AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 11, 2002
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
FLEMING COMPANIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
<Table>
OKLAHOMA 5141 48-0222760
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</Table>
1945 LAKEPOINTE DRIVE
LEWISVILLE, TEXAS 75057
(972) 906-8000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
FOR CO-REGISTRANTS, SEE "TABLE OF CO-REGISTRANTS" ON FOLLOWING PAGE.
---------------------
CARLOS M. HERNANDEZ, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
FLEMING COMPANIES, INC.
1945 LAKEPOINTE DRIVE
LEWISVILLE, TEXAS 75057
(972) 906-8000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
---------------------
COPIES TO:
JOHN M. NEWELL, ESQ.
LATHAM & WATKINS
505 MONTGOMERY STREET, SUITE 1900
SAN FRANCISCO, CALIFORNIA 94111
(415) 391-0600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration number for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier, effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
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TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED OFFERING PROPOSED AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
9 7/8% Senior Subordinated Notes due
2012................................. $260,000,000 100% $260,000,000 $23,920
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Guarantees of 9 7/8% Senior
Subordinated Notes due 2012(2)....... --(2) --(2) --(2) --(2)
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</Table>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f).
(2) No separate consideration will be received with respect to these guarantees
and, therefore, no registration fee is attributable to them.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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TABLE OF CO-REGISTRANTS
<Table>
<Caption>
STATE OF I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION PSICC
NAME ORGANIZATION NUMBER NUMBER
- ---- --------------- --------------- ------
ABCO Food Group, Inc. ................................... Nevada 88-0440077 5411
ABCO Markets, Inc. ...................................... Arizona 86-0491500 *
ABCO Realty Corp......................................... Arizona 86-0491499 *
AG, L.L.C................................................ Oklahoma ** **
American Logistics Group, Inc. .......................... Delaware 13-2656567 5141
ASI Office Automation, Inc. ............................. California 95-3256944 *
Baker's Food Group, Inc. ................................ Nevada 88-0440078 5411
Cardinal Wholesale, Inc. ................................ Minnesota 41-0969178 5194
C/M Products, Inc. ...................................... California 94-3104739 5194
Core-Mark International, Inc. ........................... Delaware 91-1295550 5194
Core-Mark Interrelated Companies, Inc.................... California 94-2317385 5194
Core-Mark MidContinent, Inc. ............................ Arkansas 74-2354997 5194
Dunigan Fuels, Inc. ..................................... Texas 52-2206478 5172
E.A. Morris Distributors Limited......................... Canada 91-1243227 *
FAVAR CONCEPTS, LTD...................................... Delaware 73-1570430 5411
Fleming Food Management Co., L.L.C....................... Oklahoma 73-1577381 5141
Fleming Foods of Texas, L.P.............................. Oklahoma 73-1577380 5141
Fleming International Ltd................................ Oklahoma 73-1414701 5141
Fleming Supermarkets of Florida, Inc. ................... Florida 65-0418543 5411
Fleming Transportation Service, Inc. .................... Oklahoma 73-1126039 5141
Fleming Wholesale, Inc. ................................. Nevada 93-1175982 5141
Food 4 Less Beverage Company, Inc. ...................... Texas ** **
FuelServ, Inc. .......................................... Delaware 75-2894483 5172
Gateway Insurance Agency, Inc. .......................... Wisconsin 39-1346803 5141
General Acceptance Corporation........................... California 95-3895935 *
Head Distributing Company................................ Georgia 58-1095258 5194
LAS, Inc. ............................................... Oklahoma 73-1410261 5411
Marquise Ventures Company, Inc. ......................... California 95-3983880 *
Minter-Weisman Co........................................ Minnesota 41-0809931 5194
Piggly Wiggly Company.................................... Oklahoma 73-1477999 6794
Progressive Realty, Inc. ................................ Oklahoma 73-1485750 5141
Rainbow Food Group, Inc. ................................ Nevada 88-0440079 5411
Retail Investments, Inc. ................................ Nevada 86-0900985 5411
Retail Supermarkets, Inc. ............................... Texas 74-0658440 5411
RFS Marketing Services, Inc. ............................ Oklahoma 73-1489627 5141
Richmar Foods, Inc. ..................................... California 68-0095094 5411
Scrivner Transportation, Inc. ........................... Oklahoma 73-1288028 *
</Table>
- ---------------
* Inactive entity.
** No I.R.S. Employer Identification Number or PSICC Number -- subsidiary
created solely for liquor license.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JULY 11, 2002
PRELIMINARY PROSPECTUS
FLEMING COMPANIES, INC.
OFFER TO EXCHANGE
UP TO
$260,000,000 AGGREGATE PRINCIPAL AMOUNT OF ITS
9 7/8% SENIOR SUBORDINATED NOTES DUE 2012,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR ANY AND ALL OF ITS OUTSTANDING 9 7/8% SENIOR SUBORDINATED NOTES DUE 2012
MATERIAL TERMS OF THE EXCHANGE OFFER
- The exchange offer expires at 5:00 p.m., New York City time, on
, 2002, unless extended.
- We will exchange all outstanding notes that are validly tendered and not
validly withdrawn for an equal principal amount of notes which are
registered under the Securities Act.
- The exchange offer is not subject to any conditions other than that it
not violate applicable law or any applicable interpretation of the staff
of the SEC.
- You may withdraw tenders of outstanding notes at any time before the
exchange offer expires.
- The exchange of notes will not be a taxable event for U.S. federal income
tax purposes.
- We will not receive any proceeds from the exchange offer.
- The terms of the new series of notes are substantially identical to the
outstanding notes, except for transfer restrictions and registration
rights relating to the outstanding notes.
- You may tender outstanding notes only in denominations of $1,000 and
multiples of $1,000.
- Our affiliates may not participate in the exchange offer.
PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE 13 OF THIS PROSPECTUS FOR
A DESCRIPTION OF THE RISKS YOU SHOULD CONSIDER WHEN EVALUATING THIS INVESTMENT.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
We are not making this exchange offer in any state where it is not
permitted.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OF THE NOTES OR DETERMINED THAT THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is , 2002.
We have not authorized any dealer, salesperson or other person to give any
information or to make any representations to you other than the information
contained in this prospectus. You must not rely on any information or
representations not contained in this prospectus as if we had authorized it.
This prospectus does not offer to sell or solicit an offer to buy any securities
other than the registered notes to which it relates, nor does it offer to buy
any of these notes in any jurisdiction from any person to whom it is unlawful to
make such offer or solicitation in such jurisdiction.
The information contained in this prospectus is current only as of the date
on the cover page of this prospectus, and may change after that date. We do not
imply that there has been no change in the information contained in this
prospectus or in our affairs since that date by delivering this prospectus.
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT US THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS PROSPECTUS. THIS
INFORMATION IS AVAILABLE WITHOUT CHARGE TO YOU UPON WRITTEN OR ORAL REQUEST. IF
YOU WOULD LIKE A COPY OF ANY OF THIS INFORMATION, PLEASE SUBMIT YOUR REQUEST TO
1945 LAKEPOINTE DRIVE, BOX 299013, LEWISVILLE, TEXAS 75029, ATTENTION: LEGAL
DEPARTMENT, OR CALL (972) 906-8000 AND ASK TO SPEAK TO SOMEONE IN OUR LEGAL
DEPARTMENT. IN ADDITION, TO OBTAIN TIMELY DELIVERY OF ANY INFORMATION YOU
REQUEST, YOU MUST SUBMIT YOUR REQUEST NO LATER THAN , 2002, WHICH IS
FIVE BUSINESS DAYS BEFORE THE DATE THE EXCHANGE OFFER EXPIRES.
---------------------
TABLE OF CONTENTS
<Table>
Industry Data............................................... ii
Disclosure Regarding Forward-Looking Statements............. ii
Prospectus Summary.......................................... 1
Risk Factors................................................ 13
The Exchange Offer.......................................... 22
Use of Proceeds............................................. 31
Capitalization.............................................. 31
Selected Consolidated Financial Data of Fleming............. 32
Selected Consolidated Financial Data of Core-Mark........... 35
Unaudited Pro Forma Condensed Consolidated Financial
Information............................................... 37
Business.................................................... 47
Management.................................................. 59
Principal and Management Shareholders....................... 63
Description of Other Indebtedness........................... 65
Description of Notes........................................ 67
Book-Entry; Delivery and Form............................... 100
Plan of Distribution........................................ 102
Material United States Federal Income Tax Considerations.... 103
Legal Matters............................................... 108
Independent Auditors........................................ 108
Available Information....................................... 109
Incorporation by Reference.................................. 109
</Table>
i
INDUSTRY DATA
In this prospectus, we rely on and refer to information regarding market
data obtained from internal surveys, market research, publicly available
information and industry publications. Although we believe the information is
reliable, we cannot guarantee the accuracy or completeness of the information
and have not independently verified it.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
All statements other than statements of historical facts included or
incorporated by reference in this prospectus, including, without limitation,
statements in the section entitled "Risk Factors" and elsewhere in this
prospectus regarding our future financial position, business strategy and our
management's plans and objectives for future operations, are forward-looking
statements. Forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate," "believe" or "continue" or the negative thereof or
variations thereon or similar terminology. Although we believe that the
expectations reflected in these forward-looking statements are reasonable, these
expectations may not prove to be correct. Important factors that could cause
actual results to differ materially from our expectations are disclosed under
the section "Risk Factors" and elsewhere in this prospectus, including, without
limitation, in conjunction with the forward-looking statements included and
incorporated by reference in this prospectus. These forward-looking statements
and our business and prospects are subject to a number of factors that could
cause actual results to differ materially, including:
- our ability to obtain capital or obtain it on acceptable terms;
- unanticipated problems with product procurement;
- adverse effects of the changing industry environment and increased and
intense competition;
- sales declines and loss of customers;
- negative effects of Kmart Corporation's bankruptcy reorganization;
- exposure to litigation and other contingent losses;
- failure to achieve the expected results of our growth plans;
- the inability to integrate acquired companies and to achieve operating
improvements at those companies;
- increases in labor costs and disruptions in labor relations with union
bargaining units representing our employees;
- negative effects of our substantial indebtedness and the limitations
imposed by restrictive covenants contained in our debt instruments; and
- goodwill impairment due to changes in markets.
All subsequent written and oral forward-looking statements attributable to
us, or persons acting on our behalf, are expressly qualified in their entirety
by the cautionary statements. We undertake no obligation to update
forward-looking statements to reflect developments or information obtained after
the date on the cover page of this prospectus.
ii
PROSPECTUS SUMMARY
In this prospectus, the words "Fleming," "the Company," "ours," "us" and
"we" refer to Fleming Companies, Inc., the issuer of the notes, and its
subsidiaries. We will refer to the outstanding notes as the "old notes," and
will refer to new notes as the "exchange notes." Unless indicated otherwise, the
term "notes" refers to both the old notes and the exchange notes. The following
summary contains basic information about us and this exchange offer. It likely
does not contain all the information that is important to you. For a more
complete understanding of this exchange offer, we encourage you to read this
entire document and the documents to which we have referred you.
THE EXCHANGE OFFER
The Old Notes................. We issued the old notes to Deutsche Bank
Securities Inc., Lehman Brothers Inc., Salomon
Smith Barney Inc., First Union Securities,
Inc., J.P. Morgan Securities Inc., Morgan
Stanley & Co. Incorporated and UBS Warburg LLC
on April 15, 2002. These initial purchasers
subsequently resold the old notes to "qualified
institutional buyers" as defined under Rule
144A of the Securities Act and to persons
outside the United States under Regulation S.
The purchasers of the old notes agreed to
comply with transfer restrictions and other
conditions.
The Exchange Offer............ We are offering to exchange our exchange notes
for our outstanding old notes that are properly
tendered and accepted. You may tender
outstanding old notes only in denominations of
$1,000 and multiples of $1,000. We will issue
the exchange notes on or promptly after the
exchange offer expires. As of the date of this
prospectus, $260,000,000 principal amount of
the old notes are outstanding.
Expiration Date............... The exchange offer will expire at 5:00 p.m.,
New York City time, on , 2002, unless
extended, in which case the expiration date
will mean the latest date and time to which we
extend the exchange offer.
Conditions to the Exchange
Offer......................... The exchange offer is not subject to any
condition other than that it not violate
applicable law or any applicable interpretation
of the staff of the SEC. The exchange offer is
not conditioned upon any minimum principal
amount of old notes being tendered for
exchange.
Procedures for Tendering Old
Notes......................... If you wish to tender your old notes for
exchange notes pursuant to the exchange offer
you must transmit to Manufacturers and Traders
Trust Company, as exchange agent, on or before
the expiration date, either:
- a computer generated message transmitted
through The Depository Trust Company's
Automated Tender Offer Program system and
received by the exchange agent and forming a
part of a confirmation of book-entry transfer
in which you acknowledge and agree to be
bound by the terms of the letter of
transmittal; or
- a properly completed and duly executed letter
of transmittal, which accompanies this
prospectus, or a facsimile of the letter of
transmittal, together with your old notes and
any other
1
required documentation, to the exchange agent
at its address listed in this prospectus and
on the front cover of the letter of
transmittal.
If you cannot satisfy either of these
procedures on a timely basis, then you should
comply with the guaranteed delivery procedures
described below. By executing the letter of
transmittal, you will make the representations
to us described under "The Exchange
Offer -- Procedures for Tendering."
Special Procedures for
Beneficial Owners............. If you are a beneficial owner whose old notes
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and you wish to tender your old notes in the
exchange offer, you should contact the
registered holder promptly and instruct the
registered holder to tender on your behalf. If
you wish to tender on your own behalf, you must
either (1) make appropriate arrangements to
register ownership of the old notes in your
name or (2) obtain a properly completed bond
power from the registered holder, before
completing and executing the letter of
transmittal and delivering your old notes.
Guaranteed Delivery
Procedures.................... If you wish to tender your old notes and time
will not permit the documents required by the
letter of transmittal to reach the exchange
agent before the expiration date, or the
procedure for book-entry transfer cannot be
completed on a timely basis, you must tender
your old notes according to the guaranteed
delivery procedures described in this
prospectus under the heading "The Exchange
Offer -- Guaranteed Delivery Procedures."
Acceptance of Old Notes and
Delivery of Exchange Notes.... Subject to the satisfaction or waiver of the
conditions to the exchange offer, we will
accept for exchange any and all old notes which
are validly tendered in the exchange offer and
not withdrawn before 5:00 p.m., New York City
time, on the expiration date.
Withdrawal Rights............. You may withdraw the tender of your old notes
at any time before 5:00 p.m., New York City
time, on the expiration date, by complying with
the procedures for withdrawal described in this
prospectus under the heading "The Exchange
Offer -- Withdrawal of Tenders."
Material United States Federal
Income Tax Considerations..... The exchange of notes will not be a taxable
event for United States federal income tax
purposes. For a discussion of the material
federal income tax consequences relating to the
exchange of notes, see "Material United States
Federal Income Tax Considerations."
Exchange Agent................ Manufacturers and Traders Trust Company, the
trustee under the indenture governing the old
notes, is serving as the exchange agent.
2
Consequences of Failure to
Exchange Old Notes............ If you do not exchange your old notes for
exchange notes, you will continue to be subject
to the restrictions on transfer provided in the
old notes and in the indenture governing the
old notes. In general, the old notes may not be
offered or sold, unless registered under the
Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws. We do not currently plan to register the
old notes under the Securities Act. See "Risk
Factors -- If you do not exchange your old
notes pursuant to this exchange offer, you may
never be able to sell your old notes."
Registration Rights
Agreement..................... You are entitled to exchange your old notes for
exchange notes with substantially identical
terms. The exchange offer satisfies this right.
After the exchange offer is completed, you will
no longer be entitled to any exchange or
registration rights with respect to your old
notes.
WE EXPLAIN THE EXCHANGE OFFER IN GREATER DETAIL BEGINNING ON PAGE 22.
3
THE EXCHANGE NOTES
The form and terms of the exchange notes are the same as the form and terms
of the old notes, except that the exchange notes will be registered under the
Securities Act and, therefore, the exchange notes will not be subject to the
transfer restrictions, registration rights and provisions providing for an
increase in the interest rate applicable to the old notes. The exchange notes
will evidence the same debt as the old notes and both the old notes and the
exchange notes, which we will collectively refer to as the "notes," are governed
by the same indenture.
Securities Offered............ $260,000,000 principal amount of 9 7/8% senior
subordinated notes due 2012.
Issuer........................ Fleming Companies, Inc.
Maturity Date................. May 1, 2012.
Interest...................... The exchange notes will bear interest at the
rate of 9 7/8% per year (calculated using a
360-day year), payable every six months on May
1 and November 1, commencing November 1, 2002.
Interest on the exchange notes will accrue from
the last interest payment date on which
interest was paid on the old notes, or if no
interest was paid on the old notes, from the
date of issuance of the old notes, which was
April 15, 2002. Holders whose old notes are
accepted for exchange will be deemed to have
waived their right to receive any interest
accrued on the old notes from the last interest
payment date.
Ranking....................... The notes are our general unsecured obligations
subordinated in right of payment to all our
existing and future Senior Indebtedness,
including all our obligations under our credit
agreement, our 10 1/8% senior notes due 2008
and our 9 1/4% senior notes due 2010 and will
rank equal in right of payment with all our
existing and future senior subordinated
indebtedness, including our outstanding 10 5/8%
senior subordinated notes due 2007 and our
5 1/4% convertible senior subordinated notes
due 2009, and senior to all our future
subordinated indebtedness. As of April 20,
2002, on a pro forma basis after giving effect
to the Acquisition and related financings, we
and our subsidiaries had a total of
approximately $2.2 billion of indebtedness, of
which approximately $1.4 billion was Senior
Indebtedness, and were able to borrow
approximately an additional $400 million under
our credit facility.
Note Guarantees............... The Note Guarantees are general unsecured
obligations of the Subsidiary Guarantors,
subordinated in right of payment to all such
Subsidiary Guarantors' existing and future
Senior Indebtedness, and rank equal in right of
payment to all such Subsidiary Guarantors'
existing and future senior subordinated
indebtedness and senior to all future
subordinated indebtedness of such Subsidiary
Guarantors. If we create or acquire a new
wholly-owned subsidiary or if any subsidiary
guarantees certain other debt, it will
guarantee the notes unless we designate the
subsidiary as an "unrestricted subsidiary"
under the indenture.
Optional Redemption........... The notes are redeemable at our option, in
whole or in part, at any time on or after May
1, 2007 at the redemption prices set forth
herein, plus accrued and unpaid interest.
4
Optional Redemption After
Equity Offerings.............. At any time (which may be more than once)
before the third anniversary of the issue date
of the old notes, we can choose to redeem up to
35% of the initial aggregate principal amount
of the notes with money that we raise in one or
more equity offerings, as long as:
- we pay 109.875% of the face amount of the
notes, plus interest;
- we redeem the notes within 90 days of
completing the equity offering; and
- at least 65% of the initial aggregate
principal amount of the notes issued remains
outstanding afterwards.
Change of Control Offer....... Upon the occurrence of a change of control of
Fleming, each holder of notes will have the
right to require us to purchase such holder's
notes at a purchase price of 101% of the
principal amount thereof, plus accrued and
unpaid interest.
We might not be able to pay you the required
price for notes you present to us at the time
of a change of control, because:
- we might not have enough funds at that time;
- the terms of our senior debt may prevent us
from paying; or
- our bylaws may prevent us from paying.
Certain Indenture
Provisions.................... The indenture governing the notes contains
covenants limiting our (and most or all of our
subsidiaries') ability to:
- incur additional debt;
- pay dividends or distributions on our capital
stock or repurchase our capital stock;
- issue stock of subsidiaries;
- make certain investments;
- create liens on our assets to secure debt;
- enter into transactions with affiliates;
- merge or consolidate with another company;
and
- transfer and sell assets.
These covenants are subject to a number of
important limitations and exceptions.
Form of Exchange Notes........ The exchange notes will be represented by one
or more permanent global certificates, in fully
registered form, deposited with a custodian
for, and registered in the name of a nominee
of, The Depository Trust Company, as
depositary. You will not receive exchange notes
in certificated form unless one of the events
described in the section entitled "Book-Entry;
Delivery and Form" occurs. Instead, beneficial
interests in the exchange notes will be shown
on, and transfers of these notes will be
5
effected only through, records maintained in
book-entry form by The Depository Trust Company
and its participants.
Use of Proceeds............... We will not receive any cash proceeds in the
exchange offer.
Risk Factors.................. Investing in the notes involves substantial
risks. See the section entitled "Risk Factors"
for a description of certain of the risks you
should consider before investing in the notes.
WE EXPLAIN THE EXCHANGE NOTES IN GREATER DETAIL BEGINNING ON PAGE 67.
6
THE COMPANY
INTRODUCTION
Fleming is an industry leader in the distribution of consumer package
goods. We believe that our network of "multi-tier" distribution centers offers
retailers of varying size and format a low-cost supply chain alternative to
other distribution competitors or to self-distribution. Multi-tier distribution
allows us to optimize the particular volume, value and velocity characteristics
of each product that we distribute, thereby increasing our efficiency and
lowering our costs.
On June 18, 2002 we acquired Core-Mark International, Inc. ("Core-Mark"), a
distributor of consumer package goods to convenience stores and other retailers
in the western United States and western Canada. As a result of the acquisition
of Core-Mark (the "Acquisition"), our distribution group now serves
approximately 50,000 retail locations across the United States and western
Canada, including approximately 3,000 supermarkets, approximately 40,000
convenience stores and approximately 7,000 supercenters, discount stores,
limited assortment stores, drug stores, specialty stores and other stores. We
believe that the Acquisition will further transform our distribution group into
an efficient, nationwide, multi-tier supply chain for consumer package goods to
retailers of any size and format.
On a pro forma basis after giving effect to the Acquisition, our
distribution group net sales were $16.6 billion for 2001 and $4.8 billion for
the 16 weeks ended April 20, 2002. Our distribution group represented
approximately 87% of our pro forma total net sales in 2001 and for the 16 weeks
ended April 20, 2002. To supply our customers, we currently have a network of 24
high velocity case-pick and flow-through distribution centers, 26 high velocity
piece-pick distribution centers and five low velocity case-pick and piece-pick
distribution centers, that have a total of approximately 21 million square feet
of warehouse space.
Our retail group operates 109 price impact supermarkets that offer everyday
low prices, typically below the prices of market-leading conventional
supermarkets, and that focus on high-quality perishables. These stores typically
cost less to build, maintain and operate than conventional supermarkets. In
addition, we operate 17 limited assortment stores under the yes!LESS(R) banner.
Limited assortment stores offer a narrow selection of low-price, private label
food and other consumable goods and general merchandise at deep-discount prices.
Our retail group net sales were $2.4 billion for 2001 and $669 million for the
16 weeks ended April 20, 2002, representing approximately 13% of our total net
sales for each respective period, on a pro forma basis after giving effect to
the Acquisition. Of those amounts, approximately $2.0 billion and $669 million
were attributable to continuing retail formats for each respective period.
COMPETITIVE STRENGTHS
Interconnected Network of Multi-Tier, High-Volume, Low-Cost Distribution
Centers: Our network of multi-tier distribution centers optimizes the
particular volume, value and velocity characteristics of each product that we
distribute. We employ case-pick (in which products are selected in case
quantities and aggregated and distributed on pallets), piece-pick (in which
products are selected in single-unit quantities and distributed in totes) and
flow-through (in which products are distributed in full pallet quantities)
distribution methods. Our multi-tier process further segregates products into
high velocity items (which are characterized by fast inventory turns, such as
tobacco products, candy and paper products) and low velocity items (which are
characterized by slower inventory turns, such as health and beauty products,
general merchandise and specialty items). Consequently, we are able to serve
consumer package goods retailers of any size and format. We also believe that
our distribution center volumes are among the highest in the consumer package
goods distribution industry. With high volume comes the opportunity to operate
more efficiently by reducing costs through economies of scale, which enables us
to provide our customers with lower-cost merchandise and services.
National Distribution Capabilities: We believe we are the only distributor
of consumer package goods capable of meeting the growing need for a national
supply chain which can serve all retail formats anywhere in the United States.
In addition, we believe we are one of only two suppliers capable of
7
distributing consumer package goods to convenience stores and related
convenience-oriented retailers across the United States and western Canada.
Efficient Centralized Purchasing: We currently make category management
decisions and negotiate with vendors for approximately 84% of our merchandise
procurement from one location, our customer support center near Dallas, Texas.
We believe our customer support center is one of the largest volume-buying
locations of consumable goods in the United States. Centralized purchasing
benefits us and ultimately, our customers, in several ways. It allows us to
lower our cost of goods through aggregated purchasing power, and it lowers our
administrative costs by eliminating the redundancy involved in purchasing
through multiple locations. It also makes it less expensive for our vendors to
serve us, which we believe in turn reduces our cost of goods. We believe that
our centralized purchasing capabilities are valuable to national retailers, as
well as the smaller independent retailers that make up our traditional customer
base.
Diverse Distribution Customer Base: We distribute to approximately 50,000
retail store locations that operate in a wide variety of formats across the
United States and western Canada. On a pro forma basis after giving effect to
the Acquisition, other than Kmart, which accounted for 17% of our net sales in
2001, no customer accounted for more than approximately 2% of our fiscal 2001
net sales.
Successful Price Impact Retail Format: Our price impact supermarkets offer
name-brand and private label consumable goods at significantly lower prices than
conventional supermarkets. We keep prices low by leveraging our existing
distribution and procurement capabilities and maintaining a lower cost structure
associated with operating these stores. We believe this format is profitable
because we offer a reduced number of product selections, focus on high-turnover
products and product categories, employ flow-through distribution methods that
reduce product storage and handling expense and minimize store operating costs.
Experienced Management Team: Our management team is led by Mark Hansen,
Chairman and Chief Executive Officer, who has been with Fleming since 1998.
Since Mr. Hansen joined us, we have further strengthened our management team
through the addition of a number of experienced officers across key functional
areas of our organization including information technology, logistics,
merchandising and supply chain management, retail store operations, finance and
human resources. These executives bring substantial experience from leading food
wholesale, supermarket, supercenter and general merchandise retailers.
BUSINESS STRATEGY
Our business strategy is to use our competitive strengths to achieve sales
and earnings growth in both our distribution group and retail group. As
principal elements of our strategy, we intend to:
Further Grow Sales to New Channel Retailers: We believe that our network
of multi-tier distribution centers strategically positions us to grow our sales
to new channel retailers. In recent years, consumers have been shifting their
purchases of food and other consumable goods away from conventional full-service
grocery stores toward these other retail channels. For this reason, we have
moved beyond our historic focus on conventional full-service grocery stores and
have successfully targeted convenience stores and other convenience-related
retailers, supercenters, discount stores, price impact stores, dollar stores,
ethnic food stores, limited-assortment stores, drug stores, military exchanges
and other specialty retailers, as evidenced by our recent supply agreement with
Target.
Grow Sales to Traditional Format Customers: Despite being the largest
distributor in the wholesale grocery industry, we currently account for a small
percentage of sales in this traditional core market, representing substantial
room for additional growth. Many of our potential customers are currently served
by local or regional wholesalers that cannot offer the efficiencies produced by
our nationwide network of multi-tier distribution centers and our centralized
purchasing. Our repositioned distribution group has already enabled us to
increase sales to existing and new customers in this sector, and we expect to be
able to continue this trend.
8
Grow Sales to Self-Distributing Chain Supermarkets: In addition to
enabling us to grow our sales of consumer package goods and other merchandise to
new channel retailers and our traditional format customers, we believe that we
can employ our network of multi-tier distribution centers to expand our
distribution capabilities to serve large, national chain supermarkets that
currently self-distribute. For example, during the next five years we will
supply 39 Albertson's stores in Oklahoma and Nebraska. We believe that our
national presence, our multi-tier distribution platform and our centralized
purchasing capabilities will provide national chain supermarkets with a
compelling alternative to self-distribution. We are seeking additional
opportunities to establish similar relationships with other major supermarket
chains.
Continue to Improve Working Capital Management and Reduce Costs: We intend
to improve our working capital management primarily by further developing our
centralized procurement operations, taking advantage of the efficiencies created
by our multi-tier distribution network, and by continuing to develop and
implement our "F-1" supply chain technologies to better integrate our
distribution centers and our central procurement operations.
9
SUMMARY HISTORICAL CONSOLIDATED AND UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The following table displays our summary financial data for the periods
ended and as of the dates indicated. We derived the historical data for the
fiscal years ended December 25, 1999, December 30, 2000 and December 29, 2001
and as of those dates from our audited consolidated financial statements. We
derived the historical data for the 16 weeks ended April 21, 2001 and April 20,
2002 and as of those dates from our unaudited consolidated condensed financial
statements, which include all adjustments that management considers necessary
for a fair presentation of our financial position and results of operation for
those periods. The historical data for the 16 weeks ended April 20, 2002 are not
necessarily indicative of the results that may be expected for any other interim
period or for the full fiscal year ending December 28, 2002. The summary
unaudited pro forma income statement data give effect to the Acquisition and
related financings as if each of these transactions had occurred at the
beginning of the period. The summary unaudited pro forma balance sheet data give
effect to these transactions as if each of these transactions had occurred on
April 20, 2002. The summary pro forma financial data are not intended to
represent our financial position or results of operations had these transactions
been completed as of such dates or to project our financial position or results
of operations for any future period or date. You should read the information set
forth below together with the other financial information contained or
incorporated by reference in this prospectus.
<Table>
<Caption>
HISTORICAL PRO FORMA
------------------------------------------------------------------ ---------
FISCAL YEAR ENDED(1) 16 WEEKS ENDED 52 WEEKS
------------------------------------------ --------------------- ENDED
DECEMBER 25, DECEMBER 30, DECEMBER 29, APRIL 21, APRIL 20, APRIL 20,
1999(2) 2000(3) 2001(4) 2001(5) 2002(6) 2002
------------ ------------ ------------ --------- --------- ---------
INCOME STATEMENT DATA:
Net sales(7)......................... $14,218 $14,369 $15,558 $4,137 $4,686 $19,603
Costs and expenses:
Cost of sales(7)................... 12,781 13,022 14,367 3,771 4,347 18,302
Selling and administrative......... 1,262 1,187 961 315 255 1,002
Interest expense................... 165 175 166 58 50 184
Interest income and other.......... (30) (25) (24) (9) (7) (23)
Impairment/restructuring charge
(credit)......................... 103 213 (24) (27) -- 3
Litigation charge (credit)......... -- (2) 49 2 -- 49
------- ------- ------- ------ ------ -------
Total costs and expenses....... 14,281 14,570 15,495 4,110 4,645 19,517
------- ------- ------- ------ ------ -------
Earnings (loss) before taxes......... (63) (201) 63 27 41 86
Taxes on income (loss)............... (18) (79) 36 11 16 48(8)
------- ------- ------- ------ ------ -------
Earnings (loss) before extraordinary
charge(9).......................... (45) (122) 27 16 25 38
Extraordinary charge from early
retirement of debt (net of
taxes)............................. -- -- (4) (4) -- --
------- ------- ------- ------ ------ -------
Net earnings (loss)(9)......... $ (45) $ (122) $ 23 $ 12 $ 25 $ 38(8)
======= ======= ======= ====== ====== =======
Diluted earnings (loss) per
share(10).......................... $ (1.17) $ (3.15) $ 0.52 $ 0.29 $ 0.52 $ 0.69(8)
BALANCE SHEET DATA: (AT END OF
PERIOD)
Cash and cash equivalents.......... $ 7 $ 30 $ 17 $ 27 $ 4 $ 5
Total assets....................... 3,573 3,403 3,655 3,176 3,824 4,443
Total debt (including current
maturities and capital leases)... 1,694 1,669 1,811 1,636 1,917 2,203
Shareholders' equity............... 561 427 498 494 518 687
</Table>
10
<Table>
<Caption>
HISTORICAL PRO FORMA
------------------------------------------------------------------ ---------
FISCAL YEAR ENDED(1) 16 WEEKS ENDED 52 WEEKS
------------------------------------------ --------------------- ENDED
DECEMBER 25, DECEMBER 30, DECEMBER 29, APRIL 21, APRIL 20, APRIL 20,
1999(2) 2000(3) 2001(4) 2001(5) 2002(6) 2002
------------ ------------ ------------ --------- --------- ---------
OTHER FINANCIAL AND OPERATING DATA:
EBITDA(11)......................... $ 281 $ 154 $ 385 $ 137 $ 137 $ 446
Adjusted EBITDA(12)................ 411 456 476 136 137 538
Depreciation and
amortization(13)................. 158 169 166 51 46 184
Capital expenditures............... 166 151 238 48 61 259
Adjusted EBITDA to interest
expense.......................... 2.92x
Net debt to Adjusted EBITDA(14).... 4.09x
</Table>
- ---------------
(1) Fiscal 2000 is a 53-week year; all other years are 52 weeks.
(2) The results in 1999 reflect an impairment/restructuring charge with related
costs totaling $137 million ($92 million after-tax) related to our
strategic plan. Such period also reflects unusual items ($31 million charge
to close ten conventional retail stores, income of $22 million from
extinguishing a portion of the self-insured workers' compensation
liability, interest income of $9 million related to refunds in federal
income taxes from prior years, and $6 million in gains from the sale of
distribution facilities) netting to $6 million of income ($3 million
after-tax).
(3) The results in 2000 reflect an impairment/restructuring charge with related
costs totaling $309 million ($183 million after-tax) relating to our
strategic plan. Such period also reflects unusual items ($10 million charge
related primarily to asset impairment on retail stores, income of $2
million relating to litigation settlements, and $9 million in gains from
the sale of distribution facilities) netting to less than $1 million of
income ($1 million loss after-tax).
(4) The results in 2001 reflect an impairment/restructuring credit totaling $24
million ($25 million after-tax reflecting the tax expense impact of
goodwill permanent differences from the sale of certain retail stores)
relating to our strategic plan. Such period also reflects unusual items
($49 million in charges relating to litigation settlements, $20 million in
charges relating to Kmart's bankruptcy reorganization and $2 million due to
early retirement of debt) netting to approximately $70 million in charges
($42 million after-tax).
(5) The results in the first quarter of 2001 reflect an
impairment/restructuring net credit totaling $1 million (less than $1
million after-tax) relating to our strategic plan. Such period also
reflects unusual items ($2 million in charges relating to litigation
settlements and approximately $2 million in charges due to early retirement
of debt) netting to approximately $3 million in charges ($2 million
after-tax).
(6) During the first quarter of 2002 we adopted SFAS No. 142 and ceased
amortizing goodwill cost. No prior period restatements were made. Goodwill
amortization for any of the prior years reported did not exceed $33
million. Also, cash and cash equivalents and total debt amounts exclude
amounts related to the 10 1/2% senior subordinated notes due 2004 and
related transaction fees as these amounts are being held in trust to redeem
the notes in June 2002.
(7) During the first quarter of 2002, we adopted EITF 01-9 and reduced sales
and cost of sales for all prior periods with the impact on any year
reported not exceeding $75 million. The adoption had no effect on gross
margins or earnings.
(8) The pro forma combined effective tax rate of 56% for the 52 weeks ended
April 20, 2002 includes the impact of an unusual tax gain related to our
disposition of non-strategic retail operations and the pro forma
amortization of goodwill from our acquisition of Core-Mark, most of which
would not have been tax deductible. Our effective tax rate would have been
approximately 40% absent these two items since we will not amortize
goodwill in accordance with SFAS 142 and do not anticipate another similar
tax gain. This effective tax rate of approximately 40% would have
represented a pro forma combined tax expense of $34.0 million, net income
of $52.1 million and diluted income per share of $0.95.
