for any period, the consolidated net income (loss) of the Company and its consolidated Subsidiaries for such period as determined in accordance with GAAP, adjusted by excluding (i) net after-tax extraordinary gains or losses (less all fees and expenses relating thereto), as the case may be, (ii) net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset sales, (iii) any - 4- depreciation and amortization expense incurred by the Company and its consolidated Subsidiaries from the date of the Acquisition to the date of determination resulting from (a) any write-up in the book value of any assets due to the Acquisition and (b) any goodwill due to the Acquisition (including any write-off or accelerated amortization of goodwill), (iv) any expenses incurred in connection with the Acquisition and the financing thereof and the Recapitalization, (v) any expenses relating to the incurrence or refinancing of Indebtedness, (vi) the net income (or loss) of any Person (including any Unrestricted Subsidiary and excluding the Company or a Subsidiary) in which the Company or any of its Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or its Subsidiaries by such other Person during such period, (vii) net income (or net loss) of any Person combined with the Company or any of its Subsidiaries in a "pooling of interests" basis attributable to any period prior to the date of combination and (viii) non-cash charges of the Company and its Subsidiaries resulting from the application of Statement of Financial Accounting Standards No. 106 ("SFAS 106") to the extent such charges exceed the cash payments for benefits covered by SFAS 106 for the relevant period. "Consolidated Assets" means the net book value of the Existing Assets shown on the balance sheet of the Company, as determined in accordance with GAAP consistently applied, as of the last day of the Company's last fiscal quarter prior to the date hereof. "Consolidated Capital Expenditures" means cash capital expenditures reflected in the consolidated statement of cash flows of the Company and Capital Lease Obligations that are on the consolidated balance sheet of the Company and its Subsidiaries, in each case in conformity with GAAP. "Consolidated Fixed Charge Coverage Ratio" of the Company means, for any period, the ratio of (i) the sum of Consolidated Adjusted Net Income, Consolidated Interest Expense, Consolidated Tax Expense and Consolidated Non-cash Charges deducted in computing Consolidated Adjusted Net Income, in each case, for such period, of the Company and its Subsidiaries on a consolidated basis, all determined in accordance with GAAP, to (ii) the sum of such Consolidated Interest Expense for such period; provided that, in making such computation, the Consolidated Interest Expense attributable to interest on any Indebtedness computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period; provided, further, that - 5- in making any calculation prior to the first anniversary date of the Recapitalization, the Recapitalization shall be deemed to have taken place on the first day of such period. "Consolidated Interest Expense" means, for any period, the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on a consolidated statement of earnings of the Company and its Subsidiaries for such period minus the aggregate amount for such period of interest imputed on future liabilities of the Company and its Subsidiaries, other than Indebtedness, recorded at present value. Consolidated Interest Expense shall include accruals in respect of Interest Rate Hedge Arrangements (but shall exclude any such accruals in the nature of amortization of front-end fees or other similar payments). "Consolidated Non-cash Charges" of the Company means, for any period, the aggregate depreciation, amortization and other non-cash charges of the Company and its consolidated Subsidiaries for such period, as determined in accordance with GAAP (excluding any such non-cash charge which requires an accrual of or reserve for cash charges for any future period). "Consolidated Tax Expense" of the Company means, for any period, as applied to the Company, the provision for federal, state, local and foreign income taxes of the Company and its consolidated Subsidiaries for such period as determined in accordance with GAAP. "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 Rodney Square North, Wilmington, Delaware 19890. "Corporation" includes corporations, associations, partnerships, companies and business trusts. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Deferred Coupon Notes" means the Junior Subordinated Deferred Coupon Notes due 2003 of the Company in aggregate principal amount at maturity of $225,250,000. "Equitable Investors" means The Equitable Life Assurance Society of the United States and any of its Affiliates that beneficially own, directly or indirectly, shares of Capital Stock of SMG-II, Holdings, Newco or the Company. - 6- "Event of Default" has the meaning specified in Article Five. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Existing Assets" means the assets and other property held by the Company (and not its subsidiaries) as of the last day of the Company's last fiscal quarter prior to the date hereof, adjusted by excluding any assets and other property transferred to Newco in the Spin-Off, plus any assets held by the Company (and not its subsidiaries) irrevocably designated from time to time by the Company as Existing Assets. "Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer. "Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the United States Code, as amended from time to time. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect from time to time; provided, however, that with respect to the obligations of any Person under Articles Eight and Ten and the definitions applicable thereto, "GAAP" means generally accepted accounting principles in the United States as in effect on the date hereof. "Guaranteed Debt" of any Person means, without duplication, all Indebtedness of any other Person referred to in the definition of Indebtedness contained in this Section 101 guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) other than with respect to the Logistical Services Agreement or any Spin-Off Agreement, to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (iii) other than with respect to the Logistical Services Agreement or any Spin-Off Agreement, to supply funds to, or in any other manner invest in, the debtor (including any agreement to pay for property or services to be acquired by such debtor irrespective of whether such property is received or such - 7- services are rendered) or (iv) to maintain working capital or equity capital of the debtor, or otherwise to maintain the net worth, solvency or other financial condition of the debtor or (v) otherwise to assure a creditor against loss; provided that the term "guarantee" shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or any obligation or liability of such Person in respect of leasehold interests assigned by such Person to any other Person. "Holder" means a Person in whose name a Security is registered in the Security Register. "Holdings" means Supermarkets General Holdings Corporation, a Delaware corporation, and any successor thereto. "Holdings Intercompany Notes" means the 11-5/8% subordinated note and the 12-5/8% subordinated debenture each issued by the Company to Holdings in the forms attached hereto as Appendix B and in aggregate principal amounts not in excess of the principal amounts outstanding on the date hereof. "Holdings Preferred Stock" means Holdings' Cumulative Exchangeable Redeemable Preferred Stock, par value $.01 per share, having a liquidation preference of $25 per share and maturing on December 31, 2007, that is outstanding on the date hereof. "Indebtedness" means with respect to any Person, without duplication, (i) all indebtedness of such Person for borrowed money (including overdrafts) or for the deferred purchase price of property or services, excluding any trade payables, import letters of credit and other accrued current liabilities incurred in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any standby letters of credit and acceptances issued under letter of credit facilities, acceptance facilities or other similar facilities, (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness 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 accounts payable arising in the ordinary course of business, (iv) all Capital Lease Obligations of such Person, (v) all Indebtedness referred to in (but not excluded from) clause (i), (ii), (iii) or (iv) above of other Persons and all dividends of other Persons, the payment of which is secured by (or for which - 8- the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien, upon or in 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 Guaranteed Debt of such Person, (vii) 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 and (viii) all obligations under interest rate hedge contracts of such Person. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Redeemable Capital Stock, such fair market value to be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock. "Indenture" means this instrument as originally executed (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. "Intercompany Agreement" means the agreement in the form attached hereto as Appendix A, as amended or modified in accordance with the terms of this Indenture. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Securities. "Interest Rate Hedge Arrangement" means any rate swap transaction under a rate swap agreement to which the Company is a party or beneficiary, or becomes a party or beneficiary, and any interest rate protection agreement, interest rate future, interest rate option or other interest rate hedge arrangement to or under which the Company is a party or a beneficiary, or becomes a party or a beneficiary, or to or under which any Subsidiary of the Company is or becomes such a party or beneficiary if the obligations of such Subsidiary thereunder are guaranteed by the Company. "Investments" of any Person means, directly or indirectly, any advance, loan or other extension of credit or capital contribution by such Person 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) any - 9- other Person, or any purchase or acquisition by such Person of any stock, bonds, notes, debentures or other securities issued or owned by any other Person. For the purpose of making any calculations hereunder, (i) Investment shall include the Fair Market Value of the net assets of any Subsidiary at the time that such Subsidiary is designated an Unrestricted Subsidiary and shall exclude the Fair Market Value of the net assets of any Unrestricted Subsidiary that is designated a Subsidiary and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at Fair Market Value at the time of such transfer; provided that in each case, the Fair Market Value of an asset or property shall be as determined by the Board of Directors of the Company in good faith. "Lien" means any mortgage, charge, pledge, lien, privilege, security interest or encumbrance of any kind. "Logistical Services Agreement" means the Logistical Services Agreement dated as of October 26, 1993 between the Company and Plainbridge, as amended or modified in accordance with the provisions hereof. "Majority-owned Subsidiary" means a Subsidiary at least 50% of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more of the Subsidiaries, or the Company and one or more of the Subsidiaries, provided that Majority-owned Subsidiary shall not include any such Subsidiary if the equity ownership or the Voting Stock of such Subsidiary not owned by the Company and/or one or more of the Subsidiaries is owned by Holdings and/or one or more Affiliates of Holdings other than the Company and its Subsidiaries. "Management Investors" means the officers and other members of the management of the Company who at any particular date shall beneficially own, directly or indirectly, Voting Stock of the Company. "Material Subsidiary" means, at any particular time, any Subsidiary of the Company that, together with the Subsidiaries of such Subsidiary, (a) accounted for more than 10% of the consolidated revenues of the Company and its Subsidiaries for the most recently completed fiscal year of the Company or (b) was the owner of more than l0% of the consolidated assets of the Company and its Subsidiaries as at the end of such fiscal year, all as shown on the consolidated financial statements of the Company and its Subsidiaries for such fiscal year. "Maturity" when used with respect to any Security means the date on which the principal of such Security becomes - 10- due and payable as therein or herein provided, whether at Stated Maturity, Change in Control Purchase Date or Redemption Date and whether by declaration of acceleration, Change in Control, call for redemption or otherwise. "ML Funds" means Merrill Lynch Capital Appreciation Partnership No. IX, L.P., a Delaware partnership, ML Offshore LBO Partnership No. IX, a Cayman Islands partnership, ML Employees LBO Partnership No. I, L.P., a Delaware partnership, Merrill Lynch Interfunding Inc., a Delaware corporation, Merchant Banking L.P. No. I, a Delaware partnership, Merrill Lynch KECALP L.P., a Delaware partnership, Merrill Lynch Capital Appreciation Partnership No. B-X, L.P., a Delaware partnership, ML Offshore LBO Partnership No. B-X, a Cayman Islands partnership, MLCP Associates, L.P. No. II, a Delaware partnership, Merrill Lynch Venture Capital, Inc., a Delaware corporation and any Affiliates of the foregoing that beneficially own, directly or indirectly, shares of Capital Stock of SMG-II. "Newco" means PTK Holdings, Inc., a corporation incorporated under the laws of the State of Delaware, and any successor thereto. "Officers' Certificate" means a certificate signed by (i) the Chairman, a Vice Chairman, the President, a Vice President or the Treasurer of the Company and (ii) the Secretary or an Assistant Secretary of the Company and delivered to the Trustee; provided, however, that such certificate may be signed by two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee. Each such opinion shall include the statements provided for in Trust Indenture Act Section 314(e) to the extent applicable. "Outstanding" when used with respect to Securities means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (a) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (b) Securities, or portions thereof, for whose payment, redemption or purchase money in the necessary - 11- amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities and the Trustee or such Paying Agent is not prohibited from paying such money to the Holders on that date pursuant to the terms of Article Thirteen of this Indenture; provided that, if such Securities 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; (c) Securities, except to the extent provided in Sections 1402 and 1403, with respect to which the Company has effected defeasance or covenant defeasance as provided in Article Fourteen; and (d) Securities in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands the Securities are valid obligations of the Company; provided, however, that, in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, notice, direction, consent or waiver hereunder, Securities owned by the Company, or any other obligor upon the Securities or any Affiliate of the Company, or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, notice, direction, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor. "Pari Passu Indebtedness" means any Indebtedness of the Company that is pari passu in right of payment to the Securities. "Paying Agent" means any Person authorized by the Company to pay the principal of (or premium, if any) or interest on any Securities on behalf of the Company. - 12 - "Permitted Holders" means ML Funds, the Management Investors and the Equitable Investors, provided that the Equitable Investors shall not be a Permitted Holder if they are a member of a "group" (as such term is used in Section 13(d) of the Exchange Act) in respect of the Company which does not include the Management Investors and the ML Funds. "Permitted Indebtedness" means any of the following Indebtedness of the Company or any Subsidiary, as the case may be: (i) Indebtedness under the Bank Credit Agreement in an aggregate principal amount at any one time outstanding not to exceed $575,000,000; (ii) Indebtedness under the Securities in an aggregate principal amount at any one time outstanding not to exceed $197,567,000; (iii) Indebtedness outstanding on the date hereof and listed on Schedule I hereto; (iv) Indebtedness under the Senior Subordinated Notes, the Subordinated Debentures and the Deferred Coupon Notes; (v) obligations pursuant to interest rate hedge contracts; (vi) (A) Indebtedness under Capital Lease Obligations and (B) Purchase Money Mortgages; (vii) Indebtedness in respect of trade letters of credit and standby letters of credit incurred in the ordinary course of business; (viii) Indebtedness of the Company or any Subsidiary to any one or the other of them; provided that the obligation of the obligor of such Indebtedness is subject to the Intercompany Agreement; (ix) Indebtedness of any Subsidiary made in accordance with the applicable provisions of Section 1014 or Section 1015; (x) Indebtedness consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets; (xi) any obligation or liability in respect of leasehold interests assigned by the Company or any Subsidiary to any other Person; - 13- (xii) Indebtedness under the Holdings Intercompany Notes; (xiii) Indebtedness represented by letters of credit not exceeding an aggregate amount of $45,000,000 at any one time outstanding (other than those permitted by clause (vii) above); (xiv) Indebtedness incurred to finance Consolidated Capital Expenditures (including Acquired Indebtedness to the extent that, in conformity with GAAP, assets acquired in conjunction with such Acquired Indebtedness are included in the property, plant or equipment reflected on the consolidated balance sheet of the Company and its Subsidiaries); (xv) Indebtedness in addition to that described in clauses (i) through (xiv) of this definition of "Permitted Indebtedness", and any renewals, extensions, substitutions, refinancings or replacements of such Indebtedness, not to exceed $75,000,000 outstanding at any one time in the aggregate; and (xvi) any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") of any Indebtedness described in clauses (ii), (iii), (iv) and (xiv)), including any successive refinancings so long as the aggregate amount of Indebtedness represented thereby is in a principal amount that does not exceed the principal amount so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing; provided that for purposes of this clause, the principal amount of any Indebtedness shall be deemed to mean the principal amount thereof or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination and such refinancing does not reduce the Average Life to Stated Maturity or the final Stated Maturity of such Indebtedness. "Permitted Investment" means any of the following: (i) any Investment in any Majority-owned Subsidiary by the Company or any other Majority-owned Subsidiary, any Investment in any Person by the Company or any Majority-owned Subsidiary as a result of which such Person becomes a Majority-owned Subsidiary or any Investment in the Company by any Majority-owned Subsidiary; (ii) any Temporary Cash Investment; (iii) intercompany - 14- Indebtedness to the extent permitted under clause (viii) of the definition of "Permitted Indebtedness" contained in this Section 101; (iv) Investments in existence on the date hereof and any Investment with respect to which the Company or any Subsidiary is legally committed to make, but only if such commitment was in existence on the date hereof in each case, other than any Investment in any Unrestricted Subsidiary; (v) sales of goods on trade credit terms consistent with the Company's past practices or as otherwise consistent with trade credit terms in common use in the industry; (vi) Investments pursuant to the Logistical Services Agreement or Spin-Off Agreements; (vii) any Investment in any Person acquired or retained in connection with any asset sale or other disposition of assets; (viii) loans or advances to employees made in the ordinary course of business; and (ix) in addition to "Permitted Investments" described in the foregoing clauses (i) through (viii), Investments in the aggregate amount of $45,000,000 at any one time outstanding. "Permitted Payment" has the meaning specified in Section 1008. "Permitted Senior Subordinated Indebtedness" means (i) the Senior Subordinated Notes, (ii) in addition to (i), other Indebtedness of the Company in an aggregate principal amount not to exceed $200,000,000 at any one time outstanding and (iii) any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this definition, a "refinancing") of any Indebtedness described in the foregoing clause (i), including any successive refinancings, so long as the aggregate amount of Indebtedness represented thereby in a principal amount that does not exceed the principal amount so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing; provided that for purposes of this clause, the principal amount of any Indebtedness shall be deemed to mean the principal amount thereof or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination. "Person" means any individual, corporation, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. - 15- "Plainbridge" means Plainbridge, Inc., a corporation incorporated under the laws of the State of Delaware, and any successor thereto. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for a mutilated Security or in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Security. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's preferred or preference stock whether now outstanding or issued after the date hereof, and includes, without limitation, all classes and series of preferred or preference stock. "Purchase Money Mortgages" means Indebtedness of the Company or any Subsidiary (i) issued to finance or refinance the purchase or construction of any assets of the Company or any Subsidiary or (ii) secured by a Lien on any assets of the Company or any Subsidiary where the lender's sole recourse is to the assets so encumbered, in either case (a) to the extent the purchase or construction prices for such assets are or should be included in "addition to property, plant or equipment" in accordance with GAAP and (b) if the purchase or construction of such assets is not part of any acquisition of a Person or business unit. "Qualified Capital Stock" of any Person means any and all Capital Stock of such Person other than Redeemable Capital Stock. "Recapitalization" means the Recapitalization described in the Amended and Restated Prospectus and Consent Solicitation, as amended or supplemented, relating to the issuance of the Securities. "Redeemable Capital Stock" means any Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or otherwise, is or upon the happening of an event or passage of time would be required to be redeemed prior to the final Stated Maturity of the Securities or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity. - 16- "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date means the June 1 or December 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Representative" means the indenture trustee or other trustee, agent or representative for an issue of Senior Indebtedness. "Responsible Officer", when used with respect to the Trustee, means any officer assigned to the Corporate Trust Administration of the Trustee or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers or assigned by the Trustee to administer corporate trust matters at its Corporate Trust Office and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Payments" has the meaning specified in Section 1008. "Security" and "Securities" have the meaning set forth in the second paragraph of this Indenture. "Senior Indebtedness" means the principal of, premium, if any, and interest on (such interest on Senior Indebtedness, wherever referred to in this Indenture, being deemed to include interest accruing after the filing of a petition initiating any proceeding pursuant to any bankruptcy law in accordance with and at the rate (including any rate applicable upon any default or event of default, to the extent lawful) specified in any document evidencing the Senior Indebtedness, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such bankruptcy law) any Indebtedness of the Company (other than as otherwise provided in this definition), whether outstanding on the date hereof or thereafter created, incurred or assumed in accordance with the provisions of this Indenture, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly - 17- provides that such Indebtedness shall not be senior in right of payment to the Securities. Without limiting the generality of the foregoing, "Senior Indebtedness" shall include the principal of, premium, if any, and interest on (including interest accruing after the occurrence of an event of default) all obligations of every nature of the Company from time to time owed under Permitted Senior Subordinated Indebtedness and under the Bank Credit Agreement, including, without limitation, principal of and interest on, and all fees, expenses, indemnities, payments for early termination of Interest Rate Hedge Arrangements and reimbursement obligations under letters of credit payable under the Bank Credit Agreement. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) Indebtedness evidenced by the Securities, the Subordinated Debentures and the Deferred Coupon Notes, (ii) Indebtedness that is subordinate or junior in right of payment to any Indebtedness of the Company (other than Permitted Senior Subordinated Indebtedness), except for subordination as a result of intercreditor arrangements with respect to collateral, (iii) Indebtedness that when incurred, and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company, (iv) Indebtedness that is represented by Redeemable Capital Stock, (v) Indebtedness of the Company to a subsidiary of the Company or any other Affiliate of the Company or any of such Affiliate's subsidiaries, including the Holdings Intercompany Notes and (vi) that portion of any Indebtedness (other than any Indebtedness provided by any lender pursuant to the Bank Credit Agreement, except to the extent such Indebtedness is provided with actual knowledge on the part of any such lender that the incurrence thereof by the Company is a violation of this Indenture) which at the time of issuance is issued in violation of this Indenture. "Senior Subordinated Notes" means the Company's 11 5/8% Senior Subordinated Notes due 2003 in aggregate principal amount not in excess of $440,000,000. "SMG-II" means SMG-II Holdings Corporation, a Delaware corporation, and any successor thereto. "Special Record Date" means a date fixed by the Trustee for the payment of any Defaulted Interest pursuant to Section 307. "Specified Senior Indebtedness" means (i) all Senior Indebtedness under the Bank Credit Agreement, (ii) all Senior - 18- Indebtedness under the Senior Subordinated Notes and (iii) any other issue of Senior Indebtedness or refinancings thereof permitted by said definition having a principal amount of at least $100,000,000 and is specifically designated in the instrument evidencing such Senior Indebtedness as "Specified Senior Indebtedness" by the Company. For purposes of this definition: (a) the amount of the Indebtedness of the Company with respect to any Interest Rate Hedge Arrangement shall be deemed to be the lesser of (x) 25% of the notional amount of such Interest Rate Hedge Arrangement, or (y) the maximum amount the Company could be required to pay under such Interest Rate Hedge Arrangement; and (b) a refinancing of any such Indebtedness shall be treated as such only if it ranks or would rank pari passu with the Indebtedness refinanced. "Spin-Off Agreements" means (i) the Distribution and Transfer Agreement dated as of May 3, 1993 among the Company, Holdings and Chefmark; (ii) the Distribution and Transfer Agreement dated as of October 26, 1993 among the Company, Newco and Plainbridge; (iii) the Blair Services Agreement dated as of October 26, 1993 between the Company and Plainbridge; (iv) the Rickel Services Agreement dated as of October 26, 1993 between the Company and Plainbridge; (v) the Chefmark Services Agreement dated as of May 3, 1993 between the Company and Chefmark; (vi) the Tax Sharing Agreement; (vii) the Chefmark Supply Agreement dated May 3, 1993 between the Company and Chefmark; and (viii) leases between the Company as lessee and Plainbridge as lessor entered into on the date of this Indenture, in each case as amended or modified in accordance with the provisions hereof. "Spin-Off" means the contribution by the Company to Plainbridge of the Rickel home center business, the warehouse, distribution and transportation operations and the inventory therein that service the Pathmark supermarkets and drug stores and certain other assets and the distribution of the shares of Plainbridge to Newco. "Stated Maturity", when used with respect to any Indebtedness or any installment of interest thereon, means the date specified in such Indebtedness as the fixed date on which the principal of such Indebtedness or such installment of interest is due and payable. "Subordinated Debentures" means the 12-5/8% Subordinated Debentures due 2002 of the Company in aggregate principal amount not in excess of the aggregate principal amount outstanding on the date hereof. - 19- "Subordinated Indebtedness" means Indebtedness of the Company subordinated in right of payment to the Securities. "Subsidiary" means any Person a majority of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries; provided that an Unrestricted Subsidiary shall not be deemed to be a Subsidiary for purposes of this Indenture. "Tax Sharing Agreement" means the Tax Sharing Agreement dated as of the date of the Spin-Off between the Company and SMG-II, as amended or modified in accordance with the provisions hereof. "Temporary Cash Investment" means (i) any evidence of Indebtedness, maturing not more than 180 days after the date of acquisition, issued by the United States of America, or an instrumentality or agency thereof and guaranteed fully as to principal, premium, if any, and interest by the United States of America, (ii) any certificate of deposit, maturing not more than 180 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution that has combined capital and surplus of not less than $300,000,000, whose debt is rated at the time as of which any investment therein is made, of "A" (or higher) according to Moody's Investors Service, Inc. ("Moody's"), or "A" (or higher) according to Standard & Poor's Corporation ("S&P"), (iii) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Company) organized and existing under the laws of the United States of America, with a rating, at the time as of which any investment therein is made, of "P-2" (or higher) according to Moody's or "A-2" (or higher) according to S&P, (iv) any short-term, tax-exempt investment in indebtedness issued by a municipality existing under the laws of the United States of America with a rating, at the time as of which any investment therein is made, of "A" (or higher) according to Moody's or "A" (or higher) according to S&P, and (v) any money market deposit accounts issued or offered by any domestic commercial bank having capital and surplus in excess of $300,000,000. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, and as in force at the date as of which this instrument was executed, except as provided in Section 905. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument, until a successor Trustee shall have become such pursuant to the applicable - 20- provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Unrestricted Subsidiary" means (i) any subsidiary of the Company that at the time of determination shall be an Unrestricted Subsidiary (as designated by the Board of Directors of the Company, as provided below) and (ii) any subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company may designate any subsidiary of the Company (including any newly acquired or newly formed subsidiary) to be an Unrestricted Subsidiary if all of the following conditions apply: (a) such subsidiary is not liable, directly or indirectly, with respect to any Indebtedness other than Unrestricted Subsidiary Indebtedness and (b) any Investment in such subsidiary made as a result of designating such subsidiary an Unrestricted Subsidiary shall not violate the provisions of Section 1017. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complies with the foregoing conditions. The Board of Directors of the Company may designate any Unrestricted Subsidiary as a Subsidiary; provided that immediately after giving effect to such designation, the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the restrictions of Section 1007. "Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary means Indebtedness of such Unrestricted Subsidiary (i) as to which neither the Company nor any Subsidiary is directly or indirectly liable (by virtue of the Company or any such Subsidiary being the primary obligor on, guarantor of, or otherwise liable in any respect to, such Indebtedness), except Guaranteed Debt of the Company or any Subsidiary to any Affiliate, in which case (unless the incurrence of such Guaranteed Debt resulted in a Restricted Payment at the time of incurrence) the Company shall be deemed to have made a Restricted Payment (as defined in Section 1008) equal to the principal amount of any such Indebtedness to the extent guaranteed at the time such Affiliate is designated an Unrestricted Subsidiary and (ii) which, upon the occurrence of a default with respect thereto, does not result in, or permit any holder of any Indebtedness of the Company or any Subsidiary to declare, a default on such Indebtedness of the Company or any Subsidiary or cause the payment thereof to be accelerated or payable prior to its Stated Maturity. "Voting Stock" means stock of the class or classes pursuant to which the holders thereof have the general voting - 21- power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). Section 102. Other Definitions. Defined in Term Section "Act"............................................. 105 "Change in Control Notice" ....................... 1012 "Change in Control Offer" ........................ 1012 "Change in Control Purchase Date" ................ 1012 "Change in Control Purchase Notice" .............. 1012 "Change in Control Purchase Price" ............... 10l2 "covenant defeasance" ............................ 1403 "Defaulted Interest" ............................. 307 "defeasance" ..................................... l402 "incorporated provision" ......................... 108 "Notice of Default" .............................. 501 "Security Register" .............................. 305 "Security Registrar" ............................. 305 "Surviving Entity" ............................... 801 "U.S. Government Obligations" .................... 1404 Section 103. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion (other than the certificates required by Section 1018(a)) with respect to compliance with a condition or covenant provided for in this Indenture shall include: - 22- (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 104. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of a officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, - 23- statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 105. 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 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 of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Trust Indenture Act Section 315) 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 Securities shall be proved by the Security Register. (d) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of such Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding Trust Indenture Act Section 316(c), any such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not more than 30 days prior to the first solicitation of Holders generally in connection therewith and no later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Securities then - 24- Outstanding have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for this purpose the Securities then Outstanding shall be computed as of such record date; provided that no such request, demand, authorization, direction, notice, consent, waiver or other Act by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act by the Holder of any Security shall bind every future Holder of the same Security or the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, suffered or omitted to be done by the Trustee, any Paying Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Security. Section 106. Notices, etc., to Trustee and Company. 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, any Representative or the Company shall be sufficient for every purpose hereunder if made, given, furnished or delivered, in writing, to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration; or (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or delivered in writing or mailed, first-class postage prepaid, to the Company addressed to it c/o Pathmark Stores, Inc., 301 Blair Road, Woodbridge, New Jersey 07095, Attention: President, or at ay other address furnished in writing to the Trustee by the Company. The Company shall provide the Trustee in writing with the name and address of the agent bank under the Bank Credit Agreement as of the effective date of this Indenture and shall promptly provide the Trustee in writing with any change in such information. Section 107. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless - 25- otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later that 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 108. Conflict of any Provision of Indenture with Trust Indenture Act. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 318, inclusive, of the Trust Indenture Act, or conflicts with any provision (an "incorporated provision") required by or deemed to be included in this Indenture by operation of such Trust Indenture Act Sections, such imposed duties or incorporated provision shall control. 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 109. 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. - 26- Section 110. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its respective successors and assigns, whether so expressed or not. Section 111. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 112. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person (other than the parties hereto and their successors hereunder, any Paying Agent, the Holders and the holders of Senior Indebtedness) any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 113. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the conflicts of laws principles thereof. Section 114. Legal Holidays. In any case where any Interest Payment Date, any date established for payment of Defaulted Interest pursuant to Section 307, or any Maturity with respect to any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, or date established for payment of Defaulted Interest pursuant to Section 307, or Maturity, and no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date, or date established for payment of Defaulted Interest pursuant to Section 307, or Maturity, as the case may be, to the next succeeding Business Day. Section 115. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations - 27- of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting any of the Securities waives and releases all such liability. ARTICLE TWO SECURITY FORMS Section 201. Forms Generally. The Securities and the Trustee's certificate of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. Any portion of the text of any Security may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Security. The definitive Securities shall be printed, 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 Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Section 202. Form of Face of Security. The form of the face of the Securities shall be substantially as follows: PATHMARK STORES, INC. ll-5/8% Subordinated Note due 2002 No. $ Pathmark Stores, Inc., a Delaware corporation (herein called the "Company", which term includes any successor entity under the Indenture hereinafter referred to), for value received, hereby promises to pay to or registered assigns, the principal sum of Dollars on June 15, 2002, at the office or agency of the Company referred to below, - 28- and to pay interest thereon on December 15, 1993 and semiannually thereafter on June 15 and December 15 in each year and at Stated Maturity, from June 15, 1993 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 11-5/8% per annum, until the principal hereof is paid or duly provided for. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the June 1 or December 1 (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 Securities, 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 Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities 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 Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address shall appear on the Security Register. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse - 29- hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: PATHMARK STORES, INC. By Attest: By [SEAL] Authorized Signature Section 203. Form of Reverse of Security. The form of the reverse of the Securities shall be substantially as follows: This Security is one of a duly authorized issue of securities of the Company designated as its 11-5/8% Subordinated Notes due 2002 (herein called the "Securities"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $ , which may be issued under an indenture (herein called the "Indenture") dated as of , 1993, between the Company and Wilmington Trust Company, 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 and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. The Securities are subject to redemption otherwise than through the operation of the sinking fund (as described below) upon not less than 21 nor more than 60 days' notice, in amounts of $1,000 or an integral multiple of $1,000, at any time on or after June 15, 1997, as a whole or in part, at the election of the Company, at a Redemption Price equal to the percentage of the principal amount set forth below if redeemed - 30- during the 12-month period beginning June 15 of the years indicated below: Year Redemption Price 1997 105.8125% 1998 103.8750% 1999 101.9375% and thereafter at 100% of the principal amount, together in the case of any such redemption with accrued interest, if any, to the Redemption Date (subject to the right of Holders of record on relevant Regular Record Dates to receive interest due on a Interest Payment Date), all as provided in the Indenture. In the event that a Change in Control occurs, each Holder shall have the right to require that the Company repurchase such Holder's Securities in whole or in part in integral multiples of $1,000 at a purchase price in cash in an amount equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. Within 30 days following a Change in Control, the Company covenants to either (i) repay in full all Indebtedness under the Bank Credit Agreement and permanently reduce the commitments of the lenders thereunder or offer to repay in full all such Indebtedness and permanently reduce such commitments and repay the Indebtedness and permanently reduce the commitment of each lender that accepted such offer or (ii) obtain the requisite consent under the Bank Credit Agreement to permit the repurchase of the Securities. The Securities are also subject to redemption on June 15 in each of the years 2000 and 2001 through the operation of a sinking fund, at a Redemption Price equal to 100% of the principal amount, together with accrued and unpaid interest, if any, to the Redemption Date, all as provided in the Indenture. The Company may, at its option, receive a credit against the sinking fund obligation equal to the aggregate principal amount of Securities acquired by the Company and surrendered to the Trustee for cancellation and of Securities redeemed or called for redemption otherwise than through operation of the sinking fund that have not previously been so credited for such purpose by the Trustee. In the case of any redemption of Securities, interest installments whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Date referred to on the face hereof. Securities (or portions thereof) for whose - 31- redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. If an Event of Default shall occur and be continuing, the principal of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Security and (b) certain restrictive covenants and the related Defaults and Events of Default, upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Security. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security 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 Security. The indebtedness evidenced by the Securities is subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full of all Senior Indebtedness of the Company whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by his acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on his behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the - 32- Trustee his attorney-in-fact for such purpose; provided that the indebtedness evidenced by this Security shall cease to be so subordinate and subject in right of payment upon any defeasance of this Security as provided in the Indenture. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place, and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable on the Security Register of the Company, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for such purpose in The City of New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities 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 Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any registration of transfer or exchange or redemption of Securities, but the Company may require payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charges payable in connection with any registration of transfer or exchange. Prior to the time of due presentment of this Security 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 Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any agent shall be affected by notice to the contrary. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. - 33- Customary abbreviations may be used in the name of a Holder or a assignee, such as: TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to Minors Act). I/We assign and transfer this Security to Insert assignee's soc. sec. or tax ID no. ........ (Print or type assignee's name, address and zip code) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: Signed: (Sign exactly as your name appears on the other side of this Security.) Signature Guaranteed: (Signature must be guaranteed by a member firm of a principal stock exchange or a commercial bank or trust company.) Section 204. Form of Trustee's Certificate of Authentication. TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities referred to in the within-mentioned Indenture. WILMINGTON TRUST COMPANY as Trustee By Authorized Signatory - 34- ARTICLE THREE THE SECURITIES Section 301. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $ , except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 303, 304, 305, 306, 906, 1012 or 1108. The Securities shall be known and designated as the "11-5/8% Subordinated Notes due 2002" of the Company. Their Stated Maturity shall be June 15, 2002, and they shall bear interest at the rate of 11-5/8% per annum from June 15, 1993 or the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable on December 15, 1993 and semi-annually thereafter on June 15 and December 15 in each year and at said Stated Maturity, until the principal thereof is paid or duly provided for. Subject to Article Thirteen, interest on any overdue amount of principal, interest (to the extent lawful) or premium, if any, shall be payable on demand. The principal of (and premium, if any) and interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose; provided, however, that, at the option of the Company, interest may be paid by check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Security Register. The Securities shall be redeemable as provided in Article Eleven. The Securities shall be entitled to the benefits, and shall be redeemable through the operation, of the sinking fund as provided in Article Twelve. The Indebtedness evidenced by the Securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article Thirteen. Section 302. Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. - 35- Section 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by any two of the following: its Chairman, one of its Vice Chairmen, its President or one of its Vice Presidents, under its corporate seal reproduced thereon and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices on the date of such Securities. The Trustee shall (upon Company Order) authenticate and deliver Securities for original issue in an aggregate principal amount of up to $197,567,000. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as provided in this Indenture and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of one of its duly authorized signatories, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. In case the Company, pursuant to Article Eight, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of substantially all of its properties and assets to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company shall have been merged, or the successor Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed an indenture supplemental hereto - 36- with the Trustee pursuant to Article Eight, any of the Securities authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Securities executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Securities surrendered for such exchange and of like principal amount; and the Trustee, upon Company Order of the successor Person, shall authenticate and deliver Securities as specified in such request for the purpose of such exchange. If Securities shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section in exchange or substitution for or upon registration of transfer of any Securities, such successor Person, at the option of any Holder but without expense to such Holder, shall provide for the exchange of all Securities at the time Outstanding held by such Holder for Securities authenticated and delivered in such new name. Section 304. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. - 37- Section 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee (and any other office or agency so designated) is hereby initially appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at the office or agency of the Company designated pursuant to Section 1002 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denomination or denominations and of a like aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denomination or denominations of a like aggregate principal amount upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer, or for exchange or redemption, shall (if so required by the Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange or redemption of Securities, but the Company may require payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other - 38- governmental charges that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 303, 304, 306, 906, l0l2 or 1108 not involving any transfer. The Company shall not be required (a) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business (i) 15 days before the mailing of a notice of redemption of the Securities selected for redemption under Section 1104 or l203 and ending at the close of business on the day of such mailing or (ii) 15 days before an Interest Payment Date and ending on the close of business on the Interest Payment Date, or (b) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of Securities being redeemed in part. Section 306. Mutilated, Destroyed, Lost and Stolen Securities. If (a) any mutilated Security is surrendered to the Trustee, or (b) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them and any agent of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a replacement Security of like tenor and principal amount, and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a replacement Security, pay such Security. Upon the issuance of any replacement Securities under this Section, the Company may require the payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charges that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every replacement Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute a contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at anytime enforceable by anyone and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. - 39- The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 307. Payment of Interest; Interest Rights Preserved. Interest on any Security 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 Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security 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 applicable interest rate borne by the Securities, to the extent lawful (such defaulted interest (and such interest thereon) herein collectively called "Defaulted Interest"), shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder; and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Subsection (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) 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 Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Subsection provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the - 40- Company 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 his address as it appears in the Security 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 Securities (or their respective Predecessor Securities) are registered at the close of business 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 Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Subsection, such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 308. Persons Deemed Owners. Prior to 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 whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 307) interest on such Security and for all other purposes whatsoever, whether or not such Security 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 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment pursuant to Section l202 shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company shall deliver to the Trustee for cancellation any - 41- Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order. Section 310. Computation of Interest. Interest on the Securities shall be computed on the basis of a year of twelve 30-day months. ARTICLE FOUR SATISFACTION AND DISCHARGE Section 401. Satisfaction and Discharge of Indenture. This Indenture shall, upon Company Request, cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Securities herein expressly provided for) and the Trustee, on demand of and at the expense of the Company shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (1) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities 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 1003) have been delivered to the Trustee for cancellation; or (2) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the - 42- Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (2)(i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount in cash in U.S. Dollars or U.S. Government Obligations sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that (i) all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with and (ii) 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 is a party or by which it is bound. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 606 and, if money shall have been deposited with the Trustee pursuant to subclause (2) of Subsection (a) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section l003 shall survive. Section 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee. Money so held in trust shall not be subject to the provisions of Article Thirteen of this Indenture. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 401 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's - 43- obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 401; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE FIVE REMEDIES Section 501. Events of Default. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether or not it shall be occasioned or prohibited by the provisions of Article Thirteen or be voluntary or involuntary or be effected by the operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administration or governmental body): (a) default in the payment of any interest on any Security when such interest becomes due and payable and continuance of such default for a period of 30 days; or (b) default in the payment of the principal of (or premium, if any, on) any Security at its Maturity; or (c) default in the deposit of any sinking fund payment, when and as due by the terms of Article Twelve hereof or the Securities; or (d) default in the performance, or breach, of any covenant or agreement of the Company hereunder (other than a default in the performance, or breach, of a covenant or agreement that is specifically dealt with elsewhere in this Section), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default or breach and stating that such notice is a "Notice of Default" hereunder; or (e)(i) an event of default shall have occurred under any mortgage, bond, indenture, loan agreement or other document evidencing any issue of Indebtedness of the - 44- Company or any Material Subsidiary for money borrowed, which issue has an aggregate outstanding principal amount of not less than $50,000,000, and such default shall result in such Indebtedness becoming, whether by declaration or otherwise, due and payable prior to the date on which it would otherwise become due and payable or (ii) a default in any payment when due at final maturity of any such Indebtedness; or (f) final judgments or orders not covered by insurance or a bond rendered against the Company or any Material Subsidiary which require the payment in money, either individually or in an aggregate amount, that is more than $30,000,000 and such judgment or order shall remain unsatisfied or unstayed for 60 days; or (g) the entry of a decree or order by a court having jurisdiction in the premises (i) for relief in respect of the Company or any Material Subsidiary in an involuntary case or proceeding under the Federal Bankruptcy Code or any other federal or state bankruptcy, insolvency, reorganization or similar law or (ii) adjudging the Company or any Material Subsidiary a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or any Material Subsidiary under the Federal Bankruptcy Code or any other applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or any Material Subsidiary or of any substantial part of any of their properties, or ordering the winding up or liquidation of any of their affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (h) the institution by the Company or any Material Subsidiary of a voluntary case or proceeding under the Federal Bankruptcy Code or any other applicable federal or state law or any other case or proceedings to be adjudicated a bankrupt or insolvent, or the consent by the Company or any Material Subsidiary to the entry of a decree or order for relief in respect of the Company or any Material Subsidiary in any involuntary case or proceeding under the Federal Bankruptcy Code or any other applicable federal or state law or to the institution of bankruptcy or insolvency proceedings against the Company or any Material Subsidiary, or the filing by the Company or any Material Subsidiary of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other applicable federal or state law, or the consent by it to the filing of any such petition or to the - 45- appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of any of the Company or any Material Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due or taking of corporate action by the Company or any Material Subsidiary in furtherance of any such action; or (i) default in the performance or breach of any of the provisions of Article Eight. Section 502. Acceleration of Maturity; Rescission. If an Event of Default (other than an Event of Default specified in Section 50l(g) or 501(h)) occurs and is continuing, the Trustee or the Holders of at least 25% of the principal amount of the Securities then Outstanding may, and the Trustee at the request of such Holders shall, declare all unpaid principal of, premium, if any, and accrued interest on all the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders); provided that so long as the Bank Credit Agreement shall be in force and effect, if any such Event of Default shall have occurred and be continuing, any such acceleration shall not be effective until the earlier of (a) five Business Days following a notice of acceleration given to the Company and the agent bank under the Bank Credit Agreement and only if upon such fifth Business Day such Event of Default shall be continuing or (b) the acceleration of any Indebtedness under the Bank Credit Agreement. If an Event of Default specified in Section 501(g) or 501(h) occurs and is continuing, the amounts described above shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. 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 at least a majority in aggregate principal amount of the Securities outstanding, by written notice to the Company and the Trustee, may annul 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 Securities, (iii) the principal of and premium, if any, on any Securities which have become due otherwise than by such - 46- declaration of acceleration and interest thereon at the rate borne by the Securities, and (iv) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Securities; and (b) all Events of Default, other than the non-payment of principal of the Securities which have become due solely by the declaration of acceleration, have been waived as provided in Section 513 or cured. No such rescission shall affect any subsequent default or impair any right consequent thereon. Notwithstanding the preceding paragraph, in the event of a declaration of acceleration in respect of the Securities, because an Event of Default specified in Section 501(e) shall have occurred and be continuing, such declaration of acceleration shall be automatically annulled if the Indebtedness that is the subject of such Event of Default has been discharged or the holders thereof have rescinded their declaration of acceleration in respect of such Indebtedness, and, if such Indebtedness is not Senior Indebtedness, such rescission has been made without any payment or other transfer or grant, or any promise or other undertaking to pay or otherwise transfer or grant, any tangible or intangible property or right to such holders in connection with such rescission, and written notice of such discharge or rescission, as the case may be, shall have been given to the Trustee by the Company and by the holders of such Indebtedness or a trustee, fiduciary or agent for such holders, within 60 days after such declaration of acceleration in respect of the Securities, and (x) no other Event of Default has occurred during such 60-day period, and (y) no Default arising from such discharge has occurred during such 60-day period, which, in either case, has not been cured or waived during such period. Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (a) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest, with interest upon the overdue principal (and premium, if any) and, to the extent that payment - 47- of such interest shall be legally enforceable, upon overdue installments of interest, at the rate borne by the Securities; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders under this Indenture by such appropriate private or judicial proceedings as the Trustee shall deem most effectual to protect and enforce such rights. Section 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; provided that in the event that proof of such claim and such other papers or documents have not been so filed by the thirtieth day prior to the final date on which - 48- such claim may be filed, the holders of Specified Senior Indebtedness or their representatives shall be permitted to file such proof of claim and other papers and documents for and on behalf of the Holders of the Securities; 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, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 606. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any proposal, plan of reorganization, arrangement, adjustment or composition or other similar arrangement affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 506. Application of Money Collected. Subject to Article Thirteen, any money, securities or other property collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation - 49- thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 606; SECOND: To the payment of the amounts then due and unpaid upon the Securities for principal (and premium, if any) and interest, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest; and THIRD: The balance, if any, to the Company. Section 507. Limitation on Suits. No Holder of any Securities shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or the Securities, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders - 50- or to enforce any right under this Indenture except in the manner provided in this Indenture and for the equal and ratable benefit of all the Holders. Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 307) interest on such Security on the respective due dates expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, 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 510. Rights and Remedies Cumulative. Except as provided in Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be - 51- exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 512. Control by Holders. The Holders of not less than a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided that (a) such direction shall not be in conflict with any rule of law or with this Indenture or expose the Trustee to personal liability, and (b) subject to the provisions of Trust Indenture Act Section 315, the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 513. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities 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 (or premium, if any) or interest on any Security, 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 Security affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 514. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security 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 - 52- 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 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 Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). Section 515. Waiver of Stay, Extension or Usury Laws. The Company 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, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 516. Unconditional Right of Holders to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any other provision of any Security, the right of any Holder of any Security to receive payment of the principal of, premium, if any, and interest on such Security on or after the respective due dates expressed in such Security, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. ARTICLE SIX THE TRUSTEE Section 601. Notice of Defaults. Within 60 days after the occurrence of any Default, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, notice of - 53- such Default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Security or in the payment of any sinking fund installment, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders; and provided further that, in the case of any default or breach of the character specified in Section 501(d), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. Section 602. Certain Rights of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee need perform only those duties as are specifically set forth in this Indenture and no covenants or obligations shall be implied in this Indenture that are adverse to the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided that the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this subsection (c) does not limit the effect of subsection (b) of this Section 602; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, - 54- unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 512; and (iv) 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, and does believe, that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to this Section 602. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense, including such reasonable advances as may be requested by the Trustee. (f) Subject to the foregoing subsections (a) through (e) of this Section 602: (i) The Trustee may rely and shall be protected in acting or in refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. Any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or a Company Order and any resolution by the board of directors of the Company may be sufficiently evidenced by a Board Resolution. (ii) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. In addition, in determining the Company's compliance with the financial covenants set forth herein, the Trustee may rely on the certificate delivered to the Trustee pursuant to Section 1018(a). - 55- (iii) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (iv) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers. (v) The Trustee may consult with counsel, accountants or other experts and any advice of such counsel, accountants or other experts shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice. Section 603. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, 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 Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility and Qualification on Form T-l supplied to the Company are true and accurate, subject to the qualifications set forth therein. Section 604. Trustee and Agents May Hold Securities; Collections; etc. The Trustee, any Paying Agent, Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities with the same rights it would have if it were not the Trustee, Paying Agent, Security Registrar or such other agent and, subject to Trust Indenture Act Sections 310(b) and 31l, 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 Trustee, Paying Agent, Security Registrar or such other agent. - 56- Section 605. Money Held in Trust. All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust hereunder for the purposes for which they were received and need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. Section 606. Compensation and Reimbursement. The Company covenants and agrees: (a) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee and each of its officers, directors, employees, agents and counsel for, and to hold them harmless against, any loss, liability or expense incurred without negligence or bad faith on their part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation of the Company under this Section 606 to compensate the Trustee and to pay and reimburse the Trustee for such expenses, disbursements and advances shall constitute additional Indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture and shall not be subject to the provisions of Article Thirteen. If, and to the extent that, the Trustee, its counsel, and other agents do not receive compensation for services rendered, reimbursement of their advances, expenses and disbursements, or indemnity, as herein provided, as the result of allowances made in any - 57- reorganization, bankruptcy, receivership, liquidation or other proceeding or by any plan or reorganization or readjustment of obligations of the Company, the Trustee shall be entitled, in priority to the Holders of the Securities, to receive any distributions of any securities, dividends or other disbursements which would otherwise be made to the Holders of the Securities in any such proceeding or proceedings and the Trustee is hereby constituted and appointed, irrevocably, the attorney-in-fact for the Holders of the Securities and each of them to collect and receive, in their name, place and stead, such distributions, dividends or other disbursements, to deduct therefrom the amounts due to the Trustee, its counsel and other agents on account of services rendered, advances, expenses, and disbursements made or incurred, or indemnity, and to pay and distribute the balance, pro rata, to the Holders of the Securities. The Trustee shall have a lien upon any securities or other consideration to which the Holders of the Securities may become entitled pursuant to any such plan or reorganization or readjustment of obligations, or in any such proceeding or proceedings; and the court or judge in any such proceeding or proceedings may determine the terms and conditions under which any such lien shall exist and be enforced. As security for the performance of the obligations of the Company under this Section, the Trustee shall have a claim prior to the Securities upon all money, securities or other property held or collected by the Trustee as such, except funds held in trust for the benefit of Holders of particular Securities, and the Securities are hereby subordinated to such claim. If the Trustee incurs expenses or renders services after an Event of Default specified in Section 501(g) or 501(h) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under the Federal Bankruptcy Code and any other applicable federal or state bankruptcy Law. Section 607. Conflicting Interests. The Trustee shall comply with the provisions of Section 3l0(b) of the Trust Indenture Act. Section 608. 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 Section 310(a)(1) and which shall have a combined capital and surplus of at least $100,000,000 and have its Corporate Trust Office located in The City of New York (or, if its Corporate Trust Office shall not be located in The City of New York, the - 58- Company shall, pursuant to Section 1002, maintain an office or agency in The City of New York where the Securities may be presented or surrendered and notices and demands hereunder may be made or served) to the extent there is such an institution eligible and willing to serve. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of Federal, State, Territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 609. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 610, at which time the retiring Trustee shall be fully discharged from its obligations hereunder. (b) The Trustee may resign at any time by giving written notice thereof to the Company. 