EXHIBIT 4G
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FRED MEYER, INC.
NOTE AGREEMENT
Dated as of April 25, 1995
$50,000,000 7.77% Senior Notes Due April 25, 2002
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Table of Contents
(Not a part of the Agreement)
SECTION HEADING PAGE
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT...............................1
Section 1.1. Description of Notes.....................................1
Section 1.2. Commitment, Closing Date.................................1
SECTION 2. PREPAYMENT OF NOT.ES..............................................2
Section 2.1. Optional Prepayment with Premium.........................2
Section 2.2. Notice of Optional Prepayments...........................2
Section 2.3. Direct Payment...........................................3
SECTION 3. REPRESENTATIONS...................................................3
Section 3.1. Representations of the Company...........................3
Section 3.2. Representations of the Purchaser.........................3
SECTION 4. CLOSING CONDITIONS................................................4
Section 4.1. Conditions...............................................4
Section 4.2. Waiver of Conditions.....................................5
SECTION 5. COMPANY COVENANTS.................................................6
Section 5.1. Corporate Existence, Etc.................................6
Section 5.2. Insurance................................................6
Section 5.3. Taxes, Claims for Labor and Materials;
Compliance with Laws.....................................6
Section 5.4. Maintenance, Etc.........................................7
Section 5.5. Nature of Business.......................................7
Section 5.6. Consolidated Adjusted Net Worth..........................7
Section 5.7. Limitations on Indebtedness..............................7
Section 5.8. Limitation on Liens......................................8
Section 5.9. Mergers, Consolidations and Sales
of Assets...............................................11
Section 5.10. Guaranties..............................................14
Section 5.11. Repurchase of Notes.....................................14
Section 5.12. Transactions with Affiliates............................14
Section 5.13. Withdrawal from Multiemployer Plans
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and Termination of Pension Plans........................14
Section 5.14. Redesignation of Subsidiaries...........................15
Section 5.15. Reports and Rights of Inspection........................15
Section 5.16. Dividends, Stock Purchases..............................18
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR..........................19
Section 6.1. Events of Default.......................................19
Section 6.2. Notice to Holders.......................................20
Section 6.3. Acceleration of Maturities..............................21
Section 6.4. Rescission of Acceleration..............................21
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.................................22
Section 7.1. Consent Required........................................22
Section 7.2. Solicitation of Holders.................................22
Section 7.3. Effect of Amendment or Waiver...........................23
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.........................23
Section 8.1. Definitions.............................................23
Section 8.2. Accounting Principles...................................31
Section 8.3. Directly or Indirectly..................................31
SECTION 9. MISCELLANEOUS....................................................31
Section 9.1. Registered Notes........................................31
Section 9.2. Exchange of Notes.......................................32
Section 9.3. Loss, Theft, Etc. of Notes..............................32
Section 9.4. Expenses, Stamp Tax Indemnity...........................32
Section 9.5. Powers and Rights Not Waived;
Remedies Cumulative.....................................33
Section 9.6. Notices.................................................33
Section 9.7. Successors and Assigns..................................34
Section 9.8. Survival of Covenants and
Representations.........................................34
Section 9.9. Severability............................................34
Section 9.10. Changes in GAAP.........................................34
Section 9.11. Governing Law...........................................34
Section 9.12. Submission to Jurisdiction..............................34
Section 9.13. Captions................................................35
Signature...................................................................35
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ATTACHMENTS TO NOTE AGREEMENT:
Schedule I -- Names and Addresses of Purchasers and Amounts
of Commitments
Schedule II -- Description of Current Debt, Funded Debt
(including Capitalized Leases), Liens,
Subsidiaries, Pending Tax Matters and Other
Matters
Exhibit A -- Form of Senior Notes due April 25, 2002
Exhibit B -- Representations and Warranties of the
Company
Exhibit C -- Description of Closing Opinion of
Counsel to the Company
Exhibit D -- Subordination Provisions Applicable to
Subordinated Indebtedness
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FRED MEYER, INC.
3800 S.E. 22nd Avenue
Portland, Oregon 97242
NOTE AGREEMENT
Dated as of
April 25, 1995
To the Purchasers named in Schedule I
hereto which are signatories of this
Agreement
Ladies and Gentlemen:
The undersigned, Fred Meyer, Inc., a Delaware corporation (the
"Company"), agrees with you as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.
Section 1.1. Description of Notes. (a) The Company will authorize the
issue and sale of its 7.77% Senior Notes due April 25, 2002 (such
originally issued notes, together with any notes issued in substitution,
exchange or replacement therefor, are hereinafter collectively referred to
as the "Notes"). The Notes will be dated the date of issue, will bear
interest from such date at the rate of 7.77% per annum, payable
semiannually in arrears on the 25th of April and October in each year
(commencing October 25, 1995) and at maturity and will bear interest on
overdue principal (including any overdue optional prepayment of principal)
and premium, if any, and (to the extent legally enforceable) on any overdue
installment of interest at the Overdue Rate after the date due, whether by
acceleration or otherwise, until paid. The Notes shall mature on April 25,
2002 and shall be substantially in the form attached hereto as Exhibit A.
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months. The Notes are not subject to prepayment or
redemption at the option of the Company prior to their expressed maturity
date except on the terms and conditions and in the amounts and with the
premium, if any, set forth in Section 2 of this Agreement. You and the
other purchasers named in Schedule I are hereinafter sometimes referred to
as the "Purchasers". The terms which are capitalized herein shall have the
meanings set forth in Section 8.1 unless the context shall otherwise
require.
Section 1.2. Commitment, Closing Date. Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the
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Company agrees to issue and sell to you, and you agree to purchase from the
Company, Notes in the aggregate principal amount set forth opposite your
name on Schedule I hereto at a price of 100% of such principal amount on
the Closing Date hereafter mentioned.
Delivery of the Notes will be made at the offices of Prudential
Capital Group, 777 S. Figueroa Street, Suite 2950, Los Angeles, California
90017, against payment therefor in Federal Reserve funds in the amount of
the purchase price at 10:00 A.M., Los Angeles time, on April 25, 1995 (the
"Closing Date"). The Notes delivered to you on the Closing Date will be
delivered to you in the form of a single registered Note in the form
attached hereto as Exhibit A for the full amount of your purchase (unless
different denominations are specified by you), registered in your name or
in the name of such nominee, as may be specified in Schedule I attached
hereto.
SECTION 2. PREPAYMENT OF NOTES.
No prepayment of the Notes may be made except to the extent and in the
manner provided in this Section.
Section 2.1. Optional Prepayment with Premium. Upon compliance with
Section 2.2, the Company shall have the privilege, at any time and from
time to time, of prepaying the outstanding Notes, either in whole or in
part (but if in part then in a minimum principal amount of $1,000,000), by
payment of the principal amount of the Notes, or portion thereof to be
prepaid, and accrued interest thereon to the date of such prepayment,
together with a premium equal to the Make-Whole Amount, determined as of
two Business Days prior to the date of such prepayment pursuant to this
Section 2.1.
Section 2.2. Notice of Optional Prepayments. The Company will give
notice of any prepayment of the Notes pursuant to Section 2.1 to each
holder thereof not less than 30 days nor more than 60 days before the date
fixed for such optional prepayment specifying (a) such date, (b) the
principal amount of the holder's Notes to be prepaid on such date, (c) that
a premium may be payable, (d) the date when such premium will be
calculated, (e) the estimated premium, and (f) the accrued interest
applicable to the prepayment. Such notice of prepayment shall also certify
all facts, if any, which are conditions precedent to any such prepayment.
Notice of prepayment having been so given, the aggregate principal amount
of the Notes specified in such notice, together with accrued interest
thereon and the premium, if any, payable with respect thereto, shall become
due and payable on the prepayment date specified in said notice. Not later
than three Business Days prior to the prepayment date specified in such
notice, the Company shall provide each holder of a Note written notice of
the premium, if any, payable in connection with such prepayment and,
whether or not any premium is payable, a reasonably detailed computation of
the Make-Whole Amount. Upon notice by any holder to the Company that such
holder believes the Company's calculation of the Make-
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Whole Amount is in error, the Company shall recalculate the Make- Whole
Amount, including an adjustment, if required, to the prepayment premium.
Section 2.3. Direct Payment. Notwithstanding anything to the contrary
contained in this Agreement or the Notes, in the case of any Note owned by
you or your nominee or owned by any subsequent Institutional Holder which
has given written notice to the Company requesting that the provisions of
this Section 2.3 shall apply, the Company will punctually pay when due the
principal thereof, interest thereon and premium, if any, due with respect
to said principal, without any presentment thereof, directly to you, to
your nominee or to such subsequent Institutional Holder at your address or
your nominee's address set forth in Schedule I hereto or such other address
as you, your nominee or such subsequent Institutional Holder may from time
to time designate in writing to the Company or, if a bank account with a
United States bank is designated for you or your nominee on Schedule I
hereto or in any written notice to the Company from you, from your nominee
or from any such subsequent Institutional Holder, the Company will make
such payments in immediately available funds to such bank account, no later
than 12:00 p.m. New York City time on the date due, marked for attention as
indicated, or in such other manner or to such other account in any United
States bank as you, your nominee or any such subsequent Institutional
Holder may from time to time direct in writing. If for any reason
whatsoever the Company does not make any such payment by such 12:00 p.m.
transmittal time, such payment shall be deemed to have been made on the
next following Business Day and such payment shall bear interest at the
Overdue Rate.
SECTION 3. REPRESENTATIONS.
Section 3.1. Representations of the Company. The Company represents
and warrants that all representations and warranties set forth in Exhibit B
are true and correct as of the date hereof and are incorporated herein by
reference with the same force and effect as though herein set forth in
full.
Section 3.2. Representations of the Purchaser. (a) You represent, and
in entering into this Agreement the Company understands, that you are
acquiring the Notes for the purpose of investment and not with a view to
the distribution thereof, and that you have no present intention of
selling, negotiating or otherwise disposing of the Notes; it being
understood, however, that the disposition of your property shall at all
times be and remain within your control.
(b) You further represent that either: (1) you are acquiring the Notes
with assets from your general account and not with the assets of any
separate account in which any employee benefit plan has any interest; (2)
no part of the funds to be used by you to purchase the Notes constitutes
assets allocated to any separate account maintained by you such that the
application of such funds constitutes a prohibited transaction under
Section 406 of ERISA; or (3) all or a part of such funds constitute assets
of one or more separate accounts, trusts or a commingled pension trust
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maintained by you, and you have disclosed to the Company the names of such
employee benefit plans whose assets in such separate account or accounts or
pension trusts exceed 10% of the total assets or are expected to exceed 10%
of the total assets of such account or accounts or trusts as of the date of
such purchase and the Company has advised you in writing (and in making the
representations set forth in this clause (3) you are relying on such
advice) that the Company is not a party-in- interest nor are the Notes
employer securities with respect to the particular employee benefit plan
disclosed to the Company by you as aforesaid (for the purpose of this
clause (3), all employee benefit plans maintained by the same employer or
employee organization are deemed to be a single plan). As used in this
Section 3.2(b), the terms "separate account", "party-in- interest",
"employer securities" and "employee benefit plan" shall have the respective
meanings assigned to them in ERISA.
SECTION 4. CLOSING CONDITIONS.
Section 4.1. Conditions. Your obligation to purchase the Notes on the
Closing Date shall be subject to the performance by the Company of its
agreements hereunder which by the terms hereof are to be performed at or
prior to the time of delivery of the Notes and to the following further
conditions precedent:
(a) Closing Certificate. You shall have received a certificate
dated the Closing Date, signed by the President or a Vice President of
the Company, the truth and accuracy of which shall be a condition to
your obligation to purchase the Notes proposed to be sold to you and
to the effect that (1) the representations and warranties of the
Company set forth in Exhibit B hereto are true and correct on and with
respect to the Closing Date, (2) the Company has performed all of its
obligations hereunder which are to be performed on or prior to the
Closing Date, and (3) no Default or Event of Default has occurred and
is continuing.
(b) Legal Opinions. You shall have received from Stoel Rives
Boley Jones & Grey, counsel for the Company, its opinion dated the
Closing Date, in form and substance satisfactory to you, and covering
the matters set forth in Exhibit C hereto.
(c) Company's Existence and Authority. On or prior to the Closing
Date, you shall have received, in form and substance reasonably
satisfactory to you and your special counsel, such documents and
evidence with respect to the Company as you may reasonably request in
order to establish the existence and good standing of the Company and
the authorization of the transactions contemplated by this Agreement.
(d) Certain Documents. The Company shall have delivered to you
duly executed copies of (i) the Notes and this Agreement; (ii) an
incumbency certificate regarding the due election, authorization and
signature exemplars of
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officers signing or otherwise acting on behalf of the Company in
connection herewith; and (iii) a secretary's certificate (A) attaching
the Company's certificate of incorporation, certified as of a recent
date by the Secretary of State of Delaware, and bylaws, certified by
the Secretary of the Company; (B) attaching the resolutions of the
Board of Directors of the Company authorizing the issue and sale of
the Notes, the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby and
certifying that such resolutions were duly adopted by such Board, have
not been since modified or rescinded, and remain in full force and
effect; and (C) certifying that no proceedings to dissolve, liquidate
or otherwise terminate the corporate existence of the Company or any
Material Restricted Subsidiary have been commenced or are
contemplated.
(e) Funding Instructions. At least three Business Days prior to
the Closing Date, you shall have received written instructions
executed by a Responsible Officer of the Company directing the manner
of the payment of funds and setting forth (1) the name of the
transferee bank, (2) such transferee bank's ABA number, (3) the
account name and number into which the purchase price for the Notes is
to be deposited, and (4) the name and telephone number of the account
representative responsible for verifying receipt of such funds.
(f) Structuring Fee. Concurrently with the delivery of the Notes
to you on the Closing Date, a structuring fee of $10,000 shall have
been paid by the Company. The Company shall not be responsible for any
of your other fees, costs or expenses in connection with the
negotiation, execution and delivery of this Agreement and the Notes.