(9) On December 30, 2001, we adopted SFAS 142, Accounting for Goodwill and
Other Intangible Assets, which eliminated periodic amortization of
goodwill. If we had applied the nonamortization provisions of SFAS 142 for
each of the periods presented, earnings (loss) before extraordinary charge
would have been $(26) million for 1999, $(103) million for 2000, $46
million for 2001, $22 million for the 16 weeks ended April 21, 2001; and
$60 million for the pro forma 52 weeks ended April 20, 2002; and net
earnings (loss) would have been $(26) million for 1999, $(103) million for
2000, $42 million for 2001, $18 million for the 16 weeks ended April 21,
2001, and $60 million for the pro forma 52 weeks ended April 20, 2002.
(10) See note (9). If we had applied the nonamortization provisions of SFAS 142
for all periods presented our diluted earnings (loss) per share would have
been $(0.67) for 1999, $(2.67) for 2000, $0.94 for 2001, $0.42 for the 16
weeks ended April 21, 2001, and $1.08 for the pro forma 52 weeks ended
April 20, 2002.
11
(11) EBITDA is earnings before extraordinary items, interest expense, income
taxes, depreciation and amortization, equity investment results and LIFO
provision. EBITDA should not be considered as an alternative measure of our
net income, operating performance, cash flow or liquidity. We provide it as
additional information related to our ability to service debt; however,
conditions may require conservation of funds for other uses. Although we
believe EBITDA enhances your understanding of our financial condition, this
measure, when viewed individually, is not necessarily a better indicator of
any trend as compared to measures (e.g., net sales, net earnings, net cash
flows, etc.) conventionally computed in accordance with GAAP. Amounts
presented may not be comparable to similar measures disclosed by other
companies.
(12) Adjusted EBITDA is EBITDA less unusual adjustments (e.g., strategic plan
charges and specific litigation charges). The following table reconciles
EBITDA to Adjusted EBITDA:
<Table>
<Caption>
HISTORICAL PRO FORMA
------------------------------------------------------------------ ---------
FISCAL YEAR ENDED 16 WEEKS ENDED 52 WEEKS
------------------------------------------ --------------------- ENDED
DECEMBER 25, DECEMBER 30, DECEMBER 29, APRIL 21, APRIL 20, APRIL 20,
1999 2000 2001 2001 2002 2002
------------ ------------ ------------ --------- --------- ---------
EBITDA............................... $281 $154 $385 $137 $137 $446
Add back:
Non-cash strategic plan charges.... 78 121 (12) (18) -- 6
Non-cash unusual adjustments....... 14 8 20 -- -- 20
---- ---- ---- ---- ---- ----
EBITDA excluding non-cash strategic
plan charges and unusual
adjustments........................ 373 283 393 119 137 472
Add back:
Cash related strategic plan
charges.......................... 58 181 36 17 -- 19
Cash related unusual adjustments... (20) (8) 47 -- -- 47
---- ---- ---- ---- ---- ----
Adjusted EBITDA...................... $411 $456 $476 $136 $137 $538
==== ==== ==== ==== ==== ====
</Table>
(13) Depreciation and amortization expense includes goodwill amortization, if
any, and excludes amortization of debt cost which is reflected in interest
expense.
(14) Net debt is calculated as total debt (including capital lease obligations)
less cash and cash equivalents.
12
RISK FACTORS
You should read and carefully consider the risks described below, together
with the other information contained in or incorporated by reference into this
prospectus, before making a decision to tender your old notes in the exchange
offer. The risk factors set forth below, other than the first risk factor set
forth below, are generally applicable to the old notes as well as the exchange
notes. If any of the following risks actually occur, our business, financial
condition, operating results and prospects could be materially adversely
affected, which in turn could adversely affect our ability to repay the notes.
IF YOU DO NOT EXCHANGE YOUR OLD NOTES PURSUANT TO THIS EXCHANGE OFFER, YOU MAY
NEVER BE ABLE TO SELL YOUR OLD NOTES.
If you are a holder of old notes, it may be difficult for you to sell old
notes that are not exchanged in the exchange offer. Those notes may not be
offered or sold unless they are registered or they are exempt from the
registration requirements under the Securities Act and applicable state
securities laws. The restrictions on transfer of your old notes arise because we
issued the old notes pursuant to an exemption from the registration requirements
of the Securities Act and applicable state securities laws. We do not intend to
register the old notes under the Securities Act.
If you do not tender your old notes or if we do not accept some of your old
notes, those notes will continue to be subject to the transfer and exchange
restrictions in:
- the indenture;
- the legend on the old notes; and
- the offering memorandum relating to the old notes.
Moreover, to the extent old notes are tendered and accepted in the exchange
offer, the trading market, if any, for the old notes would be adversely
affected.
WE HAVE A SUBSTANTIAL AMOUNT OF DEBT AND DEBT SERVICE OBLIGATIONS, WHICH COULD
ADVERSELY AFFECT OUR FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR
OBLIGATIONS UNDER THE NOTES AND OUR OTHER OUTSTANDING DEBT INSTRUMENTS.
We have a substantial amount of debt outstanding. The following chart shows
certain important credit statistics as of April 20, 2002, on a pro forma basis
after giving effect to the Acquisition and related financings.
<Table>
<Caption>
AT APRIL 20, 2002,
AS ADJUSTED
------------------
(IN THOUSANDS)
Total debt (including capital leases)....................... $2,202,719
Shareholders' equity........................................ 687,382
Total capitalization........................................ 2,890,101
Debt to capitalization...................................... 76.2%
</Table>
The amount of our debt could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations with respect to
the notes and our other outstanding debt instruments;
- require us to dedicate a substantial portion of our cash flow to payments
on our debt;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to fund future working capital, capital expenditures
and other general corporate requirements;
13
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate; and
- limit, along with the financial and other restrictive covenants in our
debt, among other things, our ability to borrow additional funds. If we
fail to comply with those covenants, it could result in an event of
default which, if not cured or waived, could have a material adverse
effect on our financial condition.
We and our subsidiaries may be able to incur substantial additional debt in
the future, including secured debt. The terms of the indentures governing our
outstanding debt and our credit facility do not fully prohibit us or our
subsidiaries from doing so. As of April 20, 2002, on a pro forma basis after
giving effect to the Acquisition and related financings, our credit facility
would have provided additional capacity of up to approximately $400 million, all
of which would be secured. If new debt is added to our and our subsidiaries'
current debt levels, the related risks that we and they now face could
intensify.
Our ability to make payments on and to refinance our debt will depend on
our financial and operating performance, which may fluctuate significantly from
quarter to quarter and is subject to prevailing economic conditions and to
financial, business and other factors beyond our control.
We cannot assure you that our business will generate sufficient cash flow
from operations or that future borrowings will be available to us under our
credit facility in an amount sufficient to enable us to pay our debt, including
the notes, or to fund our other liquidity needs. We may need to refinance all or
a portion of our debt, including the notes, on or before maturity. We cannot
assure you that we will be able to refinance any of our debt, including our
credit facility or the notes, on commercially reasonable terms or at all.
WE MAY BE MATERIALLY ADVERSELY AFFECTED BY THE BANKRUPTCY OF KMART CORPORATION.
Kmart Corporation is our largest customer, accounting for 17% of our net
sales in 2001, on a pro forma basis after giving effect to the Acquisition. We
began shipments under a ten-year agreement in April 2001, with full
implementation in July 2001. On January 22, 2002, Kmart and certain of its
subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S.
Bankruptcy Code. Shortly thereafter, we and Kmart entered into a critical vendor
agreement under the terms of which Kmart paid us $76 million of indebtedness and
we agreed to supply Kmart for two years. We will assert a claim in the
bankruptcy proceeding for obligations under our ten-year distribution agreement.
A material portion of this claim may not be paid by Kmart.
The terms of our distribution agreement provide that Kmart can terminate
if, among other things, the volume of Kmart's purchases decline by certain
amounts, if we materially breach our obligations, including a failure to
maintain specified service levels, or if we experience certain types of changes
of control. Kmart can also elect to terminate the distribution agreement on
12-months written notice given after the fifth anniversary of its effective
date, with the termination to take place at the end of a transition period of up
to an additional 12 months at Kmart's discretion.
Subject to the effect of the critical vendor agreement, Kmart has the right
to assume or reject the distribution agreement with us. If Kmart rejects it, a
breach by Kmart will result, effective immediately prior to the bankruptcy
filing date, but we may still have to supply Kmart for a 12-month transition
period. If Kmart assumes the distribution agreement, it would be required to
cure all defaults, including payment of our prepetition claim. Because Kmart is
a substantial portion of our business, negative information about Kmart's
performance, financial condition, business prospects and progress through its
bankruptcy may adversely affect the market for and prices of the notes.
We cannot predict what effect this bankruptcy will have on us, but Kmart's
announced plan to close 283 stores will result in the elimination of sales to
those stores. Further, a failure by Kmart to successfully reorganize or to
continue as a going concern would have a material adverse effect on us. Also,
although no material litigation is currently outstanding, we may be involved in
litigation related to the Kmart bankruptcy.
14
THE NOTES ARE SUBORDINATED TO ALL SENIOR INDEBTEDNESS.
The notes and the guarantees of the notes by our subsidiaries are
subordinated in right of payment to all of our existing and future Senior
Indebtedness, as defined in the "Description of Notes -- Subordination" section
of this prospectus. As a result, in the event of bankruptcy, liquidation or
reorganization or upon acceleration of the notes due to an event of default and
in specific other events, our assets will be available to pay obligations on the
notes only after all Senior Indebtedness has been paid in full in cash or other
payment satisfactory to the holders of the notes. The incurrence of additional
indebtedness and other liabilities could adversely affect our ability to pay our
obligations on the notes. As of April 20, 2002, on a pro forma basis after
giving effect to the Acquisition and related financings, we and our subsidiaries
had $2.2 billion of indebtedness, of which $1.4 billion was senior to the notes.
We anticipate that from time to time we may incur additional indebtedness,
including Senior Indebtedness.
NOT ALL OF OUR SUBSIDIARIES WILL GUARANTEE THE NOTES, AND YOUR RIGHT TO RECEIVE
PAYMENTS ON THE NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR NON-GUARANTOR
SUBSIDIARIES DECLARES BANKRUPTCY, LIQUIDATE OR REORGANIZE.
Not all of our subsidiaries will guarantee the notes. In the event any of
our non-guarantor subsidiaries becomes insolvent, liquidates, reorganizes,
dissolves or otherwise winds up, holders of their indebtedness and their trade
creditors will generally be entitled to payment on their claims from the assets
of those subsidiaries before any of those assets are made available to us.
Consequently, your claims in respect of the notes will be effectively
subordinated to all of the liabilities of our non-guarantor subsidiaries.
THE INDENTURE GOVERNING THE NOTES, OUR CREDIT FACILITY AND OUR OTHER EXISTING
INDEBTEDNESS CONTAIN PROVISIONS THAT COULD MATERIALLY RESTRICT OUR BUSINESS.
The indenture governing the notes, our credit facility and our other
existing indebtedness contain a number of significant covenants that, among
other things, restrict our ability to:
- dispose of assets;
- incur additional debt;
- guarantee third-party obligations;
- repay other debt or amend other debt instruments;
- create liens on assets;
- enter into capital leases;
- make investments, loans or advances;
- make acquisitions or engage in mergers or consolidations;
- make capital expenditures; and
- engage in certain transactions with our subsidiaries and affiliates.
In addition, under our credit facility, we are required to meet a number of
financial ratios and tests.
Our ability to comply with these covenants may be affected by events beyond
our control. If we breach any of these covenants or restrictions, it could
result in an event of default under our credit facility and the documents
governing our other existing indebtedness, which would permit our lenders to
declare all amounts borrowed thereunder to be due and payable, together with
accrued and unpaid interest, and our senior lenders could terminate their
commitments to make further extensions of credit under our credit facility. If
we were unable to repay debt to our secured lenders, they could proceed against
the collateral securing the debt.
15
IF THE CUSTOMERS TO WHOM WE LEND MONEY OR FOR WHOM WE GUARANTEE STORE LEASE
OBLIGATIONS FAIL TO REPAY US, IT COULD HARM OUR FINANCIAL RESULTS.
We provide subleases, extend loans to and make investments in many of our
retail store customers, often in conjunction with the establishment of long-term
supply contracts. As of April 20, 2002, on a pro forma basis after giving effect
to the Acquisition, we had an aggregate of $128 million in outstanding loans to
our customers. Our loans to our customers are generally not investment grade and
are highly illiquid. We also have investments in customers through direct
financing leases of real property and equipment, lease guarantees, operating
leases or credit extensions for inventory purchases.
Although we have strict credit policies and apply cost/benefit analyses to
these investment decisions, we face the risk that credit losses from existing or
future investments or commitments could adversely affect our financial results.
On a pro forma basis after giving effect to the Acquisition, our credit loss
expense from receivables as well as from investments in customers was $40
million in 2001 (including a $17 million charge relating to the Kmart
bankruptcy) and $1 million for the 16 weeks ended April 20, 2002.
VARIOUS CHANGES IN THE DISTRIBUTION AND RETAIL MARKETS IN WHICH WE OPERATE HAVE
LED AND MAY CONTINUE TO LEAD TO REDUCED SALES AND MARGINS FOR US AND LOWER
PROFITABILITY FOR OUR CUSTOMERS.
The distribution and retail markets in which we operate are undergoing
accelerated change as distributors and retailers seek to lower costs and provide
additional services in an increasingly competitive environment. An example of
this is the growing trend of large self-distributing chains consolidating to
reduce costs and gain efficiencies. Eating away from home and alternative format
food stores, such as warehouse stores and supercenters, have taken market share
from traditional supermarket operators, including independent grocers, many of
whom are our customers. Vendors, seeking to ensure that more of their
promotional fees and allowances are used by retailers to increase sales volume,
increasingly direct promotional dollars to large self-distributing chains. We
believe that these changes have led to reduced sales, reduced margins and lower
profitability among many of our customers and, consequently, for us. If the
strategies we have developed in response to these changing market conditions are
not successful, it could harm our financial condition and business prospects.
CONSUMABLE GOODS DISTRIBUTION IS A LOW-MARGIN BUSINESS AND IS SENSITIVE TO
ECONOMIC CONDITIONS.
We derive most of our revenues from the consumable goods distribution
industry. This industry is characterized by a high volume of sales with
relatively low profit margins. A significant portion of our sales are at prices
that are based on product cost plus a percentage markup. Consequently, our
results of operations may be negatively impacted when consumable goods prices go
down, even though our percentage markup may remain constant. The consumable
goods industry is also sensitive to national and regional economic conditions,
and the demand for our consumable goods has been adversely affected from time to
time by economic downturns.
WE FACE COMPETITION IN BOTH OUR DISTRIBUTION AND RETAIL MARKETS, AND IF WE ARE
UNABLE TO COMPETE EFFECTIVELY IN THESE MARKETS, IT COULD HARM OUR BUSINESS.
Our distribution group operates in a highly competitive market. We face
competition from local, regional and national food distributors on the basis of
price, quality and assortment, schedules and reliability of deliveries and the
range and quality of services provided. We also compete with retail supermarket
chains that self-distribute, purchasing directly from vendors and distributing
products to their supermarkets for sale to the consumer. Consolidation of
self-distributing chains may produce even stronger competition for our
distribution group.
Our retail group competes with other food outlets on the basis of price,
quality and assortment, store location and format, sales promotions,
advertising, availability of parking, hours of operation and store appeal.
Traditional mass merchandisers have gained a growing foothold in food marketing
and distribution with alternative store formats, such as warehouse stores and
supercenters, which depend on concentrated
16
buying power and low-cost distribution technology. We expect that stores with
alternative formats will continue to increase their market share in the future.
Retail consolidations not only produce stronger competition for our retail
group, but may also result in declining sales in our distribution group if our
existing customers are acquired by self-distributing chains.
Some of our competitors have greater financial and other resources than we
do. In addition, consolidation in the industry, heightened competition among our
vendors and new entrants could create additional competitive pressures that
reduce our margins and adversely affect our business. If we fail to successfully
respond to these competitive pressures or to implement our strategies
effectively, it could have a material adverse effect on our financial condition
and business prospects.
BECAUSE WE OWN AND OPERATE REAL ESTATE, WE FACE THE RISK OF BEING HELD LIABLE
FOR ENVIRONMENTAL DAMAGES THAT MAY OCCUR ON OUR PROPERTIES.
Our facilities and operations are subject to various laws, regulations and
judicial and administrative orders concerning protection of the environment and
human health, including provisions regarding the transportation, storage,
distribution, disposal or discharge of certain materials. In conformity with
these provisions, we have a comprehensive program for testing, removal,
replacement or repair of our underground fuel storage tanks and for site
remediation where necessary. Although we have established reserves that we
believe will be sufficient to satisfy the anticipated costs of all known
remediation requirements, we cannot assure you that these reserves will be
sufficient.
We and others have been designated by the U.S. Environmental Protection
Agency and by similar state agencies as potentially responsible parties under
the Comprehensive Environmental Response, Compensation and Liability Act, or
CERCLA, or similar state laws, as applicable, with respect to EPA-designated
Superfund sites. While liability under CERCLA for remediation at these sites is
generally joint and several with other responsible parties, we believe that, to
the extent we are ultimately determined to be liable for the expense of
remediation at any site, such liability will not result in a material adverse
effect on our consolidated financial position or results of operations.
WE ARE A PARTY TO OR THREATENED WITH VARIOUS LITIGATION AND CONTINGENT LOSS
SITUATIONS ARISING IN THE ORDINARY COURSE OF OUR BUSINESS. IF ANY PROCEEDING IS
RESOLVED AGAINST US, IT COULD HARM OUR FINANCIAL CONDITION AND BUSINESS
PROSPECTS.
We are a party to or threatened with various other litigation and
contingent loss situations arising in the ordinary course of our business
including:
- disputes with customers and vendors;
- disputes with owners or creditors of financially troubled or failed
customers;
- disputes with employees;
- disputes with insurance carriers;
- disputes with landlords and lessees;
- disputes with tax authorities;
- litigation involving health and other effects of cigarette smoking and
other uses of tobacco; and
- litigation by the U.S. Department of Justice to recover federal Medicare
costs allegedly connected to smoking;
some of which may be for substantial amounts. We incur the costs of defending
any such litigation whether or not a claim has merit. We intend to vigorously
defend against all lawsuits, but we cannot predict the outcome of any case. An
unfavorable outcome in any case could harm our business and financial results.
17
BECAUSE WE SELL FOOD AND OTHER PRODUCTS, WE ARE SUBJECT TO PRODUCT LIABILITY
CLAIMS.
Like any other seller of food and other consumer products, we face the risk
of exposure to product liability claims in the event that people who purchase
products we sell become injured or experience illness from those products. We
believe that we have sufficient primary and excess umbrella liability insurance
to protect us against any product liability claims that may arise. However, this
insurance may not continue to be available at a reasonable cost, or, even if it
is available, it may not be adequate to cover our liabilities. We generally seek
contractual indemnification and insurance coverage from parties supplying our
products, but this indemnification or insurance coverage is limited, as a
practical matter, to the creditworthiness of the indemnifying party and the
policy limits of any insurance provided by suppliers. If we do not have adequate
insurance or contractual indemnification to cover our liabilities, product
liability claims could materially reduce our earnings.
OUR CURRENT STRATEGY INVOLVES GROWTH THROUGH ACQUISITIONS, WHICH REQUIRES US TO
INCUR SUBSTANTIAL COSTS AND POTENTIAL LIABILITIES FOR WHICH WE MAY NEVER
REALIZE THE ANTICIPATED BENEFITS.
As part of our growth strategy for our distribution group, we intend to
continue to seek strategic acquisitions of other distributors on a selective
basis. In addition, our retail group intends to continue to selectively acquire
stores operated by others on a strategic basis. Since the beginning of 2001, we
have acquired several businesses.
On June 18, 2002, we acquired Core-Mark International, Inc., a distributor
of consumer package goods to nearly 30,000 convenience stores and other
retailers in the western United States and western Canada from its network of 19
distribution centers. Also, in April 2002, we acquired Head Distributing
Company, a wholesale distributor that operates two piece-pick distribution
centers and serves approximately 3,000 retail locations in six southeastern
states. On June 28, 2002, we acquired inventory and assets at Albertson's
distribution center in Tulsa, Oklahoma and caused a third party to acquire the
warehouse and lease it to us in order for us to supply 39 Albertson's stores in
Oklahoma and Nebraska for the next five years. In September 2001, we purchased
certain assets and inventory of Miller & Hartman South, LLC, a wholesale
distributor serving over 1,800 convenience stores in Kentucky and surrounding
states. In April 2001, we acquired Minter-Weisman Co., a wholesale distribution
company serving over 800 convenience stores in Minnesota, Wisconsin and
surrounding states.
In May 2002, we purchased seven stores located in the Dallas, Texas
metropolitan area, which we operate under our price impact format. In September
2001, we purchased five Smith's Food & Drug Stores located in New Mexico and
Texas from Kroger Co. which we operate under our price impact format. In April
2001, we also purchased seven Food 4 Less stores located in Central California
from Whitco Foods, Inc. which we operate as price impact stores under the Food 4
Less banner.
We cannot assure you that we will be able to continue to implement our
growth strategy, or that this strategy will ultimately be successful. We
regularly engage in evaluations of potential acquisitions. Any potential
acquisition may result in significant transaction expenses, increased interest
and amortization expense, increased capital expenditures, increased depreciation
expense and increased operating expense, any of which could have a material
adverse effect on our operating results.
Achieving the benefits of these acquisitions will depend in part on our
ability to integrate those businesses with our business in an efficient manner.
We cannot assure you that this will happen or that it will happen in an
efficient manner. Our consolidation of operations following these acquisitions
may require substantial attention from our management. The diversion of
management attention and any difficulties encountered in the transition and
integration process could have a material adverse effect on our ability to
achieve expected net sales, operating expenses and operating results for these
acquired businesses. We cannot assure you that we will realize any of the
anticipated benefits of any acquisition, and if we fail to realize these
anticipated benefits, our operating performance could suffer.
Furthermore, we may not be able to identify suitable acquisition candidates
in the future, obtain acceptable financing or consummate any future
acquisitions.
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WE OPERATE IN A COMPETITIVE LABOR MARKET, AND A SUBSTANTIAL NUMBER OF OUR
EMPLOYEES ARE COVERED BY COLLECTIVE BARGAINING AGREEMENTS.
Our continued success will depend on our ability to attract and retain
qualified personnel in both our distribution and retail groups. We compete with
other businesses in our markets with respect to attracting and retaining
qualified employees. A shortage of qualified employees would require us to
enhance our wage and benefits packages in order to compete effectively in the
hiring and retention of qualified employees or to hire more expensive temporary
employees. In addition, approximately 45%, or approximately 9,500, of our
employees are covered by collective bargaining agreements, most of which expire
at various times over the course of the next five years.
We cannot assure you that we will be able to renew our respective
collective bargaining agreements, that our labor costs will not increase, that
we will be able to recover any increases through increased prices charged to
customers or that we will not suffer business interruptions as a result of
strikes or other work stoppages. If we fail to attract and retain qualified
employees, to control our labor costs, or to recover any increased labor costs
through increased prices charged to our customers, it could harm our business.
UNDER CERTAIN CIRCUMSTANCES, FEDERAL AND STATE LAWS MAY ALLOW COURTS TO VOID
THE GUARANTEES OF THE NOTES AND REQUIRE NOTEHOLDERS TO RETURN PAYMENTS THEY
RECEIVE FROM OUR SUBSIDIARY GUARANTORS.
Under the federal Bankruptcy Code and comparable provisions of state
fraudulent transfer laws, a court could void the guarantees or subordinate
claims in respect of the guarantees to all of a Subsidiary Guarantor's other
debts if, among other things, any Subsidiary Guarantor, at the time it incurred
the indebtedness evidenced by its guarantee:
- received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee; and
- was insolvent or rendered insolvent by reason of the incurrence; or
- was engaged in a business or transaction for which its remaining assets
constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay as they became due.
In addition, a court could void any payment by a Subsidiary Guarantor or
require a noteholder to return the payment to a Subsidiary Guarantor or to a
fund for the benefit of its creditors.
The measure of insolvency for purposes of fraudulent transfer laws varies
depending upon the law applied in any proceeding. Generally, however, a
Subsidiary Guarantor would be considered insolvent if:
- the sum of its debts, including contingent liabilities, was greater than
the fair saleable value of its assets; or
- the present fair saleable value of its assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
- it could not pay its debts as they become due.
On the basis of our historical financial information, recent operating
history and other factors, we believe that after giving effect to the issuance
of the guarantees, none of the Subsidiary Guarantors will be insolvent, have
unreasonably small capital for the respective businesses in which they are
engaged or have incurred debts beyond their respective abilities to pay as they
mature. However, we cannot assure you that a court making these determinations
would agree with our conclusions in this regard.
19
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
OF CONTROL OFFER REQUIRED BY THE INDENTURE GOVERNING THE NOTES AND OUR OTHER
EXISTING INDEBTEDNESS. IN ADDITION, OUR BYLAWS MAY NOT PERMIT US TO MAKE THE
CHANGE OF CONTROL PAYMENT EVEN IF WE DO HAVE THE FUNDS.
Upon the occurrence of a change of control of our company, we will be
required to offer to repurchase all outstanding notes and other outstanding
debt. If a change of control were to occur, we cannot assure you that we would
have sufficient funds to pay the repurchase price for all the notes tendered by
the holders. Our credit facility and our other indentures contain, and any
future other agreements relating to other indebtedness to which we become a
party may contain, restrictions or prohibitions on our ability to repurchase
notes or may provide that an occurrence of a change of control constitutes an
event of default under, or otherwise requires payment of amounts borrowed under
those agreements. If a change of control occurs at a time when we are prohibited
from repurchasing the notes, we could seek the consent of our then existing
lenders and noteholders to the repurchase of the notes or attempt to refinance
the borrowings that contain the prohibition. If we were unable to obtain such a
consent or repay the borrowings, we would remain prohibited from repurchasing
the notes. In that case, our failure to repurchase tendered notes would
constitute an event of default under the indenture governing the notes and may
constitute a default under the terms of other indebtedness that we may enter
into from time to time. In addition, our bylaws contain a provision that
prohibits us from adopting a shareholder rights plan or any other form of
"poison pill" without the prior approval of holders of at least a majority of
the shares of our outstanding capital stock. It is unclear whether this
provision of our bylaws would prohibit us from repurchasing the notes in the
event of a change of control. If a court concluded that the change of control
provisions of the indenture governing the notes were inconsistent with or
prohibited by our bylaws, we may not be able to repurchase the notes.
For more details, see the section "Description of Notes" in this prospectus
under the heading "Purchase of Notes Upon a Change of Control."
YOU CANNOT BE SURE THAT A PUBLIC MARKET WILL DEVELOP FOR THE EXCHANGE NOTES.
Before this exchange offer, there was no established trading market for the
exchange notes. We have been informed by certain initial purchasers of the old
notes that they intend to make a market in the exchange notes. However, they may
cease their market-making at any time. In addition, such market-making activity
will be subject to the limits imposed by the Securities Act and the Exchange
Act. Accordingly, we cannot assure you that any market for the exchange notes
will develop or, if one does develop, that it will be maintained. If a public
market for the exchange notes fails to develop or be sustained, the trading
price of the exchange notes could be materially adversely affected.
In addition, the liquidity and the market price of the notes may be
adversely affected by changes in the overall market for debt securities and by
changes in our financial performance or prospects, or in the prospects of the
companies in our industry. The market price of the notes may also be
significantly affected by the market price of our common stock, which could be
subject to wide fluctuations in response to a variety of factors, including
those described in this "Risk Factors" section. As a result, you cannot be sure
that a public market will develop for the exchange notes.
VOLATILE TRADING PRICES MAY REQUIRE YOU TO BEAR THE FINANCIAL RISK OF AN
INVESTMENT IN THE NOTES FOR AN INDEFINITE PERIOD OF TIME.
If a market develops for the exchange notes, the exchange notes might trade
at prices higher or lower than their initial debt offering price. The trading
price would depend on many factors, such as prevailing interest rates, the
market for similar securities, general economic conditions, and our financial
condition, performance and business prospects. Historically, the market for
non-investment grade debt has been subject to disruptions that have caused
substantial fluctuation in the prices of these securities. The market for the
notes may be subject to such disruptions, which could have an adverse effect on
the price of the notes. You should be aware that you may be required to bear the
financial risk of an investment in the notes for an indefinite period of time.
20
In addition, because we depend on Kmart for a substantial portion of our
business, negative information about Kmart's performance, financial condition
and business prospects may adversely affect the market for and prices of the
notes.
TERRORIST ATTACKS AND OTHER ACTS OF VIOLENCE OR WAR MAY AFFECT THE MARKETS ON
WHICH THE NOTES TRADE, THE MARKETS IN WHICH WE OPERATE, OUR OPERATIONS AND OUR
PROFITABILITY.
Terrorist attacks may negatively affect our operations and your investment.
There can be no assurance that there will not be further terrorist attacks
against the United States or U.S. businesses. These attacks or armed conflicts
may directly impact our physical facilities or those of our suppliers or
customers. Furthermore, these attacks may make travel and the transportation of
our supplies and products more difficult and more expensive and ultimately
affect our sales.
Also as a result of terrorism, the United States has entered into an armed
conflict which could have a further impact on our sales, our supply chain, and
our ability to deliver product to our customers. Political and economic
instability in some regions of the world may also result and could negatively
impact our business. The consequences of any armed conflict are unpredictable,
and we may not be able to foresee events that could have an adverse effect on
our business or your investment.
More generally, any of these events could cause consumer confidence and
spending to decrease or result in increased volatility in the United States and
worldwide financial markets and economy. They also could result in a worsening
of economic conditions in the United States or abroad. Any of these occurrences
could have a significant impact on our operating results, revenues and costs and
may result in the volatility of the market price for our securities and on the
future price of our securities.
21
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
We issued the old notes on April 15, 2002 to Deutsche Bank Securities Inc.,
Lehman Brothers Inc., Salomon Smith Barney Inc., First Union Securities, Inc.,
J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated and UBS Warburg
LLC, the initial purchasers, pursuant to a purchase agreement. The initial
purchasers subsequently sold the old notes to "qualified institutional buyers,"
as defined in Rule 144A under the Securities Act, in reliance on Rule 144A, and
outside the United States under Regulation S of the Securities Act. As a
condition to the sale of the old notes, we entered into a registration rights
agreement with the initial purchasers on April 15, 2002. Pursuant to the
registration rights agreement, we agreed that we would:
(1) file a registration statement with the SEC with respect to the
exchange notes on or before July 12, 2002;
(2) use all reasonable efforts to cause the registration statement to
be declared effective by the SEC on or before October 11, 2002;
(3) use all reasonable efforts to keep the registration statement
effective until the closing of the exchange offer;
(4) use all reasonable efforts to keep the exchange offer open for not
less than 30 days (or longer if required by applicable law) after the date
that notice of the exchange offer is mailed to holders of the old notes;
and
(5) use our best efforts to consummate the exchange offer on or before
November 26, 2002.
We filed a copy of the registration rights agreement as an exhibit to the
registration statement.
RESALE OF THE EXCHANGE NOTES
Based upon an interpretation by the staff of the SEC contained in no-action
letters issued to third parties, we believe that you may exchange old notes for
exchange notes in the ordinary course of business. For further information on
the SEC's position, see Exxon Capital Holdings Corporation, available May 13,
1988, Morgan Stanley & Co. Incorporated, available June 5, 1991 and Shearman &
Sterling, available July 2, 1993, and other interpretive letters to similar
effect. You will be allowed to resell exchange notes to the public without
further registration under the Securities Act and without delivering to
purchasers of the exchange notes a prospectus that satisfies the requirements of
Section 10 of the Securities Act so long as you do not participate, do not
intend to participate, and have no arrangement with any person to participate,
in a distribution of the exchange notes. However, the foregoing does not apply
to you if you are:
- a broker-dealer who purchased the exchange notes directly from us to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act; or
- you are an "affiliate" of ours within the meaning of Rule 405 under the
Securities Act.
In addition, if:
- you are a broker-dealer; or
- you acquire exchange notes in the exchange offer for the purpose of
distributing or participating in the distribution of the exchange notes,
you cannot rely on the position of the staff of the SEC contained in the
no-action letters mentioned above and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction, unless an exemption from registration is otherwise
available.
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Each broker-dealer that receives exchange notes for its own account in
exchange for old notes, which the broker-dealer acquired as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of the exchange notes.
The letter of transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. A broker-dealer may use
this prospectus, as it may be amended or supplemented from time to time, in
connection with resales of exchange notes received in exchange for old notes
which the broker-dealer acquired as a result of market-making or other trading
activities.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions described in this prospectus
and in the letter of transmittal, we will accept any and all old notes validly
tendered and not withdrawn before the expiration date. We will issue $1,000
principal amount of exchange notes in exchange for each $1,000 principal amount
of outstanding old notes surrendered pursuant to the exchange offer. You may
tender old notes only in integral multiples of $1,000.
The form and terms of the exchange notes are the same as the form and terms
of the old notes except that:
- we will register the exchange notes under the Securities Act and,
therefore, the exchange notes will not bear legends restricting their
transfer; and
- holders of the exchange notes will not be entitled to any of the rights
of holders of old notes under the registration rights agreement, which
rights will terminate upon the completion of the exchange offer.
The exchange notes will evidence the same debt as the old notes and will be
issued under the same indenture, so the exchange notes and old notes will be
treated as a single class of debt securities under the indenture.
As of the date of this prospectus, $260,000,000 in aggregate principal
amount of the old notes are outstanding and registered in the name of Cede &
Co., as nominee for The Depository Trust Company. Only registered holders of the
old notes, or their legal representative or attorney-in-fact, as reflected on
the records of the trustee under the indentures, may participate in the exchange
offer. We will not set a fixed record date for determining registered holders of
the old notes entitled to participate in the exchange offer.
You do not have any appraisal or dissenters' rights under the indenture in
connection with the exchange offer. We intend to conduct the exchange offer in
accordance with the provisions of the registration rights agreement and the
applicable requirements of the Securities Act, the Exchange Act and the rules
and regulations of the SEC.
We will be deemed to have accepted validly tendered old notes when, as and
if we had given oral or written notice of acceptance to the exchange agent. The
exchange agent will act as your agent for the purposes of receiving the exchange
notes from us.
If you tender old notes in the exchange offer you will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of old notes
pursuant to the exchange offer. We will pay all charges and expenses, other than
the applicable taxes described below, in connection with the exchange offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term expiration date will mean 5:00 p.m., New York City time on
, 2002, unless we, in our sole discretion, extend the exchange offer,
in which case the term expiration date will mean the latest date and time to
which we extend the exchange offer.
23
To extend the exchange offer, we will:
- notify the exchange agent of any extension orally or in writing; and
- mail to each registered holder an announcement that will include
disclosure of the approximate number of old notes deposited to date,
each before 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date.
We reserve the right, in our reasonable discretion:
- to delay accepting any old notes:
- to extend the exchange offer; or
- if any conditions listed below under "-- Conditions" are not satisfied,
to terminate the exchange offer by giving oral or written notice of the
delay, extension or termination to the exchange agent.
We will follow any delay in acceptance, extension or termination as
promptly as practicable by oral or written notice to the registered holders. If
we amend the exchange offer in a manner we determine constitutes a material
change, we will promptly disclose the amendment in a prospectus supplement that
we will distribute to the registered holders. We will also extend the exchange
offer for a period of five to ten business days, depending upon the significance
of the amendment and the manner of disclosure, if the exchange offer would
otherwise expire during the five to ten business day period.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest at the same rate and on the same
terms as the old notes. Consequently, the exchange notes will bear interest at a
rate equal to 9 7/8% per annum (calculated using a 360-day year). Interest will
be payable semi-annually on each May 1 and November 1.
You will receive interest on from the date of initial issuance of
the exchange notes, plus an amount equal to the accrued interest on the old
notes from the date of initial issuance of the old notes to the date of
exchange. We will deem the right to receive any interest accrued on the old
notes waived by you if we accept your old notes for exchange.