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 30 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 Security 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 Securities, delivered to the Trustee and the Company. (d) If at any time: (1) the Trustee shall fail to comply with the provisions of Trust Indenture Act Section 310(b) after - 59- written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 608 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 Security for at least six months, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 514, the Holder of any Security who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with Section 610, 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 Securities and so accepted appointment, the Holder of any Security 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 Securities as their names and addresses appear in the Security Register. - 60- Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Section 610. 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; provided, however, that the retiring Trustee shall continue to be entitled to the benefit of Section 606(c); but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Upon acceptance of appointment by any successor Trustee as provided in this Section 610, the Company shall give notice thereof to the Holders of the Securities, by mailing such notice to such Holders at their addresses as they shall appear on the Security Register. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 609. If the Company fails to give such notice within 10 days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Company. Section 611. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor - 61- of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 612. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor under the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 701. Disclosure of Names and Addresses of Holders. Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee or any agent of either of them shall be held accountable by reason of the disclosure of any information as to the names and addresses of the Holders in accordance with Trust Indenture Act Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Trust Indenture Act Section 312. Section 702. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Securities, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, as provided in Trust Indenture Act Section 313(c), a brief report dated as of such May l5 if required by Trust Indenture Act Section 313(a). - 62- Section 703. Reports by Company. The Company shall: (a) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section l3 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of such Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (b) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (c) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, in the manner and to the extent provided in Trust Indenture Act Section 313(c), such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 801. Company May Consolidate, etc., Only on Certain Terms. The Company shall not consolidate or merge with or into any other Person, or sell, assign, transfer, lease, convey - 63- or otherwise dispose of all or substantially all of its properties and assets (as an entirety or substantially as an entirety in one transaction or series of related transactions) to any Person or permit any of its Subsidiaries to enter into any such transaction or transactions if such transaction or transactions, in the aggregate, would result in a transfer of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis to any Person unless, at the time and after giving effect thereto: (i) either (a) the Company shall be the continuing corporation, or (b) the Person (if other than the Company) formed by such consolidation, or into which the Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or disposition the properties and assets of the Company, substantially as an entirety (the "Surviving Entity") shall be a corporation duly organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and the Surviving Entity shall, in either case, expressly assume by supplemental indenture hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture and this Indenture shall remain in full force and effect; (ii) immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction on a pro forma basis, the Consolidated Fixed Charge Coverage Ratio of the Company (or the Surviving Entity if the Company is not the continuing obligor under this Indenture), for the Company's four most recently completed full fiscal quarters is at least 1.75 to 1.0; and (iv) the Company has delivered or caused to be delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, lease or transfer and such supplemental indenture, if one is required by this Section 801, comply with this Section 801 and that all conditions precedent herein provided for relating to such transaction have been complied with. Section 802. Successor Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease or conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 801, the successor Person formed by - 64- such consolidation or into which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein. In the event of any transaction (other than a lease) described in and complying with the conditions listed in Section 8.01 in which the Company is not the continuing corporation, the successor Person formed or remaining shall succeed to, and be substituted for, and may exercise every right and power, of the Company and the Company would be discharged from all obligations and covenants under this Indenture and the Securities. ARTICLE NINE SUPPLEMENTAL INDENTURES Section 901. Supplemental Indentures without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; (b) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein or in the Securities conferred upon the Company; (c) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture; provided that, in each case, such provisions shall not adversely affect the interests of the Holders; (d) to secure the Securities pursuant to the requirements of Section 801 or Section 1010 or otherwise; (e) to provide for the guarantee of payment of the Securities by any Subsidiary pursuant to the requirements of Section 1014 or Section 1015; - 65- (f) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act, as contemplated by Section 905 or otherwise; (g) to evidence and provide the acceptance of the appointment of a successor Trustee hereunder; or (h) to make any other change that does not adversely affect the rights of any Holder. Section 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by Act of such Holders delivered to the Company and the Trustee, each when authorized by a Board Resolution, and the Trustee may enter into one or more indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of waiving or modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture, amendment or waiver shall, without the consent of the Holder of each Outstanding Security affected thereby: (a) change the Stated Maturity of the principal of, or any installment of interest on, any Security or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which the principal of any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date) or modify the obligation of the Company to make and consummate a Change in Control Offer or modify any of the provisions or definitions with respect thereto; or (b) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; or (c) modify any of the provisions of this Section or Section 513 or Section 1019, except to increase any such percentage or to provide that certain other provisions of - 66- this Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby; or (d) modify any of the provisions of Article Thirteen hereof in a manner adverse to the Holders of the Securities; or (e) except as otherwise permitted under Article Eight, consent to the assignment or transfer by the Company of any of its rights and obligations under this Indenture. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Trust Indenture Act Section 315(a) through 315(d) and Section 602 hereof) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 906. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this - 67- Article may, and shall if required by the Company, bear a notation in form approved by the Company as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Company, to any such supplemental indenture may be prepared and executed by the Company and shall be authenticated and delivered by the Trustee in exchange for Outstanding Securities. Section 907. Effect on Senior Indebtedness. No supplemental indenture shall adversely affect the rights of any holders of Senior Indebtedness under Article Thirteen unless the requisite holders of each issue of Senior Indebtedness affected thereby shall have consented to such supplemental indenture. ARTICLE TEN COVENANTS Section 1001. Payment of Principal, Premium and Interest. The Company will duly and punctually pay the principal of (and premium, if any) and interest on the Securities in accordance with the terms of the Securities and this Indenture. Section 1002. Maintenance of Office or Agency. The Company will maintain, in The City of New York, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. If the Corporate Trust Office is located in New York City, then it shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. - 68- The Company may from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Securities 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 recission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or recission and any change in the location of any such office or agency. Section 1003. Money for Security Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for the Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any Securities, deposit with a Paying Agent a sum in same day funds (or New York Clearing House funds if such deposit is made prior to the date on which such deposit is required to be made) sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the - 69- making of any payment of principal (and premium, if any) or interest; (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 respects with the provisions of this Indenture relating to the duties, rights and obligations 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 shall 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 (and premium, if any) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 1004. Corporate Existence. Subject to Article Eight, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and that of each Material Subsidiary of the Company and the corporate rights - 70- (charter and statutory), corporate licenses and corporate franchises of the Company and its Material Subsidiaries, except where a failure to do so, singly or in the aggregate, is not likely to have a materially adverse effect upon the business, assets, financial conditions or results of operations of the Company and the Material Subsidiaries taken as a whole determined on a consolidated basis in accordance with generally accepted accounting principles; provided that the Company shall not be required to preserve any such existence (except of the Company), right, licenses or franchise if the Board of Directors of the Company, or of the Material Subsidiary concerned, shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company or such Material Subsidiary and that the loss thereof is not disadvantageous in any material respect to the Holders. Section 1005. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon it or any Subsidiary or upon the income, profits or property of the Company or any of its Subsidiaries and (b) all material lawful claims for labor, materials and supplies, which, if unpaid, might by law become a lien upon the property of the Company or any of its Subsidiaries that could produce a material adverse effect on the consolidated financial condition of the Company; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and in respect of which appropriate reserves (in the good faith judgment of management of the Company) are being maintained in accordance with GAAP. Section 1006. Maintenance of Properties. The Company shall cause all material properties owned by or leased to it or any Material Subsidiary of the Company and necessary in the conduct of its business or the business of such Material Subsidiary to be maintained and kept in normal condition, repair and working order, ordinary wear and tear excepted; provided that nothing in this Section shall prevent the Company or any Material Subsidiary of the Company from discontinuing the use, operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Board of Directors of the Company or the Material Subsidiary concerned, or of any officer (or other agent employed by the Company or any Material Subsidiary of the Company) of the Company or such Material Subsidiary having managerial responsibility for any such - 71- property, desirable in the conduct of the business of the Company or any Material Subsidiary of the Company and if such discontinuance or disposal is not adverse in any material respect to the Securityholders. The Company shall provide or cause to be provided, for itself and any Material Subsidiaries of the Company, insurance (including appropriate self-insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like properties in the same general areas in which the Company or such Material Subsidiaries operate. Section 1007. Limitation on Indebtedness. The Company will not, and will not permit any of its Subsidiaries to, create, incur, assume, or directly or indirectly guarantee or in any other manner become directly or indirectly liable for the payment of, any Indebtedness (including any Acquired Indebtedness, but excluding Permitted Indebtedness) unless, at the time of such event and after giving effect thereto on a pro forma basis, the Company's Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding such event, taken as one period and calculated on the assumption that such Indebtedness had been incurred on the first day of such four-quarter period and on the assumption that, in connection with the incurrence of any such Indebtedness, any related acquisition (whether by means of purchase, merger or otherwise) and any related repayment of Indebtedness also had occurred on such date with the appropriate adjustments with respect to such acquisition and repayment being included in such pro forma calculation, would have been at least equal to 1.75 to 1.0. Section 1008. Limitation on Restricted Payments. (a) The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, (i) declare or pay any dividend on, or make any distribution to holders of, any shares of the Company's Capital Stock (other than dividends or distributions payable in shares of its Qualified Capital Stock or in options, warrants or other rights to purchase such Qualified Capital Stock), (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any Affiliate thereof (other than Capital Stock of (x) any Subsidiary held by the Company or any of its Majority-owned Subsidiaries and (y) any Majority-owned - 72- Subsidiary of the Company) or any options, warrants or other rights to acquire such Capital Stock, (iii) make any principal payment on or redeem, repurchase, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, scheduled sinking fund payment or maturity, any Indebtedness of the Company which is pari passu with or expressly subordinate in right of payment to the Securities, (iv) declare or pay any dividend or distribution on any Capital Stock of any Subsidiary to any Person (other than the Company or any of its Majority-owned Subsidiaries) or purchase, redeem or otherwise acquire or retire for value any Capital Stock of any Subsidiary held by any Person (other than the Company or any of its Majority-owned Subsidiaries), or (v) incur, create or assume any guarantee of Indebtedness of any Affiliate of the Company (other than a Majority-owned Subsidiary of the Company) or make any Investment (other than any Permitted Investment) in any Person, including any Unrestricted Subsidiary (such payments or other actions described in the foregoing clauses (i) through (v), other than any such action that is a Permitted Payment, are collectively referred to as "Restricted Payments"), unless at the time of and after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution), (1) no Default or Event of Default shall have occurred and be continuing and (2) the aggregate amount of all Restricted Payments (plus Permitted Payments set forth in Sections 1008(b)(vi), (xi) and (xiii)) declared or made after the date hereof (including Investments in Unrestricted Subsidiaries pursuant to the provisions of Section 1017) shall not exceed the sum of: (A) 50% of the aggregate cumulative Consolidated Adjusted Net Income of the Company accrued on a cumulative basis during the period beginning on October 31, 1993 and ending on the last day of the Company's last fiscal quarter ending prior to the date of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Adjusted Net Income shall be a loss, minus 100% of such loss), plus - 73- (B) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, whose determination shall be conclusive), received after the date hereof by the Company as capital contributions to the Company, plus (C) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, whose determination shall be conclusive), received after the date hereof by the Company from the issuance or sale (other than to any of its Subsidiaries) of shares of Qualified Capital Stock of the Company or warrants, options or rights to purchase shares (other than issuances permitted by clause (v) of the definition of Permitted Payments contained in Section l008(b)) of Qualified Capital Stock of the Company, plus (D) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, whose determination shall be conclusive), received by the Company (other than from any of its Subsidiaries) upon the exercise of options, warrants or rights to purchase shares of Qualified Capital Stock of the Company, plus (E) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, whose determination shall be conclusive), received after the date hereof by the Company from the issue or sale of debt securities that have been converted into or exchanged for Qualified Capital Stock of the Company, together with the aggregate cash received by the Company at the time of such conversion or exchange. (b) Section 1008(a) to the contrary notwithstanding, the Company and its Subsidiaries may take the following actions (clauses (i) through (xiii) being referred to as "Permitted Payments") so long as, in the case of clauses (vi), (ix), (xi) and (xiii), no Default or Event of Default has occurred and is continuing: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such declaration date such declaration complied with the provisions of Section 1008(a) (in which event such - 74- dividend shall be deemed to have been paid on such date of declaration thereof for purposes of Section 1008(a)); (ii) the repurchase, redemption or other acquisition or retirement of any shares of any class of Capital Stock of the Company or any Affiliate 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 (other than to a Subsidiary) of shares of Qualified Capital Stock of the Company; (iii) payments by the Company to SMG-II pursuant to the Tax Sharing Agreement; (iv) dividends or distributions in an aggregate amount not to exceed the amount of dividends or distributions paid to the Company or its Subsidiaries by Unrestricted Subsidiaries since the date of this Indenture; (v) the redemption, defeasance, repurchase or acquisition or retirement for value (each, for purposes of this clause, a "refinancing") of any Indebtedness of the Company (other than Redeemable Capital Stock) which is pari passu with or expressly subordinate in right of payment to the Securities through the issuance of (A) new Indebtedness of the Company or (B) shares of Qualified Capital Stock of the Company or Newco, provided that, with respect to clause (A), any such new Indebtedness (1) has a principal amount that does not exceed the principal amount so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing; provided that for purposes of this clause, the principal amount of any Indebtedness shall be deemed to mean the principal amount thereof or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination, (2) has an Average Life to Stated Maturity that is equal to or - 75- greater than the remaining Average Life to Stated Maturity of the Securities, (3) has a final Stated Maturity that exceeds the final Stated Maturity of principal of the Securities, and (4) is pari passu with or expressly subordinated in right of payment to the Securities at least to the same extent as the Indebtedness refinanced; (vi) dividends, loans or advances by the Company to Holdings to enable Holdings or Newco to pay cash dividends on the Holdings Preferred Stock; provided that on the date of payment of such dividend, the Company, after giving pro forma effect to such dividend, loan or advance, would be able to incur $1.00 of additional Indebtedness under the provisions of Section 1007 (other than Permitted Indebtedness), assuming a market rate of interest on such Indebtedness; (vii) the redemption, repurchase, defeasance or acquisition or retirement for value of any Pari Passu Indebtedness (other than the Subordinated Debentures); provided that the Company shall redeem, pursuant to the optional redemption provisions in Article Eleven and the Securities, the principal amount of Securities bearing the same proportion to the aggregate amount of such Pari Passu Indebtedness being redeemed, repurchased, defeased or acquired or retired for value that the aggregate outstanding principal amount of the Securities bears to the aggregate outstanding principal amount of such Pari Passu Indebtedness (without giving effect to such redemption, repurchase, defeasance, acquisition or retirement); (viii) the declaration or payment of any dividend or distribution on any Capital Stock of any Subsidiary, or the purchase, redemption, acquisition or retirement for value of any Capital Stock of any Subsidiary; provided that such declaration, payment, purchase, redemption, acquisition or retirement is made pro rata among all holders of such Capital Stock of such Subsidiary; (ix) payments or other actions described in clauses (i) through (v) of Section 1008(a) that would otherwise be Restricted Payments in an aggregate amount not to exceed $35,000,000; (x) the dividend or distribution of the Capital stock of Plainbridge to Newco; (xi) the repurchase of any Indebtedness of the Company which is pari passu with or expressly - 76- subordinate in right of payment to the Securities at a purchase price not greater than 101% of the principal amount of such Indebtedness in the event of a Change in Control (as defined in this Indenture) pursuant to a provision similar to Section 1012; provided that prior to such repurchase the Company has made the Change in Control Offer as provided in Section 1012 and has repurchased all Securities validly tendered for payment in connection with such Change in Control Offer; (xii) the redemption, repurchase, defeasance or acquisition or retirement for value of the Subordinated Debentures, provided that, in the case of a redemption, repurchase, defeasance or acquisition or retirement for value with the proceeds of other Indebtedness, the applicable provisions of clause (v) above are complied with; and (xiii) the redemption, repurchase, defeasance or acquisition or retirement for value of the Holdings Intercompany Notes remaining outstanding following the Recapitalization (other than a scheduled principal payment, scheduled sinking fund payment or at maturity). Except as provided in this Section 1008(b) and Section 1008(a)(2), nothing in this Section 1008 limits or restricts the making of any Permitted Payment and a Permitted Payment will not be treated as a Restricted Payment. (c) In computing Consolidated Adjusted Net Income of the Company under clause (A) of Section 1008(a), (l) the Company shall use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (2) the Company shall be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment which, at the time of the making of such Restricted Payment would in the good faith determination of the Company be permitted under the applicable provisions of this Section 1008, such Restricted Payment shall be deemed to have been made in compliance with such provisions notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Adjusted Net Income of the Company for any period. Section 1009. Limitation on Transactions with Affiliates. (a) The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of - 77- assets, property or services) with any Affiliate of the Company (other than a wholly owned Subsidiary thereof) unless (i) such transaction or series of transactions is or are on terms that are no less favorable to the Company or such Subsidiary, as the case may be, than those that could have been obtained at the time of such transaction or transactions in a comparable transaction in arm's-length dealings with an unaffiliated third party and (ii) (A) with respect to any transaction or series of transactions involving aggregate payments in excess of $1,000,000, but less than $10,000,000, the Company delivers an Officers' Certificate to the Trustee certifying that such transaction or transactions complies with clause (i) above and (B) with respect to a transaction or series of transactions, involving aggregate payments equal to or greater than $10,000,000, (1) such transaction or transactions shall have received the approval of a majority of the disinterested directors of the Board of Directors of the Company if Plainbridge is a party to such transaction or series of transactions or (2) if Plainbridge is not a party to such transaction or series of transactions, such transactions or series of transactions shall have received either the approval of a majority of the disinterested directors of the Board of Directors of the Company or the Company shall deliver to the Trustee a written opinion of a nationally recognized investment banking firm stating that such transaction is fair to the Company from a financial point of view; provided, however, that the foregoing restriction shall not apply to (1) the payment of fees to Merrill Lynch Capital Partners, Inc. or Merrill Lynch, Pierce, Fenner & Smith Incorporated or any of their Affiliates for consulting, investment banking or financial advisory services rendered by such Person to the Company or any Subsidiary of the Company, (2) the payment of reasonable and customary regular fees to directors of the Company, Newco, SMG-II, Holdings or any of their respective subsidiaries or parents who are not employees of any of such Persons, (3) the Logistical Services Agreement and transactions pursuant thereto and (4) the Spin-Off Agreements and transactions pursuant thereto. For purposes of this Section 1009(a), any transaction or series of related transactions between the Company or any Subsidiary and any Affiliate of the Company that is approved as being on the terms required by clause (i) above by a majority of the disinterested directors of the Board of Directors of the Company shall be deemed to be on terms as favorable as those that might be obtained at the time of such transaction or series of transactions in a comparable transaction in arm's-length dealings with an unaffiliated third party, and thus shall be permitted under this Section 1009(a). (b) The Company will not, and will not permit any of its Subsidiaries to, amend, modify, or in any way alter the terms of the Intercompany Agreement, the Logistical Services Agreement or the Spin-Off Agreements in a manner materially - 78- adverse to the Company, other than (i) by adding new Subsidiaries and (ii) in the case of the Logistical Services Agreement and the Spin-Off Agreements, any amendments or modifications that are approved by a majority of the disinterested directors of the Board of Directors of the Company. Section 1010. Limitation on Liens. The Company will not, and will not permit any Subsidiary to, create, incur, affirm or suffer to exist any Lien of any kind securing any Pari Passu Indebtedness or Subordinated Indebtedness (including any assumption, guarantee or other liability with respect thereto by any Subsidiary) upon any property or assets (including any intercompany notes) of the Company or any Subsidiary owned on the date hereof or acquired after the date hereof, or any income or profits therefrom, unless the Securities are directly secured equally and ratably with (or prior to in the case of Subordinated Indebtedness) the obligation or liability secured by such Lien, and except for any Lien securing Acquired Indebtedness created prior to the incurrence of such Indebtedness by the Company or any Subsidiary, provided that any such Lien only extends to the assets that were subject to such Lien securing such Acquired Indebtedness prior to the related acquisition by the Company or its Subsidiaries. Section 1011. Limitation on Other Senior Subordinated Indebtedness. The Company will not create, incur, assume, guarantee or in any other manner become liable with respect to any Indebtedness (other than Permitted Senior Subordinated Indebtedness) that is subordinate in right of payment to any Senior Indebtedness unless such Indebtedness is also pari passu with, or subordinate in right of payment to, the Securities, pursuant to subordination provisions substantially similar to those contained in Article Thirteen. Section l0l2. Purchase of Securities Upon Change in Control. (a) If there shall have occurred a Change in Control, Securities shall be purchased by the Company, at the option of the Holder thereof, in whole or in part in integral multiples of $1,000, on a date which shall be a Business Day that is not earlier than 45 days nor later than 60 days from the date the Change in Control Notice referred to below is given to Holders or such later date as may be necessary for the Company to comply with requirements under the Exchange Act (such date, or such later date, being the "Change in Control Purchase Date"), at a purchase price in cash (the "Change in Control Purchase - 79- Price") in an amount equal to 101% of the principal amount of such Securities, plus accrued and unpaid interest (including any Defaulted Interest), if any, to the Change in Control Purchase Date, subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 1012(c). (b) Within 30 days following a Change in Control and prior to the mailing of the Change in Control Notice to Holders provided for in paragraph (c) below, the Company covenants to either (1) repay in full all Indebtedness under the Bank Credit Agreement and permanently reduce the commitments of the lenders thereunder or offer to repay in full all such Indebtedness and permanently reduce such commitments and repay the Indebtedness and permanently reduce the commitment of each lender who has accepted such offer or (2) obtain the requisite consent under the Bank Credit Agreement to permit the repurchase of the Securities as provided for in this Section 1012. The Company shall first comply with this subsection (b) before it shall be required to repurchase the Securities pursuant to this Section 1012, and any failure to comply with this subsection (b) shall constitute a default of a covenant for purposes of Section 501(d). (c) Within 30 days after the occurrence of a Change in Control, the Company shall give written notice of such Change in Control (a "Change in Control Notice") and of its offer (the "Change in Control Offer") to purchase Securities as specified herein to the Trustee, and to each Holder of the Securities at his address appearing on the Security Register, by first-class mail, postage prepaid. The Trustee shall be under no obligation to ascertain the occurrence of a Change in Control. The Change in Control Notice shall contain all instructions and materials necessary to enable such Holders to tender Securities, shall include a form of Change in Control Purchase Notice to be completed by the Holder and shall state: (i) (A) the events causing the Change in Control and the date such Change in Control is deemed to have occurred for purposes of this Section 1012, and (B) a description of any material developments in the Company's business since the latest annual or quarterly report filed with the Trustee pursuant to Section 1018(c) or 1018(d) and, if material, any appropriate pro forma financial information; (ii) the date by which a Holder must give a Change in Control Purchase Notice; (iii) the Change in Control Purchase Price; - 80- (iv) the Change in Control Purchase Date; (v) that any Security not purchased will continue to accrue interest; (vi) that Securities to be purchased shall, on the Change in Control Purchase Date, become due and payable at the Change in Control Purchase Price and from and after such date (unless the Company shall default in the payment of the Change in Control Purchase Price) such Securities shall cease to bear interest; and (vii) the procedures a holder must follow to exercise rights under this Section 1012 and a brief description of those rights and the procedures for withdrawing a Change in Control Purchase Notice. (d) A Holder may exercise its rights specified in Section 1012(a) upon (i) delivery to any Paying Agent a written notice (a "Change in Control Purchase Notice") at any time on or prior to one Business Day before the Change in Control Purchase Date, stating (A) the certificate number of the Security that the Holder will deliver to be purchased and (B) the portion of the principal amount of the Security that the holder will deliver to be purchased, which portion must be $1,000 or an integral multiple thereof and (ii) delivery of such Security to such Paying Agent at such office prior to, on or after the Change in Control Purchase Date (together with all necessary endorsements), such delivery being a condition to receipt by the Holder of the Change in Control Purchase Price therefor. If a Holder has elected to deliver to the Company for purchase a portion of a Security, and if the principal amount of such portion is $1,000 or an integral multiple of $1,000, the Company shall purchase such portion from the Holder thereof pursuant to this Section 1012. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of a portion of such Security. Each Paying Agent shall promptly notify the Company of the receipt by the former of any and all Change in Control Purchase Notices and any and all written notices of withdrawal thereof. (e) Upon receipt by any Paying Agent of a Change in Control Purchase Notice, the Holder of the Security in respect of which such Change in Control Purchase Notice was given shall (unless such Change in Control Purchase Notice is withdrawn pursuant to Section 1012(j)) thereafter be entitled to receive solely the Change in Control Purchase Price with respect to such Security. Such Change in Control Purchase Price shall be paid to such Holder promptly following the later of the Business Day following the Change in Control Purchase Date - 81- (provided the conditions in Section 1012(d) have been satisfied) and the time of delivery of such Security to the relevant Paying Agent at the office of such Paying Agent by the Holder thereof in the manner required by Section 1012(d). (f) On or prior to the Change in Control Purchase Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in same day funds (or New York Clearing House funds if such deposit is made prior to the Change in Control Purchase Date) sufficient to pay the Change in Control Purchase Price of, and (except if the Change in Control Purchase Date shall be an Interest Payment Date) accrued interest on, all the Securities or portions thereof which are to be purchased on that date. (g) Upon a Change in Control Purchase Notice having been given as aforesaid, Securities to be purchased shall, on the Change in Control Purchase Date, become due and payable at the Change in Control Purchase Price and from and after such date (unless the Company shall default in the payment of the Change in Control Purchase Price) such Securities shall cease to bear interest. Upon surrender of any such Security for purchase in accordance with the foregoing provisions, such Security shall be paid by the Company at the Change in Control Purchase Price; provided, however, that installments of interest whose Stated Maturity is on or prior to the Change in Control Purchase Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 307. If any Security tendered for purchase shall not be so paid upon surrender thereof, the principal thereof (and premium, if any, thereon) shall, until paid, bear interest from the Change in Control Purchase Date at the rate borne by such Security. (h) Any Security that is to be purchased only in part shall be surrendered to a Paying Agent at the office of such Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, one or more new Securities of any authorized denomination as requested by such Holder in an aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Security so surrendered that is not purchased. - 82- (i) The Company shall comply with the applicable tender offer rules, including Rule l4e-l under the Exchange Act, in connection with a Change in Control Offer. (j) A Change in Control Purchase Notice may be withdrawn before or after delivery by the Holder to the relevant Paying Agent at the office of such Paying Agent of the Security to which such Change in Control Purchase Notice relates, by means of a written notice of withdrawal (by facsimile transmission or letter) received by such Paying Agent at such office not later than one Business Day prior to the Change in Control Purchase Date, specifying, as applicable: (i) the certificate number of the Security in respect of which such notice of withdrawal is being submitted; (ii) the principal amount of the Security with respect to which such notice of withdrawal is being submitted; and (iii) the principal amount, if any, of the Security that remains subject to the original Change in Control Purchase Notice and that has been or will be delivered for purchase by the Company. A written notice of withdrawal may be in the form set forth in the preceding paragraph. Each Paying Agent will promptly return to the prospective Holders thereof any Securities with respect to which a Change in Control Purchase Notice has been withdrawn in compliance with this Indenture. Section 1013. Restrictions on Preferred Stock of Subsidiaries. The Company will not permit any of its Subsidiaries to issue any Preferred Stock (other than to the Company or a Majority-owned Subsidiary of the Company), or permit any Person (other than the Company or a Majority-owned Subsidiary of the Company) to own or hold an interest in any Preferred Stock of any such Subsidiary, previously held by the Company or a Majority-owned Subsidiary of the Company unless such Subsidiary would be entitled to incur Indebtedness in accordance with the provisions of Section 1007 in the aggregate principal amount equal to the aggregate liquidation value of such Preferred Stock assuming a market rate of interest (as determined by the Company) for such Preferred Stock as of the date of issuance or transfer. Section 1014. Limitations on Issuances of Guarantees of Indebtedness. The Company will not permit any Subsidiary, directly or indirectly, to guarantee, assume or in any other manner become liable with respect to any Pari Passu Indebtedness or - 83- Subordinated Indebtedness, unless such Subsidiary simultaneously executes and delivers a supplemental indenture hereto providing for a guarantee of the Securities; provided that, in the case of a Subsidiary's guarantee, assumption or other liability with respect to Subordinated Indebtedness, such guarantee, assumption or other liability shall be subordinated to such Subsidiary's guarantee of the Securities to the same extent as such Subordinated Indebtedness is subordinated to the Securities; and provided further that this Section 1014 shall not be applicable to any guarantee, assumption or other liability of any Subsidiary of the Company that (i) existed at the time such Person became a Subsidiary of the Company and (ii) was not incurred in connection with, or in contemplation of, such Person becoming a Subsidiary of the Company. Any such guarantee of the Securities by a Subsidiary shall provide by its terms that it shall be automatically and unconditionally released and discharged upon either (A) the release or discharge of such guarantee of such Pari Passu Indebtedness or Subordinated Indebtedness, as the case may be, except a discharge by or as a result of payment under such guarantee or (B) any sale, exchange or transfer, to any Person not an Affiliate of the Company, of all the Company's stock in, or all or substantially all the assets of, such Subsidiary, which sale, exchange or transfer is made in compliance with the applicable provisions of this Indenture. Section 1015. Restriction on Transfer of Assets. The Company will not sell, convey, transfer or otherwise dispose of its assets or property to any of its Subsidiaries, except for (i) sales, conveyances, transfers or other dispositions of assets or property acquired by the Company after the date hereof; (ii) sales, conveyances, transfers or other dispositions of Existing Assets (a) made in the ordinary course of business; (b) made outside the ordinary course of business with a net book value that, when aggregated with all other such transfers by the Company since the date of this Indenture, less the net book value of Existing Assets transferred to the Company from its Subsidiaries, would not exceed 25% of the Consolidated Assets of the Company; or (c) to any Subsidiary if such Subsidiary simultaneously with such transfer executes and delivers a supplemental indenture hereto providing for the guarantee of payment of the Securities by such Subsidiary, which guarantee shall be subordinated to any guarantee of such Subsidiary of Senior Indebtedness of the Company and shall be subordinated to any other Indebtedness of such Subsidiary (which is not subordinated to any other Indebtedness of such Subsidiary or which is designated by such Subsidiary as being senior in right of payment to such guarantee), in each case to the same extent as the Securities are subordinated to the Senior Indebtedness of the Company - 84- under this Indenture and (iii) sales, conveyances, transfers or other dispositions of Existing Assets made pursuant to the Spin-Off. Notwithstanding the foregoing, any such guarantee of a Subsidiary of the Securities shall provide by its terms that it shall be automatically and unconditionally released and discharged (i) on the date that the net book value of the Existing Assets held by the Company is greater than 75% of Consolidated Assets or (ii) upon any sale, exchange or transfer to any Person not an Affiliate of the Company of all of the Company's stock in, or all or substantially all the assets of, such Subsidiary, which sale, exchange or transfer is made in compliance with the terms of this Indenture. Section 1016. Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not permit any Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind, on the ability of any Subsidiary to (a) pay dividends or make any other distribution on its Capital Stock, (b) pay any Indebtedness owed to the Company or any Subsidiary, (c) make loans or advances to the Company or any Subsidiary, or (d) transfer any of its property or assets to the Company or any Subsidiary, except (i) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the date hereof; (ii) any encumbrance or restriction, with respect to a Subsidiary that is not a Subsidiary of the Company on the date hereof, in existence at the time such Person becomes a Subsidiary of the Company or created on the date it becomes a Subsidiary; (iii) any encumbrance or restriction on the ability of any Subsidiary whose assets consist substantially only of fee or leasehold interests in real property and improvements thereon to transfer any such interests which are acquired after the date hereof or any unimproved real property acquired on or prior to the date hereof to the Company or any Subsidiary, which encumbrance or restriction is required by a lender to, or purchaser of any indebtedness of, such Subsidiary in connection with a financing or refinancing permitted hereunder; and (iv) any encumbrance or restriction pursuant to any agreement that extends, refinances, renews or replaces any agreement containing any of the restrictions described in the foregoing clauses (i)-(iii), provided that the terms and conditions of any such restrictions are not materially less favorable to the Holders of the Securities than those under or pursuant to the agreement extended, refinanced, renewed or replaced. Section 1017. Limitation on Unrestricted Subsidiaries. The Company will not make, and will not permit any of its Subsidiaries to make, any Investments in Unrestricted - 85- Subsidiaries if, at the time thereof, the aggregate amount of such Investments would exceed the amount of Restricted Payments then permitted to be made pursuant to Section 1008. Any Investments in Unrestricted Subsidiaries permitted to be made pursuant to this Section 1017 (i) will be treated as the payment of a Restricted Payment in calculating the amount of Restricted Payments made by the Company and (ii) may be made in cash or property. Section 1018. Statement as to Compliance; Notice of Default; Provision of Financial Statements. (a) The Company will deliver to the Trustee, within 120 days after the end of each fiscal year ending after the date hereof, a brief certificate of its principal executive officer, principal financial officer or principal accounting officer stating whether, to such officer's knowledge, the Company is in compliance with all covenants and conditions to be complied with by it under this Indenture. For purposes of this Section 1018, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. (b) If a Default has occurred and is continuing, or if the Trustee, any Holder or the trustee for or the holder of any other evidence of Indebtedness of the Company (other than Indebtedness in the aggregate principal amount of less than $50,000,000) gives any notice or takes any other action with respect to a claimed Default, the Company shall deliver to the Trustee an Officers' Certificate specifying such Default, notice or other action within 5 Business Days of its occurrence. (c) The Company shall supply without cost to each Holder of the Securities, and file with the Trustee within l5 days after the Company is required to file the same with the Commission, copies of the annual reports and quarterly reports and of the information, documents and other reports which the Company may be required to file with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act. (d) If the Company is not required to file with the Commission such reports and other information referred to in Section 1018(c), the Company shall furnish without cost to each Holder of the Securities and file with the Trustee (i) within 105 days after the end of each fiscal year, annual reports containing the information required to be contained in Items 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12 and 13 of Form 10-K promulgated under the Exchange Act, or substantially the same information required to be contained in comparable items of any successor form, (ii) within 60 days after the end of each of the first three fiscal quarters of each fiscal year, quarterly reports - 86- containing the information required to be contained in Form 10-Q promulgated under the Exchange Act, or substantially the same information required to be contained in any successor form and (iii) promptly from the time after the occurrence of an event required to be therein reported, such other reports containing information required to be contained in Form 8-K promulgated under the Exchange Act, or substantially the same information required to be contained in any successor form. The Company shall also make such reports available to prospective purchasers of the Securities, securities analysts and broker-dealers upon their request. Section 1019. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any covenant or condition set forth in Sections 1007 through 1018 (other than Section 1012) if, before or after the time for such compliance, the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding shall, by Act of such Holders, waive such compliance in such instance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. ARTICLE ELEVEN REDEMPTION OF SECURITIES Section 1101. Right of Redemption. The Securities may be redeemed, otherwise than through the operation of the sinking fund provided for in Article Twelve, at the election of the Company at any time, as a whole or in part subject to the conditions and at the Redemption Prices specified in the form of Security, together with accrued interest to the Redemption Date. Section 1102. Applicability of Article. Redemption of Securities at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. Section 1103. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 1101 shall be evidenced by a Board - 87- Resolution. In case of any redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by it (unless a shorter notice period shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed. Section 1104. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed, the particular Securities or portions thereof to be redeemed shall be selected not more than 60 days and not less than 30 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, either pro rata, by lot or, by any other method the Trustee shall deem fair and reasonable, and the amounts to be redeemed may be equal to $1,000 or any integral multiple thereof. The Trustee shall promptly notify the Company and the Security Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. Section 1105. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 21 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (a) the Redemption Date; (b) the Redemption Price; (c) if less than all Outstanding Securities are to be redeemed, the identification (and, in the case of a - 88- Security to be redeemed in part, the principal amount) of the particular Securities to be redeemed; (d) that on the Redemption Date the Redemption Price will become due and payable upon each such Security or portion thereof, and that (unless the Company shall default in payment of the Redemption Price) interest thereon shall cease to accrue on and after said date; (e) the place or places where such Securities are to be surrendered for payment of the Redemption Price; (f) if applicable, that such redemption is for the sinking fund provided in Article Twelve; (g) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (h) the CUSIP number, if any, relating to such Securities; and (i) in the case of a Security to be redeemed in part, the principal amount of such Security to be redeemed and that after the Redemption Date upon surrender of such Security, new Security or Securities in the aggregate principal amount equal to the unredeemed portion thereof will be issued. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at its request, by the Trustee in the name and at the expense of the Company. Section 1106. Deposit of Redemption Price. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in same day funds (or New York Clearing House funds if such deposit is made prior to the applicable Redemption Date) sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities or portions thereof which are to be redeemed on that date. Section 1107. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, - 89- become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal thereof (and premium, if any, thereon) shall, until paid, bear interest from the Redemption Date at the rate borne by such Security. Section 1108. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 1002 (with, if the Company, the Security Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company, the Security Registrar or the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE TWELVE SINKING FUND Section 1201. Mandatory Sinking Fund Payments. As a mandatory sinking fund for the retirement of the Securities, the Company will, until all of the Securities shall have been paid, or payment thereof duly provided for, pay to the Trustee, on or prior to June 15, 2000 and on or prior to June 15, 2001, an amount in same day funds (or New York Clearing House funds if such payment is made prior to the applicable June 15) sufficient to redeem 25% of original aggregate principal - 90- amount of Securities at the Redemption Price specified in the form of Security hereinbefore set forth. The cash amount of any sinking fund payment is subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities on such June 15 as herein provided. Section 1202. Satisfaction of Sinking Fund Payments with Securities. The Company (a) may deliver Outstanding Securities (other than any previously called for redemption pursuant to this Article Twelve) theretofore purchased or otherwise acquired by the Company and (b) may apply as a credit Securities which have been redeemed at the election of the Company pursuant to Section 1101, in each case in satisfaction of all or any part of any sinking fund payment required to be made pursuant to Section 1201; provided that such Securities have not been previously so credited. Each such Security shall be received and credited for such purpose by the Trustee at the Redemption Price specified in the form of Security set forth in Article Two for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. Section 1203. Redemption of Securities for Sinking Fund. On or before April l5, 2000 and April 15, 2001, the Company will deliver to the Trustee an Officers' Certificate specifying the portion of the mandatory sinking fund payment in Section 1201, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering or crediting Securities pursuant to Section l202 and will also deliver, if not previously delivered, to the Trustee any Securities to be so delivered. Such certificate shall be irrevocable and upon its delivery the Company shall be obligated to make the cash payment or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. In the case of the failure of the Company to deliver such certificate, the sinking fund payment due on the next succeeding sinking fund payment date for the Securities shall be paid entirely in cash and shall be sufficient to redeem the principal amount of such Securities subject to a mandatory sinking fund payment without the option to deliver or credit Securities as provided in Section 1202. Before May 1 in each such year the Trustee shall select the Securities to be redeemed upon the next ensuing June 15 in the manner specified in Section 1104 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1105. Such notice having been duly given, the redemption of such Securities shall be made - 91- upon the terms and in the manner stated in Sections 1107 and 1108. ARTICLE THIRTEEN SUBORDINATION OF SECURITIES Section 1301. Securities Subordinate to Senior Indebtedness. The Company covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the indebtedness represented by the Securities and the payment of the principal of and premium, if any, and interest on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full, in cash or cash equivalents, of all Senior Indebtedness (including any interest accruing after the occurrence of an Event of Default under Section 501(g) or (h)). This Article Thirteen shall constitute a continuing offer to all persons who become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness, and such holders are made obligees hereunder and any one or more of them may enforce such provisions. Holders of Senior Indebtedness need not prove reliance on the subordination provisions hereof. Section 1302. Payment Over of Proceeds Upon Dissolution, etc. In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its creditors, as such, or to its assets, or (b) any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Company, then and in any such event: (1) the holders of all Senior Indebtedness shall be entitled to receive payment in full, in cash or cash equivalents, of all amounts due or to become due on or in respect of all Senior Indebtedness, or provision shall be made for such payment in cash or cash equivalents, before the Holders of the Securities are entitled to receive any payment on account of - 92- principal of (or premium, if any) or interest on the Securities; and (2) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the provisions of this Article Thirteen, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities (except, so long as the effect of this parenthetical clause is not to cause the Securities to be treated in any case or proceeding or similar event described in Subsection (a), (b) or (c) of this Section 1302 as part of the same class of claims as the Senior Indebtedness or any class of claims on a parity with or senior to the Senior Indebtedness, for any such payment or distribution (x) authorized by an order or decree giving effect, and stating in such order or decree that effect is given, to the subordination of the Securities to the Senior Indebtedness, and made by a court of competent jurisdiction in a reorganization proceeding under any applicable bankruptcy law, or (y) of securities that (A) are unsecured (except to the extent the Securities are secured), (B) have an Average Life to Stated Maturity and final maturity which are no shorter than the Average Life to Stated Maturity of the Securities or any securities issued to the holders of the Senior Indebtedness under the Bank Credit Agreement pursuant to a plan of reorganization or readjustment, (C) are subordinated, to at least the same extent as the Securities, to the payment of all Senior Indebtedness then outstanding and (D) are not guaranteed by any Subsidiary of the Company (except to the extent the Securities are so guaranteed)), shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their Representative or Representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the principal of, and premium, if any, and interest on, and other amounts due or in connection with, the Senior Indebtedness held or represented by each, to the extent necessary to make - 93- payment in full, in cash or cash equivalents, of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (3) in the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any such payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities, before all Senior Indebtedness is paid in full, in cash or cash equivalents, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full, in cash or cash equivalents, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance, transfer or lease of its properties and assets substantially as an entirety to another corporation upon the terms and conditions set forth in Article Eight shall not be deemed a dissolution, winding up, liquidation, reorganization, assignment for the benefit of creditors or marshalling of assets and liabilities of the Company for the purposes of this Section if the corporation formed by such consolidation or into which the Company is merged or the corporation which acquires by conveyance, transfer or lease such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance, transfer or lease, comply with the conditions set forth in Article Eight. Section 1303. No Payment When Specified Senior Indebtedness in Default. (a) (i) In the event of and during the continuation of any default in the payment of principal of (or premium, if any) or interest on any Specified Senior Indebtedness beyond any applicable grace period with respect thereto, or (ii) in the - 94- event that any other event of default with respect to any Specified Senior Indebtedness shall have occurred and be continuing and shall have resulted in such Specified Senior Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, or (b) in the event that any event of default (other than a default described in clause (a)) with respect to any Specified Senior Indebtedness shall have occurred and be continuing permitting the holders of such Specified Senior Indebtedness (or a trustee on behalf of such holders) to declare such Specified Senior Indebtedness due and payable prior to the date on which it would otherwise have become due and payable, then no payment shall be made by the Company on account of the principal of (or premium, if any) or interest on the Securities or on account of the purchase or redemption or other acquisition of Securities (x) in case of any event of default described in subclause (i) of clause (a), or an event of default described in subclause (ii) of clause (a) resulting in an acceleration as specified in clause (a), unless and until such payment event of default shall have been cured or waived or shall have ceased to exist or such acceleration shall have been rescinded or annulled or the holders of such Specified Senior Indebtedness or their agents have waived the benefits of this Section, or (y) in case of any event of default specified in clause (b), from the earlier of the date the Company or the Trustee receives written notice of such event of default (which notice requests that no such payment be made) from the agent with respect to any such event of default under the Bank Credit Agreement or any other Representative of a holder of Specified Senior Indebtedness with respect to any such event of default under such Specified Senior Indebtedness until the earlier of (1) 179 days after such date and (2) the date, if any, on which the Specified Senior Indebtedness to which such event of default relates is discharged or such event of default is waived by the holders of such Specified Senior Indebtedness (including, if any Indebtedness under the Bank Credit Agreement is outstanding, lenders under the Bank Credit Agreement) or otherwise cured (provided that further written notice relating to the same or any other event of default specified in clause (b) above with respect to any Specified Senior Indebtedness received by the Company or the Trustee within 12 months after such receipt shall not be effective for purposes of this clause (y)). In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, then and in such event such payment shall be paid over and delivered forthwith to the Company. - 95- The provisions of this Section shall not apply to any payment with respect to which Section 1302 would be applicable. Section 1304. Payment Permitted if No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent the Company, at any time except during the pendency of any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 1302 or under the conditions described in Section 1303, from making payments at any time of principal of (and premium, if any) or interest on the Securities. Section 1305. Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full, in cash or cash equivalents, of all Senior Indebtedness, the Holders of the Securities shall be subrogated (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated to Senior Indebtedness of the Company to the same extent as the Securities are subordinated and which is entitled to like rights of subrogation) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. Section 1306. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as among the - 96- Company, its creditors other than holders of Senior Indebtedness and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the express limitations set forth in Article Five and to the rights, if any, under this Article of the holders of Senior Indebtedness (1) in any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 1302, to receive, pursuant to and in accordance with such Section, cash, property and securities otherwise payable or deliverable to the Trustee or such Holder, or (2) under the conditions specified in Section 1303, to prevent any payment prohibited by such Section. Section 1307. Trustee to Effectuate Subordination. Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes. Section 1308. No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or - 97- more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any Person liable in any manner for the collection of Senior Indebtedness; and (d) exercise or refrain from exercising any rights against the Company and any other Person. Section 1309. Notice to Trustee. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from the Company or a holder of Senior Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least three Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date. Subject to the provisions of Section 601, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the - 98- extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Section 1310. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 602, and the Holders of the Securities 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 of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. Section 1311. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 606. Section 1312. Article Applicable to Paying Agents. In case at any time 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 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 in addition to or - 99- in place of the Trustee; provided, however, that Section 1311 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. Section 1313. Rescission. The provisions of this Article Thirteen shall continue to be effective or be reinstated, as the case may be, if at any time any payment in respect of any Senior Indebtedness is rescinded or must otherwise be returned by the holder thereof upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment had not been made. Section 1314. Application by Trustee of Assets Deposited With It. Any cash or U.S. Government Obligations deposited in trust with the Trustee pursuant to and in accordance with Section 1401 shall be for the sole benefit of the Holders and shall not be subject to the subordination provisions of this Article Thirteen. ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE Section 1401. Option to Effect Defeasance or Covenant Defeasance. The Company may, at its option by Board Resolution, at any time, with respect to the Securities, elect to have either Section 1402 or Section 1403 be applied to all Outstanding Securities upon compliance with the conditions set forth below in this Article Fourteen. Section 1402. Defeasance and Discharge. Upon the Company's exercise under Section l401 of the option applicable to this Section 1402, the Company shall be deemed to have been discharged from its obligations with respect to all Outstanding Securities 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 Outstanding Securities, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 1405 and the other Sections of this Indenture referred to in (A) and (B) below, and to have - 100 - satisfied all its other obligations under such Securities and this Indenture, including its obligations under the covenants contained in Article Thirteen (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Securities to receive solely from the trust fund described in Section 1404 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any) and interest on such Securities when such payments are due, (B) the Company's obligations with respect to such Securities under Sections 304, 305, 306, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (D) this Article Fourteen. Subject to compliance with this Article Fourteen, the Company may exercise its option under this Section 1402 notwithstanding the prior exercise of its option under Section 1403 with respect to the Securities. Section 1403. Covenant Defeasance. Upon the Company's exercise under Section 1401 of the option applicable to this Section 1403, the Company shall be released from its obligations under the covenants contained in Articles Eight and Thirteen and in Sections 1007 through 1018 with respect to the Outstanding Securities on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Securities shall thereafter be deemed to be not "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder (it being understood that such Securities shall not be deemed Outstanding for financial accounting purposes). For this purpose, such covenant defeasance means that, with respect to the Outstanding Securities, the Company may omit to comply with and shall have no liability in respect of any terms, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a default or an Event of Default under Section 501(d) or Section 501(i), but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. In addition, upon the Company's exercise under Section 1401 of the option applicable to Section 1403, Sections 501(d) through 501(i) (other than Sections 501(g) and (h)) shall not constitute Events of Default. - 101 - Section 1404. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 1402 or Section 1403 to the Outstanding Securities: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 608 who shall agree to comply with the provisions of this Article Fourteen 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 Securities, (A) cash in U.S. Dollars in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, cash in U.S. Dollars in an amount, or (C) a combination thereof, 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, (i) the principal of (and premium, if any) and interest on the Outstanding Securities on the Stated Maturity of such principal or installment of principal (and premium, if any) or interest and (ii) any mandatory sinking fund payments or analogous payments applicable to the Outstanding Securities on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to the Securities. For this purpose, "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (y) 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, and shall also include a depository receipt issued by a bank (as - 102 - defined in Section 3(a)(2) of the Securities Act of 1933, as amended), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt; (2) In the case of an election under Section 1402, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the date 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 Securities will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (3) In the case of an election under Section 1403, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States to the effect that the Holders of the Outstanding Securities will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; (4) No Default or Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit or, insofar as Subsection 501(g) or 501(h) is concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); - 103 - (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 is a party or by which it is bound; (6) In the case of an election under either Section 1402 or 1403, the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit made by the Company pursuant to its election under Section 1402 or 1403 was not made by the Company with the intent of preferring the Holders over other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (7) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel in the United States, each stating that all conditions precedent provided for relating to either the defeasance under Section 1402 or the covenant defeasance under Section 1403 (as the case may be) have been complied with as contemplated by this Section 1404. On and after the date the conditions set forth above are satisfied, the United States dollars or U.S. Government Obligations so deposited shall not be subject to the rights of the holders of Senior Indebtedness pursuant to the provisions of Article Thirteen. Section 1405. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 1405, the "Trustee") pursuant to Section 1404 in respect of the Outstanding Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. Money and U.S. Government Obligations so held in trust are not subject to Article Thirteen. - 104 - The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or U.S. Government Obligations deposited pursuant to Section 1404 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities. Anything in this Article Fourteen 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 1404 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 1404(l)), are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. Section 1406. Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or U.S. Government Obligations in accordance with Section 1402 or 1403, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 1402 or 1403, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1402 or 1403, as the case may be; provided, however, that, if the Company makes any payment of principal of (or premium, if any) or interest on any Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent. * * * * * - 105 - This Indenture may be signed in any number of counterparts with the same effect as if the signatures to each counterpart were upon a single instrument, and all such counterparts together shall be deemed an original of this Indenture. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. PATHMARK STORES, INC. By: /s/ Anthony Cuti Title: President and Chief Financial Officer Attest: /s/ Title: WILMINGTON TRUST COMPANY By: /s/ Donald G. MacKelcan Title: Financial Services Officer Attest: Title: - 106 - STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 26th day of October, 1993, before me personally came Anthony Cuti, to me known, who, being by me duly sworn, did depose and say that s/he resides at Saddle River, New Jersey; that s/he is President of PATHMARK STORES, INC., one of the corporations described in and which executed the above instrument; that s/he knows the corporate seal of such corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed pursuant to authority of the Board of Directors of such corporation; and that s/he signed her/his name thereto pursuant to like authority. (NOTARIAL SEAL) /s/ Linda Corrigan -------------------------- Notary Public - 107 - STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 26th day of October, 1993, before me personally came Donald B. MacKelcan, to me known, who, being duly sworn, did depose and say that s/he resides at Wilmington, Delaware; that s/he is Financial Services Officer of WILMINGTON TRUST COMPANY, one of the corporations described in and which executed the above instrument; that s/he knows the corporate seal of such corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed pursuant to authority of the Board of Directors of such corporation; and that s/he signed her/his name thereto pursuant to like authority. (NOTARIAL SEAL) /s/ Linda Corrigan -------------------------- - 108 - Schedule I PATHMARK STORES, INC. CERTAIN EXISTING INDEBTEDNESS ----------------------------- (000's OMITTED) INDUSTRIAL REVENUE BONDS (See details on page 2) $ 6,375 OTHER DEBT (PRIMARILY MORTGAGES) (See details on page 2) 41,804 ------- $48,179 ======= Holdings Intercompany Note related to the Holdings Subordinated Notes in an aggregate principal amount equal to or less than $3,361,000. Holdings Intercompany Note related to the 13-1/8 Junior Subordinated Discount Debentures due 2003 of Holdings in an aggregate principal amount equal to or less than $1,800,000.
