CALCULATION AGENCY AGREEMENT
BETWEEN
THE KROGER CO.
AND
J.P. MORGAN SECURITIES INC.
June 26, 1998
The Kroger Co., an Ohio corporation (the "Company"), proposes to issue and sell
$200,000,000 aggregate principal amount of its Puttable Reset Securities (PURS)
due July 1, 2010 (the "Bonds") in accordance with the terms of the Indenture,
dated as of May 1, 1998, as amended by the First Supplemental Indenture, dated
as of May 11, 1998 and the Second Supplemental Indenture, dated as of June 26,
1998 (collectively, the "Indenture"), in each case between the Company and Star
Bank, N.A., as trustee (the "Trustee"). Terms used but not defined herein shall
have the meanings assigned to them in the Bonds.
For the purpose of appointing an agent to perform the functions of Calculation
Agent as described in the Bonds, and for other reasons related thereto, the
Company and J.P. Morgan Securities Inc. hereby agree as follows (it being
understood that the references to J.P. Morgan Securities Inc. in subsection 1
through 4 below mean such firm in its capacity as Calculation Agent, in sections
5 and 6 below mean such firm in its individual capacity and not as Calculation
Agent, and in sections 7 through 12 below mean such firm in either capacity, as
the context may require):
1. Upon the terms and subject to the conditions contained herein, the Company
hereby appoints J.P. Morgan Securities Inc. as agent (solely in such capacity,
the "Calculation Agent") for the purpose of performing the functions of
Calculation Agent as described in the Bonds.
2. (a) Subject to sections 3 and 4 below, the Calculation Agent agrees to
perform the functions of the Calculation Agent described in the Bonds. The
Calculation Agent shall require each financial institution that is to act as a
Reference Dealer to execute a Reference Dealer agreement substantially in the
form attached hereto as Annex A, with such changes as J.P. Morgan Securities
Inc., in its individual capacity, reasonably may request with the approval of
the Company.
(b) Upon the request of a registered holder of Bonds, the Trustee or the
Company, the Calculation Agent shall inform such holder, the Trustee or the
Company of the results of any calculation or determination.
3. The Calculation Agent accepts and agrees to perform its obligations set
forth herein, upon the terms and subject to the conditions hereof, including the
following, to all of which the Company and the Trustee agree:
(a) The Company promises to reimburse the Calculation Agent for the
reasonable out-of-pocket expenses (including counsel fees and expenses) incurred
by it in connection with the services rendered hereunder by it as Calculation
Agent upon receipt of such invoices as the Company shall reasonably require.
The Company also agrees to indemnify the Calculation Agent for, and to hold it
harmless against, any and all loss, liability, damage, claims or expense
(including the costs and expenses, including reasonable legal fees and expenses,
of defending against any claim of liability) incurred by the Calculation Agent
that arises out of or in connection with its acting as Calculation Agent
hereunder, except such as may result from the gross negligence or bad faith of
the Calculation Agent. The Calculation Agent shall incur no liability to and
shall be indemnified and held harmless by the Company for, or in respect of, any
actions taken, omitted to be taken or suffered to be taken in good faith by the
Calculation Agent in reasonable reliance upon (i) the written opinion of counsel
satisfactory to it or (ii) instructions from the Trustee or the Company. The
Calculation Agent shall not be liable for any error resulting from the use of or
reliance on a source of information used in good faith and with due care to make
any determination, calculation or declaration hereunder. In no event shall the
Calculation Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits),
even if the Calculation Agent has been advised of the likelihood of such
loss or damage and regardless of the form of action. The provisions of this
paragraph shall survive the termination of this Agreement.
(b) In acting under this Agreement and in connection with the Bonds, the
Calculation Agent is acting solely as agent of the Company and does not assume
any obligations to, or relationship of agency or trust for or with, any of
the owners or holders of the Bonds.
(c) Notwithstanding any other provision to the contrary set forth in this
Agreement, the Calculation Agent shall be protected against and shall incur no
liability for or in respect of any action taken or omitted to be taken or
anything suffered by it in reliance upon the terms of the Bonds or any notice,
direction, certificate, affidavit, statement or other paper, document or
communication reasonably believed by it to be genuine and to have been approved
or signed by the proper party or parties.