PROCEDURES FOR TENDERING
You may tender old notes in the exchange offer only if you are a registered
holder of old notes. To tender in the exchange offer, you must:
- complete, sign and date the letter of transmittal or a facsimile of the
letter of transmittal;
- have the signatures guaranteed if required by the letter of transmittal;
and
- mail or otherwise deliver the letter of transmittal or the facsimile to
the exchange agent at the address listed below under "-- Exchange Agent"
for receipt before the expiration date.
In addition, either:
- the exchange agent must receive certificates for the old notes along with
the letter of transmittal into its account at the depositary pursuant to
the procedure for book-entry transfer described below before the
expiration date;
- the exchange agent must receive a timely confirmation of a book-entry
transfer of the old notes, if the procedure is available, into its
account at the depositary pursuant to the procedure for book-entry
transfer described below before the expiration date; or
- you must comply with the guaranteed delivery procedures described below.
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Your tender, if not withdrawn before the expiration date, will constitute
an agreement between you and us in accordance with the terms and subject to the
conditions described in this prospectus and in the letter of transmittal.
The method of delivery of old notes and the letter of transmittal and all
other required documents to the exchange agent is at your election and risk. We
recommend that instead of delivery by mail, you use an overnight or hand
delivery service, properly insured. In all cases, you should allow sufficient
time to assure delivery to the exchange agent before the expiration date. You
should not send letters of transmittal or old notes to us. You may request your
respective brokers, dealers, commercial banks, trust companies or nominees to
effect the transactions described above for you.
If you are a beneficial owner of old notes whose old notes are registered
in the name of a broker, dealer, commercial bank, trust company or other nominee
and you wish to tender your notes, you should contact the registered holder
promptly and instruct the registered holder to tender on your behalf. If you
wish to tender on your own behalf, before completing and executing the letter of
transmittal and delivering the old notes you must either:
- make appropriate arrangements to register ownership of the old notes in
your name; or
- obtain a properly completed bond power from the registered holder.
The transfer of registered ownership may take considerable time. Unless the
old notes are tendered:
(1) by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on the letter of transmittal; or
(2) for the account of:
- a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.;
- a commercial bank or trust company having an office or correspondent
in the United States; or
- an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act that is a member of one of the recognized
signature guarantee programs identified in the letter of transmittal,
an eligible guarantor institution must guarantee the signatures on a letter of
transmittal or a notice of withdrawal described below under "-- Withdrawal of
Tenders."
If the letter of transmittal is signed by a person other than the
registered holder, the old notes must be endorsed or accompanied by a properly
completed bond power, signed by the registered holder as the registered holder's
name appears on the old notes.
If the letter of transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, they
should so indicate when signing, and unless waived by us, they must submit
evidence satisfactory to us of their authority to so act with the letter of
transmittal.
The exchange agent and the depositary have confirmed that any financial
institution that is a participant in the depositary's system may utilize the
depositary's Automated Tender Offer Program to tender notes.
We will determine in our sole discretion all questions as to the validity,
form, eligibility, including time of receipt, acceptance and withdrawal of
tendered old notes, which determination will be final and binding. We reserve
the absolute right to reject any and all old notes not properly tendered or any
old notes our acceptance of which would, in the opinion of our counsel, be
unlawful. We also reserve the right to waive any defects, irregularities or
conditions of tender as to particular old notes. Our interpretation of the terms
and conditions of the exchange offer, including the instructions in the letter
of transmittal, will be final and binding on all parties. Unless waived, you
must cure any defects or irregularities in connection
25
with tenders of old notes within the time we determine. Although we intend to
notify you of defects or irregularities with respect to tenders of old notes,
neither we, the exchange agent nor any other person will incur any liability for
failure to give you that notification. Unless waived, we will not deem tenders
of old notes to have been made until you cure the defects or irregularities.
While we have no present plan to acquire any old notes that are not
tendered in the exchange offer or to file a registration statement to permit
resales of any old notes that are not tendered in the exchange offer, we reserve
the right in our sole discretion to purchase or make offers for any old notes
that remain outstanding after the expiration date. We also reserve the right to
terminate the exchange offer, as described below under "-- Conditions," and, to
the extent permitted by applicable law, purchase old notes in the open market,
in privately negotiated transactions or otherwise. The terms of any of those
purchases or offers could differ from the terms of the exchange offer.
If you wish to tender old notes in exchange for exchange notes in the
exchange offer, we will require you to represent that:
- you are not an affiliate of ours;
- you will acquire any exchange notes in the ordinary course of your
business; and
- at the time of completion of the exchange offer, you have no arrangement
with any person to participate in the distribution of the exchange notes.
In addition, in connection with the resale of exchange notes, any
participating broker-dealer who acquired the old notes for its own account as a
result of market-making or other trading activities must deliver a prospectus
meeting the requirements of the Securities Act. The SEC has taken the position
that participating broker-dealers may fulfill their prospectus delivery
requirements with respect to the exchange notes, other than a resale of an
unsold allotment from the original sale of the notes, with this prospectus.
RETURN OF NOTES
If we do not accept any tendered old notes for any reason described in the
terms and conditions of the exchange offer or if you withdraw or submit old
notes for a greater principal amount than you desire to exchange, we will return
the unaccepted, withdrawn or non-exchanged notes without expense to you as
promptly as practicable. In the case of old notes tendered by book-entry
transfer into the exchange agent's account at the depositary pursuant to the
book-entry transfer procedures described below, we will credit the old notes to
an account maintained with the depositary as promptly as practicable.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the old notes at the depositary for purposes of the exchange offer within two
business days after the date of this prospectus, and any financial institution
that is a participant in the depositary's systems may make book-entry delivery
of old notes by causing the depositary to transfer the old notes into the
exchange agent's account at the depositary in accordance with the depositary's
procedures for transfer. However, although delivery of old notes may be effected
through book-entry transfer at the depositary, you must transmit and the
exchange agent must receive, the letter of transmittal or a facsimile of the
letter of transmittal, with any required signature guarantees and any other
required documents, at the address below under "-- Exchange Agent" on or before
the expiration date or pursuant to the guaranteed delivery procedures described
below.
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GUARANTEED DELIVERY PROCEDURES
If you wish to tender your old notes and (1) the notes are not immediately
available or (2) you cannot deliver the old notes, the letter of transmittal or
any other required documents to the exchange agent before the expiration date,
you may effect a tender if:
(a) the tender is made through an eligible guarantor institution;
(b) before the expiration date, the exchange agent receives from the
eligible guarantor institution a properly completed and duly executed
notice of guaranteed delivery, substantially in the form provided by us,
that:
- states your name and address, the certificate number(s) of the old
notes and the principal amount of old notes tendered,
- states that the tender is being made by that notice of guaranteed
delivery, and
- guarantees that, within three New York Stock Exchange trading days
after the expiration date, the eligible guarantor institution will
deposit with the exchange agent the letter of transmittal, together
with the certificate(s) representing the old notes in proper form for
transfer or a confirmation of a book-entry transfer, as the case may
be, and any other documents required by the letter of transmittal; and
(c) within five New York Stock Exchange trading days after the
expiration date, the exchange agent receives a properly executed letter of
transmittal, as well as the certificate(s) representing all tendered old
notes in proper form for transfer and all other documents required by the
letter of transmittal.
Upon request, the exchange agent will send to you a notice of guaranteed
delivery if you wish to tender your notes according to the guaranteed delivery
procedures described above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, you may withdraw tenders
of old notes at any time before 5:00 p.m., New York City time, on the expiration
date.
To withdraw a tender of old notes in the exchange offer, the exchange agent
must receive a written or facsimile transmission notice of withdrawal at its
address listed in this prospectus before the expiration date. Any notice of
withdrawal must:
- specify the name of the person who deposited the old notes to be
withdrawn;
- identify the old notes to be withdrawn, including the certificate
number(s) and principal amount of the old notes; and
- be signed in the same manner as the original signature on the letter of
transmittal by which the old notes were tendered, including any required
signature guarantees.
We will determine in our sole discretion all questions as to the validity,
form and eligibility of the notices, and our determination will be final and
binding on all parties. We will not deem any properly withdrawn old notes to
have been validly tendered for purposes of the exchange offer, and we will not
issue exchange notes with respect to those old notes, unless you validly
retender the withdrawn old notes. You may retender properly withdrawn old notes
by following one of the procedures described above under "-- Procedures for
Tendering" at any time before the expiration date.
CONDITIONS
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or exchange the exchange notes for, any old
notes, and may terminate the exchange offer as provided in
27
this prospectus before the acceptance of the old notes, if, in our reasonable
judgment, the exchange offer violates applicable law, rules or regulations or an
applicable interpretation of the staff of the SEC.
If we determine in our reasonable discretion that any of these conditions
are not satisfied, we may:
- refuse to accept any old notes and return all tendered old notes to you;
- extend the exchange offer and retain all old notes tendered before the
exchange offer expires, subject, however, to your rights to withdraw the
old notes; or
- waive the unsatisfied conditions with respect to the exchange offer and
accept all properly tendered old notes that have not been withdrawn.
If the waiver constitutes a material change to the exchange offer, we will
promptly disclose the waiver by means of a prospectus supplement that we will
distribute to the registered holders of the old notes, and we will extend the
exchange offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders, if the exchange offer would otherwise expire during the five to ten
business day period.
TERMINATION OF RIGHTS
All of your rights under the registration rights agreement will terminate
upon consummation of the exchange offer except with respect to our continuing
obligations:
- to indemnify you and parties related to you against liabilities,
including liabilities under the Securities Act; and
- to provide, upon your request, the information required by Rule
144A(d)(4) under the Securities Act to permit resales of the notes
pursuant to Rule 144A.
SHELF REGISTRATION
If (1) applicable law or SEC policy does not permit us to consummate the
exchange offer, (2) we do not consummate the exchange offer on or before
November 26, 2002 or (3) you notify us before the 60th day following the
completion of the exchange offer that:
- you are prohibited by law or SEC policy from participating in the
exchange offer;
- you may not resell the exchange notes acquired by you in the exchange
offer to the public without delivering a prospectus, and the prospectus
contained in the registration statement is not appropriate or available
for resales by you; or
- you are a broker-dealer and hold notes acquired directly from us,
we will file with the SEC a shelf registration statement to register for public
resale the registrable notes held by you if you provide us with the necessary
information for inclusion in the shelf registration statement.
For the purposes of the registration rights agreement, "registrable notes"
means each old note until the earliest date on which:
- a registration statement covering the old note has been declared
effective by the SEC and the note has been disposed of in accordance with
such effective registration statement;
- the old note has been exchanged pursuant to the exchange offer for an
exchange note or exchange notes that may be resold without restriction
under state and federal securities laws;
- such old note ceases to be outstanding; or
- the old note may be resold without restriction pursuant to Rule 144 under
the Securities Act.
28
ADDITIONAL INTEREST
If:
(1)(A) we do not file the registration statement with the SEC on or
before July 12, 2002 or (B) we are obligated to file a shelf registration
statement and we fail to file the shelf registration statement with the SEC
on or before the 90th day after the obligation to file a shelf registration
statement arises, then, commencing on the day after either required filing
date, we agree to pay additional interest on the principal amount of the
old notes at a rate of 0.50% per annum for the first 90 days immediately
following the required filing date, with the additional interest increasing
by an additional 0.50% per annum at the beginning of each subsequent 90-day
period; or
(2)(A) the SEC does not declare the registration statement effective
on or before October 11, 2002, or (B) we are obligated to file a shelf
registration statement and the SEC does not declare the shelf registration
statement effective on or before the 180th day after the obligation to file
a shelf registration statement arises, then, commencing on the day after
either required effective date, we agree to pay additional interest on the
principal amount of the old notes at a rate of 0.50% per annum for the
first 90 days immediately following the required effective date, with the
additional interest increasing by an additional 0.50% per annum at the
beginning of each subsequent 90-day period; or
(3)(A) we do not complete the exchange offer on or before the 45th day
after the SEC declares the registration statement effective, or (B) if
applicable, a shelf registration statement has been declared effective but
thereafter ceases to be effective at any time prior to April 15, 2004
(unless all of the old notes have already been disposed of or all of the
old notes are eligible to be sold pursuant to Rule 144(k)), then we agree
to pay additional interest on the principal amount of the old notes at a
rate of 0.50% per annum for the first 90 days commencing on (x) the 46th
day after the effective date, in the case of (A) above, or (y) the day the
shelf registration statement ceases to be effective, in the case of (B)
above, with the additional interest rate increasing by an additional 0.50%
per annum at the beginning of each subsequent 90-day period;
provided, however, that the additional interest rate on the old notes may not
accrue under more than one of the foregoing clauses (1) through (3) at any one
time and at no time will the aggregate amount of additional interest accruing
exceed in the aggregate 1.00% per annum; provided, further, however, that when
(i) we file the registration statement or the shelf registration statement (in
the case of clause (1) above), (ii) the SEC declares the registration statement
or the shelf registration statement (in the case of clause (2) above), or (iii)
we complete the exchange offer (in the case of clause (3)(A) above), or upon the
effectiveness of the shelf registration statement which had ceased to remain
effective (in the case of clause (3)(B) above), additional interest on the old
notes as a result of such clause (or the relevant subclause thereof), as the
case may be, shall cease to accrue.
We agree to pay any amount of additional interest due pursuant to clause
(1), (2) or (3) above in cash on the same original interest payment dates as the
old notes.
EXCHANGE AGENT
We have appointed Manufacturers and Traders Trust Company as exchange agent
for the exchange offer. You should direct questions and requests for assistance,
requests for additional copies of this prospectus or the letter of transmittal
and requests for a notice of guaranteed delivery to the exchange agent addressed
as follows:
<Table>
By Registered or Certified Mail: By Hand Delivery:
Manufacturers and Traders Trust Company Manufacturers and Traders Trust Company
One M&T Plaza One M&T Plaza
Buffalo, New York 14203 Buffalo, New York 14203
Attention: Russell T. Whitley Attention: Russell T. Whitley
</Table>
29
<Table>
By Overnight Delivery: By Facsimile:
Manufacturers and Traders Trust Company (716) 842-4474
One M&T Plaza Attn: Russell T. Whitley
Buffalo, New York 14203 Confirm by Telephone: (716) 842-5602
Attention: Russell T. Whitley
</Table>
Delivery to an address other than the one stated above or transmission via
a facsimile number other than the one stated above will not constitute a valid
delivery.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. We are making the
principal solicitation by mail; however, our officers and regular employees may
make additional solicitations by facsimile, telephone or in person.
We have not retained any dealer manager in connection with the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses.
We will pay the cash expenses incurred in connection with the exchange
offer, which we estimate to be approximately $250,000. These expenses include
registration fees, fees and expenses of the exchange agent and the trustee,
accounting and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of notes
pursuant to the exchange offer. If, however, a transfer tax is imposed for any
reason other than the exchange of the old notes pursuant to the exchange offer,
then you must pay the amount of the transfer taxes. If you do not submit
satisfactory evidence of payment of the taxes or exemption from payment with the
letter of transmittal, we will bill the amount of the transfer taxes directly to
you.
CONSEQUENCE OF FAILURES TO EXCHANGE
Participation in the exchange offer is voluntary. We urge you to consult
your financial and tax advisors in making your decisions on what action to take.
Old notes that are not exchanged for exchange notes pursuant to the exchange
offer will remain restricted securities. Accordingly, those old notes may be
resold only:
- to a person whom the seller reasonably believes is a qualified
institutional buyer in a transaction meeting the requirements of Rule
144A under the Securities Act;
- in a transaction meeting the requirements of Rule 144;
- outside the United States to a foreign person in a transaction meeting
the requirements of Rule 903 or 904 of Regulation S under the Securities
Act;
- in accordance with another exemption from the registration requirements
of the Securities Act and based upon an opinion of counsel if we so
request;
- to us; or
- pursuant to an effective registration statement.
In each case, the old notes may be resold only in accordance with any
applicable securities laws of any state of the United States or any other
applicable jurisdiction.
30
USE OF PROCEEDS
We will not receive any cash proceeds from the exchange offer. The exchange
offer satisfies an obligation to holders of old notes under the registration
rights agreement. The net proceeds from the $260 million old notes offering,
after deducting estimated fees and expenses, were approximately $251 million. We
used the net proceeds from the old notes offering to repay our $250 million of
10 1/2% senior subordinated notes due 2004, which we redeemed on June 1, 2002 at
a redemption price of 102.625% of the aggregate outstanding principal amount
thereof.
CAPITALIZATION
The following table sets forth (a) our current maturities of long-term debt
and capital leases and our consolidated capitalization at April 20, 2002 and (b)
our current maturities of long-term debt and capital leases and our consolidated
capitalization at April 20, 2002 as adjusted to give effect to the Acquisition,
the sale of the old notes, the sale of $200 million aggregate principal amount
of our 9 1/4% senior notes due 2010, the sale of 9.2 million shares of our
common stock and our credit facility, after deducting underwriting discounts and
commissions and offering expenses and our application of the net proceeds
therefrom.
<Table>
<Caption>
AT APRIL 20, 2002
---------------------------
ACTUAL(1) AS ADJUSTED(2)
---------- --------------
(IN THOUSANDS)
Current maturities of long-term debt and capital leases.... $ 61,498 $ 26,001
Long-term debt:
New revolving credit facility............................ -- 79,667
New term loan facility................................... -- 420,750
Existing revolving credit facility....................... 310,000 --
Existing term loan facility.............................. 69,010 --
Long-term obligations under capital leases............... 328,295 328,295
10 1/8% senior notes due 2008............................ 348,225 348,225
9 1/4% senior notes due 2010............................. -- 200,000
10 5/8% senior subordinated notes due 2007............... 400,000 400,000
9 7/8% senior subordinated notes due 2012................ 260,260 260,260
5 1/4% convertible senior subordinated notes due 2009.... 150,000 150,000
Other debt (including discounts)......................... (10,479) (10,479)
---------- ----------
Total long-term debt (including current maturities)... 1,916,809 2,202,719
Total shareholders' equity............................ 517,909 687,382
---------- ----------
Total capitalization (including current maturities)... $2,434,718 $2,890,101
========== ==========
</Table>
- ---------------
(1) Does not include our $250 million of 10 1/2% senior subordinated notes due
2004 outstanding at April 20, 2002, which we redeemed on June 1, 2002.
(2) The "As Adjusted" column gives effect to our repayment of certain
indebtedness of Core-Mark in connection with the Acquisition. As of March
31, 2002, Core-Mark had $76 million outstanding under its receivables
securitization facility and $75 million aggregate principal amount of its
11 3/8% senior subordinated notes due 2003 outstanding. Upon consummation of
the Acquisition, (i) we called for redemption Core-Mark's obligations under
its receivables securitization facility, which bore interest at either LIBOR
or the commercial paper rate, plus a margin and would have matured in
January 2003 and (ii) we called Core-Mark's 11 3/8% senior subordinated
notes due 2003 for redemption at a redemption price of 102.844% of the
aggregate outstanding principal amount thereof, plus accrued and unpaid
interest to the redemption date.
31
SELECTED CONSOLIDATED FINANCIAL DATA OF FLEMING
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The information presented below for, and as of the end of, each of the
fiscal years in the five-year period ended December 29, 2001 is derived from our
audited consolidated financial statements. The information presented below for,
and as of the end of, the 16 weeks ended April 21, 2001 and April 20, 2002 is
derived from our unaudited consolidated condensed financial statements, which
include all adjustments that management considers necessary for a fair
presentation of our financial position and results of operations for those
periods. The information for, and as of the end of, the 16 weeks ended April 20,
2002 is not necessarily indicative of the results that may be expected for any
other interim period or for the full fiscal year ending December 28, 2002. You
should read the information set forth below together with the other financial
information contained or incorporated by reference in this prospectus.
<Table>
<Caption>
FISCAL YEAR ENDED(1) 16 WEEKS ENDED
------------------------------------------------------------------------ ---------------------
DECEMBER 27, DECEMBER 26, DECEMBER 25, DECEMBER 30, DECEMBER 29, APRIL 21, APRIL 20,
1997(2) 1998(3) 1999(4) 2000(5) 2001(6) 2001(7) 2002(8)
------------ ------------ ------------ ------------ ------------ --------- ---------
INCOME STATEMENT DATA:
Net sales(9)................... $14,916 $14,629 $14,218 $14,369 $15,558 $4,137 $4,686
Costs and expenses:
Cost of sales(9)............. 13,508 13,179 12,781 13,022 14,367 3,771 4,347
Selling and administrative... 1,172 1,251 1,262 1,187 961 315 255
Interest expense............. 163 161 165 175 166 58 50
Interest income and other.... (30) (25) (30) (25) (24) (9) (7)
Impairment/restructuring
charge (credit)............ -- 653 103 213 (24) (27) --
Litigation charge (credit)... 21 8 -- (2) 49 2 --
------- ------- ------- ------- ------- ------ ------
Total costs and expenses... 14,834 15,227 14,281 14,570 15,495 4,110 4,645
------- ------- ------- ------- ------- ------ ------
Earnings(loss) before taxes.... 82 (598) (63) (201) 63 27 41
Taxes on income(loss).......... 44 (87) (18) (79) 36 11 16
------- ------- ------- ------- ------- ------ ------
Earnings(loss) before
extraordinary charge(10)..... 38 (511) (45) (122) 27 16 25
Extraordinary charge from early
retirement of debt (net of
taxes)....................... (13) -- -- -- (4) (4) --
------- ------- ------- ------- ------- ------ ------
Net earnings(loss)(10)..... $ 25 $ (511) $ (45) $ (122) $ 23 $ 12 $ 25
======= ======= ======= ======= ======= ====== ======
Diluted earnings(loss) per
share(10).................... $ 0.67 $(13.48) $ (1.17) $ (3.15) $ 0.52 $ 0.29 $ 0.52
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents.... $ 30 $ 6 $ 7 $ 30 $ 17 $ 27 $ 4
Total assets................. 3,924 3,491 3,573 3,403 3,655 3,176 3,824
Total debt (including current
maturities and capital
leases).................... 1,563 1,566 1,694 1,669 1,811 1,636 1,917
Shareholders' equity......... 1,090 570 561 427 498 494 518
OTHER FINANCIAL AND OPERATING
DATA:
Cash flows provided by (used
in) operating activities... $ 113 $ 141 $ 118 $ 127 $ (32) $ (116) $ (43)
Cash flows provided by (used
in) investing activities... (54) (163) (213) (48) (190) 84 (49)
Cash flows provided by (used
in) financing activities... (92) (2) 96 (55) 209 29 342
EBITDA(11)................... 441 (237) 281 154 385 137 137
Adjusted EBITDA(12).......... 460 431 411 456 476 136 137
Depreciation and
amortization(13)........... 173 180 158 169 166 51 46
Capital expenditures......... 129 200 166 151 238 48 61
Ratio of earnings to fixed
charges(14)................ 1.41x -- -- -- 1.29x 1.43x 1.65x
</Table>
- ---------------
(1) Fiscal 2000 is a 53-week year; all other years are 52 weeks.
(2) The results in 1997 reflect a charge of $19 million ($9 million after-tax)
related to the settlement of a lawsuit against us. Such period also
reflects an extraordinary charge of $22 million ($13 million after-tax)
related to a recapitalization.
(3) The results in 1998 reflect an impairment/restructuring charge with related
costs totaling $668 million ($543 million after-tax) related to the
strategic plan.
(4) The results in 1999 reflect an impairment/restructuring charge with related
costs totaling $137 million ($92 million after-tax) related to our
strategic plan. Such period also reflects unusual items ($31 million charge
to close 10 conventional retail stores, income of $22 million from
extinguishing a portion of the self-insured workers' compensation
liability, interest income of
32
$9 million related to refunds in federal income taxes from prior years, and $6
million in gains from the sale of distribution facilities) netting to $6 million
of income ($3 million after-tax).
(5) The results in 2000 reflect an impairment/restructuring charge with related
costs totaling $309 million ($183 million after-tax) relating to our
strategic plan. Such period also reflects unusual items ($10 million charge
related primarily to asset impairment on retail stores, income of $2
million relating to litigation settlements, and $9 million in gains from
the sale of distribution facilities) netting to less than $1 million of
income ($1 million loss after-tax).
(6) The results in 2001 reflect an impairment/restructuring credit totaling $24
million ($25 million after-tax reflecting the tax expense impact of
goodwill permanent differences from the sale of certain retail stores)
relating to our strategic plan. Such period also reflects unusual items
($49 million in charges relating to litigation settlements, $20 million in
charges relating to Kmart's bankruptcy reorganization and $2 million due to
early retirement of debt) netting to approximately $70 million in charges
($42 million after-tax).
(7) The results in the first quarter of 2001 reflect an
impairment/restructuring net credit totaling $1 million (less than $1
million after-tax) relating to our strategic plan. Such period also
reflects unusual items ($2 million in charges relating to litigation
settlements and approximately $2 million in charges due to early retirement
of debt) netting to approximately $3 million in charges ($2 million
after-tax).
(8) During the first quarter of 2002, we adopted SFAS No. 142 and ceased
amortizing goodwill cost. No prior period restatements were made. Goodwill
amortization for any of the prior years reported did not exceed $33
million. Also, cash and cash equivalents and total debt amounts exclude
amounts related to the 10 1/2% senior subordinated notes due 2004 and
related transaction fees as these amounts are being held in trust to redeem
the notes in June, 2002.
(9) During the first quarter of 2002, we adopted EITF 01-9 and reduced sales
and cost of sales for all prior periods with the impact on any year
reported not exceeding $75 million. The adoption had no effect on gross
margins or earnings.
(10) On December 30, 2001, we adopted SFAS 142, Accounting for Goodwill and
Other Intangible Assets, which eliminated periodic amortization of
goodwill. If we had applied the nonamortization provisions of SFAS 142 for
each of the periods presented, earnings (loss) before extraordinary charge
would have been $70 million for 1997, $(480) million for 1998, $(26)
million for 1999, $(103) million for 2000, $46 million for 2001, $22
million for the 16 weeks ended April 21, 2001. A reconciliation of reported
net earnings (loss) to adjusted net earnings (loss) along with the related
earnings (loss) per share amounts is as follows:
<Table>
16 WEEKS
FISCAL YEAR ENDED ENDED
------------------------------------------------------------------------ ---------
DECEMBER 27, DECEMBER 26, DECEMBER 25, DECEMBER 30, DECEMBER 29, APRIL 21,
1997 1998 1999 2000 2001 2001
------------ ------------ ------------ ------------ ------------ ---------
Reported net earnings (loss)......... $ 25 $ (511) $ (45) $ (122) $ 23 $ 12
Add back: Goodwill amortization...... 32 31 19 19 19 6
----- ------- ------ ------ ----- -----
Adjusted net earnings (loss)......... $ 57 $ (480) $ (26) $ (103) $ 42 $ 18
===== ======= ====== ====== ===== =====
BASIC EARNINGS (LOSS) PER SHARE:
Reported net earnings (loss)....... $0.67 $(13.48) $(1.17) $(3.15) $0.55 $0.30
Goodwill amortization.............. 0.83 0.81 0.50 0.48 0.45 0.14
----- ------- ------ ------ ----- -----
Adjusted net earnings (loss)....... $1.50 $(12.67) $(0.67) $(2.67) $1.00 $0.44
DILUTED EARNINGS (LOSS) PER SHARE:
Reported net earnings (loss)....... $0.67 $(13.48) $(1.17) $(3.15) $0.52 $0.29
Goodwill amortization.............. 0.83 0.81 0.50 0.48 0.42 0.13
----- ------- ------ ------ ----- -----
Adjusted net earnings (loss)....... $1.50 $(12.67) $(0.67) $(2.67) $0.94 $0.42
---------
APRIL 20,
2002
---------
Reported net earnings (loss)......... $ 25
Add back: Goodwill amortization...... --
-----
Adjusted net earnings (loss)......... $ 25
=====
BASIC EARNINGS (LOSS) PER SHARE:
Reported net earnings (loss)....... $0.56
Goodwill amortization.............. --
-----
Adjusted net earnings (loss)....... $0.56
DILUTED EARNINGS (LOSS) PER SHARE:
Reported net earnings (loss)....... $0.52
Goodwill amortization.............. --
-----
Adjusted net earnings (loss)....... $0.52
</Table>
(11) EBITDA is earnings before extraordinary items, interest expense, income
taxes, depreciation and amortization, equity investment results and LIFO
provision. EBITDA should not be considered as an alternative measure of our
net income, operating performance, cash flow or liquidity. We provide it as
additional information related to our ability to service debt; however,
conditions may require conservation of funds for other uses. Although we
believe EBITDA enhances your understanding of our financial condition, this
measure, when viewed individually, is not necessarily a better indicator of
any trend as compared to conventionally computed measures (e.g., net sales,
net earnings, net cash flows, etc.). Amounts presented may not be
comparable to similar measures disclosed by other companies.
33
(12) Adjusted EBITDA is EBITDA less unusual adjustments (e.g., strategic plan
charges and specific litigation charges). The following table reconciles
EBITDA to Adjusted EBITDA:
<Table>
<Caption>
HISTORICAL
------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED 16 WEEKS ENDED
------------------------------------------------------------------------ ---------------------
DECEMBER 27, DECEMBER 26, DECEMBER 25, DECEMBER 30, DECEMBER 29, APRIL 21, APRIL 20,
1997 1998 1999 2000 2001 2001 2002
------------ ------------ ------------ ------------ ------------ --------- ---------
EBITDA......................... $441 $(237) $281 $154 $385 $137 $137
Add back:
Non-cash strategic plan
charges.................... -- 594 78 121 (12) (18) --
Non-cash unusual
adjustments................ -- -- 14 8 20 -- --
---- ----- ---- ---- ---- ---- ----
EBITDA excluding non-cash
strategic plan charges and
unusual adjustments.......... 441 357 373 283 393 119 137
Add back:
Cash related strategic plan
charges.................... -- 74 58 181 36 17 --
Cash related unusual
adjustments................ 19 -- (20) (8) 47 -- --
---- ----- ---- ---- ---- ---- ----
Adjusted EBITDA................ $460 $ 431 $411 $456 $476 $136 $137
==== ===== ==== ==== ==== ==== ====
</Table>
(13) Depreciation and amortization expense includes goodwill amortization, if
any, and excludes amortization of debt cost which is reflected in interest
expense (see Note 10 above).
(14) For purposes of computing this ratio, earnings consist of earnings before
income taxes and fixed charges. Fixed charges consist primarily of interest
expense, including amortization of deferred debt issuance costs and
one-third of rental expense (the portion considered representative of the
interest factor). Earnings were insufficient to cover fixed charges by $598
million, $63 million and $202 million for the fiscal years ended December
26, 1998, December 25, 1999 and December 30, 2000, respectively.
34
SELECTED CONSOLIDATED FINANCIAL DATA OF CORE-MARK
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The following table sets forth selected historical consolidated financial
and other data for Core-Mark International, Inc. The historical financial data
as of the end of and for each year in the five-year period ended December 31,
2001 have been derived from Core-Mark's audited consolidated financial
statements. The information presented below for, and as of the end of, the
three-month period ended March 31, 2001 and 2002 is derived from Core-Mark's
unaudited condensed consolidated financial statements, which include all
adjustments that Core-Mark's management considers necessary for a fair
presentation of Core-Mark's financial position and results of operations for
those periods. The information for, and as of the end of, the three months ended
March 31, 2002 is not necessarily indicative of the results that may be expected
for any other interim period or for the full fiscal year ended December 31,
2002. You should read the information set forth below together with the other
financial information contained or incorporated by reference in this prospectus.
<Table>
<Caption>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------------------------- -------------------
1997 1998 1999 2000 2001 2001 2002
---------- ---------- ---------- ---------- ---------- -------- --------
(IN THOUSANDS)
STATEMENT OF INCOME DATA:
Net sales....................... $2,395,867 $2,476,376 $2,838,107 $3,035,379 $3,425,024 $754,266 $825,153
Costs of goods sold(1).......... 2,216,162 2,295,659 2,643,069 2,840,334 3,211,160 705,121 774,297
---------- ---------- ---------- ---------- ---------- -------- --------
Gross profit(1)................. 179,705 180,717 195,038 195,045 213,864 49,145 50,856
Operating and administrative
expenses...................... 148,902 150,977 155,128 160,143 169,691 42,150 41,463
---------- ---------- ---------- ---------- ---------- -------- --------
Operating income(1)............. 30,803 29,740 39,910 34,902 44,173 6,995 9,393
Interest expense, net........... 18,181 15,402 12,696 12,852 11,121 3,042 2,488
Amortization of debt refinancing
costs(2)...................... 1,498 2,204 1,274 1,274 1,274 318 318
---------- ---------- ---------- ---------- ---------- -------- --------
Income before income taxes...... 11,124 12,134 25,940 20,776 31,778 3,635 6,587
Income tax expense(3)........... 4,834 4,925 5,740 9,721 14,268 1,633 2,832
---------- ---------- ---------- ---------- ---------- -------- --------
Net income(4)................... $ 6,290 $ 7,209 $ 20,200 $ 11,055 $ 17,510 $ 2,002 $ 3,755
========== ========== ========== ========== ========== ======== ========
OTHER DATA:
EBITDAL(5)...................... $ 41,597 $ 56,419 $ 53,493 $ 50,129 $ 59,446 $ 9,867 $ 11,664
Cash provided by (used in):
Operating activities.......... 17,547 5,933 40,781 (1,925) 28,211 48,867 11,964
Investing activities.......... (30,739) (5,311) (6,575) (7,620) (7,916) (517) (152)
Financing activities.......... 3,549 9,533 (42,789) 21,282 (23,150) (56,617) (12,467)
Depreciation and
amortization(6)............... 7,528 8,065 7,912 8,911 9,678 2,475 2,052
LIFO expense(1)................. 3,266 18,614 5,671 6,316 5,595 397 219
Capital expenditures............ 9,378 5,311 6,575 7,620 7,916 517 152
</Table>
<Table>
<Caption>
AS OF DECEMBER 31, AS OF
---------------------------------------------------- MARCH 31,
1997 1998 1999 2000 2001 2002
-------- -------- -------- -------- -------- ---------
(IN THOUSANDS)
BALANCE SHEET DATA:
Total assets.............................. $336,580 $359,390 $350,068 $374,876 $390,141 $376,465
Total debt, including current
maturities.............................. 197,012 208,124 165,335 186,617 163,467 151,000
</Table>
- ---------------
(1) Core-Mark's U.S. inventories are valued at the lower of cost or market. Cost
of goods sold is determined on a last-in, first-out (LIFO) basis. During
periods of rising prices, the LIFO method of costing inventories generally
results in higher costs being charged against income compared to the
35
FIFO method ("LIFO expense") while lower costs are retained in inventories.
Conversely, during periods of declining prices or a decrease of Core-Mark's
inventory quantities, the LIFO method of costing inventories generally
results in lower costs being charged against income compared to the FIFO
method ("LIFO income"). During the year ended December 31, 1998, Core-Mark
recognized LIFO expense of $18.6 million, primarily due to several very
large increases in domestic cigarette wholesale prices during 1998. However,
the LIFO expense in 1998 was more than offset by profits resulting from such
price increases.
(2) Amortization of debt refinancing costs reflects the amortization of all
costs associated with issuing, restructuring and refinancing debt.
(3) Prior to 1999, Core-Mark had a significant valuation allowance that reduced
certain deferred tax assets, based upon management's assessment that it was
more likely than not that these deferred tax assets would not be realized.
However, as a result of Core-Mark's earnings history, in 1999 Core-Mark's
management concluded that the tax benefits related to future deductions,
including net operating loss carryforwards, were more likely than not to be
realized. Therefore, in 1999, Core-Mark recorded a $6.2 million decrease in
its valuation allowance, which resulted in a one-time reduction of its tax
rate of approximately 24%.