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Schedule I (cont'd) PATHMARK STORES, INC. CERTAIN EXISTING INDEBTEDNESS ----------------------------- INTEREST MATURITY BALANCE INDEBTEDNESS RATE DATE (IN THOUSANDS) ------------------------ -------- -------- -------------- Massachusetts Mutual Life 9.0% 1999 $ 243 Insurance Company 1295 State Street Springfield, MA 01101 Re: Madison Stuart Properties John Hancock Mutual Life 7.0 1994 1,207 Insurnace Company 200 Berkley Street Boston, MA 02117 Re: Bridge Stuart Properties Massachusetts Mutual Life 7.0-9.0 1993-99 480 Insurance Company 1295 State Street Springfield, MA 01101 Re: Pennsylvania Stuart Properties Connecticut General Life 10.2-10.4 1997-99 855 Insurance Company Hartford, CT 06115 Re: Jersey Stuart Properties Prudential Insurance Company 10.5 1998 37,278 of America 10 Rockefeller Center, 15th Fl. New York, NY Re: SGC Mortgaged Properties Delaware Economic Development 10.875 2003 3,000 Authority c/o Philadelphia National Bank P.O. Box 7010 Philadelphia, PA Re: Lancaster Pike IRB Industrial Revenue Bonds 10.6 2003 3,375 c/o Philadelphia National Bank P.O. Box 7918 Philadelphia, PA Re: Schillington IRB Jacqueline Nallitt 11.0 1999 276 1688 Victory Blvd. Staten Island, NY Re: Forrest Ave. Mall Store Mt. Vernon Urban Renewal Agency 8.0 1995 670 9 South First Ave., 9th Fl. Mt. Vernon, NY 10550 Re: Mt. Vernon Development AFCO 5.5 1994 795 900 Lanidex Plaza Parsippany, NJ 07054 Re: Insurance Policy Premium ______ LONG TERM DEBT $48,179 =======
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Schedule I PATHMARK STORES, INC. CERTAIN EXISTING LIENS ---------------------- The Indebtedness listed hereon is secured only by mortgages on the properties listed opposite such Indebtedness. INTEREST MATURITY BALANCE INDEBTEDNESS PROPERTY RATE DATE (IN THOUSANDS) -------------------------- ------------------------- -------- -------- -------------- Massachusetts Mutual Life Pathmark of Hamilton 9.0% 1999 $ 243 Insurance Company 2735 S. Broad Street 1295 State Street Hamilton Township, NJ 08610 Springfield, MA 01101 Re: Madison Stuart Properties John Hancock Mutual Life Pathmark of Inwood 7.0% 1994 362 Insurance Company 410 W. 207th Street 200 Berkley Street New York, NY 10034 Boston, MA 02117 Re: Bridge Stuart Properties Pathmark & Rickel of 511 Edgewater Park 2110 Rt. 130 & Wood Lane Rd. Beverly, NJ 08010 Pathmark of Ivy Hill .344 1331 Ivy Hill Road Springfield Township Philadelphia, PA 19150 Massachusetts Mutual Life Former Pathmark of Whitaker 7.0-9.0 1993-99 394 Insurance Company 5520 Whitaker Avenue 1295 State Street Philadelphia, PA 19124 Springfield, MA 01101 Re: Pennsylvania Stuart Franklin Township Gas Properties 673 Somerset Street Somerset, NJ 08873 Paramus Gas 34 639 Route 17 South Paramus, NJ 07652 Fairless Hills Gas 28 Route 1 and Atlantic Ave. Fairless Hills, PA 19030 Connecticut General Life Pathmark of Belmont 10.2-10.4 1997-99 855 Insurance Company 115 Belmont Avenue Hartford, CT 06115 Belleville, NJ 07109 Re: Jersey Stuart Properties Prudential Insurance Company Pathmark of Upper Darby 10.5 1998 1,710 of America 421 S. 69th Street 10 Rockefeller Center, Upper Darby, PA 19082 15th Fl. New York, NY Re: SGC Mortgaged Properties Pathmark & Rickel of 4,355 Glenolden 140 N. McDade Blvd. Glenolden, PA 19036 Pathmark & Rickel of 3,078 Shillington 243A W. Lancaster Avenue Shillington, PA 19607
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INTEREST MATURITY BALANCE INDEBTEDNESS PROPERTY RATE DATE (IN THOUSANDS) -------------------------- ------------------------- -------- -------- -------------- Prudential Insurance Company Pathmark of Willow Grove 4,450 of America (continued) 2545 Moreland Road Willow Grove, PA 19090 Pathmark of Lancaster Pike 2,018 3901 Lancaster Pike Wilmington, DE 19805 Pathmark & Rickel of East 9,633 Brunswick 50 Race Track Road East Brunswick, NJ 08615 Rickel of Forrest Avenue 3,135 1520 Forrest Avenue Staten Island, NY 10302 Rickel of Johnson City 2,337 540 Harry L. Drive Johnson City, NY 13790 Pathmark Drug of Danbury 10.5 1996 2,200 100 Danbury - Newtown Road Danbury, CT 06810 Purity Supreme Store 3,762 3375 Berlin Turnpike Newington, CT 06111 Jacqueline Nallitt Pathmark of Forrest 11.0 1999 276 1688 Victory Blvd. Avenue Staten Island, NY 1351 Forrest Avenue Re: Forrest Ave. Mall Store Staten Island, NY 10302 Mt. Vernon Urban Renewal Agency Pathmark Development 8.0 1995 670 9 South First Ave., 9th Fl. One Pathmark Plaza Mt. Vernon, NY 10550 Mt. Vernon, NY 10550 Re: Mt. Vernon Development _______ $41,009 =======
S-I-4 APPENDIX A [Form of Intercompany Agreement] [Indebtedness of the Company or any Majority-owned Subsidiary to any one or the other of them will qualify as Permitted Indebtedness if, and only if, such Indebtedness is made pursuant to and is evidenced by an agreement in the form of a promissory note in substantially the form as follows:] $ , 19 Evidences of all loans or advances ("Loans") 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. All capitalized terms used herein that are defined in, or by reference in, the Indenture between Pathmark Stores, Inc. and Wilmington Trust Company, trustee, dated as of , 1993 with respect to the 11-5/8% Subordinated Notes, due 2002 (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. Not Forgivable. Unless the Maker of the Loan hereunder is the Company, the Holder may not forgive any amounts owing under this Intercompany Note. A-1 Section 1.02. Interest; Prepayment. (a) The interest rate ("Interest Rate") on any Loan 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 shall be payable upon demand of the Holder. (c) If the principal or accrued interest, if any, on 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 1% per annum from maturity until the principal and interest on such Loans are fully paid. (d) Any amounts owed hereunder may be prepaid at any time by the Maker. Section 1.03. Subordination. All Loans made to the Company shall be subordinated in right of payment to the payment and performance of the obligations of the Company and any Subsidiary under the Indenture, the Securities, and any other Indebtedness ranking senior to or pari passu with the Securities, including, without limitation, any Senior Indebtedness; provided that, with respect to a Subsidiary in any specific instance, such Subsidiary is also an obligor under the Indenture, the Securities or such other senior 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 an Event of Default has occurred under the Indenture, then (x) in the event the Maker is not the Company and not a Subsidiary that is also an obligor under the Indenture or the Securities (in the case where the Holder is not the Company), all amounts owing under the Loans hereunder shall be immediately due and payable (whether or not demand has been made) to the Holder, (y) in the event the Maker is the Company, the amounts owing under the Loans hereunder shall not be payable and (z) in the event the Maker is a Subsidiary that is also an obligor under the Indenture or the Securities and the Holder is not the Company or another Subsidiary that is also an obligor under the Indenture or the Securities, the amounts owing under the Loans hereunder shall not be due and payable; provided, however, that, if such Event of Default or acceleration has been waived, cured or rescinded, such amounts A-2 shall no longer be due and payable in the case of clause (x), and such amounts may be paid in the case of clauses (y) and (z). 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 from a Subsidiary that is also an obligor under the Indenture or the Securities, which payments or distributions, pursuant to clause (y) or (z) of the prior sentence, are not payable after any Event of Default has occurred, is continuing and has not been waived, cured or rescinded, such Holder will pay over and deliver forthwith to the Company or such Subsidiary, 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 Agreement, or consent to depart therefrom 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 Agreement, except to its legal successor-in-interest. Section 3.03. Third Party Beneficiaries. The Holders of the Securities or any other Indebtedness ranking pari passu with, or senior to, the Securities including, without limitation, any Senior Indebtedness, shall be third party beneficiaries to this Agreement and shall have the right to enforce this Agreement against the Company and the Subsidiaries. Section 3.04. Headings. Article and Section headings in this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Section 3.05. Entire Agreement. This Agreement 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. Section 3.06. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. A-3 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: A-4 GRID Amount Interest Rate Date of of on the Notation Advance Advance Advance Made By Appendix B-1 [Form of Holdings Intercompany Note] PROMISSORY NOTE U.S. $ Dated as of: , 1993 FOR VALUE RECEIVED, the undersigned, Supermarkets General Corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of Supermarkets General Holdings Corporation (the "Lender") the principal sum of United States Dollars (U.S. $ ) at the times and in the amounts provided for the payment of principal thereof or thereunder (and any premiums) in the Indenture dated as of May 1, 1992 by and between the Lender and Wilmington Trust Company, Trustee (the "Trustee"), as supplemented by the First Supplemental Indenture dated as of , 1993 between the Lender and the Trustee and the 11-5/8% Subordinated Notes due 2002 issued thereunder (such Indenture and Notes, as supplemented, amended, modified or waived from time to time in accordance with the terms thereof being the "Lender Indenture" and "Lender Subordinated Notes", respectively), together with interest on such principal sum from the date hereof at the times and in the amounts provided in the Lender Indenture and the Lender Subordinated Notes for the payment of interest thereunder. Indebtedness evidenced by this Note is subordinated in right of payment to the prior payment in full of (i) all Senior Indebtedness (as defined in the Indenture dated as of , 1993 by and between the Borrower and Wilmington Trust Company, Trustee with respect to the 11-5/8% Subordinated Notes due 2002 (the "Borrower Indenture"), (ii) the Borrower's 11-5/8% Subordinated Notes due 2002 (the "Borrower Subordinated Notes")), (iii) the Subordinated Debentures and the Deferred Coupon Notes (as defined in the Borrower Indenture) and (iv) all other Indebtedness (as defined in the Borrower Indenture) of the Borrower, whether outstanding on the date of the Borrower Indenture or thereafter created, incurred, assumed or guaranteed to the same extent as the Borrower Subordinated Notes are subordinated to Senior Indebtedness (as defined in the Borrower Indenture) of the Borrower under the Borrower Indenture. For purposes of this provision, Article Thirteen and other relevant provisions of the Borrower Indenture are hereby incorporated by reference in this Note with appropriate modifications to the extent required by the terms hereof to effectuate such subordination. The Borrower shall make each payment under this Note not later than 12:00 noon (Eastern Standard time) on the day when due in lawful money of the United States of America (in freely transferable United States dollars) to the Lender at its address c/o Merrill Lynch Capital Partners, Inc., 767 Fifth Avenue, 48th Floor, New York, New York 10153, Attention: Stephen M. McLean, or at such other address of which the Lender may give the Borrower written notice from time to time, in same day funds. Computations of interest shall be made by the Lender in accordance with the terms and conditions contained in the Lender Indenture and the Lender Subordinated Notes. This Note shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its duly authorized representative as of the day and year first above written. SUPERMARKETS GENERAL CORPORATION By Name: Title: Address: 301 Blair Road Woodbridge, NJ 07095 8283e B-1-2 Appendix B-2 [Form of Holdings Intercompany Note] PROMISSORY NOTE U.S. $ Dated as of: , 1993 FOR VALUE RECEIVED, the undersigned, Supermarkets General Corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of Supermarkets General Holdings Corporation (the "Lender") the principal sum of United States Dollars (U.S. $ ) at the times and in the amounts provided for the payment of principal thereof or thereunder (and any premiums) in the Indenture dated as of May 25, 1987 by and between the Lender and Wilmington Trust Company, Trustee (the "Trustee"), as amended and restated as of May 15, 1992 and as supplemented as of June 15, 1992 and the 12-5/8% Subordinated Debentures due 2002 issued thereunder (such Indenture and Notes, as supplemented, amended, modified or waived from time to time in accordance with the terms thereof being the "Lender Indenture" and "Lender Subordinated Debentures", respectively), together with interest on such principal sum from the date hereof at the times and in the amounts provided in the Lender Indenture and the Lender Subordinated Debentures for the payment of interest thereunder. Indebtedness evidenced by this Note is subordinated in right of payment to the prior payment in full of (i) all Senior Indebtedness (as defined in the Indenture dated as of , 1993 by and between the Borrower and Wilmington Trust Company, Trustee with respect to the 12-5/8% Subordinated Debentures due 2002 (the "Borrower Indenture"), (ii) the Borrower's 12-5/8% Subordinated Debentures due 2002 (the "Borrower Subordinated Notes")), (iii) the Subordinated Notes and the Deferred Coupon Notes (as defined in the Borrower Indenture) and (iv) all other Indebtedness (as defined in the Borrower Indenture) of the Borrower, whether outstanding on the date of the Borrower Indenture or thereafter created, incurred, assumed or guaranteed to the same extent as the Borrower Subordinated Notes are subordinated to Senior Indebtedness (as defined in the Borrower Indenture) of the Borrower under the Borrower Indenture. For purposes of this provision, Article Thirteen and other relevant provisions of the Borrower Indenture are hereby incorporated by reference in this Note with appropriate modifications to the extent required by the terms hereof to effectuate such subordination. The Borrower shall make each payment under this Note not later than 12:00 noon (Eastern Standard time) on the day when due in lawful money of the United States of America (in freely transferable United States dollars) to the Lender at its address c/o Merrill Lynch Capital Partners, Inc., 767 Fifth Avenue, 48th Floor, New York, New York 10153, Attention: Stephen M. McLean, or at such other address of which the Lender may give the Borrower written notice from time to time, in same day funds. Computations of interest shall be made by the Lender in accordance with the terms and conditions contained in the Lender Indenture and the Lender Subordinated Notes. This Note shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its duly authorized representative as of the day and year first above written. SUPERMARKETS GENERAL CORPORATION By Name: Title: Address: 301 Blair Road Woodbridge, NJ 07095 8283e B-2-2 EX-4.9 10 DRAFT - 8/23/93 8280e/8281e 0296L/0300L PATHMARK STORES, INC., Issuer, and WILMINGTON TRUST COMPANY, Trustee INDENTURE Dated as of October 26, 1993 12-5/8% Subordinated Debentures due 2002 Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of October 26, 1993* Trust Indenture Indenture Act Section Section Sec. 310(a)(1) ............................. 608 (a)(2) ............................. 608 (b) ............................. 607, 609 Sec. 312(c) ............................. 701 Sec. 314(a) ............................. 703 (a)(4) ............................. 1018 (c)(1) ............................. 103 (c)(2) ............................. 103 (e) ............................. 103 Sec. 315(b) ............................. 601 Sec. 316(a)(last sentence) ............................. 101 ("Out- standing") (a)(1)(A) ............................. 502, 512 (a)(1)(B) ............................. 513 (b) ............................. 508 (c) ............................. 105 Sec. 317(a)(1) ............................. 503 (a)(2) ............................. 504 Sec. 318(a) ............................. 108 * This reconciliation and tie shall not, for any purpose, be deemed to be part of the Indenture. TABLE OF CONTENTS PAGE ARTICLE ONE Definitions and Other Provisions of General Application Section 101. Definitions ............................ 1 Acquired Indebtedness .................. 2 Acquisition ............................ 2 Affiliate .............................. 2 Average Life to Stated Maturity ........ 3 Bank Credit Agreement .................. 3 Board of Directors ..................... 3 Board Resolution ....................... 3 Business Day ........................... 3 Capital Lease Obligation ............... 3 Capital Stock .......................... 3 Change in Control ...................... 3 Chefmark ............................... 4 Commission ............................. 4 Company ................................ 4 Company Request or Company Order ....... 4 Consolidated Adjusted Net Income (Loss). 4 Consolidated Assets .................... 5 Consolidated Capital Expenditures ...... 5 Consolidated Fixed Charge Coverage Ratio ....................... 5 Consolidated Interest Expense .......... 6 Consolidated Non-cash Charges .......... 6 Consolidated Tax Expense ............... 6 Corporate Trust Office ................. 6 Corporation ............................ 6 Default ................................ 6 Deferred Coupon Notes................... 6 Equitable Investors .................... 6 Event of Default ....................... 7 Exchange Act ........................... 7 Existing Assets ........................ 7 Fair Market Value ...................... 7 Note: This table of contents shall not, for any purpose, be deemed to be a part of this Indenture. PAGE Federal Bankruptcy Code ................ 7 Generally Accepted Accounting Principles or GAAP ................... 7 Guaranteed Debt ........................ 7 Holder ................................. 8 Holdings ............................... 8 Holdings Intercompany Notes ............ 8 Holdings Majority-owned Subsidiary...... 8 Holdings Preferred Stock ............... 8 Holdings Subsidiary..................... 8 Indebtedness ........................... 9 Indenture .............................. 9 Intercompany Agreement ................. 10 Interest Payment Date .................. 10 Interest Rate Hedge Arrangement ........ 10 Investments ............................ 10 Lien ................................... 10 Logistical Services Agreement .......... 10 Majority-owned Subsidiary .............. 11 Management Investors ................... 11 Material Subsidiary .................... 11 Maturity ............................... 11 ML Funds ............................... 11 Newco................................... 12 Officers' Certificate .................. 12 Opinion of Counsel ..................... 12 Outstanding ............................ 12 Pari Passu Indebtedness ................ 13 Paying Agent ........................... 13 Permitted Holders ...................... 13 Permitted Indebtedness ................. 13 Permitted Investment ................... 15 Permitted Payment ...................... 16 Permitted Senior Subordinated Indebtedness ......................... 16 Person ................................. 16 Plainbridge ............................ 16 Predecessor Security ................... 16 Preferred Stock ........................ 17 Purchase Money Mortgages ............... 17 Qualified Capital Stock ................ 17 Recapitalization ....................... 17 Redeemable Capital Stock ............... 17 -ii- PAGE Redemption Date ........................ 17 Redemption Price ....................... 17 Regular Record Date .................... 18 Representative ......................... 18 Responsible Officer .................... 18 Restricted Payments .................... 18 Security and Securities ................ 18 Senior Indebtedness .................... 18 Senior Subordinated Notes .............. 19 SMG-II ................................. 19 Special Record Date .................... 19 Specified Senior Indebtedness .......... 19 Spin-Off Agreements .................... 20 Spin-Off .............................. 20 Stated Maturity ........................ 20 Subordinated Indebtedness .............. 20 Subordinated Notes...................... 20 Subsidiary ............................. 20 Tax Sharing Agreement .................. 21 Temporary Cash Investment .............. 21 Trust Indenture Act .................... 21 Trustee ................................ 21 Unrestricted Subsidiary ................ 21 Unrestricted Subsidiary Indebtedness ... 22 Voting Stock ........................... 22 Section 102. Other Definitions ...................... 23 Section 103. Compliance Certificates and Opinions ... 23 Section 104. Form of Documents Delivered to Trustee . 24 Section 105. Acts of Holders ........................ 24 Section 106. Notices, etc., to Trustee and Company .......................... 26 Section 107. Notice to Holders; Waiver .............. 26 Section 108. Conflict of any Provision of Indenture with Trust Indenture Act ... 27 Section 109. Effect of Headings and Table of Contents ............................. 27 Section 110. Successors and Assigns ................. 27 Section 111. Separability Clause .................... 28 Section 112. Benefits of Indenture .................. 28 Section 113. Governing Law .......................... 28 Section 114. Legal Holidays ......................... 28 Section 115. No Recourse Against Others ............. 28 -iii- PAGE ARTICLE TWO Security Forms Section 201. Forms Generally ........................ 29 Section 202. Form of Face of Security ............... 29 Section 203. Form of Reverse of Security ............ 31 Section 204. Form of Trustee's Certificate of Authentication ....................... 35 ARTICLE THREE The Securities Section 301. Title and Terms ........................ 36 Section 302. Denominations .......................... 36 Section 303. Execution, Authentication, Delivery and Dating ............................... 37 Section 304. Temporary Securities ................... 38 Section 305. Registration, Registration of Transfer and Exchange ......................... 39 Section 306. Mutilated, Destroyed, Lost and Stolen Securities ........................... 40 Section 307. Payment of Interest; Interest Rights Preserved ............................ 41 Section 308. Persons Deemed Owners .................. 42 Section 309. Cancellation ........................... 42 Section 310. Computation of Interest ................ 43 ARTICLE FOUR Satisfaction and Discharge Section 401. Satisfaction and Discharge of Indenture ......................... 43 Section 402. Application of Trust Money ............. 44 ARTICLE FIVE Remedies Section 501. Events of Default ...................... 45 Section 502. Acceleration of Maturity; Rescission ... 47 Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee ........... 48 -iv- PAGE Section 504. Trustee May File Proofs of Claim ....... 49 Section 505. Trustee May Enforce Claims Without Possession of Securities ............. 50 Section 506. Application of Money Collected ......... 50 Section 507. Limitation on Suits .................... 51 Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest ............................. 52 Section 509. Restoration of Rights and Remedies ..... 52 Section 510. Rights and Remedies Cumulative ......... 52 Section 511. Delay or Omission Not Waiver ........... 53 Section 512. Control by Holders ..................... 53 Section 513. Waiver of Past Defaults ................ 53 Section 514. Undertaking for Costs .................. 54 Section 515. Waiver of Stay, Extension or Usury Laws ........................... 54 Section 516. Unconditional Right of Holders to Institute Certain Suits ........... 54 ARTICLE SIX The Trustee Section 601. Notice of Defaults ..................... 55 Section 602. Certain Rights of Trustee .............. 55 Section 603. Not Responsible for Recitals or Issuance of Securities ............... 57 Section 604. Trustee and Agents May Hold Securities; Collections; etc. ........ 57 Section 605. Money Held in Trust .................... 58 Section 606. Compensation and Reimbursement ......... 58 Section 607. Conflicting Interests .................. 59 Section 608. Corporate Trustee Required; Eligibility .......................... 60 Section 609. Resignation and Removal; Appointment of Successor ......................... 60 Section 610. Acceptance of Appointment by Successor ............................ 62 Section 611. Merger, Conversion, Consolidation or Succession to Business ............... 63 Section 612. Preferential Collection of Claims Against Company ...................... 63 -v- PAGE ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company Section 701. Disclosure of Names and Addresses of Holders ........................... 63 Section 702. Reports by Trustee ..................... 64 Section 703. Reports by Company ..................... 64 ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease Section 801. Company May Consolidate, etc., Only on Certain Terms ................ 65 Section 802. Successor Substituted .................. 66 ARTICLE NINE Supplemental Indentures Section 901. Supplemental Indentures without Consent of Holders ........... 66 Section 902. Supplemental Indentures with Consent of Holders .............. 67 Section 903. Execution of Supplemental Indentures ... 68 Section 904. Effect of Supplemental Indentures ...... 68 Section 905. Conformity with Trust Indenture Act .... 69 Section 906. Reference in Securities to Supplemental Indentures ........................... 69 Section 907. Effect on Senior Indebtedness .......... 69 ARTICLE TEN Covenants Section 1001. Payment of Principal, Premium and Interest ............................. 69 Section 1002. Maintenance of Office or Agency ........ 69 Section 1003. Money for Security Payments to Be Held in Trust ........................ 70 Section 1004. Corporate Existence .................... 72 -vi- PAGE Section 1005. Payment of Taxes and Other Claims ...... 72 Section 1006. Maintenance of Properties .............. 73 Section 1007. Limitation on Indebtedness ............. 73 Section 1008. Limitation on Restricted Payments ...... 74 Section 1009. Limitation on Transactions with Affiliates ........................... 79 Section 1010. Limitation on Liens .................... 80 Section 1011. Limitation on Other Senior Subordinated Indebtedness ............ 80 Section 1012. Purchase of Securities Upon Change in Control .............................. 81 Section 1013. Restrictions on Preferred Stock of Subsidiaries ......................... 85 Section 1014. Limitations on Issuances of Guarantees of Indebtedness ...................... 85 Section 1015. Restriction on Transfer of Assets ...... 85 Section 1016. Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries ......................... 86 Section 1017. Limitation on Unrestricted Subsidiaries ......................... 87 Section 1018. Statement as to Compliance; Notice of Default; Provision of Financial Statements ........................... 87 Section 1019. Waiver of Certain Covenants ............ 88 ARTICLE ELEVEN Redemption of Securities Section 1101. Right of Redemption .................... 89 Section 1102. Applicability of Article ............... 89 Section 1103. Election to Redeem; Notice to Trustee .. 89 Section 1104. Selection by Trustee of Securities to Be Redeemed .......................... 89 Section 1105. Notice of Redemption ................... 90 Section 1106. Deposit of Redemption Price ............ 91 Section 1107. Securities Payable on Redemption Date .. 91 Section 1108. Securities Redeemed in Part ............ 91 ARTICLE TWELVE [Intentionally omitted] -vii- PAGE ARTICLE THIRTEEN Subordination of Securities Section 1301. Securities Subordinate to Senior Indebtedness ......................... 92 Section 1302. Payment Over of Proceeds Upon Dissolution, etc. .................... 92 Section 1303. No Payment When Specified Senior Indebtedness in Default .............. 95 Section 1304. Payment Permitted if No Default ........ 96 Section 1305. Subrogation to Rights of Holders of Senior Indebtedness ............... 96 Section 1306. Provisions Solely to Define Relative Rights ...................... 97 Section 1307. Trustee to Effectuate Subordination .... 97 Section 1308. No Waiver of Subordination Provisions .. 97 Section 1309. Notice to Trustee ...................... 98 Section 1310. Reliance on Judicial Order or Certificate of Liquidating Agent ..... 99 Section 1311. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights ..................... 99 Section 1312. Article Applicable to Paying Agents .... 100 Section 1313. Rescission ............................. 100 Section 1314. Application by Trustee of Assets Deposited With It .................... 100 ARTICLE FOURTEEN Defeasance and Covenant Defeasance Section 1401. Option to Effect Defeasance or Covenant Defeasance ............... 100 Section 1402. Defeasance and Discharge ............... 101 Section 1403. Covenant Defeasance..................... 101 Section 1404. Conditions to Defeasance or Covenant Defeasance .................. 102 Section 1405. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions ....... 105 Section 1406. Reinstatement .......................... 105 -viii- TESTIMONIUM........................................... 106 SIGNATURES AND SEALS.................................. 106 ACKNOWLEDGMENTS EXISTING INDEBTEDNESS..............................SCHEDULE I FORM OF INTERCOMPANY AGREEMENT.....................APPENDIX A FORM OF HOLDINGS INTERCOMPANY NOTE.................APPENDIX B -ix- INDENTURE, dated as of October 26, 1993, between PATHMARK STORES, INC., a Delaware corporation (hereinafter called the "Company"), and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as trustee (hereinafter called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the creation of an issue of its 12-5/8% Subordinated Debentures due 2002 (hereinafter called the "Securities"), of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture; This Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act that are required to be part of and to govern indentures qualified under the Trust Indenture Act; All acts and things necessary have been done to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid, binding and legal obligations of the Company, and to make this Indenture a valid agreement of the Company in accordance with its terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (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 generally accepted accounting principles and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States as of the date hereof; and (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Articles Five, Six, Ten, Thirteen and Fourteen are defined in those Articles. "Acquired Indebtedness" means Indebtedness of a Person (including an Unrestricted Subsidiary) (i) existing at the time such Person becomes a Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person, other than Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Subsidiary or such acquisition, as the case may be. "Acquisition" means the acquisition of the Company by Holdings completed in October 1987, pursuant to the Agreement and Plan of Merger dated as of April 22, 1987 among the Company, SMG Acquisition Corporation and Holdings, as amended. "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 or (ii) for purposes of Section l009 only, any other Person that owns, directly or indirectly, 10% or more of such Person's Capital Stock or any officer or director of any such Person or other Person or with respect to any natural Person, any person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. 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 the ownership of Voting Stock, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. - 2- "Average Life to Stated Maturity" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from the date of determination to the date or dates of each successive scheduled principal payment of such Indebtedness multiplied by (b) the amount of each such principal payment by (ii) the sum of all such principal payments. "Bank Credit Agreement" means the Credit Agreement dated as of the date hereof among the Company and the lenders thereunder and Bankers Trust Company, as agent, as in effect on the date hereof, and as such agreement may be amended, renewed, extended, supplemented or otherwise modified from time to time, and any agreement or successive agreements governing Indebtedness incurred to refund, refinance, restructure or replace the Indebtedness and commitments then outstanding or permitted to be outstanding under such Credit Agreement or other agreement. "Board of Directors" means the board of directors of the Company 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 to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York or the State of Delaware are authorized or obligated by law, regulation or executive order to close. "Capital Lease Obligation" of any Person means any obligations of such Person and its Subsidiaries on a consolidated basis under any capital lease of real or personal property which, in accordance with GAAP, has been recorded as a capitalized lease obligation. "Capital Stock" of any Person means any and all shares, interests, participations, or other equivalents (however designated) of such Person's capital stock whether now outstanding or issued after the date hereof. "Change in Control" means an event as a result of which: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than Permitted Holders is or becomes the "beneficial owner" (as - 3- defined in Rules 13d-3 and l3d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total Voting Stock of the Company and (ii) such person succeeds in having its nominees constitute a majority of the Company's Board of Directors. "Chefmark" means Chefmark, Inc., a corporation incorporated under the laws of the State of Delaware, and any successor thereto. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this instrument, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. To the extent necessary to comply with the requirements of the provisions of Trust Indenture Act Sections 3l0 through 317 as they are applicable to the Company, the term "Company" shall include any other obligor with respect to the Securities for the purposes of complying with such provisions. "Company Request" or "Company Order" means a written request or order signed in the name of the Company (i) by its Chairman, a Vice Chairman, its President or a Vice President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee; provided, however, that such written request or order may be signed by any two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "Consolidated Adjusted Net Income (Loss)" of the Company means, for any period, the consolidated net income (loss) of the Company and its consolidated Subsidiaries for such period as determined in accordance with GAAP, adjusted by excluding (i) net after-tax extraordinary gains or losses (less all fees and expenses relating thereto), as the case may be, (ii) net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset sales, (iii) any - 4- depreciation and amortization expense incurred by the Company and its consolidated Subsidiaries from the date of the Acquisition to the date of determination resulting from (a) any write-up in the book value of any assets due to the Acquisition and (b) any goodwill due to the Acquisition (including any write-off or accelerated amortization of goodwill), (iv) any expenses incurred in connection with the Acquisition and the financing thereof and the Recapitalization, (v) any expenses relating to the incurrence or refinancing of Indebtedness, (vi) the net income (or loss) of any Person (including any Unrestricted Subsidiary and excluding the Company or a Subsidiary) in which the Company or any of its Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or its Subsidiaries by such other Person during such period, (vii) net income (or net loss) of any Person combined with the Company or any of its Subsidiaries in a "pooling of interests" basis attributable to any period prior to the date of combination and (viii) non-cash charges of the Company and its Subsidiaries resulting from the application of Statement of Financial Accounting Standards No. 106 ("SFAS 106") to the extent such charges exceed the cash payments for benefits covered by SFAS 106 for the relevant period. "Consolidated Assets" means the net book value of the Existing Assets shown on the balance sheet of the Company, as determined in accordance with GAAP consistently applied, as of the last day of the Company's last fiscal quarter prior to the date hereof. "Consolidated Capital Expenditures" means cash capital expenditures reflected in the consolidated statement of cash flows of the Company and Capital Lease Obligations that are on the consolidated balance sheet of the Company and its Subsidiaries, in each case in conformity with GAAP. "Consolidated Fixed Charge Coverage Ratio" of the Company means, for any period, the ratio of (i) the sum of Consolidated Adjusted Net Income, Consolidated Interest Expense, Consolidated Tax Expense and Consolidated Non-cash Charges deducted in computing Consolidated Adjusted Net Income, in each case, for such period, of the Company and its Subsidiaries on a consolidated basis, all determined in accordance with GAAP, to (ii) the sum of such Consolidated Interest Expense for such period; provided that, in making such computation, the Consolidated Interest Expense attributable to interest on any Indebtedness computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period; provided, further, that - 5- in making any calculation prior to the first anniversary date of the Recapitalization, the Recapitalization shall be deemed to have taken place on the first day of such period. "Consolidated Interest Expense" means, for any period, the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on a consolidated statement of earnings of the Company and its Subsidiaries for such period minus the aggregate amount for such period of interest imputed on future liabilities of the Company and its Subsidiaries, other than Indebtedness, recorded at present value. Consolidated Interest Expense shall include accruals in respect of Interest Rate Hedge Arrangements (but shall exclude any such accruals in the nature of amortization of front-end fees or other similar payments). "Consolidated Non-cash Charges" of the Company means, for any period, the aggregate depreciation, amortization and other non-cash charges of the Company and its consolidated Subsidiaries for such period, as determined in accordance with GAAP (excluding any such non-cash charge which requires an accrual of or reserve for cash charges for any future period). "Consolidated Tax Expense" of the Company means, for any period, as applied to the Company, the provision for federal, state, local and foreign income taxes of the Company and its consolidated Subsidiaries for such period as determined in accordance with GAAP. "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 Rodney Square North, Wilmington, Delaware 19890. "Corporation" includes corporations, associations, partnerships, companies and business trusts. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Deferred Coupon Notes" means the Junior Subordinated Deferred Coupon Notes due 2003 of the Company in aggregate principal amount at final maturity not in excess of the aggregate principal amount at final maturity on the date of this Indenture. "Equitable Investors" means The Equitable Life Assurance Society of the United States and any of its - 6- Affiliates that beneficially own, directly or indirectly, shares of Capital Stock of SMG-II, Holdings, Newco or the Company. "Event of Default" has the meaning specified in Article Five. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Existing Assets" means the assets and other property held by the Company (and not its subsidiaries) as of the last day of the Company's last fiscal quarter prior to the date hereof, adjusted by excluding any assets and other property transferred to Newco in the Spin-Off, plus any assets held by the Company (and not its subsidiaries) irrevocably designated from time to time by the Company as Existing Assets. "Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer. "Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the United States Code, as amended from time to time. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect from time to time; provided, however, that with respect to the obligations of any Person under Articles Eight and Ten and the definitions applicable thereto, "GAAP" means generally accepted accounting principles in the United States as in effect on the date hereof. "Guaranteed Debt" of any Person means, without duplication, all Indebtedness of any other Person referred to in the definition of Indebtedness contained in this Section 101 guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) other than with respect to the Logistical Services Agreement or any Spin-Off Agreement, to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (iii) other than with respect to the Logistical Services Agreement or any Spin-Off Agreement, to supply funds to, or in - 7- any other manner invest in, the debtor (including any agreement to pay for property or services to be acquired by such debtor irrespective of whether such property is received or such services are rendered) or (iv) to maintain working capital or equity capital of the debtor, or otherwise to maintain the net worth, solvency or other financial condition of the debtor or (v) otherwise to assure a creditor against loss; provided that the term "guarantee" shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or any obligation or liability of such Person in respect of leasehold interests assigned by such Person to any other Person. "Holder" means a Person in whose name a Security is registered in the Security Register. "Holdings" means Supermarkets General Holdings Corporation, a Delaware corporation, and any successor thereto. "Holdings Intercompany Notes" means the 11-5/8% subordinated note and the 12-5/8% subordinated debenture each issued by the Company to Holdings in the forms attached hereto as Appendix B and in aggregate principal amounts not in excess of the principal amounts outstanding on the date hereof. "Holdings Majority-owned Subsidiary" means a Holdings Subsidiary of at least 80% of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by Holdings or by one or more of the Holdings Subsidiaries, or Holdings and one or more of the Holdings Subsidiaries. "Holdings Preferred Stock" means Holdings' Cumulative Exchangeable Redeemable Preferred Stock, par value $.01 per share, having a liquidation preference of $25 per share and maturing on December 31, 2007, that is outstanding on the date hereof. "Holdings Subsidiary" means any Person a majority of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by Holdings or by one or more other Holdings Subsidiaries, or by Holdings and one or more other Holdings Subsidiaries. - 8- "Indebtedness" means with respect to any Person, without duplication, (i) all indebtedness of such Person for borrowed money (including overdrafts) or for the deferred purchase price of property or services, excluding any trade payables, import letters of credit and other accrued current liabilities incurred in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any standby letters of credit and acceptances issued under letter of credit facilities, acceptance facilities or other similar facilities, (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness 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 accounts payable arising in the ordinary course of business, (iv) all Capital Lease Obligations of such Person, (v) all Indebtedness referred to in (but not excluded from) clause (i), (ii), (iii) or (iv) above of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien, upon or in 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 Guaranteed Debt of such Person, (vii) 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 and (viii) all obligations under interest rate hedge contracts of such Person. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Redeemable Capital Stock, such fair market value to be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock. "Indenture" means this instrument as originally executed (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. - 9- "Intercompany Agreement" means the agreement in the form attached hereto as Appendix A, as amended or modified in accordance with the terms of this Indenture. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Securities. "Interest Rate Hedge Arrangement" means any rate swap transaction under a rate swap agreement to which the Company is a party or beneficiary, or becomes a party or beneficiary, and any interest rate protection agreement, interest rate future, interest rate option or other interest rate hedge arrangement to or under which the Company is a party or a beneficiary, or becomes a party or a beneficiary, or to or under which any Subsidiary of the Company is or becomes such a party or beneficiary if the obligations of such Subsidiary thereunder are guaranteed by the Company. "Investments" of any Person means, directly or indirectly, any advance, loan or other extension of credit or capital contribution by such Person 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) any other Person, or any purchase or acquisition by such Person of any stock, bonds, notes, debentures or other securities issued or owned by any other Person. For the purpose of making any calculations hereunder, (i) Investment shall include the Fair Market Value of the net assets of any Subsidiary at the time that such Subsidiary is designated an Unrestricted Subsidiary and shall exclude the Fair Market Value of the net assets of any Unrestricted Subsidiary that is designated a Subsidiary and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at Fair Market Value at the time of such transfer; provided that in each case, the Fair Market Value of an asset or property shall be as determined by the Board of Directors of the Company in good faith. "Lien" means any mortgage, charge, pledge, lien, privilege, security interest or encumbrance of any kind. "Logistical Services Agreement" means the Logistical Services Agreement dated as of October 26, 1993 between the Company and Plainbridge, as amended or modified in accordance with the provisions hereof. - 10- "Majority-owned Subsidiary" means a Subsidiary at least 50% of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more of the Subsidiaries, or the Company and one or more of the Subsidiaries, provided that Majority-owned Subsidiary shall not include any such Subsidiary if the equity ownership or the Voting Stock of such Subsidiary not owned by the Company and/or one or more of the Subsidiaries is owned by Holdings and/or one or more Affiliates of Holdings other than the Company and its Subsidiaries. "Management Investors" means the officers and other members of the management of the Company who at any particular date shall beneficially own, directly or indirectly, Voting Stock of the Company. "Material Subsidiary" means, at any particular time, any Subsidiary of the Company that, together with the Subsidiaries of such Subsidiary, (a) accounted for more than 10% of the consolidated revenues of the Company and its Subsidiaries for the most recently completed fiscal year of the Company or (b) was the owner of more than l0% of the consolidated assets of the Company and its Subsidiaries as at the end of such fiscal year, all as shown on the consolidated financial statements of the Company and its Subsidiaries for such fiscal year. "Maturity" when used with respect to any Security means the date on which the principal of the Securities becomes due and payable as therein or herein provided, whether at Stated Maturity, Change in Control Purchase Date or Redemption Date and whether by declaration of acceleration, Change in Control, call for redemption or otherwise. "ML Funds" means Merrill Lynch Capital Appreciation Partnership No. IX, L.P., a Delaware partnership, ML Offshore LBO Partnership No. IX, a Cayman Islands partnership, ML Employees LBO Partnership No. I, L.P., a Delaware partnership, Merrill Lynch Interfunding Inc., a Delaware corporation, Merchant Banking L.P. No. I, a Delaware partnership, Merrill Lynch KECALP L.P., a Delaware partnership, Merrill Lynch Capital Appreciation Partnership No. B-X, L.P., a Delaware partnership, ML Offshore LBO Partnership No. B-X, a Cayman Islands partnership, MLCP Associates, L.P. No. II, a Delaware partnership, Merrill Lynch Venture Capital, Inc., a Delaware corporation and any Affiliates of the foregoing that beneficially own, directly or indirectly, shares of Capital Stock of SMG-II. - 11- "Newco" means PTK Holdings, Inc., a corporation incorporated under the laws of the State of Delaware, and any successor thereto. "Officers' Certificate" means a certificate signed by (i) the Chairman, a Vice Chairman, the President, a Vice President or the Treasurer of the Company and (ii) the Secretary or an Assistant Secretary of the Company and delivered to the Trustee; provided, however, that such certificate may be signed by two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee. Each such opinion shall include the statements provided for in Trust Indenture Act Section 314(e) to the extent applicable. "Outstanding" when used with respect to Securities means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (a) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (b) Securities, or portions thereof, for whose payment, redemption or purchase money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities and the Trustee or such Paying Agent is not prohibited from paying such money to the Holders on that date pursuant to the terms of Article Thirteen of this Indenture; provided that, if such Securities 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; - 12- (c) Securities, except to the extent provided in Sections 1402 and 1403, with respect to which the Company has effected defeasance or covenant defeasance as provided in Article Fourteen; and (d) Securities in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands the Securities are valid obligations of the Company; provided, however, that, in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, notice, direction, consent or waiver hereunder, Securities owned by the Company, or any other obligor upon the Securities or any Affiliate of the Company, or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, notice, direction, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor. "Pari Passu Indebtedness" means any Indebtedness of the Company that is pari passu in right of payment to the Securities. "Paying Agent" means any Person authorized by the Company to pay the principal of (or premium, if any) or interest on any Securities on behalf of the Company. "Permitted Holders" means ML Funds, the Management Investors and the Equitable Investors, provided that the Equitable Investors shall not be a Permitted Holder if they are a member of a "group" (as such term is used in Section 13(d) of the Exchange Act) in respect of the Company which does not include the Management Investors and the ML Funds. "Permitted Indebtedness" means any of the following Indebtedness of the Company or any Subsidiary, as the case may be: - 13- (i) Indebtedness under the Bank Credit Agreement in an aggregate principal amount at any one time outstanding not to exceed $575,000,000; (ii) Indebtedness under the Securities; (iii) Indebtedness outstanding on the date hereof and listed on Schedule I hereto; (iv) Indebtedness under the Senior Subordinated Notes, the Subordinated Notes and the Deferred Coupon Notes; (v) obligations pursuant to interest rate hedge contracts; (vi) (A) Indebtedness under Capital Lease Obligations and (B) Purchase Money Mortgages; (vii) Indebtedness in respect of trade letters of credit and standby letters of credit incurred in the ordinary course of business; (viii) Indebtedness of the Company or any Subsidiary to any one or the other of them; provided that the obligation of the obligor of such Indebtedness is subject to the Intercompany Agreement; (ix) Indebtedness of any Subsidiary made in accordance with the applicable provisions of Section 1014 or Section 1015; (x) Indebtedness consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets; (xi) any obligation or liability in respect of leasehold interests assigned by the Company or any Subsidiary to any other Person; (xii) Indebtedness under the Holdings Intercompany Notes; (xiii) Indebtedness represented by letters of credit not exceeding an aggregate amount of $45,000,000 at any one time outstanding (other than those permitted by clause (vii) above); (xiv) Indebtedness incurred to finance Consolidated Capital Expenditures (including Acquired Indebtedness to - 14- the extent that, in conformity with GAAP, assets acquired in conjunction with such Acquired Indebtedness are included in the property, plant or equipment reflected on the consolidated balance sheet of the Company and its Subsidiaries); (xv) Indebtedness in addition to that described in clauses (i) through (xiv) of this definition of "Permitted Indebtedness", and any renewals, extensions, substitutions, refinancings or replacements of such Indebtedness, not to exceed $75,000,000 outstanding at any one time in the aggregate; and (xvi) any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") of any Indebtedness described in clauses (ii), (iii), (iv) and (xiv), including any successive refinancings so long as the aggregate amount of Indebtedness represented thereby is in a principal amount that does not exceed the principal amount so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing; provided that for purposes of this clause, the principal amount of any Indebtedness shall be deemed to mean the principal amount thereof or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination and such refinancing does not reduce the Average Life to Stated Maturity or the final Stated Maturity of such Indebtedness. "Permitted Investment" means any of the following: (i) any Investment in any Majority-owned Subsidiary by the Company or any other Majority-owned Subsidiary, any Investment in any Person by the Company or any Majority-owned Subsidiary as a result of which such Person becomes a Majority-owned Subsidiary or any Investment in the Company by any Majority-owned Subsidiary; (ii) any Temporary Cash Investment; (iii) intercompany Indebtedness to the extent permitted under clause (viii) of the definition of "Permitted Indebtedness" contained in this Section 101; (iv) Investments in existence on the date hereof and any Investment with respect to which the Company or any Subsidiary is legally committed to make, but only if such commitment was in existence on the date hereof in each case, other than any Investment in any Unrestricted Subsidiary; (v) sales of goods on trade credit terms consistent with the Company's past practices or as otherwise consistent with trade - 15- credit terms in common use in the industry; (vi) Investments pursuant to the Logistical Services Agreement or Spin-Off Agreements; (vii) any Investment in any Person acquired or retained in connection with any asset sale or other disposition of assets; (viii) loans or advances to employees made in the ordinary course of business; and (ix) in addition to "Permitted Investments" described in the foregoing clauses (i) through (viii), Investments in the aggregate amount of $45,000,000 at any one time outstanding. "Permitted Payment" has the meaning specified in Section 1008. "Permitted Senior Subordinated Indebtedness" means (i) the Senior Subordinated Notes, (ii) in addition to (i), other Indebtedness of the Company in an aggregate principal amount not to exceed $200,000,000 at any one time outstanding and (iii) any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this definition, a "refinancing") of any Indebtedness described in the foregoing clause (i), including any successive refinancings, so long as the aggregate amount of Indebtedness represented thereby in a principal amount that does not exceed the principal amount so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing; provided that for purposes of this clause, the principal amount of any Indebtedness shall be deemed to mean the principal amount thereof or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination. "Person" means any individual, corporation, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Plainbridge" means Plainbridge, Inc., a corporation incorporated under the laws of the State of Delaware, and any successor thereto. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for a - 16- mutilated Security or in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Security. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's preferred or preference stock whether now outstanding or issued after the date hereof, and includes, without limitation, all classes and series of preferred or preference stock. "Purchase Money Mortgages" means Indebtedness of the Company or any Subsidiary (i) issued to finance or refinance the purchase or construction of any assets of the Company or any Subsidiary or (ii) secured by a Lien on any assets of the Company or any Subsidiary where the lender's sole recourse is to the assets so encumbered, in either case (a) to the extent the purchase or construction prices for such assets are or should be included in "addition to property, plant or equipment" in accordance with GAAP and (b) if the purchase or construction of such assets is not part of any acquisition of a Person or business unit. "Qualified Capital Stock" of any Person means any and all Capital Stock of such Person other than Redeemable Capital Stock. "Recapitalization" means the Recapitalization described in the Prospectus and Consent Solicitation, as amended or supplemented, relating to the issuance of the Securities. "Redeemable Capital Stock" means any Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or otherwise, is or upon the happening of an event or passage of time would be required to be redeemed prior to the final Stated Maturity of the Securities or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. - 17- "Regular Record Date" for the interest payable on any Interest Payment Date means the June 1 or December 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Representative" means the indenture trustee or other trustee, agent or representative for an issue of Senior Indebtedness. "Responsible Officer", when used with respect to the Trustee, means any officer assigned to the Corporate Trust Administration of the Trustee or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers or assigned by the Trustee to administer corporate trust matters at its Corporate Trust Office and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Payments" has the meaning specified in Section 1008. "Security" and "Securities" have the meaning set forth in the second paragraph of this Indenture. "Senior Indebtedness" means the principal of, premium, if any, and interest on (such interest on Senior Indebtedness, wherever referred to in this Indenture, being deemed to include interest accruing after the filing of a petition initiating any proceeding pursuant to any bankruptcy law in accordance with and at the rate (including any rate applicable upon any default or event of default, to the extent lawful) specified in any document evidencing the Senior Indebtedness, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such bankruptcy law) any Indebtedness of the Company (other than as otherwise provided in this definition), whether outstanding on the date hereof or thereafter created, incurred or assumed in accordance with the provisions of this Indenture, 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 the Securities. Without limiting the generality of the foregoing, "Senior Indebtedness" shall include the principal of, premium, if any, and interest on (including interest accruing after the occurrence of an event of default) all obligations of every nature of the Company from time to time owed under Permitted Senior Subordinated Indebtedness and under the Bank Credit Agreement, including, without limitation, - 18- principal of and interest on, and all fees, expenses, indemnities, payments for early termination of Interest Rate Hedge Arrangements and reimbursement obligations under letters of credit payable under the Bank Credit Agreement. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) Indebtedness evidenced by the Securities, the Subordinated Notes and the Deferred Coupon Notes, (ii) Indebtedness that is subordinate or junior in right of payment to any Indebtedness of the Company (other than Permitted Senior Subordinated Indebtedness), except for subordination as a result of intercreditor arrangements with respect to collateral, (iii) Indebtedness that when incurred, and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company, (iv) Indebtedness that is represented by Redeemable Capital Stock, (v) Indebtedness of the Company to a subsidiary of the Company or any other Affiliate of the Company or any of such Affiliate's subsidiaries, including the Holdings Intercompany Notes and (vi) that portion of any Indebtedness (other than any Indebtedness provided by any lender pursuant to the Bank Credit Agreement, except to the extent such Indebtedness is provided with actual knowledge on the part of any such lender that the incurrence thereof by the Company is a violation of this Indenture) which at the time of issuance is issued in violation of this Indenture. "Senior Subordinated Notes" means the Company's 12 5/8% Senior Subordinated Notes due 2003 in aggregate principal amount not in excess of $440,000,000. "SMG-II" means SMG-II Holdings Corporation, a Delaware corporation. "Special Record Date" means a date fixed by the Trustee for the payment of any Defaulted Interest pursuant to Section 307. "Specified Senior Indebtedness" means (i) all Senior Indebtedness under the Bank Credit Agreement, (ii) all Senior Indebtedness under the Senior Subordinated Notes and (iii) any other issue of Senior Indebtedness or refinancings thereof permitted by said definition having a principal amount of at least $100,000,000 and is specifically designated in the instrument evidencing such Senior Indebtedness as "Specified Senior Indebtedness" by the Company. For purposes of this definition: (a) the amount of the Indebtedness of the Company with respect to any Interest Rate Hedge Arrangement shall be - 19- deemed to be the lesser of (x) 25% of the notional amount of such Interest Rate Hedge Arrangement, or (y) the maximum amount the Company could be required to pay under such Interest Rate Hedge Arrangement; and (b) a refinancing of any such Indebtedness shall be treated as such only if it ranks or would rank pari passu with the Indebtedness refinanced. "Spin-Off Agreements" means (i) the Distribution and Transfer Agreement dated as of May 3, 1993 among the Company, Holdings and Chefmark; (ii) the Distribution and Transfer Agreement dated as of October 26, 1993 among the Company, Newco and Plainbridge; (iii) the Blair Services Agreement dated as of October 26, 1993 between the Company and Plainbridge; (iv) the Rickel Services Agreement dated as of October 26, 1993 between the Company and Plainbridge; (v) the Chefmark Services Agreement dated as of May 3, 1993 between the Company and Chefmark; (vi) the Tax Sharing Agreement; (vii) the Chefmark Supply Agreement dated May 3, 1993 between the Company and Chefmark; and (viii) leases between the Company as lessee and Plainbridge as lessor entered into on the date of this Indenture, in each case as amended or modified in accordance with the provisions hereof. "Spin-Off" means the contribution by the Company to Plainbridge of the Rickel home center business, the warehouse, distribution and transportation operations and the inventory therein that service the Pathmark supermarkets and drug stores and certain other assets and the distribution of the shares of Plainbridge to Newco. "Stated Maturity", when used with respect to any Indebtedness or any installment of interest thereon, means the date specified in such Indebtedness as the fixed date on which the principal of such Indebtedness or such installment of interest is due and payable. "Subordinated Indebtedness" means Indebtedness of the Company subordinated in right of payment to the Securities. "Subordinated Notes" means the Company's 11-5/8% Subordinated Notes due 2002 in an aggregate principal amount not in excess of the aggregate principal amount outstanding on the date hereof. "Subsidiary" means any Person a majority of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other - 20- Subsidiaries; provided that an Unrestricted Subsidiary shall not be deemed to be a Subsidiary for purposes of this Indenture. "Tax Sharing Agreement" means the Tax Sharing Agreement dated as of the date of the Spin-Off, 1993 between SMG-II and the Company, as amended or modified in accordance with the provisions hereof. "Temporary Cash Investment" means (i) any evidence of Indebtedness, maturing not more than 180 days after the date of acquisition, issued by the United States of America, or an instrumentality or agency thereof and guaranteed fully as to principal, premium, if any, and interest by the United States of America, (ii) any certificate of deposit, maturing not more than 180 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution that has combined capital and surplus of not less than $300,000,000, whose debt is rated at the time as of which any investment therein is made, of "A" (or higher) according to Moody's Investors Service, Inc. ("Moody's"), or "A" (or higher) according to Standard & Poor's Corporation ("S&P"), (iii) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Company) organized and existing under the laws of the United States of America, with a rating, at the time as of which any investment therein is made, of "P-2" (or higher) according to Moody's or "A-2" (or higher) according to S&P, (iv) any short-term, tax-exempt investment in indebtedness issued by a municipality existing under the laws of the United States of America with a rating, at the time as of which any investment therein is made, of "A" (or higher) according to Moody's or "A" (or higher) according to S&P, and (v) any money market deposit accounts issued or offered by any domestic commercial bank having capital and surplus in excess of $300,000,000. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, and as in force at the date as of which this instrument was executed, except as provided in Section 905. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument, 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 Subsidiary" means (i) any subsidiary of the Company that at the time of determination shall be an Unrestricted Subsidiary (as designated by the Board of Directors of the Company, as provided below) and (ii) any - 21- subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company may designate any subsidiary of the Company (including any newly acquired or newly formed subsidiary) to be an Unrestricted Subsidiary if all of the following conditions apply: (a) such subsidiary is not liable, directly or indirectly, with respect to any Indebtedness other than Unrestricted Subsidiary Indebtedness and (b) any Investment in such subsidiary made as a result of designating such subsidiary an Unrestricted Subsidiary shall not violate the provisions of Section 1017. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complies with the foregoing conditions. The Board of Directors of the Company may designate any Unrestricted Subsidiary as a Subsidiary; provided that immediately after giving effect to such designation, the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the restrictions of Section 1007. "Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary means Indebtedness of such Unrestricted Subsidiary (i) as to which neither the Company nor any Subsidiary is directly or indirectly liable (by virtue of the Company or any such Subsidiary being the primary obligor on, guarantor of, or otherwise liable in any respect to, such Indebtedness), except Guaranteed Debt of the Company or any Subsidiary to any Affiliate, in which case (unless the incurrence of such Guaranteed Debt resulted in a Restricted Payment at the time of incurrence) the Company shall be deemed to have made a Restricted Payment (as defined in Section 1008) equal to the principal amount of any such Indebtedness to the extent guaranteed at the time such Affiliate is designated an Unrestricted Subsidiary and (ii) which, upon the occurrence of a default with respect thereto, does not result in, or permit any holder of any Indebtedness of the Company or any Subsidiary to declare, a default on such Indebtedness of the Company or any Subsidiary or cause the payment thereof to be accelerated or payable prior to its Stated Maturity. "Voting Stock" means stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). - 22- Section 102. Other Definitions. Defined in Term Section "Act"............................................. 105 "Change in Control Notice" ....................... 1012 "Change in Control Offer" ........................ 1012 "Change in Control Purchase Date" ................ 1012 "Change in Control Purchase Notice" .............. 1012 "Change in Control Purchase Price" ............... 10l2 "covenant defeasance" ............................ 1403 "Defaulted Interest" ............................. 307 "defeasance" ..................................... l402 "incorporated provision" ......................... 108 "Notice of Default" .............................. 501 "Security Register" .............................. 305 "Security Registrar" ............................. 305 "Surviving Entity" ............................... 801 "U.S. Government Obligations" .................... 1404 Section 103. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion (other than the certificates required by Section 1018(a)) with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements - 23- or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 104. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of a officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 105. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this - 24- 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 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 of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Trust Indenture Act Section 315) 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 Securities shall be proved by the Security Register. (d) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of such Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding Trust Indenture Act Section 316(c), any such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not more than 30 days prior to the first solicitation of Holders generally in connection therewith and no later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Securities then Outstanding have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for this purpose the Securities then Outstanding shall be computed as of such record date; provided that no such request, demand, authorization, direction, notice, consent, waiver or other Act by the Holders on such record date shall be deemed effective unless it shall become effective - 25- pursuant to the provisions of this Indenture not later than six months after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act by the Holder of any Security shall bind every future Holder of the same Security or the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, suffered or omitted to be done by the Trustee, any Paying Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Security. Section 106. Notices, etc., to Trustee and Company. 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, any Representative or the Company shall be sufficient for every purpose hereunder if made, given, furnished or delivered, in writing, to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration; or (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or delivered in writing or mailed, first-class postage prepaid, to the Company addressed to it c/o Pathmark Stores, Inc., 301 Blair Road, Woodbridge, New Jersey 07095, Attention: President, or at any other address furnished in writing to the Trustee by the Company. The Company shall provide the Trustee in writing with the name and address of the agent bank under the Bank Credit Agreement as of the effective date of this Indenture and shall promptly provide the Trustee in writing with any change in such information. Section 107. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later that the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In - 26- 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 108. Conflict of any Provision of Indenture with Trust Indenture Act. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 318, inclusive, of the Trust Indenture Act, or conflicts with any provision (an "incorporated provision") required by or deemed to be included in this Indenture by operation of such Trust Indenture Act Sections, such imposed duties or incorporated provision shall control. 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 109. 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 110. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its respective successors and assigns, whether so expressed or not. - 27- Section 111. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 112. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person (other than the parties hereto and their successors hereunder, any Paying Agent, the Holders and the holders of Senior Indebtedness) any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 113. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the conflicts of laws principles thereof. Section 114. Legal Holidays. In any case where any Interest Payment Date, any date established for payment of Defaulted Interest pursuant to Section 307, or any Maturity with respect to any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, or date established for payment of Defaulted Interest pursuant to Section 307, or Maturity, and no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date, or date established for payment of Defaulted Interest pursuant to Section 307, or Maturity, as the case may be, to the next succeeding Business Day. Section 115. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting any of the Securities waives and releases all such liability. - 28- ARTICLE TWO SECURITY FORMS Section 201. Forms Generally. The Securities and the Trustee's certificate of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. Any portion of the text of any Security may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Security. The definitive Securities shall be printed, 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 Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Section 202. Form of Face of Security. The form of the face of the Securities shall be substantially as follows: PATHMARK STORES, INC. l2-5/8% Subordinated Debenture due 2002 No. $ Pathmark Stores, Inc., a Delaware corporation (herein called the "Company", which term includes any successor entity under the Indenture hereinafter referred to), for value received, hereby promises to pay to or registered assigns, the principal sum of Dollars on June 15, 2002, at the office or agency of the Company referred to below, and to pay interest thereon on December 15, 1993 and semiannually thereafter on June 15 and December 15 in each year and at Stated Maturity, from June 15, 1993 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 12-5/8% per annum, until the principal hereof is paid or duly provided for. - 29- The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the June 1 or December 1 (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 Securities, 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 Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities 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 Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address shall appear on the Security Register. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. - 30- IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: PATHMARK STORES, INC. By Attest: By [SEAL] Authorized Signature Section 203. Form of Reverse of Security. The form of the reverse of the Securities shall be substantially as follows: This Security is one of a duly authorized issue of securities of the Company designated as its 12-5/8% Subordinated Debentures due 2002 (herein called the "Securities"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $95,750,000, which may be issued under an indenture (herein called the "Indenture") dated as of October 26, 1993, between the Company and Wilmington Trust Company, 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 and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. The Securities are subject to redemption upon not less than 21 nor more than 60 days' notice, in amounts of $1,000 or an integral multiple of $1,000, at any time on or after June 15, 1994 (or, in the circumstances specified in the proviso to this sentence, at any time before June 15, 1994), as a whole or in part, at the election of the Company, at a Redemption Price equal to the percentage of the principal amount set forth below if redeemed during the 12-month period beginning June 15 of the years indicated below: - 31- Year Redemption Price 1993 112.625% 1994 112.625% 1995 112.625% 1996 112.625% 1997 103.600% 1998 102.700% 1999 101.800% 2000 100.900% and thereafter at 100% of the principal amount, in each case together with accrued interest, if any, to the Redemption Date (subject to the right of Holders of record on relevant Regular Record Dates to receive interest due on a Interest Payment Date), all as provided in this Indenture; provided that the Securities shall be subject to optional redemption prior to June 15, 1994 only in the event of (i) the occurrence of a Change in Control or (ii) the Company ceasing to be a Holdings Majority-owned Subsidiary. In the event that a Change in Control occurs, each Holder shall have the right to require that the Company repurchase such Holder's Securities in whole or in part in integral multiples of $1,000 at a purchase price in cash in an amount equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. Within 30 days following a Change in Control, the Company covenants to either (i) repay in full all Indebtedness under the Bank Credit Agreement and permanently reduce the commitments of the lenders thereunder or offer to repay in full all such Indebtedness and permanently reduce such commitments and repay the Indebtedness and permanently reduce the commitments of each lender that accepted such offer or (ii) obtain the requisite consent under the Bank Credit Agreement to permit the repurchase of the Securities. In the case of any redemption of Securities, interest installments whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Date referred to on the face hereof. Securities (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. - 32- If an Event of Default shall occur and be continuing, the principal of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Security and (b) certain restrictive covenants and the related Defaults and Events of Default, upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Security. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security 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 Security. The indebtedness evidenced by the Securities is subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full of all Senior Indebtedness of the Company whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by his acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on his behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee his attorney-in-fact for such purpose; provided that the indebtedness evidenced by this Security shall cease to be so subordinate and subject in right of payment upon any defeasance of this Security as provided in the Indenture. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on - 33- this Security at the times, place, and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable on the Security Register of the Company, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for such purpose in The City of New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities 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 Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any registration of transfer or exchange or redemption of Securities, but the Company may require payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charges payable in connection with any registration of transfer or exchange. Prior to the time of due presentment of this Security 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 Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any agent shall be affected by notice to the contrary. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. Customary abbreviations may be used in the name of a Holder or a assignee, such as: TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to Minors Act). - 34- I/We assign and transfer this Security to Insert assignee's soc. sec. or tax ID no. ........ - -------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: Signed: (Sign exactly as your name appears on the other side of this Security.) Signature Guaranteed: (Signature must be guaranteed by a member firm of a principal stock exchange or a commercial bank or trust company.) Section 204. Form of Trustee's Certificate of Authentication. TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities referred to in the within-mentioned Indenture. WILMINGTON TRUST COMPANY as Trustee By Authorized Signatory - 35- ARTICLE THREE THE SECURITIES Section 301. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $95,750,000, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 303, 304, 305, 306, 906, 1012 or 1108. The Securities shall be known and designated as the "12-5/8% Subordinated Debentures due 2002" of the Company. Their Stated Maturity shall be June 15, 2002, and they shall bear interest at the rate of 12-5/8% per annum from June 15, 1993 or the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable on December 15, 1993 and semi-annually thereafter on June 15 and December 15 in each year and at said Stated Maturity, until the principal thereof is paid or duly provided for. Subject to Article Thirteen, interest on any overdue amount of principal, interest (to the extent lawful) or premium, if any, shall be payable on demand. The principal of (and premium, if any) and interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose; provided, however, that, at the option of the Company, interest may be paid by check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Security Register. The Securities shall be redeemable as provided in Article Eleven. The Indebtedness evidenced by the Securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article Thirteen. Section 302. Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. - 36- Section 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by any two of the following: its Chairman, one of its Vice Chairmen, its President or one of its Vice Presidents, under its corporate seal reproduced thereon and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices on the date of such Securities. The Trustee shall (upon Company Order) authenticate and deliver Securities for original issue in an aggregate principal amount of up to $95,750,000. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as provided in this Indenture and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of one of its duly authorized signatories, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. In case the Company, pursuant to Article Eight, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of substantially all of its properties and assets to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company shall have been merged, or the successor Person which shall have received a conveyance, transfer, lease or other disposition as - 37- aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article Eight, any of the Securities authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Securities executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Securities surrendered for such exchange and of like principal amount; and the Trustee, upon Company Order of the successor Person, shall authenticate and deliver Securities as specified in such request for the purpose of such exchange. If Securities shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section in exchange or substitution for or upon registration of transfer of any Securities, such successor Person, at the option of any Holder but without expense to such Holder, shall provide for the exchange of all Securities at the time Outstanding held by such Holder for Securities authenticated and delivered in such new name. Section 304. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. - 38- Section 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee (and any other office or agency so designated) is hereby initially appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at the office or agency of the Company designated pursuant to Section 1002 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denomination or denominations and of a like aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denomination or denominations of a like aggregate principal amount upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer, or for exchange or redemption, shall (if so required by the Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange or redemption of Securities, but the Company may require payment of a sum sufficient to pay all - 39- documentary, stamp or similar issue or transfer taxes or other governmental charges that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 303, 304, 306, 906, l0l2 or 1108 not involving any transfer. The Company shall not be required (a) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business (i) 15 days before the mailing of a notice of redemption of the Securities selected for redemption under Section 1104 and ending at the close of business on the day of such mailing or (ii) 15 days before an Interest Payment Date and ending on the close of business on the Interest Payment Date, or (b) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of Securities being redeemed in part. Section 306. Mutilated, Destroyed, Lost and Stolen Securities. If (a) any mutilated Security is surrendered to the Trustee, or (b) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them and any agent of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a replacement Security of like tenor and principal amount, and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a replacement Security, pay such Security. Upon the issuance of any replacement Securities under this Section, the Company may require the payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charges that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every replacement Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute a contractual obligation of the Company, whether or - 40- not the destroyed, lost or stolen Security 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 Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 307. Payment of Interest; Interest Rights Preserved. Interest on any Security 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 Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security 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 applicable interest rate borne by the Securities, to the extent lawful (such defaulted interest (and such interest thereon) herein collectively called "Defaulted Interest"), shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder; and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Subsection (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) 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 Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Subsection provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the - 41- date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date. 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 his address as it appears in the Security 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 Securities (or their respective Predecessor Securities) are registered at the close of business 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 Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Subsection, such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 308. Persons Deemed Owners. Prior to 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 whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 307) interest on such Security and for all other purposes whatsoever, whether or not such Security 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 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee - 42- and shall be promptly cancelled by it. The Company shall deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order. Section 310. Computation of Interest. Interest on the Securities shall be computed on the basis of a year of twelve 30-day months. ARTICLE FOUR SATISFACTION AND DISCHARGE Section 401. Satisfaction and Discharge of Indenture. This Indenture shall, upon Company Request, cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Securities herein expressly provided for) and the Trustee, on demand of and at the expense of the Company shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (1) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities 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 1003) have been delivered to the Trustee for cancellation; or (2) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or - 43- (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (2)(i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount in cash in U.S. Dollars or U.S. Government Obligations sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that (i) all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with and (ii) 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 is a party or by which it is bound. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 606 and, if money shall have been deposited with the Trustee pursuant to subclause (2) of Subsection (a) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section l003 shall survive. Section 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee. Money so held in trust shall not be subject to the provisions of Article Thirteen of this Indenture. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 401 by reason of any - 44- legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 401; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE FIVE REMEDIES Section 501. Events of Default. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether or not it shall be occasioned or prohibited by the provisions of Article Thirteen or be voluntary or involuntary or be effected by the operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administration or governmental body): (a) default in the payment of interest on any Security when such interest becomes due and payable and continuance of such default for a period of 30 days; or (b) default in the payment of the principal of (or premium, if any, on) any Security at its Maturity; or (c) default in the performance, or breach, of any covenant or agreement of the Company hereunder (other than a default in the performance, or breach, of a covenant or agreement that is specifically dealt with elsewhere in this Section), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default or breach and stating that such notice is a "Notice of Default" hereunder; or (d) (i) an event of default shall have occurred under any mortgage, bond, indenture, loan agreement or other document evidencing any issue of Indebtedness of the - 45- Company or any Material Subsidiary for money borrowed, which issue has an aggregate outstanding principal amount of not less than $50,000,000, and such default shall result in such Indebtedness becoming, whether by declaration or otherwise, due and payable prior to the date on which it would otherwise become due and payable or (ii) a default in any payment when due at final maturity of any such Indebtedness; or (e) final judgments or orders not covered by insurance or a bond rendered against the Company or any Material Subsidiary which require the payment in money, either individually or in an aggregate amount, that is more than $30,000,000 and such judgment or order shall remain unsatisfied or unstayed for 60 days; or (f) the entry of a decree or order by a court having jurisdiction in the premises (i) for relief in respect of the Company or any Material Subsidiary in an involuntary case or proceeding under the Federal Bankruptcy Code or any other federal or state bankruptcy, insolvency, reorganization or similar law or (ii) adjudging the Company or any Material Subsidiary a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or any Material Subsidiary under the Federal Bankruptcy Code or any other applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or any Material Subsidiary or of any substantial part of any of their properties, or ordering the winding up or liquidation of any of their affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (g) the institution by the Company or any Material Subsidiary of a voluntary case or proceeding under the Federal Bankruptcy Code or any other applicable federal or state law or any other case or proceedings to be adjudicated a bankrupt or insolvent, or the consent by the Company or any Material Subsidiary to the entry of a decree or order for relief in respect of the Company or any Material Subsidiary in any involuntary case or proceeding under the Federal Bankruptcy Code or any other applicable federal or state law or to the institution of bankruptcy or insolvency proceedings against the Company or any Material Subsidiary, or the filing by the Company or any Material Subsidiary of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other applicable federal or state law, or the - 46- consent by it to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of any of the Company or any Material Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due or taking of corporate action by the Company or any Material Subsidiary in furtherance of any such action; or (h) default in the performance or breach of any of the provisions of Article Eight. Section 502. Acceleration of Maturity; Rescission. If an Event of Default (other than an Event of Default specified in Section 50l(f) or 501(g)) occurs and is continuing, the Trustee or the Holders of at least 25% of the principal amount of the Securities then Outstanding may, and the Trustee at the request of such Holders shall, declare all unpaid principal of, premium, if any, and accrued interest on all the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders); provided that so long as the Bank Credit Agreement shall be in force and effect, if any such Event of Default shall have occurred and be continuing, any such acceleration shall not be effective until the earlier of (a) five Business Days following a notice of acceleration given to the Company and the agent bank under the Bank Credit Agreement and only if upon such fifth Business Day such Event of Default shall be continuing or (b) the acceleration of any Indebtedness under the Bank Credit Agreement. If an Event of Default specified in Section 501(f) or 501(g) occurs and is continuing, the amounts described above shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. 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 at least a majority in aggregate principal amount of the Securities outstanding, by written notice to the Company and the Trustee, may annul 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 - 47- all Securities, (iii) the principal of and premium, if any, on any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, and (iv) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Securities; and (b) all Events of Default, other than the non-payment of principal of the Securities which have become due solely by the declaration of acceleration, have been waived as provided in Section 513 or cured. No such rescission shall affect any subsequent default or impair any right consequent thereon. Notwithstanding the preceding paragraph, in the event of a declaration of acceleration in respect of the Securities, because an Event of Default specified in Section 501(d) shall have occurred and be continuing, such declaration of acceleration shall be automatically annulled if the Indebtedness that is the subject of such Event of Default has been discharged or the holders thereof have rescinded their declaration of acceleration in respect of such Indebtedness, and, if such Indebtedness is not Senior Indebtedness, such rescission has been made without any payment or other transfer or grant, or any promise or other undertaking to pay or otherwise transfer or grant, any tangible or intangible property or right to such holders in connection with such rescission, and written notice of such discharge or rescission, as the case may be, shall have been given to the Trustee by the Company and by the holders of such Indebtedness or a trustee, fiduciary or agent for such holders, within 60 days after such declaration of acceleration in respect of the Securities, and (x) no other Event of Default has occurred during such 60-day period, and (y) no Default arising from such discharge has occurred during such 60-day period, which, in either case, has not been cured or waived during such period. Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (a) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount - 48- then due and payable on such Securities for principal (and premium, if any) and interest, with interest upon the overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon overdue installments of interest, at the rate borne by the Securities; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders under this Indenture by such appropriate private or judicial proceedings as the Trustee shall deem most effectual to protect and enforce such rights. Section 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and - 49- counsel) and of the Holders allowed in such judicial proceeding; provided that in the event that proof of such claim and such other papers or documents have not been so filed by the thirtieth day prior to the final date on which such claim may be filed, the holders of Specified Senior Indebtedness or their representatives shall be permitted to file such proof of claim and other papers and documents for and on behalf of the Holders of the Securities; 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, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 606. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any proposal, plan of reorganization, arrangement, adjustment or composition or other similar arrangement affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 506. Application of Money Collected. Subject to Article Thirteen, any money, securities or other property collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or - 50- dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 606; SECOND: To the payment of the amounts then due and unpaid upon the Securities for principal (and premium, if any) and interest, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest; and THIRD: The balance, if any, to the Company. Section 507. Limitation on Suits. No Holder of any Securities shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or the Securities, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; - 51- it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture except in the manner provided in this Indenture and for the equal and ratable benefit of all the Holders. Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 307) interest on such Security on the respective due dates expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, 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 510. Rights and Remedies Cumulative. Except as provided in Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and 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. - 52- Section 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 512. Control by Holders. The Holders of not less than a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided that (a) such direction shall not be in conflict with any rule of law or with this Indenture or expose the Trustee to personal liability, and (b) subject to the provisions of Trust Indenture Act Section 315, the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 513. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities 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 (or premium, if any) or interest on any Security, 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 Security affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. - 53- Section 514. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security 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 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 Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). Section 515. Waiver of Stay, Extension or Usury Laws. The Company 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, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 516. Unconditional Right of Holders to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any other provision of any Security, the right of any Holder of any Security to receive payment of the principal of, premium, if any, and interest on such Security on or after the respective due dates expressed in such Security, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. - 54- ARTICLE SIX THE TRUSTEE Section 601. Notice of Defaults. Within 60 days after the occurrence of any Default, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security 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 (or premium, if any) or interest on any Security, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders; and provided further that, in the case of any default or breach of the character specified in Section 501(d), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. Section 602. Certain Rights of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee need perform only those duties as are specifically set forth in this Indenture and no covenants or obligations shall be implied in this Indenture that are adverse to the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided that the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. - 55- (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this subsection (c) does not limit the effect of subsection (b) of this Section 602; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 512; and (iv) 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, and does believe, that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to this Section 602. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense, including such reasonable advances as may be requested by the Trustee. (f) Subject to the foregoing subsections (a) through (e) of this Section 602: (i) The Trustee may rely and shall be protected in acting or in refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. Any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or a Company Order and any resolution by the board of directors of the Company may be sufficiently evidenced by a Board Resolution. - 56- (ii) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. In addition, in determining the Company's compliance with the financial covenants set forth herein, the Trustee may rely on the certificate delivered to the Trustee pursuant to Section 1018(a). (iii) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (iv) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers. (v) The Trustee may consult with counsel, accountants or other experts and any advice of such counsel, accountants or other experts shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice. Section 603. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, 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 Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility and Qualification on Form T-l supplied to the Company are true and accurate, subject to the qualifications set forth therein. Section 604. Trustee and Agents May Hold Securities; Collections; etc. The Trustee, any Paying Agent, Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities with - 57- the same rights it would have if it were not the Trustee, Paying Agent, Security Registrar or such other agent and, subject to Trust Indenture Act Sections 310(b) and 31l, 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 Trustee, Paying Agent, Security Registrar or such other agent. Section 605. Money Held in Trust. All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust hereunder for the purposes for which they were received and need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. Section 606. Compensation and Reimbursement. The Company covenants and agrees: (a) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee and each of its officers, directors, employees, agents and counsel for, and to hold them harmless against, any loss, liability or expense incurred without negligence or bad faith on their part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation of the Company under this Section 606 to compensate the Trustee and to pay and reimburse the Trustee for such expenses, disbursements and advances shall constitute - 58- additional Indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture and shall not be subject to the provisions of Article Thirteen. If, and to the extent that, the Trustee, its counsel, and other agents do not receive compensation for services rendered, reimbursement of their advances, expenses and disbursements, or indemnity, as herein provided, as the result of allowances made in any reorganization, bankruptcy, receivership, liquidation or other proceeding or by any plan or reorganization or readjustment of obligations of the Company, the Trustee shall be entitled, in priority to the Holders of the Securities, to receive any distributions of any securities, dividends or other disbursements which would otherwise be made to the Holders of the Securities in any such proceeding or proceedings and the Trustee is hereby constituted and appointed, irrevocably, the attorney-in-fact for the Holders of the Securities and each of them to collect and receive, in their name, place and stead, such distributions, dividends or other disbursements, to deduct therefrom the amounts due to the Trustee, its counsel and other agents on account of services rendered, advances, expenses, and disbursements made or incurred, or indemnity, and to pay and distribute the balance, pro rata, to the Holders of the Securities. The Trustee shall have a lien upon any securities or other consideration to which the Holders of the Securities may become entitled pursuant to any such plan or reorganization or readjustment of obligations, or in any such proceeding or proceedings; and the court or judge in any such proceeding or proceedings may determine the terms and conditions under which any such lien shall exist and be enforced. As security for the performance of the obligations of the Company under this Section, the Trustee shall have a claim prior to the Securities upon all money, securities or other property held or collected by the Trustee as such, except funds held in trust for the benefit of Holders of particular Securities, and the Securities are hereby subordinated to such claim. If the Trustee incurs expenses or renders services after an Event of Default specified in Section 501(g) or 501(h) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under the Federal Bankruptcy Code and any other applicable federal or state bankruptcy Law. Section 607. Conflicting Interests. The Trustee shall comply with the provisions of Section 3l0(b) of the Trust Indenture Act. - 59- Section 608. 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 Section 310(a)(1) and which shall have a combined capital and surplus of at least $100,000,000 and have its Corporate Trust Office located in The City of New York (or, if its Corporate Trust Office shall not be located in The City of New York, the Company shall, pursuant to Section 1002, maintain an office or agency in The City of New York where the Securities may be presented or surrendered and notices and demands hereunder may be made or served) to the extent there is such an institution eligible and willing to serve. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of Federal, State, Territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 609. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 610, at which time the retiring Trustee shall be fully discharged from its obligations hereunder. (b) The Trustee may resign at any time by giving written notice thereof to the Company. 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 30 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 Security 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. - 60- (c) The Trustee may be removed at any time by an Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and the Company. (d) If at any time: (1) the Trustee shall fail to comply with the provisions of Trust Indenture Act Section 310(b) after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 608 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 Security for at least six months, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 514, the Holder of any Security who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with Section 610, 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 Securities and so accepted appointment, the Holder of any Security who has been a bona - 61- 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 Securities as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Section 610. 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; provided, however, that the retiring Trustee shall continue to be entitled to the benefit of Section 606(c); but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Upon acceptance of appointment by any successor Trustee as provided in this Section 610, the Company shall give notice thereof to the Holders of the Securities, by mailing such notice to such Holders at their addresses as they shall appear on the Security Register. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 609. If the Company fails to give such notice within 10 days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Company. - 62- Section 611. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 612. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor under the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 701. Disclosure of Names and Addresses of Holders. Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee or any agent of either of them shall be held accountable by reason of the disclosure of any information as to the names and addresses of the Holders in accordance with Trust Indenture Act Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Trust Indenture Act Section 312. - 63- Section 702. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Securities, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, as provided in Trust Indenture Act Section 313(c), a brief report dated as of such May l5 if required by Trust Indenture Act Section 313(a). Section 703. Reports by Company. The Company shall: (a) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section l3 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of such Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (b) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (c) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, in the manner and to the extent provided in Trust Indenture Act Section 313(c), such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. - 64- ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 801. Company May Consolidate, etc., Only on Certain Terms. The Company shall not consolidate or merge with or into any other Person, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties and assets (as an entirety or substantially as an entirety in one transaction or series of related transactions) to any Person or permit any of its Subsidiaries to enter into any such transaction or transactions if such transaction or transactions, in the aggregate, would result in a transfer of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis to any Person unless, at the time and after giving effect thereto: (i) either (a) the Company shall be the continuing corporation, or (b) the Person (if other than the Company) formed by such consolidation, or into which the Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or disposition the properties and assets of the Company, substantially as an entirety (the "Surviving Entity"), shall be a corporation duly organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and the Surviving Entity shall, in either case, expressly assume by supplemental indenture hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture and this Indenture shall remain in full force and effect; (ii) immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction on a pro forma basis, the Consolidated Fixed Charge Coverage Ratio of the Company (or the Surviving Entity if the Company is not the continuing obligor under this Indenture), for the Company's four most recently completed full fiscal quarters is at least 1.75 to 1.0; and (iv) the Company has delivered or caused to be delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, transfer or lease and such supplemental indenture, - 65- if one is required by this Section 801, comply with this Section 801 and that all conditions precedent herein provided for relating to such transaction have been complied with. Section 802. Successor Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease or conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 801, the successor Person formed by such consolidation or into which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein. In the event of any transaction (other than a lease) described in and complying with the conditions listed in Section 8.01 in which the Company is not the continuing corporation, the successor Person formed or remaining shall succeed to, and be substituted for, and may exercise every right and power, of the Company and the Company would be discharged from all obligations and covenants under this Indenture and the Securities. ARTICLE NINE SUPPLEMENTAL INDENTURES Section 901. Supplemental Indentures without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; (b) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein or in the Securities conferred upon the Company; (c) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising - 66- under this Indenture; provided that, in each case, such provisions shall not adversely affect the interests of the Holders; (d) to secure the Securities pursuant to the requirements of Section 801 or Section 1010 or otherwise; (e) to provide for the guarantee of payment of the Securities by any Subsidiary pursuant to the requirements of Section 1014 or Section 1015; (f) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act, as contemplated by Section 905 or otherwise; (g) to evidence and provide the acceptance of the appointment of a successor Trustee hereunder; or (h) to make any other change that does not adversely affect the rights of any Holder. Section 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by Act of such Holders delivered to the Company and the Trustee, each when authorized by a Board Resolution, and the Trustee may enter into one or more indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of waiving or modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture, amendment or waiver shall, without the consent of the Holder of each Outstanding Security affected thereby: (a) change the Stated Maturity of the principal of, or any installment of interest on, any Security or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which the principal of any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date) or modify the obligation of the Company to make and consummate a Change in Control Offer or modify any of the provisions or definitions with respect thereto; or - 67- (b) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; or (c) modify any of the provisions of this Section or Section 513 or Section 1019, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby; or (d) modify any of the provisions of Article Thirteen hereof in a manner adverse to the Holders of the Securities; or (e) except as otherwise permitted under Article Eight, consent to the assignment or transfer by the Company of any of its rights and obligations under this Indenture. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Trust Indenture Act Section 315(a) through 315(d) and Section 602 hereof) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. - 68- Section 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 906. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Company, bear a notation in form approved by the Company as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Company, to any such supplemental indenture may be prepared and executed by the Company and shall be authenticated and delivered by the Trustee in exchange for Outstanding Securities. Section 907. Effect on Senior Indebtedness. No supplemental indenture shall adversely affect the rights of any holders of Senior Indebtedness under Article Thirteen unless the requisite holders of each issue of Senior Indebtedness affected thereby shall have consented to such supplemental indenture. ARTICLE TEN COVENANTS Section 1001. Payment of Principal, Premium and Interest. The Company will duly and punctually pay the principal of (and premium, if any) and interest on the Securities in accordance with the terms of the Securities and this Indenture. Section 1002. Maintenance of Office or Agency. The Company will maintain, in The City of New York, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. If the Corporate Trust Office is located in New York City, then it shall be such office or agency of the Company, unless the Company shall designate and - 69- maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Securities 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 recission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or recission and any change in the location of any such office or agency. Section 1003. Money for Security Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for the Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any Securities, deposit with a Paying Agent a sum in same day funds (or New York Clearing House funds if such deposit is made prior to the date on which such deposit is required to be made) sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument - 70- in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest; (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 respects with the provisions of this Indenture relating to the duties, rights and obligations 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 shall 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 (and premium, if any) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the - 71- New York Times and the Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 1004. Corporate Existence. Subject to Article Eight, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and that of each Material Subsidiary of the Company and the corporate rights (charter and statutory), corporate licenses and corporate franchises of the Company and its Material Subsidiaries, except where a failure to do so, singly or in the aggregate, is not likely to have a materially adverse effect upon the business, assets, financial conditions or results of operations of the Company and the Material Subsidiaries taken as a whole determined on a consolidated basis in accordance with generally accepted accounting principles; provided that the Company shall not be required to preserve any such existence (except of the Company), right, licenses or franchise if the Board of Directors of the Company, or of the Material Subsidiary concerned, shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company or such Material Subsidiary and that the loss thereof is not disadvantageous in any material respect to the Holders. Section 1005. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon it or any Subsidiary or upon the income, profits or property of the Company or any of its Subsidiaries and (b) all material lawful claims for labor, materials and supplies, which, if unpaid, might by law become a lien upon the property of the Company or any of its Subsidiaries that could produce a material adverse effect on the consolidated financial condition of the Company; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and in respect of which appropriate reserves (in the good faith judgment of management of the Company) are being maintained in accordance with GAAP. - 72- Section 1006. Maintenance of Properties. The Company shall cause all material properties owned by or leased to it or any Material Subsidiary of the Company and necessary in the conduct of its business or the business of such Material Subsidiary to be maintained and kept in normal condition, repair and working order, ordinary wear and tear excepted; provided that nothing in this Section shall prevent the Company or any Material Subsidiary of the Company from discontinuing the use, operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Board of Directors of the Company or the Material Subsidiary concerned, or of any officer (or other agent employed by the Company or any Material Subsidiary of the Company) of the Company or such Material Subsidiary having managerial responsibility for any such property, desirable in the conduct of the business of the Company or any Material Subsidiary of the Company and if such discontinuance or disposal is not adverse in any material respect to the Securityholders. The Company shall provide or cause to be provided, for itself and any Material Subsidiaries of the Company, insurance (including appropriate self-insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like properties in the same general areas in which the Company or such Material Subsidiaries operate. Section 1007. Limitation on Indebtedness. The Company will not, and will not permit any of its Subsidiaries to, create, incur, assume, or directly or indirectly guarantee or in any other manner become directly or indirectly liable for the payment of, any Indebtedness (including any Acquired Indebtedness, but excluding Permitted Indebtedness) unless, at the time of such event and after giving effect thereto on a pro forma basis, the Company's Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding such event, taken as one period and calculated on the assumption that such Indebtedness had been incurred on the first day of such four-quarter period and on the assumption that, in connection with the incurrence of any such Indebtedness, any related acquisition (whether by means of purchase, merger or otherwise) and any related repayment of Indebtedness also had occurred on such date with the appropriate adjustments with respect to such acquisition and repayment being included in such pro forma calculation, would have been at least equal to 1.75 to 1.0. - 73- Section 1008. Limitation on Restricted Payments. (a) The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, (i) declare or pay any dividend on, or make any distribution to holders of, any shares of the Company's Capital Stock (other than dividends or distributions payable in shares of its Qualified Capital Stock or in options, warrants or other rights to purchase such Qualified Capital Stock), (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any Affiliate thereof (other than Capital Stock of (x) any Subsidiary held by the Company or any of its Majority-owned Subsidiaries and (y) any Majority-owned Subsidiary of the Company) or any options, warrants or other rights to acquire such Capital Stock, (iii) make any principal payment on or redeem, repurchase, defease or otherwise acquire or retire for value, prior to any scheduled principal payment or maturity, any Indebtedness of the Company which is pari passu with or expressly subordinate in right of payment to the Securities, (iv) declare or pay any dividend or distribution on any Capital Stock of any Subsidiary to any Person (other than the Company or any of its Majority-owned Subsidiaries) or purchase, redeem or otherwise acquire or retire for value any Capital Stock of any Subsidiary held by any Person (other than the Company or any of its Majority-owned Subsidiaries), or (v) incur, create or assume any guarantee of Indebtedness of any Affiliate of the Company (other than a Majority-owned Subsidiary of the Company) or make any Investment (other than any Permitted Investment) in any Person, including any Unrestricted Subsidiary (such payments or other actions described in the foregoing clauses (i) through (v), other than any such action that is a Permitted Payment, are collectively referred to as "Restricted Payments"), unless at the time of and after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution), (1) no Default - 74- or Event of Default shall have occurred and be continuing and (2) the aggregate amount of all Restricted Payments (plus Permitted Payments set forth in Sections 1008(b)(vi), (xi) and (xii)) declared or made after the date hereof (including Investments in Unrestricted Subsidiaries pursuant to the provisions of Section 1017) shall not exceed the sum of: (A) 50% of the aggregate cumulative Consolidated Adjusted Net Income of the Company accrued on a cumulative basis during the period beginning on October 31, 1993 and ending on the last day of the Company's last fiscal quarter ending prior to the date of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Adjusted Net Income shall be a loss, minus 100% of such loss), plus (B) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, whose determination shall be conclusive), received after the date hereof by the Company as capital contributions to the Company, plus (C) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, whose determination shall be conclusive), received after the date hereof by the Company from the issuance or sale (other than to any of its Subsidiaries) of shares of Qualified Capital Stock of the Company or warrants, options or rights to purchase shares (other than issuances permitted by clause (v) of the definition of Permitted Payments contained in Section l008(b)) of Qualified Capital Stock of the Company, plus (D) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, whose determination shall be conclusive), received by the Company (other than from any of its Subsidiaries) upon the exercise of options, warrants or rights to purchase shares of Qualified Capital Stock of the Company, plus (E) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Company's Board of Directors, - 75- whose determination shall be conclusive), received after the date hereof by the Company from the issue or sale of debt securities that have been converted into or exchanged for Qualified Capital Stock of the Company, together with the aggregate cash received by the Company at the time of such conversion or exchange. (b) Section 1008(a) to the contrary notwithstanding, the Company and its Subsidiaries may take the following actions (clauses (i) through (xii) being referred to as "Permitted Payments") so long as, in the case of clauses (vi), (ix), (x) and (xii), no Default or Event of Default has occurred and is continuing: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such declaration date such declaration complied with the provisions of Section 1008(a) (in which event such dividend shall be deemed to have been paid on such date of declaration thereof for purposes of Section 1008(a)); (ii) the repurchase, redemption or other acquisition or retirement of any shares of any class of Capital Stock of the Company or any Affiliate 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 (other than to a Subsidiary) of shares of Qualified Capital Stock of the Company; (iii) payments by the Company to SMG-II pursuant to the Tax Sharing Agreement; (iv) dividends or distributions in an aggregate amount not to exceed the amount of dividends or distributions paid to the Company or its Subsidiaries by Unrestricted Subsidiaries since the date of this Indenture; (v) the redemption, defeasance, repurchase or acquisition or retirement for value (each, for purposes of this clause, a "refinancing") of any Indebtedness of the Company (other than Redeemable Capital Stock) which is pari passu with or expressly subordinate in right of payment to the Securities - 76- through the issuance of (A) new Indebtedness of the Company or (B) shares of Qualified Capital Stock of the Company or Newco, provided that, with respect to clause (A), any such new Indebtedness (1) has a principal amount that does not exceed the principal amount so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing; provided that for purposes of this clause, the principal amount of any Indebtedness shall be deemed to mean the principal amount thereof or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination, (2) has an Average Life to Stated Maturity that is equal to or greater than the remaining Average Life to Stated Maturity of the Securities, (3) has a final Stated Maturity that exceeds the final Stated Maturity of principal of the Securities, and (4) is pari passu with or expressly subordinated in right of payment to the Securities at least to the same extent as the Indebtedness refinanced; (vi) dividends, loans or advances by the Company to Holdings to enable Holdings or Newco to pay cash dividends on the Holdings Preferred Stock; provided that on the date of payment of such dividend, the Company, after giving pro forma effect to such dividend, loan or advance, would be able to incur $1.00 of additional Indebtedness under the provisions of Section 1007 (other than Permitted Indebtedness), assuming a market rate of interest on such Indebtedness; (vii) the redemption, repurchase, defeasance or acquisition or retirement for value of any Pari Passu Indebtedness; provided that the Company shall redeem, pursuant to the