(g) Legality of Investment. The Notes to be purchased by you
shall be a legal investment for you under the laws of each
jurisdiction to which you may be subject (without resort to any
so-called "basket provisions" to such laws).
(h) Satisfactory Proceedings. All proceedings taken in connection
with the transactions contemplated by this Agreement, and all
documents necessary to the consummation thereof, shall be satisfactory
in form and substance to you and your counsel, and you shall have
received a copy (executed or certified as may be appropriate) of all
legal documents or proceedings taken in connection with the
consummation of said transactions.
Section 4.2. Waiver of Conditions. If on the Closing Date the Company
fails to tender to you the Notes to be issued to you on such date or if the
conditions specified in Section 4.1 have not been fulfilled, you may
thereupon elect to be relieved of all further obligations under this
Agreement. Without limiting the foregoing, if the conditions specified in
Section 4.1 have not been fulfilled, you may waive compliance by the
Company with any such condition to such extent as you may in your sole
discretion
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determine. Nothing in this Section 4.2 shall operate to relieve the Company
of any of its obligations hereunder or to waive any of your rights against
the Company.
SECTION 5. COMPANY COVENANTS.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
Section 5.1. Corporate Existence, Etc. The Company will preserve and
keep in full force and effect, and will cause each Restricted Subsidiary to
preserve and keep in full force and effect, its corporate existence and all
licenses and permits necessary to the proper conduct of its business,
provided that the foregoing shall not prevent any transaction permitted by
Section 5.9.
Section 5.2. Insurance. The Company will maintain, and will cause each
Restricted Subsidiary to maintain, insurance coverage by financially sound
and reputable insurers and in such forms and amounts (including
deductibles) and against such risks as are (a) maintained by prudent
corporations of established reputation engaged in the same or a similar
business and owning and operating similar properties and, in the case of
the Company, having as of the date of any determination thereof a
"consolidated net worth" determined in accordance with GAAP approximately
equal to the Consolidated Net Worth of the Company or (b) consistent with
the Company's insurance practices existing on the Closing Date, including
self-insurance, all as more fully set forth in Schedule II hereto.
Section 5.3. Taxes, Claims for Labor and Materials; Compliance with
Laws.
(a) The Company will promptly pay and discharge, and will cause each
Restricted Subsidiary promptly to pay and discharge, all lawful taxes,
assessments and governmental charges or levies imposed upon the Company or
such Restricted Subsidiary, respectively, or upon or in respect of all or
any part of the property or business of the Company or such Restricted
Subsidiary, all trade accounts payable in accordance with usual and
customary business terms, and all claims for work, labor or materials,
which if unpaid might become a Lien upon any property of the Company or
such Restricted Subsidiary; provided the Company or such Restricted
Subsidiary shall not be required to pay any such tax, assessment, charge,
levy, account payable or claim if (1) the validity, applicability or amount
thereof is being contested in good faith by appropriate actions or
proceedings which will prevent the forfeiture or sale of any property of
the Company or such Restricted Subsidiary or any material interference with
the use thereof by the Company or such Restricted Subsidiary, and (2) the
Company or such Restricted Subsidiary shall set aside, on its books,
reserves deemed by it to be adequate with respect thereto.
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(b) The Company will promptly comply and will cause each Restricted
Subsidiary to promptly comply with all laws, ordinances or governmental
rules and regulations to which it is subject, including, without
limitation, the Occupational Safety and Health Act of 1970, as amended,
ERISA and all Environmental Laws, the violation of which could materially
and adversely affect the properties, business, prospects, profits or
condition (financial or otherwise) of the Company and its Restricted
Subsidiaries or would result in any Lien not permitted under Section 5.8.
Section 5.4. Maintenance, Etc. The Company will maintain, preserve and
keep, and will cause each Restricted Subsidiary to maintain, preserve and
keep, its properties which are used or useful in the conduct of its
business (whether owned in fee or a leasehold interest) in good repair and
working order and from time to time will make all necessary repairs,
replacements, renewals and additions so that at all times the efficiency
thereof shall be maintained.
Section 5.5. Nature of Business. Neither the Company nor any
Restricted Subsidiary will engage in or cease to engage in any business if,
as a result, the general nature of the business, taken on a consolidated
basis, which would then be engaged in by the Company and its Restricted
Subsidiaries would be substantially changed from the distribution, either
at retail or wholesale, of apparel, general merchandise and food and drug
store products and in connection therewith or in furtherance of and as a
supplement thereto operation of the businesses involved in the manufacture,
distribution or sale of food, consumer products or services, and related
businesses.
Section 5.6. Consolidated Adjusted Net Worth. The Company will at all
times keep and maintain Consolidated Adjusted Net Worth at an amount not
less than $400,000,000.
Section 5.7. Limitations on Indebtedness. (a) The Company will not
create, assume, guarantee or otherwise incur or in any manner be or become
liable in respect of any Funded Debt, and will not permit any Restricted
Subsidiary to, create, assume, guarantee or otherwise incur or in any
manner be or become liable in respect of any Indebtedness, except:
(1) Funded Debt evidenced by the Notes;
(2) Funded Debt of the Company and Indebtedness of Restricted
Subsidiaries outstanding as of the Closing Date and described on
Schedule II hereto;
(3) Subordinated Funded Debt of the Company to a Restricted
Subsidiary;
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(4) Indebtedness of a Restricted Subsidiary to the Company or to
a Predominantly-owned Restricted Subsidiary; and
(5) additional Funded Debt of the Company and Indebtedness of its
Restricted Subsidiaries, provided that at the time of creation,
issuance, assumption, guarantee or other incurrence thereof and after
giving effect thereto and to the application of the proceeds thereof:
(i) in the case of the issuance of any Funded Debt of the Company
or a Restricted Subsidiary, Consolidated Funded Debt shall not exceed
60% of Consolidated Total Capitalization; provided that
notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may incur Consolidated Funded Debt exceeding 60% but in
no event exceeding 65% of Consolidated Total Capitalization
("Acquisition Funded Debt") for a period of not more than four
consecutive fiscal quarters in any five consecutive fiscal year period
if, but only if, 100% of the net proceeds of such Acquisition Funded
Debt are applied to the acquisition of assets or capital stock of any
Person engaged in one or more of the businesses engaged in by the
Company or a Restricted Subsidiary as described in Section 5.5; and
(ii) in the case of the issuance of any Funded Debt of the
Company secured by Liens permitted by Section 5.8(a)(11) or the
issuance of Indebtedness of a Restricted Subsidiary (other than
Indebtedness of a Restricted Subsidiary secured by Liens permitted by
Section 5.8(a)(8) or (10) and Indebtedness of a corporation which
becomes a Restricted Subsidiary after the date hereof), the sum
(without duplication) of (A) all Funded Debt of the Company and its
Restricted Subsidiaries secured by Liens permitted by Section
5.8(a)(11), plus (B) the aggregate amount of all Indebtedness of
Restricted Subsidiaries incurred in accordance with the provisions of
this clause (ii) shall not exceed 15% of Consolidated Total Assets.
(b) Indebtedness issued or incurred in accordance with the limitations
of Section 5.7(a) may be renewed, extended or refunded (without increase in
principal amount remaining unpaid at the time of such renewal, extension or
refunding), provided that at the time of such renewal, extension or
refunding and after giving effect thereto, no Event of Default would exist.
(c) Any corporation which becomes a Restricted Subsidiary after the
date hereof shall for all purposes of Section 5.7(a)(5)(i) be deemed to
have created, assumed or incurred at the time it becomes a Restricted
Subsidiary all Indebtedness of such corporation existing immediately after
it becomes a Restricted Subsidiary.
Section 5.8. Limitation on Liens. (a) The Company will not, and will
not permit any Restricted Subsidiary to, create or incur, or suffer to be
incurred or to exist, any Lien
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on its or their property or assets, whether now owned or hereafter
acquired, or upon any income or profits therefrom, except:
(1) Liens for property taxes or assessments or other governmental
charges or levies and Liens securing claims or demands of mechanics
and materialmen, provided that payment thereof is not at the time
required by Section 5.3;
(2) Liens of or resulting from any litigation or legal proceeding
which are currently being contested in good faith by appropriate
proceedings unless the judgment they secure shall not have been
stayed, bonded or discharged within 60 days;
(3) Liens incidental to the conduct of business or the ownership
of properties and assets (including Liens in connection with workers'
compensation, unemployment insurance and other like laws,
warehousemen's and attorneys' liens and statutory landlords' liens)
and Liens to secure the performance of bids, tenders or trade
contracts, or to secure statutory obligations, surety or appeal bonds
or other Liens of like general nature, in any such case incurred in
the ordinary course of business and not in connection with the
borrowing of money, which in any such case would not materially and
adversely affect the properties, business, prospects, profits or
condition (financial or otherwise) of the Company and its Restricted
Subsidiaries, taken as a whole; provided in each case, the obligation
secured is not overdue or, if overdue, is being contested in good
faith by appropriate actions or proceedings;
(4) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights- of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use
of real properties, which are necessary for the conduct of the
activities of the Company and its Restricted Subsidiaries or which
customarily exist on properties of corporations engaged in similar
activities and similarly situated and which do not in any event
materially impair their use in the operation of the business of the
Company and its Restricted Subsidiaries;
(5) Liens securing Indebtedness of a Restricted Subsidiary to the
Company or to another Restricted Subsidiary;
(6) Liens existing as of the Closing Date and either described in
the footnotes to the consolidated financial statements of the Company
and its Subsidiaries for the fiscal year ended January 28, 1995 or
described on Schedule II hereto;
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(7) Liens created or incurred under leases of real property owned
by the Company in which the Company is the landlord, provided that (1)
the rentals payable under any such lease are for fair rental value,
(2) any such lease is entered into in (i) an "arm's-length"
transaction and (ii) the ordinary course of the Company's business and
(3) after giving effect to the execution, extension or renewal of any
such lease, no Default or Event of Default would exist;
(8) Liens created or incurred after the Closing Date given to
secure the payment of the purchase price incurred in connection with
the acquisition or purchase of real or personal property or the cost
of construction or improvements to real or personal property, in any
such case, useful and intended to be used in carrying on the business
of the Company or a Restricted Subsidiary, provided that (i) the Lien
shall attach solely to the real or personal property acquired,
purchased, constructed or improved, (ii) such Lien shall have been
created or incurred within 270 days after the date of acquisition or
purchase or the date of completion of construction or improvement of
such real or personal property, as the case may be, (iii) at the time
of the imposition of the Lien, the aggregate amount remaining unpaid
on all Indebtedness secured by Liens on such real or personal
property, as the case may be (whether or not assumed by the Company or
a Restricted Subsidiary) shall not exceed an amount equal to the
lesser of the total acquisition or purchase price or cost of
construction or improvement, as the case may be, or fair market value
of such real or personal property (as determined in good faith by the
Board of Directors of the Company), and (iv) all such Indebtedness
shall have been incurred within the applicable limitations provided in
Section 5.7(a)(5);
(9) Liens affixed on real or personal property (including without
limitation outstanding shares of capital stock and Indebtedness) of
any entity at the time such entity becomes a Restricted Subsidiary
given to secure the payment of the purchase price incurred in
connection with the acquisition of such entity by the Company or a
Restricted Subsidiary; provided that (i) the Lien shall attach solely
to such real or personal property, (ii) such Lien shall have been
created or incurred substantially concurrently with such acquisition
or purchase, (iii) at the time of acquisition or purchase of such
Restricted Subsidiary, the aggregate amount of Indebtedness secured by
Liens on such real or personal property (whether or not assumed by the
Company or such Restricted Subsidiary) shall not exceed an amount
equal to the lesser of the purchase price or fair market value of such
real property or such personal property (as determined in good faith
by the Board of Directors of the Company), and (iv) all such
Indebtedness shall have been incurred within the applicable
limitations provided in Section 5.7(a)(5);
(10) Liens on real or personal property existing (i) at the time
of acquisition thereof, whether or not the Indebtedness secured
thereby is assumed by the Company or any such Restricted Subsidiary,
or (ii) on the property or
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outstanding shares of a corporation at the time such corporation is
merged into or consolidated with the Company or any such Restricted
Subsidiary or at the time of a sale, lease or other disposition of the
properties or outstanding shares or Indebtedness of a corporation or
firm as an entirety to the Company or any such Restricted Subsidiary;
provided that the amount of Indebtedness secured by such Liens shall
not exceed an amount equal to the lesser of the acquisition or
purchase price or fair market value of such real or personal property;
and provided further, that all such Indebtedness shall have been
incurred within the limitations of Section 5.7(a)(5)(i);
(11) Liens created or incurred after the Closing Date given to
secure Indebtedness of the Company or any Restricted Subsidiary in
addition to the Liens permitted by the preceding clauses (1) through
(10) hereof, provided that all Indebtedness secured by such Liens
shall have been incurred within the applicable limitations provided in
Section 5.7(a)(5); and
(12) Liens permitted by the preceding clause (5), (6), (7), (8),
(9), (10) or (11) of this Section 5.8 which have been extended or
renewed in respect of the same property theretofore subject to such
Liens in connection with the extension, renewal or refunding of the
Indebtedness secured thereby; provided that (i) such extension,
renewal or refunding of Indebtedness shall be without increase in the
principal amount remaining unpaid as of the date of such extension,
renewal or refunding and (ii) such Liens shall attach solely to the
same such property.
(b) In the event that any property, asset or income or profits
therefrom is subjected to a Lien in violation of this Section 5.8, the
Company will make or cause to be made provision whereby the Notes will be
secured equally and ratably with all other obligations secured thereby and
concurrently therewith the Company shall furnish to the holders of the
Notes an opinion to such effect in scope and form reasonably satisfactory
to the holders of at least 66-2/3% of the principal amount of the Notes at
the time outstanding of Stoel Rives Boley Jones & Grey or another
independent counsel satisfactory to such holders, and in any case the Notes
shall have the benefit, to the full extent that, and with such priority as,
the holders may be entitled thereto under applicable law, of an equitable
Lien on such property, asset, income or profits securing the Notes.