(d) The Calculation Agent shall be obligated to perform such duties and
only such duties as are specifically set forth for the Calculation Agent herein
or in the Bonds, and no implied duties or obligations shall be read into this
Agreement against the Calculation Agent.
(e) The Calculation Agent may, upon obtaining the prior written consent of
the Company, perform any duties hereunder through agents or attorneys, and the
Calculation Agent shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it hereunder.
(f) The Company will not, without first obtaining the prior written
consent of the Calculation Agent, make any change to the terms of the Bonds
if such change would materially and adversely affect the Calculation Agent's
rights, duties and obligations under this Agreement.
(g) The Calculation Agent shall be protected and shall incur no liability
for or in respect of any action taken or omitted to be taken in good faith or
anything suffered in good faith by it in reliance upon anything contained in the
Bonds, the Indenture, the Prospectus Supplement dated June 23, 1998 or the
Prospectus dated April 29, 1998 relating to the Bonds (together, the
Prospectus ) or any information supplied to the Calculation Agent by the Company
pursuant to this Agreement excluding any information supplied by the Calculation
Agent in any capacity.
(h) The Calculation Agent, whether acting for itself or in any other
capacity, its partners, officers, directors, employees and shareholders or any
affiliate of the Calculation Agent may become the owner, holder or pledgee of
Bonds (or the owner, holder, pledgee or obligor with respect to any option, swap
or other contract related thereto) with the same rights as it would have had if
it were not acting hereunder as Calculation Agent and may engage or be
interested in any financial or other transaction with the Company as fully as if
it were not the Calculation Agent.
(i) The Calculation Agent shall promptly provide to the Trustee a written
report of all determinations and calculations required to be made by the
Calculation Agent pursuant to the terms of this Agreement and the Bonds. The
Trustee may conclusively rely on all of the information provided to it pursuant
to the preceding sentence without further investigation on its behalf.
Any determination or calculation made by the Calculation Agent in
accordance with the terms of this Agreement and the Bonds shall be final and
binding on the Company, the Trustee and the Holders and owners of the Bonds,
absent manifest error.
4. (a) The Calculation Agent may at any time resign as Calculation Agent by
giving written notice to the Company (with a copy to the Trustee) of such
intention on its part, specifying the date on which its desired resignation
shall become effective; provided, however, that such date shall not be earlier
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than 30 days after the receipt of such notice by the Company, unless the Company
agrees in writing to accept less notice. The Company may remove the Calculation
Agent at any time, but only for cause, by filing with the Calculation Agent
(with a copy to the Trustee) any instrument in writing signed on behalf of the
Company and specifying such removal, the reasons for such removal and the date
when such removal is intended to become effective. Such resignation or removal
shall take effect upon the date of the appointment by the Company, as
hereinafter provided, of a successor Calculation Agent. If at least 30 days
prior to the next succeeding Calculation Date after notice of resignation or
removal has been given, a successor Calculation Agent has not been appointed,
the Calculation Agent may petition a court of competent jurisdiction to appoint
a successor Calculation Agent. A successor Calculation Agent shall be appointed
by the Company by an instrument in writing signed on behalf of the Company and
the successor Calculation Agent. Upon the appointment of a successor
Calculation Agent and acceptance by it of such appointment, the Calculation
Agent so superseded shall cease to be such Calculation Agent
hereunder. Upon its resignation or removal, the Calculation Agent shall be
entitled to the reimbursement of all reasonable out-of-pocket expenses
incurred in connection with the services rendered hereunder by it as Calculation
Agent.
(b) Any successor Calculation Agent appointed hereunder shall execute
and deliver to its predecessor, the Company and the Trustee an instrument
accepting such appointment hereunder and agreeing to perform the functions of
the Calculation Agent under the Bonds and the obligations of the Calculation
Agent under this Agreement and to be bound by this Agreement, and thereupon such
successor Calculation Agent, without any further act, deed or conveyance, shall
become vested with all the authority, rights, powers, trusts, immunities,
duties and obligations of such predecessor with like effect as if originally
named as such Calculation Agent hereunder, and such predecessor Calculation
Agent, upon payment of its charges and disbursements then unpaid, shall
thereupon become obliged to transfer and deliver, and such successor Calculation
Agent shall be entitled to receive and the predecessor Calculation Agent shall
provide, copies of any relevant records maintained by such predecessor
Calculation Agent.