(4) On January 1, 2002, Core-Mark adopted SFAS 142, Accounting for Goodwill and
Other Intangibles. If Core-Mark had applied the nonamortization provisions
of SFAS 142 to all periods presented, net income would have been $8 million
for 1997, $9 million for 1998, $22 million for 1999, $13 million for 2000,
$20 million for 2001, and $2.5 million for the three months ended March 31,
2001.
(5) EBITDAL represents operating income before depreciation, amortization and
LIFO expense, each as defined herein. EBITDAL should not be considered in
isolation or as a substitute for net income, operating income, cash flows or
other consolidated income or cash flow data prepared in accordance with
generally accepted accounting principles, or as a measure of a company's
profitability or liquidity. EBITDAL is included because it is one measure
used by certain investors to determine a company's ability to service its
indebtedness.
(6) Depreciation and amortization includes depreciation on property and
equipment, amortization of goodwill and other non-cash charges, and excludes
amortization of debt refinancing costs.
36
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following pro forma consolidated information has been derived by the
application of pro forma adjustments to the consolidated financial statements of
(i) Fleming as of April 20, 2002 and Core-Mark as of March 31, 2002; (ii)
Fleming for the 52 weeks ended December 29, 2001 and Core-Mark for the 12 months
ended December 31, 2001; (iii) Fleming for the 16 weeks ended April 20, 2002 and
Core-Mark for the three months ended March 31, 2002; and (iv) Fleming for the 52
weeks ended April 20, 2002 and Core-Mark for the 12 months ended March 31, 2002.
The pro forma consolidated balance sheet gives effect to Fleming's
acquisition of Core-Mark (the "Acquisition") for approximately $295 million in
cash, plus Fleming's assumption of all of Core-Mark's net debt outstanding as of
the closing of the Acquisition (which was approximately $95 million at the time
of the closing on June 18, 2002, for a total purchase price of approximately
$390 million) and the related financing transactions (together with the
Acquisition, the "Transactions") as if they had occurred as of April 20, 2002.
The pro forma consolidated statements of income give effect to the Acquisition
and the related financing transactions as if they had occurred (i) on December
31, 2000, with respect to the pro forma consolidated statement of income for the
52 weeks ended December 29, 2001; (ii) on December 30, 2001, with respect to the
pro forma consolidated statement of income for the 16 weeks ended April 20,
2002; and (iii) on April 22, 2001, with respect to the pro forma consolidated
statement of income for the 52 weeks ended April 20, 2002. The adjustments
necessary to fairly present this pro forma consolidated financial information
have been made based on available information and in the opinion of Fleming's
management are reasonable and are described in the accompanying notes. This pro
forma information reflects that the Acquisition was financed by a combination of
borrowings under a new credit facility and public offerings of debt and equity.
The pro forma consolidated financial information should not be considered
indicative of actual results that would have been achieved had the Acquisition
and the related financing transactions been consummated on the respective dates
indicated and do not purport to indicate balance sheet data or income statement
data as of any future date or for any future period. We cannot assure you that
the assumptions used in the preparation of the pro forma consolidated financial
information will prove to be correct.
The pro forma adjustments were applied to the historical consolidated
financial statements to reflect and account for the Acquisition and the related
financing transactions. As a result, these adjustments have no impact on the
historical basis of the assets and liabilities.
37
PRO FORMA COMBINING BALANCE SHEET INFORMATION
AS OF APRIL 20, 2002
(IN THOUSANDS)
<Table>
<Caption>
PRO FORMA
FLEMING CORE-MARK ADJUSTMENTS PRO FORMA
---------- --------- ----------- ----------
ASSETS
Current Assets:
Cash and cash equivalents.............. $ 3,974 $ 23,542 $ (23,000)(a) $ 4,516
Cash held by Trustee for refinancing... 263,125 263,125
Receivables, net....................... 588,321 130,902 -- 719,223
Inventories............................ 954,174 118,278 52,133(b) 1,124,585
Assets held for sale................... 28,666 -- -- 28,666
Other current assets................... 76,169 8,610 (27,804)(c) 56,975
---------- -------- --------- ----------
Total current assets.............. 1,914,429 281,332 1,329 2,197,090
Investments and notes receivable, net....... 102,073 -- -- 102,073
Investment in direct financing leases....... 76,941 -- -- 76,941
Property and equipment...................... 1,676,372 77,970 (46,555)(d) 1,707,787
Less accumulated depreciation and
amortization.............................. (734,388) (46,555) 46,555(d) (734,388)
---------- -------- --------- ----------
Net property and equipment........ 941,984 31,415 -- 973,399
Other assets................................ 233,693 6,034 75,385(e) 315,112
Goodwill, net............................... 554,388 57,684 166,122(f) 778,194
---------- -------- --------- ----------
Total assets...................... $3,823,508 $376,465 $ 242,836 $4,442,809
========== ======== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................... $ 835,205 $114,972 $ -- $ 950,177
Current maturities of long-term debt... 39,747 76,000 (111,497)(g) 4,250
Current obligations under capital
leases............................... 21,751 -- -- 21,751
Debt to be refinanced.................. 263,125 -- -- 263,125
Other current liabilities.............. 183,711 43,622 (4,869)(h) 222,464
---------- -------- --------- ----------
Total current liabilities......... 1,343,539 234,594 (116,366) 1,461,767
Long-term debt.............................. 1,527,016 75,000 246,407(i) 1,848,423
Long-term obligations under capital
leases.................................... 328,295 -- -- 328,295
Other liabilities........................... 106,749 12,527 (2,334)(j) 116,942
Shareholders' equity:
Common stock........................... 111,661 55 22,945(k) 134,661
Capital in excess of par value......... 562,235 26,121 120,352(k) 708,708
Reinvested earnings (deficit).......... (96,551) 37,443 (37,443)(k) (96,551)
Accumulated other comprehensive
income --
Cumulative currency translation
adjustments..................... -- (5,447) 5,447(k) --
Additional minimum pension
liability....................... (59,436) (3,828) 3,828(k) (59,436)
---------- -------- --------- ----------
Total shareholders' equity... 517,909 54,344 115,129 687,382
---------- -------- --------- ----------
Total liabilities and
shareholders' equity............ $3,823,508 $376,465 $ 242,836 $4,442,809
========== ======== ========= ==========
</Table>
38
NOTES TO UNAUDITED PRO FORMA COMBINING BALANCE SHEET
(DOLLARS IN THOUSANDS)
For the purpose of determining the pro forma effect of the transactions on
Fleming's Consolidated Balance Sheet as of April 20, 2002, the following pro
forma adjustments have been made:
<Table>
(a) Cash and cash equivalents --
Reflect Core-Mark cash used to reduce debt.................. $ (23,000)
=========
(b) Inventories:
Eliminate Core-Mark LIFO inventory reserve -- offset to
deferred tax.......................................... $ 20,853
Eliminate Core-Mark LIFO inventory reserve -- offset to
goodwill.............................................. 31,280
---------
$ 52,133
=========
(c) Other current assets:
Reclass Core-Mark current deferred tax liability to
Fleming current deferred tax asset.................... $ (4,869)
Eliminate Core-Mark LIFO inventory reserve (see note
(b)).................................................. (20,853)
Eliminate Core-Mark prepaid pension amount............. (2,082)
---------
$ (27,804)
=========
(d) Property and equipment:
Offset Core-Mark accumulated depreciation and
amortization against cost of property and equipment
with our initial assumption that net book value
approximates fair value............................... $ (46,555)
Eliminate Core-Mark accumulated depreciation and
amortization.......................................... 46,555
---------
$ --
=========
(e) Other assets:
Reclass Core-Mark long-term deferred tax liability to
Fleming long-term deferred tax asset.................. $ (3,005)
Eliminate existing Core-Mark deferred financing costs
due to early debt retirement.......................... (1,501)
Reflect estimated financing costs from the debt portion
of the transaction.................................... 24,875
Reflect deferred tax adjustment on Core-Mark pension
liability............................................. (936)
Reflect estimate of other intangibles acquired as a
result of this transaction............................ 55,952
---------
$ 75,385
=========
(f) Goodwill, net:
Eliminate existing Core-Mark net goodwill.............. $ (57,684)
Reflect goodwill from this transaction................. 223,806
---------
$ 166,122
=========
(g) Current maturities of long-term debt:
Reflect payment of existing Core-Mark debt............. $ (76,000)
Reflect current maturity of new term loan.............. 4,250
Repay existing term loan............................... (39,747)
---------
$(111,497)
=========
(h) Other current liabilities --
Reclass Core-Mark current deferred tax liability to
Fleming current deferred tax asset (see note (c))..... $ (4,869)
=========
</Table>
39
NOTES TO UNAUDITED PRO FORMA COMBINING BALANCE SHEET -- CONTINUED
(DOLLARS IN THOUSANDS)
<Table>
(i) Long-term debt:
Payment of existing Core-Mark debt..................... $ (75,000)
Reflect redemption premium on existing Core-Mark
debt.................................................. 2,133
Reflect new financing to fund the transaction.......... 659,027
Repay existing term loan and credit facility........... (379,010)
Reflect estimated transaction fees:
Debt (see note (e))............................... 24,875
Equity (see note (k))............................. 9,007
Merger and acquisition............................ 5,375
---------
$ 246,407
=========
(j) Other liabilities:
Reclass Core-Mark long-term deferred tax liability to
Fleming long-term deferred tax asset (see note (e))... $ (3,005)
Adjust Core-Mark post-retirement liability............. 671
---------
$ (2,334)
=========
(k) Shareholders' equity:
Eliminate Core-Mark common stock....................... $ (55)
Issue Fleming common stock ($2.50 par value, 9,200
shares)............................................... 23,000
---------
22,945
Eliminate Core-Mark common stock -- excess capital
impact................................................ (26,121)
Issue Fleming common stock -- excess capital impact
($19.40 per share less par value, 9,200 shares)....... 155,480
Reflect equity transaction fees........................ (9,007)
---------
120,352
Eliminate Core-Mark retained earnings.................. (37,443)
Eliminate Core-Mark currency translation adjustments... 5,447
Eliminate Core-Mark additional minimum pension
liability............................................. 3,828
---------
$ 115,129
=========
</Table>
40
PRO FORMA COMBINING INCOME STATEMENT INFORMATION
52 WEEKS ENDED DECEMBER 29, 2001
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
PRO FORMA
FLEMING CORE-MARK ADJUSTMENTS PRO FORMA
----------- ---------- ----------- -----------
Net sales................................ $15,558,102 $3,425,024 $ -- $18,983,126
Costs and expenses (income):
Cost of sales....................... 14,368,199 3,211,160 76,680(a) 17,656,039
Selling and administrative.......... 960,590 169,691 (61,978)(b) 1,068,303
Interest expense.................... 165,534 12,395 13,194(c) 191,123
Interest income and other........... (24,053) -- (834)(d) (24,887)
Impairment/restructuring credit..... (23,595) -- -- (23,595)
Litigation charge................... 48,628 -- -- 48,628
----------- ---------- --------- -----------
Total costs and expenses....... 15,495,303 3,393,246 27,062 18,915,611
----------- ---------- --------- -----------
Income before taxes...................... 62,799 31,778 (27,062) 67,515
Taxes on income(f)....................... 36,022 14,268 (7,905)(e) 42,385
----------- ---------- --------- -----------
Income before extraordinary charge(g).... 26,777 17,510 (19,157) 25,130
Extraordinary charge from early
retirement of debt (net of taxes)...... (3,469) -- -- (3,469)
----------- ---------- --------- -----------
Net income(g).................. $ 23,308 $ 17,510 $ (19,157) $ 21,661
=========== ========== ========= ===========
Basic income per share:
Income before extraordinary
charge(f)(h)...................... $ 0.63 $ 0.49
Extraordinary charge from early
retirement of debt (net of
taxes)............................ (0.08) (0.07)
----------- -----------
Net income(f)(h)............... $ 0.55 $ 0.42
=========== ===========
Diluted income per share:
Income before extraordinary
charge(f)(i)...................... $ 0.60 $ 0.46
Extraordinary charge from early
retirement of debt (net of
taxes)............................ (0.08) (0.06)
----------- -----------
Net income(f)(i)............... $ 0.52 $ 0.40
=========== ===========
Weighted average shares outstanding:
Basic............................... 42,588 9,200(j) 51,788
Diluted(i).......................... 44,924 9,200(k) 54,124
</Table>
41
PRO FORMA COMBINING INCOME STATEMENT INFORMATION
16 WEEKS ENDED APRIL 20, 2002
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
PRO FORMA
FLEMING CORE-MARK ADJUSTMENTS PRO FORMA
---------- --------- ----------- ----------
Net sales.................................. $4,686,139 $825,153 $ -- $5,511,292
Costs and expenses (income):
Cost of sales......................... 4,346,460 774,297 18,711(a) 5,139,468
Selling and administrative............ 255,012 41,463 (17,312)(b) 279,163
Interest expense...................... 50,413 2,806 5,068(c) 58,287
Interest income and other............. (6,966) -- (141)(d) (7,107)
---------- -------- -------- ----------
Total costs and expenses......... 4,644,919 818,566 6,326 5,469,811
---------- -------- -------- ----------
Income before taxes........................ 41,220 6,587 (6,326) 41,481
Taxes on income............................ 16,611 2,832 (2,728)(e) 16,715
---------- -------- -------- ----------
Net income....................... $ 24,609 $ 3,755 $ (3,598) $ 24,766
========== ======== ======== ==========
Basic income per share..................... $ 0.56 $ 0.46
========== ==========
Diluted income per share................... $ 0.52 $ 0.44
========== ==========
Weighted average shares outstanding:
Basic................................. 44,175 9,200(j) 53,375
Diluted............................... 50,601 9,200(k) 59,801
</Table>
42
PRO FORMA COMBINING INCOME STATEMENT INFORMATION
52 WEEKS ENDED APRIL 20, 2002
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
PRO FORMA
FLEMING CORE-MARK ADJUSTMENTS PRO FORMA
----------- ---------- ----------- -----------
Net sales............................... $16,106,882 $3,495,911 $ -- $19,602,793
Costs and expenses (income):
Cost of sales...................... 14,943,544 3,280,336 77,425(a) 18,301,305
Selling and administrative......... 898,289 169,004 (65,000)(b) 1,002,293
Interest expense................... 158,445 11,841 13,748(c) 184,034
Interest income and other.......... (22,098) -- (736)(d) (22,834)
Impairment/restructuring charge.... 3,264 -- -- 3,264
Litigation charge.................. 48,628 -- -- 48,628
----------- ---------- -------- -----------
Total costs and expenses...... 16,030,072 3,461,181 25,437 19,516,690
----------- ---------- -------- -----------
Income before taxes..................... 76,810 34,730 (25,437) 86,103
Taxes on income(f)...................... 40,890 15,467 (8,393)(e) 47,964
----------- ---------- -------- -----------
Net income(g)................. $ 35,920 $ 19,263 $(17,044) $ 38,139
=========== ========== ======== ===========
Basic income per share(f)(h)............ $ 0.82 $ 0.72
=========== ===========
Diluted income per share(f)(i).......... $ 0.79 $ 0.69
=========== ===========
Weighted average shares outstanding:
Basic.............................. 43,813 9,200(j) 53,013
Diluted(i)......................... 50,866 4,245(k) 55,111
</Table>
43
NOTES TO UNAUDITED PRO FORMA COMBINING INCOME STATEMENTS
(DOLLARS IN THOUSANDS)
Fleming's Financial Statements for the 52 weeks ended December 29, 2001
reflect the retroactive reclassification to decrease net sales and cost of sales
by approximately $70 million with no effect on gross margin due to the adoption
of EITF 01-9. Core-Mark early adopted EITF 01-9 in 2001.
For the purpose of determining the pro forma effect of the transactions on
Fleming's Consolidated Income Statement for the 52 weeks ended April 20, 2002,
the Consolidated Income Statement information for Fleming's 16 weeks ended April
20, 2002 was combined with the Consolidated Income Statement information for
Fleming's 52 weeks ended December 29, 2001, and the Consolidated Income
Statement information for Fleming's 16 weeks ended April 21, 2001 was
subtracted. Fleming has presented information for the 52 weeks ended April 20,
2002 because Fleming's first quarter of 2001 includes results related to our
disposition of conventional retail operations.
For the purpose of determining the pro forma effect of the transactions on
Fleming's Consolidated Income Statements for the 52 weeks ended December 29,
2001, the 16 weeks ended April 20, 2002 and the 52 weeks ended April 20, 2002,
the following pro forma adjustments have been made:
(a) The adjustment to cost of sales reflects the following:
<Table>
52 WEEKS 16 WEEKS 52 WEEKS
ENDED ENDED ENDED
DECEMBER 29, APRIL 20, APRIL 20,
2001 2002 2002
-------- -------- --------
Reclass Core-Mark distribution and
warehouse expense from selling and
administrative (see note (b))........... $ 76,680 $ 18,711 $ 77,425
======== ======== ========
</Table>
(b) The adjustment to selling and administrative reflects the
following:
<Table>
<Caption>
52 WEEKS 16 WEEKS 52 WEEKS
ENDED ENDED ENDED
DECEMBER 29, APRIL 20, APRIL 20,
2001 2002 2002
------------ --------- ---------
Reclass Core-Mark distribution and
warehouse expense to cost of sales (see
note (a))............................... $(76,680) $(18,711) $(77,425)
Eliminate Core-Mark goodwill
amortization............................ (2,083) -- (1,562)
Amortize goodwill acquired as a result of
the transaction (estimate of 20
years).................................. 11,190 -- 8,392
Amortize other intangible assets acquired
as a result of the transaction (estimate
of 10 years)............................ 5,595 1,399 5,595
-------- -------- --------
$(61,978) $(17,312) $(65,000)
======== ======== ========
</Table>
(c) The adjustment for interest expense reflects the following:
<Table>
<Caption>
52 WEEKS 16 WEEKS 52 WEEKS
ENDED ENDED ENDED
DECEMBER 29, APRIL 20, APRIL 20,
2001 2002 2002
------------ --------- ---------
Reclassify Core-Mark interest income from
interest expense (see note (d))......... $ 834 $ 141 $ 736
Eliminate Core-Mark interest expense to
reflect debt repayment.................. (13,229) (2,947) (12,577)
Reflect Fleming interest expense on new
financing to fund the transaction....... 25,589 7,874 25,589
-------- -------- --------
$ 13,194 $ 5,068 $ 13,748
======== ======== ========
</Table>
44
NOTES TO UNAUDITED PRO FORMA COMBINING INCOME STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
(d) The adjustment for interest income and other reflects the
following:
<Table>
<Caption>
52 WEEKS 16 WEEKS 52 WEEKS
ENDED ENDED ENDED
DECEMBER 29, APRIL 20, APRIL 20,
2001 2002 2002
------------ --------- ---------
Reclassify Core-Mark interest income from
interest expense (see note (c))......... $ (834) $ (141) $ (736)
======== ======== ========
</Table>
(e) The adjustment for taxes on income reflects the following:
<Table>
<Caption>
52 WEEKS 16 WEEKS 52 WEEKS
ENDED ENDED ENDED
DECEMBER 29, APRIL 20, APRIL 20,
2001 2002 2002
------------ --------- ---------
Eliminate Core-Mark taxes on income....... $(14,268) $ (2,832) $(15,467)
Reflect tax provision on Core-Mark results
of operations net of pro forma
adjustments............................. 6,363 104 7,074
-------- -------- --------
$ (7,905) $ (2,728) $ (8,393)
======== ======== ========
</Table>
(f) The pro forma combined effective tax rates of 63% for the 52
weeks ended December 29, 2001 and 56% for the 52 weeks ended
April 20, 2002 include the impact of an unusual tax gain related
to our disposition of non-strategic retail operations and the pro
forma amortization of goodwill from our acquisition of Core-Mark,
most of which would not have been tax deductible. Our effective
tax rate for both periods would have been approximately 40%
absent these two items since we will not amortize goodwill in
accordance with SFAS 142 and do not anticipate another similar
tax gain. For the 52 weeks ended December 29, 2001, our effective
tax rate of approximately 40% would have represented a pro forma
combined tax expense of $27.3 million, net income before
extraordinary item of $40.2 million, net income of $36.8 million,
basic income per share before extraordinary item of $0.78, basic
income per share of $0.71, diluted income per share before
extraordinary item of $0.74 and diluted income per share of
$0.67. For the 52 weeks ended April 20, 2002, our effective tax
rate of approximately 40% would have represented a pro forma
combined tax expense of $34.0 million, net income of $52.1
million, basic income per share of $0.98 and diluted income per
share of $0.95.
(g) On December 30, 2001 we adopted SFAS 142, Accounting for Goodwill
and Other Intangible Assets. If we had applied the
nonamortization provisions of SFAS 142 to all periods presented,
our pro forma combined income before extraordinary charge for the
52 weeks ended December 29, 2001, would have been $56 million and
our pro forma combined net income would have been $52 million for
the 52 weeks ended December 29, 2001, and $60 million for the 52
weeks ended April 20, 2002. Our historical numbers include
goodwill amortization of $21 million for the year ended December
29, 2001 and $15 million for the 52 weeks ended April 20, 2002.
If we had applied the nonamortization provisions of SFAS 142 to
our historical amounts, our income before extraordinary item for
the year ended December 29, 2001 would have been $46 million
($1.01 per diluted share) and our net income would have been $42
million ($0.94 per diluted share) for the year ended December 29,
2001 and $49 million ($1.06 per diluted share) for the 52 weeks
ended April 20, 2002.
45
NOTES TO UNAUDITED PRO FORMA COMBINING INCOME STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
(h) See note (g). If we had applied the nonamortization provisions
of SFAS 142 to all periods presented, our pro forma combined
basic earnings per share before extraordinary charge for the 52
weeks ended December 29, 2001, would have been $1.07 per share,
our pro forma combined basic earnings per share would have been
$1.00 for the 52 weeks ended December 29, 2001 and $1.13 for the
52 weeks ended April 20, 2002.
(i) See note (g). If we had applied the nonamortization provisions
of SFAS 142 to all periods presented, our pro forma combined
diluted earnings per share before extraordinary charge for the
52 weeks ended December 29, 2001, would have been $1.02 and our
pro forma combined diluted earnings per share would have been
$0.96 for the 52 weeks ended December 29, 2001, and $1.08 for
the 52 weeks ended April 20, 2002. Our 5 1/4% convertible notes
would be dilutive for all periods presented. The diluted
weighted average shares would have been 58,072,000 shares for
the 52 weeks ended December 29, 2001 and 60,066,000 shares for
the 52 weeks ended April 20, 2002.
(j) The adjustment for basic weighted average shares outstanding
reflects the following:
<Table>
<Caption>
52 WEEKS 16 WEEKS 52 WEEKS
ENDED ENDED ENDED
DECEMBER 29, APRIL 20, APRIL 20,
2001 2002 2002
------------ --------- ---------
Reflect Fleming common shares issued to
partially fund the transaction
(including the exercise of the
underwriters' over-allotment option).... 9,200 9,200 9,200
======== ======== ========
</Table>
(k) The adjustment for diluted weighted average shares outstanding
reflects the following:
<Table>
<Caption>
52 WEEKS 16 WEEKS 52 WEEKS
ENDED ENDED ENDED
DECEMBER 29, APRIL 20, APRIL 20,
2001 2002 2002
------------ --------- ---------
Reflect Fleming common shares issued to
partially fund the transaction
(including the exercise of the
underwriters' over-allotment option).... 9,200 9,200 9,200
Reflect adjustment to Fleming's diluted
weighted average shares outstanding due
to the impact of Fleming's 5 1/4%
convertible notes (anti-dilutive for the
52 weeks ended April 20, 2002).......... -- -- (4,955)
-------- -------- --------
9,200 9,200 4,245
======== ======== ========
</Table>
46
BUSINESS
INTRODUCTION
Fleming is an industry leader in the distribution of consumer package
goods. We believe that our network of "multi-tier" distribution centers offers
retailers of varying size and format a low-cost supply chain alternative to
other distribution competitors or to self-distribution. Multi-tier distribution
allows us to optimize the particular volume, value and velocity characteristics
of each product that we distribute, thereby increasing our efficiency and
lowering our costs.
On June 18, 2002, we acquired Core-Mark International, Inc. ("Core-Mark"),
a distributor of consumer package goods to convenience stores and other
retailers in the western United States and western Canada. As a result of the
acquisition of Core-Mark (the "Acquisition"), our distribution now serves
approximately 50,000 retail locations across the United States and western
Canada, including approximately 3,000 supermarkets, approximately 40,000
convenience stores and approximately 7,000 supercenters, discount stores,
limited assortment stores, drug stores, specialty stores and other stores. We
believe that the Acquisition will further transform our distribution group into
an efficient, nationwide, multi-tier supply chain for consumer package goods to
retailers of any size and format.
On a pro forma basis after giving effect to the Acquisition, our
distribution group net sales were $16.6 billion for 2001 and $4.8 billion for
the 16 weeks ended April 20, 2002. Our distribution group represented
approximately 87% of our pro forma total net sales in 2001 and for the 16 weeks
ended April 20, 2002. To supply our customers, we currently have a network of 24
high velocity case-pick and flow-through distribution centers, 26 high velocity
piece-pick distribution centers and five low velocity case-pick and piece-pick
distribution centers, that have a total of approximately 21 million square feet
of warehouse space.
Our retail group operates 109 price impact supermarkets that offer everyday
low prices, typically below the prices of market-leading conventional
supermarkets, and that focus on high-quality perishables. These stores typically
cost less to build, maintain and operate than conventional supermarkets. In
addition, we operate 17 limited assortment stores under the yes!LESS(R) banner.
Limited assortment stores offer a narrow selection of low-price, private label
food and other consumable goods and general merchandise at deep-discount prices.
Our retail group net sales were $2.4 billion for 2001 and $669 million for the
16 weeks ended April 20, 2002, representing approximately 13% of our total net
sales for each respective period, on a pro forma basis after giving effect to
the Acquisition. Of those amounts, approximately $2.0 billion and $669 million
were attributable to continuing retail formats for each respective period.
COMPETITIVE STRENGTHS
Interconnected Network of Multi-Tier, High-Volume, Low-Cost Distribution
Centers: Our network of multi-tier distribution centers optimizes the
particular volume, value and velocity characteristics of each product that we
distribute. We employ case-pick (in which products are selected in case
quantities and aggregated and distributed on pallets), piece-pick (in which
products are selected in single-unit quantities and distributed in totes) and
flow-through (in which products are distributed in full pallet quantities)
distribution methods. Our multi-tier process further segregates products into
high velocity items (which are characterized by fast inventory turns, such as
tobacco products, candy and paper products) and low velocity items (which are
characterized by slower inventory turns, such as health and beauty products,
general merchandise and specialty items). Consequently, we are able to serve
consumer package goods retailers of any size and format. We also believe that
our distribution center volumes are among the highest in the consumer package
goods distribution industry. With high volume comes the opportunity to operate
more efficiently by reducing costs through economies of scale, which enables us
to provide our customers with lower-cost merchandise and services.
National Distribution Capabilities: We believe we are the only distributor
of consumer package goods capable of meeting the growing need for a national
supply chain which can serve all retail formats anywhere in the United States.
In addition, we believe we are one of only two suppliers capable of
47
distributing consumer package goods to convenience stores and related
convenience-oriented retailers across the United States and western Canada.
Efficient Centralized Purchasing: We currently make category management
decisions and negotiate with vendors for approximately 84% of our merchandise
procurement from one location, our customer support center near Dallas, Texas.
We believe our customer support center is one of the largest volume-buying
locations of consumable goods in the United States. Centralized purchasing
benefits us and ultimately, our customers, in several ways. It allows us to
lower our cost of goods through aggregated purchasing power, and it lowers our
administrative costs by eliminating the redundancy involved in purchasing
through multiple locations. It also makes it less expensive for our vendors to
serve us, which we believe in turn reduces our cost of goods. We believe that
our centralized purchasing capabilities are valuable to national retailers, as
well as the smaller independent retailers that make up our traditional customer
base.
Diverse Distribution Customer Base: We distribute to approximately 50,000
retail store locations that operate in a wide variety of formats across the
United States and western Canada. On a pro forma basis after giving effect to
the Acquisition, other than Kmart, which accounted for 17% of our net sales in
2001, no customer accounted for more than approximately 2% of our fiscal 2001
net sales.
Successful Price Impact Retail Format: Our price impact supermarkets offer
name-brand and private label consumable goods at significantly lower prices than
conventional supermarkets. We keep prices low by leveraging our existing
distribution and procurement capabilities and maintaining a lower cost structure
associated with operating these stores. We believe this format is profitable
because we offer a reduced number of product selections, focus on high-turnover
products and product categories, employ flow-through distribution methods that
reduce product storage and handling expense and minimize store operating costs.
Experienced Management Team: Our management team is led by Mark Hansen,
Chairman and Chief Executive Officer, who has been with Fleming since 1998.
Since Mr. Hansen joined us, we have further strengthened our management team
through the addition of a number of experienced officers across key functional
areas of our organization including information technology, logistics,
merchandising and supply chain management, retail store operations, finance and
human resources. These executives bring substantial experience from leading food
wholesale, supermarket, supercenter and general merchandise retailers.
BUSINESS STRATEGY
Our business strategy is to use our competitive strengths to achieve sales
and earnings growth in both our distribution group and retail group. As
principal elements of our strategy, we intend to:
Further Grow Sales to New Channel Retailers: We believe that our network
of multi-tier distribution centers strategically positions us to grow our sales
to new channel retailers. In recent years, consumers have been shifting their
purchases of food and other consumable goods away from conventional full-service
grocery stores toward these other retail channels. For this reason, we have
moved beyond our historic focus on conventional full-service grocery stores and
have successfully targeted convenience stores and other convenience-related
retailers, supercenters, discount stores, price impact stores, dollar stores,
ethnic food stores, limited-assortment stores, drug stores, military exchanges
and other specialty retailers, as evidenced by our recent supply agreement with
Target.
Grow Sales to Traditional Format Customers: Despite being the largest
distributor in the wholesale grocery industry, we currently account for a small
percentage of sales in this traditional core market, representing substantial
room for additional growth. Many of our potential customers are currently served
by local or regional wholesalers that cannot offer the efficiencies produced by
our nationwide network of multi-tier distribution centers and our centralized
purchasing. Our repositioned distribution group has already enabled us to
increase sales to existing and new customers in this sector, and we expect to be
able to continue this trend.
48
Grow Sales to Self-Distributing Chain Supermarkets: In addition to
enabling us to grow our sales of consumer package goods and other merchandise to
new channel retailers and our traditional format customers, we believe that we
can employ our network of multi-tier distribution centers to expand our
distribution capabilities to serve large, national chain supermarkets that
currently self-distribute. For example, during the next five years we will
supply 39 Albertson's stores in Oklahoma and Nebraska. We believe that our
national presence, our multi-tier distribution platform and our centralized
purchasing capabilities will provide national chain supermarkets with a
compelling alternative to self-distribution. We are seeking additional
opportunities to establish similar relationships with other major supermarket
chains.
Continue to Improve Working Capital Management and Reduce Costs: We intend
to improve our working capital management primarily by further developing our
centralized procurement operations, taking advantage of the efficiencies created
by our multi-tier distribution network, and by continuing to develop and
implement our "F-1" supply chain technologies to better integrate our
distribution centers and our central procurement operations.
OUR DISTRIBUTION GROUP
Our distribution group sells food and non-food products to supermarkets,
convenience stores, supercenters, discount stores, limited assortment stores,
drug stores, specialty stores and other stores across the United States. On a
pro forma basis after giving effect to the Acquisition, our distribution group
net sales were $16.6 billion for fiscal 2001 and $4.8 billion for the 16 weeks
ended April 20, 2002, excluding sales to our own retail stores. Sales to our own
retail stores totaled $1.2 billion during fiscal 2001 and $372 million for the
16 weeks ended April 20, 2002.
As a result of the Acquisition, we have a nationwide network of multi-tier
distribution centers that employ piece-pick, case-pick and flow-through
distribution methods. We believe that our network of multi-tier distribution
centers offers retailers of varying size and format a low-cost alternative to
other distribution competitors or to self-distribution, partly because our
network allows us to address the particular volume, value and velocity
characteristics of each product that we distribute. In particular, we believe
there is an increasing demand for a national network of distribution facilities
that can uniformly meet the piece-pick needs of large-scale retail chains.
49
The following map displays the location of our distribution centers.
[MAP OF DISTRIBUTION CENTERS]
We employ the high velocity case-pick method to distribute items that turn
over quickly, such as fast-moving grocery items. This method allows us to select
products in case quantities and then aggregate and distribute them on pallets.
We use flow-through distribution methods to distribute items that move rapidly
through the distribution center, such as bulk paper, water and promotional
grocery items, in full pallet quantities. We have 24 high velocity case-pick and
flow-through distribution centers. We use the high velocity piece-pick method to
distribute high-turn consumer goods such as tobacco, candy, snacks, fast food
and beverages to convenience-oriented retailers. This method selects products in
single-unit quantities and distributes them in totes. We have 26 high velocity
piece-pick distribution centers. We use low velocity case-pick and piece-pick
distribution methods to distribute products that turn the least often, such as
health and beauty aids, general merchandise and specialty and slow-moving
grocery items. We have five low velocity case-pick and piece-pick distribution
centers.
Cross-docking of product between facilities allows us to maximize the
efficiency of our truck fleet, reduce costly truck miles and, consequently,
lower our costs.
Customers Served. Our distribution group serves a wide variety of retail
operations located in all 50 states, western Canada and the Caribbean including
supermarkets, convenience stores, supercenters, discount stores, limited
assortment stores, drug stores, specialty stores and other stores.
On a pro forma basis after giving effect to the Acquisition, our top ten
customers accounted for approximately 26% of our total net sales during 2001 and
approximately 28% of our total net sales for the 16 weeks ended April 20, 2002.
On a pro forma basis after giving effect to the Acquisition, Kmart Corporation,
our largest customer, represented approximately 17% of our total net sales in
2001 and 19% of our total net sales for the 16 weeks ended April 20, 2002. On a
pro forma basis after giving effect to the Acquisition, no other single customer
represented more than approximately 2% of our net sales for fiscal 2001 or the
16 weeks ended April 20, 2002.
50
Pricing. Our distribution segment uses market research and cost analyses
as a basis for pricing its products and services. We have three basic marketing
programs for our distribution business: FlexMate, FlexPro and FlexStar.
The FlexMate marketing program prices product to customers at a quoted sell
price, a selling price established by us that might include a mark-up. Under the
FlexPro and FlexStar programs, grocery, frozen and dairy products are priced at
their net acquisition value, which is generally comparable to the net cash price
paid by the distribution segment. Customers pay fees for specific activities
related to the selection and distribution of products. Certain vendor allowances
and service income are passed through to the customer under the FlexPro and
FlexStar programs, but service charges are different between the two programs.
Private Label. Fleming's private label brands are Fleming-owned brands
that we offer exclusively to our customers. Our predominant brand is BestYet,
and we also offer a growing number of products under Exceptional Value, our
opening price-point brand. We recently introduced BestYet meat and a re-
formatted BestYet health and beauty care line. Private label lines are designed
to offer quality products that are equal or superior in quality to comparable
nationally advertised brands and value brand products at more competitive
prices. We believe our private label brands generate higher margins for us and
for our customers than nationally advertised brands and other value brand
products because we are able to acquire them at lower costs.
We offer two controlled labels, IGA and Piggly Wiggly brands, which are
national quality brands. Controlled labels are brands to which we have exclusive
distribution rights to a particular customer or in a specific region and are
offered only in stores operating under specific banners, which we may or may not
control.
Procurement. We currently make category management decisions and negotiate
with vendors for approximately 84% of our merchandise procurement from one
location, our customer support center near Dallas, Texas. This makes more
efficient use of our procurement staff, improves buying efficiency and reduces
the cost of goods. We believe our customer support center is one of the largest
buying locations of consumable goods in the United States. We believe that our
centralized purchasing capabilities and the volume discount pricing we have
achieved are valuable to our customers. We make a small percentage of our
procurement decisions at the distribution center level where local market needs
and trends can best be addressed, such as decisions regarding ethnic products,
and where transportation costs may be minimized.