Section 5.9. Mergers, Consolidations and Sales of Assets. (a) The
Company will not, and will not permit any Restricted Subsidiary to,
consolidate with or be a party to a merger with any other corporation, or
sell, lease or otherwise dispose of all or substantially all of its assets;
provided that:
(1) any Restricted Subsidiary may merge or consolidate with or
into the Company or any Predominantly-owned Restricted Subsidiary so
long as in any
12
merger or consolidation involving the Company, the Company shall
be the surviving or continuing corporation;
(2) the Company may consolidate or merge with or into any other
corporation if (i) the corporation which results from such
consolidation or merger (the "surviving corporation") is organized
under the laws of any state of the United States or the District of
Columbia, (ii) the due and punctual payment of the principal of and
premium, if any, and interest on all of the Notes, according to their
tenor, and the due and punctual performance and observation of all of
the covenants in the Notes and this Agreement to be performed or
observed by the Company are expressly assumed by the surviving
corporation, by written agreement reasonably satisfactory in scope and
form to the holders of 66-2/3% in aggregate principal amount of the
outstanding Notes (provided that execution by the holders of the Notes
of such agreement shall not be required), and (iii) at the time of
such consolidation or merger and immediately after giving effect
thereto, (A) no Default or Event of Default would exist and (B) the
surviving corporation would be permitted by the provisions of Section
5.7(a)(5) to incur at least $1.00 of additional Consolidated Funded
Debt; and
(3) the Company may sell or otherwise dispose of all or
substantially all of its assets to any Person if (i) the acquiring
Person is a corporation organized under the laws of any state of the
United States or the District of Columbia, (ii) the due and punctual
payment of the principal of and premium, if any, and interest on all
the Notes, according to their tenor, and the due and punctual
performance and observance of all of the covenants in the Notes and in
this Agreement to be performed or observed by the Company are
expressly assumed by the acquiring corporation, by written agreement
reasonably satisfactory in scope and form to the holders of 66-2/3% in
aggregate principal amount of the outstanding Notes (provided that
execution by the holders of the Notes of such agreement shall not be
required), and (iii) at the time of such sale or disposition and
immediately after giving effect thereto, (A) no Default or Event of
Default would exist and (B) the acquiring corporation would be
permitted by the provisions of Section 5.7(a)(5) to incur at least
$1.00 of additional Consolidated Funded Debt.
(b) The Company will not, and will not permit any Restricted
Subsidiary to, sell, lease, transfer, abandon or otherwise dispose of (any
such sale, lease, transfer, abandonment or other disposition being herein
referred to as a "Transfer") any assets (including stock of any
Subsidiary); provided that the foregoing restrictions do not apply to:
(1) Transfers in the ordinary course of business for fair value
and except as provided in Section 5.9(a); or
13
(2) the Transfer of assets of a Restricted Subsidiary to the
Company or a Predominantly-owned Restricted Subsidiary; or
(3) the Transfer of any real or personal property of the Company
or a Restricted Subsidiary the book value of which at the time of such
Transfer shall be less than $5,000,000; provided that in the opinion
of a Responsible Officer of the Company (i) the Transfer is for fair
value and is in the best interests of the Company and (ii) such
Transfer is not part of a plan by the Company to divest itself of a
substantial portion of its assets inconsistent with the purposes of
this Section 5.9 (in which event such Transfer shall be made within
the limitations of Section 5.9(a)(3) or (b)(5)); or
(4) any Transfer of assets of the Company or a Restricted
Subsidiary whenever it is determined in the good faith judgment of a
Responsible Officer of the Company that such assets are obsolete,
worn-out or without economic value to the Company or any of its
Restricted Subsidiaries; or
(5) any Transfer of such assets for cash or other property to a
Person or Persons if all of the following conditions are met:
(i) the assets (valued at net book value) do not, together with
all other assets of the Company and its Restricted Subsidiaries
previously Transferred during the same fiscal year in reliance upon
this Section 5.9(b)(5), exceed 10% of Consolidated Total Assets
determined as of the end of the immediately preceding fiscal quarter;
(ii) in the good faith judgment of the Company's Board of
Directors, the Transfer is for fair value and is in the best interests
of the Company or such Restricted Subsidiary;
(iii) immediately after the consummation of the transaction and
after giving effect thereto, (A) no Default or Event of Default would
exist, and (B) the Company would be permitted by the provisions of
Section 5.7(a)(5) to incur at least $1.00 of additional Consolidated
Funded Debt; and
(iv) in the case of any Transfer of all or substantially all of
the assets or stock of a Subsidiary or of any Indebtedness of a
Subsidiary, immediately after the Transfer such Subsidiary shall have
no Indebtedness of or continuing Investment in the capital stock of
the Company or of any Subsidiary and any such Indebtedness or
Investment shall have been discharged or acquired, as the case may be,
by the Company or a Subsidiary;
provided, however, that for purposes of the foregoing calculation,
there shall not be included any assets (or portions of such assets) to
the extent the proceeds are
14
applied within 12 months of the date of Transfer of such assets to
either (A) the acquisition of fixed assets useful and intended to be
used in the operation of the Company and its Subsidiaries as described
in Section 5.5 and having a fair market value (as determined in good
faith by the Board of Directors of the Company) at least equal to that
of the assets so Transferred and/or (B) the prepayment at any
applicable prepayment premium of Funded Debt (other than Subordinated
Funded Debt) of the Company. It is understood and agreed by the
Company that any such proceeds paid and applied to the prepayment of
the Notes as hereinabove provided shall be prepaid as and to the
extent provided in Section 2.1.
Section 5.10. Guaranties. The Company will not, and will not permit
any Restricted Subsidiary to, become or be liable in respect of any
Guaranty of Indebtedness except Guaranties of Indebtedness by the Company
which are limited in amount to a maximum principal amount, any interest
accrued thereon and any expenses incurred in connection therewith or which
constitute Guaranties of Indebtedness incurred by any Restricted Subsidiary
in compliance with the provisions of this Agreement.
Section 5.11. Repurchase of Notes. Neither the Company nor any
Subsidiary or Affiliate which is controlled by the Company, directly or
indirectly, may repurchase or make any offer to repurchase any Notes unless
an offer has been made to repurchase Notes, pro rata, from all holders of
the Notes at the same time and upon the same terms. In case the Company or
any Subsidiary or Affiliate which is controlled by the Company repurchases
or otherwise acquires any Notes, such Notes shall immediately thereafter be
cancelled and no Notes shall be issued in substitution therefor. Without
limiting the foregoing, upon the purchase or other acquisition of any Notes
by the Company, any Subsidiary or any such Affiliate, such Notes shall no
longer be outstanding for purposes of any section of this Agreement
relating to the taking by the holders of the Notes of any actions with
respect hereto, including, without limitation, Section 6.3, Section 6.4 and
Section 7.1.
Section 5.12. Transactions with Affiliates. The Company will not, and
will not permit any Restricted Subsidiary to, enter into or be a party to
any transaction or arrangement with any Affiliate (including, without
limitation, the purchase from, sale to or exchange of property with, or the
rendering of any service by or for, any Affiliate), except in the ordinary
course of and pursuant to the reasonable requirements of the Company's or
such Restricted Subsidiary's business and upon fair and reasonable terms
which, when taken as a whole, are no less favorable to the Company or such
Restricted Subsidiary than would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate.
Section 5.13. Withdrawal from Multiemployer Plans and Termination of
Pension Plans. The Company will not and will not permit any Subsidiary to
withdraw from any Multiemployer Plan if such withdrawal could result in
withdrawal liability (as described
15
in Part I of Subtitle E of Title IV of ERISA) or to terminate any Plan
which in either case could materially and adversely affect the financial
condition of the Company and its Restricted Subsidiaries or the ability of
the Company to perform its obligations under this Agreement or the Notes.
Section 5.14. Redesignation of Subsidiaries. The Company may designate
or redesignate any Unrestricted Subsidiary as a Restricted Subsidiary by
giving prompt written notice to the holders of the Notes that the Board of
Directors of the Company has made such determination, provided, however,
that no Unrestricted Subsidiary may be designated as a Restricted
Subsidiary and no Restricted Subsidiary which at any time from and after
the Closing Date had previously been designated as an Unrestricted
Subsidiary may be designated as an Unrestricted Subsidiary if, at the time
of such action and after giving effect thereto: (a) the Company would not
be permitted by the provisions of Section 5.7(a)(5) to incur at least $1.00
of additional Consolidated Funded Debt, or (b) a Default or Event of
Default would exist, and provided further, that any Restricted Subsidiary
which at any time from and after the Closing Date had previously been
designated as an Unrestricted Subsidiary and which is to be designated an
Unrestricted Subsidiary may not thereafter be designated as a Restricted
Subsidiary for a period of at least 366 days following the date of
designation of such Restricted Subsidiary as an Unrestricted Subsidiary.
Section 5.15. Reports and Rights of Inspection. (A) The Company will
keep, and will cause each Restricted Subsidiary to keep, proper books of
record and account, on a consolidated basis, in which full and correct
entries will be made of all dealings or transactions of, or in relation to,
the business and affairs of the Company and its Subsidiaries, in accordance
with GAAP consistently applied (except for changes disclosed in the
financial statements furnished to you pursuant to this Section 5.15 and
concurred in by the independent public accountants referred to in Section
5.15(b)), and will furnish to you so long as you are the holder of any Note
and to each other Institutional Holder of the then outstanding Notes (in
duplicate if so specified below or otherwise requested):
(a) Quarterly Statements. As soon as available and in any event
within 90 days after the end of each quarterly fiscal period (except
the last) of each fiscal year, copies of:
(1) a consolidated balance sheet of the Company and its
consolidated Subsidiaries as of the close of such quarterly fiscal
period, setting forth in comparative form the consolidated figures for
the fiscal year then most recently ended,
(2) consolidated statements of operations of the Company and its
consolidated Subsidiaries for such quarterly fiscal period and for the
portion of the fiscal year ending with such quarterly fiscal period,
in each case setting forth
16
in comparative form the consolidated figures for the corresponding
periods of the preceding fiscal year, and
(3) a consolidated statement of cash flows of the Company and its
consolidated Subsidiaries for the portion of the fiscal year ending
with such quarterly fiscal period, setting forth in comparative form
the consolidated figures for the corresponding period of the preceding
fiscal year,all in reasonable detail and certified (subject to normal
year-end adjustments) as to fairness of presentation and consistency
by a Responsible Officer of the Company;
(b) Annual Statements. As soon as available and in any event
within 120 days after the close of each fiscal year of the Company,
copies of:
(1) a consolidated balance sheet of the Company and its
consolidated Subsidiaries as of the close of such fiscal year, and
(2) consolidated statements of operations, changes in
stockholders' equity and cash flows of the Company and its
consolidated Subsidiaries for such fiscal year,
in each case setting forth in comparative form the consolidated
figures for the preceding fiscal year, all in reasonable detail and
accompanied by a report thereon of a firm of independent public
accountants of recognized national standing selected by the Company to
the effect that the consolidated financial statements present fairly,
in all material respects, the consolidated financial position of the
Company and its consolidated Subsidiaries as of the end of the fiscal
year being reported on and the consolidated results of the operations
and cash flows for said year in conformity with GAAP and that the
examination of such accountants in connection with such financial
statements has been conducted in accordance with generally accepted
auditing standards and included such tests of the accounting records
and such other auditing procedures as said accountants deemed
necessary in the circumstances;
(c) Audit Reports. Promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the
books of the Company or any Restricted Subsidiary and any management
letter received from such accountants;
(d) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or
proxy statement sent by the Company to its creditors and stockholders
generally and of each regular or periodic report, and any registration
statement or prospectus filed by the Company or any Subsidiary with
any securities exchange or the Securities and Exchange Commission or
any successor agency, and copies of any orders in any
17
proceedings to which the Company or any of its Subsidiaries is a
party, issued by any governmental agency, Federal or state, having
jurisdiction over the Company or any of its Subsidiaries;
(e) ERISA Reports. Promptly upon the occurrence thereof, written
notice of (1) a Reportable Event with respect to any Plan for which
the requirement of notice to the PBGC within 30 days has not been
waived (provided that the loss of qualification of a Plan and the
failure to meet the minimum funding standard of Section 412 of the
Code or Section 302 of ERISA shall be a Reportable Event for which
notice must be given regardless of the issuance of any waiver of the
reporting requirement by the PBGC); (2) the institution of any steps
by the Company, any ERISA Affiliate, the PBGC or any other Person to
terminate any Plan under Sections 4041(c) or 4042 of ERISA; (3) the
institution of any steps by the Company or any ERISA Affiliate to
withdraw from any Plan which could result in a liability to the
Company; (4) a non-exempt "prohibited transaction" within the meaning
of Section 406 of ERISA in connection with any Plan; (5) any material
increase in the contingent liability of the Company or any Restricted
Subsidiary with respect to any post-retirement welfare liability; or
(6) the taking of any action by, or the threatening of the taking of
any action by, the Internal Revenue Service, the Department of Labor
or the PBGC with respect to any of the foregoing;
(f) Officer's Certificates. Within the periods provided in
paragraphs (a) and (b) above, a certificate of a Responsible Officer
of the Company stating that such officer has reviewed the provisions
of this Agreement and setting forth: (1) the information and
computations (in sufficient detail) required in order to establish
whether the Company was in compliance with the requirements of
Sections 5.6, 5.7, 5.8(a)(10) and 5.9(b)(5) at the end of the period
covered by the financial statements then being furnished, and (2)
whether there existed as of the date of such financial statements and
whether, to the best of such officer's knowledge, there exists on the
date of the certificate or existed at any time during the period
covered by such financial statements any Default or Event of Default
and, if any such condition or event exists on the date of the
certificate, specifying the nature and period of existence thereof and
the action the Company is taking and proposes to take with respect
thereto;
(g) Accountant's Certificates. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they
have reviewed this Agreement and stating further whether, in making
their audit, such accountants have become aware of any Default or
Event of Default under any of the terms or provisions of this
Agreement insofar as any such terms or provisions pertain to or
involve accounting matters or determinations, and if any such
condition or event then exists, specifying the nature and period of
existence thereof; and
18
(h) Requested Information. With reasonable promptness, such other
data and information as you or any such Institutional Holder may
reasonably request.