optional redemption provisions in Article Eleven and the Securities, the principal amount of Securities bearing the same proportion to the aggregate amount of such Pari Passu Indebtedness being redeemed, repurchased, defeased or acquired or retired for value that the aggregate outstanding principal amount of such Securities bears to the aggregate outstanding principal amount of such Pari Passu Indebtedness (without giving effect to such redemption, repurchase, defeasance, acquisition or retirement); - 77- (viii) the declaration or payment of any dividend or distribution on any Capital Stock of any Subsidiary, or the purchase, redemption, acquisition or retirement for value of any Capital Stock of any Subsidiary; provided that such declaration, payment, purchase, redemption, acquisition or retirement is made pro rata among all holders of such Capital Stock of such Subsidiary; (ix) payments or other actions described in clauses (i) through (v) of Section 1008(a) that would otherwise be Restricted Payments in an aggregate amount not to exceed $35,000,000; (x) the dividend or distribution of the Capital Stock of Plainbridge to Newco; (xi) the repurchase of any Indebtedness of the Company which is pari passu with or expressly subordinate in right of payment to the Securities at a purchase price not greater than 101% of the principal amount of such Indebtedness in the event of a Change in Control pursuant to a provision similar to Section 1012; provided that prior to such repurchase the Company has made the Change in Control Offer as provided in Section 1012 and has repurchased all Securities validly tendered for payment in connection with such Change in Control Offer; and (xii) the redemption, repurchase, defeasance or acquisition or retirement for value of the Holdings Intercompany Notes remaining outstanding following the Recapitalization (other than a scheduled principal payment, scheduled sinking fund payment or at maturity). Except as provided in this Section 1008(b) and Section 1008(a)(2), nothing in this Section 1008 limits or restricts the making of any Permitted Payment and a Permitted Payment will not be treated as a Restricted Payment. (c) In computing Consolidated Adjusted Net Income of the Company under clause (A) of Section 1008(a), (l) the Company shall use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (2) the Company shall be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment which, at the time of the making of such Restricted Payment would in the good faith determination of the Company be permitted under the applicable provisions of this Section 1008, such Restricted Payment shall be deemed to have - 78- been made in compliance with such provisions notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Adjusted Net Income of the Company for any period. Section 1009. Limitation on Transactions with Affiliates. (a) The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with any Affiliate of the Company (other than a wholly owned Subsidiary thereof) unless (i) such transaction or series of transactions is or are on terms that are no less favorable to the Company or such Subsidiary, as the case may be, than those that could have been obtained at the time of such transaction or transactions in a comparable transaction in arm's-length dealings with an unaffiliated third party and (ii) (A) with respect to any transaction or series of transactions involving aggregate payments in excess of $1,000,000, but less than $10,000,000, the Company delivers an Officers' Certificate to the Trustee certifying that such transaction or transactions complies with clause (i) above and (B) with respect to a transaction or series of transactions, involving aggregate payments equal or greater than $10,000,000, (1) such transaction or transactions shall have received the approval of a majority of the disinterested directors of the Board of Directors of the Company if Plainbridge is a party to such transaction or series of transactions or (2) if Plainbridge is not a party to such transaction or series of transactions, such transactions or series of transactions shall have received either the approval of a majority of the disinterested directors of the Board of Directors of the Company or the Company shall deliver to the Trustee a written opinion of a nationally recognized investment banking firm stating that such transaction is fair to the Company from a financial point of view; provided, however, that the foregoing restriction shall not apply to (1) the payment of fees to Merrill Lynch Capital Partners, Inc. or Merrill Lynch, Pierce, Fenner & Smith Incorporated or any of their Affiliates for consulting, investment banking or financial advisory services rendered by such Person to the Company or any Subsidiary of the Company, (2) the payment of reasonable and customary regular fees to directors of the Company, Newco, SMG-II, Holdings or any of their respective subsidiaries or parents who are not employees of any of such Persons, (3) the Logistical Services Agreement and transactions pursuant thereto and (4) the Spin-Off Agreements and transactions pursuant thereto. For purposes of this Section 1009(a), any transaction or series of - 79- related transactions between the Company or any Subsidiary and any Affiliate of the Company that is approved as being on the terms required by clause (i) above by a majority of the disinterested directors of the Board of Directors of the Company shall be deemed to be on terms as favorable as those that might be obtained at the time of such transaction or series of transactions in a comparable transaction in arm's-length dealings with an unaffiliated third party, and thus shall be permitted under this Section 1009(a). (b) The Company will not, and will not permit any of its Subsidiaries to, amend, modify, or in any way alter the terms of the Intercompany Agreement, the Logistical Services Agreement or the Spin-Off Agreements in a manner materially adverse to the Company, other than (i) by adding new Subsidiaries and (ii) in the case of the Logistical Services Agreement and the Spin-Off Agreements, any amendments or modifications that are approved by a majority of the disinterested directors of the Board of Directors of the Company. Section 1010. Limitation on Liens. The Company will not, and will not permit any Subsidiary to, create, incur, affirm or suffer to exist any Lien of any kind securing any Pari Passu Indebtedness or Subordinated Indebtedness (including any assumption, guarantee or other liability with respect thereto by any Subsidiary) upon any property or assets (including any intercompany notes) of the Company or any Subsidiary owned on the date hereof or acquired after the date hereof, or any income or profits therefrom, unless the Securities are directly secured equally and ratably with (or prior to in the case of Subordinated Indebtedness) the obligation or liability secured by such Lien, and except for any Lien securing Acquired Indebtedness created prior to the incurrence of such Indebtedness by the Company or any Subsidiary, provided that any such Lien only extends to the assets that were subject to such Lien securing such Acquired Indebtedness prior to the related acquisition by the Company or its Subsidiaries. Section 1011. Limitation on Other Senior Subordinated Indebtedness. The Company will not create, incur, assume, guarantee or in any other manner become liable with respect to any Indebtedness (other than Permitted Senior Subordinated Indebtedness) that is subordinate in right of payment to any Senior Indebtedness unless such Indebtedness is also pari passu with, or subordinate in right of payment to, the Securities, - 80- pursuant to subordination provisions substantially similar to those contained in Article Thirteen. Section l0l2. Purchase of Securities Upon Change in Control. (a) If there shall have occurred a Change in Control, Securities shall be purchased by the Company, at the option of the Holder thereof, in whole or in part in integral multiples of $1,000, on a date which shall be a Business Day that is not earlier than 45 days nor later than 60 days from the date the Change in Control Notice referred to below is given to Holders or such later date as may be necessary for the Company to comply with requirements under the Exchange Act (such date, or such later date, being the "Change in Control Purchase Date"), at a purchase price in cash (the "Change in Control Purchase Price") in an amount equal to 101% of the principal amount of such Securities, plus accrued and unpaid interest (including any Defaulted Interest), if any, to the Change in Control Purchase Date, subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 1012(c). (b) Within 30 days following a Change in Control and prior to the mailing of the Change in Control Notice to Holders provided for in paragraph (c) below, the Company covenants to either (1) repay in full all Indebtedness under the Bank Credit Agreement and permanently reduce the commitments of the lenders thereunder or offer to repay in full all such Indebtedness and permanently reduce such commitments and repay the Indebtedness and permanently reduce the commitment of each lender who has accepted such offer or (2) obtain the requisite consent under the Bank Credit Agreement to permit the repurchase of the Securities as provided for in this Section 1012. The Company shall first comply with this subsection (b) before it shall be required to repurchase the Securities pursuant to this Section 1012, and any failure to comply with this subsection (b) shall constitute a default of a covenant for purposes of Section 501(d). (c) Within 30 days after the occurrence of a Change in Control, the Company shall give written notice of such Change in Control (a "Change in Control Notice") and of its offer (the "Change in Control Offer") to purchase Securities as specified herein to the Trustee, and to each Holder of the Securities at his address appearing on the Security Register, by first-class mail, postage prepaid. The Trustee shall be under no obligation to ascertain the occurrence of a Change in Control. The Change in Control Notice shall contain all instructions and materials necessary to enable such Holders to - 81- tender Securities, shall include a form of Change in Control Purchase Notice to be completed by the Holder and shall state: (i) (A) the events causing the Change in Control and the date such Change in Control is deemed to have occurred for purposes of this Section 1012, and (B) a description of any material developments in the Company's business since the latest annual or quarterly report filed with the Trustee pursuant to Section 1018(c) or 1018(d) and, if material, any appropriate pro forma financial information; (ii) the date by which a Holder must give a Change in Control Purchase Notice; (iii) the Change in Control Purchase Price; (iv) the Change in Control Purchase Date; (v) that any Security not purchased will continue to accrue interest; (vi) that Securities to be purchased shall, on the Change in Control Purchase Date, become due and payable at the Change in Control Purchase Price and from and after such date (unless the Company shall default in the payment of the Change in Control Purchase Price) such Securities shall cease to bear interest; and (vii) the procedures a holder must follow to exercise rights under this Section 1012 and a brief description of those rights and the procedures for withdrawing a Change in Control Purchase Notice. (d) A Holder may exercise its rights specified in Section 1012(a) upon (i) delivery to any Paying Agent a written notice (a "Change in Control Purchase Notice") at any time on or prior to one Business Day before the Change in Control Purchase Date, stating (A) the certificate number of the Security that the Holder will deliver to be purchased and (B) the portion of the principal amount of the Security that the holder will deliver to be purchased, which portion must be $1,000 or an integral multiple thereof and (ii) delivery of such Security to such Paying Agent at such office prior to, on or after the Change in Control Purchase Date (together with all necessary endorsements), such delivery being a condition to receipt by the Holder of the Change in Control Purchase Price therefor. If a Holder has elected to deliver to the Company for purchase a portion of a Security, and if the principal - 82- amount of such portion is $1,000 or an integral multiple of $1,000, the Company shall purchase such portion from the Holder thereof pursuant to this Section 1012. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of a portion of such Security. Each Paying Agent shall promptly notify the Company of the receipt by the former of any and all Change in Control Purchase Notices and any and all written notices of withdrawal thereof. (e) Upon receipt by any Paying Agent of a Change in Control Purchase Notice, the Holder of the Security in respect of which such Change in Control Purchase Notice was given shall (unless such Change in Control Purchase Notice is withdrawn pursuant to Section 1012(j)) thereafter be entitled to receive solely the Change in Control Purchase Price with respect to such Security. Such Change in Control Purchase Price shall be paid to such Holder promptly following the later of the Business Day following the Change in Control Purchase Date (provided the conditions in Section 1012(d) have been satisfied) and the time of delivery of such Security to the relevant Paying Agent at the office of such Paying Agent by the Holder thereof in the manner required by Section 1012(d). (f) On or prior to the Change in Control Purchase Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in same day funds (or New York Clearing House funds if such deposit is made prior to the Change in Control Purchase Date) sufficient to pay the Change in Control Purchase Price of, and (except if the Change in Control Purchase Date shall be an Interest Payment Date) accrued interest on, all the Securities or portions thereof which are to be purchased on that date. (g) Upon a Change in Control Purchase Notice having been given as aforesaid, Securities to be purchased shall, on the Change in Control Purchase Date, become due and payable at the Change in Control Purchase Price and from and after such date (unless the Company shall default in the payment of the Change in Control Purchase Price) such Securities shall cease to bear interest. Upon surrender of any such Security for purchase in accordance with the foregoing provisions, such Security shall be paid by the Company at the Change in Control Purchase Price; provided, however, that installments of interest whose Stated Maturity is on or prior to the Change in Control Purchase Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 307. If any Security - 83- tendered for purchase shall not be so paid upon surrender thereof, the principal thereof (and premium, if any, thereon) shall, until paid, bear interest from the Change in Control Purchase Date at the rate borne by such Security. (h) Any Security that is to be purchased only in part shall be surrendered to a Paying Agent at the office of such Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, one or more new Securities of any authorized denomination as requested by such Holder in an aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Security so surrendered that is not purchased. (i) The Company shall comply with the applicable tender offer rules, including Rule l4e-l under the Exchange Act, in connection with a Change in Control Offer. (j) A Change in Control Purchase Notice may be withdrawn before or after delivery by the Holder to the relevant Paying Agent at the office of such Paying Agent of the Security to which such Change in Control Purchase Notice relates, by means of a written notice of withdrawal (by facsimile transmission or letter) received by such Paying Agent at such office not later than one Business Day prior to the Change in Control Purchase Date, specifying, as applicable: (i) the certificate number of the Security in respect of which such notice of withdrawal is being submitted; (ii) the principal amount of the Security with respect to which such notice of withdrawal is being submitted; and (iii) the principal amount, if any, of the Security that remains subject to the original Change in Control Purchase Notice and that has been or will be delivered for purchase by the Company. A written notice of withdrawal may be in the form set forth in the preceding paragraph. Each Paying Agent will promptly return to the prospective Holders thereof any Securities with respect to which a Change in Control Purchase Notice has been withdrawn in compliance with this Indenture. - 84- Section 1013. Restrictions on Preferred Stock of Subsidiaries. The Company will not permit any of its Subsidiaries to issue any Preferred Stock (other than to the Company or a Majority-owned Subsidiary of the Company), or permit any Person (other than the Company or a Majority-owned Subsidiary of the Company) to own or hold an interest in any Preferred Stock of any such Subsidiary previously held by the Company or a Majority-owned Subsidiary of the Company unless such Subsidiary would be entitled to incur Indebtedness in accordance with the provisions of Section 1007 in the aggregate principal amount equal to the aggregate liquidation value of such Preferred Stock assuming a market rate of interest (as determined by the Company) for such Preferred Stock as of the date of issuance or transfer. Section 1014. Limitations on Issuances of Guarantees of Indebtedness. The Company will not permit any Subsidiary, directly or indirectly, to guarantee, assume or in any other manner become liable with respect to any Pari Passu Indebtedness or Subordinated Indebtedness, unless such Subsidiary simultaneously executes and delivers a supplemental indenture hereto providing for a guarantee of the Securities; provided that, in the case of a Subsidiary's guarantee, assumption or other liability with respect to Subordinated Indebtedness, such guarantee, assumption or other liability shall be subordinated to such Subsidiary's guarantee of the Securities to the same extent as such Subordinated Indebtedness is subordinated to the Securities; and provided further that this Section 1014 shall not be applicable to any guarantee, assumption or other liability of any Subsidiary of the Company that (i) existed at the time such Person became a Subsidiary of the Company and (ii) was not incurred in connection with, or in contemplation of, such Person becoming a Subsidiary of the Company. Any such guarantee of the Securities by a Subsidiary shall provide by its terms that it shall be automatically and unconditionally released and discharged upon either (A) the release or discharge of such guarantee of such Pari Passu Indebtedness or Subordinated Indebtedness, as the case may be, except a discharge by or as a result of payment under such guarantee or (B) any sale, exchange or transfer, to any Person not an Affiliate of the Company, of all the Company's stock in, or all or substantially all the assets of, such Subsidiary, which sale, exchange or transfer is made in compliance with the applicable provisions of this Indenture. Section 1015. Restriction on Transfer of Assets. The Company will not sell, convey, transfer or otherwise dispose of its assets or property to any of its - 85- Subsidiaries, except for (i) sales, conveyances, transfers or other dispositions of assets or property acquired by the Company after the date hereof; (ii) sales, conveyances, transfers or other dispositions of Existing Assets (a) made in the ordinary course of business; (b) made outside the ordinary course of business with a net book value that, when aggregated with all other such transfers by the Company since the date of this Indenture, less the net book value of Existing Assets transferred to the Company from its Subsidiaries, would not exceed 10% of the Consolidated Assets of the Company; or (c) to any Subsidiary if such Subsidiary simultaneously with such transfer executes and delivers a supplemental indenture hereto providing for the guarantee of payment of the Securities by such Subsidiary, which guarantee shall be subordinated to any guarantee of such Subsidiary of Senior Indebtedness of the Company and shall be subordinated to any other Indebtedness of such Subsidiary (which is not subordinated to any other Indebtedness of such Subsidiary or which is designated by such Subsidiary as being senior in right of payment to such guarantee), in each case to the same extent as the Securities are subordinated to the Senior Indebtedness of the Company under this Indenture and (iii) sales, conveyances, transfers or other dispositions of Existing Assets made pursuant to the Spin-Off. Notwithstanding the foregoing, any such guarantee of a Subsidiary of the Securities shall provide by its terms that it shall be automatically and unconditionally released and discharged (i) on the date that the net book value of the Existing Assets held by the Company is greater than 90% of Consolidated Assets or (ii) upon any sale, exchange or transfer to any Person not an Affiliate of the Company of all of the Company's stock in, or all or substantially all the assets of, such Subsidiary, which sale, exchange or transfer is made in compliance with the terms of this Indenture. Section 1016. Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not permit any Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind, on the ability of any Subsidiary to (a) pay dividends or make any other distribution on its Capital Stock, (b) pay any Indebtedness owed to the Company or any Subsidiary, (c) make loans or advances to the Company or any Subsidiary, or (d) transfer any of its property or assets to the Company or any Subsidiary, except (i) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the date hereof; (ii) any encumbrance or restriction, with respect to a Subsidiary that is not a Subsidiary of the Company on the date hereof, in existence at the time such Person becomes a Subsidiary of the Company or created on the date it becomes a - 86- Subsidiary; (iii) any encumbrance or restriction on the ability of any Subsidiary whose assets consist substantially only of fee or leasehold interests in real property and improvements thereon to transfer any such interests which are acquired after the date hereof or any unimproved real property acquired on or prior to the date hereof to the Company or any Subsidiary, which encumbrance or restriction is required by a lender to, or purchaser of any indebtedness of, such Subsidiary in connection with a financing or refinancing permitted hereunder; and (iv) any encumbrance or restriction pursuant to any agreement that extends, refinances, renews or replaces any agreement containing any of the restrictions described in the foregoing clauses (i)-(iii), provided that the terms and conditions of any such restrictions are not materially less favorable to the Holders of the Securities than those under or pursuant to the agreement extended, refinanced, renewed or replaced. Section 1017. Limitation on Unrestricted Subsidiaries. The Company will not make, and will not permit any of its Subsidiaries to make, any Investments in Unrestricted Subsidiaries if, at the time thereof, the aggregate amount of such Investments would exceed the amount of Restricted Payments then permitted to be made pursuant to Section 1008. Any Investments in Unrestricted Subsidiaries permitted to be made pursuant to this Section 1017 (i) will be treated as the payment of a Restricted Payment in calculating the amount of Restricted Payments made by the Company and (ii) may be made in cash or property. Section 1018. Statement as to Compliance; Notice of Default; Provision of Financial Statements. (a) The Company will deliver to the Trustee, within 120 days after the end of each fiscal year ending after the date hereof, a brief certificate of its principal executive officer, principal financial officer or principal accounting officer stating whether, to such officer's knowledge, the Company is in compliance with all covenants and conditions to be complied with by it under this Indenture. For purposes of this Section 1018, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. (b) If a Default has occurred and is continuing, or if the Trustee, any Holder or the trustee for or the holder of any other evidence of Indebtedness of the Company (other than Indebtedness in the aggregate principal amount of less than $50,000,000) gives any notice or takes any other action with - 87- respect to a claimed Default, the Company shall deliver to the Trustee an Officers' Certificate specifying such Default, notice or other action within 5 Business Days of its occurrence. (c) The Company shall supply without cost to each Holder of the Securities, and file with the Trustee within l5 days after the Company is required to file the same with the Commission, copies of the annual reports and quarterly reports and of the information, documents and other reports which the Company may be required to file with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act. (d) If the Company is not required to file with the Commission such reports and other information referred to in Section 1018(c), the Company shall furnish without cost to each Holder of the Securities and file with the Trustee (i) within 105 days after the end of each fiscal year, annual reports containing the information required to be contained in Items 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12 and 13 of Form 10-K promulgated under the Exchange Act, or substantially the same information required to be contained in comparable items of any successor form, (ii) within 60 days after the end of each of the first three fiscal quarters of each fiscal year, quarterly reports containing the information required to be contained in Form 10-Q promulgated under the Exchange Act, or substantially the same information required to be contained in any successor form and (iii) promptly from the time after the occurrence of an event required to be therein reported, such other reports containing information required to be contained in Form 8-K promulgated under the Exchange Act, or substantially the same information required to be contained in any successor form. The Company shall also make such reports available to prospective purchasers of the Securities, securities analysts and broker-dealers upon their request. Section 1019. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any covenant or condition set forth in Sections 1007 through 1018 (other than Section 1012) if, before or after the time for such compliance, the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding shall, by Act of such Holders, waive such compliance in such instance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. - 88- ARTICLE ELEVEN REDEMPTION OF SECURITIES Section 1101. Right of Redemption. The Securities may be redeemed, at the election of the Company, at any time, as a whole or in part subject to the conditions and at the Redemption Prices specified in the form of Security, together with accrued interest to the Redemption Date. Section 1102. Applicability of Article. Redemption of Securities at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. Section 1103. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by it (unless a shorter notice period shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed. Section 1104. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed, the particular Securities or portions thereof to be redeemed shall be selected not more than 60 days and not less than 30 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, either pro rata, by lot or, by any other method the Trustee shall deem fair and reasonable, and the amounts to be redeemed may be equal to $1,000 or any integral multiple thereof. The Trustee shall promptly notify the Company and the Security Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities shall relate, in the case of any Security redeemed - 89- or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. Section 1105. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 21 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (a) the Redemption Date; (b) the Redemption Price; (c) if less than all Outstanding Securities are to be redeemed, the identification (and, in the case of a Security to be redeemed in part, the principal amount) of the particular Securities to be redeemed; (d) that on the Redemption Date the Redemption Price will become due and payable upon each such Security or portion thereof, and that (unless the Company shall default in payment of the Redemption Price) interest thereon shall cease to accrue on and after said date; (e) the place or places where such Securities are to be surrendered for payment of the Redemption Price; (f) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (g) the CUSIP number, if any, relating to such Securities; and (h) in the case of a Security to be redeemed in part, the principal amount of such Security to be redeemed and that after the Redemption Date upon surrender of such Security, new Security or Securities in the aggregate principal amount equal to the unredeemed portion thereof will be issued. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at its request, by the Trustee in the name and at the expense of the Company. - 90- Section 1106. Deposit of Redemption Price. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in same day funds (or New York Clearing House funds if such deposit is made prior to the applicable Redemption Date) sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities or portions thereof which are to be redeemed on that date. Section 1107. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal thereof (and premium, if any, thereon) shall, until paid, bear interest from the Redemption Date at the rate borne by such Security. Section 1108. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 1002 (with, if the Company, the Security Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company, the Security Registrar or the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange - 91- for the unredeemed portion of the principal of the Security so surrendered. ARTICLE TWELVE [Intentionally omitted] ARTICLE THIRTEEN SUBORDINATION OF SECURITIES Section 1301. Securities Subordinate to Senior Indebtedness. The Company covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the indebtedness represented by the Securities and the payment of the principal of and premium, if any, and interest on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full, in cash or cash equivalents, of all Senior Indebtedness (including any interest accruing after the occurrence of an Event of Default under Section 501(f) or (g)). This Article Thirteen shall constitute a continuing offer to all persons who become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness, and such holders are made obligees hereunder and any one or more of them may enforce such provisions. Holders of Senior Indebtedness need not prove reliance on the subordination provisions hereof. Section 1302. Payment Over of Proceeds Upon Dissolution, etc. In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its creditors, as such, or to its assets, or (b) any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Company, then and in any such event: - 92- (1) the holders of all Senior Indebtedness shall be entitled to receive payment in full, in cash or cash equivalents, of all amounts due or to become due on or in respect of all Senior Indebtedness, or provision shall be made for such payment in cash or cash equivalents, before the Holders of the Securities are entitled to receive any payment on account of principal of (or premium, if any) or interest on the Securities; and (2) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the provisions of this Article Thirteen, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities (except, so long as the effect of this parenthetical clause is not to cause the Securities to be treated in any case or proceeding or similar event described in Subsection (a), (b) or (c) of this Section 1302 as part of the same class of claims as the Senior Indebtedness or any class of claims on a parity with or senior to the Senior Indebtedness, for any such payment or distribution (x) authorized by an order or decree giving effect, and stating in such order or decree that effect is given, to the subordination of the Securities to the Senior Indebtedness, and made by a court of competent jurisdiction in a reorganization proceeding under any applicable bankruptcy law, or (y) of securities that (A) are unsecured (except to the extent the Securities are secured), (B) have an Average Life to Stated Maturity and final maturity which are no shorter than the Average Life to Stated Maturity of the Securities or any securities issued to the holders of the Senior Indebtedness under the Bank Credit Agreement pursuant to a plan of reorganization or readjustment, (C) are subordinated, to at least the same extent as the Securities, to the payment of all Senior Indebtedness then outstanding and (D) are not guaranteed by any Subsidiary of the Company (except to the extent the Securities are so guaranteed)), shall be paid by the liquidating trustee or agent or other person making - 93- such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their Representative or Representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the principal of, and premium, if any, and interest on, and other amounts due or in connection with, the Senior Indebtedness held or represented by each, to the extent necessary to make payment in full, in cash or cash equivalents, of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (3) in the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any such payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities, before all Senior Indebtedness is paid in full, in cash or cash equivalents, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full, in cash or cash equivalents, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance, transfer or lease of its properties and assets substantially as an entirety to another corporation upon the terms and conditions set forth in Article Eight shall not be deemed a dissolution, winding up, liquidation, reorganization, assignment for the benefit of creditors or marshalling of assets and liabilities of the Company for the purposes of this Section if the corporation formed by such consolidation or into which the Company is merged or the corporation which acquires by - 94- conveyance, transfer or lease such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance, transfer or lease, comply with the conditions set forth in Article Eight. Section 1303. No Payment When Specified Senior Indebtedness in Default. (a) (i) In the event of and during the continuation of any default in the payment of principal of (or premium, if any) or interest on any Specified Senior Indebtedness beyond any applicable grace period with respect thereto, or (ii) in the event that any other event of default with respect to any Specified Senior Indebtedness shall have occurred and be continuing and shall have resulted in such Specified Senior Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, or (b) in the event that any event of default (other than a default described in clause (a)) with respect to any Specified Senior Indebtedness shall have occurred and be continuing permitting the holders of such Specified Senior Indebtedness (or a trustee on behalf of such holders) to declare such Specified Senior Indebtedness due and payable prior to the date on which it would otherwise have become due and payable, then no payment shall be made by the Company on account of the principal of (or premium, if any) or interest on the Securities or on account of the purchase or redemption or other acquisition of Securities (x) in case of any event of default described in subclause (i) of clause (a), or an event of default described in subclause (ii) of clause (a) resulting in an acceleration as specified in clause (a), unless and until such payment event of default shall have been cured or waived or shall have ceased to exist or such acceleration shall have been rescinded or annulled or the holders of such Specified Senior Indebtedness or their agents have waived the benefits of this Section, or (y) in case of any event of default specified in clause (b), from the earlier of the date the Company or the Trustee receives written notice of such event of default (which notice requests that no such payment be made) from the agent with respect to any such event of default under the Bank Credit Agreement or any other Representative of a holder of Specified Senior Indebtedness with respect to any such event of default under such Specified Senior Indebtedness until the earlier of (1) 179 days after such date and (2) the date, if any, on which the Specified Senior Indebtedness to which such event of default relates is discharged or such event of default is waived by the holders of such Specified Senior Indebtedness (including, if any Indebtedness under the Bank Credit Agreement is outstanding, lenders under the Bank Credit Agreement) or otherwise cured (provided that further written notice relating - 95- to the same or any other event of default specified in clause (b) above with respect to any Specified Senior Indebtedness received by the Company or the Trustee within 12 months after such receipt shall not be effective for purposes of this clause (y)). In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, then and in such event such payment shall be paid over and delivered forthwith to the Company. The provisions of this Section shall not apply to any payment with respect to which Section 1302 would be applicable. Section 1304. Payment Permitted if No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent the Company, at any time except during the pendency of any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 1302 or under the conditions described in Section 1303, from making payments at any time of principal of (and premium, if any) or interest on the Securities. Section 1305. Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full, in cash or cash equivalents, of all Senior Indebtedness, the Holders of the Securities shall be subrogated (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated to Senior Indebtedness of the Company to the same extent as the Securities are subordinated and which is entitled to like rights of subrogation) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment or - 96- distribution by the Company to or on account of the Senior Indebtedness. Section 1306. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the express limitations set forth in Article Five and to the rights, if any, under this Article of the holders of Senior Indebtedness (1) in any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 1302, to receive, pursuant to and in accordance with such Section, cash, property and securities otherwise payable or deliverable to the Trustee or such Holder, or (2) under the conditions specified in Section 1303, to prevent any payment prohibited by such Section. Section 1307. Trustee to Effectuate Subordination. Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes. Section 1308. No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any - 97- non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any Person liable in any manner for the collection of Senior Indebtedness; and (d) exercise or refrain from exercising any rights against the Company and any other Person. Section 1309. Notice to Trustee. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from the Company or a holder of Senior Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least three Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date. - 98- Subject to the provisions of Section 601, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Section 1310. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 602, and the Holders of the Securities 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 of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. Section 1311. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. - 99- Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 606. Section 1312. Article Applicable to Paying Agents. In case at any time a 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 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 in addition to or in place of the Trustee; provided, however, that Section 1311 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. Section 1313. Rescission. The provisions of this Article Thirteen shall continue to be effective or be reinstated, as the case may be, if at any time any payment in respect of any Senior Indebtedness is rescinded or must otherwise be returned by the holder thereof upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment had not been made. Section 1314. Application by Trustee of Assets Deposited With It. Any cash or U.S. Government Obligations deposited in trust with the Trustee pursuant to and in accordance with Section 1401 shall be for the sole benefit of the Holders and shall not be subject to the subordination provisions of this Article Thirteen. ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE Section 1401. Option to Effect Defeasance or Covenant Defeasance. The Company may, at its option by Board Resolution, at any time, with respect to the Securities, elect to have either Section 1402 or Section 1403 be applied to all Outstanding Securities upon compliance with the conditions set forth below in this Article Fourteen. - 100- Section 1402. Defeasance and Discharge. Upon the Company's exercise under Section l401 of the option applicable to this Section 1402, the Company shall be deemed to have been discharged from its obligations with respect to all Outstanding Securities 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 Outstanding Securities, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 1405 and the other Sections of this Indenture referred to in (A) and (B) below, and to have satisfied all its other obligations under such Securities and this Indenture, including its obligations under the covenants contained in Article Thirteen (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Securities to receive solely from the trust fund described in Section 1404 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any) and interest on such Securities when such payments are due, (B) the Company's obligations with respect to such Securities under Sections 304, 305, 306, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (D) this Article Fourteen. Subject to compliance with this Article Fourteen, the Company may exercise its option under this Section 1402 notwithstanding the prior exercise of its option under Section 1403 with respect to the Securities. Section 1403. Covenant Defeasance. Upon the Company's exercise under Section 1401 of the option applicable to this Section 1403, the Company shall be released from its obligations under the covenants contained in Articles Eight and Thirteen and in Sections 1007 through 1018 with respect to the Outstanding Securities on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Securities shall thereafter be deemed to be not "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder (it being understood that such Securities shall not be deemed Outstanding for financial accounting purposes). For this purpose, such covenant defeasance means that, with respect to the Outstanding - 101- Securities, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a default or an Event of Default under Section 501(c) or Section 501(h), but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. In addition, upon the Company's exercise under Section 1401 of the option applicable to Section 1403, Sections 501(c) through 501(h) (other than Sections 501(f) and (g)) shall not constitute Events of Default. Section 1404. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 1402 or Section 1403 to the Outstanding Securities: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 608 who shall agree to comply with the provisions of this Article Fourteen 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 Securities, (A) cash in U.S. Dollars in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, cash in U.S. Dollars in an amount, or (C) a combination thereof, 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, (i) the principal of (and premium, if any) and interest on the Outstanding Securities on the Stated Maturity of such principal or installment of principal (and premium, if any) or interest and (ii) any mandatory sinking fund payments or analogous payments applicable to the Outstanding Securities on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities; provided that the Trustee shall have - 102- been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to the Securities. For this purpose, "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (y) 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, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt; (2) In the case of an election under Section 1402, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the date 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 Securities will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (3) In the case of an election under Section 1403, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States to the effect that the Holders of the Outstanding Securities - 103- will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; (4) No Default or Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit or, insofar as Subsection 501(f) or 501(g) is concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); (5) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound; (6) In the case of an election under either Section 1402 or 1403, the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit made by the Company pursuant to its election under Section 1402 or 1403 was not made by the Company with the intent of preferring the Holders over other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (7) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel in the United States, each stating that all conditions precedent provided for relating to either the defeasance under Section 1402 or the covenant defeasance under Section 1403 (as the case may be) have been complied with as contemplated by this Section 1404. On and after the date the conditions set forth above are satisfied, the United States dollars or U.S. Government Obligations so deposited shall not be subject to the rights of the holders of Senior Indebtedness pursuant to the provisions of Article Thirteen. - 104- Section 1405. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 1405, the "Trustee") pursuant to Section 1404 in respect of the Outstanding Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. Money and U.S. Government Obligations so held in trust are not subject to Article Thirteen. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or U.S. Government Obligations deposited pursuant to Section 1404 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities. Anything in this Article Fourteen 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 1404 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 1404(l)), are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. Section 1406. Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or U.S. Government Obligations in accordance with Section 1402 or 1403, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 1402 or 1403, as the case may be, until such time as the Trustee or - 105- Paying Agent is permitted to apply all such money in accordance with Section 1402 or 1403, as the case may be; provided, however, that, if the Company makes any payment of principal of (or premium, if any) or interest on any Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent. * * * * * This Indenture may be signed in any number of counterparts with the same effect as if the signatures to each counterpart were upon a single instrument, and all such counterparts together shall be deemed an original of this Indenture. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. PATHMARK STORES, INC. By: /s/ Anthony Cuti Title: Attest: Marc Strassler Title: WILMINGTON TRUST COMPANY By: /s/ Donald G. MacKelean Title: Attest: Title: - 106- STATE OF New York ) ) ss.: COUNTY OF New York ) On the 26th day of October, 1993, before me personally came Anthony Cuti, to me known, who, being by me duly sworn, did depose and say that s/he resides at Saddle River, New Jersey; that s/he is President of PATHMARK STORES, INC., one of the corporations described in and which executed the above instrument; that s/he knows the corporate seal of such corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed pursuant to authority of the Board of Directors of such corporation; and that s/he signed her/his name thereto pursuant to like authority. (NOTARIAL SEAL) /s/ Linda Corrigan --------------- Notary Public - 107- STATE OF New York ) ) ss.: COUNTY OF New York ) On the 26th day of October 26, 1993, before me personally came Donald Mackelean, to me known, who, being duly sworn, did depose and say that s/he resides at Wilmington Delaware; that s/he is Financial Services Officer of WILMINGTON TRUST COMPANY, one of the corporations described in and which executed the above instrument; that s/he knows the corporate seal of such corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed pursuant to authority of the Board of Directors of such corporation; and that s/he signed her/his name thereto pursuant to like authority. (NOTARIAL SEAL) /s/ Linda Corrigan --------------- Notary Public - 108- Schedule I PATHMARK STORES, INC. CERTAIN EXISTING INDEBTEDNESS ----------------------------- (000's OMITTED) INDUSTRIAL REVENUE BONDS (See details on page 2) $ 6,375 OTHER DEBT (PRIMARILY MORTGAGES) (See details on page 2) 41,804 ------- $48,179 ======= Holdings Intercompany Note related to the Holdings Subordinated Notes in an aggregate principal amount equal to or less than $3,361,000. Holdings Intercompany Note related to the 13-1/8 Junior Subordinated Discount Debentures due 2003 of Holdings in an aggregate principal amount equal to or less than $1,800,000.
S-I-1
Schedule I (cont'd) PATHMARK STORES, INC. CERTAIN EXISTING INDEBTEDNESS ----------------------------- INTEREST MATURITY BALANCE INDEBTEDNESS RATE DATE (IN THOUSANDS) ------------------------ -------- -------- -------------- Massachusetts Mutual Life 9.0% 1999 $ 243 Insurance Company 1295 State Street Springfield, MA 01101 Re: Madison Stuart Properties John Hancock Mutual Life 7.0 1994 1,207 Insurnace Company 200 Berkley Street Boston, MA 02117 Re: Bridge Stuart Properties Massachusetts Mutual Life 7.0-9.0 1993-99 480 Insurance Company 1295 State Street Springfield, MA 01101 Re: Pennsylvania Stuart Properties Connecticut General Life 10.2-10.4 1997-99 855 Insurance Company Hartford, CT 06115 Re: Jersey Stuart Properties Prudential Insurance Company 10.5 1998 37,278 of America 10 Rockefeller Center, 15th Fl. New York, NY Re: SGC Mortgaged Properties Delaware Economic Development 10.875 2003 3,000 Authority c/o Philadelphia National Bank P.O. Box 7010 Philadelphia, PA Re: Lancaster Pike IRB Industrial Revenue Bonds 10.6 2003 3,375 c/o Philadelphia National Bank P.O. Box 7918 Philadelphia, PA Re: Schillington IRB Jacqueline Nallitt 11.0 1999 276 1688 Victory Blvd. Staten Island, NY Re: Forrest Ave. Mall Store Mt. Vernon Urban Renewal Agency 8.0 1995 670 9 South First Ave., 9th Fl. Mt. Vernon, NY 10550 Re: Mt. Vernon Development AFCO 5.5 1994 795 900 Lanidex Plaza Parsippany, NJ 07054 Re: Insurance Policy Premium ______ LONG TERM DEBT $48,179 =======
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Schedule I PATHMARK STORES, INC. CERTAIN EXISTING LIENS ---------------------- The Indebtedness listed hereon is secured only by mortgages on the properties listed opposite such Indebtedness. INTEREST MATURITY BALANCE INDEBTEDNESS PROPERTY RATE DATE (IN THOUSANDS) -------------------------- ------------------------- -------- -------- -------------- Massachusetts Mutual Life Pathmark of Hamilton 9.0% 1999 $ 243 Insurance Company 2735 S. Broad Street 1295 State Street Hamilton Township, NJ 08610 Springfield, MA 01101 Re: Madison Stuart Properties John Hancock Mutual Life Pathmark of Inwood 7.0% 1994 362 Insurance Company 410 W. 207th Street 200 Berkley Street New York, NY 10034 Boston, MA 02117 Re: Bridge Stuart Properties Pathmark & Rickel of 511 Edgewater Park 2110 Rt. 130 & Wood Lane Rd. Beverly, NJ 08010 Pathmark of Ivy Hill .344 1331 Ivy Hill Road Springfield Township Philadelphia, PA 19150 Massachusetts Mutual Life Former Pathmark of Whitaker 7.0-9.0 1993-99 394 Insurance Company 5520 Whitaker Avenue 1295 State Street Philadelphia, PA 19124 Springfield, MA 01101 Re: Pennsylvania Stuart Franklin Township Gas Properties 673 Somerset Street Somerset, NJ 08873 Paramus Gas 34 639 Route 17 South Paramus, NJ 07652 Fairless Hills Gas 28 Route 1 and Atlantic Ave. Fairless Hills, PA 19030 Connecticut General Life Pathmark of Belmont 10.2-10.4 1997-99 855 Insurance Company 115 Belmont Avenue Hartford, CT 06115 Belleville, NJ 07109 Re: Jersey Stuart Properties Prudential Insurance Company Pathmark of Upper Darby 10.5 1998 1,710 of America 421 S. 69th Street 10 Rockefeller Center, Upper Darby, PA 19082 15th Fl. New York, NY Re: SGC Mortgaged Properties Pathmark & Rickel of 4,355 Glenolden 140 N. McDade Blvd. Glenolden, PA 19036 Pathmark & Rickel of 3,078 Shillington 243A W. Lancaster Avenue Shillington, PA 19607
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INTEREST MATURITY BALANCE INDEBTEDNESS PROPERTY RATE DATE (IN THOUSANDS) -------------------------- ------------------------- -------- -------- -------------- Prudential Insurance Company Pathmark of Willow Grove 4,450 of America (continued) 2545 Moreland Road Willow Grove, PA 19090 Pathmark of Lancaster Pike 2,018 3901 Lancaster Pike Wilmington, DE 19805 Pathmark & Rickel of East 9,633 Brunswick 50 Race Track Road East Brunswick, NJ 08615 Rickel of Forrest Avenue 3,135 1520 Forrest Avenue Staten Island, NY 10302 Rickel of Johnson City 2,337 540 Harry L. Drive Johnson City, NY 13790 Pathmark Drug of Danbury 10.5 1996 2,200 100 Danbury - Newtown Road Danbury, CT 06810 Purity Supreme Store 3,762 3375 Berlin Turnpike Newington, CT 06111 Jacqueline Nallitt Pathmark of Forrest 11.0 1999 276 1688 Victory Blvd. Avenue Staten Island, NY 1351 Forrest Avenue Re: Forrest Ave. Mall Store Staten Island, NY 10302 Mt. Vernon Urban Renewal Agency Pathmark Development 8.0 1995 670 9 South First Ave., 9th Fl. One Pathmark Plaza Mt. Vernon, NY 10550 Mt. Vernon, NY 10550 Re: Mt. Vernon Development _______ $41,009 =======
S-I-4 APPENDIX A [Form of Intercompany Agreement] [Indebtedness of the Company or any Majority-owned Subsidiary to any one or the other of them will qualify as Permitted Indebtedness if, and only if, such Indebtedness is made pursuant to and is evidenced by an agreement in the form of a promissory note in substantially the form as follows:] $ , 19 Evidences of all loans or advances ("Loans") 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. All capitalized terms used herein that are defined in, or by reference in, the Indenture between Pathmark Stores, Inc. and Wilmington Trust Company, trustee, dated as of , 1993 with respect to the 12 5/8% Subordinated Debentures due 2002 (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. Not Forgivable. Unless the Maker of the Loan hereunder is the Company, the Holder may not forgive any amounts owing under this Intercompany Note. A-1 Section 1.02. Interest; Prepayment. (a) The interest rate ("Interest Rate") on any Loan 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 shall be payable upon demand of the Holder. (c) If the principal or accrued interest, if any, on 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 1% per annum from maturity until the principal and interest on such Loans are fully paid. (d) Any amounts owed hereunder may be prepaid at any time by the Maker. Section 1.03. Subordination. All Loans made to the Company shall be subordinated in right of payment to the payment and performance of the obligations of the Company and any Subsidiary under the Indenture, the Securities, and any other Indebtedness ranking senior to or pari passu with the Securities, including, without limitation, any Senior Indebtedness; provided that, with respect to a Subsidiary in any specific instance, such Subsidiary is also an obligor under the Indenture, the Securities or such other senior 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 an Event of Default has occurred under the Indenture, then (x) in the event the Maker is not the Company and not a Subsidiary that is also an obligor under the Indenture or the Securities (in the case where the Holder is not the Company), all amounts owing under the Loans hereunder shall be immediately due and payable (whether or not demand has been made) to the Holder, (y) in the event the Maker is the Company, the amounts owing under the Loans hereunder shall not be payable and (z) in the event the Maker is a Subsidiary that is also an obligor under the Indenture or the Securities and the Holder is not the Company or another Subsidiary that is also an obligor under the Indenture or the Securities, the amounts owing under the Loans hereunder shall not be due and payable; provided, however, that, if such Event of Default or acceleration has been waived, cured or rescinded, such amounts shall no longer be due and payable in the case of clause (x), and such amounts may be paid in the case of clauses (y) and (z). 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 from a Subsidiary that is also an obligor under the Indenture or the Securities, which payments or distributions, pursuant to clause (y) or (z) of the prior sentence, are not payable after any Event of Default has occurred, is continuing and has not been waived, cured or rescinded, such Holder will pay over and deliver forthwith to the Company or such Subsidiary, as, the case may be, all such payments and distributions. A-2 ARTICLE III MISCELLANEOUS Section 3.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement, or consent to depart therefrom 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 Agreement, except to its legal successor-in-interest. Section 3.03. Third Party Beneficiaries. The Holders of the Securities or any other Indebtedness ranking pari passu with, or senior to, the Securities including, without limitation, any Senior Indebtedness, shall be third party beneficiaries to this Agreement and shall have the right to enforce this Agreement against the Company and the Subsidiaries. Section 3.04. Headings. Article and Section headings in this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Section 3.05. Entire Agreement. This Agreement 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. Section 3.06. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. A-3 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: A-4 GRID Amount Interest Rate Date of of on the Notation Advance Advance Advance Made By Appendix B-1 [Form of Holdings Intercompany Note] PROMISSORY NOTE U.S. $ Dated as of: , 1993 FOR VALUE RECEIVED, the undersigned, Supermarkets General Corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of Supermarkets General Holdings Corporation (the "Lender") the principal sum of United States Dollars (U.S. $ ) at the times and in the amounts provided for the payment of principal thereof or thereunder (and any premiums) in the Indenture dated as of May 1, 1992 by and between the Lender and Wilmington Trust Company, Trustee (the "Trustee"), as supplemented by the First Supplemental Indenture dated as of October 5, 1993 between the Lender and the Trustee and the 11-5/8% Subordinated Notes due 2002 issued thereunder (such Indenture and Notes, as supplemented, amended, modified or waived from time to time in accordance with the terms thereof being the "Lender Indenture" and "Lender Subordinated Notes", respectively), together with interest on such principal sum from the date hereof at the times and in the amounts provided in the Lender Indenture and the Lender Subordinated Notes for the payment of interest thereunder. Indebtedness evidenced by this Note is subordinated in right of payment to the prior payment in full of (i) all Senior Indebtedness (as defined in the Indenture dated as of October 26, 1993 by and between the Borrower and Wilmington Trust Company, Trustee with respect to the 11-5/8% Subordinated Notes due 2002 (the "Borrower Indenture"), (ii) the Borrower's 11-5/8% Subordinated Notes due 2002 (the "Borrower Subordinated Notes")), (iii) the Subordinated Debentures and the Deferred Coupon Notes (as defined in the Borrower Indenture) and (iv) all other Indebtedness (as defined in the Borrower Indenture) of the Borrower, whether outstanding on the date of the Borrower Indenture or thereafter created, incurred, assumed or guaranteed to the same extent as the Borrower Subordinated Notes are subordinated to Senior Indebtedness (as defined in the Borrower Indenture) of the Borrower under the Borrower Indenture. For purposes of this provision, Article Thirteen and other relevant provisions of the Borrower Indenture are hereby incorporated by reference in this Note with appropriate modifications to the extent required by the terms hereof to effectuate such subordination. The Borrower shall make each payment under this Note not later than 12:00 noon (Eastern Standard time) on the day when due in lawful money of the United States of America (in freely transferable United States dollars) to the Lender at its address c/o Merrill Lynch Capital Partners, Inc., 767 Fifth Avenue, 48th Floor, New York, New York 10153, Attention: Stephen M. McLean, or at such other address of which the Lender may give the Borrower written notice from time to time, in same day funds. Computations of interest shall be made by the Lender in accordance with the terms and conditions contained in the Lender Indenture and the Lender Subordinated Notes. This Note shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its duly authorized representative as of the day and year first above written. PATHMARK STORES, INC. By Name: Title: Address: 301 Blair Road Woodbridge, NJ 07095 8283e B-1-2 Appendix B-2 [Form of Holdings Intercompany Note] PROMISSORY NOTE U.S. $ Dated as of: , 1993 FOR VALUE RECEIVED, the undersigned, Supermarkets General Corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of Supermarkets General Holdings Corporation (the "Lender") the principal sum of United States Dollars (U.S. $ ) at the times and in the amounts provided for the payment of principal thereof or thereunder (and any premiums) in the Indenture dated as of May 25, 1987 by and between the Lender and Wilmington Trust Company, Trustee (the "Trustee"), as amended and restated as of May 15, 1992 and as supplemented as of June 15, 1992 and the 12-5/8% Subordinated Debentures due 2002 issued thereunder (such Indenture and Notes, as supplemented, amended, modified or waived from time to time in accordance with the terms thereof being the "Lender Indenture" and "Lender Subordinated Debentures", respectively), together with interest on such principal sum from the date hereof at the times and in the amounts provided in the Lender Indenture and the Lender Subordinated Debentures for the payment of interest thereunder. Indebtedness evidenced by this Note is subordinated in right of payment to the prior payment in full of (i) all Senior Indebtedness (as defined in the Indenture dated as of October 5, 1993 by and between the Borrower and Wilmington Trust Company, Trustee with respect to the 12-5/8% Subordinated Debentures due 2002 (the "Borrower Indenture"), (ii) the Borrower's 12-5/8% Subordinated Debentures due 2002 (the "Borrower Subordinated Notes")), (iii) the Subordinated Notes and the Deferred Coupon Notes (as defined in the Borrower Indenture) and (iv) all other Indebtedness (as defined in the Borrower Indenture) of the Borrower, whether outstanding on the date of the Borrower Indenture or thereafter created, incurred, assumed or guaranteed to the same extent as the Borrower Subordinated Notes are subordinated to Senior Indebtedness (as defined in the Borrower Indenture) of the Borrower under the Borrower Indenture. For purposes of this provision, Article Thirteen and other relevant provisions of the Borrower Indenture are hereby incorporated by reference in this Note with appropriate modifications to the extent required by the terms hereof to effectuate such subordination. The Borrower shall make each payment under this Note not later than 12:00 noon (Eastern Standard time) on the day when due in lawful money of the United States of America (in freely transferable United States dollars) to the Lender at its address c/o Merrill Lynch Capital Partners, Inc., 767 Fifth Avenue, 48th Floor, New York, New York 10153, Attention: Stephen M. McLean, or at such other address of which the Lender may give the Borrower written notice from time to time, in same day funds. Computations of interest shall be made by the Lender in accordance with the terms and conditions contained in the Lender Indenture and the Lender Subordinated Notes. This Note shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its duly authorized representative as of the day and year first above written. PATHMARK STORES, INC. By Name: Title: Address: 301 Blair Road Woodbridge, NJ 07095 8283e B-2-2 EX-10.1 11 LOGISTICAL SERVICES AGREEMENT BETWEEN PATHMARK STORES, INC. AND PLAINBRIDGE, INC. DATED AS OF OCTOBER 26, 1993 LOGISTICAL SERVICES AGREEMENT TABLE OF CONTENTS Page ARTICLE I CERTAIN DEFINITIONS Section 1.01 Certain Defined Terms ............... 