Facilities and Transportation. Our distribution group operates a network
of 24 high-velocity case-pick and flow-through distribution centers, 26
high-velocity piece-pick distribution centers and five low-velocity case-pick
and piece-pick distribution centers that are responsible for the distribution of
national brands and private label Fleming brands, including groceries, meat,
dairy and delicatessen products, frozen foods, produce, bakery goods and a
variety of related food and non-food items. All facilities are equipped with
modern material handling equipment for receiving, storing and shipping large
quantities of merchandise. Our distribution centers comprise approximately 21
million square feet of warehouse space. Additionally, the distribution group
rents, on a short-term basis, approximately 904,000 square feet of off-site
temporary storage space.
Transportation arrangements and operations vary by distribution center and
may vary by customer. Some customers prefer to handle product delivery
themselves, others prefer us to deliver products, and still others ask us to
coordinate delivery with a third party. Accordingly, many of our distribution
centers maintain a truck fleet to deliver products to customers, and several of
our distribution centers also engage dedicated contract carriers to deliver
products. We increase the utilization of our truck fleet by back-hauling
products from suppliers and others, thereby reducing the number of empty miles
traveled. To further increase our fleet utilization, we have made our truck
fleet available to other firms on a for-hire carriage basis.
Capital Invested in Customers. As part of our services to retailers, we
provide capital to certain customers by extending credit for inventory
purchases, by becoming primarily or secondarily liable for store
51
leases, by leasing equipment to retailers and by making secured loans to
customers. At April 20, 2002, on a pro forma basis after giving effect to the
Acquisition, we were the primary lessee of approximately 600 retail store
locations subleased to and operated by customers. In making credit and
investment decisions, we consider many factors, including estimated return on
capital, assumed risks and benefits (including our ability to secure long-term
supply contracts with these customers).
At April 20, 2002, on a pro forma basis after giving effect to the
Acquisition, we had loans outstanding to customers totaling $128 million. We
also have investments in customers through direct financing leases of real
property and equipment, lease guarantees, operating leases or credit extensions
for inventory purchases. On a pro forma basis after giving effect to the
Acquisition, our credit loss expense from receivables as well as from
investments in customers was $40 million in 2001 (including a $17 million charge
relating to the Kmart bankruptcy) and $1 million for the 16 weeks ended April
20, 2002.
Cost-Reduction Initiatives. To strengthen our position as a low-cost
supplier to our retail customers and increase our profitability, we instituted a
"culture of thrift" among our employees and developed initiatives to reduce our
expenses. This program focuses on five areas: merchandising and procurement,
logistics and distribution, shared services and finance, retail operations and
customer relations. In the merchandising and procurement functions, we have
lowered cost of goods and administrative costs by centralizing most of our
procurement functions, which were conducted in individual distribution centers,
into one national procurement center near Dallas, which we believe is one of the
largest buyer locations of consumable goods in the United States. The logistics
and distribution functions have removed costs associated with back-haul,
in-bound transportation and other logistics functions. In addition, we
established a new shared services center in Oklahoma City where we have
centralized the management of our accounting, human resources, information
technology and other support services. We have also achieved progress in the
rollout of our "F1" supply chain technologies that we are currently developing
and implementing to better integrate our distribution centers and our central
procurement operations. These new technologies will include transportation,
warehouse management and procurement software applications. The transportation
management software and processes will provide us with the ability to track all
freight movement, whether it is inbound, outbound or inter-facility, resulting
in more efficient and effective routing and fleet management. In the first
quarter of 2002, we installed transportation management software in our Geneva,
Northeast, Warsaw, Memphis, Garland, Kansas City, Lincoln and Massillon
divisions. Retail operations have taken steps to reduce labor costs and reduce
store operating costs, and certain administrative functions have also been
centralized for retail operations. Finally, customer relations has established a
single point of contact for each customer to eliminate many paper-based
processes and improve customer communications.
OUR RETAIL GROUP
At May 15, 2002, our retail group operated 109 price impact supermarkets
primarily under the Food 4 Less and Rainbow Foods banners. In addition, at May
15, 2002, we operated 17 limited assortment stores under the yes!LESS(R) banner,
11 of which we opened in 2001.
52
As part of our strategic plan, we sold or closed 238 of our conventional
format supermarkets in order to focus resources on growing our price impact
stores and improving financial results. The following chart illustrates the
number of supermarkets and limited assortment stores we operated as of the dates
indicated:
<Table>
<Caption>
DECEMBER 25, DECEMBER 30, DECEMBER 29, MAY 15,
1999 2000 2001 2002
------------ ------------ ------------ -------
CONTINUING STORES
Price Impact........................... 71 74 99 109
Limited Assortment..................... -- 6 17 17
--- --- --- ---
Subtotal............................. 71 80 116 126
NON-STRATEGIC STORES................... 171 107 -- --
--- --- --- ---
TOTAL................................ 242 187 116 126
=== === === ===
</Table>
Price Impact Supermarkets. At May 15, 2002, our retail group operated 109
price impact supermarkets, of which 42 are located in Minnesota, 26 in Northern
California, 13 in Wisconsin, seven in the Salt Lake City, Utah area, 13 in
Texas, seven in the Phoenix, Arizona area, and one in Las Cruces, New Mexico.
These stores average approximately 45,000 square feet and offer deep-discount,
everyday low prices well below those offered by conventional supermarkets and
carry prices for grocery products that are also generally lower than
supercenters. Our price impact supermarkets are also known for their quality
meat and produce offerings. Our price impact supermarkets that have been open at
least one year generated average weekly sales of approximately $450,000 per
store for the year ended December 29, 2001.
Our price impact supermarkets serve price-sensitive middle-income consumers
who often have larger-than-average families. These stores have a wider trade
area than conventional supermarkets yet are generally more convenient to shop
than supercenters. Our price impact supermarkets offer name-brand food and
consumable goods at significantly lower prices than conventional format retail
store operators because of the many low-cost features of our stores. These
features include: offering a reduced number of product selections, focusing on
popular, name-brand products and product categories, employing flow-through
distribution methods which reduce product storage and handling expense and
minimizing store operating costs.
These stores do not cost as much as conventional stores to construct and
maintain, as price impact stores typically feature cement floors, cinder block
walls, exposed ceiling and walk-in freezers and coolers which combine the
typically separate storage and display areas. In addition, price impact stores
produce lower operating expenses, primarily as a result of less labor content
due to pallet or case-loading display racks, fewer product categories offered
due to focusing on the more popular items, self bagging, and elimination of
staffed service departments.
We believe price-sensitive consumers are underserved on a nationwide basis.
Because price impact stores cost less to build and maintain than conventional
supermarkets, we expect to be able to grow our price impact supermarket
operations while incurring lower capital expenditures. We believe the success of
our price impact stores is based on an underserved trade area and does not
require significant market share. As a result, we spend less on advertising and
marketing for these stores compared to conventional format stores.
Limited Assortment Stores. In 2000, we began to develop our limited
assortment retail concept operating under the yes!LESS(R) trade name, operating
stores averaging 12,000 to 15,000 square feet of selling space. Our yes!LESS(R)
concept is designed to appeal to a needs-based consumer, primarily with low
price private label food and other consumables and an attractive selection of
general merchandise products at opening price points. With 11 stores opened in
2001, as of May 15, 2002, there were 17 yes!LESS(R) retail stores open, 16 in
Texas and one in Louisiana.
53
PRODUCTS
We supply a full line of national brands and Fleming brands, including
groceries, meat, dairy and delicatessen products, frozen foods, produce, bakery
goods and a variety of general merchandise, health and beauty care and other
related items. During 2001, the total number of SKUs carried in our distribution
centers was approximately 42,000. During 2001, our product mix as a percentage
of sales was approximately 61% groceries, 33% perishables and 6% general
merchandise.
Our subsidiary Core-Mark distributes a full line of national brands and
Core-Mark brands, including cigarettes and other tobacco products, food products
such as candy, fast food, snacks, groceries, non-alcoholic beverages, and
non-food products such as film, batteries and other sundries and health and
beauty care products, a total of approximately 31,000 SKUs. During 2001,
cigarette net sales constituted approximately 72% of Core-Mark's total net
sales.
SUPPLIERS
We purchase our products from numerous vendors and growers. As a large
customer with centralized procurement, we are able to secure favorable terms and
volume discounts on many of our purchases, leading to lower unit costs. We
purchase products from a diverse group of suppliers and believe we have adequate
sources of supply for substantially all of our products.
COMPETITION
Our distribution group operates in a competitive market. Our primary
competitors are national, regional and local food and consumer package goods
distributors and national chains that perform their own distribution. The
convenience retail distribution business is comprised of one other national
distributor in the United States (McLane, a subsidiary of Wal-Mart) and a number
of large, multi-regional and smaller local distributors. The principal factors
on which we compete include price, quality and assortment of product lines,
schedules and reliability of delivery and the range and quality of customer
services.
The primary competitors of our retail group supermarkets are national,
regional and local grocery chains, as well as supercenters, independent
supermarkets, convenience stores, drug stores, restaurants and fast food
outlets. Principal competitive factors include price, quality and assortment,
store location and format, sales promotions, advertising, availability of
parking, hours of operation and store appeal.
INTELLECTUAL PROPERTY
We or our subsidiaries use many trade names registered either by us or by
third parties from whom we license the rights to use such trade names at either
the federal or state level or a combination of both, such as Piggly Wiggly,
PWPETRO, Piggly Wiggly xpress, Super 1 Foods, Festival Foods, Jubilee Foods,
Jamboree Foods, MEGAMARKET, Shop 'N Kart, ABCO Desert Market, American Family,
Big Star, Big T, Big Bear, Big Dollar, Buy for Less, County Pride Markets,
Rainbow Foods, Red Fox, Sentry, Shop N Bag, Super Duper, Super Foods, Super
Thrift, Thriftway, Value King and yes!LESS.
We license the Food 4 Less service mark and trade name from Ralphs Grocery
Company, a subsidiary of Kroger Co., and have the exclusive right to use and
sublicense the name in certain areas of California. We also have the exclusive
license to use and sublicense the name in all other states, excluding certain
areas of Southern California and certain areas in various other states
previously licensed to others by Ralphs or its predecessors. Additionally,
should the rights to such a previously licensed area terminate, we would
automatically obtain the exclusive license for that area. The Food 4 Less
license agreement generally provides for protected trade area status for five
years after the date that we, our franchisees or Ralphs commit to entering a new
market area under the Food 4 Less banner. However, we are not prohibited by the
licensing agreement from opening stores under a different trade name in any of
these areas.
54
EMPLOYEES
At April 20, 2002, we had approximately 21,000 full-time and part-time
employees, with 10,000 employed by the distribution group, 9,000 by the retail
group and 2,000 employed in shared services, customer support and other
functions.
Approximately 44% of our employees are covered by collective bargaining
agreements with the International Brotherhood of Teamsters; Chauffeurs,
Warehousemen and Helpers of America; the United Food and Commercial Workers; the
International Longshoremen's and Warehousemen's Union; the Retail, Wholesale and
Department Store Union; and the International Union of Operating Engineers. Most
of these agreements expire at various times throughout the next five years. We
consider our employee relations in general to be satisfactory.
At December 31, 2001, our subsidiary Core-Mark had 2,916 employees.
Core-Mark is a party to local collective bargaining agreements with the
International Brotherhood of Teamsters, United Food Commercial Workers and the
Industrial Wood and Allied Workers of Canada. Core-Mark is currently in
negotiations with the union in Victoria. These agreements, most of which expire
at various times over the course of the next five years, cover an aggregate of
approximately 9%, or approximately 260, of Core-Mark's employees. In addition,
in April 2002, 13 of 21 of Core-Mark's drivers in Denver, Colorado filed a
petition with the National Labor Relations Board seeking an election to
determine whether they may be represented by Teamsters Local Union No. 961 for
collective bargaining purposes under Section 7 of the National Labor Relations
Act. In May 2002, Core-Mark's drivers in Tacoma, Washington filed a petition
with the National Labor Relations Board seeking an election to determine whether
they may be represented by Teamsters Local Union No. 313 for collective
bargaining purposes under Section 7 of the National Labor Relations Act. In June
2002, Core-Mark's drivers in Flagstaff, Arizona filed a petition with the
National Labor Relations Board seeking an election to determine whether they may
be represented by Teamsters Local Union No. 17 for collective bargaining
purposes under Section 7 of the National Labor Relations Act.
55
PROPERTIES
The following chart displays our distribution group facilities(1). Except
as otherwise indicated in the table below, we lease all of our properties.
<Table>
<Caption>
APPROXIMATE
LOCATION SQUARE FEET
- -------- -----------
(IN THOUSANDS)
HIGH VELOCITY CASE-PICK (24 FACILITIES):
Ewa Beach, HI....................... 361
Ft. Wayne, IN....................... 1,043
Fresno, CA**........................ 828
Garland, TX*........................ 1,175
Geneva, AL.......................... 793
Kansas City, KS..................... 937
La Crosse, WI*...................... 907
Lafayette, LA*...................... 443
Lincoln, NE......................... 516
Lubbock, TX**....................... 762
Massillon, OH**..................... 874
Memphis, TN**....................... 1,071
Miami, FL**......................... 764
Milwaukee, WI*...................... 600
Minneapolis, MN*.................... 480
Nashville, TN....................... 941
North East, MD**.................... 591
Phoenix, AZ**....................... 1,033
Sacramento, CA**.................... 787
Salt Lake City, UT**................ 555
South Brunswick, NJ................. 526
Superior, WI*....................... 371
Tulsa, OK........................... 748
Warsaw, NC**........................ 672
------
Total........................ 17,778
LOW VELOCITY CASE-PICK AND PIECE-PICK (5 FACILITIES):
King of Prussia, PA................. 377
La Crosse, WI*...................... 163
Memphis, TN**....................... 495
Sacramento, CA...................... 439
Topeka, KS.......................... 223
------
Total........................ 1,697
</Table>
<Table>
<Caption>
APPROXIMATE
LOCATION SQUARE FEET
- -------- -----------
(IN THOUSANDS)
HIGH VELOCITY PIECE-PICK (26 FACILITIES):
Adel, GA............................ 79
Albuquerque, NM..................... 96
Altoona, PA*........................ 172
Denver, CO.......................... 91
Bakersfield, CA..................... 70
Corona, CA.......................... 201
Corona, CA (AMI Consolidation
Facility)......................... 57
Ft. Worth, TX....................... 113
Grants Pass, OR..................... 43
Hayward, CA......................... 130
Las Vegas, NV....................... 100
Leitchfield, KY**................... 169
Los Angeles, CA..................... 194
Marshfield, WI*..................... 157
Plymouth, MN........................ 239
Portland, OR........................ 112
Romeoville, IL...................... 125
Sacramento, CA...................... 187
Sacramento, CA (Arctic Cascade
Consolidation Facility)........... 22
Salt Lake City, UT.................. 109
Smyrna, GA.......................... 125
Spokane, WA......................... 78
Calgary, Alberta.................... 76
Vancouver, BC....................... 70
Victoria, BC........................ 48
Winnipeg, Manitoba.................. 55
------
Total........................ 2,918
TEMPORARY STORAGE FACILITIES:
Typically rented on a short-term
basis............................... 904
------
Total Distribution Square
Footage.................... 22,393
======
</Table>
- ---------------
* Owned
** Owned and leased
(1) We expect to close our high velocity case-pick facility in Oklahoma City,
Oklahoma and our low velocity case-pick and piece-pick facility in Dallas,
Texas this fall. These facilities are not reflected in the table above.
In addition, we have closed five other facilities in various states, which
we are actively marketing.
As of May 15, 2002, our retail group operated 126 supermarkets in a variety
of formats in Arizona, California, Minnesota, New Mexico, Louisiana, Texas, Utah
and Wisconsin. Our continuing chains included 109 price impact supermarkets and
17 limited assortment stores. For more information, see the subsection "Our
Retail Group."
56
Our shared service center office is located in Oklahoma City, Oklahoma. The
shared service center occupies leased office space totaling approximately
229,000 square feet. Our customer support center near Dallas, Texas occupies
leased office space totaling approximately 153,000 square feet.
We own and lease other significant assets, such as inventories, fixtures
and equipment and capital leases.
Our subsidiary Core-Mark does not own any real property. Core-Mark's
principal executive offices are located in South San Francisco, California, and
consist of approximately 22,000 square feet of leased office space. In addition,
Core-Mark leases approximately 13,000 square feet in Vancouver, British Columbia
for its tax and information technology departments and eight small offices for
use by sales personnel in certain parts of the United States and Canada.
Core-Mark also leases its 19 primary distribution facilities, 15 of which are
located in the western United States and four in western Canada, which are shown
in the table above. Each distribution facility is equipped with modern equipment
(including freezers and coolers at 18 facilities) for receiving, stocking, order
selection and shipping a large volume of customer orders.
LEGAL PROCEEDINGS
We are a party to or threatened with various litigation and contingent loss
situations arising in the ordinary course of our business including disputes
with customers and vendors, owners or creditors of financially troubled or
failed customers, suppliers, landlords, employees regarding labor conditions,
wages, workers' compensation matters and alleged discriminatory practices,
insurance carriers and tax authorities. In this regard, we are currently in
binding arbitration with one of our former convenience store customers, Clark
Retail Enterprises, Inc., regarding the required mix of annual minimum purchases
under a supply agreement and related product service charges. The outcome of
this matter could have an effect on our financial results.
Our facilities and operations are subject to various laws, regulations and
judicial and administrative orders concerning protection of the environment and
human health, including provisions regarding the transportation, storage,
distribution, disposal or discharge of certain materials. In conformity with
these provisions, we have a comprehensive program for testing, removal,
replacement or repair of our underground fuel storage tanks and for site
remediation where necessary. We have established reserves that we believe will
be sufficient to satisfy the anticipated costs of all known remediation
requirements.
We and others have been designated by the U.S. Environmental Protection
Agency and by similar state agencies as potentially responsible parties under
the Comprehensive Environmental Response, Compensation and Liability Act, or
CERCLA, or similar state laws, as applicable, with respect to EPA-designated
Superfund sites. While liability under CERCLA for remediation at these sites is
generally joint and several with other responsible parties, we believe that, to
the extent we are ultimately determined to be liable for the expense of
remediation at any site, such liability will not result in a material adverse
effect on our consolidated financial position or results of operations. We are
committed to maintaining the environment and protecting natural resources and
human health and to achieving full compliance with all applicable laws,
regulations and orders.
We have received notice from a distributor in the State of Washington
alleging that our operation of Core-Mark's existing distribution centers
violates an existing noncompetition agreement in the states of Washington and
Oregon. We do not believe that our operation of Core-Mark's existing
distribution centers in these jurisdictions is precluded by this agreement.
Manufacturers and distributors of cigarettes and other tobacco products are
currently facing a number of significant issues that affect the business
environment in which they operate including: proposed additional governmental
regulation; actual and proposed excise tax increases; increased litigation
involving health and other effects of cigarette smoking and other uses of
tobacco; and litigation by the U.S. Department of Justice to recover federal
Medicare costs allegedly connected to smoking.
Legislation has been introduced in Congress that would grant the FDA
authority to regulate tobacco products. Although no such legislation passed
during the year 2001, the prospects for similar legislation in
57
the future are uncertain. If such legislation is passed, we cannot assure you
that the FDA would not promulgate regulations that would result in a material
reduction in the consumption of tobacco products in the United States.
In November 1998, 46 states, five territories and the District of Columbia
entered into a settlement of approximately $250 billion with four major tobacco
companies to resolve litigation over smoking-related costs incurred by state
Medicaid programs.
Included in the terms of the settlement are conditions that tobacco
companies participating in the settlement may not: target youth in the
advertising, promotion or marketing of tobacco products (including the use of
cartoons in such promotion); use tobacco brand names to sponsor concerts,
athletic events or other events in which a significant percentage of the
audience is under 18 years of age; advertise products in conspicuous places
outdoors (such as billboards) or on transit vehicles; merchandise a tobacco
brand name through the marketing, distribution or sale of apparel or other
merchandise; provide free samples of tobacco products in any area except an
adults-only facility; distribute or sell cigarettes in pack sizes of less than
20; or lobby state legislatures on certain anti-tobacco initiatives (such as
limitations on youth access to vending machines).
58
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors are as follows:
<Table>
<Caption>
NAME AGE PRESENT POSITION
- ---- --- ----------------
EXECUTIVE OFFICERS:
Mark S. Hansen........................ 47 Chairman and Chief Executive Officer
Robert A. Allen....................... 53 Executive Vice President and
President, Convenience Distribution
J.R. Campbell......................... 58 Executive Vice President,
Merchandising and Supply
E. Stephen Davis...................... 61 Executive Vice President and
President, Wholesale
Ronald B. Griffin..................... 48 Executive Vice President and Chief
Information Officer
William H. Marquard................... 42 Executive Vice President, Business
Development
Scott M. Northcutt.................... 40 Executive Vice President, Human
Resources
Neal J. Rider......................... 40 Executive Vice President and Chief
Financial Officer
Michael J. Carey...................... 55 Senior Vice President, Western
Operations
Keith D. Durham....................... 43 Senior Vice President, Fleming Retail
Group
Charles L. Hall....................... 52 Senior Vice President, Real Estate and
Store Development
Carlos M. Hernandez................... 47 Senior Vice President, General Counsel
and Secretary
Matthew H. Hildreth................... 36 Senior Vice President, Finance and
Treasurer
Timothy R. LaBeau..................... 47 Senior Vice President, Operations
William E. May, Jr. .................. 53 Senior Vice President, Operations
William A. Merrigan................... 57 Senior Vice President, Logistics
Philip B. Murphy...................... 53 Senior Vice President, Procurement
Mark D. Shapiro....................... 42 Senior Vice President, Finance and
Operations Control
Thomas A. Zatina...................... 51 Senior Vice President, Northern
Operations
DIRECTORS:
Mark S. Hansen........................ 47 Chairman and Chief Executive Officer
Herbert M. Baum....................... 65 Director
Kenneth M. Duberstein................. 58 Director
Archie R. Dykes....................... 71 Director
Carol B. Hallett...................... 64 Director
Robert S. Hamada...................... 64 Director
Alice M. Peterson..................... 49 Director
</Table>
59
EXECUTIVE OFFICERS
Mark S. Hansen joined us as Chairman and Chief Executive Officer in
November 1998. Prior to joining us, Mr. Hansen served as President and Chief
Executive Officer of SAM's Club, a division of Wal-Mart Stores, Inc., from 1997
through 1998. Prior to joining Wal-Mart, Mr. Hansen served in multiple
capacities at PETsMART, Inc., a retailer of pet food, pet supplies and related
products, including as President and Chief Executive Officer from 1989 to 1997.
Prior to 1989, Mr. Hansen served in various management capacities in the
supermarket industry. He serves as an executive advisory board member of Swander
Pace Capital and is a director of Applebee's Restaurants and Amazon.com.
Robert A. Allen joined us as Executive Vice President and President,
Convenience Distribution upon consummation of the Acquisition in June 2002.
Prior to the Acquisition, Mr. Allen had been Chief Executive Officer of
Core-Mark since January 1998 and President of Core-Mark since January 1996. Mr.
Allen served as Chief Operating Officer of Core-Mark from January 1996 to
December 1997. Prior to 1996, he served as Senior Vice President, Distribution
of Core-Mark from 1992 through 1995. Mr. Allen was a director of Core-Mark from
1994 to June 2002.
J.R. Campbell joined us as our Executive Vice President, Merchandising and
Supply in January 2002. Prior to joining us, Mr. Campbell served for over 20
years in various capacities at Wal-Mart Stores, Inc., including Senior Vice
President and General Merchandise Manager of Wal-Mart Stores, Senior Vice
President of Merchandising for Sam's Club, and most recently as President,
Global Sourcing Division of Wal-Mart Stores.
E. Stephen Davis joined us in 1960 and has served as our Executive Vice
President and President, Wholesale since February 2000. Prior to that, Mr. Davis
has served us in various positions, including Executive Vice President, Food
Distribution from 1998 to February 2000, Executive Vice President, Operations
from 1997 to 1998, Executive Vice President, Food Operations from 1996 to 1997
and Executive Vice President, Distribution from 1995 to 1996.
Ronald B. Griffin joined us as Executive Vice President and Chief
Information Officer in January 2002. Prior to joining us, Mr. Griffin served for
over 10 years in various capacities at The Home Depot, Inc., including most
recently as Senior Vice President and Chief Information Officer.
William H. Marquard joined us as Executive Vice President, Business
Development in June 1999. From 1991 until joining us, Mr. Marquard was a partner
in the consulting practice of Ernst & Young.
Scott M. Northcutt joined us as Senior Vice President, Human Resources in
January 1999 and he became Executive Vice President, Human Resources in February
2000. From 1997 until joining us, Mr. Northcutt was Vice President -- People
Group at SAM's Club, a division of Wal-Mart Stores, Inc. From 1988 to 1995, he
served as Vice President -- Human Resources and from 1995 to 1996, he served as
Vice President -- Store Operations at Dollar General Corporation.
Neal J. Rider joined us as Executive Vice President and Chief Financial
Officer in January 2000. From 1999 until joining us, Mr. Rider was Executive
Vice President and Chief Financial Officer at Regal Cinemas, Inc. From 1980 to
1999, Mr. Rider served in multiple capacities at American Stores Company,
including Treasurer and Controller responsibilities from 1994 to 1997 before
becoming Chief Financial Officer in 1998.
Michael J. Carey joined us in 1983 and has served as our Senior Vice
President, Western Operations since June 2000. Prior to that, Mr. Carey served
as our Operating Group President from 1998 to June 2000, our President, LaCrosse
Division from 1996 to 1998, and our Director of IGA Marketing from 1994 to 1996.
Keith D. Durham joined us as Senior Vice President, Fleming Retail Group in
July 2002. From 1993 until joining us, Mr. Durham served as Vice President of
Operations at Costco Wholesale.
Charles L. Hall joined us as Senior Vice President, Real Estate and Store
Development in June 1999. From 1998 until joining us, he was Senior Vice
President -- Real Estate and Store Development at Eagle
60
Hardware and Garden, Inc. From 1992 to 1998, he served as Vice President of Real
Estate Development at PETsMART, Inc.
Carlos M. Hernandez joined us in March 2000 as Associate General Counsel
and Assistant Secretary and has served as our Senior Vice President, General
Counsel and Secretary since February 2001. Prior to joining us, Mr. Hernandez
was employed in various capacities at Armco Inc. from 1981 to 1999, and then as
an attorney at AK Steel Holding Corporation from October to December 1999.
Matthew H. Hildreth joined us as Senior Vice President, Finance and
Treasurer in May 2001. Prior to joining us, Mr. Hildreth served in various
positions at JPMorgan since 1989, including most recently as Vice President and
Sector Head of North American Trucking for JPMorgan's Transportation and
Logistics Group.
Timothy R. LaBeau joined us in January 2002 as Senior Vice President of
Operations. Prior to joining us, Mr. LaBeau served as President and Chief
Executive Officer of American Sales Company, a subsidiary of Royal Ahold, from
1998 to December 2001. Prior to that, Mr. LaBeau served as Executive Vice
President of Merchandising and Procurement for Ahold USA from 1994 to 1998.
William E. May, Jr. joined us in June 2002 as Senior Vice President,
Operations. Prior to joining us, Mr. May served as Vice President of Gap Global
Distribution and Vice President of Old Navy Distribution at The Gap, Inc. from
1999 to 2002. Prior to that, Mr. May served as Executive Vice President and
Chief Operating Officer of Nash Finch Company from 1996 to 1998.
William A. Merrigan joined us in November 2000 and has served as our Senior
Vice President, Logistics since May 2001. Prior to joining us, Mr. Merrigan
served as Senior Vice President of Logistics at Nash Finch Company from 1998 to
November 2000. Prior to that, Mr. Merrigan served in various senior positions at
Wakefern Food Corporation from 1986 to 1998, including most recently as Vice
President of Logistics and Transportation.
Philip B. Murphy joined us in October 2000 as Vice President of Grocery,
and has served as our Senior Vice President, Procurement since May 2001. Prior
to that, Mr. Murphy served as Senior Vice President and General Manager of
Services at PETsMART, Inc. from 1995 to 2000.
Mark D. Shapiro joined us in June 2001 as Senior Vice President, Finance.
Prior to joining us, Mr. Shapiro served in various positions at Big Lots, Inc.
since 1992, including most recently as Senior Vice President and Chief Financial
Officer.
Thomas A. Zatina joined us in June 2001 as Senior Vice President, Northern
Operations. Prior to joining us, Mr. Zatina served in various positions at
Bozzuto's, Inc., a Connecticut-based wholesale distributor, since 1986,
including most recently as Executive Vice President and Chief Operating Officer.
DIRECTORS
Herbert M. Baum joined us as a director in 1998. He is Chairman, president
and chief executive officer of The Dial Corporation (a consumer products
company). Prior to joining The Dial Corporation in August 2000, Mr. Baum served
as president and chief operating officer of Hasbro, Inc. from January 1999. From
1993 to 1998, Mr. Baum served as chairman and chief executive officer of Quaker
State Corporation. From 1978 to 1993, Mr. Baum served in a variety of positions
for Campbell Soup Company where his last position held was President Campbell
North and South America. Mr. Baum is a director of Grocery Manufacturers of
America, The Dial Corporation, Midas, Inc., Meredith Corporation, PepsiAmericas,
Inc. (formerly Whitman Corporation), and Action Performance Companies, Inc.
Kenneth M. Duberstein joined us as a director in May 2001. He is chairman
and Chief Executive Officer of The Duberstein Group, Inc., an independent
strategic planning and consulting company. Prior to that, Mr. Duberstein served
President Reagan in various capacities, including Chief of Staff from 1988 to
1989, Deputy Chief of Staff from 1987 to 1988 and Assistant and Deputy Assistant
to the President for Legislative Affairs from 1981 to 1983. Mr. Duberstein is a
director of The Boeing Company, Conoco, Inc., Fannie Mae, GVG, The St. Paul
Companies, Inc., and serves on the Board of Governors for the American
61
Stock Exchange and the National Association of Securities Dealers. He also
serves as Vice Chairman of the Kennedy Center for Performing Arts, Chairman of
Ethics Oversight Committee for the U.S. Olympics Committee, Trustee of Franklin
& Marshall College and Johns Hopkins University, and serves on the Council on
Foreign Relations, the Institute of Politics at the John F. Kennedy School of
Government at Harvard University and the National Alliance to End Homelessness.
Archie R. Dykes joined us as a director in 1981. He is chairman and chief
executive officer of Capital City Holdings, Inc. (a venture capital
organization). He is senior chairman and a director of PepsiAmericas, Inc.
(formerly Whitman Corporation), Midas, Inc. and the Employment Corporation. A
former chancellor of the University of Kansas and of the University of
Tennessee, Mr. Dykes also serves as a trustee of the Kansas University Endowment
Association and of the William Allen White Foundation.
Carol B. Hallett joined us as a director in 1993. She is president and
chief executive officer of the Air Transport Association of America, Washington,
D.C. (the nation's oldest and largest airline trade organization). Prior to
joining the Air Transport Association in April 1995, Mrs. Hallett served as
senior government relations advisor with Collier, Shannon, Rill & Scott from
February 1993 to March 1995. From November 1989 through January 1993, Mrs.
Hallett served as the Commissioner of the United States Customs Service. From
September 1986 to May 1989, she served as the U.S. Ambassador to The
Commonwealth of the Bahamas. From July 1983 to August 1986, Mrs. Hallett served
as the national vice chairman and field director of Citizens for America. Mrs.
Hallett also served three terms in the California legislature and as minority
leader in the State Assembly. Mrs. Hallett is a director of Mutual of Omaha
Insurance Company. She is a trustee for the Junior Statesmen of America. Mrs.
Hallett also serves on the President's Cabinet of California Polytechnic State
University.
Robert S. Hamada joined us as a director in February 2001. He has been the
Chief Executive Officer of Merchant's Exchange since July 2001. An
internationally known authority in finance, Mr. Hamada was a member of the
faculty of the University of Chicago from 1966 until 2001, during which time he
served as Dean from 1993 to June 2001, as the Edward Eagle Brown Distinguished
Service Professor of Finance at the Graduate School of Business, as director of
the Center for International Business and Research from 1992 to 1993, as deputy
dean for the faculty at the Graduate School of Business from 1985 to 1990, and
as director of the Center for Research in Security Prices from 1980 to 1985. Mr.
Hamada is a director of Northern Trust Corporation, A.M. Castle & Co., Flying
Food Fare, Window to the World Communications, Inc., Merchant's Exchange, Terra
Foundation for the Arts, and the National Bureau of Economic Research.
Alice M. Peterson joined us as a director in 1998. She is the President of
Loretto Group, a finance strategy and consulting firm. She served as President
of RIM Finance, LLC (a wholly-owned subsidiary of the Canadian company, Research
In Motion Limited, the maker of BlackBerry wireless handheld devices), from
December 2000 to September 2001. From April 2000 to September 2000, Ms. Peterson
served as Chief Executive Officer of GuidanceResources.com (an Internet-based
service that employers provide as a value-added benefit to enhance employee
productivity). From October 1998 to February 2000, Ms. Peterson served as vice
president and general manager of Sears Online, the unit of Sears, Roebuck and
Co. where all business-to-consumer Internet activities are conducted, including
interactive marketing. Ms. Peterson was vice president and treasurer of Sears,
Roebuck and Co. from 1993 to 1998. She joined that company in 1989 as corporate
director of finance, became managing director -- corporate finance in 1992, and
vice president -- treasurer in 1993. Prior to joining Sears, Ms. Peterson served
as assistant treasurer of Kraft, Inc. from 1988 to 1989. From 1984 to 1988, Ms.
Peterson served in a variety of financial positions for PepsiCo, Inc. where her
last position held was director of capital markets. Ms. Peterson is a director
of RIM Finance, LLC and she serves on the Ravinia Festival Board of Trustees.
62
PRINCIPAL AND MANAGEMENT SHAREHOLDERS
This table indicates how many shares of our common stock and stock
equivalent units were beneficially owned as of July 8, 2002 by each of our
directors and our five most highly-compensated executive officers who retained
their positions as of July 8, 2002 and by beneficial owners of more than 5% of
our common stock as of the dates indicated in the footnotes to the table. No
director or executive officer owns in excess of 1% of our outstanding shares
except for Mr. Hansen. As of July 8, 2002, 53,850,516 shares of our common stock
were issued and outstanding.
<Table>
<Caption>
EXECUTIVE
SHARES OF DIRECTORS' OFFICERS'
COMMON STOCK STOCK STOCK
BENEFICIALLY EQUIVALENT EQUIVALENT PERCENT OF
NAME OWNED(1) UNITS(2) UNITS(3) CLASS OWNED
- ---- ------------ ---------- ---------- -----------
Mark S. Hansen(4)(5).................... 991,349 -- 100,000 1.82%
Herbert M. Baum(5)(6)................... 6,250 1,484 -- *
Archie R. Dykes(6)...................... 18,488 5,314 -- *
Kenneth M. Duberstein(5)................ 2,000 -- -- *
Carol B. Hallett(5)(6).................. 8,449 6,237 -- *
Robert S. Hamada(5)..................... 4,000 1,034 -- *
Alice M. Peterson(6).................... 17,250 2,250 -- *
Thomas G. Dahlen(4)(5).................. 154,000 -- 66,000 *
E. Stephen Davis(4)(5)(6)(7)............ 198,598 -- 66,000 *
William H. Marquard(4).................. 181,000 -- 50,000 *
Neal J. Rider(4)(7)..................... 289,923 -- 66,000 *
All directors and executive officers as
a group (26 persons)(4)(5)(6)(7)...... 2,294,741 16,319 918,000 4.12%
Mellon Financial Corporation(8)......... 6,222,897 -- -- 11.56%
One Mellon Center
Pittsburgh, Pennsylvania 15258
Southeastern Asset Management,
Inc.(9)............................... 7,790,900 -- -- 14.47%
6410 Poplar Avenue, Suite 900
Memphis, Tennessee 38119
</Table>
- ---------------
* Less than 1%
(1) This column includes our common stock held by directors and officers or by
certain members of their families (for which the directors and executive
officers have sole or shared voting or investment power), our common stock
which the officers have the right to acquire within 60 days of July 8, 2002
under our stock option and stock incentive plans, and shares of our
restricted common stock, subject to forfeiture, awarded under our stock
incentive plans.