(B) Without limiting the foregoing, the Company will permit you, so
long as you are the holder of any Note, and each Institutional Holder of
the then outstanding Notes (or such agents as either you or such
Institutional Holder may designate), to visit and inspect, under the
Company's guidance, any of the properties of the Company or any Restricted
Subsidiary, to examine all of their books of account, records, reports and
other papers, to make copies and extracts therefrom and to discuss their
respective affairs, finances and accounts with their respective officers,
employees, and independent public accountants (and by this provision the
Company authorizes said accountants to discuss with you the finances and
affairs of the Company and its Restricted Subsidiaries), all at such
reasonable times and as often as may be reasonably requested. Any
visitation shall be at the sole expense of you or such Institutional
Holder, unless a Default or Event of Default shall have occurred and be
continuing or the holder of any Note or of any other evidence of
Indebtedness of the Company or any Restricted Subsidiary gives any written
notice or takes any other action with respect to a claimed default, in
which case, any such visitation or inspection shall be at the sole expense
of the Company.
(C) If at any time Unrestricted Subsidiaries constitute 5% or more of
Consolidated Total Assets or Unrestricted Subsidiaries contribute 5% or
more of operating income of the Company and its Subsidiaries, then and in
such event the Company shall for each quarterly and annual fiscal period
thereafter deliver the financial statements referred to in clauses (a) and
(b) of Section 5.15(A) on the basis of the Company and its Restricted
Subsidiaries.
Section 5.16. Dividends, Stock Purchases. The Company will not except
as hereinafter provided:
(a) declare or pay any dividends, either in cash or property, on
any shares of its capital stock of any class (except dividends or
other distributions payable solely in shares of common stock of the
Company);
(b) directly or indirectly, or through any Subsidiary or through
any Affiliate of the Company, purchase, redeem or retire any shares of
its capital stock of any class or any warrants, rights or options to
purchase or acquire any shares of its capital stock (other than in
exchange for or out of the net cash proceeds to the Company for the
substantially concurrent issue or sale of shares of common stock of
the Company or warrants, rights or options to purchase or acquire any
shares of its common stock); or
(c) make any other payment or distribution, either directly or
indirectly or through any Subsidiary, in respect of its capital stock;
19
if after giving effect thereto, an Event of Default would exist under
Section 5.6, Section 5.7 or Section 5.9.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
Section 6.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note
when the same shall have become due and such default shall continue
for more than five Business Days; or
(b) Default shall occur in the making of any payment of the
principal of any Note or premium, if any, thereon at the expressed or
any accelerated maturity date or at any date fixed for prepayment; or
(c) Default shall occur in the observance or performance of any
covenant or agreement contained in Section 5.6 through Section 5.9
which is not remedied within ten Business Days after the first day on
which a Responsible Officer of the Company first obtains knowledge of
such default; or
(d) Default shall occur in the observance or performance of any
other provision of this Agreement which is not remedied within 30 days
after the first day on which a Responsible Officer of the Company
first obtains knowledge of such Default; provided that in the case of
any Default pursuant to this Section 6.1(d) which cannot with due
diligence be cured within such 30-day period, if the Company shall
proceed promptly to cure the same and thereafter prosecute the curing
of such Default with due diligence, the time within which to cure such
Default shall be extended for such period as may be necessary to
effect such cure but in no event more than 60 additional days; or
(e) Default shall be made in the payment when due (whether by
lapse of time, by declaration, by call for redemption or otherwise) of
the principal of or interest on any Indebtedness for borrowed money
(other than the Notes) under any indenture, agreement or other
instrument under which any Indebtedness for borrowed money of the
Company or any Restricted Subsidiary aggregating in excess of
$10,000,000 is outstanding and such default or event shall permit the
acceleration by the holders of such Indebtedness for borrowed money
(or a trustee on their behalf) or repurchase by the Company or an
Affiliate of, occur at the maturity of, or result in the acceleration
of, such Indebtedness for borrowed money of the Company or any
Restricted Subsidiary and such acceleration shall not have been
rescinded or annulled; or
20
(f) Default or the happening of any event shall occur under any
indenture, agreement or other instrument under which any Indebtedness
for borrowed money (other than the Notes) of the Company or any
Restricted Subsidiary aggregating in excess of $10,000,000 may be
issued and such default or event shall occur at the maturity of, or
result in the acceleration of, such Indebtedness for borrowed money of
the Company or any Restricted Subsidiary and such acceleration shall
not have been rescinded or annulled; or
(g) Any representation or warranty made by the Company herein, or
made by the Company in any statement or certificate furnished by the
Company in connection with the consummation of the issuance and
delivery of the Notes or furnished by the Company pursuant hereto, is
untrue in any material respect as of the date of the issuance or
making thereof; or
(h) Final judgment or judgments for the payment of money
aggregating in excess of $10,000,000 (net of insurance proceeds to the
extent the insurer has acknowledged liability) is or are outstanding
against the Company or any Material Restricted Subsidiary or against
any property or assets of either and any one of such judgments has
remained unpaid, unvacated, unbonded or unstayed by appeal or
otherwise for a period of 60 days from the date of its entry; or
(i) A custodian, liquidator, trustee or receiver is appointed for
the Company or any Material Restricted Subsidiary or for the major
part of the property of either and is not discharged within 60 days
after such appointment; or
(j) The Company or any Material Restricted Subsidiary becomes
insolvent or bankrupt, is generally not paying its debts as they
become due or makes an assignment for the benefit of creditors, or the
Company or any Material Restricted Subsidiary applies for or consents
to the appointment of a custodian, liquidator, trustee or receiver for
the Company or such Material Restricted Subsidiary or for the major
part of the property of either; or
(k) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Company or any Material Restricted Subsidiary and, if
instituted against the Company or any Material Restricted Subsidiary,
are consented to or are not dismissed within 60 days after such
institution.
Section 6.2. Notice to Holders. When any Event of Default described in
the foregoing Section 6.1 has occurred, or if the holder of any Note or of
any other evidence of Indebtedness for borrowed money of the Company gives
any notice or takes any other action with respect to a claimed default, the
Company agrees to give notice promptly and
21
in any event within five Business Days after a Responsible Officer of the
Company first obtains knowledge of such event to all holders of the Notes
then outstanding.
Section 6.3. Acceleration of Maturities. When any Event of Default
described in paragraph (a) or (b) of Section 6.1 has happened and is
continuing, any holder of any Note may, by notice in writing sent to the
Company in the manner provided in Section 9.6, declare the entire principal
and all interest accrued on such Note to be, and such Note shall thereupon
become due and payable as hereinafter provided, without any presentment,
demand, protest or other notice of any kind, all of which are hereby
expressly waived. When any Event of Default described in paragraphs (a)
through (h), inclusive, of said Section 6.1 has happened and is continuing,
the holder or holders of 66-2/3% or more of the principal amount of the
Notes at the time outstanding may, by notice in writing to the Company in
the manner provided in Section 9.6, declare the entire principal and all
interest accrued on all Notes to be, and all Notes shall thereupon become
due and payable as hereinafter provided, without any presentment, demand,
protest or other notice of any kind, all of which are hereby expressly
waived. The Notes declared due and payable pursuant to foregoing sentences
of this Section 6.3 shall be and become due and payable five Business Days
following notice in writing sent to the Company in the manner provided in
Section 9.6 as provided in foregoing sentences of this Section 6.3 (the
"Acceleration Date"). When any Event of Default described in paragraph (i),
(j) or (k) of Section 6.1 has occurred, then all outstanding Notes shall
immediately become due and payable without presentment, demand or notice of
any kind. Upon the Notes becoming due and payable as a result of any Event
of Default as aforesaid, the Company will forthwith pay to the holders of
the Notes the entire principal and interest accrued on the Notes and, to
the extent not prohibited by applicable law, an amount as liquidated
damages for the loss of the bargain evidenced hereby (and not as a penalty)
equal to the Make-Whole Amount, determined as of the date on which the
Notes shall so become due and payable; provided, however, that if prior to
the Acceleration Date in respect of the occurrence of any Event of Default
described in paragraphs (a) through (h) of Section 6.1, the provisions of
Section 6.4(a), (b) and (c) shall have been satisfied but the declaration
of acceleration of any Notes shall not have been rescinded and annulled
pursuant to the provisions of Section 6.4, then and in such event the
Company shall on the Acceleration Date pay to the holders of the Notes
which have not rescinded such declaration of acceleration the entire
principal and interest accrued on such Notes, without payment of any Make-
Whole Amount. No course of dealing on the part of the holder or holders of
any Notes nor any delay or failure on the part of any holder of Notes to
exercise any right shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers and remedies. The Company further
agrees, to the extent permitted by law, to pay to the holder or holders of
the Notes all costs and expenses incurred by them in the collection of any
Notes upon any default hereunder or thereon, including reasonable
compensation to such holder's or holders' attorneys for all services
rendered in connection therewith.
22
Section 6.4. Rescission of Acceleration. The provisions of Section 6.3
are subject to the condition that if the principal of and accrued interest
on (1) any outstanding Note has been declared due and payable by reason of
the occurrence of any Event of Default described in paragraph (a) or (b) of
Section 6.1, the holder of such Note may, by written instrument filed with
the Company, rescind and annul such declaration and the consequences
thereof, and (2) all of the outstanding Notes have been declared
immediately due and payable by reason of the occurrence of any Event of
Default described in paragraphs (c) through (h), inclusive, of Section 6.1,
the holders of 66-2/3% in aggregate principal amount of the Notes then
outstanding may, by written instrument filed with the Company, rescind and
annul such declaration and the consequences thereof, provided in each case
that at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any
principal, interest or premium on the Notes which has become due and
payable solely by reason of such declaration under Section 6.3) shall
have been duly paid; and
(c) each and every other Default and Event of Default shall have
been made good, cured or waived pursuant to Section 7.1;
and provided further, that no such rescission and annulment shall extend to
or affect any subsequent Default or Event of Default or impair any right
consequent thereto.
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.
Section 7.1. Consent Required. Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Company, be
amended or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), if the
Company shall have obtained the consent in writing of the holders of at
least 66-2/3% in aggregate principal amount of outstanding Notes; provided
that without the written consent of the holders of all of the Notes then
outstanding, no such amendment or waiver shall be effective (a) which will
change the time of payment of the principal of or the interest on any Note
or change the principal amount thereof or reduce the rate of interest
thereon, or (b) which will change any of the provisions with respect to
optional prepayments, or (c) which will change the percentage of holders of
the Notes required to consent to any such amendment or waiver of any of the
provisions of this Section 7 or Section 6.
23
Section 7.2. Solicitation of Holders. So long as there are any Notes
outstanding, the Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of
this Agreement or the Notes unless each holder of Notes (irrespective of
the amount of Notes then owned by it) shall be informed thereof by the
Company within 5 Business Days following the initial inquiry with respect
thereto by the Company to any holder of the Notes and shall be afforded the
opportunity of considering the same and shall be supplied by the Company
with sufficient information to enable it to make an informed decision with
respect thereto. The Company will not, directly or indirectly, pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any holder of Notes as consideration for or
as an inducement to entering into by any holder of Notes of any waiver or
amendment of any of the terms and provisions of this Agreement or the Notes
unless such remuneration is concurrently offered, on the same terms,
ratably to the holders of all Notes then outstanding. Promptly and in any
event within 30 days of the date of execution and delivery of any such
waiver or amendment, the Company shall provide a true, correct and complete
copy thereof to each of the holders of the Notes.
Section 7.3. Effect of Amendment or Waiver. Any such amendment or
waiver shall apply equally to all of the holders of the Notes and shall be
binding upon them, upon each future holder of any Note and upon the
Company, whether or not such Note shall have been marked to indicate such
amendment or waiver. No such amendment or waiver shall extend to or affect
any obligation not expressly amended or waived or impair any right
consequent thereon.
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS
Section 8.1. Definitions. Unless the context otherwise requires, the
terms hereinafter set forth when used herein shall have the following
meanings and the following definitions shall be equally applicable to both
the singular and plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (other than a Restricted Subsidiary)
(a) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the
Company, (b) which beneficially owns or holds 10% or more of any class of
the Voting Stock of the Company or (c) 10% or more of the Voting Stock (or
in the case of a Person which is not a corporation, 10% or more of the
equity interest) of which is beneficially owned or held by the Company or a
Subsidiary. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of Voting Stock, by
contract or otherwise.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks in Portland, Oregon or New York, New York are
required by law to close or are customarily closed.
24
"Capitalized Lease" shall mean any lease the obligation for Rentals
with respect to which is required to be capitalized on a consolidated
balance sheet of the lessee and its subsidiaries in accordance with GAAP.
"Capitalized Rentals" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations from time to time promulgated thereunder.
"Company" shall mean Fred Meyer, Inc., a Delaware corporation, and any
Person who succeeds to all, or substantially all, of the assets and
business of Fred Meyer, Inc.