2 ARTICLE II PURCHASE OBLIGATIONS AND ACQUISITION OF MERCHANDISE Section 2.01 Agreement to Purchase ............... 8 Section 2.02 Directed Purchases from Vendors ..... 8 Section 2.03 Warranty and Passing of Title ....... 9 Section 2.04 Merchandise Pricing and Payment ..... 9 Section 2.05 Service Level Requirement ........... 11 Section 2.06 Plainbridge Sales to Third Parties .. 11 ARTICLE III WAREHOUSING Section 3.01 Warehousing ......................... 12 Section 3.02 Permits; Compliance ................. 12 Section 3.03 Storage and Handling Capacity ....... 13 ARTICLE IV INVENTORY Section 4.01 Inventory ........................... 14 Section 4.02 Excess Inventory .................... 14 Section 4.03 Quality Control ..................... 14 ARTICLE V DELIVERY Section 5.01 Delivery ............................ 18 Section 5.02 Vendor Direct-to-Store Deliveries ........................ 19 i Page ARTICLE VI UPCHARGES Section 6.01 Upcharges ........................... 20 Section 6.02 Minimum Annual Upcharge Payment ..... 20 ARTICLE VII SHORTAGES AND VENDOR RETURNS Section 7.01 Shortages ........................... 22 Section 7.02 Reclamation ......................... 23 ARTICLE VIII FORCE MAJEURE; PLAINBRIDGE INSURANCE Section 8.01 Occurrence of Event of Force Majeure ........................... 23 Section 8.02 Plainbridge Insurance ............... 24 ARTICLE IX BUSINESS CONTEXT OF THE AGREEMENT Section 9.01 Agreement Based on Past Practices .................... 24 Section 9.02 Commitment to Efficient Operations ........................ 25 ARTICLE X TERM AND TERMINATION Section 10.01 Term ................................ 25 Section 10.02 Optional Termination by Pathmark .... 25 Section 10.03 Termination for Breach .............. 26 Section 10.04 Offer to Purchase Assets upon Termination by Pathmark ........... 26 Section 10.05 Plainbridge Put upon Termination by Plainbridge .................... 27 Section 10.06 Waiver .............................. 27 ii Page ARTICLE XI PURCHASE OPTIONS Section 11.01 Sale of Pathmark Distribution Assets ............... 28 Section 11.02 Change of Control ................... 28 ARTICLE XII DISPUTE RESOLUTION Section 12.01 Grievances and Disputed Amounts ........................... 28 Section 12.02 Interparty Dispute Resolution ....... 29 Section 12.03 Arbitration ......................... 29 Section 12.04 Selection of Arbitrator ............. 29 Section 12.05 Cost of Arbitration ................. 29 ARTICLE XIII GENERAL PROVISIONS Section 13.01 Books and Records ................... 30 Section 13.02 Entire Agreement .................... 30 Section 13.03 Expenses ............................ 30 Section 13.04 Amendments .......................... 30 Section 13.05 Notices ............................. 30 Section 13.06 Binding Effect; Assignment .......... 31 Section 13.07 Counterparts ........................ 31 Section 13.08 Confidentiality ..................... 31 Section 13.09 Relationship of Parties ............. 32 Section 13.10 No Third-Party Beneficiaries ........ 32 Section 13.11 Severability ........................ 33 Section 13.12 Headings ............................ 33 Section 13.13 Governing Law ....................... 33 iii LOGISTICAL SERVICES AGREEMENT, dated as of October 26, 1993 (this "Agreement"), between PATHMARK STORES, INC., a Delaware corporation ("Pathmark"), and PLAINBRIDGE, INC., a Delaware corporation ("Plainbridge"). W I T N E S S E T H : WHEREAS, Pathmark, Plainbridge and Supermarkets General Holdings Corporation, a Delaware corporation, have entered into a Distribution and Transfer Agreement, dated as of October 26, 1993 (the "Distribution and Transfer Agreement"), pursuant to which Pathmark will, among other things, contribute its warehouse and distribution operations (the "Blair Businesses") to the capital of Plainbridge in exchange for the assumption by Plainbridge of substantially all the liabilities (other than liabilities relating to transferred inventory) and obligations relating to the Blair Businesses (the "Plainbridge Asset and Liability Transfer"); WHEREAS, pursuant to the Distribution and Transfer Agreement, Pathmark will distribute to its sole stockholder all the outstanding shares of the common stock, par value $.01 per share, of Plainbridge; WHEREAS, certain warehousing, distribution and logistical services have heretofore been supplied to Pathmark by the Blair Businesses; WHEREAS, it is a condition to the Plainbridge Asset and Liability Transfer that Pathmark and Plainbridge enter into this Agreement, pursuant to which Plainbridge will continue to supply the aforementioned services to Pathmark in substantially the same manner as prior to the Reorganization; and WHEREAS, Pathmark and Plainbridge intend that the services provided to Pathmark during fiscal year 1992 (the "Past Practices") will provide a baseline against which the performance of this Agreement may be compared, and, further, Pathmark and Plainbridge have jointly prepared a manual (the "Pathmark/Blair Logistics Manual") in which certain Past Practices are documented, and which is referred to from time to time in this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, Pathmark and Plainbridge hereby agree as follows: 2 ARTICLE I CERTAIN DEFINITIONS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person; provided, however, that Pathmark and its Subsidiaries, on the one hand, and Plainbridge and its Subsidiaries, on the other hand, shall not be deemed to be Affiliates of each other for purposes of this Agreement. "Agreement" has the meaning specified in the preamble to this Agreement. "Applicable Share Value" as a given date means (i) the Fair Market Share Value, if the Public Share Value is not the Applicable Share Value pursuant to clause (ii) below, and (ii) the Public Share Value if, in the aggregate, 20% or more of the outstanding Common Stock has been sold to the public by the holders of the Common Stock or the Common Stock Company pursuant to one or more registered offerings under the Securities Act of 1933, as amended, or pursuant to Rule 144 thereunder, and the Common Stock is listed on a national securities exchange or is trading on the NASDAQ/National Market System or is trading on a market in the Common Stock made by a professional marketmaker. "Billback" means a charge to a Vendor by a purchaser of Merchandise, whether or not contracted for and irrespective of the type of purchasing, advertising, or other performance criteria required to generate such a charge, which reflects a deduction to be made from a previous payment or payments to such Vendor based on any type of Discount or Allowance. "Blair Businesses" has the meaning specified in the recitals to this Agreement. "Business Day" means any day other than Saturday, Sunday or a legal holiday in the State of New Jersey "Change of Control" means any change in the ultimate beneficial ownership of the Voting Stock of Plainbridge such that a Person, other than Merrill Lynch & Co., Inc., a Delaware corporation, or an Affiliate of Merrill Lynch & Co., Inc., is the ultimate beneficial owner of a majority of such Voting Stock. "Common Stock" has the meaning specified in Section 10.04(a). "Common Stock Company" has the meaning specified in Section 10.04(a). "Competing Retailers" means supermarkets, drug stores, and other retail stores stocking merchandise carried by Pathmark in Pathmark's current markets in New Jersey, Delaware, Eastern and Central Pennsylvania, Metropolitan New York, and Connecticut; provided that retail stores that do not in the ordinary course of business engage to a significant degree in the sale of food or pharmacy-related products shall not be deemed to be Competing Retailers. 3 "Damaged or Dated Merchandise" means the Pathmark/Blair Merchandise described in the Pathmark/Blair Logistics Manual that, at some time subsequent to its receipt by Pathmark, no longer complies with Pathmark's standards and specifications as set forth in the Pathmark/Blair Logistics Manual or remains unsold by Pathmark subsequent to the date of expiration listed on the packaging of such Pathmark/Blair Merchandise. "Discounts and Allowances" or "Discounts or Allowances" means all merchandising credits, advertising allowances, trade allowances, rebates, discounts (cash or otherwise), slotting allowances, broker accruals, volume incentive allowances, other deferred accruals and all other funds made available by Vendors to a purchaser of Merchandise. "Distribution and Transfer Agreement" has the meaning specified in the recitals to this Agreement. "Event of Force Majeure" means, for any Person, any event, circumstance or condition that is beyond the control of such Person and that prevents such Person from performing, in whole or in part, its obligations under this Agreement. Without limiting the generality of the foregoing, the following occurrences shall be deemed to be Events of Force Majeure: (a) Acts of God, fire, explosion, accident, flood, storm or other natural phenomenon; (b) war (whether declared or undeclared), riot, blockade, sabotage or acts of public enemies; (c) national defense requirements; (d) compliance with any law, rule, regulation or Governmental Order that (x) becomes effective after the date hereof and (y) is binding on the Person seeking to rely on such law, rule, regulation or Governmental Order to excuse performance, and such Person's compliance therewith is not voluntary or optional; (e) strikes, lockouts or injunctions (it being understood that nothing herein shall require a Person to settle such or any other kind of labor dispute except on such terms as shall be satisfactory to such Person); (f) unavailability (for reasons other than the cost thereof) of adequate fuel, power, raw materials, labor, containers or transportation facilities; and (g) breakage or failure of machinery or equipment. Without limiting the generality of the foregoing, compliance with any Law or Governmental Order shall not be considered an Event of Force Majeure unless such Law or Governmental Order is binding on the Person seeking to rely on compliance with such Law or Governmental Order to excuse performance of its obligations under this Agreement and 4 such Person's compliance therewith is not voluntary or optional. "Event of Insolvency" means that, with respect to any Person or any of its Subsidiaries, such Person or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against such Person or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period or 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or such Person or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this definition. "Fair Market Value" means fair market value as Pathmark and Plainbridge together, in good faith, may reasonably determine; provided that if Pathmark and Plainbridge are unable to make such a determination, such determination shall be made by an independent appraiser mutually acceptable to Pathmark and Plainbridge, and the determination by such independent appraiser shall be conclusive. "Fair Market Share Value" means the value of a share of Common Stock as of the date of payment for the Pathmark Distribution Assets as a result of a Pathmark Forced Termination as determined in a good faith in a written report to Plainbridge by an independent investment banking firm of national reputation, selected by Plainbridge. For the purpose of the definition of Fair Market Value, the value to be determined shall be the price per share at which the Common Stock delivered (assuming that there is only one class of common stock, each share possessing equal voting rights) would trade on a national securities exchange, NASDAQ or a similar market, assuming full liquidity and the absence of any significant concentration of ownership of such Common Stock in any holder or group of holders. In reaching such determination, such independent investment banking firm shall compare the Common Stock Company with whatever companies it deems relevant. Among the factors that shall be considered as relevant in its determination shall be market share and the specialized nature of products, price to earnings ratio, the market value to book value ratio and the market value to operating cash flow ratio of the common stock of such companies. "Governmental Authority" means any U.S. federal, state or local government, governmental authority, regulatory or administrative agency, governmental commission, board, bureau, court or tribunal or any other similar arbitral body. "Governmental Order" means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority. 5 "Law" means any federal, state, local or foreign statute, law, ordinance, regulation, rule, code, order, requirement or rule of common law. "Liabilities, Actions and Damages" means any and all claims, damages, losses, liabilities and expenses of any kind or nature whatsoever including, without limitation, any incidental or consequential damages. "Merchandise" means food, groceries, general merchandise, pharmacy-related products and other merchandise sold currently and in the future in Pathmark supermarkets and drug stores. "Past Practices" has the meaning specified in the recitals to this Agreement. "Pathmark" has the meaning specified in the preamble to this Agreement. "Pathmark/Blair Merchandise" means all Merchandise ordered from a Vendor by Pathmark on behalf of Plainbridge, intended to be ultimately sold and delivered by Plainbridge to Pathmark. "Pathmark/Blair Logistics Manual" has the meaning specified in the recitals to this Agreement. "Pathmark Distribution Assets" has the meaning specified in Section 10.04(a). "Pathmark Forced Termination" has the meaning specified in Section 10.04(a). "Person" means any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended. "Piggyback Order" means a purchase order by Plainbridge for Merchandise from Vendors in contemplation of resale to third parties, which orders are placed with Vendors at the same time and as part of the same order as a purchase order for Pathmark/Blair Merchandise. "Plainbridge" has the meaning specified in the preamble to this Agreement. "Plainbridge Asset and Liability Transfer" has the meaning specified in the recitals to this Agreement. "Plainbridge Credit Agreement" means the bank credit agreement, dated as of October 26, 1993, among Plainbridge, the lenders listed on the signature pages thereof and Bankers Trust Company, as Agent, as amended, modified, or supplemented from time to time. "Plainbridge Security Agreement" means the security agreement, dated as of October 26, 1993, between Plainbridge and Bankers Trust Company, as agent for the lenders party to the Bank Credit Agreement, as amended, modified, or supplemented from time to time. "Plainbridge Disbursement Account" means the account established in the name of Plainbridge at a bank or similar financial institution and from which Plainbridge shall make payment to Vendors. 6 "Plainbridge Permit" means any franchise, grant, authorization, license, permit, easement, variance, exemption, consent, certificate, approval, or other order necessary for Plainbridge to own, lease, and operate its properties or to carry on the Blair Businesses in the manner contemplated by this Agreement. "Plainbridge Subsidiary" means a Subsidiary of Plainbridge. "Public Share Value" of a share of Common Stock as of the date of payment for the Pathmark Distribution Assets shall be the average closing price of a share of Common Stock on such national securities exchange as may be designated by the Common Stock Company, in the event that the Common Stock is not listed for trading on a national securites exchange but is quoted on an automated quotation system, the average closing bid price per share of Common Stock on such automated quotation system or, in the event that the Common Stock is not quoted on any such system, the average of the closing bid prices per share of Common Stock as furnished by a professional marketmaker making a market in the Common Stock designated by the Common Stock Company (the "Average Closing Price"), for the 30-day period ending on such date. The Average Closing Price of a share of Common Stock shall be determined by dividing (i) the sum of the closing prices for the Common Stock on each day that the Common Stock was traded and a closing price was reported on such national securities exchange or such automated quotation system or by such marketmaker, as the case may be, during the 30-day period, by (ii) the number of days on which the Common Stock was traded and a closing price was reported on such national securities exchange or such automated quotation system or by such marketmaker, as the case may be, during the 30-day period. "Subsidiary" of a Person means any corporation, partnership, joint venture, association or other entity controlled by such Person directly or indirectly through one or more intermediaries. "Top-Up Merchandise" has the meaning specified in Section 4.01(a). "Upcharge" has the meaning specified in Section 6.01(a). "Vendor" means a vendor from whom Pathmark proposes to purchase or purchases Merchandise or whom it invites to bid to act as a supplier of Merchandise. "Voting Stock" means capital stock issued by a corporation, or the equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right to vote may have been suspended by the happening of such a contingency. ARTICLE II PURCHASE OBLIGATIONS AND ACQUISITION OF MERCHANDISE SECTION 2.01. Agreement to Purchase. (a) Subject to the provisions of this Agreement, Pathmark shall purchase from Plainbridge, and Plainbridge shall sell to Pathmark, on the terms and conditions set forth in this Agreement, such of Pathmark's Merchandise requirements as Pathmark may request; provided, however, that Plainbridge shall not be required to supply Merchandise that is sold to Pathmark solely on a Vendor direct-to-store delivery basis. (b) Pathmark shall at all times be permitted to solicit bids from, and to purchase its Merchandise 7 requirements and obtain warehousing and distribution services from, third-party suppliers of warehousing and distribution services; provided, however, that irrespective of whether Pathmark has so utilized such third parties, Pathmark shall remain obligated to pay to Plainbridge the Minimum Annual Upcharge Payment pursuant to Section 6.02. SECTION 2.02. Directed Purchases from Vendors. (a) Following the date hereof, and thereafter from time to time, Pathmark shall, on or about the time of its placement of a purchase order with a Vendor for Pathmark/Blair Merchandise, deliver to Plainbridge a copy of such purchase order. All Pathmark/Blair Merchandise shall be ordered by Pathmark on behalf, and for the account, of Plainbridge. Plainbridge shall purchase, receive from, and pay the Vendor for, in accordance with the terms and conditions of such purchase orders, and store and, at Pathmark's direction and subject to Section 2.04, sell and deliver to Pathmark, all such Pathmark/Blair Merchandise. (b) With respect to all Merchandise shipped from Vendors directly to Pathmark, Pathmark shall purchase such Merchandise on its own behalf and for its own account; provided, however, that Pathmark may still designate Plainbridge or a Plainbridge Subsidiary to act as Pathmark's carrier for the transportation of such Merchandise from the Vendor to Pathmark. Any and all fees that Plainbridge or a Plainbridge Subsidiary, as the case may be, may charge Pathmark for such transportation services not relating to Pathmark/Blair Merchandise are not contemplated by and do not come within the scope of this Agreement. (c) Pathmark shall be responsible for negotiating all relevant terms and conditions of purchase for Pathmark/Blair Merchandise purchased from Vendors, including, without limitation, the types of merchandise desired, the quantities required, approximate delivery schedules, pricing, and terms and conditions of payment. SECTION 2.03. Warranty and Passing of Title. (a) Plainbridge warrants to Pathmark that, upon delivery to Pathmark, Pathmark shall have good and marketable title to the Pathmark/Blair Merchandise delivered to Pathmark pursuant to this Agreement. Plainbridge shall indemnify and hold harmless Pathmark and its officers, directors, employees, agents, and advisors from and against any and all Liabilities, Actions and Damages (including, without limitation, reasonable fees and expenses of counsel) arising out of, in connection with, or by reason of any breach of the warranty in this Section 2.03(a). 8 (b) Title to and risk of loss with respect to, and responsibility for, all Pathmark/Blair Merchandise delivered to Pathmark pursuant to this Agreement shall pass from Plainbridge to Pathmark at the point of its delivery to the applicable Pathmark store location. Prior to such time, Plainbridge shall have title to and risk of loss with respect to, and responsibility for, all Pathmark/Blair Merchandise received by it from Vendors. SECTION 2.04. Merchandise Pricing and Payment. (a) The delivery of Pathmark/Blair Merchandise by Plainbridge to Pathmark shall create a payable on the part of Pathmark to Plainbridge for an amount equal, subject to the provisions of this Section 2.04, to the amount indicated on the purchase order submitted by Pathmark to the Vendor for such Pathmark/Blair Merchandise, as such amount may subsequently be adjusted by mutual agreement between Pathmark and such Vendor, and, if not included in such purchase order, any and all contracted freight costs relating to the transportation of such Pathmark/Blair Merchandise from the Vendor to Plainbridge (the "Base Price"). Payables incurred hereunder shall be paid by Pathmark to Plainbridge as set forth in Section 2.04(b) and (f). (b) Plainbridge shall offer to Pathmark terms and conditions of payment for all Pathmark/Blair Merchandise equivalent to the terms and conditions of payment for such Pathmark/Blair Merchandise offered by the Vendor to Plainbridge. Pathmark agrees to pay to Plainbridge an amount sufficient to enable Plainbridge to pay the Vendors' amounts owing under any purchase order for Pathmark/Blair Merchandise at the time that the Vendor requires payment from Plainbridge in respect thereto. The aggregate of such payments shall be applied against the aggregate payables incurred under Section 2.04(a). (c) If requested by a Vendor, Pathmark may, in its sole discretion, guarantee any payment obligations of Plainbridge to such Vendor which relate to Pathmark/Blair Merchandise. Plainbridge shall not sell any such Pathmark/Blair Merchandise to third parties without the prior written consent of Pathmark. (d) All Discounts and Allowances made available by Vendors to Plainbridge in respect of Pathmark/Blair Merchandise shall reduce the Upcharge owed by Pathmark to Plainbridge in respect of such Pathmark/Blair Merchandise; provided, however, that no such reduction shall occur if such Discounts and Allowances have been or will be paid directly to Pathmark; and provided further that if such Discounts and 9 Allowances are already accounted for in the Vendor's invoice to Plainbridge in respect of such Pathmark/Blair Merchandise, then such Discounts and Allowances shall reduce the Base Price, and not the Upcharge, of such Pathmark/Blair Merchandise. Pathmark shall be responsible for notifying Plainbridge of the availability of such Discounts and Allowances, and Plainbridge shall assist Pathmark in its efforts to secure such Discounts and Allowances. There shall be no reduction in the applicable Upcharge or Base Price, as the case may be, for any Discounts or Allowances made available by Vendors to Plainbridge solely as a result of actions taken or not taken by Plainbridge. Any and all Discounts or Allowances lost by, or interest charged by Vendors to, Plainbridge as a result of late payment by Pathmark to Plainbridge for Pathmark/Blair Merchandise shall be promptly paid by Pathmark to Plainbridge upon the incurrence of any such lost Discounts or Allowances or Vendor interest. Any and all charges over and above the Base Price from a Vendor to Plainbridge as a result of actions taken or not taken solely by Plainbridge shall not increase the Upcharge payable by Pathmark to Plainbridge. (e) All Billbacks related to Pathmark/Blair Merchandise shall be for the account of Pathmark, unless the availability of such Billbacks is solely the result of actions taken or not taken solely by Plainbridge, in which case they shall be for the account of Plainbridge. Pathmark shall be responsible for tracking and collecting Billbacks that are for its account; provided, however, that Plainbridge shall promptly remit to Pathmark all Billbacks received by Plainbridge which are for the account of Pathmark. (f) Pathmark's payment obligations to Plainbridge under this Section 2.04 shall be discharged by the delivery by Pathmark of immediately available funds in the required amounts to the Plainbridge Disbursement Account. Such payments shall be made at or before the time that payment is due from Plainbridge to the Vendor of the Pathmark/Blair Merchandise to which such payments relate. SECTION 2.05. Service Level Requirement. Subject to the availability of Pathmark/Blair Merchandise at Plainbridge facilities, Plainbridge shall deliver Pathmark/Blair Merchandise to Pathmark at a 98% or better Service Level, as determined and defined in the Pathmark/Blair Logistics Manual. If a failure by Plainbridge to meet such Service Level results in a material adverse economic effect on Pathmark, Plainbridge shall promptly pay to Pathmark that amount of money determined to have been lost by Pathmark as a result of such failure. 10 SECTION 2.06. Plainbridge Sales to Third Parties. (a) Plainbridge may purchase and sell Merchandise for its own account to third parties; provided, however, that subject to the third sentence of this subsection 2.06(a), Plainbridge may not sell to Competing Retailers without Pathmark's prior written consent, which consent shall not be unreasonably withheld. Upon the occurrence of a default by Plainbridge under the Plainbridge Bank Credit Agreement and the exercise by the lenders thereunder of their rights in respect of the Merchandise pursuant to the terms of the Plainbridge Security Agreement, Pathmark shall have the right to purchase, and, if such right to purchase is exercised, Plainbridge shall sell to Pathmark, for cash, within 30 days of written notice to Pathmark that such lenders intend to exercise such rights, all or a portion all Merchandise (including Pathmark/Blair Merchandise) purchased by Plainbridge and warehoused as stored by Plainbridge at the time of such default (i) with respect to Plainbridge/Blair Merchandise, on the terms and conditions contemplated by this Agreement and (ii) with respect to Merchandise purchased by Plainbridge for its own account, on terms and conditions customary in the industry at such time; provided that all payments will be made directly to the Agent under the Plainbridge Bank Credit Agreement. It is understood that, in the event or to the extent that Pathmark does not exercise such right, the restriction on sales to third parties contained in the first sentence of Subsection 2.06(a) or in the second sentence of Subsection 2.04(c) would not restrict the rights of Plainbridge's lenders under the Plainbridge Security Agreement. (b) Plainbridge shall be permitted to make Piggyback Orders; provided, however, that such Piggyback Orders may not interfere with the delivery schedules, quantity requirements or any other needs of Pathmark in connection with the Pathmark/Blair Merchandise underlying such Piggyback Orders. All Discounts and Allowances included in a Vendor's invoice shall be credited to the account of Plainbridge to the extent that they relate to the Piggyback Order. Discounts and Allowances not included in the Vendor's invoice to Plainbridge but paid separately by the Vendor, by the granting of credits to Plainbridge or otherwise, shall be for the account of Pathmark. Pathmark may, in its sole discretion, grant additional cost allowances relating to such Piggyback Orders to Plainbridge to aid in the development of the Piggyback Order business of Plainbridge. ARTICLE III WAREHOUSING SECTION 3.01. Warehousing. Plainbridge shall be responsible for the warehousing and storage of all Pathmark/Blair Merchandise. Plainbridge shall determine the facilities at which Pathmark/Blair Merchandise shall be warehoused and stored; provided that the Upcharges applicable to a particular merchandise line shall not be increased due to the storage of such merchandise in warehouse locations not in accordance with Past Practices, as specified in the Pathmark/Blair Logistics Manual, without Pathmark's prior written consent. SECTION 3.02. Permits; Compliance. If Plainbridge is unable to obtain or maintain any franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals, or other orders necessary for it to own, lease, and operate its properties or to carry on the Blair Businesses in the manner in which this Agreement contemplates (the "Blair Permits"), Pathmark may use a third party to supply the services contemplated in this Agreement to be provided by Plainbridge to the extent Plainbridge is unable to do so ("Blair Permit 11 Noncompliance"); provided that Pathmark shall use reasonable efforts to engage a third party which can supply such services to Pathmark at the lowest practicable cost. If Pathmark engages a third party to supply any such services because of Blair Permit Noncompliance, the Minimum Annual Upcharge Payment (as defined in Section 6.02) shall be reduced, during the period of Blair Permit Noncompliance, by the sum of (i) the aggregate of the Upcharges that would have been applicable, if Pathmark had purchased such Merchandise through Plainbridge, on that quantity and type of Merchandise purchased by Pathmark through such third-party supplier and (ii) the excess, if any, of Pathmark's cost of purchasing such Merchandise from such third-party supplier over the sum of (A) the Base Price and (B) the Upcharge that would have been applicable to such Merchandise if Pathmark had purchased such Merchandise through Plainbridge. If Plainbridge subsequently obtains or returns to effectiveness the applicable Blair Permits, the Minimum Annual Upcharge Payment shall (i) for the period in which there existed Blair Permit Noncompliance, be reduced in accordance with the immediately preceding sentence, and (ii) upon the return to effectiveness of the Blair Permits, be further reduced by the sum of (A) the aggregate of the Upcharges that would have been applicable, if Pathmark had purchased such Merchandise through Plainbridge, on that quantity and type of Merchandise purchased by Pathmark through a third-party supplier with whom Pathmark shall, because of the Blair Permit Noncompliance, have entered into any contract or arrangement to provide the services contemplated in this Agreement to be provided by Plainbridge and which contract or arrangement cannot be immediately discontinued by Pathmark and is continuing, and (B) the difference, if any, between Pathmark's cost of purchasing such Merchandise from such third-party supplier and the sum of (1) the Base Price and (2) the Upcharge that would have been applicable to such Merchandise if Pathmark had purchased such Merchandise through Plainbridge. SECTION 3.03. Storage and Handling Capacity. (a) Plainbridge shall make available storage and handling capacity sufficient to accommodate Pathmark/Blair Merchandise, in accordance with Past Practices. In addition, Plainbridge shall provide storage and handling capacity sufficient to accommodate increases in the volume (measured by total case shipments) of Pathmark/Blair Merchandise of up to five percent per year, subject to the provisions of Sections 6.02(d) and (e). If Plainbridge fails to meet such annual capacity growth requirement, Plainbridge shall promptly pay to Pathmark the cost incurred by Pathmark to 12 obtain such additional capacity through alternate suppliers, less the aggregate upcharges that would have been payable pursuant to this Agreement in respect of all Pathmark/Blair Merchandise handled by such alternate suppliers through such additional capacity. (b) Pathmark shall promptly, as they are incurred, reimburse Plainbridge for all reasonable incremental out-of-pocket costs (but not capital costs) incurred by Plainbridge for the storage and handling of Pathmark/Blair Merchandise that is in excess of the capacity Plainbridge is required to provide pursuant to Section 3.03(a); provided such out-of-pocket costs do not exceed the costs of storage and handling at independent warehouses operating in the same geographic regions as the Blair Businesses. ARTICLE IV INVENTORY SECTION 4.01. Inventory. (a) Plainbridge shall at all times maintain, for the exclusive use of Pathmark, an inventory of Pathmark/Blair Merchandise with a book value of at least $130 million. To the extent that the inventory of Pathmark/Blair Merchandise shall fall below such level, Plainbridge shall promptly notify Pathmark of the amount of the deficiency and shall purchase sufficient Merchandise ("Top-Up Merchandise") to maintain such level; provided that Pathmark shall have ordered such Merchandise from Vendors. Pathmark shall be liable for the Upcharge on, and the Base Price of, Top-Up Merchandise only upon the delivery to Pathmark of such Top-Up Merchandise from Plainbridge. (b) The purchase by Pathmark of Merchandise from other third-party suppliers in accordance with Section 2.01(b) shall not relieve Plainbridge of its obligations to comply with the provisions of Section 4.01(a). (c) Plainbridge shall keep separate books of account and records, in accordance with United States generally accepted accounting principles, with respect to (i) Pathmark/Blair Merchandise and (ii) other Merchandise purchased by Plainbridge for resale to third parties. SECTION 4.02. Excess Inventory. (a) Pathmark may designate any Pathmark/Blair Merchandise as "excess inventory". Plainbridge may, upon obtaining Pathmark's prior written consent, sell such excess inventory to third parties 13 at prices to be determined by Pathmark. Pathmark shall reimburse Plainbridge promptly for all losses realized on the disposition of such excess inventory. (b) At Pathmark's sole discretion, Plainbridge may repurchase excess inventory of Pathmark/Blair Merchandise that is located at Pathmark stores from Pathmark at a price equal to the cost of such Pathmark/Blair Merchandise to Pathmark (it being understood that such cost includes the Upcharge charged to Pathmark by Plainbridge when such Pathmark/Blair Merchandise was delivered to Pathmark). Written consent, which consent shall not be unreasonably withheld, shall be required from Pathmark for sales by Plainbridge of such excess inventory to Competing Retailers. SECTION 4.03. Quality Control. (a) All Pathmark/Blair Merchandise purchased by Pathmark pursuant to this Agreement shall comply with, and be shipped and stored in accordance with, the standards and specifications (including, without limitation, temperature controls, sanitation standards, date code reviews and packaging inspections) set forth in the Pathmark/Blair Logistics Manual and with all such other reasonable and practicable standards and specifications, expressed in comparable detail, of a nature similar to and requiring tolerances no more onerous to Plainbridge than those currently contained in the Pathmark/Blair Logistics Manual, as may be furnished to Plainbridge in writing from time to time by Pathmark (the "Standards and Specifications"). (b) Pathmark shall not be obligated to purchase any Pathmark/Blair Merchandise that does not meet Pathmark's quality standards indicated on the applicable purchase order or which shall have been previously communicated to the Vendor and Plainbridge and negotiated with and accepted by the Vendor; provided, however, that Pathmark may not impose on Plainbridge any standards that are more stringent than those accepted by the Vendor. Plainbridge shall be responsible for ensuring that any Pathmark/Blair Merchandise determined to be inferior to the quality standards established by Pathmark is rejected or returned to Vendors and not accepted for shipment to Pathmark stores; provided, however, that the requirement that Plainbridge maintain product quality standards shall not be construed as requiring Plainbridge to perform detailed inspections of all Pathmark/Blair Merchandise for compliance with the Standards and Specifications; and provided further that Plainbridge shall not be responsible for inspecting any Pathmark/Blair Merchandise already inspected by Pathmark. Plainbridge shall also be responsible for ensuring that Pathmark/Blair 14 Merchandise receiving, selection, and delivery functions are handled in such a manner that Pathmark product dating code standards, as set forth in the Pathmark/Blair Logistics Manual, are met. (c) Notwithstanding Plainbridge's responsibility for quality control, Pathmark may from time to time place its representatives at Plainbridge's facilities to ensure that the Pathmark/Blair Merchandise being accepted meets the standards established pursuant to Sections 4.03(a) and (b). Plainbridge shall permit Pathmark's duly authorized representatives (the "Inspectors") to inspect the facilities of Plainbridge maintained or used in the storage and handling of Pathmark/Blair Merchandise (the "Facilities") at any reasonable time in order to verify that the Facilities and the Pathmark/Blair Merchandise comply with the Standards and Specifications and shall provide workspace sufficient to accommodate the reasonable requirements of such Inspectors; provided that such Inspectors shall conduct themselves in such a way as not to unduly interfere with Plainbridge's business operations. Subject to the foregoing, Plainbridge shall: (i) permit the Inspectors to have full access to all employees and agents of Plainbridge involved in the storage, handling and distribution of Pathmark/Blair Merchandise and otherwise in the performance of Plainbridge's obligations under this Agreement, and use ordinary diligence to ensure the cooperation of such employees and agents, as may be reasonably necessary for carrying out the duties set forth in this Section 4.03(d); provided that Pathmark shall not solicit or endeavor to entice away any employee of Plainbridge, or otherwise interfere with the lawful business between Plainbridge and any employee thereof; (ii) permit the Inspectors to examine all phases of the storage and handling of Pathmark/Blair Merchandise and, solely at Plainbridge's expense, to sample, in reasonable quantities, all such Pathmark/Blair Merchandise at any reasonable time in order to verify that such procedures comply with Pathmark's Standards and Specifications; provided that such inspection does not interfere with the ordinary business operations of Plainbridge; and (iii) permit the Inspectors access to all areas of the Facilities, including, without limitation, all receiving areas, storage areas and facilities, and all 15 equipment, relating to the handling, rotation or transportation of Pathmark/Blair Merchandise, and to perform inspections or other tests to the extent reasonably necessary in order to verify that such facilities and equipment perform in a manner that complies with Pathmark's Standards and Specifications. (d) Plainbridge further acknowledges that, notwithstanding any rights of Pathmark provided for under Section 4.03(c), Pathmark expressly reserves the right to enforce any and all provisions of this Section 4.03 at all times, without regard to any previous failure to exercise any such rights. (e) Plainbridge hereby guarantees to Pathmark that any and all Pathmark/Blair Merchandise delivered by Plainbridge to Pathmark or any Affiliate of Pathmark shall, as of the date of such delivery and insofar as applicable, (i) be Merchandise that may be introduced into interstate commerce pursuant to the Federal Food, Drug and Cosmetic Act, 21 U.S.C. Secs. 301 et seq., (ii) conform to all applicable consumer product safety Laws, standards, rules and regulations promulgated under the Federal Consumer Product Safety Act, 15 U.S.C. Secs. 2051 et seq., and shall not be a banned hazardous product thereunder, (iii) conform to all applicable consumer product safety Laws, standards, rules and regulations promulgated under the Federal Hazardous Substances Act, 15 U.S.C. Secs. 1261 et seq., and shall not be a banned hazardous substance thereunder, and (iv) have been inspected by the United States Department of Agriculture and be Merchandise that may be introduced into interstate commerce pursuant to, and shall not be adulterated or misbranded as determined under, the Federal Meat Inspection Act, 21 U.S.C. Secs. 601 et seq. Plainbridge further guarantees that any such Pathmark/Blair Merchandise shall comply with all other federal Laws, rules and regulations of all political subdivisions of the United Sates of America and with the Laws, rules and regulations of the respective states and their respective political subdivisions, whether now or hereinafter enacted. Plainbridge agrees that if any Pathmark/Blair Merchandise is found to violate any of the above indicated Laws, standards, rules or regulations, or is otherwise rendered unmarketable by any Governmental Authorities administering such Laws, standards, rules and regulations, Plainbridge shall accept return of the Pathmark/Blair Merchandise, if such Pathmark/Blair Merchandise shall not have been seized or condemned by any such Governmental Authority, and shall refund to Pathmark the cost thereof as billed to Pathmark together with any 16 reasonable and necessary transportation charges incurred in said return. If any such Pathmark/Blair Merchandise shall have been seized by a Governmental Authority, Plainbridge shall refund to Pathmark the cost thereof as billed to Pathmark but will be entitled to defend, in Plainbridge's own name and at its own expense, any such seizure, and to obtain possession of such Pathmark/Blair Merchandise in the event that Plainbridge is successful in such defense. ARTICLE V DELIVERY SECTION 5.01. Delivery. (a) Plainbridge or a Plainbridge Subsidiary shall deliver Pathmark/Blair Merchandise to Pathmark stores in a timely manner as specified in the Pathmark/Blair Logistics Manual, using its best efforts to meet Pathmark's reasonable delivery schedules by, among other things, appropriately scheduling deliveries from Vendors to Plainbridge's storage facilities, insofar as it has discretion within the delivery schedule indicated by Pathmark to the Vendor. Pathmark shall direct Plainbridge or a Plainbridge Subsidiary, as the case may be, as to what Pathmark/Blair Merchandise shall be delivered to which Pathmark stores. Plainbridge or a Plainbridge Subsidiary shall ensure that Pathmark/Blair Merchandise received is available for shipment within the periods designated in the Pathmark/Blair Logistics Manual. Neither Plainbridge nor a Plainbridge Subsidiary may, without Pathmark's prior written consent, change the method or pattern of delivery in a manner that, in the sole determination of Pathmark, adversely impacts Pathmark's operations. Pathmark shall notify Plainbridge or a Plainbridge Subsidiary, as the case may be, of (i) any restrictions imposed by local ordinances, not existing on the date of this Agreement, on the delivery of Merchandise to existing stores and (ii) any restrictions imposed by local ordinances on the delivery of Merchandise to new stores. (b) Subject to Section 3.03, Plainbridge or a Plainbridge Subsidiary, as the case may be, shall increase the number of deliveries of Pathmark/Blair Merchandise to Pathmark stores and the number of trailers available for such deliveries commensurate with any increase by Pathmark in the number of its stores and at the rate per new store specified in the Pathmark/Blair Logistics Manual. 17 (c) Pathmark shall be responsible for the unloading of Pathmark/Blair Merchandise at each store and shall provide approximately that number of man-hours of labor per load as is specified in the Pathmark/Blair Logistics Manual for such task. Plainbridge or Plainbridge Subsidiary drivers shall assist in the unloading of Pathmark/Blair Merchandise delivered to stores. (d) Plainbridge or a Plainbridge Subsidiary, as the case may be, shall retrieve all trailers delivered to Pathmark stores within the periods specified in the Pathmark/Blair Logistics Manual. (e) Pathmark shall pay the detention fee specified in the Pathmark/Blair Logistics Manual for any delay incurred by Plainbridge or a Plainbridge Subsidiary as a result of a trailer being retained by Pathmark in excess of the standard delivery periods specified in the Pathmark/Blair Logistics Manual. (f) Pathmark shall pay a storage fee to Plainbridge or a Plainbridge Subsidiary, as the case may be, in connection with any trailers used by Pathmark other than for the delivery of Pathmark/Blair Merchandise to and from Pathmark stores. Such storage fee shall not exceed the cost of a third-party rental of equivalent equipment plus the related out-of-pocket costs incurred by Plainbridge or such Plainbridge Subsidiary. Such storage costs shall not be applicable to trailers used by Pathmark for temporary storage purposes, where such trailers are available from among the fleet of trailers normally allocated by Plainbridge for Pathmark/Blair Merchandise, as specified in the Pathmark/Blair Logistics Manual. (g) Pallets normally maintained in the Facilities shall be considered the property of Plainbridge. Pathmark shall not be responsible for any losses of such pallets due to breakage or normal shrinkage during the ordinary course of Plainbridge's distribution and transportation operations, except that Pathmark shall be responsible for duly documented material losses of such assets that occur at Pathmark stores. SECTION 5.02. Vendor Direct-to-Store Deliveries. Pathmark shall determine whether any Merchandise is to be delivered by a Vendor directly to Pathmark stores ("Direct-to-Store Deliveries"). Pathmark shall in good faith attempt to designate Plainbridge or a Plainbridge Subsidiary as the carrier for Direct-to-Store Deliveries; provided that Plainbridge's or a Plainbridge Subsidiary's charges for such delivery are no greater than the lesser of (i) the applicable Vendor's prepaid freight charge and (ii) the fee that would 18 be charged for such delivery by third party carriers. Pathmark shall not be liable for additional freight charges that may be incurred by Plainbridge or such Plainbridge Subsidiary in connection with such Direct-to-Store Deliveries that are over and above the agreed-upon payment from Pathmark to Plainbridge or such Plainbridge Subsidiary. Any Vendor freight allowances, which shall be for the account of Plainbridge, shall reduce the freight fee charged to Pathmark by Plainbridge or such Plainbridge Subsidiary, as the case may be. ARTICLE VI UPCHARGES SECTION 6.01. Upcharges. (a) Upon the delivery of Pathmark/Blair Merchandise to Pathmark by Plainbridge, Pathmark shall pay Plainbridge a fee (an "Upcharge") in the amounts specified in the Pathmark/Blair Logistics Manual. It is expressly understood that Upcharges shall vary depending on the type of Pathmark/Blair Merchandise and its value. (b) Annual cost benefits derived from increases in the volume of Pathmark/Blair Merchandise, as applied to the applicable fiscal year's average cost per case, and increases in the volume of Plainbridge's sales to third parties over the volumes and values specified in the Pathmark/Blair Logistics Manual shall be shared between Plainbridge and Pathmark. Such benefits shall be calculated for each fiscal year period by subtracting the Plainbridge variable Upcharge (as specified in the Pathmark/Blair Logistics Manual) from the actual Upcharge relating to the type and value of such Pathmark/Blair Merchandise and third party sales. The result shall be divided equally between Pathmark and Plainbridge. (c) Consistent with Past Practices, Plainbridge shall provide an allowance to Pathmark on all Pathmark/Blair Merchandise equal to 1% of the Base Price (before deduction of cash discounts). Such allowance shall be charged to the various distribution facilities on a weekly basis in accordance with the formula contained in the Pathmark/Blair Logistics Manual, and shall be deducted from the weekly installment of the Minimum Annual Upcharge Payment described in Section 6.02. In the event that variations in the amount of Pathmark/Blair Merchandise ordered by Pathmark are so great as to materially adversely affect Plainbridge's ability to pay its weekly expenses, Plainbridge shall provide the 19 allowance to Pathmark on a bi-weekly basis for as long as such ability shall be so affected. SECTION 6.02. Minimum Annual Upcharge Payment. (a) Pathmark shall be obligated to pay Plainbridge a minimum annual fee (the "Minimum Annual Upcharge Payment") of $134,879,000, the Upcharge fee that would result if 95% of the actual volume level for 1992 was achieved; provided that the Minimum Annual Upcharge Payment shall be reduced by the allowance described in Section 6.01(c). The Minimum Annual Upcharge Payment shall be increased, but not decreased, by an amount equal to the annual rate of inflation, as calculated using the consolidated internal inflation factors that are used by Pathmark for its computations of inventory valuations based on the "Last In, First Out" methodology in accordance with United States Generally Accepted Accounting Principles. (b) The Minimum Annual Upcharge Payment shall be payable in equal weekly installments on the last Business Day of each week. The amount of such weekly installments shall be calculated by dividing (x) the Minimum Annual Upcharge Payment, as it may be increased pursuant to Section 6.02(a), by (y) 52 or 53, as the case may be, depending on the number of weeks in the applicable fiscal year of Pathmark; provided, however, that the installments payable on the last Business Day of the first week of each fiscal month shall be adjusted by (i) the aggregate fiscal year-to-date Upcharges, based upon the actual Upcharges, actually paid or payable by Pathmark to Plainbridge for fiscal year-to-date purchases, and (ii) the sum of the aggregate fiscal year-to-date Upcharges actually paid by Pathmark to Plainbridge for fiscal year-to-date purchases, including installments on the Minimum Annual Upcharge Payment and any adjustments thereto. If the amount calculated pursuant to subclause (i) above exceeds the amount calculated pursuant to subclause (ii) above, such excess shall be added to the first weekly installment payable from Pathmark to Plainbridge subsequent to the monthly calculation. If the amount calculated pursuant to subclause (i) above is less than the amount calculated pursuant to subclause (ii) above, such shortfall shall be deducted from the first weekly installment payable from Pathmark to Plainbridge subsequent to such monthly calculation; provided, however, that no such deduction may be taken if it would reduce the aggregate fiscal year-to-date Upcharge payments to an amount less than the pro rata fiscal year-to-date Minimum Annual Upcharge Payment as calculated based on a 52-week or 53-week year, as applicable. 20 (c) As promptly as practicable after the end of each fiscal year, Pathmark and Plainbridge shall calculate (i) the aggregate Upcharges payable to Plainbridge by Pathmark during such fiscal year (the "Actual Upcharge") and (ii) the aggregate Minimum Annual Upcharge Payment installments and monthly adjustments actually paid to Plainbridge by Pathmark during such fiscal year (the "Paid Upcharge"). Promptly upon the completion of such calculations: (i) Pathmark shall pay to Plainbridge the amount, if positive, equal to (x) the Actual Upcharge less (y) the Paid Upcharge; and (ii) Plainbridge shall pay to Pathmark the amount, if positive, equal to (x) the Paid Upcharge less (y) the Actual Upcharge; provided, however, that such amount shall not be paid if such payment would reduce the Minimum Annual Upcharge Payment, as it may be increased pursuant to Section 6.02(a). (d) In the event that during the term of this Agreement Pathmark disposes of any of its stores, which stores are not replaced with substitute stores, such that (i) the total number of Pathmark supermarket stores is less than 146 or (ii) the total number of Pathmark drugstores is less than 33, the Minimum Annual Upcharge Payment shall thenceforth be reduced by the product of (x) the Minimum Annual Upcharge Payment and (y) a fraction the numerator of which shall be the aggregate Upcharges paid by Pathmark in respect of Pathmark/Blair Merchandise purchased for such stores during the preceding fiscal year and the denominator of which shall be the aggregate Upcharges paid by Pathmark during the preceding fiscal year. In addition, upon the occurrence of such an event, Pathmark and Plainbridge hereby agree to negotiate in good faith to determine whether such reduced level in the number of stores will continue to exist for the then foreseeable future and, if so, to renegotiate in good faith an appropriate reduction in the capacity growth requirement of Section 3.03(a). (e) In the event that Pathmark experiences a reduction in its volume requirements (other than a volume reduction due to store dispositions) such that the volume of purchased Pathmark/Blair Merchandise in any one fiscal year is less than 90% of the actual volume level for 1992, the parties agree to renegotiate in good faith (i) a reduction in the Minimum Annual Upcharge Payment to the extent that Plainbridge is able to realize reductions in its fixed or variable operating costs as a result of such decreased volume and (ii) a reduction in the capacity growth requirement of Section 3.03(a) in the event that Pathmark and Plainbridge agree, negotiating in good faith, that Pathmark will continue 21 to experience such reduced volume level for the then foreseeable future. ARTICLE VII SHORTAGES AND VENDOR RETURNS SECTION 7.01. Shortages. (a) Plainbridge shall grant Pathmark a general, fixed credit for shortages, damages, and misselects that reduce assumed full pallet quantities billed to Pathmark. This credit shall be equal to a percentage of the billed cost of the Pathmark/Blair Merchandise, as specified in the Pathmark/Blair Logistics Manual. Shortages or overages (greater than full pallet shipments) that are actually discovered shall be reported and investigated as specified in the Pathmark/Blair Logistics Manual. (b) Plainbridge shall conduct annual physical inventories at each of its warehouses, the results of which shall be compared with Plainbridge's book inventory records to determine losses or overages. Any shrink losses so determined shall be for the account of Plainbridge. If any such physical inventory discloses overages, such overages shall be offset against any previous shrink losses occurring in the same fiscal year to determine if there is a net overage. Pathmark shall be credited for any such net overage to reflect undelivered Pathmark/Blair Merchandise that had been assumed delivered to Pathmark. SECTION 7.02. Reclamation. (a) Pathmark shall return all Damaged or Dated Merchandise to Plainbridge, which shall then dispose of all such Damaged or Dated Merchandise. Plainbridge shall determine the manner in which Damaged or Dated Merchandise is to be disposed of; provided that any such disposition not consistent with the policies established in the Pathmark/Blair Logistics Manual must be approved by Pathmark. Plainbridge shall pursue the most cost effective means of processing Damaged or Dated Merchandise. Plainbridge shall be prohibited from selling Damaged or Dated Merchandise, without the prior written consent of Pathmark, to any third party that is in the business of reselling, or that could reasonably be expected to resell, such Damaged or Dated Merchandise to Competing Retailers. (b) Pathmark shall receive a credit from Plainbridge offsetting the base price and Upcharges previously paid for Damaged or Dated Merchandise, equal to the lesser of (i) 22 Pathmark's cost of such Damaged or Dated Merchandise, (ii) any credit relating to such Damaged or Dated Merchandise that Plainbridge receives from the applicable Vendor, which credit Plainbridge shall use all reasonable efforts to obtain, and (iii) the net proceeds to Plainbridge of any sale of such Damaged or Dated Merchandise to third parties. ARTICLE VIII FORCE MAJEURE; PLAINBRIDGE INSURANCE SECTION 8.01. Occurrence of Event of Force Majeure. (a) If, as a result of the occurrence of an Event of Force Majeure, either party is unable to perform its obligations under this Agreement, in whole or in part, subject to Section 8.01(b) below, such obligations shall be temporarily suspended to the extent, but only to the extent, that they cannot be performed as a result of such Event of Force Majeure; provided that such suspension shall be in effect only for the period during which such Event of Force Majeure shall be continuing; and provided further that the party shall diligently attempt to remove the cause of its inability to fully perform such obligations and shall keep the other party advised on a regular basis of its progress in removing the cause of its inability to fully perform such obligations. If an Event of Force Majeure prevents Plainbridge from performing some or all of its obligations under this Agreement, the Minimum Annual Upcharge Payment shall be reduced proportionately to the extent that Plainbridge is so prevented from performing such obligations. (b) Notwithstanding any other provision of this Agreement, if during the term of this Agreement, as a result of the occurrence and continuance of an Event of Force Majeure, Plainbridge shall be unable to supply Pathmark/Blair Merchandise to Pathmark in the quantities required pursuant to this Agreement for a period exceeding 180 consecutive days, Pathmark shall have the right to terminate this Agreement. Section 8.02. Plainbridge Insurance. All material properties and risks of Plainbridge and any and all Plainbridge Subsidiaries shall at all times be covered by valid and currently effective insurance policies or binders of insurance or programs of self-insurance in such types and amounts as are consistent with customary practices and standards of companies engaged in businesses and operations similar to those of Plainbridge and the Plainbridge Subsidiaries. 23 ARTICLE IX BUSINESS CONTEXT OF THE AGREEMENT SECTION 9.01. Agreement Based on Past Practices. In the event that future developments in the warehouse and distribution business cause significant alterations in the way that shipping configurations, Merchandise mix, and other basic aspects of such business are conducted, and such alterations would work to the material detriment of either party, the parties agree to negotiate changes to this Agreement in good faith to provide Plainbridge with profit opportunities and Pathmark with cost levels substantially similar to those intended on the date of this Agreement. SECTION 9.02. Commitment to Efficient Operations. The parties hereby agree to cooperate to reduce costs and improve service levels. Among other things, Pathmark shall communicate, as and when it deems appropriate, to Plainbridge its projected sales figures based on its annual, quarterly and weekly budget projections. If either party undertakes other measures designed to achieve such efficiency goals, and those measures inadvertently and disproportionately penalize the other party, the parties shall negotiate in good faith to appropriately allocate the costs of such measures based on the benefits expected to be realized by each party. ARTICLE X TERM AND TERMINATION SECTION 10.01. Term. This Agreement shall become effective as of the date hereof and shall remain in effect for a period of ten years or until such time as it shall have been terminated in the manner provided in Section 10.02 or 10.03. If this Agreement is not so terminated prior to the end of such ten-year period, Pathmark shall, for a period of five years, each year have an option to renew this Agreement for an additional year. Pathmark may exercise such option by delivering written notice of its election to exercise such option to Plainbridge at least 90 days before the otherwise scheduled expiration of the term of this Agreement. SECTION 10.02. Optional Termination by Pathmark. Pathmark may terminate this Agreement upon not less than six months' written notice to Plainbridge (a "Notice of Termination"), at any time on or after the fourth anniversary of the date of this Agreement. This Agreement shall 24 terminate on the later of (i) six months following the date of a Notice of Termination or (ii) the date specified in the Notice of Termination. During the period following delivery of a Notice of Termination and prior to the termination of this Agreement, each party shall perform its obligations under this Agreement in substantially the same manner as they were performed prior to the date of delivery of such Notice of Termination, with no disruption to Pathmark's supply of Pathmark/Blair Merchandise; provided, however, that the parties shall negotiate in good faith to agree to a "winding-up" schedule for such period. SECTION 10.03. Termination for Breach. This Agreement may be terminated upon not less than six months' written notice, at the option of: (a) Pathmark, (i) if Plainbridge fails to perform in any material way any of its material obligations under this Agreement and if such failure shall remain unremedied for sixty (60) days after written notice thereof shall have been given by Pathmark to Plainbridge, or (ii) upon the occurrence of an Event of Insolvency with respect to Plainbridge. (b) Plainbridge, (i) if Pathmark fails to perform in any material way any of its material obligations under this Agreement and if such failure shall remain unremedied for sixty (60) days after written notice thereof shall have been given by Plainbridge to Pathmark, or (ii) upon the occurrence of an Event of Insolvency with respect to Pathmark. SECTION 10.04. Offer to Purchase Assets upon Termination by Pathmark. (a) In the event that Pathmark terminates this Agreement pursuant to Section 10.03(a) (a "Pathmark Forced Termination"), Pathmark shall have the right to purchase, and, if such right to purchase is exercised, Plainbridge shall sell to Pathmark, for cash, within 30 days of the effectiveness of such termination, the portion of the assets of Plainbridge that is essential to the support of the obligations of Plainbridge to Pathmark under this Agreement (the "Pathmark Distribution Assets") at a price equal to the lower of their (i) net book value and (ii) Fair Market Value, payable, at Pathmark's option (except with respect to Merchandise, which shall be sold only for cash), in (i) cash or (ii) shares of common stock ("Common Stock") of Pathmark or an Affiliate of Pathmark (as applicable, the "Common Stock Company") registered under the Securities Act of 1933, as amended, having an aggregate Applicable Share Value equal to such net book value or Fair Market Value, as the case may be. (b) In the event that Pathmark elects to purchase the Pathmark Distribution Assets upon the occurrence of a Pathmark Forced Termination, Pathmark shall deliver to Plainbridge a notice to such effect signed by the Chief Executive Officer of Pathmark within 90 days of the date of 25 the applicable notice of termination, and Pathmark shall be obligated to purchase from Plainbridge, and Plainbridge shall sell within 30 days of the effectiveness of such Pathmark Forced Termination, the Pathmark Distribution Assets at a price equal to the lower of their (i) net book value and (ii) Fair Market Value. (c) In the event that Pathmark terminates this Agreement pursuant to Section 10.02 (a "Pathmark Optional Termination"), it shall offer to purchase, for cash, within 30 days of the effectiveness of such termination, and, if Plainbridge accepts such offer, purchase, the Pathmark Distribution Assets at their Fair Market Value. (d) In the event that Plainbridge elects to sell the Pathmark Distribution Assets to Pathmark upon the occurrence of a Pathmark Optional Termination, Plainbridge shall deliver to Pathmark a notice to such effect signed by the Chief Executive Officer of Plainbridge and delivered to Pathmark within 90 days of the date of the applicable notice of termination, and Pathmark shall purchase from Plainbridge within 30 days of the effectiveness of such Pathmark Optional Termination the Pathmark Distribution Assets at their Fair Market Value. SECTION 10.05. Plainbridge Put upon Termination by Plainbridge. (a) In the event that Plainbridge terminates this Agreement pursuant to Section 10.03(b) (a "Plainbridge Termination"), Plainbridge shall have the right to sell, and, in the event that such right is exercised, Pathmark shall purchase, for cash, within 30 days of the effectiveness of such termination, the Pathmark Distribution Assets at their Fair Market Value. (b) In the event that Plainbridge elects to sell the Pathmark Distribution Assets upon the occurrence of a Plainbridge Termination, Plainbridge shall deliver a notice to such effect signed by the Chief Executive Officer of Plainbridge to Pathmark within 90 days of the date of the applicable notice of termination, and Plainbridge shall sell to Pathmark within 30 days of the effectiveness of such Plainbridge Termination the Pathmark Distribution Assets at their Fair Market Value. SECTION 10.06. Waiver. Either party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other party or (b) waive compliance with any of the agreements or conditions of the other party contained herein. Any such extension or 26 waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition, of this Agreement. The failure of any party to assert any of its rights hereunder shall not constitute a waiver of any of such rights. ARTICLE XI PURCHASE OPTIONS SECTION 11.01. Sale of Pathmark Distribution Assets. Other than in the ordinary course of business, Plainbridge shall not sell any of the Pathmark Distribution Assets without Pathmark's prior written consent. SECTION 11.02. Change of Control. (a) In the event of a Change of Control, Pathmark shall have the right to purchase any or all of the Pathmark Distribution Assets at their Fair Market Value. (b) In the event of a Change of Control, Plainbridge shall deliver a notice (a "Change of Control Notice") signed by an officer of Plainbridge to Pathmark stating the occurrence of a Change of Control within fifteen Business Days of the occurrence of such Change of Control. For a period of two years following delivery of a Change of Control Notice (the "Change of Control Option Period"), Pathmark shall have the irrevocable and exclusive option to purchase any or all of the Pathmark Distribution Assets at their Fair Market Value. If Pathmark elects to purchase the Pathmark Distribution Assets, it shall give written notice (a "Pathmark Election Notice") of such election to Plainbridge prior to the expiration of the Change of Control Option Period. (c) In the event that Pathmark elects to purchase the Pathmark Distribution Assets upon the occurrence of a Change of Control, Plainbridge shall be obligated to sell to Pathmark, and Pathmark shall purchase within 30 days of the date of the applicable Pathmark Election Notice, the Pathmark Distribution Assets at their Fair Market Value. 