(c) Any corporation, partnership, limited liability company or other
entity into which the Calculation Agent may be merged or converted or with which
the Calculation Agent may be consolidated, or any corporation, partnership,
limited liability company or other entity resulting from any merger, conversion
or consolidation to which the Calculation Agent shall be a party, shall, to the
extent permitted by applicable law, be the successor Calculation Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto provided that such successor
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Calculation Agent shall assume, or be deemed to have assumed, all of the
obligations and liabilities of its predecessor under this Agreement. Notice of
any such merger, conversion, consolidation or sale shall forthwith be given to
the Company and the Trustee.
(d) The foregoing indemnity, reimbursement and other provisions of this
Agreement will survive any resignation or removal of the Calculation Agent. The
agreements of the parties set forth above will be binding upon and inure to the
benefit of their respective successors.
5. For good and valuable consideration, the sufficiency of which is hereby
acknowledged, the Company hereby agrees with J.P. Morgan Securities Inc., in its
individual capacity and not as Calculation Agent, as follows:
(a) If at any time J.P. Morgan Securities Inc., with the advice of its
counsel and after consultation with the Company and its counsel, determines that
registration of the Bonds under the Securities Act of 1933 (or any successor
law), as it may be amended from time to time, is required in order for J.P.
Morgan Securities Inc. to resell the Bonds on any Reset Date as contemplated in
the Prospectus, the Company will, at its own expense, cause the Bonds to be so
registered in time to permit such resale of the Bonds on the relevant Reset
Date.
(b) Notwithstanding any provision to the contrary set forth in the
Indenture, the Company will not purchase any Bonds in the open market, by tender
offer, in a private transaction or otherwise, except pursuant to any purchase
obligation it may have under the Bonds or with the prior written consent of J.P.
Morgan Securities Inc., as holder of the Call Option.
(c) Notwithstanding any provision to the contrary set forth in the
Indenture, the Company will not cause or permit the provisions of any Bond (or
the Indenture, as it relates to any Bond) to be modified in any way without the
prior written consent of J.P. Morgan Securities Inc. (including with respect to
the payment and settlement provisions of paragraph 5 of the Bonds).
(d) The Bonds and the Indenture, insofar as they relate to the Call Option
or may affect the interests of J.P. Morgan Securities Inc. as holder of such
option (including the provisions relating to the interest rate reset and resale
to a Final Dealer, but excluding the provisions referred to in the next
sentence), constitute obligations of the Company that are made for the benefit
of, and are enforceable by, J.P. Morgan Securities Inc., in its individual
capacity and not as Calculation Agent. In addition, insofar as the
provisions of any Bond purport to provide rights to J.P. Morgan Securities
Inc. against any holder of such Bond (including the right to purchase such
Bond from any holder on any Reset Date pursuant to the Call Option), the
Company shall take all action reasonably necessary or desirable to enforce
such rights in its own name, but for the benefit of J.P. Morgan Securities
Inc. so as to ensure that J.P. Morgan Securities Inc. receives the full
benefit of such rights as if they were enforceable directly by J.P. Morgan
Securities Inc., in each case if, to the extent and in the manner, but only
if, to the extent and in the manner, requested by J.P. Morgan Securities
Inc. Among other things, if requested by J.P. Morgan Securities Inc., such
action by the Company shall include effecting transfers of Bonds or beneficial
interests therein as contemplated in paragraph 9 of the reverse of the Bonds,
exchanging Bonds in book-entry form for Bonds that are not in such form and
vice-versa as contemplated in paragraph 9 of the reverse of the Bonds and
instituting suit to enforce specific performance of such rights or to obtain
money damages or other relief in respect of such rights, whether against the
holders or their respective successors, assigns, estates, heirs or
representatives. Without limiting the foregoing, J.P. Morgan Securities Inc.
may take any action under the Bonds (including giving any notice, making any
determination and effecting any settlement pursuant to paragraphs 11, 2 and 5
thereof) that the provisions of the Bonds contemplate may be taken by J.P.