"Consolidated Adjusted Net Worth" shall mean as of the date of any
determination thereof the arithmetic sum of:
(a) the amount of the capital stock accounts (net of treasury
stock, at cost, but including preferred stock), plus (or minus in the
case of a deficit) the surplus and retained earnings of the Company
and its Restricted Subsidiaries as set forth in the consolidated
financial statements of the Company as at the end of the fiscal
quarter immediately preceding the date of such determination,
MINUS
(b) the net book value, after deducting any reserves applicable
thereto, of all items of the following character which are included in
the assets of the Company and its Restricted Subsidiaries, to wit:
(1) the incremental increase in an asset resulting from any
reappraisal, revaluation or write-up of assets, other than an increase
to the extent permitted by GAAP, in any such case in connection with
the acquisition of an asset or business by the Company or any of its
Restricted Subsidiaries; and
(2) (i) unamortized debt discount and expense and (ii) goodwill,
patents, patent applications, permits, trademarks, trade names,
copyrights, licenses, franchises, experimental expense, organizational
expense, research and development expense and such other assets as are
properly classified as "intangible assets" the fair market value of
which is in excess of $5,000,000 acquired by the Company or any of its
Restricted Subsidiaries after the Closing Date; provided, however,
that notwithstanding the foregoing, the Company may include in any
determination of "Consolidated Adjusted Net Worth" the aggregate net
value of capitalized software, prepaid royalties, patents, patent
applications, trademarks,
25
trade names, and copyrights and other intellectual property the fair
market value of which is $5,000,000 or less acquired after the Closing
Date;
all determined in accordance with GAAP.
"Consolidated Funded Debt" shall mean, as of the date of any
determination thereof, all Funded Debt of the Company and its Restricted
Subsidiaries, determined on a consolidated basis eliminating intercompany
items.
"Consolidated Total Assets" shall mean, as of the date of any
determination thereof, total assets of the Company and its Restricted
Subsidiaries determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Capitalization" shall mean, as of the date of any
determination thereof, the sum of (a) Consolidated Funded Debt plus (b)
Consolidated Adjusted Net Worth.
"Default" shall mean any event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute
an Event of Default.
"Environmental Law" shall mean any international, federal, state or
local statute, law, regulation, order, consent decree, judgment, permit,
license, code, covenant, deed restriction, common law, treaty, convention,
ordinance or other requirement relating to public health, safety or the
environment, including, without limitation, those relating to releases,
discharges or emissions to air, water, land or groundwater, to the
withdrawal or use of groundwater, to the use and handling of
polychlorinated biphenyls or asbestos, to the disposal, treatment, storage
or management of hazardous or solid waste, or Hazardous Substances or crude
oil, or any fraction thereof, or to exposure to toxic or hazardous
materials, to the handling, transportation, discharge or release of gaseous
or liquid Hazardous Substances and any regulation, order, notice or demand
issued pursuant to such law, statute or ordinance, in each case applicable
to the property of the Company and its Subsidiaries or the operation,
construction or modification of any thereof, including without limitation,
the following: the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, the Solid Waste Disposal Act, as amended by
the Resource Conservation and Recovery Act of 1976 and the Hazardous and
Solid Waste Amendments of 1984, the Hazardous Materials Transportation Act,
as amended, the Federal Water Pollution Control Act, as amended by the
Clean Water Act of 1976, the Safe Drinking Water Control Act, the Clean Air
Act of 1966, as amended, the Toxic Substances Control Act of 1976, the
Occupational Safety and Health Act of 1977, as amended, the Emergency
Planning and Community Right-to-Know Act of 1986, the National
Environmental Policy Act of 1975, the Oil Pollution Act of 1990 and any
similar or implementing state law, and any state statute and any further
amendments to these laws providing for financial responsibility for cleanup
or other actions with respect
26
to the release or threatened release of Hazardous Substances or crude oil,
or any fraction thereof, and all rules, regulations, guidance documents and
publications promulgated thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to
time. References to sections of ERISA shall be construed to also refer to
any successor sections.
"ERISA Affiliate" shall mean any corporation, trade or business that
is, along with the Company, a member of a controlled group of corporations
or a controlled group of trades or businesses, as described in section
414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA.
"Event of Default" shall have the meaning set forth in Section 6.1.
"Funded Debt" of any Person shall mean (a) all Indebtedness of such
Person for borrowed money or which has been incurred in connection with the
acquisition of assets in each case having a final maturity of more than one
year from the date of origin thereof (or which is renewable or extendible
at the option of the obligor for a period or periods more than one year
from the date of origin), including all payments in respect thereof that
are required to be made within one year from the date of any determination
of Funded Debt, whether or not the obligation to make such payments shall
constitute a current liability of the obligor under GAAP, (b) all
Capitalized Rentals of such Person, and (c) all Guaranties by such Person
of Funded Debt of others.
"GAAP" shall mean generally accepted accounting principles at the
time.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments
for deposit or collection) of such Person guaranteeing, or in effect
guaranteeing, any Indebtedness, dividend or other obligation of any other
Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred through
an agreement, contingent or otherwise, by such Person: (a) to purchase such
Indebtedness or obligation or any property or assets constituting security
therefor, (b) to advance or supply funds (1) for the purchase or payment of
such Indebtedness or obligation, or (2) to maintain working capital or any
balance sheet or income statement condition or otherwise to advance or make
available funds for the purchase or payment of such Indebtedness or
obligation, (c) to lease property or to purchase Securities or other
property or services primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the ability of the primary obligor to
make payment of the Indebtedness or obligation, or (d) otherwise to assure
the owner of the Indebtedness or obligation of the primary obligor against
loss in respect thereof; provided that (i) letters of credit issued for the
benefit of the Company or a Restricted Subsidiary and used to finance the
purchase of inventory or
27
the construction of improvements otherwise subject to a construction
contract and (ii) notes, bills and checks presented by the Company or a
Restricted Subsidiary to banks for collection or deposit in the ordinary
course of business upon customary credit terms may be excluded from any
determination of "Guaranties". For the purposes of all computations made
under this Agreement, a Guaranty in respect of any Indebtedness for
borrowed money shall be deemed to be Indebtedness equal to the principal
amount of such Indebtedness for borrowed money which has been guaranteed,
and a Guaranty in respect of any other obligation or liability or any
dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such obligation, liability or dividend.
"Hazardous Substance" shall mean any hazardous or toxic material,
substance or waste, pollutant or contaminant which is regulated under any
statute, law, ordinance, rule or regulation of any local, state, regional
or federal authority having jurisdiction over the property of the Company
and its Subsidiaries or its use, including but not limited to any material,
substance or waste which is: (a) defined as a hazardous substance under
Section 311 of the Federal Water Pollution Control Act (33 U.S.C. Section
1317), as amended; (b) regulated as a hazardous waste under Section 1004 or
Section 3001 of the Federal Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), as
amended; (c) defined as a hazardous substance under Section 101 of the
Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 et seq.), as amended; or (d) defined or regulated as a
hazardous substance or hazardous waste under any rules or regulations
promulgated under any of the foregoing statutes.
"Indebtedness" of any Person shall mean and include all (a)
obligations of such Person for borrowed money or which have been incurred
in connection with the acquisition of property or assets, (b) obligations
secured by any Lien upon property or assets owned by such Person, even
though such Person has not assumed or become liable for the payment of such
obligations, provided that if such Person has not, directly or indirectly,
assumed or otherwise become liable for the payment of such obligations, the
amount of Indebtedness included in any calculation shall not exceed the net
book value of the property or assets encumbered by the related Lien, (c)
obligations created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person,
notwithstanding the fact that the rights and remedies of the seller, lender
or lessor under such agreement in the event of default are limited to
repossession or sale of property, (d) Capitalized Rentals and (e)
Guaranties of obligations of others of the character referred to in this
definition; provided that in no event shall:
(1) trade payables incurred in the ordinary course of business by
the Company or a Restricted Subsidiary upon customary credit terms;
and
28
(2) lease obligations of the Company or any Restricted Subsidiary
which do not constitute Capitalized Rentals in accordance with GAAP be
included in any determination of "Indebtedness."
"Institutional Holder" shall mean any of the following Persons: (a)
any bank, savings and loan association, savings institution, trust company
or national banking association, acting for its own account or in a
fiduciary capacity, (b) any charitable foundation, (c) any insurance
company, (d) any fraternal benefit society, (e) any pension, retirement or
profit-sharing trust or fund within the meaning of Title I of ERISA or for
which any bank, trust company, national banking association or investment
adviser registered under the Investment Advisers Act of 1940, as amended,
is acting as trustee or agent, (f) any investment company or business
development company, as defined in the Investment Company Act of 1940, as
amended, (g) any small business investment company licensed under the Small
Business Investment Act of 1958, as amended, (h) any broker or dealer
registered under the Securities Exchange Act of 1934, as amended, or any
investment adviser registered under the Investment Adviser Act of 1940, as
amended, (i) any government, any public employees' pension or retirement
system, or any other government agency supervising the investment of public
funds, (j) any other entity all of the equity owners of which are
Institutional Holders or (k) any other Person which may be within the
definition of "qualified institutional buyer" as such term is used in Rule
144A, as from time to time in effect, promulgated under the Securities Act
of 1933, as amended.
"Lien" shall mean any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether
such interest is based on the common law, statute or contract, and
including but not limited to the security interest lien arising from a
mortgage, encumbrance, pledge, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes. The term "Lien" shall
include reservations, exceptions, encroachments, easements, rights-of- way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting real property. The term "Lien" shall also include,
with respect to stock, stockholder agreements, voting trust agreements,
buy-back agreements and all similar arrangements. For the purposes of this
Agreement, the Company or a Restricted Subsidiary shall be deemed to be the
owner of any property which it has acquired or holds subject to a
conditional sale agreement, Capitalized Lease or other arrangement pursuant
to which title to the property has been retained by or vested in some other
Person for security purposes and such retention or vesting shall constitute
a Lien.
"Make-Whole Amount" shall mean in connection with any Note the excess,
if any, of (a) the aggregate present value as of the date of such
prepayment or payment of each dollar of principal of the Notes being
prepaid or paid and the amount of interest (exclusive of interest accrued
to the date of prepayment or payment) that would have been payable in
respect of such dollar if such prepayment or payment had not been made,
determined by discounting such amounts at the Reinvestment Rate (applied on
a
29
semiannual basis) from the respective dates on which they would have been
payable, over (b) 100% of the principal amount of the outstanding Notes
being prepaid or paid. If the Reinvestment Rate is equal to or higher than
7.77%, then the Make-Whole Amount with respect to the Notes shall be zero.
For purposes of any determination of the Make-Whole Amount:
"Reinvestment Rate" shall mean (1) the yield reported on page
"USD" of the Bloomberg Financial Markets Services Screen (or, if not
available, any other nationally recognized trading screen reporting
on-line intraday trading in United States government Securities) at
11:00 a.m. (New York City, New York time) for the United States
government Securities having a maturity (rounded to the nearest month)
corresponding with the maturity date of the principal of the Notes
being prepaid or paid or (2) in the event no nationally recognized
trading screen reporting on-line intraday trading in the United States
government Securities is available, Reinvestment Rate shall mean the
arithmetic mean of the yields for the two columns under the heading
"Week Ending" published in the Statistical Release under the caption
"Treasury Constant Maturities" for the maturity (rounded to the
nearest month) corresponding to the maturity date of the principal of
the Notes being prepaid or paid. If no published maturity exactly
corresponds to the maturity date of the principal of the Notes being
prepaid or paid, yields for the two published maturities most closely
corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be
interpolated or extrapolated from such yields on a straight-line
basis, rounding in each of such relevant periods to the nearest month.
For the purposes of calculating the "Reinvestment Rate", the most
recent Statistical Release published prior to the date of
determination of the Make-Whole Amount shall be used.
"Statistical Release" shall mean the then most recently published
statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve System
and which establishes yields on actively traded U.S. Government
Securities adjusted to constant maturities or, if such statistical
release is not published at the time of any determination hereunder,
then such other reasonably comparable index which shall be designated
by the holders of 66-2/3% in aggregate principal amount of the
outstanding Notes.
"Material Restricted Subsidiary" shall mean any Restricted Subsidiary
the net worth (computed in accordance with the definition of "Consolidated
Adjusted Net Worth") of which constitutes at least 2.5% of Consolidated
Adjusted Net Worth.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Overdue Rate" shall mean 8.77%.
30
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political
subdivision thereof.
"Plan" shall mean a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to
which the Company or any ERISA Affiliate contributed or is a member or
otherwise may have any liability.
"Predominantly-owned" when used in connection with any Subsidiary
shall mean a Subsidiary of which at least 80% of the issued and outstanding
shares of stock (except shares required as directors' qualifying shares)
shall be owned by the Company and/or one or more of its Predominantly-owned
Subsidiaries.
"Purchasers" shall have the meaning set forth in Section 1.1.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee
is obligated to make to the lessor on termination of the lease or surrender
of the property) payable by the Company or a Restricted Subsidiary, as
lessee or sublessee under a lease of real or personal property, but shall
be exclusive of any amounts required to be paid by the Company or a
Restricted Subsidiary (whether or not designated as rents or additional
rents) on account of maintenance, repairs, insurance, taxes and similar
charges. Fixed rents under any so-called "percentage leases" shall be
computed solely on the basis of the minimum rents, if any, required to be
paid by the lessee regardless of sales volume or gross revenues.
"Reportable Event" shall have the same meaning as in ERISA.
"Responsible Officer" shall mean the President, Chief Financial
Officer, Treasurer or Chief Accounting Officer of the Company.
"Restricted Subsidiary" shall mean any Subsidiary (a) which is
organized under the laws of the United States or any State thereof; (b)
which conducts substantially all of its business and has substantially all
of its assets within the United States; and (c) which is not designated as
an Unrestricted Subsidiary on Schedule II to this Agreement or in
accordance with Section 5.15.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Subordinated Funded Debt" shall mean all Funded Debt of the Company
which is at all times evidenced by a written instrument or instruments
containing subordination
31
provisions substantially in the form set forth in Exhibit D attached
hereto, providing for the subordination thereof to other Indebtedness of
the Company, including, without limitation, the Notes, or such other
provisions as may be approved in writing by the holders of not less than
66-2/3% in aggregate principal amount of the outstanding Notes.