27 ARTICLE XII DISPUTE RESOLUTION SECTION 12.01. Grievances and Disputed Amounts. If Pathmark disputes any portion of an invoice from Plainbridge, it shall pay the undisputed amount by the payment due date. Either party shall give notice to the other party of any invoice adjustment it believes should be made, and the parties shall attempt to reach agreement on such adjustment within seven days. SECTION 12.02. Interparty Dispute Resolution. Disputes between the two parties arising under this Agreement and not settled pursuant to Section 12.01 or otherwise shall be submitted to an arbitration panel made up of representatives from both parties (the "Dispute Panel"). The President of Pathmark shall act as chairman of the Dispute Panel, and each party shall appoint two other members to the Dispute Panel, with each member of the Dispute Panel having one vote. The decision of the Dispute Panel shall be binding on both parties; provided that the Boards of Directors of each party shall have approved the decision. In the event that a decision of the Dispute Panel shall not be approved by each Board of Directors, the dispute shall be submitted to independent arbitration pursuant to Sections 12.03, 12.04 and 12.05. SECTION 12.03. Arbitration. In the event that the parties are not successful in resolving the dispute pursuant to Section 12.02, the parties agree to submit the matter to binding arbitration in accordance with the Center for Public Resources Rules for Non-Administered Arbitration of Business Disputes or the procedure of another mutually agreed-upon organization, as modified herein, by a sole arbitrator, in New York, New York, selected in accordance with the provisions of Section 12.04. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Secs. 1-16, and judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. SECTION 12.04. Selection of Arbitrator. Upon a failure of the parties to resolve a dispute pursuant to Section 12.02, the parties shall have 10 days to agree upon a mutually acceptable neutral person not affiliated with either of the parties to act as arbitrator. If no arbitrator has been selected within such time, the parties agree jointly to request the Center for Public Resources or another mutually 28 agreed-upon organization to supply within 10 days a list of potential arbitrators with qualifications as specified by the parties in the joint request. Within five days of receipt of the list, the parties shall independently rank the proposed candidates, shall simultaneously exchange rankings, and shall select as the arbitrator the individual receiving the highest combined ranking who is available to serve. SECTION 12.05. Cost of Arbitration. The costs of arbitration shall be apportioned between Pathmark and Plainbridge as determined by the arbitrator in such manner as the arbitrator deems reasonable taking into account the circumstances of the case, the conduct of the parties during the proceeding, and the result of the arbitration. ARTICLE XIII GENERAL PROVISIONS SECTION 13.01. Books and Records. Upon prior written notice, each party shall have access to the books and records of the other party as they pertain to such party's obligations or its ability to perform its obligations under this Agreement. SECTION 13.02. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, between the parties hereto with respect to the subject matter hereof. SECTION 13.03. Expenses. Except as otherwise specified in this Agreement, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby prior to the date of the Plainbridge Asset and Liability Transfer shall be paid by Pathmark to the extent that appropriate documentation concerning such costs and expenses shall be provided to Pathmark. SECTION 13.04. Amendments. (a) This Agreement may not be amended or modified except (i) by an instrument in writing signed by, or on behalf of, each of Pathmark and Plainbridge or (ii) by a waiver in accordance with Section 10.06. 29 (b) The Pathmark/Blair Logistics Manual may not be amended or modified except by an instrument in writing signed by, or on behalf of, each of Pathmark and Plainbridge. SECTION 13.05. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by courier service, by cable, by telecopy, by telegram, by telex or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 13.05): (a) If to Pathmark: PATHMARK STORES, INC. 301 Blair Road P.O. Box 5301 Woodbridge, New Jersey 07095-0915 Telecopier: (908) 499-3460 Attention: Chief Executive Officer With a copy to: Corporate Secretary (b) If to Plainbridge: PLAINBRIDGE, INC. P.O. Box 5021 Woodbridge, New Jersey 07095 Telecopier: (908) 499-3100 Attention: President With a copy to: Corporate Secretary SECTION 13.06. Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of Pathmark and Plainbridge and their respective successors and assigns; provided that (i) Plainbridge shall not have the right to assign or subcontract its rights and obligations hereunder or any interest herein without the prior written consent of Pathmark and (ii) Pathmark may assign its rights and obligations hereunder without Plainbridge's consent only so long as (A) (1) Pathmark shall assign all such rights and obligations and (2) the assignment is to a person who is acquiring all or substantially all of Pathmark's assets or (B) Pathmark shall guarantee all of the assigned obligations. Notwithstanding the foregoing, Plainbridge may assign (without Pathmark's prior written consent) any of its rights, but not its obligations, hereunder to any Person providing financing to Plainbridge. 30 SECTION 13.07. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 13.08. Confidentiality. Each of Pathmark and any of its Subsidiaries, on the one hand, and Plainbridge and the Plainbridge Subsidiaries, on the other hand, agree to and will cause their respective authorized agents, representatives, Affiliates, employees, officers, directors, accountants, counsel and other designated representatives (collectively, "Representatives") to: (i) treat and hold as confidential (and not disclose or provide access to any Person to) all records, books, contracts, instruments, computer data and other data and information (collectively, "Information") concerning the other in its possession or furnished by the other or the other's Representatives pursuant to this Agreement, (ii) in the event that either party or its Representatives become legally compelled to disclose any such Information, provide the other party with prompt written notice of such requirement so that such other party may seek a protective order or other remedy or waive compliance with this Section 13.08 and (iii) in the event that such protective order or other remedy is not obtained, or the other party waives compliance with this Section 13.08, furnish only that portion of such Information which is legally required to be provided and exercise its best efforts to obtain assurances that confidential treatment will be accorded such Information; provided, however, that this sentence shall not apply to any Information that, at the time of disclosure, is available publicly and was not disclosed in breach of this Agreement by such party or its Representatives; and provided further, however, that Plainbridge agrees that Pathmark is the owner of all Information relating to Pathmark's purchasing practices and that Pathmark may in its sole discretion sell such purchasing-related Information to third parties. Each party agrees and acknowledges that remedies at Law for any breach of its obligations under this Section 13.08 are inadequate and that in addition thereto the other party shall be entitled to seek equitable relief, including injunction and specific performance, in the event of any such breach, without the necessity of demonstrating the inadequacy of monetary damages. SECTION 13.09. Relationship of Parties. In all matters relating to this Agreement, both parties shall be acting solely as independent contractors and shall be solely 31 responsible for the acts of their employees, officers, directors and agents. Employees, agents or contractors of one party shall not be considered employees, agents or contractors of the other party. SECTION 13.10. No Third-Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person, including, without limitation, any union or any employee or former employee of Pathmark or Plainbridge or any Subsidiary of Pathmark or Plainbridge Subsidiary, any legal or equitable right, benefit or remedy of any nature whatsoever, including, without limitation, any rights of employment for any specified period, under or by reason of this Agreement. SECTION 13.11 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. SECTION 13.12. Headings. The descriptive headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 13.13. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New Jersey, without regard to the principles of conflicts of laws thereof. 32 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first written above. PATHMARK STORES, INC. By /s/ John Henry Name: John Henry Title: Vice President PLAINBRIDGE, INC. By /s/ Marc S. Strassler Name: Marc A. Strassler Title: Vice President EX-10.2 12 RICKEL SERVICES AGREEMENT SERVICES AGREEMENT, dated as of October 26, 1993 (this "Agreement"), between PATHMARK STORES, INC., a Delaware corporation ("Pathmark"), and PLAINBRIDGE, INC., a Delaware corporation ("Plainbridge"). W I T N E S S E T H: WHEREAS, Pathmark, Plainbridge and PTK Holdings, Inc., a Delaware corporation, have entered into a Distribution and Transfer Agreement, dated as of October 26, 1993, pursuant to which Pathmark will, among other things, contribute certain assets and properties related to its Rickel operations (the "Rickel Businesses") to the capital of Plainbridge and Plainbridge will assume substantially all the liabilities and obligations relating to the Rickel Businesses (the "Asset and Liability Transfer"); WHEREAS, Pathmark and its employees have heretofore provided certain administrative services to the Rickel Businesses and, in order for Plainbridge to operate the Rickel Businesses, Plainbridge will require that Pathmark continue to provide such services to Plainbridge on the terms and conditions set forth herein; WHEREAS, it is a condition to the Asset and Liability Transfer that Pathmark and Plainbridge enter into this Agreement; NOW, THEREFORE, in consideration of the premises and and the mutual agreements and covenants hereinafter set forth, Pathmark and Plainbridge hereby agree as follows: ARTICLE I CERTAIN DEFINED TERMS Section 1.01 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings: 2 "Action" means any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority. "Asset and Liability Transfer" has the meaning specified in the recitals to this Agreement. "Event of Force Majeure" means, for any Person, any event, circumstance or condition that is beyond the control of such Person and that prevents such Person from performing, in whole or in part, its obligations under this Agreement. Without limiting the generality of the foregoing, the following occurrences shall be deemed to be Events of Force Majeure: (a) Acts of God, fire, explosion, accident, flood, storm or other natural phenomenon; (b) war (whether declared or undeclared), riot, blockade, sabotage or acts of public enemies; (c) national defense requirements; (d) compliance with any law, rule, regulation or Governmental Order that (x) becomes effective after the date hereof and (y) is binding on the Person seeking to rely on such law, rule, regulation or Governmental Order to excuse performance, and such Person's compliance therewith is not voluntary or optional; (e) strikes, lockouts or injunctions (it being understood that nothing herein shall require a Person to settle such or any other kind of labor dispute except on such terms as shall be satisfactory to such Person); (f) unavailability (for reasons other than the cost thereof) of adequate fuel, power, raw materials, labor, containers or transportation facilities; and (g) breakage or failure of machinery or equipment. Without limiting the generality of the foregoing, compliance with any law, regulation or Governmental Order shall not be considered an Event of Force Majeure unless such law, regulation or Governmental Order is binding on the Person seeking to rely on compliance with such law, regulation or Governmental Order to excuse performance of its obligations under this Agreement and such Person's compliance therewith is not voluntary or optional. "Event of Insolvency" means that, with respect to any Person or any of its Subsidiaries, such Person or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against such Person or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of 3 debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period or 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or such Person or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this definition. "Governmental Authority" means any U.S. federal, state or local government, governmental authority, regulatory or administrative agency, governmental commission, board, bureau, court or tribunal or any other similar arbitral body. "Governmental Order" means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority. "Liabilities" means any and all debts, liabilities, and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, or determined or undeterminable, including, without limitation, those arising under any law (including, without limitation, any environmental law), Action, or Governmental Order and those arising under any contract, agreement, arrangement, commitment, or undertaking. "Losses" means any and all losses, Liabilities, claims, damages, payments, costs and expenses, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, including, without limitation, the costs and expenses of any and all Actions, threatened Actions, demands, assessments, judgments, settlements and compromises relating thereto and attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any such Actions or threatened Actions. "Pathmark Subsidiary" means any Subsidiary of Pathmark other than Plainbridge or any Plainbridge Subsidiary. "Person" means any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended. 4 "Plainbridge Subsidiary" means any entity that is currently a subsidiary of Plainbridge and any other Subsidiary of Plainbridge which hereafter may be organized or acquired. "Rickel Businesses" has the meaning specified in the recitals to this Agreement. "Rickel Service Manual" means the Rickel service manual prepared by Pathmark and delivered to Plainbridge on the date of this Agreement. "Services" means the administrative services to be purchased from Pathmark by Plainbridge pursuant to this Agreement and described in the Rickel Service Manual. "Subsidiary" of a Person means any corporation, partnership, joint venture, association and other entity controlled by such Person directly or indirectly through one or more intermediaries. ARTICLE II SERVICES SECTION 2.01. Provision of Services by Pathmark. (a) Pathmark shall provide, or cause to be provided, to Plainbridge and each Plainbridge Subsidiary such Services as may be required by Plainbridge or such Plainbridge Subsidiary, as the case may be; such Services to be performed in a manner substantially consistent with the manner (i) in which the Services were provided by Pathmark to the Rickel Businesses prior to the Asset and Liability Transfer and (ii) in which Pathmark shall perform such Services for its own benefit. Pathmark shall be an independent contractor and, except as authorized by Plainbridge, shall have no authority to bind Plainbridge or any Plainbridge Subsidiary in any manner whatsoever. Plainbridge agrees to provide, or cause to be provided, to Pathmark and its employees such authority as may be required for Pathmark to effectively and efficiently perform the Services for Plainbridge and any Plainbridge Subsidiary. All communications with third parties by Pathmark on behalf of Plainbridge or any Plainbridge Subsidiary shall be in the name of Plainbridge or such Plainbridge Subsidiary. (b) Plainbridge shall be responsible for the completeness and accuracy of all information furnished to 5 Pathmark by Plainbridge in connection with Pathmark's performance of the Services. Plainbridge shall provide all information, data and documentation in the same format as was used by the Rickel Businesses prior to the Asset and Liability Transfer, except as reasonably agreed to by Pathmark. SECTION 2.02. Third Party Provision of Services. In the event that Pathmark has contracted with a third party to provide any of the Services, it shall use commercially reasonable efforts to cause such third party to provide such Services to Plainbridge at a performance and quality level substantially similar to the level of service provided to the Rickel Businesses prior to the Asset and Liability Transfer, and Plainbridge shall continue to pay Pathmark directly for the Services in accordance with Article III. Pathmark shall discuss with Plainbridge as soon as practicable any problems or difficulties relating to such third parties, and will give Plainbridge at least 30 days' notice in the event such a problem or difficulty threatens to affect the Services in a manner materially adverse to Plainbridge. ARTICLE III SERVICE FEE SECTION 3.01. Service Fee. As payment for such Services as may be provided pursuant to Article II, Plainbridge agrees, subject to Section 3.02, to pay Pathmark a single fee (the "Service Fee") representing the aggregate cost to Pathmark of providing such Services calculated in accordance with the methods documented in the Rickel Service Manual. Pathmark shall deliver to Plainbridge an invoice as promptly as practicable after the end of each month for the Service Fee for such month. Plainbridge shall pay to Pathmark the Service Fee specified in such invoice within seven days of its receipt. SECTION 3.02. Service Fee Adjustments. (a) Pathmark agrees to make a good faith effort to provide the Services in a cost efficient manner. (b) Service Fee reductions shall be made (retroactively as necessary) to reflect the cost reductions applicable to the period for which a Service Fee is to be or was paid. Any Service Fee reduction applicable to a period for which the Service Fee has already been paid shall be 6 applied to offset future Service Fee payments or shall be promptly paid by Pathmark to Plainbridge if no further Service Fee payments equal to or in excess of such amount can reasonably be expected to become due and payable. ARTICLE IV PROPRIETARY INFORMATION SECTION 4.01. Confidential Information. Each party agrees to, and will cause its agents, representatives, Affiliates, employees, officers, directors, accountants, counsel and other designated representatives (collectively, "Representatives") to: (i) treat and hold as confidential all, and not disclose or provide access to any Person to any, books, records, contracts, instruments, computer data and other data and information (collectively, "Information") concerning the other in its possession or furnished by the other or the other's Representatives pursuant to this Agreement (it being understood that, with respect to Plainbridge, such Information is limited to that which concerns the Rickel Businesses), (ii) in the event that either party or its representatives become legally compelled to disclose any such Information, provide the other party with prompt written notice of such requirement so that such other party may seek a protective order or other remedy or waive compliance with this Section 4.01 and (iii) in the event that such protective order or other remedy is not obtained, or the other party waives compliance with this Section 4.01, furnish only that portion of such Information that is legally required to be provided and exercise its best efforts to obtain assurances that confidential treatment will be accorded such Information; provided, however, that this sentence shall not apply to any Information that, at the time of disclosure, is available publicly and was not disclosed in breach of this Agreement by such party or its representatives. Each party agrees and acknowledges that remedies at law for any breach of its obligations under this Section 4.01 are inadequate and that in addition thereto the other party shall be entitled to seek equitable relief, including injunction and specific performance, in the event of any such breach, without the necessity of demonstrating the inadequacy of monetary damages. SECTION 4.02. Delivery of Data. Pathmark and Plainbridge agree that Plainbridge is the owner of all historical records and data processing files in Pathmark's possession relating exclusively to the Rickel Businesses (the "Records"). Plainbridge shall have the right, at any time 7 and from time to time during normal business hours, to copy and retain all Records and make extracts of information relating to Plainbridge from Pathmark's data processing records. Upon the termination of this Agreement, Pathmark shall transfer all Records to Plainbridge. Pathmark shall not destroy any Records without having given 30 days' prior written notice to Plainbridge. Pathmark shall inform any third party service providers that the Records are the property of Plainbridge and require such providers to keep the Records confidential and to transfer all Records to Plainbridge upon termination of this Agreement. ARTICLE V TERM AND TERMINATION SECTION 5.01. Term. This Agreement shall have a term of five years. Thereafter, subject to the agreement of Pathmark, Plainbridge shall each year have an option to renew for an additional year. Plainbridge may exercise such option by delivering written notice of its election to exercise such option to Pathmark at least 120 days before the otherwise scheduled expiration of the term of this Agreement, and this Agreement shall be renewed for an additional year unless Pathmark shall have objected to such renewal in a notice delivered to Plainbridge at least 90 days before the otherwise scheduled expiration of the term of this Agreement. SECTION 5.02. Termination. This Agreement may be terminated by either Plainbridge or Pathmark (i) if the other party hereto fails to perform in any material way any of its material obligations under this Agreement and if such failure shall remain unremedied for 60 days after written notice thereof shall have been given to such other party, or (ii) upon the occurrence of an Event of Insolvency with respect to the other party. SECTION 5.03. Transitional Assistance. Upon the termination of this Agreement, Pathmark shall aid Plainbridge in the resulting transition by providing Services, at a fee to be mutually agreed upon, negotiating in good faith at that time, to Plainbridge, until such time as Plainbridge shall have had a reasonable opportunity to make alternative arrangements. SECTION 5.04. Payment Obligations. Notwithstanding any provisions herein to the contrary, all payment obligations arising hereunder prior to the termination of this Agreement shall survive such termination until all such obligations shall have been paid. 8 ARTICLE VI FORCE MAJEURE SECTION 6.01. Event of Force Majeure. If, as a result of the occurrence of an Event of Force Majeure, either party is unable to perform its obligations hereunder, such obligations shall be temporarily suspended; provided that such suspension shall be in effect only for the period during which such Event of Force Majeure shall be continuing and provided further that such party shall diligently attempt to remove the cause of its inability to fully perform such obligations and shall keep the other party advised on a regular basis of its progress in removing the cause of its inability to fully perform such obligations. If and to the extent that such causes reduce or restrict the ability of Pathmark to provide Services hereunder, Pathmark shall provide the Services to Plainbridge on a proportional or restricted basis comparable to its own operations, and the charges shall be adjusted equitably, by mutual agreement, to reflect any interruption or reduction in service. In addition, Pathmark shall consult with Plainbridge in connection with Plainbridge's efforts to arrange the provision of Services by a third party and otherwise attempt to assist Plainbridge in its efforts to minimize or reduce the effect on its operations of Pathmark's inability to provide the Services in the quantities or at the levels desired by Plainbridge; provided, however, that nothing herein shall require Pathmark to assume obligations in addition to those otherwise set forth in this Agreement or to incur costs in addition to those otherwise contemplated by this Agreement. ARTICLE VII LIMITATION ON LIABILITY SECTION 7.01. Limitation on Pathmark's Liability. Plainbridge acknowledges that Pathmark is not in the business of providing the Services and that the Services are being provided pursuant to this Agreement solely as an accommodation to Plainbridge in connection with the Asset and Liability Transfer. Plainbridge's sole and exclusive remedy and Pathmark's sole and exclusive liability for any failure by Pathmark to provide, and for any Losses of Plainbridge attributable to the provision of, the Services in the manner specified in Section 2.01 shall be reperformance of such 9 services. Pathmark makes no warranty regarding the Services and disclaims all warranties with respect to the Services. ARTICLE VIII DISPUTE RESOLUTION SECTION 8.01. Grievances and Disputed Amounts. If Plainbridge disputes any portion of any invoice for the Service Fee from Pathmark, it shall pay the undisputed amount by the date specified in Section 3.01. Each party shall give notice to the other party of any invoice adjustment it believes should be made, and the parties shall attempt to reach agreement on such adjustment within seven days of such notice. SECTION 8.02. Interparty Dispute Resolution. Disputes between the two parties arising under this Agreement and not settled pursuant to Section 8.01 or otherwise shall be submitted to an arbitration panel made up of representatives from both parties (the "Dispute Panel"). The President of Pathmark shall act as chairman of the Dispute Panel, and each party shall appoint two other members to the Dispute Panel, with each member of the Dispute Panel having one vote. The decision of the Dispute Panel shall be binding on both parties; provided that the Boards of Directors of each party shall have approved the decision. In the event that a decision of the Dispute Panel shall not be approved by each Board of Directors, the dispute shall be submitted to independent arbitration pursuant to Sections 8.03, 8.04 and 8.05. SECTION 8.03. Arbitration. In the event that the parties are not successful in resolving the dispute pursuant to Section 8.02, the parties agree to submit the matter to binding arbitration in accordance with the Center for Public Resources Rules for Non-Administered Arbitration of Business Disputes or the procedure of another mutually agreed-upon organization, as modified herein, by a sole arbitrator, in New York, New York, selected in accordance with the provisions of Section 8.04. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Secs. 1-16, and judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. SECTION 8.04. Selection of Arbitrator. Upon a failure of the parties to resolve a dispute pursuant to Section 8.02, the parties shall have 10 days to agree upon a mutually acceptable neutral person not affiliated with either of the parties to act as arbitrator. If no arbitrator has 10 been selected within such time, the parties agree jointly to request the Center for Public Resources or another mutually agreed-upon organization to supply within 10 days a list of potential arbitrators with qualifications as specified by the parties in the joint request. Within five days of receipt of the list, the parties shall independently rank the proposed candidates, shall simultaneously exchange rankings, and shall select as the arbitrator the individual receiving the highest combined ranking who is available to serve. SECTION 8.05. Cost of Arbitration. The costs of arbitration shall be apportioned between Pathmark and Plainbridge as determined by the arbitrator in such manner as the arbitrator deems reasonable taking into account the circumstances of the case, the conduct of the parties during the proceeding, and the result of the arbitration. ARTICLE IX GENERAL PROVISIONS SECTION 9.01. Books and Records. Upon prior written notice, each party shall have access to the books and records of the other party as they pertain to such party's obligations or its ability to perform its obligations under this Agreement. SECTION 9.02. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, between the parties hereto with respect to the subject matter hereof. SECTION 9.03. Expenses. Except as otherwise specified in this Agreement, all costs and expenses, including, without limitation, fees and disbursements of counsel, incurred in connection with this Agreement and the transactions contemplated hereby prior to the date of the Asset and Liability Transfer shall be paid by Pathmark to the extent that appropriate documentation concerning such costs and expenses shall be provided to Pathmark. SECTION 9.04. Amendments. (a) This Agreement may not be amended or modified except (i) by an instrument in writing signed by, or on behalf of, each of Pathmark and Plainbridge or (ii) by a waiver set forth in an instrument in writing signed by the party to be bound thereby. 11 (b) The Rickel Service Manual may not be amended or modified except by an instrument in writing signed by, or on behalf of, each of Pathmark and Plainbridge. SECTION 9.05. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by courier service, by cable, by telecopy, by telegram, by telex or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.05): (a) If to Pathmark: Pathmark Stores, Inc. 301 Blair Road P.O. Box 5301 Woodbridge, New Jersey 07095-0915 Telecopier: (908) 499-3100/3460 Attention: Chief Executive Officer With a copy to: Corporate Secretary (b) If to Plainbridge: Plainbridge, Inc. P.O. Box 5021 Woodbridge, New Jersey 07095- Telecopier: Attention: President With a copy to: Corporate Secretary SECTION 9.06. Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of Pathmark and Plainbridge and their respective successors and assigns; provided that Plainbridge may not assign its rights and obligations hereunder or any interest herein without the prior written consent of Pathmark. Notwithstanding the foregoing, Plainbridge may assign (without Pathmark's prior written consent) any of its rights, but not its obligations, hereunder to any Person providing financing to Plainbridge. SECTION 9.07. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 12 SECTION 9.08. Relationship of Parties. In all matters relating to this Agreement, both parties shall be acting solely as independent contractors and shall be solely responsible for the acts of their employees, officers, directors and agents. Employees, agents or contractors of one party shall not be considered employees, agents or contractors of the other party. Neither party shall have the right, power or authority under this Agreement to create any obligation, express or implied, on behalf of the other party. SECTION 9.09. No Third-Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever. SECTION 9.10. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. SECTION 9.11. Headings. The descriptive headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 9.12. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of 13 the State of New Jersey, without regard to the principles of conflicts of laws thereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written. PATHMARK STORES, INC. By Name: John Henry Title: Vice President PLAINBRIDGE, INC. By Name: Marc Strassler Title: Vice President EX-10.6 13 EXHIBIT 10.6 TAX SHARING AGREEMENT --------------------- AMENDED AND RESTATED TAX SHARING AGREEMENT ("Agreement") dated as of December 3, 1993, by and between SMG-II HOLDINGS CORPORATION, a Delaware corporation ("Holdings") and PATHMARK STORES, INC., a Delaware corporation ("Subsidiary"). PREAMBLE Holdings and Subsidiary have determined to amend certain provisions of the Tax Sharing Agreement dated as of October 26, 1993 between them, and have further determined to restate such Agreement to reflect such amendments. Subsidiary is a member of a consolidated group, within the meaning of Section 1.1502-1(h) of the Treasury Regulations, of which Holdings is a common parent corporation ("Holdings Group") and Holdings will include Subsidiary in filing a consolidated United States Federal income tax return for the group which includes itself and Subsidiary (a "Consolidated Return"). IN CONSIDERATION of the mutual agreements and understandings set forth herein, Holdings and Subsidiary hereby agree as follows: SECTION 1. Hypothetical Subsidiary Tax Liability. ------------------------------------- For each taxable period in which Subsidiary is included in a Consolidated Return (whether or not other corporations are included in the affiliated group filing such Consolidated Return), Subsidiary shall cause to be prepared hypothetical estimated and final Federal income tax returns ("Subsidiary Group Returns") showing the estimated and final Federal income tax liability that Subsidiary would have been obligated to pay had it not joined in the Consolidated Return (the "Subsidiary Group Tax Liability"). The Subsidiary Group Tax Liability shall be computed as follows: (i) Subsidiary shall be considered to have the same taxable year as Holdings (except for short taxable years, if any, when Subsidiary enters or leaves the affiliated group). (ii) Such computation shall be made as though Subsidiary had filed a consolidated Federal income tax return for the hypothetical group consisting of itself and its subsidiaries ("Subsidiary Group"). (iii) Such computation shall be made solely by reference to items of income, gain, deduction, loss and credit in the current and prior taxable years of the Subsidiary Group, notwithstanding that any such item may require a different treatment or limitation on the Consolidated Return. (iv) Items of income, gain, loss or deduction arising from a transaction described in Section 1.1552- 1(a)(2)(ii) of the Treasury Regulations shall be taken into account by the Subsidiary Group in the same manner and in the same taxable years as such items are actually taken into account on the Consolidated Return. (v) Carryovers and carrybacks of losses, credits or similar items shall be computed using any of such items that would be available if (but subject to the same limitations that would exist if) the Subsidiary Group had filed a consolidated Federal income tax return for each year since the organization of Subsidiary notwithstanding that there is no actual carryover or carryback or there is a larger or smaller carryover or carryback as a result of filing a Consolidated Return. (vi) The treatment of any item affecting the computation of the Subsidiary Group Tax Liability shall be (i) in accordance with Federal income tax law, (ii) subject to (i), consistent with the treatment, if any, of such item in Subsidiary's similar calculations for any prior tax period unless the inconsistency is one that would not require Internal Revenue Service ("IRS") approval or unless Holdings has obtained such approval, and (iii) subject to (i), such as to minimize the actual and estimated Subsidiary Group Tax Liability and the amount of taxes payable by Subsidiary hereunder. Subsidiary shall have the right to make any and all elections permitted by law with respect to the treatment of items of income, deduction or credit for it and its subsidiaries. SECTION 2. Payments. -------- (a) If the Subsidiary Group Tax Liability (whether estimated or final) shown on the Subsidiary Group Return for any taxable period is positive, Subsidiary shall pay such amount to Holdings not later than the time or times such amount (or any portion thereof) would be due from Subsidiary to the IRS if the Subsidiary Group filed a separate consolidated return. (b) If the Subsidiary Group Return shows entitlement to a refund, including any refund attributable to a carryback or carryforward, then Holdings shall pay to Subsidiary the amount of such refund (including interest) within 10 days of receiving the Subsidiary Group Return. SECTION 3. Returns; Indemnity. For each taxable ------------------ period for which a Consolidated Return (estimated or final) which includes the Subsidiary is filed, Holdings will cause such Return to be prepared and filed and shall pay all amounts shown to be due thereon to the IRS. Holdings shall hold the Subsidiary Group harmless from any actual estimated or final Federal income tax liability (including penalties and interest) of the Holdings Group or any members thereof. The Subsidiary Group shall not be entitled to any refund or other adjustment received by the Holdings Group from the IRS but only to the payments provided herein. SECTION 4. Calculations. All determinations ------------ required by this Agreement, including the calculation of the Subsidiary Group Tax Liability, shall be jointly performed by the person or persons designated by Holdings and Subsidiary. Except as provided in Section 6 hereof, the determinations made as described in this Section 4 shall be deemed to be conclusive for purposes of this Agreement. SECTION 5. States, etc. Subsidiary agrees to join ----------- with Holdings in any consolidated or combined state or local income or franchise tax return ("Combined Return") for any taxable year for which Holdings files a Combined Return that may include Subsidiary. If the liability for any state or local income or franchise taxes of Subsidiary and Holdings is determined on a consolidated or combined basis, this Agreement shall be applied, mutatis mutandis, to all matters relating to ------- --------- such taxes. SECTION 6. Audits. If any Federal income tax ------ return filed with the IRS covering or including the Subsidiary Group is audited, the determinations required by this Agreement shall be computed on the basis of the "determination" (within the meaning of Section 1313(a) of the Internal Revenue Code of 1986, as amended) of such audit and adjusting payments with interest at the rates that would have been payable to or by the IRS shall be paid within 30 days following such "determination". SECTION 7. Cooperation. Holdings and Subsidiary ----------- will cooperate, consult and furnish each other with information concerning matters covered by this Agreement, including tax returns, claims for refund, tax audits, and other filings and proceedings related to a taxable year in which Subsidiary is or was included in a Consolidated Return. If for any taxable year the Subsidiary Group is not included in a Consolidated Return, Holdings and Subsidiary will cooperate, consult and furnish each other with information required accurately to prepare any Federal income tax return for any taxable year of either Holdings or the Subsidiary Group in which the tax liability of either (or of the affiliated group of which either is a member) may be affected by the income, deductions or other tax attributes of the other. SECTION 8. Effective Date. This Agreement is -------------- effected with respect to taxable periods ending after October 26, 1993. Notwithstanding the above sentence, Section 6 and 7 of this Agreement will apply to any "determination" occurring after October 26, 1993. SECTION 9. Miscellaneous. ------------- (a) This Agreement may only be terminated or amended by written agreement of the parties. (b) This Agreement shall be governed by the laws of the State of New York. (c) This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns. In the event Holdings ceases to be the common parent corporation of the affiliated group that includes Holdings, the new common parent corporation, if any, shall be considered a successor of Holdings. (d) For purposes of this Agreement, "tax" shall include interest, penalties and additions to tax associated therewith, and "Holdings" shall include any affiliates of Holdings with which it may file from time to time a consolidated, combined or similar return. The parties hereto have executed this Agreement as of the date first above written. SMG-II HOLDINGS CORPORATION By Joseph Adelhardt ----------------------------- Name: Title: PATHMARK STORES, INC. By Joseph Adelhardt ----------------------------- Name: Title: EX-10.7 14 EXHIBIT 10.7 TAX INDEMNITY AGREEMENT ----------------------- AMENDED AND RESTATED TAX INDEMNITY AGREEMENT ("Agreement") dated as of December 3, 1993, by and between PATHMARK STORES, INC., a Delaware corporation ("Pathmark") and PLAINBRIDGE, INC. a Delaware corporation ("Plainbridge"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Pathmark and Plainbridge have determined to amend certain provisions of the Tax Indemnity Agreement dated as of October 26, 1993 between them, and have further determined to restate such Agreement to reflect such amendments; WHEREAS, Pathmark and Plainbridge have entered into a Distribution and Transfer Agreement, dated as of October 26, 1993 pursuant to which Pathmark on October 26, 1993 distributed to its sole shareholder all the outstanding shares of the common stock, par value $.01 per share, of Plainbridge, (the "Distribution"); WHEREAS, it is intended that, for federal income tax purposes, the Distribution shall qualify as a tax-free distribution under provisions of Section 355 of the United States Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS, SMG-II HOLDINGS CORPORATION, a Delaware Corporation, is the common parent of a consolidated group (the "SMG-II Group"), within the meaning of Section 1.1502-1(h) of the United States Treasury Regulations, which includes Pathmark and Plainbridge; and WHEREAS, Pathmark and Plainbridge have determined that it is appropriate and desirable to set forth their agreement with respect to certain liabilities that may be asserted in respect of the tax consequences of the Distribution; NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth Pathmark and Plainbridge hereby agree as follows: SECTION 1. Indemnified Taxes. Plainbridge shall ----------------- indemnify Pathmark and all other members of the SMG-II Group and hold them harmless against any income or franchise taxes resulting from the Distribution, including, without limitation, any taxes imposed pursuant to or as a result of Section 311 of the Code. SECTION 2. Miscellaneous. ------------- (a) This Agreement may only be terminated or amended by written agreement of the parties. (b) This Agreement shall be governed by the laws of New York. (c) For purposes of this Agreement, "tax" shall include interest, penalties and additions to tax associated therewith. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. PATHMARK STORES, INC. By Joseph Adelhardt -------------------------- Name: Title: PLAINBRIDGE, INC. By Joseph Adelhardt -------------------------- Name: Title: EX-10.18 15 EXHIBIT 10.18 EMPLOYMENT AGREEMENT AGREEMENT, dated as of August 1, 1993 (the "Effective Date"), among Supermarkets General Corporation, a Delaware corporation (the "Company"), Supermarkets General Holdings Corporation, a Delaware corporation and parent corporation to the Company ("Holdings"), and SMG-II Holdings Corporation, a Delaware corporation and parent corporation to Holdings ("SMG- II"), and Jack Futterman ("Executive"). W I T N E S S E T H: WHEREAS, The Company, Holdings, SMG-II (collectively, the "Companies") and Executive are parties to an Employment Agreement, dated as of January 1, 1990, as amended as of February 4, 1991 and as of February 28, 1992 (the "Prior Agreement"), pursuant to which Executive is employed by the Company as Chairman of the Board of Directors, President and Chief Executive Officer, and serves in the same capacity for Holdings and SMG-II. WHEREAS, effective as of the Effective Date, Executive has relinquished the position of President of the Companies; and WHEREAS, the parties now desire to enter into a new employment agreement reflecting the terms and conditions of Executive's current positions with the Companies and certain other agreements and understandings between the parties, and the parties further intend that such new agreement shall supersede the Prior Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: 1. Employment and Duties. --------------------- (a) General. The Company hereby employs Executive ------- and Executive agrees, upon the terms and conditions herein set forth, to service as Chairman of the Board of Directors and Chief Executive Officer of the Company. Holdings hereby retains Executive as Chairman of the Board of Directors and Chief Executive Officer of Holdings, and SMG-II hereby retains Executive as Chairman of the Board of Directors and Chief Executive Officer of SMG-II. In such capacities, Executive shall report directly to the Board of Directors of the Company (the "Board"), to the Board of Directors of Holdings (the "Holdings Board"), and to the Board of Directors of SMG-II (the "SMG-II Board"), and shall perform such duties in respect of such positions as may be delineated in the By-Laws of the Company, Holdings or SMG-II, as the case may be, and such other duties, commensurate with Executive's title and positions of Chairman and Chief Executive Officer of the Company, Holdings and SMG-II, as may be assigned to Executive from time to time by the Board, the Holdings Board or the SMG- II Board. If elected or appointed, Executive shall also serve as a director or officer of any of the Company's subsidiaries or affiliated companies without further compensation. (b) Full-Time Service. Throughout the Period (as ----------------- defined in paragraph 2 below), Executive shall, except as may from time to time be otherwise agreed in writing by the Company, and unless prevented by ill health, devote his full- time working hours to his duties hereunder, shall in all respects conform to and comply with the lawful and reasonable directions and instructions given to him by the Board, the Holdings Board and the SMG-II Board, and shall use his best efforts to promote and serve the interests of the Companies. (c) No Other Employment. Throughout the Period, ------------------- Executive shall not, directly or indirectly, render services to any other person or organization for which he receives compensation without the consent of the Board, the Holdings Board or the SMG-II Board, or otherwise engage in activities which would interfere significantly with his faithful performance of his duties hereunder. Executive may perform inconsequential services without specific compensation therefor in connection with the management of personal investments, provided that such activity does not contravene the provisions of subparagraph 1(b) hereof or paragraph 5 hereof. 2. Term of Employment. The Company shall retain ------------------ Executive and Executive shall serve in the employ of the Company for an initial period of three (3) years, commencing on the Effective Date and extending through and including July 31, 1996 (the "Initial Period"); provided, however, that -------- ------- commencing on the second anniversary of the effective Date and each successive anniversary thereafter, the term of employment hereunder shall be automatically extended for one additional year, unless at least thirty (30) days prior to such anniversary, the Company has delivered to Executive, or Executive has delivered to the Company, written notice of its or his desire, as the case may be, not to extend the term of employment (the Initial Period, including the extensions thereof, if any, is herein referred to as the "Period"); provided, further, that the period shall terminate when -------- ------- Executive's employment hereunder terminates. 3. Compensation and Other Benefits. Subject to the ------------------------------- provisions of this Agreement, the Company shall pay and provide the following compensation and other benefits to Executive during the Period as compensation for services rendered hereunder: (a) Base Salary. The Company shall pay to ----------- Executive an annual base salary (the "Base Salary") at the rate of $475,000 per annum, payable in accordance with the Company's then current payroll practices. The Base Salary shall be reviewed annually and may be increased in the discretion of the Board or Holdings Board. The Company shall be entitled to deduct or withhold all taxes and charges which the Company may be required to deduct or withhold therefrom. (b) Bonus. For each fiscal year in the Period (or ----- fraction thereof), Executive shall be eligible to receive a bonus, ranging in each year from 0 to a maximum rate of 75% of annual Base Salary, in accordance with the terms of the Executive Incentive Plan of the Company which shall be no less favorable in the aggregate to Executive than the terms of such plan in effect for Executive on the Effective Date. (c) Employment Benefit Plans. At all times during ------------------------ the Period, Executive shall be provided the opportunity to participate in pension and welfare plans, programs and arrangements (the "Plans") that are generally made available to executives of the Company, or as may be deemed appropriate by the Compensation Committee of the Board or, if there is no Compensation Committee of the Board, the Compensation Committee of the Holdings' Board. (d) Support Services. At all times during the ---------------- Period, the Company shall provide Executive with office space and support services, including secretarial services, equivalent to those afforded to Executive immediately prior to the Effective Date. (e) Relocation. The Company shall not, without ---------- Executive's consent, relocate Executive's principal place of business to a location beyond 20 miles from the location of Executives's principal place of business immediately prior to the Effective Date. (f) Travel. The Company shall not, without ------ Executive's consent, require Executive to travel on the Company's business to an extent materially inconsistent with the Company's business travel requirements as applied to Executive immediately prior to the Executive Date. 4. Termination of Employment. ------------------------- (a) Termination for Cause; Resignation Without Good ----------------------------------------------- Reason. (i) If, prior to the expiration of the Period, ------ Executive's employment is terminated by the Company for Cause, as defined in subparagraph 4(a)(ii), or if Executive resigns from his employment hereunder without Good Reason, as defined in subparagraph 4(b)(iv), Executive shall not be eligible to receive Base Salary under subparagraph 3(a) or to participate in any Plans under subparagraph 3(c) with respect to future periods after the date of such termination or resignation, except for the right to receive benefits which have become vested under any Plan in accordance with the terms of such Plan. In addition, Executive shall not be eligible to receive any bonus described in subparagraph 3(b) for the Company's fiscal year during which the date of termination or resignation occurs and any later years. (ii) Termination for "Cause" shall mean termination of Executive's employment with the Company by the Board of Directors of the Company because of (A) the commission by Executive of an act of fraud or embezzlement against the Company or any of its subsidiaries, or (B) a felony conviction of such Executive. (iii) The date of termination of employment by the Company under this paragraph 4(a) shall be the date specified in a written notice of termination (which date shall be no earlier than the date of furnishing such notice), or if no such date is specified therein, the date of receipt by Executive of such written notice of termination. The date of resignation under this paragraph 4(a) shall be two weeks after receipt by the Company of written notice of resignation, or if no such notice is provided, the day Executive ceases to perform his duties hereunder. (b) Termination Without Cause; Resignation for Good ----------------------------------------------- Reason. (i) Subject to the provisions of subparagraph ------ 4(b)(iii) and subparagraph 4(b)(vii), if, prior to the expiration of the Period, Executive's employment is terminated by the Company without Cause, or if Executive resigns from his employment for Good Reason, Executives hall be entitled to receive as severance benefits (the "Severance Benefits") the following: (A) his Base Salary at the annual rate then in effect immediately prior to such termination or resignation for the remainder of the Period or two years, whichever is longer, commencing on the day following the date of such termination or resignation (the "Severance Period"); (B) the portion of the bonus or bonuses attributable to the financial targets set forth for the Company under the EIP that Executive would have earned had his employment continued for the Severance Period, determined in accordance with the Company's Executive Incentive Plan and based on the same percentage of base compensation used to calculate bonuses for Executive at the time of such termination or resignation and subject to the Company reaching such applicable financial targets set under the EIP or any other bonus plans; provided, however, that if -------- ------- any bonus period commences during the Severance Period and concludes after the expiration thereof, the amount of the bonus, if any, for such bonus period shall be prorated to take into account the portion of such bonus period coinciding with the Severance Period; and (C) continued coverage for the Severance Period under the Company's health and insurance plans applicable to Executive immediately prior to such termination or resignation or, if any such plan does not permit continued coverage of Executive, the Company shall arrange to provide a benefit substantially similar to and no less favorable than the benefits he was entitled to under such plan; and provided further that, if such termination without -------- ------- cause or resignation for Good Reason occurs on or after a Change in Control (as hereinafter defined), then (D) Severance Period shall mean the three-year period commencing on the day following the date of such termination or resignation; and (E) the amount of Executive's Base Salary, for purposes of determining Executive's Severance Benefits, shall be deemed to be the greater of (X) his Base Salary at the annual rate in effect immediately prior to such termination or resignation, and (Y) $500,000. In addition, in the event Executive is terminated without Cause or resigns for Good Reason, the following shall apply: (1) Executive shall receive, as of the date of such termination or resignation, full credit for the Initial Period (to the extend not otherwise credited) for purposes of "Vesting Service" under the Supplemental retirement Agreement, dated March 9, 1987, between the Company and Executive (the "Retirement Agreement"); and (2) to the extent applicable, the Severance Period and the amounts paid to Executive in respect thereof (calculated solely for this purpose without reduction for compensation received from a subsequent employer) shall be considered in calculating Executive's "final average compensation" for purposes of Executive's benefits under the Retirement Agreement or any other nonqualified retirement arrangement applicable to Executive. Severance Benefits shall be reduced by any compensation or benefits which Executive is entitled to receive in connection with any employment of Executive by another employer during the Severance Period. Executive shall provide the Company with any evidence of amounts received in connection with other employment which the Company shall reasonably request. (ii) In the event of a termination or resignation described in this paragraph 4(b), Executive shall receive title, free and clear of all encumbrances, to the Company provided automobile then provided to Executive for his use and the Company will reimburse Executive for secretarial and office expenses, not in excess of $30,000.00, incurred by Executive during the first year following such termination or resignation. (iii) If, following such termination or resignation of employment, Executive breaches the provisions of paragraph 5 hereof, Executive shall not be eligible, as of the date of such breach, for the payment of Severance Benefits, and all obligations and agreements of the Company to pay Severance Benefits shall thereupon cease; provided, however, that this -------- ------- paragraph 4(b)(iii) shall not in any way impair Executive's rights to extended medical coverage, at his expense, under Section 4980B(f) of the Internal Revenue Code of 1986, as amended, and the applicable final proposed and temporary rules and regulations thereunder (the "Code"). (iv) The date of termination of employment by the Company under this paragraph 4(b) shall be the date specified in a written notice of termination to Executive (which date shall be no earlier than the date of furnishing such notice) or, if no such date is specified therein, the date on which such notice is given to Executive. The date of resignation under this paragraph 4(b) shall be two weeks after receipt by the Company of the written notice of resignation. (v) Resignation for "Good Reason" shall mean Executive's voluntary termination of employment with the Company because of (A) a reduction, without Executive's written consent, in Executive's current base or aggregate compensation, unless such reduction is generally applicable to all executives of the Company, (B) a reduction, without Executive's consent, in Executive's then current responsibilities as set forth in paragraph 1(a) hereof, or (C) such other events of hardship as the Board or Holdings' Board may determine on a case-by-case basis. (vi) Severance Benefits representing Base Salary continuation shall be paid in accordance with the Company's then current payroll practice commencing on the next payroll date following the date of the termination of Executive's employment under subparagraph 4(b), in an amount equal to the amount paid to Executive by the Company for the payroll period immediately prior to such termination or resignation. Severance Benefits representing bonus payments shall be paid annually in accordance with the Company's then current practice for paying bonuses commencing within two months after the Company's fiscal year end. (vii) In the event that the Severance Benefits would not be deductible in whole or in part in the calculation of Federal income tax owned by the Company or any of its affiliates, or any other person or entity making such payment or providing such benefit by reason of Section 280G of the Code, the Severance Benefits shall be reduced until no portion of the Severance Benefits is not deductible by reason of Section 280G of the Code. (viii) For purposes of this paragraph 4(b), "Change ------ in Control" shall mean (A) the acquisition by a Third Party ---------- (as hereinafter defined) of beneficial ownership of more than 30% of the issued and outstanding voting common stock of SMG- II, Holdings, PTK Holdings, Inc., a wholly-owned subsidiary of Holdings ("PTK"), or the Company, or (B) the acquisition of all or substantially all of the assets of the Company by a Third Party; provided, however, that no Change in Control -------- ------- shall be deemed to occur as long as (i) Merrill Lynch & Co., Inc. and its affiliates (the "Merrill Stockholders"), (ii) the -------------------- management employees of the Company, or (iii) the Merrill Stockholders, in combination with the management employees of the Company, beneficially own, directly or indirectly, more than 50% of the voting common stock of the Company. For purposes of this paragraph 4(b)(viii), "Third Party" shall mean any person other than the Company, Holding, SMG-II, PIK, each of the Merrill Stockholders, or the Equitable Life Assurance Society of the United States and its affiliates. For purposes of this paragraph 4(b)(viii), "person" and ------ "beneficial ownership" shall have the meanings assigned to ---------- --------- such terms under Section 13(d) of the Securities Exchange Act of 1934, as amended, and "affiliate" of any first person shall --------- mean a second person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first person. (c) Death. If Executive dies prior to the ----- expiration of the Period, his Base Salary and bonus (determined as the bonus he would have earned had his employment continued until the end of the applicable bonus period during which his death occurred) will be prorated through his day of death and paid to his beneficiary or estate. (d) Disability. If Executive becomes Permanently ---------- Disabled, as defined below in this subparagraph, prior to the expiration of the Period, the Company shall be entitled to terminate his employment and Executive shall be entitled to receive disability benefits in accordance with the disability policy maintained by the Company as of the date of such disability. If Executive's employment is terminated by reason of Executive becoming Permanently Disabled, the provisions of clause (1) of Section 4(b)(i) above shall apply to the calculation of Executive's benefits under the Retirement Agreement. For the purposes of this subparagraph, Executive shall be deemed "Permanently Disabled" when, and only when, he suffers a physical or mental disability or infirmity that prevents the normal performance of duties lasting for a continuous period of six months or more. 5. Secrecy and Noncompetition. -------------------------- (a) No Competing Employment. For so long as ----------------------- Executive is receiving, or is entitled to receive, any payments under or pursuant to this Agreement (such period being referred to hereinafter as the "Restricted Period"), Executive shall not, unless he receives after the Effective Date the prior written consent of the Company, directly or indirectly, whether as owner, consultant, employee, partner, venturer, agent, through stock ownership, investment of capital, lending of money or property, rendering of services, or otherwise (except ownership of less than 5% of the number of shares outstanding of any securities which are publicly traded), compete with the retail supermarket business or any other business contributing at least 15% of the consolidated revenues of the Company at the time of the termination of Executive's employment hereunder (such businesses are hereinafter referred to as the "Business"), or assist, become interested in or be connected with any corporation, firm, partnership, joint venture, sole proprietorship or other entity which so competes with the Business, except for the aforementioned 5% ownership of publicly traded securities. The restrictions imposed by this subparagraph shall not apply to any geographic area in which the Company is not engaged in the Business at the time of termination. (b) No Interference. During the Restricted Period, --------------- Executive shall not, whether for his own account or for the account of any other individual, partnership, firm, corporation or any other business organization or entity (other than the Company), intentionally solicit, endeavor to entice away from the Company, or any affiliate, or otherwise interfere with the relationship of the Company, or any affiliate, with any person who is employed with the Company, or any affiliate (including, but not limited to, any independent sales representatives or organizations), or any person or entity who is, or was within the then most recent 12-month period, a customer or client (other than an individual retail consumer) of the Company, or any affiliate. (c) Secrecy. Executive recognizes that the ------- services to be performed by him hereunder are special, unique and extraordinary in that, by reason of his employment hereunder and his past employment with the Company, he may acquire or has acquired confidential information and trade secrets concerning the operations of the Company, or its affiliates, the use or disclosure of which could cause the Company substantial loss and damages which could not be readily calculated, and for which no remedy at law would be adequate. Accordingly, Executive covenants and agrees with the Company that he will not at any time, except in performance of Executive's obligations to the Company hereunder, or with the prior written consent of the Company Board or Holdings' Board, directly or indirectly, disclose any secret or confidential information that he may learn or has learned by reason of his association with the Company, or any predecessors to its business, or use any such information to the detriment of the Company, Holdings, or any of their affiliates. The term "confidential information" includes, without limitation, information not previously disclosed to the public or to the trade by the Company's management with respect to the Company's, Holdings', or any of their respective subsidiaries' or affiliates', business plans, prospects and opportunities, the identity of clients, suppliers or customers, information regarding operational strengths and weaknesses, trade secrets, know-how and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, marketing plans of strategies, and financial information. Executive understands and agrees that the rights and obligations set forth in this subparagraph 5(c) are perpetual and, in any case, shall extend beyond the Restricted Period and Executive's employment hereunder. (d) Exclusive Property. Executive confirms that ------------------ all confidential information is and shall remain the exclusive property of the Company. All business records, papers and documents kept or made by Executive relating to the business of the Company shall be and remain the property of the Company. Upon the termination of his employment with the Company, or upon the request of the Company at any time, Executive shall promptly deliver to the Company, and shall not, without the consent of the Company (which consent shall not be unreasonably withheld), retain copies of, any written materials not previously made available to the public, records and documents made by Executive or coming into his possession concerning the business or affairs of the Company. Executive may retain records relating exclusively to the terms and conditions of his employment relationship with the Company. Executive understands and agrees that the rights and obligations set forth in this subparagraph 5(d) are perpetual and, in any case, shall extend beyond the Restricted Period and Executive's employment hereunder. (e) Stock Ownership. Other than as provided in --------------- subparagraph 1(c) or 5(a) hereof, nothing in this Agreement shall prohibit Executive from acquiring or holding any issue of stock or securities of any company or other business entity, provided that Executive does not participate in the operations of any such company, and provided further that, with respect to any class of voting securities listed on a national securities exchange or quoted on the automated quotation system of the National Association of Securities Dealers, Inc., Executive and members of his immediate family do not own at any time during the Restricted Period more than 5% of the issued and outstanding shares of such class of securities. (f) Injunctive Relief. Without intending to limit ----------------- the remedies available to the Company, Executive acknowledges that a breach of any of the covenants contained in this paragraph 5 may result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction restraining Executive from engaging in activities prohibited by this paragraph 5, or such other relief as may be required to specifically enforce any of the covenants in this paragraph 5. 