Morgan Securities Inc., and the Company will not take any action unless J.P.
Morgan Securities Inc. requests it to do so. J.P. Morgan Securities Inc.
shall reimburse the Company for any reasonable, out-of-pocket expenses the
Company incurs, including reasonable counsel fees and expenses, in connection
with any action it may take in this regard at the request of J.P. Morgan
Securities Inc. The Company s agreements set forth in this paragraph
shall not be invalid or unenforceable by reason of any provision of the Bonds
not being unenforceable by J.P. Morgan Securities Inc. This paragraph is not
intended to limit any rights that J.P. Morgan Securities Inc. may have under
the Indenture or the Bonds as a holder or owner of Securities from time to
time.
(e) Notwithstanding any provision to the contrary set forth in the Bonds
or the Indenture (but subject to section 5(d) above), the Company (i) will use
its best efforts to maintain the Bonds in book-entry form with The Depository
Trust Company (DTC) or any successor thereto and to appoint a successor
depository to the extent necessary to maintain the Bonds in book-entry form and
(ii) will waive any discretionary right it otherwise has under the Indenture to
cause the Bonds to be issued in certificated form. The Company will perform its
obligations, and pursue its rights against DTC, under the DTC Letter of
Representations dated June 26, 1998 among the Company, the Trustee and DTC.
(f) If J.P. Morgan Securities Inc. resigns or is removed as Calculation
Agent, the Company will take such steps as are necessary to ensure that there is
at all times thereafter a qualified financial institution appointed and serving
as Calculation Agent pursuant to an agreement with the Company that is
substantially similar to this Agreement (excluding this section 5) or that is
not materially adverse to the interests of J.P. Morgan Securities Inc. as holder
of the Call Option. The Company will promptly provide J.P. Morgan Securities
Inc. with a copy of each such agreement.
The agreements made in this section 5 will remain in effect regardless of
whether or not J.P. Morgan Securities Inc. ceases to act as Calculation Agent or
to perform its duties as Calculation Agent hereunder, and regardless of any
change in the Trustee. The agreements of the Company in this section 5 are not
contingent in any way upon the agreements of the parties set forth in the other
sections of this Agreement, will be binding upon the Company and its successors
and will inure to the benefit of J.P. Morgan Securities Inc. and its successors.
6. (a) J.P. Morgan Securities Inc., in its individual capacity and not as
Calculation Agent, hereby agrees with the Company and the Trustee, for the
benefit of the Company and the applicable holders of the Bonds from time to
time, that, if J.P. Morgan Securities Inc. exercises the Call Option with
respect to any Reset Date when the Bonds are outstanding, it will purchase the
outstanding Bonds from the registered holders thereof on such Reset Date upon
the terms and subject to the conditions (including the absence of a Market
Disruption Event or Failed Remarketing) set forth in such Bonds, all as provided
in such Bonds. If J.P. Morgan Securities Inc. exercises the Call Option and
becomes obligated under this Agreement to purchase outstanding Bonds on any
Reset Date but fails to do so, and the Company becomes obligated to purchase
such Bonds on the Reset Date as provided in the Bonds, such purchase by the
Company will not relieve J.P. Morgan Securities Inc. from any liability it may
have on its obligation under this Agreement to purchase such Bonds. The
holders of the Bonds shall have no right, claim or remedy under this
Agreement except as provided in this section 6.