The term "subsidiary" shall mean as to any particular parent
corporation any corporation of which more than 50% (by number of votes) of
the Voting Stock shall be beneficially owned, directly or indirectly, by
such parent corporation. The term "Subsidiary" shall mean a subsidiary of
the Company.
"Transfer" shall have the meaning assigned thereto in Section 5.9(b).
"Unrestricted Subsidiary" shall mean any Subsidiary which is
designated as an Unrestricted Subsidiary in Schedule II to this Agreement
or in accordance with Section 5.15.
"Voting Stock" shall mean Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors (or Persons performing
similar functions).
Section 8.2. Accounting Principles. Where the character or amount of
any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required
to be made for the purposes of this Agreement, the same shall be done in
accordance with GAAP, to the extent applicable, except where such
principles are inconsistent with the requirements of this Agreement.
Section 8.3. Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person
is prohibited from taking, such provision shall be applicable whether the
action in question is taken directly or indirectly by such Person.
SECTION 9. MISCELLANEOUS.
Section 9.1. Registered Notes. The Company shall cause to be kept at
its principal office a register for the registration and transfer of the
Notes, and the Company will register or transfer or cause to be registered
or transferred, as hereinafter provided, any Note issued pursuant to this
Agreement.
At any time and from time to time the holder of any Note which has
been duly registered as hereinabove provided may transfer such Note upon
surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of transfer duly executed by the holder
of such Note or its attorney duly authorized in writing.
32
Prior to the presentation to the Company of a duly executed instrument
of transfer and the Note (or, in the event of loss, theft, mutilation or
destruction of the Note, presentation of a duly executed instrument of
transfer in compliance with Section 9.3 hereof), the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and
holder thereof for all purposes of this Agreement, notwithstanding any
notice to the contrary. Payment of or on account of the principal, premium,
if any, and interest on any Note shall be made to or upon the written order
of such holder.
Section 9.2. Exchange of Notes. At any time and from time to time,
upon not less than ten days' notice to that effect given by the holder of
any Note initially delivered or of any Note substituted therefor pursuant
to Section 9.1, this Section 9.2 or Section 9.3, and, upon surrender of
such Note at its office, the Company will deliver in exchange therefor,
without expense to such holder, except as set forth below, a Note for the
same aggregate principal amount as the then unpaid principal amount of the
Note so surrendered, or Notes in the denomination of $100,000 (or such
lesser amount as shall constitute 100% of the Notes of such holder) or any
amount in excess thereof as such holder shall specify, dated as of the date
to which interest has been paid on the Note so surrendered or, if such
surrender is prior to the payment of any interest thereon, then dated as of
the date of issue, registered in the name of such Person or Persons as may
be designated by such holder, and otherwise of the same form and tenor as
the Notes so surrendered for exchange. The Company may require the payment
of a sum sufficient to cover any stamp tax or governmental charge imposed
upon such exchange or transfer.
Section 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction
of any Note, and in the case of any such loss, theft or destruction upon
delivery of a bond of indemnity in such form and amount as shall be
reasonably satisfactory to the Company, or in the event of such mutilation
upon surrender and cancellation of the Note, the Company will make and
deliver without expense to the holder thereof, a new Note, of like tenor,
in lieu of such lost, stolen, destroyed or mutilated Note. If the Purchaser
or any subsequent Institutional Holder is the owner of any such lost,
stolen or destroyed Note, then the affidavit of an authorized officer of
such owner, setting forth the fact of loss, theft or destruction and of its
ownership of such Note at the time of such loss, theft or destruction shall
be accepted as satisfactory evidence thereof and no further indemnity shall
be required as a condition to the execution and delivery of a new Note
other than the written agreement of such owner to indemnify the Company.
Section 9.4. Expenses, Stamp Tax Indemnity. Unless the parties agree
otherwise, the Company agrees to pay directly all of your out-of-pocket
expenses in connection with (i) any amendments, waivers or consents
initiated at the request of the Company at any time or by action of the
holders of the Notes during the continuance of a Default or Event of
Default (whether or not the same are actually executed and delivered),
including, without limitation, any amendments, waivers, or consents
resulting from any
33
work-out, renegotiation or restructuring relating to the performance by the
Company of its obligations under this Agreement and the Notes; and (ii)
responding to any third party subpoena or other third party legal process
or informal investigative demand issued in connection with the Notes, this
Agreement or the transactions contemplated hereby or by reason of any
holder's acquisition or ownership of any Note.
The Company further agrees that it will pay and save you harmless
against any and all liability with respect to stamp and other taxes, if
any, which may be payable or which may be determined to be payable in
connection with the execution and delivery of this Agreement or the Notes,
whether or not any Notes are then outstanding. The Company agrees to
protect and indemnify you against any liability for any and all brokerage
fees and commissions payable or claimed to be payable to any Person in
connection with the transactions contemplated by this Agreement. You
represent that you have not retained any broker or finder to arrange for
the offer, sale or delivery of the Notes.
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative. No
delay or failure on the part of the holder of any Note in the exercise of
any power or right shall operate as a waiver thereof; nor shall any single
or partial exercise of the same preclude any other or further exercise
thereof, or the exercise of any other power or right, and the rights and
remedies of the holder of any Note are cumulative to, and are not exclusive
of, any rights or remedies any such holder would otherwise have.
Section 9.6. Notices. All communications provided for hereunder shall
be in writing and, if to you, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication, in
each case addressed to you at your address appearing on Schedule I to this
Agreement or such other address as you or the subsequent holder of any Note
initially issued to you may designate to the Company in writing, and if to
the Company, delivered or mailed by registered or certified mail or
overnight air courier, or by facsimile communication confirmed by
registered or certified mail or overnight air courier, to the Company at
3800 S.E. 22nd Avenue, Portland, Oregon 97242, Attention: Vice President,
Corporate Treasurer, or to such other address as the Company may in writing
designate to you or to a subsequent holder of the Note initially issued to
you; provided, however, that a notice to you by overnight air courier shall
only be effective if delivered to you at a street address designated for
such purpose in Schedule I, and a notice to you by facsimile communication
shall only be effective if made by confirmed transmission to you at a
telephone number designated for such purpose in Schedule I, or, in either
case, as you or a subsequent holder of any Note initially issued to you may
designate to the Company in writing.
Section 9.7. Successors and Assigns. This Agreement shall be binding
upon the Company and its successors and assigns and shall inure to your
benefit and to the benefit of your successors and assigns, including each
successive holder or holders of any Notes.
34
Section 9.8. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with
the Closing Date, shall survive the closing and the delivery of this
Agreement and the Notes.
Section 9.9. Severability. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect
the validity or enforceability of any remaining portion, which remaining
portion shall remain in force and effect as if this Agreement had been
executed with the invalid or unenforceable portion thereof eliminated and
it is hereby declared the intention of the parties hereto that they would
have executed the remaining portion of this Agreement without including
therein any such part, parts or portion which may, for any reason, be
hereafter declared invalid or unenforceable.
Section 9.10. Changes in GAAP. Each of the Purchasers and each other
holder of the Notes by its acceptance thereof understands and agrees with
the Company that in the event that a change in GAAP occurs which is the
sole cause of a change in any of the calculations contemplated by this
Agreement, including without limitation, calculations with regard to the
covenants contained in Sections 5.6 through 5.9, then in such event the
Purchasers and/or such holders, as the case may be, and the Company shall
undertake to amend any affected provisions of this Agreement so as to
preserve the intent and purpose thereof and to accommodate such change in
GAAP and to enter into an amendment hereof to reflect the same.
Section 9.11. Governing Law. This Agreement and the Notes issued and
sold hereunder shall be governed by and construed in accordance with New
York law, including all matters of construction, validity and performance.
Section 9.12. Submission to Jurisdiction. Any legal action or
proceeding with respect to this Agreement or the Notes or any document
related thereto may be brought in the courts of the State of New York or of
the United States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, the Company hereby accepts for
itself and in respect of its property generally and unconditionally, the
non- exclusive jurisdiction of the aforesaid courts. The Company hereby
irrevocably and unconditionally waives any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens which it may now or hereafter have to the bringing of
any action or proceeding in such respective jurisdiction. The Company
agrees and irrevocably consents to substituted service of process in any
such action or proceeding by the mailing, by registered or certified U.S.
mail, or by any other means or mail that requires a signed receipt, of
copies of such process to the Company at its offices specified in Section
9.6. The Company agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law. To the
extent that the Company has or hereafter may
35
acquire immunity from any such jurisdiction of any court or from any legal
process (whether through service of notice, attachment prior to judgement,
attachment in aid of execution, execution or otherwise) with respect to
itself or its property, the Company hereby irrevocably waives such immunity
in respect of its obligations under this Agreement or the Notes.
Section 9.13. Captions. The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth, and this Agreement may be
executed in any number of counterparts, each executed counterpart
constituting an original but all together only one agreement.
FRED MEYER, INC.
By MICHAEL DON
------------------------------------
Its Vice President and
Corporate Treasurer
Accepted as of April 25, 1995
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By /s/
------------------------------------
Its Second Vice President
PRUCO LIFE INSURANCE COMPANY
By /s/
------------------------------------
Its Assistant Vice President
I-1
SCHEDULE I
PURCHASER SCHEDULE
Aggregate Note Denomi-
Principal nations
Amount of ------------
Notes to be
Purchased
-----------
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
$50,000,000 $48,825,000
(1) All payments on account of Notes held by such purchaser shall be
made by wire transfer of immediately available funds for credit to:
Account No. 050-54-526 (in the case of payments
on account of the Note originally issued
in the principal amount of $48,825,000)
Morgan Guaranty Trust Company of New York
23 Wall Street
New York, New York 10015
(ABA No.: 021-000-238)
Each such wire transfer shall set forth the name of the Company, a
reference to "Fred Meyer 7.77% Senior Notes due April 25, 2002,
Security No. !INV5078!, and the due date and application (as among
principal, interest and Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to payments:
The Prudential Insurance Company of America
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4069
I-2
Attention: Manager, Investment Structure and Pricing
Telephone: (201) 802-6660
Fax: (201) 624-6432
(3) Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
777 South Figueroa Street, Suite 2950
Los Angeles, California 90017
Attention: Managing Director
Telephone: (213) 486-5350
Fax: (213) 623-9764
(4) Recipient of telephonic prepayment notices:
Manager, Investment Structure and Pricing
Telephone: (201) 802-6660
Fax: (201) 624-6432
(5) Tax Identification No.: 22-1211670
I-3
Aggregate Note Denomi-
Principal nations
Amount of ------------
Notes to be
Purchased
-----------
PRUCO LIFE INSURANCE COMPANY
$ 1,175,000 $ 1,175,000
(1) All payments on account of Notes held by such purchaser shall be
made by wire transfer of immediately available funds for credit to:
Account No. 000-55-455
Morgan Guaranty Trust Company of New York
23 Wall Street
New York, New York 10015
(ABA No.: 021-000-238)
Each such wire transfer shall set forth the name of the Company, a
reference to "Fred Meyer 7.77 % Senior Notes due April 25, 2002,
Security No. "!INV5079!," and the due date and application (as
among principal, interest and Make-Whole Amount) of the payment
being made.
(2) Address for all notices relating to payments:
Pruco Life Insurance Company
c/o The Prudential Insurance Company of America
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4069
Attention: Manager, Investment Structure and Pricing
Telephone: (201) 802-6660
Fax: (201) 624-6432
I-4
(3) Address for all other communications and notices:
Pruco Life Insurance Company
c/o Prudential Capital Group
777 South Figueroa Street, Suite 2950
Los Angeles, California 90017
Attention: Managing Director
Telephone: (213) 486-5350
Fax: (213) 623-9764
(4) Recipient of telephonic prepayment notices:
Manager, Investment Structure and Pricing
Telephone: (201) 802-6660
Fax: (201) 624-6432
(5) Tax Identification No.: 22-1944557
II-1
SCHEDULE II
SUBSIDIARIES OF THE COMPANY
1. RESTRICTED SUBSIDIARIES:
PERCENTAGE
OF VOTING
JURISDICTION STOCK OWNED BY
NAME OF OF COMPANY AND EACH
SUBSIDIARY INCORPORATION OTHER SUBSIDIARY
B&B Stores, Inc. Montana 100%
B&B Pharmacy, Inc. Montana 100%
CB&S Advertising Agency, Inc. Oregon 100%
Distribution Trucking Company Oregon 100%
FM Holding Corporation Delaware 100%
Grand Central, Inc. Utah 100%
FM Retail Services, Inc. Washington 100%
Fred Meyer, Inc.
(a Washington Corporation) Washington 100%
Fred Meyer of Alaska, Inc. Alaska 100%
Fred Meyer of California, Inc. California 100%
Natur Glo, Inc. Oregon 100%
Roundup Co. Washington 100%
2. SUBSIDIARIES (OTHER THAN RESTRICTED SUBSIDIARIES):
PERCENTAGE
OF VOTING
JURISDICTION STOCK OWNED BY
NAME OF OF COMPANY AND EACH
SUBSIDIARY INCORPORATION OTHER SUBSIDIARY
Fred Meyer (UK) Limited Hong Kong 100%
(inactive)
II-2
DESCRIPTION OF DEBT AND CAPITALIZED LEASES
1. Indebtedness of Restricted Subsidiaries outstanding on the Closing
Date and Liens (if any) securing any such Indebtedness are as
follows:
Roundup Co. Note and Trust Deed to $ 13,049,299
Nationwide Life
Fred Meyer of Alaska, Note and Trust Deed to $ 16,802,352
Inc. Nationwide Life
2. Funded Debt (other than Capitalized Rentals) of the Company
outstanding on the Closing Date and Liens (if any) securing any such
Funded Debt are as follows:
Unsecured Floating Rate Notes to Five Banks $ 70,000,000
Note and Trust Deed to Employers' Life $ 2,655,222
Note and Trust Deed to Nationwide Life $ 10,620,887
Unsecured Note to Rabobank $ 10,000,000
Unsecured Commercial Paper (as of April 25, 1995) $405,000,000
Senior Notes to various Life Insurance Companies $ 57,500,000
3. Capitalized Lease Obligations of the Company and its Restricted
Subsidiaries outstanding on the Closing Date and Liens (if any)
securing any such Capitalized Leases are as follows:
Fred Meyer, Inc. to Duane Co. $ 6,938,000
Grand Central, Inc. to various investors $ 6,967,000
II-3
DESCRIPTION OF INSURANCE
A. Liability Insurance: Subject to $2,000,000 self-insurance
retention; $50,000,000 limit
B. Workers Compensation Insurance: Self-insured in major
states (Oregon and Washington); insurance carried for
losses in excess of $350,000 per incident.