6. Certain Equity Arrangements. --------------------------- Amendment of Employee Stock Options. SMG-II, as ----------------------------------- successor to Holdings in respect of all options outstanding under the SMG-II Management Investors 1987 Stock Option Plan (as successor to the Holdings Management Investors 1987 Stock Option Plan) (the "Option Plan"), and Executive have previously agreed to amend the Incentive Stock Option Agreements, dated December 22, 1987 and March 21, 1990, between Holdings and Executive, and the Nonqualified Stock Option Agreements, dated December 22, 1987 and March 21, 1990, between Holdings and Executive, and hereby agree to amend, and without further action of the parties hereby amend, the Incentive Stock Option Agreement and Nonqualified Stock Option Agreement, each dated March 26, 1992, between SMG-II and the Executive (collectively, the "Option Agreements"), to provide that, if Executive's employment is terminated by the Company without Cause, or if Executive resigns for Good Reason prior to the expiration of the Period, the options to purchase up to a maximum of 13,000 shares of Class A Common Stock of SMG-II evidence by such Option Agreements shall be exercisable until the Expiration Date (as defined in Section 2 of such Option Agreements). 7. Arbitration. Any controversy or claim arising out ----------- of or relating to this Agreement, including, but not limited to, any claim relating to the validity, interpretation, enforceability or breach of this Agreement, or any claim or controversy arising out of the employment relationship or the commencement or termination of that relationship, including, but limited to, any claim for breach of covenant, breach of any implied covenant, wrongful termination, constructive discharge or intentional infliction of emotional distress, which is not settled by agreement between the parties, shall be settled by arbitration in New York, New York, before a panel of three arbitrators, one to be selected by the Companies, one by Executive and the other by the two persons so selected, all in accordance with the rules of the American Arbitration Association then in effect; provided, however, -------- ------- that the Companies shall nevertheless be entitled to seek relief under paragraph 5 above in accordance with paragraph 5(f) thereof. In consideration of the parties' agreement to submit to arbitration disputes with regard to this Agreement and with regard to any alleged tort, contract or other claim arising out of the employment relationship, and in consideration of the anticipated expedition and minimization of expense of this arbitration remedy, each party agrees that the arbitration provisions of this Agreement shall provide it with the exclusive remedy, except as provided in the preceding sentence, and each party expressly waives any right it may have to seek redress in any other forum except as provided herein. The parties further agree that the arbitrators acting hereunder shall be empowered to assess no remedy other than payment of compensatory damages or an order (including temporary, preliminary or permanent injunctive relief) enforcing the provisions of paragraph 5 above. The expenses of the arbitration proceeding plus the reasonable attorneys fees incurred by Executive in connection therewith shall be paid by the Company. Any decision or order of the majority of arbitrators shall be binding upon the parties hereto and judgment thereon may be entered in the Supreme Court of the State of New York or any other court having jurisdiction. 8. Nonassignability; Binding Agreement. Neither this ----------------------------------- Agreement nor any right, duty, obligation or interest hereunder shall be assignable or delegable by Executive without the Company's prior written consent, provided, -------- however, that nothing in this paragraph shall preclude ------- Executive from designating any of his beneficiaries to receive any benefits payable hereunder upon his death, or the executors, administrators, or other legal representatives from assigning any rights hereunder to the person or persons entitled thereto. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto, any successors to or assigns of the Companies and Executive's heirs and the personal representatives of Executive's estate. 9. Severability. If the final determination of a court ------------ of competent jurisdiction declares, after the expiration of the time within which judicial review (if permitted) of such determination may be perfected, that any term or provision hereof is invalid or unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired, and (b) the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. 10. Amendment; Waiver. This Agreement may not be ------------------ modified, amended or waived in any manner, except by an instrument in writing signed by all parties hereto. The waiver by any party of compliance with any provision of this Agreement by any other party shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement. 11. Governing Law. All matters effecting this ------------- Agreement, including the validity thereof, are to be governed by, interpreted and construed in accordance with the laws of the State of New York. 12. Notices. Any notice hereunder by any party to any ------- other shall be given in writing by personal delivery or certified mail, return receipt requested. If addressed to Executive, the notice shall be delivered or mailed to Executive at the address last known to the Company, or if addressed to any of the Companies, the notice shall be delivered or mailed to the Company at its executive offices, to the attention of the Board. A notice shall be deemed given, if by personal delivery, on the date of such delivery or, if by certified mail, on the date shown on the applicable return receipt. 13. Supersedes Previous Agreements. This Agreement ------------------------------ supersedes all prior or contemporaneous negotiations, commitments, agreements and writings with respect to the subject matter hereof (including the Prior Agreement), all such other negotiations, commitments, agreements and writings will have no further force or effect, and the parties to any such other negotiations, commitment, agreement or writing will have no further rights or obligations thereunder; provided, -------- however, that, except as expressly provided herein, this ------- Agreement shall not supersede the Retirement Agreement, the Management Investors Exchange Agreement dated as of February 4, 1991 among SMG-II, Holdings and the Executive, or the Option Agreements. 14. Counterparts. This Agreement may be executed by any ------------ of the parties hereto in counterpart, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 15. Headings. The headings of paragraphs herein are -------- included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. 16. Tax Withholding. The Company shall be entitled to --------------- deduct or withhold from any payment made hereunder all Federal, state and local taxes which the Company is required by law to deduct or withhold therefrom. IN WITNESS WHEREOF, each of the Companies have caused the Agreement to be signed by its officer pursuant to the authority of its Board of Directors, and Executive has executed this Agreement as of the day and year first written above. SUPERMARKETS GENERAL CORPORATION By: Anthony Cuti -------------------------------- Title: Jack Futterman -------------------------------- Title: SUPERMARKETS GENERAL HOLDINGS CORPORATION By: Anthony Cuti ------------------------------- Title: SMG-II HOLDINGS CORPORATION By: Anthony Cuti ------------------------------- Title: EX-10.19 16 EXHIBIT 10.19 EMPLOYMENT AGREEMENT THIS AGREEMENT, dated as of August 1, 1993 (the "Effective Date"), between Supermarkets General Corporation, a Delaware corporation (the "Company"), and Anthony Cuti ("Executive"), and joined in by SMG-II Holdings Corporation, a Delaware corporation, and parent corporation to the Company ("SMG-II"). W I T N E S S E T H ------------------- WHEREAS, the Company and Executive are paries to an Employment Agreement, dated as of July 26, 1990 (the "Prior Agreement"); and WHEREAS, subsequent to the execution of the Prior Agreement, Executive has assumed the position of President the Company, Supermarkets General Holdings Corporation ("Holdings") and SMG-II; and WHEREAS, the parties now desire to enter into a new employment agreement reflecting the terms and conditions of Executive's current positions with the Company and certain other agreements and understandings between the parties, and the parties further intend that such new agreement shall supersede the Prior Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: 1. Employment and Duties. --------------------- (a) General. The Company hereby employs Executive ------- and Executive agrees upon the terms and conditions herein set forth to serve as President of the Company and, in such capacity,shall perform such duties as may be delineated in the by-laws of the Company, and such other duties, commensurate with Executive's title and position of President, as may be assigned to Executive from time to time by the Chairman and Chief Executive Officer of the Company, or by the Board of Directors of the Company or the Board of Directors of Supermarkets General Holdings Corporation ("Holdings"), parent corporation of the Company, or such officer of the Company or Holdings as may be designated by the Board of Directors of the Company or Holdings. If elected or appointed, Executive shall also serve as a director or officer of any of the Company's subsidiaries or affiliated companies and, if elected, will serve as an officer or a member of the Board of Directors or committees of the Board of Directors of the Company Holdings or SMG-II, without further compensation. (b) Full-Time Service. Throughout the Period (as ----------------- defined in paragraph 2 below), Executive shall, except as may from time to time be otherwise agreed to in writing by the Company and unless prevented by ill health, devote his full- time working hours to his duties hereunder, in all respects conform to and comply with the lawful and reasonable directions and instructions given to him by the Board of Directors of the Company, and Holdings, shall use his best efforts to promote and serve the interests of the Company. (c) No Other Employment. Throughout the Period, ------------------- Executive shall not, directly or indirectly, render services to any other person or organization for which he receives compensation without the consent of the Board of Directors of Holdings or the Company, or otherwise engage in activities which would interfere significantly with his faithful performance of his duties hereunder. Executive may perform inconsequential services without specific compensation therefor in connection with the management of personal investments, provided that such activity does not contravene the provisions of subparagraph 1(b) hereof or paragraph 5 hereof. 2. Term of Employment. The Company shall retain ------------------ Executive and Executive shall serve in the employ of the Company for an initial period of three years commencing on the Effective Date and extending through and including July 31, 1996 (the "Initial Period"); provided, however, that -------- ------- commencing on the second anniversary of the Effective Date and each successive anniversary thereafter the term of employment hereunder shall be automatically extended for one additional year, unless at least 30 days prior to such anniversary the Company has delivered to Executive, or Executive has delivered to the Company, written notice of its or his desire, as the case may be, not to extend the term of employment (the Initial Period, including the extensions thereof, if any, is herein referred to as the "Period"; provided, further, that the -------- ------- period shall terminate when Executive's employment hereunder terminates). 3. Compensation and other Benefits. Subject to the ------------------------------- provisions of this Agreement, the Company shall pay and provide the following compensation and other benefits to Executive during the Period as compensation for services rendered hereunder: (a) Base Salary. The Company shall pay to ----------- Executive an annual base salary (the "Base Salary) at the rate of $300,000 per annum, payable in accordance with the Company's then current payroll practice. The Base Salary shall be reviewed annually and may be increased in the discretion of the Board of Directors of Holdings or the Company. The Company shall be entitled to deduct or withhold all taxes and charges which the Company may be required to deduct or withhold therefrom. (b) Bonus. Commencing on the Effective Date, for ----- each fiscal year in the period (or fraction thereof), Executive shall be eligible to receive a bonus, ranging in each year from 0 to a maximum rate of 75% of annual Base Salary, in accordance with the terms of the Executive Incentive Plan ("EIP") of the Company as in effect for Company Executives. (c) Employee Benefit Plans. At all times during ---------------------- the Period, Executive shall be provided the opportunity to participate in pension and welfare plans, programs and arrangements (the "Plans") that are generally made available to executives of the Company, or as may be deemed appropriate by the Compensation Committee of the Board of Directors of the Company (the "Compensation Committee"), or if there shall be no Compensation Committee, then the Compensation Committee of the Board of Directors of Holdings. (d) Certain Equity Considerations. SMG-II ----------------------------- agrees that for a period of one year from the Effective Date, Executive may purchase 250 shares of SMG-II's Class A Common Stock ("Stock") at a purchase price of $100 per share in cash, subject to a private placement. (e) Support Service. At all times during the --------------- Period, the Company shall provide Executive with office space and support services, including secretarial services, equivalent to those afforded to Executive immediately prior to the Executive Date. (f) Relocation. The Company shall not, without ---------- Executive's consent, relocate Executive's principal place of business to a location beyond 20 miles from the location of Executive's principal place of business as of the Effective Date. (g) Travel. The Company shall not, without ------ Executive's consent, require Executive to travel on the Company's business to an extent materially inconsistent with the Company's normal business travel requirements. 4. Termination of Employment. ------------------------- (a) Termination for Cause (i) If, prior to the --------------------- expiration of the Period, Executive's employment is terminated by the Company for Cause, as defined in subparagraph 4(a)(ii), or if Executive resigns from his employment without Good Reason, as defined in subparagraph 4(b)(iv), Executive shall not be eligible to receive Base Salary under subparagraph 3(a) or to participate in any Plans under subparagraph 3(c) with respect to future periods after the date of such termination or resignation except for the right to receive benefits which have become vested under any Plan in accordance with the term of such Plan. In addition, Executive shall not be eligible to receive any bonus described in subparagraph 3(b) or subparagraph 3(h) for the Company's fiscal year during which the date of termination or resignation occurs and any later years. (ii) Termination for "Cause" shall mean termination of Executive's employment with the Company by the Board of Directors of the Company because of (A) the commission by Executive of an act of fraud or embezzlement against the Company or any of its subsidiaries; or (B) a conviction of such Executive of a crime. (iii) The date of termination of employment by the Company under this paragraph 4(a) shall be the date specified in a written notice of termination (which date shall be no earlier than the date of furnishing such notice), or if no such date is specified therein, the date of receipt by Executive of such written notice of termination. The date of resignation under this written notice of resignation, or if no such notice is provided, the date the Executive ceases to perform his duties hereunder. (b) Termination Without Cause; Resignation for Good ----------------------------------------------- Reason (i) Subject to the provisions of subparagraph ------ 4(b)(ii) and subparagraph 4(b)(vi), if, prior to expiration of the Period, Executive's employment is terminated by the Company without Cause or if Executive resigns from his employment with the Company for Good Reason, Executive shall be entitled to receive, as "Severance Benefits" the following: (A) his Base Salary at the annual rate then in effect immediately prior to such termination or resignation for the remainder of the Period or two years, whichever is longer, commencing on the day following the date of such termination or resignation (the "Severance Period"); (B) the portion of the bonus or bonuses attributable to the financial targets set for the Company under the EIP that Executive would have earned had his employment with the Company continued for the Severance Period, determined in accordance with the EIP and based on the same percentage of base compensation used to calculate bonuses for Executive at the time of such termination or resignation and subject to the Company reaching such applicable financial targets set under the EIP or any other bonus plans in the applicable fiscal years, provided, -------- however, that if any bonus period commences during the ------- Severance Period and concludes after the expiration thereof, the amount of the bonus, if any, for such bonus period shall be prorated to take into account the portion of such bonus period coinciding with he Severance Period; and (C) continued coverage for the Severance Period under the Company health and insurance plans applicable to Executive immediately prior to such termination or resignation, or, if any such plan does not permit continued coverage of Executive, the Company shall arrange to provide a benefit substantially similar to and no less favorable than the benefits he was entitled to under the plan. reduced by any compensation or benefits which Executive is entitled to receive in connection with any employment of the Executive by another employer during the time that Severence Benefits are payable to Executive pursuant to this paragraph 4(b). Executive shall provide the Company with any evidence of amounts received in connection with other employment which the Company shall reasonably request. (ii) If, following a termination of employment, Executive breaches the provisions of paragraph 5 hereof, Executive shall not be eligible, as of the date of such breach, for the payment Severance Benefits and all obligations and agreements of the Company to pay Severance Benefits shall thereupon cease. (iii) The date of termination of employment by the Company under this paragraph 4(b) shall be the date specified in a written notice of termination to Executive (which date shall be no earlier than the date of furnishing such notice) or, if no such date is specified therein, the date on which such notice is given to Executive. The date of resignation under this paragraph 4(b) shall be two weeks after receipt by the Company of the written notice of resignation. (iv) Resignation for "Good Reason" shall mean the Executive's voluntary termination of employment with the Company because of (A) a reduction, without Executive's written consent, in Executive's then current base or aggregate compensation, unless such reduction is generally applicable to all executives of the Company, (B) a reduction, without the Executive's consent, in Executive's then current responsibilities, (C) receipt of notice by Executive pursuant to paragraph (2) hereof of the Company's desire not to extend hardship as the Boards of Directors of Holdings and the Company may determine on a case-by-case basis. (v) Severance Benefits representing Base Salary continuation shall be paid in connection with the Company's then current payroll practice commencing on the next payroll date following the date of the termination of Executive's employment under subparagraph 4(b), in a gross amount equal to the amount paid to Executive by the Company for the payroll period immediately prior to such termination or resignation. Severance Benefits representing bonus payments shall be paid annually in accordance with the Company's then current practice for paying bonuses commencing within three months after the Company's fiscal year end. (vi) In the event that the Severance Benefits would not be deductible in whole or in part in the calculation of Federal income tax owed by The Company or any of its affiliates or any other person or entity making such payment or providing such benefit by reason of Section 280G of the Internal Revenue Code of 1986 (the "Code"), the Severance Benefits shall be reduced until no portion of the Severance Benefits is not deductible by reason of Section 280G of the Code. (c) Death. If Executive dies prior to the ----- expiration of the Period, his Base Salary and bonus (determined as the bonus he would have earned had his employment continued until the end of the applicable bonus period during which his death occurred) will be prorated through his day of death and paid to his beneficiary or estate. (d) Disability. If Executive becomes Permanently ---------- Disabled, as defined below in this subparagraph, prior to the expiration of the Period, the Company shall be entitled to terminate his employment and Executive shall be entitled to receive disability benefits in accordance with the disability policy maintained by the Company as of the date of such disability. For the purposes of this subparagraph, Executive shall be deemed "Permanently Disabled" when, and only when, he suffers a physical or mental disability or infirmity that prevents the normal performance of duties lasting for a continuous period of six months or more. 5. Secrecy and Noncompetition. -------------------------- (a) No Competing Employment. For so long as ----------------------- Executive is receiving, or is entitled to receive, any payments under or pursuant to this Agreement (such period being referred to hereinafter as the "Restricted Period"), Executive shall not, unless he receives the prior written consent of the Company, directly or indirectly, whether as owner, consultant, employee, partner, venturer, agent, through stock ownership, investment of capital, lending of money or property, rendering of services, or otherwise (except ownership of less than 5% of the number of shares outstanding of any securities which are publicly traded), compete with the retail supermarket business of the Company or any other business contributing at least 15% of the consolidated revenues of the Company at the time of termination of Executive's employment hereunder (such business are hereinafter referred to as the "Business"), or assist, become interested in or be connected with any corporation, firm, partnership, joint venture, sole partnership or other entity which so competes with the Business, except for the aforementioned 5% ownership of publicly trade securities. The restrictions imposed by this subparagraph shall not apply to any geographic area in which the Company is not engaged in the business at the time of termination. (b) No Interference. During the Restricted --------------- Period, Executive shall not, whether for his own account or for the account of any other individual, partnership, firm, corporation or other business organization or entity (other than the Company), intentionally solicit, endeavor to entice away from the Company or any Affiliate or otherwise interfere with the relationship of the Company or any Affiliate with, any person who is employed by or associated with the Company or any affiliate (including, but not limited to, any independent sales representatives or organizations) or any person or entity who is, or was within the then most recent 12 month period, a customer or client of the Company or any Affiliate. (c) Secrecy. Executive recognizes that the ------- services to be performed by him hereunder are special, unique and extraordinary in that, by reason of his employment hereunder with the Company, he may acquire confidential information and trade secrets concerning the operations of the Company or its Affiliates, the use or disclosure of which could cause the Company substantial loss and damages which could not be readily calculated and for which no remedy at law would be adequate. Accordingly, Executive covenants and agrees with the Company that he will not at any time, except in performance of Executive's obligations to the Company hereunder or with the prior written consent of the Board of Directors of Holdings, directly or indirectly, disclose any secret or confidential information that he may learn by reason of his association with the Company or use any such information to the detriment of the Company, Holdings or any of their affiliates. The term "confidential information" includes, without limitation, information not previously disclosed to the public or to the trade by the Company's management with respect to the Company's, Holdings' or any of their respective subsidiaries' or affiliates' business plans, prospects and opportunities, the identity of clients, suppliers or customers, information regarding operational strengths and weaknesses, trade secrets, know-how and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, marketing plans or strategies, and financial information. Executive understands and agrees that the rights and obligations set forth in this subparagraph 5(c) are perpetual and, in any case, shall extend beyond the Restricted Period and Executive's employment hereunder. (d) Exclusive Property. Executive confirms that all ------------------ confidential information is and shall remain the exclusive property of the Company. All business records, papers and documents kept or made by Executive relating to the business of the Company shall be and remain the property of the Company. Upon the termination of his employment with the Company or upon the request of the Company at any time, Executive shall promptly deliver to the Company, and shall not, without the consent of the Company (which consent shall not be unreasonably withheld), retain copies of any written materials not previously made available to the public, records and documents made by Executive or coming into his possession concerning the business or affairs of the Company. Executive may retain records relating exclusively to the terms and condition of employment relationship with the Company. Executive understands and agrees that the rights and obligations set forth in this subparagraph 5(d) are perpetual and, in any case, shall extend beyond the Restricted Period and Executive's employment hereunder. (e) Stock Ownership. Other than as provided in --------------- subparagraph 1(c) or 5(a) hereof, nothing in this Agreement shall prohibit Executive from acquiring or holding any issue of stock or securities of any company or other business entity, provided that Executive does not participate in the operations of any such company and provided further that, with respect to any class of voting securities listed on a national securities exchange or quoted on the automated quotations system of the National Association of Securities Dealers, Inc., Executive and members of his immediate family do not own at any time during the Restricted Period more than 5% of the issued and outstanding shares of such class of securities. (f) Injunctive Relief. Without intending to ----------------- limited the remedies available to the Company, Executive acknowledges that a breach of any of the covenants contained in this paragraph result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction restraining Executive from engaging in activities prohibited by this paragraph 5 or such other relief as may be required to specifically enforce any of the covenants in this paragraph 5. 6. Nonassignability, Binding Agreement. Neither this ----------------------------------- Agreement nor any right, duty, obligation or interest hereunder shall be assignable or delegable by Executive without the Company's prior written consent provided, however, -------- ------- that nothing in this paragraph shall preclude Executive from designating any of his beneficiaries to receive any benefits payable hereunder upon his death, or the executors, administrators, or other legal representatives from assigning any rights hereunder to the person or persons entitled thereto. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto, any successors to or assigns of the Company and Executive's heirs and the personal representatives of Executive's estate. 7. Severability. If the final determination of a court ------------ of competent jurisdiction declares, after the expiration of the time within which judicial review (if permitted) of such determination may be perfected, that any term or provision hereof is invalid or unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired, and (b) the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that becomes closest to expressing the intention of the invalid or unenforceable term or provision. 8. Amendment; Waiver. This Agreement may not be ----------------- modified, amended or waived in any manner except by an instrument in writing signed by both parties hereto. The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement. 9. Governing Law. All matters affecting this Agreement, ------------- including the validity thereof, are to be governed by, interpreted and construed in accordance with the laws of the State of New Jersey. 10. Notices. Any notice hereunder by either party to ------- the other shall be given in writing by personal delivery or certified mail, return receipt requested. If addressed to Executive, the notice shall be delivered or mailed to Executive at the address last know to the Company, of if addressed to the Company, the notice shall be delivered or mailed to the Company at its executive offices, to the attention of the Chairman of the Board, with a copy to the Secretary of the Company, at 301 Blair Road, Woodbridge, NJ 07095. A notice shall be deemed given, if by personal delivery, on the date of such delivery or, if by certified mail, on the date shown on the applicable return receipt. 11. Supersedes Previous Agreements. This Agreement ------------------------------ supersedes all prior or contemporaneous negotiations, commitments, agreements and writings with respect to the subject matter hereof, all such other negotiations, commitments, agreements and writings will have no further force or effect, and the parties to any such other negotiation, commitment, agreement or writing will have no further rights or obligations thereunder. Notwithstanding the foregoing, the parties acknowledge that the terms hereof shall have no effect on Executive's Supplemental Retirement Agreement date March 12, 1993. 12. Counterparts. This Agreement may be executed by ------------ either of the parties hereto in counterpart, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 13. Headings. The headings of paragraphs herein are -------- included solely for convenience of reference and shall not control the meaning or interpretation of any of such provisions of this Agreement. 14. Tax Withholding. The Company shall be entitled to --------------- deduct or withhold from any payment made hereunder all Federal, state and local taxes which the Company is requires by law to deduct ow withhold therefrom. 15. Definition of Affiliate. As used in this Agreement, ----------------------- the term "Affiliate" shall mean a person, corporation or other entity that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company or Holdings. IN WITNESS WHEREOF, the Company has caused this Agreement to be signed pursuant to the authority of its Board of Directors, and Executive has executed this Agreement as of the day and year first written above. SUPERMARKETS GENERAL CORPORATION By Jack Futterman ------------------------------ Jack Futterman Chairman and Chief Executive Officer Anthony Cuti ----------------------------- Consented to: SUPERMARKETS GENERAL HOLDINGS CORPORATION By Jack Futterman ---------------------------------------- Jack Futterman Chairman and Chief Executive Officer The undersigned joins in this Agreement solely for purposes of its obligations under subparagraph (d) of paragraph 3 above. SMG-II HOLDINGS CORPORATION By Jack Futterman ---------------------------------------- Jack Futterman Chairman and Chief Executive Officer EX-10.20 17 EXHIBIT 10.20 EMPLOYMENT AGREEMENT THIS AGREEMENT, dated as of August 1, 1993 (the "Effective Date"), between Supermarkets General Corporation, a Delaware corporation (the "Company"), and Jules Borshadel ("Executive"). W I T N E S S E T H ------------------- WHEREAS, the Company and Executive are paries to an Employment Agreement, dated as of July 16, 1990 (the "Prior Agreement"); and WHEREAS, subsequent to the execution of the Prior Agreement, Executive has assumed the positions of President and Chief Executive Officer of the Rickel Home Center division of the Company ("Rickel"); and WHEREAS, the parties now desire to enter into a new employment agreement reflecting the terms and conditions of Executive's current positions with the Company and certain other agreements and understandings between the parties, and the parties further intend that such new agreement shall supersede the Prior Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: 1. Employment and Duties. --------------------- (a) General. The Company hereby employs Executive ------- and Executive agrees upon the terms and conditions herein set forth to serve as President and Chief Executive Officer of Rickel and, in by-laws of the Company, and such other duties, commensurate with Executive's title and position of President and Chief Executive Officer of Rickel, as may be assigned to Executive from time to time by the Chairman and Chief Executive Officer of the Company, or by the Board of Directors of the Company or Supermarkets General Holdings Corporation ("Holdings"), parent corporation of the Company, or such other officer of the Company or Holdings as may be designated by the Board of Directors of the Company or the Board of Directors of Holdings. If elected or appointed, Executive shall also serve as a director or officer of any of the Company's subsidiaries or affiliated companies and, if elected, will serve as a member of the Board of Directors or committees of the Board of Directors of the Company and/or Holdings, without further compensation. (b) Full-Time Service. Throughout the Period (as ----------------- defined in paragraph 2 below), Executive shall, except as may from time to time be otherwise agreed to in writing by the Company and unless prevented by ill health, devote his full- time working hours to his duties hereunder, in all respects conform to and comply with the lawful and reasonable directions and instructions given to him by the Chairman and CEO of the Company, or the Boards of Directors of the Company and Holdings, and shall use his best efforts to promote and serve the interests of the Company. (c) No Other Employment. Through the Period, ------------------- Executive shall not, directly or indirectly, render services to any other person or organization for which he receives compensation without the consent of the Board of Directors of Holdings or the Company, or otherwise engage in activities which would interfere significantly with his faithful performance of his duties hereunder. Executive may perform inconsequential services without specific compensation therefor in connection with the management of personal investments, provided that such activity does not contravene the provisions of subparagraph 1(b) hereof or paragraph 5 hereof. 2. Term of Employment. The Company shall retain ------------------ Executive and Executive shall serve in the employ of the Company for an initial period of three years commencing on the Effective Date and extending through and including July 31, 1996 (the "Initial Period"); provided, however, that -------- ------- commencing on the second anniversary of the Effective Date and each successive anniversary thereafter the term of employment hereunder shall be automatically extended for one additional year, unless at least 30 days prior to such anniversary the Company has delivered to Executive, or Executive has delivered to the Company, written notice of its or his desire, as the case may be, not to extend the term of employment (the Initial Period, including the extensions thereof, if any, is herein referred to as the "Period"; provided, further, that the -------- ------- period shall terminate when Executive's employment hereunder terminates). 3. Compensation and other Benefits. Subject to the ------------------------------- provisions of this Agreement, the Company shall pay and provide the following compensation and other benefits to Executive during the Period as compensation for services rendered hereunder: (a) Base Salary. The Company shall pay to ----------- Executive an annual base salary (the "Base Salary) at the rate of $300,000 per annum, payable in accordance with the Company's then current payroll practice. The Base Salary shall be reviewed annually and may be increased in the discretion of the Board of Directors of Holdings or the Company. The Company shall be entitled to deduct or withhold all taxes and charges which the Company may be required to deduct or withhold therefrom. (b) Bonus. Commencing on the Effective Date, for ----- each fiscal year in the period (or fraction thereof), Executive shall be eligible to receive a bonus, ranging in each year from 0 to a maximum rate of 75% of annual Base Salary, in accordance with the terms of the Executive Incentive ("EIP") of the Company as in effect for Rickel. (c) Employee Benefit Plans. At all times during ---------------------- the Period, Executive shall be provided the opportunity to participate in pension and welfare plans, programs and arrangement (the "Plans") that are generally made available to executives of Rickel, or as may be deemed appropriate by the Compensation Committee of the Board of Directors of the Company (the "Compensation Committee"), or if there shall be no Compensation Committee, then the Compensation Committee of the Board of Directors of Holdings. (d) Support Service. At all times during the --------------- Period, the Company shall provide Executive with office space and support services, including secretarial services, equivalent to those afforded to Executive immediately prior to the Executive Date. (e) Relocation. The Company shall not, without ---------- Executive's consent, relocate Executive's principal place of business to a location beyond 20 miles from the location of Executive's principal place of business as of the Effective Date. (f) Travel. The Company shall not, without ------ Executive's consent, require Executive to travel on the Company's business to an extent materially inconsistent with the Company's business travel requirements as applied to Executive immediately prior to the Effective Date. (g) Special Sale Bonus. In the event the Company ------------------ decides to sell Rickel, Executive shall, in such manner as the Company may reasonably request, use his best efforts to assist the Company in effecting a sale and in obtaining the highest practicable sale price for Rickel. In consideration of the agreements of Executive contained in this Agreement and his continued employment hereunder, in the event that a sale of Rickel to a Third Party (as hereinafter defined) is consummated during the Period, the Company shall pay to Executive a bonus of $300,000, payable on the closing of said sale. For purposes of this paragraph 3(g), "Third Party" shall mean any person other than the Company, Plainbridge, Inc., PTK Holdings, Inc., Holdings, SMG-II Holdings Corporation ("SMG-II"), or any of their respective subsidiaries, any stockholder of SMG-II on the date hereof who is an affiliate as of the date hereof of Merrill Lynch & Co., Inc. or with The Equitable Life Assurance Society of the United States or any of their respective affiliates. For purposes of this paragraph 3(g), "person" shall have the meaning assigned to such term under Section 13(d) of the Securities Exchange Act of 1934, as amended, and "affiliate" of any first person shall mean a second person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first person. 4. Termination of Employment. ------------------------- (a) Termination for Cause (i) If, prior to the --------------------- expiration of the Period, Executive's employment is terminated by the Company for Cause, as defined in subparagraph 4(a)(ii), or if Executive resigns from his employment without Good Reason, as defined in subparagraph 4(b)(iv), Executive shall not be eligible to receive Base Salary under subparagraph 3(a) or to participate in any Plans under subparagraph 3(c) with respect to future periods after the date of such termination or resignation except for the right to receive benefits which have become vested under any Plan in accordance with the term of such Plan. In addition, Executive shall not be eligible to receive any bonus described in subparagraph 3(b) for the Company's fiscal year during which the date of termination or resignation occurs and any later years. (ii) Termination for "Cause" shall mean termination of Executive's employment with the Company by the Board of Directors of the Company because of (A) the commission by Executive of an act of fraud or embezzlement against the Company or any of its subsidiaries; or (B) a conviction of such Executive of a crime. (iii) The date of termination of employment by the Company under this paragraph 4(a) shall be the date specified in a written notice of termination (which date shall be no earlier than the date of furnishing such notice), or if no such date is specified therein, the date of receipt by Executive of such written notice of termination. The date of resignation under this written notice of resignation, or if no such notice is provided, the date the Executive ceases to perform his duties hereunder. (b) Termination Without Cause; Resignation for Good ----------------------------------------------- Reason (i) Subject to the provisions of subparagraph ------ 4(b)(ii) and subparagraph 4(b)(vi), if, prior to expiration of the Period, Executive's employment is terminated by the Company without Cause or if Executive resigns from his employment with the Company for Good Reason, Executive shall be entitled to receive, as "Severance Benefits" the following: (A) his Base Salary at the annual rate then in effect immediately prior to such termination or resignation for the two year period commencing on the day following the date of such termination or resignation (the "Severance Period"); (B) the portion of the bonus or bonuses attributable to the financial targets set for Rickel under the EIP which Executive would have earned had his employment with the Company continued for the Severance Period, determined in accordance with the EIP and based on the same percentage of base compensation used to calculate bonuses for Executive at the time of such termination or resignation and subject to Rickel reaching such applicable financial targets set under the EIP or any other bonus plans in the applicable fiscal year, provided, however, that if any bonus period commences during -------- ------- the Severance Period and concludes after the expiration thereof, the amount of the bonus, if any, for such bonus period shall be prorated to take into account the portion of such bonus period coinciding with he Severance Period; and (C) continued coverage for the Severance Period under Rickel health and insurance plans applicable to Executive immediately prior to such termination or resignation, or, if any such plan does not permit continued coverage of Executive, the Company shall arrange to provide a benefit substantially similar to and no less favorable than the benefits he was entitles to under the plan. Severance Benefits shall be reduced by an compensation or benefits which Executive receive o is entitled to receive in connection with any employment of the Executive are payable to Executive pursuant to this paragraph 4(b). Executive shall provide the Company with any evidence of amounts received in connection with other employment which the Company shall reasonably request. (ii) If, following a termination of employment, Executive breaches the provisions of paragraph 5 hereof, Executive shall not be eligible, as of the date of such breach, for the payment Severance Benefits and all obligations and agreements of the Company to pay Severance Benefits shall thereupon cease. (iii) The date of termination of employment by the Company under this paragraph 4(b) shall be the date specified in a written notice of termination to Executive (which date shall be no earlier than the date of furnishing such notice) or, if no such date is specified therein, the date on which such notice is given to Executive. The date of resignation under this paragraph 4(b) shall be two weeks after receipt by the Company of the written notice of resignation. (iv) Resignation for "Good Reason" shall mean the Executive's voluntary termination of employment with the Company because of (A) a reduction, without Executive's written consent, in Executive's then current base or aggregate compensation, unless such reduction is generally applicable to all executives of the Company, (B) a reduction, without the Executive's consent, in Executive's then current responsibilities, (C) receipt of notice by Executive pursuant to paragraph (2) hereof of the Company's desire of hardship as the Boards of Directors of Holdings and the Company may determine on a case-ny-case basis. (v) Severance Benefits representing Base Salary continuation shall be paid in connection with the Company's then current payroll practice commencing on the next payroll date following the date of the termination of Executive's employment under subparagraph 4(b), in a gross amount equal to the amount paid to Executive by the Company for the payroll period immediately prior to such termination or resignation. Severance Benefits representing bonus payments shall be paid annually in accordance with the Company's then current practice for paying bonuses commencing within three months after the Company's fiscal year end. (vi) In the event that the Severance Benefits would not be deductible in whole or in part in the calculation of Federal income tax owed by The Company or any of its affiliates or any other person or entity making such payment or providing such benefit by reason of Section 280G of the Internal Revenue Code of 1986 (the "Code"), the Severance Benefits shall be reduced until no portion of the Severance Benefits is not deductible by reason of Section 280G of the Code. (c) Death. If Executive dies prior to the ----- expiration of the Period, his Base Salary and bonus (determined as the bonus he would have earned had his employment continued until the end of the applicable bonus period during which his death occurred) will be prorated through his day of death and paid to his beneficiary or estate. (d) Disability. If Executive becomes Permanently ---------- Disabled, as defined below in this subparagraph, prior to the expiration of the Period, the Company shall be entitled to terminate his employment and Executive shall be entitled to receive disability benefits in accordance with the disability policy maintained by the Company as of the date of such disability. For the purposes of this subparagraph, Executive shall be deemed "Permanently Disabled" when, and only when, he suffers a physical or mental disability or infirmity that prevents the normal performance of duties lasting for a continuous period of six months or more. 5. Secrecy and Noncompetition. -------------------------- (a) No Competing Employment. For so long as ----------------------- Executive is receiving, or is entitled to receive, any payments under or pursuant to this Agreement or the Phantom Plan (such period being referred to hereinafter as the "Restricted Period"), Executive shall not, unless he receives the prior written consent of the Company, directly or indirectly, whether as owner, consultant, employee, partner, venturer, agent, through stock ownership, investment of capital, lending of money or property, rendering of services, or otherwise (except ownership of any securities which are publicly traded), compete with the retail supermarket business of the Company or any other business contributing at least 15% of the consolidated revenues of the Company at the time of termination of Executive's employment hereunder (such business are hereinafter referred to as the "Business"), or assist, become interested in or be connected with any corporation, firm, partnership, joint venture, sole partnership or other entity which so competes with the Business, except for the aforementioned 5% ownership of publicly trade securities. The restrictions imposed by this subparagraph shall not apply to any geographic area in which the Company is not engaged in the business at the time of termination. (b) No Interference. During the Restricted --------------- Period, Executive shall not, whether for his own account or for the account of any other individual, partnership, firm, corporation or other business organization or entity (other than the Company), intentionally solicit, endeavor to entice away from the Company or any Affiliate or otherwise interfere with the relationship of the Company or any Affiliate with, any person who is employed by or associated with the Company or any affiliate (including, but not limited to, any independent sales representatives or organizations) or any person or entity who is, or was within the then most recent 12 month period, a customer or client of the Company or any Affiliate. (c) Secrecy. Executive recognizes that the ------- services to be performed by him hereunder are special, unique and extraordinary in that, by reason of his employment hereunder and his past employment with the Company, he may acquire or has acquired confidential information and trade secrets concerning the operations of the Company or its Affiliates, the use or disclosure of which could cause the Company substantial loss and damages which could not be readily calculated and for which no remedy at law would be adequate. Accordingly, Executive covenants and agrees with the Company that he will not at any time, except in performance of Executive's obligations to the Company hereunder or with the prior written consent of the Board of Directors of Holdings, directly or indirectly, disclose any secret or confidential information that he may learn by reason of his association with the company or any predecessors to its business, or use any such information to the detriment of the Company, Holdings or any of their affiliates. The term "confidential information" includes, without limitation, information not previously disclosed to the public or to the trade by the Company's management with respect to the Company's, Holdings' or any of their respective subsidiaries' or affiliates' business plans, prospects and opportunities, the identity of clients, suppliers or customers, information regarding operational strengths and weaknesses, trade secrets, know-how and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, marketing plans or strategies, and financial information. Executive understands and agrees that the perpetual and, in any case, shall extend beyond the Restricted Period and Executive's employment hereunder. (d) Exclusive Property. Executive confirms that all ------------------ confidential information is and shall remain the exclusive property of the Company. All business records, papers and documents kept or made by Executive relating to the business of the Company shall be and remain the property of the Company. Upon the termination of his employment with the Company or upon the request of the Company at any time, Executive shall promptly deliver to the Company, and shall not, without the consent of the Company (which consent shall not be unreasonably withheld), retain copies of any written materials not previously made available to the public, records and documents made by Executive or coming into his possession concerning the business or affairs of the Company. Executive understands and agrees that the rights and obligations set forth in this subparagraph 5(d) are perpetual and, in any case, shall extend beyond the Restricted Period and Executive's employment hereunder. (e) Stock Ownership. Other than as provided in --------------- subparagraph 1(c) or 5(a) hereof, nothing in this Agreement shall prohibit Executive from acquiring or holding any issue of stock or securities of any company or other business entity, provided that Executive does not participate in the operations of any such company and provided further that, with respect to any class of voting securities listed on a national securities exchange or quoted on the automated quotations system of the National Association of Securities Dealers, Inc., Executive and members of his immediate family do not own at any time during the Restricted Period more than 5% of the issued and outstanding shares of such class of securities. (f) Injunctive Relief. Without intending to ----------------- limited the remedies available to the Company, Executive acknowledges that a breach of any of the covenants contained in this paragraph result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction restraining Executive from engaging in activities prohibited by this paragraph 5 or such other relief as may be required to specifically enforce any of the covenants in this paragraph 5. 6. Nonassignability, Binding Agreement. Neither this ----------------------------------- Agreement nor any right, duty, obligation or interest hereunder shall be assignable or delegable by Executive without the Company's prior written consent provided, however, -------- ------- that nothing in this paragraph shall preclude Executive from designating any of his beneficiaries to receive any benefits payable hereunder upon his death, or the executors, administrators, or other legal representatives from assigning any rights hereunder to the person or persons entitled thereto. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto, any successors to or assignees of the Company and Executive's heirs and the personal representatives of Executive's estate. 7. Severability. If the final determination of a court ------------ of competent jurisdiction declares, after the expiration of the time within which judicial review (if permitted) of such determination may be perfected, that any term or provision hereof is invalid or unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired, and (b) the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that becomes closest to expressing the intention of the invalid or unenforceable term or provision. 8. Amendment; Waiver. This Agreement may not be ----------------- modified, amended or waived in any manner except by an instrument in writing signed by both parties hereto. The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement. 9. Governing Law. All matters affecting this Agreement, ------------- including the validity thereof, are to be governed by, interpreted and construed in accordance with the laws of the State of New Jersey. 10. Notices. Any notice hereunder by either party to ------- the other shall be given in writing by personal delivery or certified mail, return receipt requested. If addressed to Executive, the notice shall be delivered or mailed to Executive at the address last know to the Company, of if addressed to the Company, the notice shall be delivered or mailed to the Company at its executive offices, to the attention of the Chairman of the Board, with a copy to the Secretary of the Company, at 301 Blair Road, Woodbridge, NJ 07095. A notice shall be deemed given, if by personal delivery, on the date of such delivery or, if by certified mail, on the date shown on the applicable return receipt. 11. Supersedes Previous Agreements. This Agreement ------------------------------ supersedes all prior or contemporaneous negotiations, commitments, agreements and writings with respect to the subject matter hereof, all such other negotiations, commitments, agreements and writings will have no further force or effect, and the parties to any such other negotiation, commitment or writing will have no further rights or obligations thereunder. 12. Counterparts. This Agreement may be executed by ------------ either of the parties hereto in counterpart, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 13. Headings. The headings of paragraphs herein are -------- included solely for convenience of reference and shall not control the meaning or interpretation of any of such provisions of this Agreement. 14. Tax Withholding. The Company shall be entitled to --------------- deduct or withhold from any payment made hereunder all Federal, state and local taxes which the Company is requires by law to deduct ow withhold therefrom. 15. Definition of Affiliate. As used in this Agreement, ----------------------- the term "Affiliate" shall mean a person, corporation or other entity that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company or Holdings. IN WITNESS WHEREOF, the Company has caused this Agreement to be signed pursuant to the authority of its Board of Directors, and Executive has executed this Agreement as of the day and year first written above. SUPERMARKETS GENERAL CORPORATION By Jack Futterman ------------------------------ Jack Futterman Chairman and Chief Executive Officer Jules Borshadel ------------------------------ Consented to: SUPERMARKETS GENERAL HOLDINGS CORPORATION By Jack Futterman ---------------------------------------- Jack Futterman Chairman and Chief Executive Officer SMG-II HOLDINGS CORPORATION By Jack Futterman ---------------------------------------- Jack Futterman Chairman and Chief Executive Officer EX-22 18 Exhibit 22 List of Subsidiaries Name State of ---- -------- Incorporation ------------- Pathmark Stores, Inc. Delaware PTK Holdings, Inc. Delaware Bridge Stuart, Inc. New York Pennsylvania Stuart, Inc. Pennsylvania Jersey Stuart, Inc. New Jersey Bucks Stuart, Inc. Pennsylvania Madison Stuart Corporation New Jersey Brick Stuart, Inc. New Jersey Trauts-South Plainfield, Inc. New Jersey AAL Realty Corp. New York Pauls Trucking Corp. New York GAW Properties Corp. New Jersey Eatontown Stuart, Corp. New Jersey Plainbridge, Inc. Delaware Chefmark, Inc. Delaware EX-23 19 Exhibit 23 [DELOITTE & TOUCHE LETTERHEAD] April 28, 1994 Supermarkets General Holdings Corporation Woodbridge, New Jersey We have audited the consolidated financial statements of Supermarkets General Holdings Corporation as of January 29, 1994 and January 30, 1993, and for each of the three years in the period ended January 29, 1994 included in your Annual Report on Form 10-K to the Securities and Exchange Commission and have issued our report thereon dated April 28, 1994. Note 5 to such consolidated financial statements contains a description of your adoption during the year ended January 29, 1994 of a change in the method utilized to calculate LIFO inventories relating to your indirect wholly owned subsidiary, Pathmark Stores, Inc. Previously, you utilized a retail approach to determine current cost and a general warehouse purchase index to measure inflation in the cost of your store merchandise inventories. As indicated in Note 5, your change arose from the development and utilization in fiscal 1993 of internal cost indices based on the specific identification of merchandise in your stores to measure inflation in such prices, thereby eliminating the averaging and estimation inherent in the retail and general warehouse purchase index methods. This change was made to more accurately measure the impact of inflation in the cost of merchandise in your stores. In our judgment, such change is to an alternative accounting principle that is preferable under the circumstances. Yours truly, Deloitte & Touche EX-24 20 Exhibit 24 SUPERMARKETS GENERAL HOLDINGS CORPORATION Power of Attorney ----------------- The undersigned, a director of Supermarkets General Holdings Corporation (the "Company"), a Delaware corporation, which intends to file with the United States Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934 (the "'34 Act"), as amended, each year an annual report on Form 10-K, or such other form appropriate for the purpose, pursuant to Section 13 or 15(d) of the '34 Act, together with possible amendments thereto, constitutes and appoints JOSEPH ADELHART and MARC A. STRASSLER, and each of them, severally, as true and lawful attorney or attorneys, with full power of substitution and resubsitution, for him and in his name, place and stead, to sign in any and all capacities and file or cause to be filed said Annual Report on Form 10-K, and any and all amendments thereto, and all instruments necessary or incidental in connection therewith, and hereby grants to the said attorneys, and each of them, severally, full power and authority to do and perform in the name and on behalf of the undersigned, and in any and all capacities, any and all acts and things whatsoever necessary or appropriate to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has hereunto set her hand and seal this 21st day of April, 1994. Susan C. Penny --------------------------- Susan C. 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