(b) If any of the following events (each a "Call Option Termination
Event") shall occur on or prior to the Reset Date, then (i) the Company shall
notify J.P. Morgan Securities Inc. promptly of the occurrence of such event
(including, in the case of clause (B) below, any modification of any kind to the
Indenture or the Bonds) and (ii) J.P. Morgan Securities Inc., as holder of the
Call Option, shall upon the occurrence of such event be entitled to demand that
the Company pay them the Call Option Termination Amount (as defined below), and
the Company shall pay such amount to J.P. Morgan Securities Inc. within three
Business Days (as defined in the Indenture) of the date of such demand: (A) an
Event of Default (as defined in the Indenture) with respect to the Bonds, or any
event which, with the giving of notice or passage of time or both, would
constitute such an Event of Default, shall have occurred and be continuing, or
(B) the Indenture or the Bonds shall have been amended in any manner, or
otherwise contain any provision not contained therein as of the date hereof,
that in the reasonable judgment of J.P. Morgan Securities Inc. materially
changes the nature of the Bonds or the coupon reset procedures, unless
consented to in writing by J.P. Morgan Securities Inc. The Call Option shall
terminate upon payment of the Call Option Termination Amount.
(c) The "Call Option Termination Amount" shall mean, on any date, the
amount determined by J.P. Morgan Securities Inc. equal to the "Fair Market
Value" of the embedded interest rate option implicit in the option to purchase
the Bonds on the Reset Date at 100% of the aggregate principal amount thereof.
"Fair Market Value shall be determined by J.P. Morgan Securities Inc., as
follows: J.P. Morgan Securities Inc. shall request five primary U.S. Government
securities dealers (each a "Reference Treasury Dealer") in the City of New York
to provide its quotation of the amount required to enter into an agreement
with J.P. Morgan Securities Inc. that would have the effect of preserving for
J.P. Morgan Securities Inc. the economic equivalent of the Call Option,
assuming the Call Option Termination Event had not occurred. J.P. Morgan
Securities Inc. shall request each Reference Treasury Dealer to provide its
quotation to the extent reasonably practicable as of the same day and time
(without regard to different time zones) on or as soon as reasonably
practicable after the notice provided for in paragraph (b) above. The day and
time as of which these quotations are to be obtained will be selected in good
faith by J.P. Morgan Securities Inc. If more than three quotations are
provided, the Fair Market Value shall be the arithmetic mean of the quotations,
without regard to the quotations having the highest and lowest values. (For
this purpose, if more than one quotation has the same highest value or lowest
value, then one of such quotations shall be disregarded.) If three or fewer
such quotations are provided, the Fair Market Value shall be the arithmetic
mean of the quotations. The determination of the Call Option Termination Amount
by J.P. Morgan Securities Inc. shall, absent manifest error, be binding on the
Company.
7. Any notice required to be given hereunder shall be delivered in person,
sent by overnight courier, registered mail, return receipt requested, or
facsimile or communicated by telephone (subject, in the case of communication by
telephone, to confirmation dispatched within twenty-four hours by letter or by
facsimile),
in the case of the Company, to:
The Kroger Co.
1014 Vine Street
Cincinnati, Ohio 45202
Attention: ______________
Facsimile: _____________
in the case of the Calculation Agent, to:
J.P. Morgan Securities Inc.
60 Wall Street
Attention: Registration Department
Facsimile: (212) [ ];
in the case of J.P. Morgan Securities Inc. (in its individual capacity, and not
as Calculation Agent), to:
J.P. Morgan Securities Inc.
60 Wall Street
New York, N.Y. 10260
Attention: Registration Department
Facsimile: (212) [ ];
and in the case of the Trustee, to:
Star Bank, N.A.
425 Walnut Street, P.O. Box 1118
Cincinnati, Ohio 45201-1118
Attention: Corporate Trust Administration
Facsimile: (513) 632-5511
or to any other address of which any party shall have notified the others in
writing as herein provided. Any notice hereunder given by facsimile or letter,
first class mail, shall be deemed to be received upon actual receipt thereof.
8. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York.
9. The rights and obligations of the Company hereunder may not be assigned or
delegated to any other person without the prior written consent of J.P. Morgan
Securities Inc. The rights and obligations of J.P. Morgan Securities Inc.
hereunder may not be assigned or delegated to any other person without the prior
written consent of the Company. This Agreement shall inure to the benefit of
and be binding upon the Company and J.P. Morgan Securities Inc. and their
respective successors and assigns, and will not confer any benefit upon any
other person (other than as provided in section 6 above). The terms
"successors" and "assigns" shall not include any purchaser of Bonds merely
because of such purchase.