C. Property Insurance: Values insured to replacement cost
including business interruption. Deductibles per incident
range up to $1,000,000 with a variety of sub-limits.
Earthquake coverage subject to a deductible of 5% of values.
II-4
EXHIBIT A-1
FRED MEYER, INC.
7.77% Senior Note
Due April 25, 2002
No. RA-____ April 25, 1995
$
Fred Meyer, Inc., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to
or registered assigns
on the 25th day of April 2002
the principal amount of
Dollars ($_________________)
and to pay interest (computed on the basis of a 360-day year of twelve
30-day months) on the principal amount from time to time remaining unpaid
hereon at the rate of 7.77% per annum from the date hereof until maturity,
payable semiannually on the 25th day of April and October in each year
(commencing on October 25, 1995) and at maturity. The Company agrees to pay
interest on overdue principal (including any overdue required or optional
prepayment of principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest, at the rate of 8.77%
per annum after the due date, whether by acceleration or otherwise, until
paid.
All of the principal hereof and premium, if any, interest hereon are
payable at the main office of Morgan Guaranty Trust Company of New York in
New York City or at such other place as the holder hereof shall designate
in writing to the Company, in coin or currency of the United States of
America which at the time of payment shall be legal tender for the payment
of public and private debts. If any amount of principal, premium, if any,
or interest on or in respect of this Note becomes due and payable on any
date which is not a Business Day, such amount shall be payable on the
immediately preceding Business Day. "Business Day" means any day other than
a Saturday, Sunday or other day on which banks in Portland, Oregon or New
York, New York are required by law to close or are customarily closed.
II-5
This Note is one of the 7.77% Senior Notes, due April 25, 2002 (the
"Notes") of the Company in the aggregate principal amount of $50,000,000
which are issued or to be issued under and pursuant to the terms and
provisions of the Note Agreement, dated as of April 25, 1995 (the "Note
Agreement"), entered into by the Company with the original Purchasers
therein referred to and this Note and the holder hereof is entitled equally
and ratably with the holders of all other Notes outstanding under the Note
Agreement to all the benefits provided for thereby or referred to therein.
Reference is hereby made to the Note Agreement for a statement of such
rights and benefits.
This Note and the other Notes outstanding under the Note Agreement may
be declared due prior to their expressed maturity dates, in the events, on
the terms and in the manner and amounts as provided in the Note Agreement.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in
the Note Agreement.
This Note is registered on the books of the Company and transferable
only by surrender thereof at the principal office of the Company duly
endorsed or accompanied by a written instrument of transfer duly executed
by the registered holder of Note or its attorney duly authorized in
writing. Payment of or on account of principal, premium, if any, and
interest on Note shall be made only to or upon the order in writing of the
registered holder.
This Note and said Note Agreement are governed by and construed in
accordance with the laws of New York, including all matters of
construction, validity and performance.
FRED MEYER, INC.
By ___________________________
Its Vice President and
Corporate Treasurer
B-1
EXHIBIT B
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to you as follows:
1. Subsidiaries. Schedule II attached to the Agreement states the name
of each of the Company's Subsidiaries, its jurisdiction of incorporation
and the percentage of its Voting Stock owned by the Company and/or its
Subsidiaries. Those Subsidiaries listed in Section 1 of said Schedule II
constitute Restricted Subsidiaries. The Company and each Subsidiary has
good and marketable title to all of the shares it purports to own of the
stock of each Subsidiary, free and clear in each case of any Lien. All such
shares have been duly issued and are fully paid and non-assessable.
2. Corporate Organization and Authority. The Company, and each
Restricted Subsidiary,
(a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry on
its business as now conducted and as presently proposed to be
conducted; and
(c) is duly licensed or qualified and is in good standing as a
foreign corporation in each jurisdiction wherein the nature of the
business transacted by it or the nature of the property owned or
leased by it makes such licensing or qualification necessary.
3. Business and Property. You have heretofore been furnished with the
Company's Annual Report on Form 10-K and related Annual Report to
Shareholders for the fiscal years ended January 29, 1994 and January 28,
1995 and certain information from Board presentation materials, including
cash flow and capital expenditure projections (collectively, the "Company
Information"), all of which generally sets forth the business conducted and
proposed to be conducted by the Company and its Subsidiaries and the
principal properties of the Company and its Subsidiaries.
4. Financial Statements. (a) The consolidated balance sheets of the
Company and its consolidated Subsidiaries as of February 2, 1991, February
1, 1992, January 30, 1993, January 29, 1994 and January 28, 1995, and the
related statements of consolidated operations, changes in consolidated
stockholders' equity and consolidated cash flows for the fiscal years ended
on said dates, each accompanied by a report thereon containing an
B-2
opinion unqualified as to scope limitations imposed by the Company and
otherwise without qualification except as therein noted, by Deloitte &
Touche, have been prepared in accordance with GAAP consistently applied
except as therein noted, are correct and complete and present fairly the
financial position of the Company and its consolidated Subsidiaries as of
such dates and the results of their operations and their cash flows for
such periods.
(b) Since January 28, 1995, there has been no change in the condition,
financial or otherwise, of the Company and its consolidated Subsidiaries as
shown on the consolidated balance sheet as of such date except changes in
the ordinary course of business, none of which individually or in the
aggregate has been materially adverse.
5. Indebtedness. Schedule II attached to the Agreement correctly
describes all Indebtedness of Restricted Subsidiaries and all Funded Debt
and Capitalized Leases of the Company and its Restricted Subsidiaries
outstanding on the Closing Date.
6. Full Disclosure. Neither the financial statements referred to in
paragraph 4 hereof nor the Agreement, the Company Information or any other
written statement furnished by the Company to you in connection with the
negotiation of the Agreement or the negotiation and sale of the Notes
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained therein or herein not
misleading. There is no fact peculiar to the Company or its Subsidiaries
which the Company has not disclosed to you in writing which materially
affects adversely or, so far as the Company can now foresee, will
materially affect adversely the properties, business, prospects, profits or
condition (financial or otherwise) of the Company and its Restricted
Subsidiaries, taken as a whole.
7. Pending Litigation. There are no proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or
any Restricted Subsidiary in any court or before any governmental authority
or arbitration board or tribunal which involve the possibility of
materially and adversely affecting the properties, business, prospects,
profits or condition (financial or otherwise) of the Company and its
Restricted Subsidiaries.
8. Title to Properties. The Company and each Restricted Subsidiary has
good and marketable title in fee simple (or its equivalent under applicable
law) to all material parcels of real property and has good title to all the
other material items of property it purports to own, including that
reflected in the most recent balance sheet referred to in paragraph 4
hereof, except as sold or otherwise disposed of in the ordinary course of
business and except for Liens permitted by the Agreement.
9. Patents and Trademarks. The Company and each Restricted Subsidiary
owns or possesses all the patents, trademarks, trade names, service marks,
copyrights,
B-3
licenses and rights with respect to the foregoing necessary for the present
and planned future conduct of its business, without any known conflict with
the rights of others.
10. Sale is Legal and Authorized. The sale of the Notes and compliance
by the Company with all of the provisions of the Agreement and the Notes--
(a) are within the corporate powers of the Company;
(b) will not violate any provisions of any law or any order of
any court or governmental authority or agency and will not conflict
with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, the Certificate of
Incorporation or By-laws of the Company or any indenture or other
agreement or instrument to which the Company is a party or by which it
may be bound or result in the imposition of any Liens or encumbrances
on any property of the Company; and
(c) have been duly authorized by proper corporate action on the
part of the Company (no action by the stockholders of the Company
being required by law, by the Certificate of Incorporation or By-laws
of the Company or otherwise), executed and delivered by the Company
and the Agreement and the Notes constitute the legal, valid and
binding obligations, contracts and agreements of the Company
enforceable in accordance with their respective terms.
11. No Defaults. No Default or Event of Default has occurred and is
continuing. The Company is not in default in the payment of principal or
interest on any Indebtedness and is not in default under any instrument or
instruments or agreements under and subject to which any Indebtedness has
been issued and no event has occurred and is continuing under the
provisions of any such instrument or agreement which with the lapse of time
or the giving of notice, or both, would constitute an event of default
thereunder.
12. Governmental Consent. No approval, consent or withholding of
objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the execution and delivery by the Company of
the Agreement or the issuance, sale or delivery of the Notes or compliance
by the Company with any of the provisions of the Agreement or the Notes.
13. Taxes. All tax returns required to be filed by the Company or any
Restricted Subsidiary in any jurisdiction have, in fact, been filed, and
all taxes, assessments, fees and other governmental charges upon the
Company or any Restricted Subsidiary or upon any of their respective
properties, income or franchises which are shown to be due and payable in
such returns have been paid. For all taxable years ending on or before
February 1, 1992, the Federal income tax liability of the Company and its
Restricted Subsidiaries has been satisfied and either the period of
limitations on
B-4
assessment of additional Federal income tax has expired or the Company and
its Restricted Subsidiaries have entered into an agreement with the
Internal Revenue Service closing conclusively the total tax liability for
the taxable year. The Company does not know of any proposed additional tax
assessment against it for which adequate provision has not been made on its
accounts, and no material controversy in respect of additional Federal or
state income taxes due since said date is pending or to the knowledge of
the Company threatened. The provisions for taxes on the books of the
Company and each Restricted Subsidiary are adequate for all open years, and
for its current fiscal period.
14. Use of Proceeds. The net proceeds from the sale of the Notes will
be used to refinance commercial paper and other short- term Indebtedness
(characterized on the Company's balance sheet as Funded Debt in accordance
with GAAP) and for capital expenditures. None of the transactions
contemplated in the Agreement (including, without limitation thereof, the
use of proceeds from the issuance of the Notes) will violate or result in a
violation of Section 7 of the Securities Exchange Act of 1934, as amended,
or any regulation issued pursuant thereto, including, without limitation,
Regulations G, T and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R., Chapter II. Neither the Company nor any Subsidiary owns
or intends to carry or purchase any "margin stock" or for any other purpose
that might result in the issuance of the Notes being deemed a "purpose
credit" within the meaning of said Regulation G. None of the proceeds from
the sale of the Notes will be used to purchase, or refinance any borrowing
the proceeds of which were used to purchase, any "security" within the
meaning of the Securities Exchange Act of 1934, as amended.
15. Private Offering. Since August 1, 1994, the Company has neither
directly or indirectly offered, nor will it offer, the Notes or any similar
Security to, or solicited or will solicit an offer to acquire the Notes or
any similar Security from, or has otherwise approached or negotiated, or
will approach or negotiate, in respect of the Notes or any similar Security
with any Person other than the Purchasers, each of whom was offered a
portion of the Notes at private sale for investment. The Company has
neither directly or indirectly offered, nor will offer, the Notes or any
similar Security to, or solicited or will solicit an offer to acquire the
Notes or any similar Security from any Person so as to bring the issuance
and sale of the Notes within the provisions of Section 5 of the Securities
Act of 1933, as amended, or to the provisions of any applicable state
securities or "blue sky" laws. The Company has not engaged or otherwise
utilized the services of any agent in offering, issuing or selling the
Notes, whether to the Purchasers or to other Persons.
16. ERISA. Based, to the extent relevant, upon the accuracy of the
representations of the Purchasers set forth in Section 3.2(b) of the
Agreement, the consummation of the transactions provided for in the
Agreement and compliance by the Company with the provisions thereof and the
Notes issued thereunder will not involve any prohibited transaction within
the meaning of ERISA or Section 4975 of the Internal
B-5
Revenue Code of 1986, as amended. Each Plan complies in all material
respects with all applicable statutes and governmental rules and
regulations, and (a) no Reportable Event has occurred and is continuing
with respect to any Plan, (b) neither the Company nor any ERISA Affiliate
has withdrawn from any Plan or Multiemployer Plan or instituted steps to do
so, and (c) no steps have been instituted to terminate any Plan. No
condition exists or event or transaction has occurred in connection with
any Plan which could result in the incurrence by the Company or any ERISA
Affiliate of any material liability, fine or penalty. No Plan maintained by
the Company or any ERISA Affiliate, nor any trust created thereunder, has
incurred any "accumulated funding deficiency" as defined in Section 302 of
ERISA nor does the present value of all benefits vested under all Plans
exceed, as of the last annual valuation date, the value of the assets of
the Plans allocable to such vested benefits. Neither the Company nor any
ERISA Affiliate has any contingent liability with respect to any
post-retirement "welfare benefit plan" (as such term is defined in ERISA)
except as has been disclosed to the Purchasers.
17. Compliance with Law. (a) Neither the Company nor any Restricted
Subsidiary (1) is in violation of any law, ordinance, franchise,
governmental rule or regulation to which it is subject; or (2) has failed
to obtain any license, permit, franchise or other governmental
authorization necessary to the ownership of its property or to the conduct
of its business, which violation or failure to obtain would materially
affect adversely the business, prospects, profits, properties or condition
(financial or otherwise) of the Company and its Restricted Subsidiaries,
taken as a whole, or impair the ability of the Company to perform its
obligations contained in the Agreement or the Notes. Neither the Company
nor any Restricted Subsidiary is in default with respect to any order of
any court or governmental authority or arbitration board or tribunal.