(2) These stock equivalent units are payable in cash only when a director
ceases to be a member of the board. These units are not exercisable within
60 days of July 8, 2002, and therefore are not included in the columns
entitled "Shares of Common Stock Beneficially Owned" and "Percent of Class
Owned."
(3) These units are not exercisable within 60 days of July 8, 2002, and
therefore are not included in the columns entitled "Shares of Common Stock
Beneficially Owned" and "Percent of Class Owned." In November of 2001, we
converted the following stock equivalent units to stock options:
<Table>
Hansen..................................................... 200,000 stock equivalent units
Dahlen..................................................... 134,000 stock equivalent units
Davis...................................................... 134,000 stock equivalent units
Marquard................................................... 100,000 stock equivalent units
Rider...................................................... 134,000 stock equivalent units
</Table>
All officers as a group (including those named above): 992,000 stock
equivalent units converted into stock options.
63
(4) The amounts shown include shares which the following persons have the right
to acquire within 60 days of July 8, 2002 under our stock option and stock
incentive plans:
<Table>
Hansen...................................................... 699,999 shares
Dahlen...................................................... 142,000 shares
Davis....................................................... 131,750 shares
Marquard.................................................... 137,500 shares*
Rider....................................................... 242,000 shares
</Table>
All directors and officers as a group (including those named above):
1,713,099.
* Includes 6,250 securities underlying options as to which Mr. Marquard can
only exercise upon instructions from a third party for shares that Mr.
Marquard will not beneficially own upon exercise.
(5) The following shares of restricted stock have been excluded from the share
totals for individuals named in the table and all directors and officers as
a group as they do not have voting or investment power with respect to such
shares:
<Table>
Hansen................................................... 100,000 shares of restricted stock
Baum..................................................... 7,000 shares of restricted stock
Duberstein............................................... 7,000 shares of restricted stock
Hallett.................................................. 7,000 shares of restricted stock
Hamada................................................... 7,000 shares of restricted stock
Dahlen................................................... 16,666 shares of restricted stock
Davis.................................................... 100,000 shares of restricted stock
</Table>
All directors and officers as a group (including those named above):
297,998 shares of restricted stock.
(6) The individuals and group named in the table have sole voting power with
respect to the following shares of restricted stock:
<Table>
Baum........................................................ 5,250 shares
Dykes....................................................... 8,750 shares
Hallett..................................................... 5,250 shares
Peterson.................................................... 8,750 shares
Davis....................................................... 8,000 shares
</Table>
All directors and officers as a group (including those named above): 36,800
shares.
(7) The individuals and group named in the table have shared voting and
investment power with respect to the following shares of common stock:
<Table>
Davis....................................................... 9,000 shares
Rider....................................................... 20,000 shares
</Table>
All directors and officers as a group (including those named above): 65,304
shares.
(8) In a Schedule 13G filed January 9, 2002, Mellon Financial Corporation
disclosed that it held 6,222,897 shares of our common stock and that it
shared voting power with respect to 385,400 shares with The Boston Company,
Inc. and The Boston Company Asset Management L.L.C. and shared dispositive
power with respect to 9,700 shares with The Boston Company, Inc. In the
same Schedule 13G, Mellon Financial Corporation disclosed that it had sole
voting power with respect to 5,202,597 shares and sole dispositive power
with respect to 6,196,622 shares.
(9) In a Schedule 13G filed March 7, 2002, Southeastern Asset Management, Inc.
disclosed that it held 7,790,900 shares of our common stock and that it
shared voting and dispositive power with respect to 6,419,000 of the held
shares with Longleaf Partners Small-Cap Fund. In the same Schedule 13G,
Southeastern Asset Management disclosed that it had sole power to vote
694,900 shares, had sole power to dispose of 1,371,900 shares, and had no
voting power with regard to 677,000 shares. The Schedule 13G identifies Mr.
O. Mason Hawkins as Chairman of the Board and Chief Executive Officer of
Southeastern Asset Management, but Mr. Hawkins does not claim any voting or
dispositive power with regard to the shares of Fleming common stock held by
Southeastern.
64
DESCRIPTION OF OTHER INDEBTEDNESS
SENIOR SECURED CREDIT FACILITY
On June 18, 2002, we entered into a new senior secured credit facility
consisting of a $550 million revolving credit facility (which includes a $225
million letter of credit subfacility), with a final maturity of five years, and
a $425 million amortizing term loan with a maturity of six years. In addition,
incremental term loans may be extended under our credit facility by lenders
agreeing to provide same up to $250 million aggregate principal amount, provided
that the loans are permitted under the terms of our existing indebtedness.
Borrowings under the revolving credit facility may be used for general corporate
purposes. Letters of credit may also be used for general corporate purposes and
are needed primarily for insurance reserves associated with our normal risk
management activities. To the extent that any of these letters of credit would
be drawn, payments would be financed by borrowings under our revolving credit
facility. Incremental term loans, if extended, may be used only to finance
acquisitions and to repay or redeem indebtedness, including loans under the
revolving credit facility. The stated interest rate on borrowings under our
credit facility is equal to a referenced index interest rate, normally the
London interbank offered interest rate, or LIBOR, plus a margin. The level of
the margin for borrowings under our revolving credit facility is dependent upon
our total leverage ratio and the average utilization of our revolving credit
facility.
Our credit facility (and related interest rate protection agreements,
foreign currency exchange agreements, commodity price hedging agreements and
certain overdraft facilities) is guaranteed by substantially all of our
subsidiaries. In addition, our obligations under our credit facility (and
related interest rate protection agreements, foreign currency exchange
agreements, commodity price hedging agreements and certain overdraft facilities)
and the obligations of our subsidiaries under the guarantees are secured by a
first priority security interest in substantially all our accounts and
inventories and those of our subsidiaries that are guarantors, and in
substantially all the capital stock or other equity interests owned by us or our
subsidiaries that are guarantors.
Our credit facility contains customary covenants associated with similar
facilities, including but not limited to the following more significant
covenants:
- maintenance of a total leverage ratio;
- maintenance of a minimum fixed charge coverage ratio and a minimum
adjusted fixed charge coverage ratio;
- maintenance of a minimum asset coverage ratio;
- a limitation on capital expenditures;
- a limitation on acquisitions and investments, including, while any
revolving loans are outstanding, the amount of cash and cash equivalents;
- a limitation on restricted payments, including dividends; and
- a limitation on incurrence of indebtedness and liens.
The commitments under our credit facility will be terminated in the event
of a defined change of control.
10 1/8% SENIOR NOTES DUE 2008
Our $355 million of 10 1/8% senior notes due 2008 are general unsecured
obligations, equal in right of payment to all of our existing and future senior
indebtedness and are guaranteed on a senior unsecured basis by each guarantor of
the notes.
65
9 1/4% SENIOR NOTES DUE 2010
Our $200 million of 9 1/4% senior notes due 2010 are general unsecured
obligations, equal in right of payment to all of our existing and future senior
indebtedness and are guaranteed on a senior unsecured basis by each guarantor of
the notes.
10 5/8% SENIOR SUBORDINATED NOTES DUE 2007
Our $400 million of 10 5/8% senior subordinated notes due 2007 are general
unsecured obligations, subordinated in right of payment to all of our existing
and future senior indebtedness and are guaranteed on a senior subordinated basis
by each guarantor of the notes.
5 1/4% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2009
Our $150 million of 5 1/4% convertible senior subordinated notes due 2009
are general unsecured obligations, subordinated in right of payment to all of
our existing and future senior indebtedness and are guaranteed on a senior
subordinated basis by each guarantor of the notes.
66
DESCRIPTION OF NOTES
We issued the old notes, and will issue the exchange notes, under an
indenture (the "INDENTURE"), among us, the Subsidiary Guarantors and
Manufacturers and Traders Trust Company, as Trustee (the "TRUSTEE"). The
following is a summary of the material provisions of the Indenture. It does not
include all of the provisions of the Indenture. We urge you to read the
Indenture because it defines your rights. The terms of the notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (the "TIA"). A copy of the Indenture may
be obtained from the Company. You can find definitions of certain capitalized
terms used in this description under "-- Certain Definitions." For purposes of
this section, references to the "Company" include only Fleming Companies, Inc.
and not its Subsidiaries.
GENERAL
The notes are our unsecured senior subordinated obligations, ranking junior
in right of payment to all of our Senior Indebtedness and pari passu in right of
payment with all of our other senior subordinated unsecured obligations.
Principal of, premium, if any, and interest on the notes and any additional
interest payable pursuant to the Registration Rights Agreement ("ADDITIONAL
INTEREST"), if any, is payable, and the notes are exchangeable and transferable,
at the office or agency of the Paying Agent in The City of New York maintained
for such purposes; provided, however, that payment of interest may be made, at
our option, by check or by wire transfer to Holders of at least $5,000,000
aggregate principal amount of notes. We may change any Paying Agent without
notice to holders of the notes (the "HOLDERS"). The notes will be issued only in
fully registered form without coupons in denominations of $1,000 and any
integral multiple thereof. No service charge will be made for any registration
of transfer, exchange or redemption of notes or, except in certain
circumstances, for any tax or other governmental charge that may be imposed in
connection therewith.
MATURITY, INTEREST AND PRINCIPAL
The notes will mature on May 1, 2012, and are unsecured senior subordinated
obligations of the Company in an aggregate principal amount of $260,000,000.
Additional notes in an unlimited amount may be issued from time to time, subject
to the limitations set forth under "-- Certain Covenants -- Limitation on
Indebtedness." The notes bear interest at an annual rate of 9 7/8% from the
original date of issuance or from the most recent interest payment date to which
interest has been paid, payable semiannually on May 1 and November 1 of each
year commencing November 1, 2002, to the Person in whose name the notes were
registered at the close of business on the April 15 or October 15 next preceding
such interest payment date. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months. Interest on the exchange notes will
accrue from the last interest payment date on which interest was paid on the old
notes or, if no interest has been paid on the old notes, from the date of
issuance of the old notes, which was April 15, 2002. Holders whose old notes are
accepted for exchange will be deemed to have waived the right to receive any
interest accrued on the old notes.
The notes are not entitled to the benefit of any sinking fund.
GUARANTEES
Payment of the principal of, premium, if any, interest on and any
Additional Interest in respect of the notes, when and as the same become due and
payable (whether at Stated Maturity or on a redemption date, or pursuant to a
Change of Control Purchase Offer or an Asset Sale Offer, and whether by
declaration of acceleration, call for redemption, purchase or otherwise), are
guaranteed, jointly and severally, on a senior subordinated basis by all of the
Wholly Owned Restricted Subsidiaries of the Company and by Restricted
Subsidiaries that guarantee certain other Indebtedness (the "SUBSIDIARY
GUARANTORS").
67
Upon the sale or disposition (whether by merger, stock purchase, asset sale
or otherwise) of a Subsidiary Guarantor or all or substantially all of its
assets to an entity which is not a Subsidiary Guarantor (and a Restricted
Subsidiary) or the designation of a Restricted Subsidiary to become an
Unrestricted Subsidiary, which transaction is otherwise in compliance with the
Indenture (including, without limitation, the provisions of "-- Certain
Covenants -- Limitation on Sale of Assets" and "-- Limitation on Issuances and
Sales of Capital Stock of Subsidiaries"), such Subsidiary Guarantor will be
deemed released from its obligations under its Note Guarantee; provided,
however, that any such termination shall occur only to the extent that all
obligations of such Subsidiary Guarantor under all of its guarantees of, and
under all of its pledges of assets or other security interests which secure, any
Indebtedness of the Company or any other Restricted Subsidiary shall also
terminate upon such release, sale or transfer.
REDEMPTION
Optional Redemption. Except as described below, the notes are not
redeemable before May 1, 2007. Thereafter, the Company may redeem the notes at
its option, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the following redemption prices (expressed as percentages of the
principal amount thereof) if redeemed during the twelve month period commencing
on May 1 of the year set forth below.
<Table>
<Caption>
YEAR PERCENTAGE
- ---- ----------
2007........................................................ 104.938%
2008........................................................ 103.292%
2009........................................................ 101.646%
2010 and thereafter......................................... 100.000%
</Table>
In addition, the Company must pay all accrued and unpaid interest on the
notes redeemed.
Optional Redemption upon Equity Offerings. In addition, up to 35% of the
initial aggregate principal amount of the notes may be redeemed on or prior to
May 1, 2005, at the option of the Company, within 90 days of an Equity Offering
with the net proceeds of such offering at a redemption price equal to 109.875%
of the principal amount thereof, together with accrued and unpaid interest, if
any, to the date of redemption (subject to the right of holders of record on
relevant record dates to receive interest due on relevant interest payment
dates); provided, that after giving effect to such redemption at least 65% of
the notes originally issued under the Indenture remains outstanding.
As used in the preceding paragraph, "Equity Offering" means a public or
private offering of Qualified Capital Stock of the Company generating gross
proceeds to the Company of at least $50 million.
SELECTION AND NOTICE
In the event that less than all of the notes are to be redeemed at any
time, selection of the notes for redemption will be made by the Trustee on a pro
rata basis, by lot or by such other method as the Trustee shall deem fair and
appropriate; provided, however, that no note of a principal amount of $1,000 or
less shall be redeemed in part. Notice of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each Holder of notes to be redeemed at its registered address. If any note is to
be redeemed in part only, the notice of redemption that relates to such note
shall state the portion of the principal amount thereof to be redeemed. A new
note in a principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon cancellation of the original note.
On or after the redemption date, interest will cease to accrue on notes or
portions thereof called for redemption and accepted for payment.
68
PURCHASE OF NOTES UPON A CHANGE OF CONTROL
If a Change of Control shall occur at any time, then each Holder of notes
shall have the right, to the extent not inconsistent with the Company's Bylaws
as in effect on the Issue Date, to require the Company to purchase such Holder's
notes in whole or in part in integral multiples of $1,000 at a purchase price
(the "CHANGE OF CONTROL PURCHASE PRICE") in cash in an amount equal to 101% of
the principal amount of such notes, plus accrued and unpaid interest, if any, to
the date of purchase (the "CHANGE OF CONTROL PURCHASE DATE"), pursuant to the
offer described below (the "CHANGE OF CONTROL PURCHASE OFFER") and the other
procedures set forth in the Indenture.
Within 30 days following the occurrence of any Change of Control, the
Company shall notify the Trustee and give written notice of such Change of
Control to each Holder of notes, by first-class mail, postage prepaid, at the
address appearing in the security register, stating, among other things, the
Change of Control Purchase Price and the Change of Control Purchase Date, which
shall be a Business Day no earlier than 30 days nor later than 60 days from the
date such notice is mailed, or such later date as is necessary to comply with
requirements under the Exchange Act; that any note not tendered will continue to
accrue interest; that, unless the Company defaults in the payment of the Change
of Control Purchase Price, any notes accepted for payment of the Change of
Control Purchase Price pursuant to the Change of Control Purchase Offer shall
cease to accrue interest after the Change of Control Purchase Date; and certain
other procedures that a Holder of notes must follow to accept a Change of
Control Purchase Offer or to withdraw such acceptance.
The Company will not be required to make a Change of Control Purchase Offer
upon a Change of Control if a third party makes the Change of Control Purchase
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in the Indenture applicable to a Change of Control
Purchase Offer made by the Company and purchases all notes properly tendered and
not withdrawn under the Change of Control Purchase Offer.
If a Change of Control were to occur, we cannot assure you that the Company
would have sufficient funds to pay the Change of Control Purchase Price for all
the notes tendered by the Holders. The Company's existing credit agreement and
indentures contain, and any future other agreements relating to other
indebtedness to which we become a party may contain, restrictions or
prohibitions on the Company's ability to repurchase notes or may provide that an
occurrence of a Change of Control constitutes an event of default under, or
otherwise requires payment of amounts borrowed under those agreements. If a
Change of Control occurs at a time when the Company is prohibited from
repurchasing the notes, we could seek the consent of our then existing lenders
and note holders to the repurchase of the notes or could attempt to refinance
the borrowings that contain the prohibition. If the Company does not obtain such
a consent or repay the borrowings, it would remain prohibited from repurchasing
the notes. In that case, failure to repurchase tendered notes would constitute
an Event of Default under the Indenture and may constitute a default under the
terms of other indebtedness that we may enter into from time to time.
Upon the occurrence of a Change of Control and prior to the mailing of the
notice to Holders provided for in the Indenture, the Company covenants to either
(x) repay in full all Indebtedness under the Credit Agreement and the Senior
Notes or offer to repay in full all such Indebtedness and to repay the
Indebtedness of each of the banks or holders thereunder, as the case may be,
that has accepted such offer or (y) obtain any requisite consent under the
Credit Agreement and the indenture governing the Senior Notes to permit the
purchase of the notes pursuant to a Change of Control Purchase Offer as provided
for in the Indenture or take any other action as may be required under the
Credit Agreement and the indenture governing the Senior Notes to permit such
purchase. The Company shall first comply with such covenants before it shall be
required to purchase the notes pursuant to the Indenture.
Our bylaws contain a provision which limits the Company's ability to "adopt
or maintain a poison pill, shareholder rights plan, rights agreement or any
other form of "poison pill" which is designed to or which has the effect of
making acquisitions of large holdings of the Corporation's shares of stock more
difficult or expensive ... unless such a plan is first approved by a majority
shareholder vote" and prohibits the amendment, alteration, deletion or
modification of such bylaw by the Board of Directors without prior
69
shareholder approval. This bylaw provision raises a question as to whether the
provisions of the Indenture described above (the "CHANGE OF CONTROL PROVISIONS")
constitute a "poison pill," "shareholder rights plan, rights agreement or any
other form of 'poison pill' " (collectively, a "POISON PILL") within the meaning
of this provision. See "Risk Factors -- We may not have the ability to raise
funds necessary to finance the change of control offer required by the
indenture. In addition, our bylaws may not permit us to make the change of
control payment even if we do have the funds." Although the matter is not free
from doubt, the Company believes that a court, properly presented with the
facts, should conclude that the Change of Control Provisions of the Indenture do
not constitute a Poison Pill within the meaning of the bylaw provision, and
accordingly are not inconsistent therewith. If the Change of Control Provisions
were found to be inconsistent with the bylaw provision, the Company would not be
able to make or consummate the Change of Control Purchase Offer or pay the
Change of Control Purchase Price when due.
One of the events which constitutes a Change of Control under the Indenture
is the disposition of "all or substantially all" of the Company's assets. This
term has not been interpreted under New York law (which is the governing law of
the Indenture) to represent a specific quantitative test. As a consequence, in
the event Holders of the notes elect to require the Company to purchase the
notes and the Company elects to contest such election, there can be no assurance
as to how a court interpreting New York law would interpret the phrase.
The Company will comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws or
regulations in connection with a Change of Control Purchase Offer.
SUBORDINATION
The payment (by set-off or otherwise) of principal of, premium, if any,
interest, if any, on the notes (including with respect to any repurchases of the
notes) is subordinated in right of payment, as set forth in the Indenture, to
the prior payment in full in cash or, at the option of the holders of Senior
Indebtedness, in Temporary Cash Investments, of all obligations in respect of
Senior Indebtedness, whether outstanding on the date of the Indenture or
thereafter incurred.
Upon any distribution to creditors of the Company or any Subsidiary
Guarantor upon any total or partial liquidation, dissolution or winding up of
the Company or such Subsidiary Guarantor or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or such
Subsidiary Guarantor or its property, whether voluntary or involuntary, an
assignment for the benefit of creditors or any marshalling of the Company's or
such Subsidiary Guarantor's assets and liabilities, the holders of Senior
Indebtedness of the Company or such Subsidiary Guarantor will be entitled to
receive payment in full in cash or, at the option of the holders of such Senior
Indebtedness, in Temporary Cash Investments, of all Obligations due or to become
due in respect of such Senior Indebtedness (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Indebtedness) before the Holders of notes will be entitled to receive any
payment of any kind or character with respect to the notes, and until all
Obligations with respect to such Senior Indebtedness are paid in full in cash
or, at the option of the holders of such Senior Indebtedness, in Temporary Cash
Investments, any distribution of any kind or character to which the Holders of
notes would be entitled shall be made to the holders of such Senior Indebtedness
(except that Holders of notes may receive Permitted Junior Securities and
payments made from the trust described under "-- Defeasance or Covenant
Defeasance of Indenture").
Neither the Company nor any Subsidiary Guarantor shall make, directly or
indirectly, (x) any payment upon or in respect of the notes (except in Permitted
Junior Securities or from the trust described under "-- Defeasance or Covenant
Defeasance of Indenture") or (y) acquire any of the notes for cash or property
or otherwise or make any other distribution with respect to the notes if (i) any
default occurs and is continuing in the payment when due, whether at maturity,
upon any redemption, by declaration or otherwise, of any amount of any
Designated Senior Indebtedness (a "PAYMENT DEFAULT") or (ii) any other default
occurs and is continuing with respect to Designated Senior Indebtedness (a
"NON-PAYMENT
70
DEFAULT") that permits holders of, or the trustee or agent on behalf of the
holders of, the Designated Senior Indebtedness as to which such default relates
to accelerate its maturity and the Trustee receives a notice of such default (a
"PAYMENT BLOCKAGE NOTICE") from the trustee or agent on behalf of holders of any
Designated Senior Indebtedness. Payments on the notes may and shall be resumed
(a) in the case of a Payment Default, upon the date on which such default is
cured or waived and (b) in case of a Non-Payment Default, the earlier of the
date on which such Non-Payment Default is cured or waived or 179 days after the
date on which the applicable Payment Blockage Notice is received, unless a
Payment Default has occurred and is continuing, including as a result of the
acceleration of the maturity of any Designated Senior Indebtedness. After a
Payment Blockage Notice is given for a Non-Payment Default, no new period of
payment blockage for a Non-Payment Default may be commenced unless and until (i)
360 days have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice and (ii) all scheduled payments of principal, premium, if any,
and interest and Additional Interest, if any, on the notes that have come due
have been paid in full in cash. No Non-Payment Default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the Trustee
shall be, or be made, the basis for a subsequent Payment Blockage Notice unless
such Non-Payment Default shall have been cured or waived for a period of not
less than 90 days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
delivery of any Payment Blockage Notice which, in either case, would give rise
to a default pursuant to any provision under which a default previously existed
or was continuing shall constitute a new default for this purpose). Each Holder
by its acceptance of a note irrevocably agrees that if any payment or payments
shall be made pursuant to the Indenture by the Company or a Subsidiary Guarantor
and the amount or total amount of such payment or payments exceeds the amount,
if any, that such Holder would be entitled to receive upon the proper
application of the subordination provisions of the Indenture, the payment of
such excess amount shall be deemed null and void, and the Holder agrees that it
will be obligated to return the amount of the excess payment to the Trustee, as
instructed in a written notice of such excess payment, within ten days of
receiving such notice.
The Indenture further requires that the Company promptly notify holders of
Senior Indebtedness if payment of the notes is accelerated because of an Event
of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of notes may recover less ratably than
creditors of the Company or a Subsidiary Guarantor who are holders of Senior
Indebtedness. The principal amount of consolidated Senior Indebtedness
outstanding at April 20, 2002, on a pro forma basis after giving effect to the
Acquisition and related financings, was approximately $1.4 billion (excluding
$70 million of obligations under undrawn letters of credit) which includes
outstanding Capital Lease Obligations of approximately $350 million. At April
20, 2002, on a pro forma basis after giving effect to the Acquisition and
related financings, the Company had outstanding the principal amount of
consolidated Pari Passu Indebtedness of approximately $550 million. The
Indenture will limit through certain financial tests the amount of additional
Indebtedness, including Senior Indebtedness and Pari Passu Indebtedness, that
the Company and its Subsidiary Guarantors can incur. See "-- Certain
Covenants -- Limitation on Indebtedness."
CERTAIN COVENANTS
The Indenture contains the following covenants, among others:
Limitation on Indebtedness. The Company will not, and will not permit any
of its Restricted Subsidiaries to, create, assume, or directly or indirectly
guarantee or in any other manner become directly or indirectly liable for the
payment of, or otherwise incur (collectively, "INCUR"), any Indebtedness
(including any Acquired Indebtedness) other than Permitted Indebtedness.
Notwithstanding the foregoing sentence, the Company and the Subsidiary
Guarantors may incur Indebtedness if, at the time of such event (and after
giving effect on a pro forma basis to:
(1) the incurrence of such Indebtedness and (if applicable) the
application of the proceeds therefrom, including to refinance other
Indebtedness;
71
(2) the incurrence, repayment or retirement of any other Indebtedness
by the Company or its Restricted Subsidiaries since the first day of such
four-quarter period as if such Indebtedness was incurred, repaid or retired
at the beginning of such four-quarter period; and
(3) the acquisition (whether by purchase, merger or otherwise) or
disposition (whether by sale, merger or otherwise) of any company, entity
or business acquired or disposed of by the Company or its Restricted
Subsidiaries, as the case may be, since the first day of such four-quarter
period as if such acquisition or disposition had occurred at the beginning
of such four-quarter period),
the Consolidated Fixed Charge Coverage Ratio of the Company for the four full
fiscal quarters immediately preceding such event, taken as one period and
calculated on the assumption that such Indebtedness had been incurred on the
first day of such four-quarter period and, in the case of Acquired Indebtedness,
on the assumption that the related acquisition (whether by means of purchase,
merger or otherwise) also had occurred on such date, with such pro forma
adjustments as may be determined in accordance with GAAP and the rules,
regulations and guidelines of the Commission (including without limitation
Article 11 of Regulation S-X), would have been at least equal to 2.25 to 1.
Limitation on Restricted Payments. The Company will not, and will not
permit any Restricted Subsidiary of the Company to, directly or indirectly:
(1) declare or pay any dividend on, or make any distribution to the
holders of, any Capital Stock of the Company or of any Restricted
Subsidiary (other than dividends or distributions payable (a) solely in
shares of Qualified Capital Stock of the Company or such Restricted
Subsidiary or in options, warrants or other rights to purchase such
Qualified Capital Stock or (b) by a Restricted Subsidiary to the Company or
any Wholly Owned Restricted Subsidiary);
(2) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any Capital Stock of the Company or any Restricted
Subsidiary or any options, warrants or other rights to acquire such Capital
Stock held by any Person (other than the Company or any Wholly Owned
Restricted Subsidiary of the Company);
(3) make any principal payment on, or redeem, repurchase, defease or
otherwise acquire or retire for value, prior to any scheduled repayment,
sinking fund payment or maturity, any Subordinated Indebtedness; or
(4) make any Investment (other than any Permitted Investment) in any
Person (such payments described in clauses (1) through (4) and not excepted
therefrom are collectively referred to herein as "RESTRICTED PAYMENTS");
unless at the time of and immediately after giving effect to the proposed
Restricted Payment (the amount of any such Restricted Payment, if other than
cash, being the Fair Market Value thereof as determined by the Board of
Directors of the Company, whose determination shall be conclusive and evidenced
by a Board Resolution):
(i) no Default or Event of Default shall have occurred and be
continuing;
(ii) the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in accordance with the provisions described
under "-- Limitation on Indebtedness"; and
(iii) such Restricted Payment, together with the aggregate of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries on or after the Issue Date, is less than the sum of, without
duplication:
(w) 50% of the aggregate cumulative Consolidated Net Income of the
Company for the period (taken as one accounting period) from the first
day of the quarter beginning after the Issue Date to the end of the
Company's most recently ended fiscal quarter for which financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit); plus
72
(x) 100% of the aggregate net cash proceeds received by the Company
as capital contributions or from the issue or sale after the Issue Date
of Equity Interests of the Company or of debt securities of the Company
that have been converted into such Equity Interests (other than Equity
Interests (or convertible debt securities) sold to a Restricted
Subsidiary of the Company and other than Redeemable Capital Stock or
debt securities that have been converted into Redeemable Capital Stock);
plus
(y) any cash received by the Company after the date of initial
issuance of the notes as a dividend or distribution from any of its
Unrestricted Subsidiaries less the cost of disposition and taxes, if any
(but in each case excluding any such amounts included in Consolidated
Net Income); plus
(z) $62 million.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may take the following actions so long as (with respect to clauses (2), (3), (4)
and (6) below) at the time of and immediately after giving effect thereto no
Default or Event of Default shall have occurred and be continuing:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if such dividend would have been permitted on the date
of declaration;
(2) the purchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company, in exchange for, or
out of the net cash proceeds of, a substantially concurrent issuance and
sale (other than to a Restricted Subsidiary) of shares of Capital Stock of
the Company (other than Redeemable Capital Stock, unless the redemption
provisions of such Redeemable Capital Stock prohibit the redemption thereof
prior to the date on which the Capital Stock to be acquired or retired was,
by its terms, required to be redeemed);
(3) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness (other than
Redeemable Capital Stock) in exchange for or out of the net cash proceeds
of a substantially concurrent issuance and sale (other than to a Restricted
Subsidiary) of shares of Capital Stock of the Company (other than
Redeemable Capital Stock, unless the redemption provisions of such
Redeemable Capital Stock prohibit the redemption thereof prior to the
Stated Maturity of the Subordinated Indebtedness to be acquired or
retired);
(4) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness (other than
Redeemable Capital Stock) in exchange for, or out of the net cash proceeds
of a substantially concurrent incurrence or sale (other than to a
Restricted Subsidiary) of, new Subordinated Indebtedness of the Company or
a Subsidiary Guarantor, as the case may be, so long as:
(a) the principal amount of such new Subordinated Indebtedness does
not exceed the principal amount (or, if such Subordinated Indebtedness
being refinanced provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determination) of the
Subordinated Indebtedness being so purchased, redeemed, defeased,
acquired or retired, plus the amount of any premium required to be paid
in connection with such refinancing pursuant to the terms of the
Subordinated Indebtedness refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing, plus the amount of reasonable expenses of the Company or
such Subsidiary Guarantor, as the case may be, incurred in connection
with such refinancing;
(b) such new Subordinated Indebtedness is subordinated to the notes
or the note Guarantee of such Subsidiary Guarantor, as the case may be,
at least to the same extent as such Subordinated Indebtedness so
purchased, redeemed, defeased, acquired or retired; and
73
(c) such new Subordinated Indebtedness has an Average Life longer
than the Average Life of the notes and a final Stated Maturity of
principal later than the final Stated Maturity of principal of the
notes;
(5) the payment of a dividend on the Company's Capital Stock (other
than Redeemable Capital Stock) of up to $0.08 per quarter per share (or up
to $0.32 per annum per share, provided that dividend payments may not be
cumulated for more than four consecutive quarters);
(6) the purchase, redemption or other acquisition or retirement for
value of shares of Capital Stock of the Company issued pursuant to options
granted under stock option plans of the Company, in order to pay
withholding taxes due as a result of income recognized upon the exercise of
such options; provided that:
(a) the Company is permitted, by the terms of such plans, to effect
such purchase, redemption or other acquisition or retirement for value
of such shares; and
(b) the aggregate consideration paid by the Company for such shares
so purchased, redeemed or otherwise acquired or retired for value does
not exceed $2 million during any fiscal year of the Company; and
(7) the repurchases of Capital Stock of the Company deemed to occur
upon the exercise of stock options if such Capital Stock represents a
portion of the exercise price thereof.
The actions described in clauses (2), (3), (5) and (6) of this paragraph
shall be Restricted Payments that shall be permitted to be taken in accordance
with this paragraph but shall reduce the amount that would otherwise be
available for Restricted Payments under clause (iii) of the preceding paragraph.
Limitation on Layering Indebtedness. The Indenture provides that neither
the Company nor any of the Subsidiary Guarantors will incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Indebtedness of the
Company or such Subsidiary Guarantor, as the case may be, and senior in any
respect in right of payment to the notes or such Subsidiary Guarantor's Note
Guarantee.
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Lien securing Indebtedness (other than Senior
Indebtedness) against any asset of the Company or any Restricted Subsidiary
(including Capital Stock of a Restricted Subsidiary), whether owned at the Issue
Date or thereafter acquired, or any proceeds therefrom, or assign or otherwise
convey any right to receive income or profits therefrom, except for Permitted
Liens, unless contemporaneously therewith:
(1) in the case of any Lien securing Pari Passu Indebtedness,
effective provision is made to secure the notes or such Note Guarantee, as
the case may be, with a Lien on the same collateral that is senior in
priority to, or pari passu with, the Lien securing such Pari Passu
Indebtedness; and
(2) in the case of any Lien securing Subordinated Indebtedness,
effective provision is made to secure the notes or such Note Guarantee, as
the case may be, with a Lien on the same collateral that is senior in
priority to the Lien securing such Subordinated Indebtedness.
Limitation on Transactions With Affiliates. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, make
any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (other than the Company, a
Wholly Owned Restricted Subsidiary or a Restricted Subsidiary that is a
Subsidiary Guarantor) (each of the foregoing, an "AFFILIATE TRANSACTION"),
unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Restricted Subsidiary than those that could
have been obtained in a comparable transaction with an unrelated Person;
and
74
(2) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $5
million, an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (1) above and that such Affiliate
Transaction has been approved by a majority of the Disinterested
Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10 million, both an Officers' Certificate referred to in clause (a) and
an opinion as to the fairness of such Affiliate Transaction to the
Company or the relevant Restricted Subsidiary from a financial point of
view issued by an investment banking firm of national standing with
total assets in excess of $1.0 billion;
provided, however, that this covenant shall not apply to (i) fees, compensation
and employee benefits, including bonuses, retirement plans and stock options,
paid to or established for directors and officers of the Company or any
Restricted Subsidiary in the ordinary course of business and approved by a
majority of the Disinterested Directors and (ii) transactions in the ordinary
course of business with customers, vendors and suppliers, the terms of which
have been approved in good faith by an officer of the Company.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) (a) pay dividends or make any other distributions to the Company
or any of its Restricted Subsidiaries (x) on its Capital Stock or (y) with
respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted
Subsidiaries;
(3) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries;
(4) grant Liens in favor of Holders of notes; or
(5) guarantee the notes;
except in each case for such encumbrances or restrictions existing under or
by reason of:
(a) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Issue Date;
(b) the Credit Agreement as in effect as of the Issue Date, and any
amendments, modifications, restatements, renewals, increase,
supplements, refunding, replacements or refinancings thereof, provided
that such amendments, modifications, restatements, renewals, increase,
supplements, refundings, replacements or refinancings are no more
restrictive with respect to such dividend and other payment restrictions
than those contained in the Credit Agreement in effect on the Issue
Date;
(c) the Indenture and the notes;
(d) applicable law;
(e) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as
in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the property or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired;
(f) by reason of customary non-assignment provisions in existing
and future leases entered into in the ordinary course of business and
consistent with past practices;
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(g) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature
described in clause (3) above on the property so acquired; and
(h) restrictions incurred by the Company or any Restricted
Subsidiary in connection with any Permitted Receivables Financing.