10. If any provision of this Agreement shall be held invalid or unenforceable
as applied in any particular case in any or all jurisdictions, such
circumstances shall not have the effect of rendering the provision invalid or
unenforceable in any other case or jurisdiction, or of rendering any other
provision of this Agreement invalid or unenforceable.
11. This Agreement may be amended by any instrument in writing signed by
each of the parties hereto.
12. This Agreement may be executed by each of the parties hereto in any
number of counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all such counterparts shall
together constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
The Kroger Co.
By: ______________________________
Name:
Title:
__________________________________
(J.P. Morgan Securities Inc. )
in its individual capacity and as Calculation Agent
ANNEX A
FORM OF REFERENCE
DEALER AGREEMENT
__________, 200_
_____________________
_____________________
_____________________
_____________________
Dear Sirs:
The Kroger Co., an Ohio corporation (the "Company"), has issued $200,000,000 in
outstanding principal amount of its Puttable Reset Securities (PURS) due July 1,
2010 (the "Bonds") pursuant to an Indenture, dated as of May 1, 1998, as amended
by the First Supplemental Indenture, dated as of May 11, 1998 and the Second
Supplemental Indenture, dated as of June 26, 1998 (collectively, the
"Indenture"), in each case between the Company and Star Bank, N.A., as trustee
(the "Trustee"). The Bonds provide for the reset of the rate at which
interest will accrue thereon and for their resale on the Reset Date. Pursuant to
a Calculation Agency Agreement, dated June 23, 1998, between the Company and
J.P. Morgan Securities Inc. (the "Calculation Agency Agreement"), we have been
appointed as the calculation agent (the "Calculation Agent") for purposes of
determining the new interest rate for the Bonds on the Reset Date. As
Calculation Agent, we would like to extend to you an invitation to participate
in the interest reset and resale process as a Reference Dealer, as described
more fully in the Bonds.
Capitalized terms used in this Agreement and not defined herein will have the
meanings ascribed to them in the Bonds.
The Calculation Date to which this agreement relates is June 23, 2000, and the
Reset Date is July 1, 2000.
Please note that by executing this agreement, you agree that, if you are
selected as the Final Dealer, you will purchase from J.P. Morgan Securities Inc.
on the Calculation Date for settlement on the Reset Date and at the Final Offer
Price your Pro Rata portion of the Bonds that J.P. Morgan Securities Inc. may
purchase pursuant to the Call Option and tender for sale to you on the Reset
Date. We will inform you whether you have been selected as the Final Dealer on
or shortly after the Calculation Date. If you are selected as the Final Dealer,
(i) the aggregate principal amount of Bonds which you may be required to
purchase will not exceed your Pro Rata portion of the Bonds that J.P. Morgan
Securities Inc. purchases pursuant to the Call Option (we will inform you of the
actual amount on the Reset Date), (ii) the price for such Bonds will be the
Final Offer Price, which we will provide to you when requesting your bid on the
Calculation Date, and (iii) the Adjusted Rate for the Bonds for the Reset Period
beginning on such Reset Date will be calculated by us based on the bid submitted
(and confirmed in writing) by you on the Calculation Date.
Notwithstanding anything to the contrary set forth in this Agreement, you will
have no obligation or right to purchase any Bonds on any Reset Date if you are
not selected as the Final Dealer or if J.P. Morgan Securities Inc. does not
purchase such Bonds on the Reset Date. Neither the Calculation Agent nor the
Company has any obligation hereunder to sell any Bonds to you.
If you are willing to participate as a Reference Dealer under the terms
described above, please fill in the information requested below and have an
appropriate person sign and return this agreement to us by .
-------,------
Upon acceptance hereof by you, this letter shall constitute a binding agreement
between you and us, and for the benefit of the Company and J.P. Morgan
Securities Inc. (in its individual capacity and not as Calculation Agent).
This agreement shall be governed by, and construed in accordance with, the laws
of the State of New York.
Very truly yours,
J.P. Morgan Securities Inc.,
as Calculation Agent
By: ___________________________
Name:
Title:
Accepted as of the date hereof:
By: ___________________________
Name:
Title:
Contact: _______________________
Telephone No.: _________________
Facsimile No.: __________________