(b) Without limiting the provisions of clause (a) of this paragraph
17, the Company and its Subsidiaries are in compliance with all applicable
Environmental Laws the failure to comply with which would materially affect
adversely the properties, business, prospects, profits or condition
(financial or otherwise) of the Company and its Subsidiaries, taken as a
whole, or the ability of the Company to perform its obligations under the
Agreement or the Notes.
18. Investment Company and Public Utility Acts. The Company is not,
and is not directly or indirectly controlled by or acting on behalf of any
Person which is, required to register as an "investment company" under the
Investment Company Act of 1940, as amended. Neither the Company nor any
Subsidiary is a (i) "holding company," a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended or (ii) public utility
within the meaning of the Federal Power Act, as amended.
19. Foreign Assets Control Regulations, etc. The Company and its
Subsidiaries are not by reason of being a "national" of "designated foreign
country" or a "specially
B-6
designated national" within the meaning of the Regulations of the Office of
Foreign Assets Control, United States Treasury Department (31 C.F.R.,
Subtitle B, Chapter V), or for any other reason, subject to any restriction
or prohibition under, or in violation of, any Federal statue or
Presidential Executive Order, or any rules or regulations of any
department, agency or administrative body promulgated under any such
statute or order, concerning trade or other relations with any foreign
country or any citizen or national thereof or the ownership or operation of
any property.
C-1
EXHIBIT C
DESCRIPTION OF CLOSING OPINION OF
COUNSEL TO THE COMPANY
The closing opinion of Stoel Rives Boley Jones & Grey, counsel for the
Company, which is called for by Section 4.1 of the Note Agreement, shall be
dated the Closing Date and addressed to the Purchasers, shall be
satisfactory in scope and form to the Purchasers and shall be to the effect
that:
1. The Company is a corporation, duly incorporated, validly
existing and in good standing under the laws of the State of Delaware,
has the corporate power and the corporate authority to execute and
perform the Note Agreement and to issue the Notes and has the full
corporate power and the corporate authority to conduct the activities
in which it is now engaged and is in good standing or of current
status as a foreign corporation, as the case may be, in each
jurisdiction set forth in the certificate of the Company attached to
this opinion (the "Company Certificate") as a jurisdiction where the
Company has material assets or conducts a material portion of its
business.
2. Each Subsidiary is a corporation duly organized, validly
existing and in good standing or of current status, as the case may
be, under the laws of its jurisdiction of incorporation and is in good
standing or of current status as a foreign corporation, as the case
may be, in each jurisdiction set forth in the Company Certificate as a
jurisdiction where such Subsidiary has material assets or conducts a
material portion of its business. All of the issued and outstanding
shares of capital stock of each such Subsidiary are owned of record by
the Company, by one or more Subsidiaries, or by the Company and one or
more Subsidiaries.
3. The Note Agreement has been duly authorized by all necessary
corporate action on the part of the Company, has been duly executed
and delivered by the Company and constitutes the legal, valid and
binding contract of the Company enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
4. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, have been duly executed and
delivered by the Company and constitute the legal, valid and binding
obligations of the Company enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent conveyance or similar
laws affecting creditors' rights generally, and
C-2
general principles of equity (regardless of whether the application of
such principles is considered in a proceeding in equity or at law).
5. No approval, consent or withholding of objection on the part
of, or filing, registration or qualification with, any governmental
body, Federal, state or local, is necessary in connection with the
execution and delivery of the Note Agreement or the Notes.
6. The issuance and sale of the Notes and the execution, delivery
and performance by the Company of the Note Agreement do not conflict
with or result in any breach of any of the provisions of or constitute
a default under or result in the creation or imposition of any Lien
upon any of the property of the Company pursuant to the provisions of
the Certificate of Incorporation or By-laws of the Company or any
agreement or other instrument listed as a "Material Agreement" in the
Company Certificate attached to this opinion.
7. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Agreement does not, under
existing law, require the registration of the Notes under the
Securities Act of 1933, as amended, or the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
8. The issuance of the Notes and the use of the proceeds of the
sale of the Notes in accordance with the provisions of and
contemplated by the Note Agreement do not violate or conflict with
Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System.
9. There is no litigation pending or, to the best knowledge of
such counsel, threatened which in such counsel's opinion could
reasonably be expected to have a materially adverse effect on the
Company's business or assets or which would impair the ability of the
Company to issue and deliver the Notes or to comply with the
provisions of the Note Agreement.
The opinion of Stoel Rives Boley Jones & Grey shall cover such other
matters relating to the sale of the Notes as the Purchasers may reasonably
request. With respect to matters of fact on which such opinion is based,
such counsel shall be entitled to rely on appropriate certificates of
public officials and officers of the Company and, with respect to the
opinion numbered (7) upon, to the extent relevant, the accuracy of the
representations of the Purchasers set forth in Section 3.2(a) of the Note
Agreement.
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EXHIBIT D
SUBORDINATION PROVISIONS APPLICABLE TO
SUBORDINATED FUNDED DEBT
(a) The indebtedness evidenced by the subordinated notes<F1>, any
renewals or extensions thereof, premium, if any, interest (including,
without limitation, any such interest accruing subsequent to the filing by
or against the Company of any proceeding brought under Chapter 11 of the
Bankruptcy Code (11 U.S.C. Section 100 et seq.)) and any fees, charges,
expenses or other sums payable under or in respect of the agreements
pursuant to which such subordinated notes were issued, shall at all times
be wholly and unconditionally subordinate and junior in right of payment to
all principal, premium, if any, and interest (including, without
limitation, any such interest accruing subsequent to the filing by or
against the Company of any proceeding brought under Chapter 11 of the
Bankruptcy Code (11 U.S.C. Section 100 et seq.) whether or not such
interest is allowed as a claim pursuant to the provisions of such Chapter)
and all other fees, charges, expenses and other sums payable in respect of
(1) the Company's $50,000,000 aggregate principal amount 7.77% Senior Notes
due April 25, 1995 (the "Notes") issued pursuant to the Note Agreement
dated as of April 25, 1995 among the Company, The Prudential Insurance
Company of America and Pruco Life Insurance Company, and (2) any other
indebtedness for money borrowed of the Company not expressed to be
subordinate or junior to any other indebtedness of the Company (the
indebtedness described in the preceding clauses (1) and (2) is hereinafter
called "Superior Indebtedness"), in the manner and with the force and
effect hereafter set forth:
(1) In the event of (i) any liquidation, dissolution or other
winding up of the Company, voluntary or involuntary, (ii) any
execution, sale, receivership, insolvency, bankruptcy, liquidation,
readjustment, reorganization, composition or other similar proceeding
relative to the Company or its property, (iii) any general assignment
by the Company for the benefit of creditors, or (iv) any distribution,
division, marshalling or application of any of the properties or
assets of the Company or the proceeds thereof to creditors, voluntary
or involuntary, and whether or not involving legal proceedings, then
and in any event:
(A) all principal, premium, if any, any interest and all other
sums owing on all Superior Indebtedness shall first be paid in full in
cash before any payment or distribution of any kind or character,
whether in cash, property or securities (other than in securities,
including equity securities, or other evidences of indebtedness, the
payment of which is unconditionally subordinated to the
---------------
<F1> Or debentures or other designation as may be appropriate.
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payment of all Superior Indebtedness which may at the time be
outstanding) shall be made on indebtedness evidenced by the
subordinated notes;
(B) all principal and interest on the subordinated notes shall
forthwith become due and payable, and any payment or distribution of
any kind or character, whether in cash, property or securities (other
than securities, including equity securities or other evidences of
indebtedness, the payment of which is unconditionally subordinated to
the payment of all Superior Indebtedness which may at the time be
outstanding), which would otherwise (but for the terms hereof) be
payable or deliverable in respect of the subordinated notes, shall be
paid or delivered directly to the holders of the Superior
Indebtedness, for application to the payment of the Superior
Indebtedness, until all Superior Indebtedness shall have been paid in
full, and the holders of the subordinated notes at the time
outstanding irrevocably authorize, empower and direct all receivers,
trustees, liquidators, conservators, fiscal agents and others having
authority in the premises to effect all such payments and deliveries;
(C) any payment or distribution of any kind or character, whether
in cash, property or securities (other than in securities, including
equity securities or other evidences of indebtedness, the payment of
which is unconditionally subordinated to the payment of all Superior
Indebtedness which may at the time be outstanding) which shall be made
upon or in respect of the subordinated notes shall be paid over to the
holders of Superior Indebtedness, pro rata, for application and
payment thereof unless and until such Superior Indebtedness shall have
been paid or satisfied in full; and
(D) notwithstanding the foregoing provisions, if for any reason
whatsoever any payment or distribution of any kind or character,
whether in cash, property or securities (other than in securities,
including equity securities or other evidences of indebtedness, the
payment of which is unconditionally subordinated to the payment of all
Superior Indebtedness which may at the time be outstanding), should be
received by a holder of the subordinated notes before all such
Superior Indebtedness is paid in full, such payment or distribution
shall be held in trust for the benefit of, and shall be immediately
paid or delivered by such holder to, as the case may be, the holders
of such Superior Indebtedness remaining unpaid, or their
representative or representatives, for application to the payment of
all such Superior Indebtedness, pro rata, unless and until such
Superior Indebtedness shall have been paid or satisfied in full.
(2) In the event that the subordinated notes are declared or
become due and payable because of the occurrence of any event of
default hereunder (or under the agreement or indenture, as
appropriate) or otherwise than at the option of the Company, under
circumstances when the foregoing clause (1) shall not be applicable,
then each holder of any Superior Indebtedness then outstanding shall
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have the right to declare immediately due and payable all or any part
of the Superior Indebtedness owing and payable to such holder and the
holders of the subordinated notes shall be entitled to payments only
after there shall first have been paid in full in cash all Superior
Indebtedness outstanding at the time the subordinated notes so become
due and payable because of any such event.
(3) In case either (i) default in respect of the payment of the
principal of, premium if any, or interest on any Superior
Indebtedness, or (ii) any other default on any Superior Indebtedness
as a result of which the holders thereof shall then be entitled to
accelerate such Superior Indebtedness shall in either such case have
occurred and be continuing with respect to any Superior Indebtedness,
unless and until all Superior Indebtedness shall have been paid in
full in cash, the Company will not, and will not permit any subsidiary
to, directly or indirectly, make or agree to make, and neither the
holder nor any assignee or successor holder of any subordinated notes
will demand, accept or receive, (A) any payment in cash, property,
securities (other than in securities, including equity securities or
other evidences of indebtedness, the payment of which is
unconditionally subordinated to the payment of all Superior
Indebtedness which may at the time be outstanding) or otherwise,
direct or indirect, of or on account of any principal of, premium, if
any, interest or any other sum owing in respect of any subordinated
notes, or (B) any payment for the purpose of any redemption, purchase
or other acquisition, direct or indirect, of any subordinated notes,
and no such payments shall be due.
(b) If any payment or distribution of any kind or character (whether
in cash, securities or other property) or any security shall be received by
any holder of the subordinated notes in contravention of any of the terms
of this Section ___, such payment or distribution or security shall be held
in trust for the benefit of, and shall be paid over or delivered and
transferred to, holders of the Superior Indebtedness pro rata for
application to the payment of all Superior Indebtedness remaining unpaid,
to the extent necessary to pay all such Superior Indebtedness in full in
cash. In the event of the failure of any holder of the subordinated notes
to endorse or assign any such payment, distribution or security, any holder
of the Superior Indebtedness or such holder's representative is hereby
irrevocably authorized to endorse or assign the same.
(c) The holder of each subordinated note undertakes and agrees for the
benefit of each holder of Superior Indebtedness to execute, verify, deliver
and file any proofs of claim within 30 days before the expiration of the
time to file the same which any holder of Superior Indebtedness may at any
time require in order to prove and realize upon any rights or claims
pertaining to the subordinated notes and to effectuate the full benefit of
the subordination contained herein; and upon failure of the holder of any
subordinated note so to do, any such holder of Superior Indebtedness shall
be deemed to be irrevocably appointed the agent and attorney-in-fact of the
holder of such note to execute, verify, deliver and file any such proofs of
claim.
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(d) No right of any holder of any Superior Indebtedness to enforce
subordination as herein provided shall at any time or in any way be
affected or impaired by any failure to act on the part of the Company or
the holders of Superior Indebtedness, or by any noncompliance by the
Company with any of the terms, provisions and covenants of the subordinated
notes or the agreement under which they are issued, regardless of any
knowledge thereof that any such holder of Superior Indebtedness may have or
be otherwise charged with.
(e) No holder of any subordinated notes will sell, assign, pledge,
encumber or otherwise dispose of any of its subordinated notes unless such
sale, assignment, pledge, encumbrance or disposition is made expressly
subject to the foregoing provisions.
(f) The Company agrees, for the benefit of the holders of Superior
Indebtedness, that in the event that any subordinated note is declared due
and payable before its expressed maturity because of the occurrence of a
default hereunder, (1) the Company will give prompt notice in writing of
such happening to the holders of Superior Indebtedness, (2) all Superior
Indebtedness shall forthwith become immediately due and payable upon
demand, regardless of the expressed maturity thereof and (3) the holders of
such subordinated notes shall not be entitled to receive any payment or
distribution in respect thereof or applicable thereto until all Superior
Indebtedness at the time outstanding shall have been paid in full.
(g) The subordination effected by the foregoing provisions and the
rights created thereby of the holders of the Superior Indebtedness shall
not be affected by (1) any amendment of or addition or supplement to any
Superior Indebtedness or any instrument or agreement relating thereto, (2)
any exercise or non-exercise of any right, power or remedy under or in
respect of any Superior Indebtedness or any instrument or agreement
relating thereto, or (3) the giving or denial of any waiver, consent,
release, indulgence, extension, renewal, modification or delay or the
taking or nontaking of any other action, inaction or omission, in respect
of any Superior Indebtedness or any instrument or agreement relating
thereto or to any securities relating thereto or any guarantee thereof,
whether or not any holder of any subordinated notes shall have had notice
or knowledge of any of the foregoing.