Limitation on Sale of Assets. The Company will not, and will not permit
any of its Restricted Subsidiaries to, engage in an Asset Sale unless the
Company or such Restricted Subsidiary, as the case may be, receives Permitted
Consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets or Equity Interests issued or sold or otherwise disposed of.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or such Restricted Subsidiary must apply such Net Proceeds:
(1) to permanently reduce Senior Indebtedness of the Company or one or
more Restricted Subsidiaries (and to correspondingly reduce commitments
with respect thereto);
(2) to offer to repurchase and repurchase the Existing Senior
Subordinated Notes to the extent required by the Indentures governing such
Existing Senior Subordinated Notes; or
(3) to make capital expenditures or acquire long-term assets used or
useful in its businesses or in businesses similar or related to the
businesses of the Company immediately prior to the Issue Date.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce Senior Indebtedness or otherwise invest such Net Proceeds in
any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "EXCESS PROCEEDS." When the aggregate
amount of Excess Proceeds exceeds $15 million, the Company will be required to
make an offer to all Holders of notes and holders of other Pari Passu
Indebtedness containing provisions similar to those set forth in the Indenture
with respect to offers to purchase or redeem with the proceeds of sales of
assets (an "ASSET SALE OFFER") to purchase the maximum principal amount of notes
that may be purchased out of the Excess Proceeds (on a pro rata basis if the
amount available for such repayment, purchase or redemption is less than the
aggregate amount of (x) the principal amount of the notes tendered in such Asset
Sale Offer and (y) the principal amount of such Pari Passu Indebtedness), at an
offer price in cash in an amount equal to 100% of the principal amount thereof,
plus accrued and unpaid interest, if any, thereon to the date of purchase, in
accordance with the procedures set forth in the Indenture. To the extent that
any Excess Proceeds remain after consummation of an Asset Sale Offer, the
Company may use any remaining Excess Proceeds for general corporate purposes
(subject to the restrictions of the Indenture). Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
Notwithstanding the foregoing provisions of the prior paragraph, the
Company and its Restricted Subsidiaries may sell or dispose of property, whether
in the form of assets or capital stock of a Restricted Subsidiary, in the
aggregate amount not exceeding $15 million in any year, and any notes received
by the Company or its Restricted Subsidiaries as consideration in any
disposition made pursuant to such $15 million exclusion from the provisions of
this covenant shall not be taken into account in determining whether the $75
million limitation set forth in the definition of "Permitted Consideration" has
been met.
Limitation on Issuances and Sales of Capital Stock of Subsidiaries. The
Company will not, and will not permit any of its Restricted Subsidiaries to,
transfer, convey, sell or otherwise dispose of any Capital Stock of any
Restricted Subsidiary of the Company to any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company), unless:
(1) such transfer, conveyance, sale or other disposition is of all of
the Capital Stock of such Restricted Subsidiary owned by the Company and
its Restricted Subsidiaries; and
(2) such transaction is made in accordance with the provisions of
"-- Limitation on Sale of Assets," provided that 85% of the proceeds from
such a sale of Capital Stock of any Restricted Subsidiary that is a
Significant Subsidiary shall consist of cash or Temporary Cash Investments.
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Notwithstanding the foregoing or the provisions of any other covenant, the
Company or any Restricted Subsidiary may sell Qualified Capital Stock of any
Restricted Subsidiary in a Public Equity Offering, provided that:
(1) 100% of the Net Proceeds from such Public Equity Offering shall be
in cash and shall be applied as provided in the provisions of "Certain
Covenants -- Limitation on Sale of Assets"; and
(2) the Tangible Assets of such Restricted Subsidiary do not exceed
10% of the Consolidated Tangible Assets of the Company, determined as of
the last day of the quarter ending immediately before the commencement of
such Public Equity Offering.
Additional Guarantees. If the Company or any of its Restricted
Subsidiaries shall acquire or form a Wholly Owned Restricted Subsidiary or any
existing or future majority-owned Restricted Subsidiary shall, after the Issue
Date, guarantee any Indebtedness of the Company or any Subsidiary Guarantor, the
Company will cause any such Restricted Subsidiary (other than an Investee Store
or Joint Venture, provided that such Investee Store or Joint Venture does not
guarantee such Indebtedness of any other Person) to:
(1) execute and deliver to the Trustee a supplemental indenture in
form and substance reasonably satisfactory to the Trustee pursuant to which
such Restricted Subsidiary shall guarantee all of the obligations of the
Company with respect to the notes on a senior subordinated basis; and
(2) deliver to the Trustee an Opinion of Counsel reasonably
satisfactory to the Trustee to the effect that a supplemental indenture has
been duly executed and delivered by such Restricted Subsidiary and is in
compliance with the terms of the Indenture.
Rule 144A Information Requirement. The Company has agreed to furnish to
the Holders or beneficial Holders of notes and prospective purchasers of notes
designated by the Holders of notes, upon their request, the information required
to be delivered pursuant to Rule 144A(4)(d) under the Securities Act until such
time as the Company either exchanges all of the old notes for the exchange notes
or has registered all of the notes for resale under the Securities Act.
Reports. Whether or not required by the rules and regulations of the
Commission, including the reporting requirements of Section 13 or 15(d) of the
Exchange Act, so long as any notes are outstanding, the Company will furnish to
the Holders of notes:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Company were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of
operations of the Company and its Subsidiaries and, with respect to the
annual information only, a report on the consolidated financial statements
required by Form 10-K by the Company's independent certified public
accountants; and
(2) all reports that would be required to be filed with the Commission
on Form 8-K if the Company were required to file such reports. In addition,
whether or not required by the rules and regulations of the Commission, the
Company will file a copy of all such information with the Commission for
public availability (unless the Commission will not accept such a filing)
and make such information available to investors or prospective investors
who request it in writing.
Payments for Consent. The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any notes for or as an inducement to any consent, waiver or amendment of any
terms or provisions of the notes unless such consideration is offered to be paid
or agreed to be paid to all Holders of the notes which so consent, waive or
agree to amend in the time frame set forth in solicitation documents relating to
such consent, waiver or agreement.
Termination of Certain Covenants in Event of Investment Grade Rating. In
the event that each of the Rating Categories assigned to the notes of the
Company by the Rating Agencies is Investment Grade,
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the provisions of "-- Limitation on Indebtedness," "-- Limitation on Restricted
Payments," "-- Limitation on Issuances and Sales of Capital Stock of
Subsidiaries," "-- Limitation on Transactions With Affiliates" and
"-- Limitation on Sale of Assets" and the Consolidated Net Worth requirement set
forth in clause (3) of "-- Consolidation, Merger, Sale of Assets" shall cease to
apply to the Company and its Restricted Subsidiaries from and after the date on
which the second of the Rating Agencies notifies the Company of the assignment
of such Rating Category. Notwithstanding the foregoing, if the Rating Category
assigned by either Rating Agency to the notes should subsequently decline below
Investment Grade, the foregoing covenants and such Consolidated Net Worth
requirement shall be reinstituted as and from the date of such rating decline.
CONSOLIDATION, MERGER, SALE OF ASSETS
The Company shall not, in a single transaction or a series of related
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer or lease or otherwise dispose of all or substantially
all of its properties and assets to any Person or group of affiliated Persons,
or permit any of its Restricted Subsidiaries to enter into any such transaction
or transactions if such transaction or transactions, in the aggregate, would
result in a sale, assignment, transfer, lease or disposal of all or
substantially all of the properties and assets of the Company and its Restricted
Subsidiaries on a Consolidated basis to any other Person or group of affiliated
Persons, unless at the time and after giving effect thereto:
(1) either:
(a) the Company shall be the surviving or continuing corporation;
or
(b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, conveyance, transfer, lease or disposition
the properties and assets of the Company substantially as an entirety
(the "SURVIVING ENTITY") shall be a corporation duly organized and
validly existing under the laws of the United States, any state thereof
or the District of Columbia and shall, in any case, expressly assume, by
a supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company, under
the notes and the Indenture, and the Indenture shall remain in full
force and effect;
(2) immediately before and immediately after giving effect to such
transaction on a pro forma basis (and treating any Indebtedness not
previously an obligation of the Company or any of its Restricted
Subsidiaries which becomes an obligation of the Company or any of its
Restricted Subsidiaries in connection with or as a result of such
transaction as having been incurred at the time of such transaction), no
Default or Event of Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction, except in the
case of a merger of the Company with or into a Wholly Owned Restricted
Subsidiary, the Company (or the Surviving Entity if the Company is not the
continuing obligor under the Indenture) will have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction;
(4) immediately after giving effect to such transaction on a pro forma
basis (on the assumption that the transaction occurred on the first day of
the four-quarter period immediately prior to the consummation of such
transaction with the appropriate adjustments with respect to the
transaction being included in such pro forma calculation), the Company (or
the Surviving Entity if the Company is not the continuing obligor under the
Indenture) could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the provisions of "-- Certain Covenants
-- Limitation on Indebtedness" above;
(5) each Subsidiary Guarantor, unless it is the other party to the
transactions described above, shall have confirmed, by supplemental
indenture to the Indenture, that its respective Note Guarantees with
respect to the notes shall apply to such Person's obligations under the
Indenture and the notes;
78
(6) if any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any Lien, the
provisions of "-- Certain Covenants -- Limitation on Liens" are complied
with; and
(7) the Company shall have delivered, or caused to be delivered, to
the Trustee, in form and substance satisfactory to the Trustee, an
Officers' Certificate and an opinion of counsel, each to the effect that
such consolidation, merger, sale, assignment, conveyance, transfer, lease
or other transaction and the supplemental indenture in respect thereto, if
required, comply with the provisions in clauses (1) through (6) of this
paragraph and that all conditions precedent herein provided for relating to
such transaction have been complied with.
The foregoing shall not prohibit a merger of any Restricted Subsidiary of the
Company with and into the Company or a merger effected solely for the purpose of
reincorporating the Company in another jurisdiction. In the event of any
consolidation, merger, sale, assignment, conveyance, transfer, lease or other
transaction described in, and complying with, the conditions listed in the
immediately preceding paragraph in which the Company is not the continuing
corporation, the successor Person formed or remaining shall succeed to, and be
substituted for, and may exercise every right and power of, the Company, as the
case may be, and the Company shall be discharged from all obligations and
covenants under the Indenture and the notes; provided that, in the case of a
transfer by lease, the predecessor shall not be released from its obligations
with respect to the payment of principal (premium, if any) and interest on the
notes.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "EVENTS OF DEFAULT":
(1) there shall be a default in the payment of any interest on the
notes when such interest becomes due and payable, and continuance of such
default for a period of 30 days;
(2) there shall be a default in the payment of the principal of (or
premium, if any, on) any notes at Maturity;
(3) (a) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company or any Subsidiary Guarantor under the
Indenture (other than a default in the performance, or breach, of a
covenant or agreement which is specifically dealt with in the immediately
preceding clauses (1) or (2) or in clauses (b) or (c) of this clause (3)),
and such default or breach shall continue for a period of 60 days after
written notice has been given, by certified mail:
(x) to the Company by the Trustee; or
(y) to the Company and the Trustee by the Holders of at least
25% in aggregate principal amount of the outstanding notes;
(b) there shall be a default in the performance or breach of the
provisions described in "-- Consolidation, Merger, Sale of Assets" or
"-- Certain Covenants -- Limitation on Asset Sales"; or
(c) the Company shall have failed to comply with the provisions of
"-- Purchase of Notes upon a Change of Control" for any reason,
including the inconsistency of such covenant with the Company's Bylaws
as in effect on the Issue Date;
(4) (a) any default in the payment of the principal of any
Indebtedness shall have occurred under any agreements, indentures or
instruments under which the Company or any Restricted Subsidiary of the
Company then has outstanding Indebtedness in excess of $50 million when the
same shall become due and payable in full and such default shall have
continued after any applicable grace period and shall not have been cured
or waived; or
79
(b) an event of default as defined in any of the agreements,
indentures or instruments described in clause (a) of this clause (4)
shall have occurred and the Indebtedness thereunder, if not already
matured at its final maturity in accordance with its terms, shall have
been accelerated;
(5) any Note Guarantee of any Significant Subsidiary individually or
any other Subsidiaries if such Restricted Subsidiaries in the aggregate
represent 15% or more of Consolidated Total Assets with respect to the
notes shall for any reason cease to be, or be asserted in writing by the
Company, any Subsidiary Guarantor or any other Restricted Subsidiary of the
Company, as applicable, not to be, in full force and effect, enforceable in
accordance with its terms, except pursuant to the release of any such Note
Guarantee in accordance with the Indenture;
(6) one or more judgments, orders or decrees for the payment of money
in excess of $50 million (net of amounts covered by insurance, bond or
similar instrument), either individually or in the aggregate, shall be
entered against the Company or any Restricted Subsidiary of the Company or
any of their respective properties and shall not be discharged and either:
(a) any creditor shall have commenced an enforcement proceeding
upon such judgment, order or decree; or
(b) there shall have been a period of 60 consecutive days during
which a stay of enforcement of such judgment or order, by reason of an
appeal or otherwise, shall not be in effect;
(7) there shall have been the entry by a court of competent
jurisdiction of:
(a) a decree or order for relief in respect of the Company or any
Significant Subsidiary in an involuntary case or proceeding under any
applicable Bankruptcy Law; or
(b) a decree or order adjudging the Company or any Significant
Subsidiary bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
or any Significant Subsidiary under any applicable federal or state law,
or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Significant
Subsidiary or of any substantial part of its property, or ordering the
winding up or liquidation of its affairs, and any such decree or order
for relief shall continue to be in effect, or any such other decree or
order shall be unstayed and in effect, for a period of 60 consecutive
days; or
(8) (a) the Company or any Significant Subsidiary commences a
voluntary case or proceeding under any applicable Bankruptcy Law or any
other case or proceeding to be adjudicated bankrupt or insolvent;
(b) the Company or any Significant Subsidiary consents to the entry
of a decree or order for relief in respect of the Company or such
Significant Subsidiary in an involuntary case or proceeding under any
applicable Bankruptcy Law or to the commencement of any bankruptcy or
insolvency case or proceeding against it;
(c) the Company or any Significant Subsidiary files a petition or
answer or consent seeking reorganization or relief under any applicable
federal or state law;
(d) the Company or any Significant Subsidiary:
(x) consents to the filing of such petition or the appointment
of, or taking possession by, a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company or
such Significant Subsidiary or of any substantial part of its
property;
(y) makes an assignment for the benefit of creditors; or
(z) admits in writing its inability to pay its debts generally
as they become due; or
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(e) the Company or any Significant Subsidiary takes any corporate
action in furtherance of any such actions in this clause (8).
If an Event of Default (other than as specified in clause (7) or (8) of the
immediately preceding paragraph) shall occur and be continuing with respect to
the notes, the Trustee, by notice to the Company, or the Holders of at least 25%
in aggregate principal amount then outstanding of such notes, by notice to the
Trustee and to the Company, may declare such notes due and payable immediately.
Upon such declaration, all amounts payable in respect of such notes shall be
immediately due and payable. If an Event of Default specified in clause (7) or
(8) of the immediately preceding paragraph occurs and is continuing, then all of
the outstanding notes under the Indenture shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee thereunder or any Holder of such notes.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the applicable Trustee, the
Holders of a majority in aggregate principal amount outstanding of notes, by
written notice to the Company and such Trustee, may annul such declaration if:
(1) the Company has paid or deposited with such Trustee a sum
sufficient to pay:
(a) all sums paid or advanced by the Trustee under the notes and
the reasonable compensation, expenses, disbursements, and advances of
the Trustee, its agents and counsel;
(b) all overdue interest on all of the notes; and
(c) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the notes; and
(2) all Events of Default, other than the non-payment of principal of
such notes which have become due solely by such declaration of
acceleration, have been cured or waived.
The Holders of a majority in aggregate principal amount of the notes
outstanding may, on behalf of the Holders of all of such notes, waive any past
defaults under the Indenture except a default in the payment of the principal
of, premium, if any, or interest on any such note, or in respect of a covenant
or provision which under the Indenture cannot be modified or amended without the
consent of the Holder of each such outstanding note.
The Company is also required to notify the Trustee within ten days of the
occurrence of any Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company and any Subsidiary Guarantor discharged with respect
to any notes issued under the Indenture ("DEFEASANCE"). Such defeasance means
that the Company shall be deemed to have paid and discharged all obligations
represented by the notes, except for:
(1) the rights of Holders of such outstanding notes to receive
payments in respect of the principal of, premium, if any, and interest on
the notes when such payments are due or on the redemption date;
(2) the Company's obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed, lost
or stolen notes, and the maintenance of an office or agency for payment and
money for note payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the
applicable Trustee; and
(4) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to certain covenants that
are described in the Indenture ("COVENANT
81
DEFEASANCE") and thereafter any omission to comply with such obligations shall
not constitute a Default or an Event of Default with respect to such notes.
In the event covenant defeasance occurs, certain events (not including
non-payment, enforceability of any Note Guarantee, bankruptcy and insolvency
events) described under "-- Events of Default" will no longer constitute an
Event of Default with respect to such notes.
In order to exercise either defeasance or covenant defeasance with respect
to the notes:
(1) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of such notes, cash in United States
dollars, U.S. Government Obligations (as defined in the Indenture), or a
combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay
and discharge the principal of, premium, if any, and interest on the notes
outstanding on the Stated Maturity thereof or on an optional redemption
date (such date being referred to as the "DEFEASANCE REDEMPTION DATE"), as
the case may be, if in the case of a Defeasance Redemption Date prior to
electing to exercise either defeasance or covenant defeasance, the Company
has delivered to the Trustee an irrevocable notice to redeem all of the
outstanding notes on such Defeasance Redemption Date;
(2) in the case of defeasance, the Company shall have delivered to the
Trustee an opinion of independent counsel in the United States stating
that:
(a) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling; or
(b) since the Issue Date, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel in the United States shall confirm that,
the Holders of the outstanding notes will not recognize income, gain or
loss for federal income tax purposes as a result of such defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
defeasance had not occurred;
(3) in the case of covenant defeasance, the Company shall have
delivered to the Trustee an opinion of independent counsel in the United
States to the effect that the Holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such covenant defeasance had not occurred;
(4) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default under, the Indenture or any
other material agreement or instrument to which the Company or any
Subsidiary Guarantor is a party or by which it is bound;
(5) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of the notes or any Subsidiary Guarantor
over the other creditors of the Company or any Subsidiary Guarantor or with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company, any Subsidiary Guarantor or others; and
(6) the Company shall have delivered to the Trustee an Officers'
Certificate stating that all conditions precedent relating to either the
defeasance or the covenant defeasance, as the case may be, have been
complied with.
Notwithstanding the foregoing, the opinion of counsel required by clause
(2) above with respect to a defeasance need not be delivered if all notes not
theretofore delivered to the Trustee for cancellation (1) have become due and
payable or (2) will become due and payable on the maturity date within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company.
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SATISFACTION AND DISCHARGE
The Indenture shall cease to be of further effect (except for surviving
rights of registration of transfer or exchange of the notes) as to all
outstanding notes when:
(1) either
(a) all notes issued under the Indenture and theretofore
authenticated and delivered (except lost, stolen or destroyed notes
which have been replaced or paid and notes for whose payment funds have
been deposited in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the
Trustee for cancellation or
(b) all notes issued under the Indenture and not theretofore
delivered to the Trustee for cancellation
(x) have become due and payable or
(y) will become due and payable at their Stated Maturity or
pursuant to an optional redemption within one year, and either the
Company or any Subsidiary Guarantor has irrevocably deposited or
caused to be deposited with the Trustee funds in an amount sufficient
to pay and discharge the entire Indebtedness in respect of the notes,
for principal of, premium and Additional Interest, if any, and
interest to the date of redemption or Stated Maturity, as the case
may be;
(2) the Company or any Subsidiary Guarantor has paid all other sums
payable by the Company and any Subsidiary Guarantor under the Indenture;
and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an opinion of counsel each stating that all conditions precedent to the
satisfaction and discharge of the Indenture, as specified therein, have
been complied with and that such satisfaction and discharge will not result
in a breach or violation of, or constitute a default under, the Indenture
or any other material agreement or instrument to which the Company or any
Subsidiary Guarantor is a party or by which it is bound.
MODIFICATION AND AMENDMENTS
From time to time, the Company, the Subsidiary Guarantors and the Trustee,
without the consent of the Holders, may amend the Indenture for certain
specified purposes, including curing ambiguities, defects or inconsistencies, so
long as such change does not adversely affect the rights of any of the Holders
in any material respect. Other modifications and amendments of the Indenture may
be made by the Company, the Subsidiary Guarantors and the Trustee with the
consent of the Holders of a majority in aggregate outstanding principal amount
of the notes; provided, however, that no such modification or amendment may,
without the consent of the Holder of each outstanding note:
(1) change the Stated Maturity or the principal of, or any installment
of interest on, any note or reduce the principal amount thereof or the rate
of interest thereon or any premium payable upon the redemption thereof, or
change the coin or currency in which any note or any premium or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment after the Stated Maturity thereof;
(2) after a Change of Control has occurred, amend, change or modify
the obligation of the Company to make and consummate a Change of Control
Purchase Offer with respect to such Change of Control or modify any of the
provisions or definitions with respect thereto;
(3) reduce the percentage in principal amount of outstanding notes,
the consent of whose Holders is required for any modification or amendment
to the Indenture, or the consent of whose Holders is required for any
waiver thereof;
(4) modify any of the provisions relating to supplemental indentures
requiring the consent of Holders or relating to the waiver of past defaults
or relating to the waiver of certain covenants, except
83
to increase the percentage of outstanding notes required for such actions
or to provide that certain other provisions of the Indenture cannot be
modified or waived without the consent of each Holder;
(5) except as otherwise permitted under "-- Consolidation, Merger,
Sale of Assets," consent to the assignment or transfer by the Company or
any Subsidiary Guarantor of any of its rights and obligations under the
Indenture; or
(6) amend or modify any of the provisions of the Indenture in any
manner which subordinates the notes issued thereunder in right of payment
to other Indebtedness of the Company or which subordinates any Note
Guarantee in right of payment to other Indebtedness of the Subsidiary
Guarantor issuing such Note Guarantee.
The Holders of a majority in aggregate principal amount of the notes issued
and outstanding may waive compliance with certain restrictive covenants and
provisions of such Indenture.
GOVERNING LAW
The Indenture provides that it, the notes and the Note Guarantees will be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be required
thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person:
(1) existing at the time such Person becomes a Restricted Subsidiary
of the Company; or
(2) assumed in connection with the acquisition of assets from such
Person;
in each case, other than Indebtedness incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary of the Company or
such acquisition.
"Affiliate" means, with respect to any specified Person any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control," when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets
(including, without limitation, by way of a sale and leaseback), other than
sales of inventory in the ordinary course of business consistent with past
practices (provided that the sale, lease, conveyance or other disposition
of all or
84
substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "-- Purchase of Notes upon a
Change of Control" and/or the provisions described above under the caption
"Certain Covenants -- Consolidation, Merger, Sale of Assets" and not by the
provisions of "-- Certain Covenants -- Limitation on Sale of Assets"); and
(2) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, whether in a single transaction or a series of related
transactions, in either case:
(a) that have a fair market value in excess of $2.5 million; or
(b) for net proceeds in excess of $2.5 million.
Notwithstanding the foregoing, a transfer of assets by the Company to a Wholly
Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the
Company or to another Wholly Owned Restricted Subsidiary, or by a non-Wholly
Owned Restricted Subsidiary to any other Restricted Subsidiary will not be
deemed to be an Asset Sale.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing:
(1) the sum of the products of:
(a) the number of years from the date of determination to the date
or dates of each successive scheduled principal payment of such
Indebtedness; multiplied by
(b) the amount of each such principal payment; by
(2) the sum of all such principal payments.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.
"Banks" means the banks and other financial institutions from time to time
that are lenders under the Credit Agreement.
"Borrowing Base Amount" means, as of any date, an amount equal to the sum
of:
(1) 85% of the aggregate book value of all accounts receivable of the
Company and its Restricted Subsidiaries; and
(2) 60% of the aggregate book value of all inventory owned by the
Company and its Restricted Subsidiaries,
all calculated on a consolidated basis and in accordance with GAAP.
To the extent the information is not available as to the amount of accounts
receivable or inventory as of a specific date, the Company shall use the most
recent available information for purposes of calculating the Borrowing Base.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.
"Capital Lease Obligation" of any Person means any obligation of such
Person and its Subsidiaries on a Consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation.
85
"Capital Stock" of any Person means any and all shares, interest,
partnership interests, participations or other equivalents (however designated)
of such Person's capital stock whether now outstanding or issued after the Issue
Date, including, without limitation, all common stock and Preferred Stock.
"Change of Control" means the occurrence of any of the following events:
(1) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall
be deemed to have beneficial ownership of all shares that such Person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 50% of the
total outstanding Voting Stock of the Company;
(2) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board of Directors,
or whose nomination for election by the stockholders of the Company, was
approved by a vote of 66 2/3% of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of such Board of Directors then in office;
(3) the Company consolidates with or merges with or into any Person or
conveys, transfers, leases or otherwise disposes of all or substantially
all of its assets to any Person, or any Person consolidates with or merges
into or with the Company, in any such event pursuant to a transaction in
which the outstanding Voting Stock of the Company is changed into or
exchanged for cash, securities or other property, other than any such
transaction where the outstanding Voting Stock of the Company is not
changed or exchanged at all (except to the extent necessary to reflect a
change in the jurisdiction of incorporation of the Company) or where:
(a) the outstanding Voting Stock of the Company is changed into or
exchanged for:
(x) Voting Stock of the surviving corporation which is not
Redeemable Capital Stock; or
(y) cash, securities or other property (other than Capital Stock
of the surviving corporation) in an amount which could be paid by the
Company as a Restricted Payment as described under "-- Certain
Covenants -- Limitation on Restricted Payments" (and such amount
shall be treated as a Restricted Payment subject to the provisions in
the Indenture described under "-- Certain Covenants -- Limitation on
Restricted Payments"); and
(b) immediately after such transaction, no "person" or "group" (as
such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person shall be deemed to have beneficial
ownership of all shares that such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50% of the total
outstanding Voting Stock of the surviving corporation; or
(4) the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution other than in a transaction which complies with
the provisions described under "-- Consolidation, Merger, Sale of Assets."
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of the Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Consolidated" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its subsidiaries if and to the extent the
accounts of such Person and each of its subsidiaries
86
would normally be consolidated with those of such Person, all in accordance with
GAAP consistently applied.
"Consolidated EBITDA" means, with respect to the Company and its Restricted
Subsidiaries on a Consolidated basis for any period all determined in accordance
with GAAP, the sum of, without duplication:
(1) Consolidated Net Income, plus
(2) Consolidated Interest Expense, to the extent deducted in computing
such Consolidated Net Income, plus;
(3) Consolidated Income Tax Expense, to the extent deducted in
computing such Consolidated Net Income, plus;
(4) Consolidated Non-Cash Charges, to the extent deducted in computing
such Consolidated Net Income, minus;
(5) non-cash items increasing such Consolidated Net Income (other than
such non-cash items in the ordinary course of business).
"Consolidated Fixed Charge Coverage Ratio" of the Company means, for any
period, the ratio of:
(1) Consolidated EBITDA for such period to:
(2) Consolidated Interest Expense for such period; provided that:
(a) in making such computation, the Consolidated Interest Expense
attributable to interest on any Indebtedness computed on a pro forma
basis; and
(x) bearing a floating interest rate shall be computed as if the
rate in effect on the date of computation had been the applicable
rate for the entire period; and
(y) which was not outstanding during the period for which the
computation is being made but which bears, at the option of the
Company, a fixed or floating rate of interest, shall be computed by
applying, at the option of the Company, either the fixed or floating
rate; and
(b) in making such computation, Consolidated Interest Expense
attributable to interest on any Indebtedness under a revolving credit
facility computed on a pro forma basis shall be computed based upon the
average daily balance of such Indebtedness during the applicable period.
"Consolidated Income Tax Expense" means for any period the provision for
federal, state, local and foreign income taxes of the Company and its Restricted
Subsidiaries for such period as determined on a Consolidated basis in accordance
with GAAP.
"Consolidated Interest Expense" means, without duplication, for any period,
the sum of:
(1) the interest expense of the Company and its Restricted
Subsidiaries for such period, as determined on a Consolidated basis in
accordance with GAAP including, without limitation:
(a) amortization of debt discount;
(b) the net cost under Interest Rate Agreements (including
amortization of discount);
(c) the interest portion of any deferred payment obligation; and
(d) accrued interest; plus
(2) the aggregate amount for such period of dividends on any
Redeemable Capital Stock or Preferred Stock of the Company and its
Restricted Subsidiaries;
87
(3) the interest component of the Capital Lease Obligations paid,
accrued and/or scheduled to be paid, or accrued by such Person during such
period; and
(4) all capitalized interest of the Company and its Restricted
Subsidiaries in each case under each of (1) through (4) determined on a
Consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the Consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period
as determined on a Consolidated basis in accordance with GAAP, adjusted, to the
extent included in calculating such net income (loss), by excluding, without
duplication:
(1) any net after-tax extraordinary gains or losses (less all fees and
expenses relating thereto);
(2) the portion of net income (or loss) of the Company and its
Restricted Subsidiaries determined on a Consolidated basis allocable to
minority interests in unconsolidated Persons to the extent that cash
dividends or distributions have not actually been received by the Company
or any Restricted Subsidiary;
(3) net income (or loss) of any Person combined with the Company or
any Restricted Subsidiary on a "pooling of interests" basis attributable to
any period prior to the date of combination;
(4) net gains or losses (less all fees and expenses relating thereto)
in respect of dispositions of assets other than in the ordinary course of
business; and
(5) the net income of any Restricted Subsidiary to the extent that the
declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its shareholders.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of:
(1) the consolidated equity of the common equity holders of such
Person and its Restricted Subsidiaries as of such date; plus
(2) the respective amounts reported on such Person's balance sheet as
of such date with respect to any series of preferred stock (other than
Redeemable Capital Stock) that by its terms is not entitled to the payment
of dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only
to the extent of any cash received by such Person upon issuance of such
preferred stock; less
(a) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going
concern business made within 12 months after the acquisition of such
business) subsequent to the Issue Date in the book value of any asset
owned by such Person or a consolidated Restricted Subsidiary of such
Person;
(b) all investments as of such date in unconsolidated Restricted
Subsidiaries and in Persons that are not Subsidiaries (except, in each
case, Permitted Investments); and
(c) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in
accordance with GAAP.
"Consolidated Non-Cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash charges of the Company and its
Restricted Subsidiaries for such period, as determined on a Consolidated basis
in accordance with GAAP (excluding any non-cash charges which require an accrual
or reserve for any future period).
88
"Consolidated Tangible Assets" means the total of all the assets appearing
on the Consolidated balance sheet of the Company and its majority-owned or
Wholly Owned Restricted Subsidiaries less:
(1) intangible assets including, without limitation, items such as
goodwill, trademarks, trade names, patents and unamortized debt discount;
and
(2) appropriate adjustments on account of minority interests of other
persons holding stock in any majority-owned Restricted Subsidiary of the
Company.
"Consolidated Total Assets" means, with respect to the Company, the total
of all assets appearing on the Consolidated balance sheet of the Company and its
majority-owned or Wholly Owned Restricted Subsidiaries, as determined on a
Consolidated basis in accordance with GAAP.
"Convertible Senior Subordinated Notes" means the 5.25% Convertible Senior
Subordinated Notes due 2009 of the Company.
"Credit Agreement" means the credit agreement dated as of July 25, 1997
among the Company, the Banks, the agents listed therein and The Chase Manhattan
Bank, as Administrative Agent, as such agreement may be amended, renewed,
extended, substituted, refinanced, restructured, replaced, supplemented or
otherwise modified from time to time (including, without limitation, any
successive renewals, extensions, substitutions, refinancings, restructurings,
replacements, supplementations or other modifications of the foregoing).
"Currency Agreements" means any spot or forward foreign exchange agreements
and currency swap, currency option or other similar financial agreements or
arrangements entered into by the Company or any of its Restricted Subsidiaries.
"Default" means any event which is, or after notice or passage of any time
or both would be, an Event of Default.
"Designated Senior Indebtedness" means:
(1) any Senior Indebtedness outstanding under the Credit Agreement;
(2) any Senior Indebtedness in respect of the Senior Notes; and
(3) any other Senior Indebtedness, the principal amount of which is
$50 million or more and that has been designated by the Company as
"Designated Senior Indebtedness."
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under the Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Equity Interest" of any Person means any shares, interests, participations
or other equivalents (however designated) in such Person's equity, and shall in
any event include any Capital Stock issued by, or partnership or membership
interests in, such Person.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Senior Subordinated Notes" means:
(1) the 10 1/2% Senior Subordinated Notes due 2004 of the Company; and
(2) the 10 5/8% Senior Subordinated Notes due 2007 of the Company.
"Fair Market Value" means, with respect to any asset or property, a price
which could be negotiated in an arm's length transaction, for cash, between a
willing seller and a willing buyer, neither of whom is under undue pressure to
complete the transaction. Fair Market Value shall be determined by officers of
the Company acting in good faith, provided, that any transaction that results in
a price in excess of $10.0 million shall be determined by the Board of Directors
of the Company acting in good faith and shall be evidenced by a Board Resolution
attached to an Officers' Certificate delivered to the Trustee.
89
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, as in effect on the Issue
Date.
"Guaranteed Debt" means, with respect to any Person, without duplication,
all Indebtedness of any other Person referred to in the definition of
Indebtedness contained herein guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement:
(1) to pay or purchase such Indebtedness or to advance or supply funds
for the payment or purchase of such Indebtedness;
(2) to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling the debtor
to make payment of such Indebtedness or to assure the holder of such
Indebtedness against loss;
(3) to supply funds to, or in any other manner invest in, the debtor
(including any agreement to pay for property or services without requiring
that such property be received or such services be rendered);
(4) to maintain working capital of the debtor, or otherwise to
maintain the net worth, solvency or other financial condition of the
debtor; or
(5) otherwise to assure a creditor against loss;
provided that the term "guarantee" shall not include endorsements for collection
or deposit, in either case in the ordinary course of business.
"Indebtedness" means, with respect to any Person, without duplication:
(1) all liabilities of such Person for borrowed money (including
overdrafts) or for the deferred purchase price of property or services,
excluding any trade payables and other accrued current liabilities arising
in the ordinary course of business, but including, without limitation, all
obligations, contingent or otherwise, of such Person in connection with any
letters of credit and acceptances issued under letter of credit facilities,
acceptance facilities or other similar facilities;
(2) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments;
(3) all indebtedness of such Person created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even if the rights and remedies of the
seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), but excluding trade payables
arising in the ordinary course of business;
(4) all Capital Lease Obligations of such Person;
(5) all obligations under Interest Rate Agreements or Currency
Agreements of such Person;
(6) Indebtedness referred to in clauses (1) through (5) above of other
Persons, the payment of which is secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien, upon or with respect to property (including, without
limitation, accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness;
(7) all Guaranteed Debt of such Person;
(8) all Redeemable Capital Stock valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued and
unpaid dividends; and
(9) any amendment, supplement, modification, deferral, renewal,
extension, refunding or refinancing of any liability of the types referred
to in clauses (1) through (8) above.
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For purposes hereof, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to the Indenture, and if such price is
based upon, or measured by, the Fair Market Value of such Redeemable Capital
Stock, such Fair Market Value is to be determined in good faith by the Board of
Directors of the issuer of such Redeemable Capital Stock.
"Interest Rate Agreements" means any interest rate protection agreements
and other types of interest rate hedging agreements (including, without
limitation, interest rate swaps, caps, floors, collars and similar agreements).
"Investee Store" means a Person in which the Company or any of its
Restricted Subsidiaries has invested equity capital, to which it has made loans
or for which it has guaranteed loans, in accordance with the business practice
of the Company and its Restricted Subsidiaries of making equity investments in,
making loans to or guaranteeing loans made to Persons for the purpose of
assisting any such Person in acquiring, remodeling, refurbishing, expanding or
operating one or more retail grocery stores.
"Investment" means, with respect to any Person, directly or indirectly:
(1) any advance (other than advances to customers in the ordinary
course of business, which are recorded as accounts receivable on the
balance sheet of the Company and its Restricted Subsidiaries), loan or
other extension of credit (including by way of guarantee); or
(2) capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account
or use of others); or
(3) any purchase, acquisition or ownership by such Person of any
Capital Stock, bonds, notes, debentures or other securities or assets
issued or owned by any other Person.
The Company shall be deemed to make an Investment in an amount equal to the
greater of the book value (as determined in accordance with GAAP) and Fair
Market Value of the net assets of any Restricted Subsidiary (or, if neither the
Company nor any of its Restricted Subsidiaries has theretofore made an
Investment in such Restricted Subsidiary, in an amount equal to the Investments
being made) at the time such Restricted Subsidiary is designated an Unrestricted
Subsidiary, and any property transferred to an Unrestricted Subsidiary from the
Company or any Restricted Subsidiary shall be deemed an Investment valued at the
greater of its book value (as determined in accordance with GAAP) and its Fair
Market Value at the time of such transfer.
"Investment Grade" means BBB- or higher by S&P or Baa3 or higher by Moody's
or the equivalent of such ratings by S&P or Moody's or in the event S&P or
Moody's shall cease rating the notes and the Company shall select any other
Rating Agency, the equivalent of such ratings by such other Rating Agency.
"Issue Date" means April 15, 2002, the date of original issuance of the old
notes.
"Joint Venture" means any Person in which the Company or any of its
Restricted Subsidiaries owns 30% or more of the Voting Stock (other than as a
result of a Public Equity Offering).
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired.
"Maturity" when used with respect to the notes means the date on which the
principal of the notes becomes due and payable as therein provided or as
provided in the Indenture, whether at Stated Maturity or on a redemption date or
pursuant to a Change of Control Purchase Offer or an Asset Sale Offer, and
whether by declaration of acceleration, call for redemption, purchase or
otherwise.
"Moody's" means Moody's Investors Service, Inc. or any successor rating
agency.
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"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions), any relocation expenses
incurred as a result thereof, any taxes paid or payable by the Company or any of
its Restricted Subsidiaries as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), amounts
required to be applied to the permanent repayment of Indebtedness secured by a
Lien on the assets or assets that were the subject of such Asset Sale and any
reserve for adjustment or indemnity in respect of the sale price of such asset
or assets in each case established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted
Subsidiaries:
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute indebtedness);
(b) is directly or indirectly liable (as a guarantor or otherwise);
or
(c) constitutes the lender;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness (other than the notes being offered hereby) of the
Company or any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries.
"Note Guarantee" means any guarantee by a Subsidiary Guarantor of the
Company's obligations under the Indenture.
"Obligations" means any principal, premium, interest (including
post-petition interest), penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable under the documentation governing any
Indebtedness.
"Pari Passu Indebtedness" means (a) with respect to the notes, Indebtedness
which ranks pari passu in right of payment to the notes, and (b) with respect to
any Note Guarantee, Indebtedness which ranks pari passu in right of payment to
such Note Guarantee.
"Permitted Consideration" means consideration consisting of any combination
of the following:
(1) cash or Temporary Cash Investments;
(2) assets used or intended for use in the Company's business as
conducted on the Issue Date;
(3) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet) of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by
their terms subordinated to the notes or any guarantee thereof) that are
assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Restricted Subsidiary
from further liability; and
(4) any securities, notes or other obligations received by the Company
or any such Restricted Subsidiary; provided that the aggregate amount of
such securities, notes or other obligations received by the Company and its
Restricted Subsidiaries pursuant to this clause (4) after the Issue Date
and held or carried at any date of determination shall not exceed $75
million.
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"Permitted Indebtedness" means any of the following Indebtedness of the
Company or any Restricted Subsidiary, as the case may be:
(1) Indebtedness of the Company and guarantees of the Subsidiary
Guarantors under the Credit Agreement in an aggregate principal amount at
any one time outstanding not to exceed the greater of:
(a) $1.0 billion, less
(x) the amount of mandatory repayments actually made by the
Company or any such Restricted Subsidiary since the Issue Date with
Net Proceeds of an Asset Sale in respect of term Indebtedness under
the Credit Agreement; and
(y) further reduced by the amount of mandatory repayments of
revolving credit Indebtedness thereunder (accompanied by a
corresponding commitment reduction thereunder) actually made by the
Company or any such Restricted Subsidiary since the Issue Date with
Net Proceeds of an Asset Sale; or
(b) the Borrowing Base Amount;
(2) Indebtedness of the Company and guarantees of the Subsidiary
Guarantors under uncommitted bank lines of credit (including any
refinancings of such Indebtedness); provided, however, that the aggregate
principal amount of Indebtedness incurred pursuant to clauses (1), (2) and
(10) of this definition does not exceed the maximum amount of Indebtedness
permitted under clause (1) of this definition;
(3) Indebtedness of the Company and the Subsidiary Guarantors
evidenced by the notes and the Note Guarantees with respect thereto under
the Indenture in an aggregate principal amount not to exceed $260 million;
(4) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Issue Date;
(5) obligations of the Company or any Restricted Subsidiary entered
into in the ordinary course of business
(a) pursuant to Interest Rate Agreements designed to protect
against or manage exposure to fluctuations in interest rates in respect
of Indebtedness or retailer notes receivables, which, if related to
Indebtedness or such retailer notes receivables, do not exceed the
aggregate notional principal amount of such Indebtedness to which such
Interest Rate Agreements relate, or
(b) under any Currency Agreements in the ordinary course of
business and designed to protect against or manage exposure to
fluctuations in foreign currency exchange rates which, if related to
Indebtedness, do not increase the amount of such Indebtedness other than
as a result of foreign exchange fluctuations;
(6) Indebtedness of the Company owing to a Wholly Owned Restricted
Subsidiary or of any Restricted Subsidiary owing to the Company or any
Wholly Owned Restricted Subsidiary; provided that any disposition, pledge
or transfer of any such Indebtedness to a Person (other than the Company or
another Wholly Owned Restricted Subsidiary) shall be deemed to be an
incurrence of such Indebtedness by the Company or Restricted Subsidiary, as
the case may be, not permitted by this clause (6);
(7) Indebtedness in respect of letters of credit, surety bonds and
performance bonds provided in the ordinary course of business;
(8) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
drawn against insufficient funds in the ordinary course of business;
provided that such Indebtedness is extinguished within ten business days of
its incurrence;
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(9) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees, indemnities or obligations in respect of purchase
price adjustments in connection with the acquisition or disposition of
assets;
(10) Indebtedness of the Company evidenced by commercial paper issued
by the Company (including any refinancings of such Indebtedness); provided,
however, that the aggregate principal amount of Indebtedness incurred
pursuant to clauses (1), (2) and (10) of this definition does not exceed
the maximum amount of Indebtedness permitted under clause (1) of this
definition;
(11) Indebtedness of the Company pursuant to guarantees by the Company
or any Subsidiary Guarantor in connection with any Permitted Receivables
Financing; provided, however, that such Indebtedness shall not exceed 20%
of the book value of the Transferred Receivables at the time such
Transferred Receivables are sold or in the case of receivables arising from
direct financing leases, 30% of the book value thereof;
(12) Indebtedness constituting Capital Lease Obligations of the
Company and its Restricted Subsidiaries (including any refinancings of such
Indebtedness) not to exceed $100 million at any time outstanding in the
aggregate;
(13) Indebtedness of the Company and its Restricted Subsidiaries in
addition to that described in clauses (1) through (12) of this definition
of "Permitted Indebtedness," together with any other outstanding
Indebtedness incurred pursuant to this clause (13) (including any
refinancings of such Indebtedness), not to exceed $100 million at any time
outstanding in the aggregate; and
(14) any renewals, extensions, substitutions, refunding, refinancings
or replacements (each, a "REFINANCING") of any Indebtedness described in
clauses (3) and (4) of this definition of "Permitted Indebtedness,"
including any successive refinancings, so long as:
(a) the aggregate principal amount of Indebtedness represented
thereby is not increased by such refinancing to an amount greater than
such principal amount plus the lesser of (x) the stated amount of any
premium or other payment required to be paid in connection with such a
refinancing pursuant to the terms of the Indebtedness being refinanced
or (y) the amount of premium or other payment actually paid at such time
to refinance the Indebtedness, plus, in either case, the amount of
reasonable expenses of the Company or any Restricted Subsidiary, as the
case may be, incurred in connection with such refinancing;
(b) in the case of any refinancing of Subordinated Indebtedness,
such new Indebtedness is subordinated to the notes or the applicable
Note Guarantee, as the case may be, to the same extent as the
Indebtedness being refinanced; and
(c) such refinancing does not reduce the Average Life to Stated
Maturity or the Stated Maturity of such Indebtedness.
For purposes of determining compliance with the "Limitation on
Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the categories of Permitted Indebtedness described
in clauses (1) through (14) above or is permitted to be incurred pursuant to the
Consolidated Fixed Charge Coverage Ratio provisions of such covenant, the
Company shall, in its sole discretion, classify (or later reclassify) such item
of Indebtedness in any manner that complies with such covenant. Accrual of
interest, accretion or amortization of original issue discount and the payment
of interest on any Indebtedness in the form of additional Indebtedness with the
same terms will not be deemed to be an incurrence of Indebtedness for purposes
of the "Limitation on Indebtedness" covenant.
"Permitted Investment" means
(1) Investments in any Wholly Owned Restricted Subsidiary or any
Restricted Subsidiary that is a Subsidiary Guarantor or any Investment in
any Person by the Company or any Restricted Subsidiary as a result of which
such Person becomes a Wholly Owned Restricted Subsidiary or a
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Restricted Subsidiary that is a Subsidiary Guarantor or any Investment in
the Company by a Restricted Subsidiary;
(2) intercompany Indebtedness to the extent permitted under clause (6)
of the definition of "Permitted Indebtedness" and Indebtedness in
connection with a Permitted Receivables Financing permitted under clause
(11) of the definition of "Permitted Indebtedness";
(3) Temporary Cash Investments;
(4) sales of goods and services on trade credit terms consistent with
the Company's past practices or otherwise consistent with trade credit
terms in common use in the industry;
(5) Investments in direct financing leases for equipment and real
estate owned or leased by the Company and leased to its customers in the
ordinary course of business consistent with past practice;
(6) Investments in Joint Ventures related to the Company's operations,
not to exceed $50 million at any one time outstanding;
(7) Investments in Investee Stores either in the form of equity, loans
or other extensions of credit; provided that any such Investment may only
be made if the amount thereof, when added to the aggregate outstanding
amount of Permitted Investments in Investee Stores (excluding for purposes
of this clause (7) any Investments made pursuant to clause (5)), after
giving effect to any loan repayments or returns of capital in respect of
any Permitted Investment in Investee Stores, does not exceed 12.5% of
Consolidated Total Assets at the time of determination;
(8) Investments as a result of non-cash consideration received by the
Company or a Restricted Subsidiary in connection with an Asset Sale made in
compliance with the "-- Certain Covenants -- Limitation on Sale of Assets"
covenant;
(9) other Investments, in addition to those permitted under (1)
through (8) above, in an aggregate amount not to exceed $25 million; and
(10) any substitutions or replacements of any Investment so long as
the aggregate amount of such Investment is not increased by such
substitution or replacement.
"Permitted Junior Securities" means Equity Interests in the Company or debt
securities that are subordinated to all Senior Indebtedness (and any debt
securities issued in exchange for Senior Indebtedness) to substantially the same
extent as, or to a greater extent than, the notes are subordinated to Senior
Indebtedness under the Indenture.
"Permitted Liens" means, with respect to any Person:
(1) Liens existing as of the Issue Date;
(2) Liens securing the notes and the Note Guarantees;
(3) any Lien arising by reason of:
(a) any judgment, decree or order of any court, so long as such
Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment, decree or
order shall not have been finally terminated or the period within which
such proceedings may be initiated shall not have expired;
(b) deposits to secure public or statutory obligations;
(c) operation of law in favor of growers, dealers and suppliers of
fresh fruits and vegetables, carriers, mechanics, materialmen, laborers,
employees or suppliers, incurred in the ordinary course of business for
sums which are not yet delinquent or are being contested in good faith
by negotiations or by appropriate proceedings which suspend the
collection thereof;
(d) the grant by the Company to licensees, pursuant to security
agreements, of security interests in trademarks and goodwill, patents
and trade secrets of the Company to secure the
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damages, if any, of such licensees, resulting from the rejection of the
license of such licensees in a bankruptcy, reorganization or similar
proceeding with respect to the Company; or
(e) security for surety or appeal bonds;
(4) any Lien on any property or assets of a Restricted Subsidiary in
favor of the Company or any Wholly Owned Restricted Subsidiary;
(5) any Lien securing Acquired Indebtedness created prior to (and not
created in connection with, or in contemplation of) the incurrence of such
Indebtedness by the Company or any Restricted Subsidiary; provided that
such Lien does not extend to any assets of the Company or any Restricted
Subsidiary other than the assets acquired in the transaction resulting in
such Acquired Indebtedness being incurred by the Company or Restricted
Subsidiary, as the case may be;
(6) any Lien to secure the performance of bids, trade contracts,
letters of credit and other obligations of a like nature and incurred in
the ordinary course of business of the Company or any Restricted
Subsidiary;
(7) any Lien securing any Interest Rate Agreements or Currency
Agreements permitted to be incurred pursuant to clause (5) of the
definition of "Permitted Indebtedness" or any collateral for the
Indebtedness to which such Interest Rate Agreements or Currency Agreements
relate;
(8) any Lien on an asset securing Indebtedness (including Capital
Lease Obligations) incurred or assumed for the purpose of financing all or
any part of the cost of acquiring or constructing such asset; provided that
such Lien covers only such asset and attaches concurrently or within 180
days after the acquisition or completion of construction thereof;
(9) any Lien on real or personal property securing Capital Lease
Obligations of the Company or any Restricted Subsidiary as lessee with
respect to such real or personal property to the extent such Indebtedness
can be incurred pursuant to "Certain Covenants -- Limitation on
Indebtedness";
(10) any Lien on a Transferred Receivable or other receivable that is
transferred in a Permitted Receivables Financing;
(11) any Lien consisting of any pledge to any Person of Indebtedness
owed by any Restricted Subsidiary to the Company or to any Wholly Owned
Restricted Subsidiary; provided that:
(a) such Restricted Subsidiary is a Subsidiary Guarantor; and
(b) the principal amount pledged does not exceed the Indebtedness
secured by such pledge;
(12) Liens securing Indebtedness which is incurred to refinance any
Indebtedness which has been secured by a Lien permitted under the Indenture
and which has been incurred in accordance with the provisions of the
Indenture; provided, however, that such Liens:
(a) are no less favorable to the Holders and are not more favorable
to the lienholders with respect to such Liens than the Liens in respect
of the Indebtedness being refinanced; and
(b) do not extend to or cover any property or assets of the Company
or any of the Restricted Subsidiaries not securing the Indebtedness so
refinanced; and
(13) any extension, renewal, substitution or replacement, in whole or
in part, of any Lien described in the foregoing clauses (4) through (12);
provided, that the Lien so extended, renewed, substituted or replaced does
not extend to any additional property or assets.
"Permitted Receivables Financing" means any transaction involving the
transfer (by way of sale, pledge or otherwise) by the Company or any of its
Restricted Subsidiaries of receivables to any other Person, provided that after
giving effect to such transaction the sum of:
(1) the aggregate uncollected balances of the receivables so
transferred ("TRANSFERRED RECEIVABLES"); plus
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(2) the aggregate amount of all collections on Transferred Receivables
theretofore received by the seller but not yet remitted to the purchaser,
in each case at the date of determination, would not exceed $600 million.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred stock whether now outstanding, or issued after the Issue
Date, and including, without limitation, all classes and series of preferred or
preference stock of such Person.
"Public Equity Offering" means with respect to the last sentence of
"Certain Covenants -- Limitation on Issuances and Sales of Capital Stock of
Subsidiaries," a primary or secondary public offering of equity securities of
any Restricted Subsidiary of the Company pursuant to an effective registration
statement under the Securities Act.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Rating Agency" means any of:
(1) S&P;
(2) Moody's; or
(3) if S&P or Moody's or both shall not make a rating of the notes
publicly available, a security rating agency or agencies, as the case may
be, nationally recognized in the United States, selected by the Company,
which shall be substituted for S&P or Moody's or both, as the case may be,
and, in each case, any successors thereto.
"Rating Category" means:
(1) with respect to S&P, any of the following categories: AAA, AA, A,
BBB, BB, B, CCC, CC, C and D (or equivalent successor categories);
(2) with respect to Moody's, any of the following categories: Aaa, Aa,
A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories); and
(3) the equivalent of any such category of S&P or Moody's used by
another Rating Agency.
In determining whether the rating of the notes has decreased by one or more
gradation, gradations within Rating Categories (+ and -- for S&P; 1, 2 and 3 for
Moody's; or the equivalent gradations for another Rating Agency) shall be taken
into account (e.g., with respect to S&P, a decline in rating from BB+ to BB, as
well as from BB- to B+, will constitute a decrease of one gradation).
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms or by the terms of any security into which it is convertible or
exchangeable or otherwise, is, or upon the happening of an event or passage of
time would be, required to be redeemed prior to any Stated Maturity of the
principal of the notes or is redeemable at the option of the holder thereof at
any time prior to any such Stated Maturity, or is convertible into or
exchangeable for debt securities at any time prior to any such Stated Maturity
at the option of the holder thereof.
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" of the Company or any Subsidiary Guarantor means:
(1) all Indebtedness of the Company or such Subsidiary Guarantor under
the Credit Agreement or any related loan documentation, including, without
limitation, obligations to pay principal and
97
interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law), premium, if any, reimbursement obligations under letters
of credit, fees, expenses and indemnities, and all obligations under
Interest Rate Agreements or Currency Agreements with respect thereto,
whether outstanding on the date of the Indenture or thereafter incurred;
(2) the principal of, premium, if any, and interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at
the rate provided for in the documentation with respect thereto, whether or
not such interest is an allowed claim under applicable law) on, and all
other Obligations with respect to, any other Indebtedness of the Company or
such Subsidiary Guarantor permitted to be incurred by the Company or such
Subsidiary Guarantor under the terms of the Indenture (including, without
limitation, the Senior Notes), whether outstanding on the date of the
Indenture or thereafter incurred, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the notes; and
(3) all Obligations of the Company or such Subsidiary Guarantor with
respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include (a) the Existing Senior Subordinated Notes or the Convertible
Senior Subordinated Notes, (b) any liability for federal, state, local or other
taxes owed or owing by the Company or any Subsidiary Guarantor, (c) any
Indebtedness of the Company or any Subsidiary Guarantor to any of its Restricted
Subsidiaries or other Affiliates, (d) any trade payables or (e) any Indebtedness
that is incurred in violation of the Indenture.
"Senior Notes" means the 10 1/8% Senior Notes due April 2008 of the
Company.
"Significant Subsidiary" of the Company means any Subsidiary of the Company
that is a "significant subsidiary" as defined in Regulation S-X under the
Exchange Act.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill
Inc., a New York corporation, or any successor rating agency.
"Stated Maturity" when used with respect to any Indebtedness or any
installment of interest thereon means the dates specified in such Indebtedness
as the fixed date on which the principal of or premiums on such Indebtedness or
such installment of interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or the
Subsidiary Guarantors that is subordinate or junior in right of payment to the
notes or the Note Guarantees, as the case may be.
"Subsidiary" means any Person a majority of the equity ownership or the
Voting Stock of which is at the time owned, directly or indirectly, by the
Company or by one or more other Restricted Subsidiaries, or by the Company and
one or more other Restricted Subsidiaries.
"Subsidiary Guarantor" means each Wholly Owned Restricted Subsidiary of the
Company and each such subsidiary's Wholly Owned Restricted Subsidiaries as of
the Issue Date and any Restricted Subsidiary that is required pursuant to the
"Additional Guarantees" covenant, on or after the Issue Date, to execute a Note
Guarantee pursuant to the Indenture until a successor replaces any such party
pursuant to the applicable provisions of the Indenture and, thereafter, shall
mean such successor.
"Tangible Assets" means the total of all the assets appearing on the
Consolidated balance sheet of a majority-owned or Wholly Owned Restricted
Subsidiary of the Company less the following:
(1) intangible assets including, without limitation, items such as
goodwill, trademarks, trade names, patents and unamortized debt discount
and expense; and
(2) appropriate adjustments on account of minority interests of other
Persons holding stock in any such majority-owned Restricted Subsidiary of
the Company.
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"Temporary Cash Investments" means:
(1) any evidence of Indebtedness issued by the United States, or an
instrumentality or agency thereof, and guaranteed fully as to principal,
premium, if any, and interest by the United States;
(2) any certificate of deposit issued by, or time deposit of, a
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than $500
million, whose debt has a rating, at the time of which any investment
therein is made, of "A" (or higher) according to Moody's or "A" (or higher)
according to S&P;
(3) commercial paper issued by a corporation (other than an Affiliate
or Restricted Subsidiary of the Company) organized and existing under the
laws of the United States with a rating, at the time as of which any
investment therein is made, of "P-1" (or higher) according to Moody's or
"A-1" (or higher) according to S&P;
(4) any money market deposit accounts issued or offered by a financial
institution that is a member of the Federal Reserve System having capital
and surplus in excess of $500 million;
(5) short term tax-exempt bonds with a rating, at the time as of which
any investment is made therein, of "Aa3" (or higher) according to Moody's
or "AA-" (or higher) according to S&P;
(6) shares in a mutual fund, the investment objectives and policies of
which require it to invest substantially in the investments of the type
described in clauses (1) through (5); and
(7) repurchase and reverse repurchase obligations with the term of not
more than seven days for underlying securities of the types described in
clauses (1) and (2) entered into with any financial institution meeting the
qualifications specified in clause (2); provided that in the case of
clauses (1), (2), (3) and (5), such investment matures within one year from
the date of acquisition thereof.
"Transferred Receivables" has the meaning specified in the definition of
"Permitted Receivables Financing" set forth herein.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution,
but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any of its Restricted Subsidiaries unless
the terms of any such agreement, contract, arrangement or understanding are
no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of
the Company;
(3) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its Restricted
Subsidiaries; and
(5) does not directly or through any of its Subsidiaries own any
Capital Stock of, or own or hold any Lien on any property of, the Company
or any of its Restricted Subsidiaries.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by filing with the Trustee a certified copy of the Board Resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant described above under the caption "Certain Covenants -- Limitation on
Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to
meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of the
99
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under the covenant
described under the caption "Certain Covenants -- Limitation on Indebtedness,"
the Company shall be in default of such covenant). The Board of Directors may at
any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if:
(1) such Indebtedness is permitted under the covenant described under
the caption "Certain Covenants -- Limitation on Indebtedness"; and
(2) no Default or Event of Default would be in existence following
such designation.
"Voting Stock" means stock or securities of the class or classes pursuant
to which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of a Person (irrespective of whether or not at the time stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).
"Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary all the
Capital Stock (other than directors qualifying shares) of which is owned by the
Company or another Wholly Owned Restricted Subsidiary.
BOOK-ENTRY; DELIVERY AND FORM
We will issue the exchange notes in the form of a Global Note. The Global
Note will be deposited with, or on behalf of, the clearing agency registered
under the Exchange Act that is designated to act as depositary for the notes and
registered in the name of the depositary or its nominee. DTC will be the initial
depositary.
Except as set forth below, a Global Note may be transferred, in whole or in
part, only to another nominee of DTC or to a successor of DTC or its nominee.
DTC has advised us that DTC is:
- a limited-purpose trust company organized under the laws of the State of
New York;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered pursuant to the provisions of Section 17A
of the Exchange Act.
DTC was created to hold securities of institutions that have accounts with
DTC and to facilitate the clearance and settlement of securities transactions
among its participants in securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include:
- securities brokers and dealers;
- banks;
- trust companies;
- clearing corporations; and
- certain other organizations.
Access to DTC's book-entry system is also available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, whether directly or indirectly.
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We expect that pursuant to the procedures established by DTC (1) upon the
issuance of a Global Note, DTC will credit, on its book-entry registration and
transfer system, the respective principal amount of the individual beneficial
interests represented by the Global Note to the accounts of participants and (2)
ownership of beneficial interests in a Global Note will be shown on, and the
transfer of those ownership interests will be effected only through, records
maintained by DTC (with respect to participants' interests) and the participants
(with respect to the owners of beneficial interests in the Global Note other
than participants). The accounts to be credited will be designated by the
initial purchasers of the beneficial interests. Ownership of beneficial
interests in a Global Note is limited to participants or persons that may hold
interests through participants.
So long as DTC or its nominee is the registered holder and owner of a
Global Note, DTC or its nominee, as the case may be, will be considered the sole
legal owner of the notes represented by the Global Note for all purposes under
the indenture and the notes. Except as set forth below, owners of beneficial
interests in a Global Note will not be entitled to receive definitive notes and
will not be considered to be the owners or holders of any notes under the Global
Note. We understand that under existing industry practice, in the event an owner
of a beneficial interest in a Global Note desires to take any action that DTC,
as the holder of the Global Note, is entitled to take, DTC would authorize the
participants to take the action, and that participants would authorize
beneficial owners owning through the participants to take the action or would
otherwise act upon the instructions of beneficial owners owning through them. No
beneficial owner of an interest in a Global Note will be able to transfer the
interest except in accordance with DTC's applicable procedures, in addition to
those provided for under the indenture and, if applicable, those of Euroclear
and Clearstream Banking.
We will make payments of the principal of, and interest on, the notes
represented by a Global Note registered in the name of and held by DTC or its
nominee to DTC or its nominee, as the case may be, as the registered owner and
holder of the Global Note.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest in respect of a Global Note, will credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of the Global Note as shown on the records of DTC or its
nominee. We also expect that payments by participants and indirect participants
to owners of beneficial interests in a Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for accounts of customers registered in
the names of nominees for these customers. The payments, however, will be the
responsibility of the participants and indirect participants, and neither we,
the Trustee nor any paying agent will have any responsibility or liability for:
- any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in a Global Note;
- maintaining, supervising or reviewing any records relating to the
beneficial ownership interests;
- any other aspect of the relationship between DTC and its participants; or
- the relationship between the participants and indirect participants and
the owners of beneficial interests in a Global Note.
Unless and until it is exchanged in whole or in part for definitive notes,
a Global Note may not be transferred except as a whole by DTC to a nominee of
DTC or by a nominee of DTC to DTC or another nominee of DTC.
Participants in DTC will effect transfers with other participants in the
ordinary way in accordance with DTC rules and will settle transfers in same-day
funds. Participants in Euroclear and Clearstream Banking will effect transfers
with other participants in the ordinary way in accordance with the rules and
operating procedures of Euroclear and Clearstream Banking, as applicable. If a
holder requires physical delivery of a definitive note for any reason, including
to sell notes to persons in jurisdictions which require
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physical delivery or to pledge notes, the holder must transfer its interest in a
Global Note in accordance with the normal procedures of DTC and the procedures
set forth in the indenture.
Cross-market transfers between DTC, on the one hand, and directly or
indirectly through Euroclear or Clearstream Banking participants, on the other,
will be effected in DTC in accordance with DTC rules on behalf of Euroclear or
Clearstream Banking, as the case may be, by its respective depositary; however,
these cross-market transactions will require delivery of instructions to
Euroclear or Clearstream Banking, as the case may be, by the counterparty in the
system in accordance with its rules and procedures and within its established
deadlines (Brussels time). Euroclear or Clearstream Banking, as the case may be,
will, if the transaction meets its settlement requirements, deliver instructions
to its respective depositary to take action to effect final settlement on its
behalf by delivering or receiving interests in a Global Note in DTC, and making
or receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Clearstream Banking
participants may not deliver instructions directly to the depositories for
Euroclear or Clearstream Banking.
Because of time zone differences, the securities account of a Euroclear or
Clearstream Banking participant purchasing an interest in a Global Note from a
DTC participant will be credited during the securities settlement processing day
(which must be a business day for Euroclear or Clearstream Banking, as the case
may be) immediately following the DTC settlement date, and the credit of any
transactions interests in a Global Note settled during the processing day will
be reported to the relevant Euroclear or Clearstream Banking participant on that
day. Cash received in Euroclear or Clearstream Banking as a result of sales of
interests in a Global Note by or through a Euroclear or Clearstream Banking
participant to a DTC participant will be received with value on the DTC
settlement date, but will be available in the relevant Euroclear or Clearstream
Banking cash account only as of the business day following settlement in DTC.
We expect that DTC will take any action permitted to be taken by a holder
of notes (including the presentation of notes for exchange as described below)
only at the direction of one or more participants to whose accounts at the DTC
interests in a Global Note are credited and only in respect of the portion of
the aggregate principal amount of the notes as to which the participant or
participants has or have given direction. However, if there is an event of
default under the notes, DTC will exchange the Global Notes for definitive
notes, which it will distribute to its participants. These definitive notes are
subject to certain restrictions on registration of transfers and will bear
appropriate legends restricting their transfer. Although we expect that DTC,
Euroclear and Clearstream Banking will agree to the foregoing procedures in
order to facilitate transfers of interests in Global Notes among participants of
DTC, Euroclear, and Clearstream Banking, DTC, Euroclear and Clearstream Banking
are under no obligation to perform or continue to perform these procedures, and
these procedures may be discontinued at any time. Neither we nor the trustee
have any responsibility for the performance by DTC, Euroclear or Clearstream
Banking or their participants or indirect participants of their obligations
under the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
Global Notes or ceases to be a clearing agency registered under the Securities
Exchange Act and we do not appoint a successor depositary within 90 days, we
will issue definitive notes in exchange for the Global Notes. The definitive
notes will be subject to certain restrictions on registration of transfers and
will bear appropriate legends concerning these restrictions.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of the exchange notes. Broker-dealers
may use this prospectus, as it may be amended or supplemented from time to time,
in connection with the resale of exchange notes received in exchange for old
notes where the broker-dealer acquired the old notes as a result of
market-making activities or other trading activities. We have agreed that for a
period of up to 180 days after the date that this registration statement is
declared effective by
102
the SEC, we will make this prospectus, as amended or supplemented, available to
any broker-dealer that requests it in the letter of transmittal for use in
connection with any such resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers or any other persons. Broker-dealers may sell exchange notes
received by broker-dealers for their own account pursuant to the exchange offer
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the exchange notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to the prevailing market prices or negotiated
prices. Broker-dealers may resell exchange notes directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any broker-dealer and/or the purchasers of the
exchange notes. Any broker-dealer that resells exchange notes that were received
by it for its own account pursuant to the exchange offer and any broker or
dealer that participates in a distribution of the exchange notes may be deemed
to be "underwriters" within the meaning of the Securities Act and any profit on
any resale of exchange notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
We have agreed to pay all expenses incident to our performance of, or
compliance with, the registration rights agreement and will indemnify you
against liabilities under the Securities Act.
By its acceptance of the exchange offer, any broker-dealer that receives
exchange notes pursuant to the exchange offer agrees to notify us before using
the prospectus in connection with the sale or transfer of exchange notes. The
broker-dealer further acknowledges and agrees that, upon receipt of notice from
us of the happening of any event which makes any statement in the prospectus
untrue in any material respect or which requires the making of any changes in
the prospectus to make the statements in the prospectus not misleading or which
may impose upon us disclosure obligations that my have a material adverse effect
on us, which notice we agree to deliver promptly to the broker-dealer, the
broker-dealer will suspend use of the prospectus until we have notified the
broker-dealer that delivery of the prospectus may resume and have furnished
copies of any amendment or supplement to the prospectus to the broker-dealer.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income and estate
tax considerations relevant to the exchange of old notes for the exchange notes
pursuant to this exchange offer and the purchase, ownership and disposition of
the notes by holders thereof, but does not purport to be a complete analysis of
all the potential tax considerations relating thereto. This summary is based
upon the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations promulgated under the Code, administrative rulings
and judicial decisions as of the date hereof. These authorities may be changed,
perhaps retroactively, so as to result in U.S. federal income and estate tax
consequences different from those set forth below. We have not sought any ruling
from the Internal Revenue Service or an opinion of counsel with respect to the
statements made and the conclusions reached in the following summary, and there
can be no assurance that the Internal Revenue Service will agree with such
statements and conclusions.
This summary assumes that the notes are held as capital assets within the
meaning of Section 1221 of the Code. This summary also does not address the tax
considerations arising under the laws of any foreign, state or local
jurisdiction. In addition, this discussion does not address all tax
considerations that may be applicable to a holder's particular circumstances or
to holders that may be subject to special tax rules, including, without
limitation:
- holders subject to the alternative minimum tax;
- banks, insurance companies, or other financial institutions;
103
- tax-exempt organizations;
- dealers in securities or commodities;
- traders in securities that elect to use a mark-to-market method of
accounting for their securities holdings;
- a U.S. holder whose "functional currency" is not the U.S. dollar;
- persons that will hold the notes as a position in a hedging transaction,
"straddle," "conversion transaction" or other risk reduction transaction;
or
- persons deemed to sell the notes under the constructive sale provisions
of the Code.
If a partnership holds notes, the tax treatment of a partner in the
partnership will generally depend upon the status of the partner and the
activities of the partnership. If you are a partner of a partnership holding our
notes, you should consult your tax advisor regarding the tax consequences of the
ownership and disposition of the notes.
THIS SUMMARY OF UNITED STATES FEDERAL TAX CONSIDERATIONS IS FOR GENERAL
INFORMATION ONLY AND IS NOT TAX ADVICE. WE URGE YOU TO CONSULT YOUR TAX ADVISOR
CONCERNING THE TAX CONSEQUENCES OF THE EXCHANGE OF THE OLD NOTES FOR THE
EXCHANGE NOTES AND OF HOLDING AND DISPOSING OF THE EXCHANGE NOTES, INCLUDING THE
U.S. FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES AND POTENTIAL CHANGES IN
THE TAX LAWS.
CONSEQUENCES OF THE EXCHANGE
The exchange of the old notes for the exchange notes in the exchange offer
will not be treated as an "exchange" for federal income tax purposes, because
the exchange notes will not be considered to differ materially in kind or extent
from the old notes. Accordingly, the exchange of old notes for exchange notes
will not be a taxable event to you for federal income tax purposes. Moreover,
the exchange notes will generally have the same tax attributes as the old notes
and the same tax consequences to you as the old notes have to you, including
without limitation, the same issue price, adjusted issue price, adjusted tax
basis and holding period. Therefore, references to "notes" apply equally to the
exchange notes and the old notes.
CONSEQUENCES TO U.S. HOLDERS
The following is a summary of the U.S. federal tax consequences that will
apply to you if you are a U.S. holder of the notes. Certain consequences to
"non-U.S. holders" of the notes are described under "-- Consequences to Non-U.S.
Holders" below. "U.S. holder" means a beneficial owner of a note that is:
- a citizen or resident of the U.S. as determined for federal income tax
purposes;
- a corporation or partnership created or organized in or under the laws of
the U.S. or any political subdivision of the U.S.;
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
- a trust that (1) is subject to the supervision of a court within the U.S.
and the control of one or more U.S. persons or (2) has a valid election
in effect under applicable Treasury Regulations to be treated as a U.S.
person.
PAYMENTS OF INTEREST
Stated interest on the notes will generally be taxable to you as ordinary
income from domestic sources at the time it is paid or accrues in accordance
with your method of accounting for tax purposes.
104
MARKET DISCOUNT
If you acquire a note at a cost that is less than the stated redemption
price (i.e., the principal) at maturity of the notes, the amount of such
difference is treated as "market discount" for federal income tax purposes,
unless such difference is less than .0025 multiplied by the stated redemption
price at maturity multiplied by the number of complete years to maturity (from
the date of acquisition).
Under the market discount rules of the Code, you are required to treat any
gain on the sale, exchange, retirement or other disposition of a note as
ordinary income to the extent of the accrued market discount that has not
previously been included in income. Thus, principal payments and payments
received upon the sale or exchange of a note are treated as ordinary income to
the extent of accrued market discount that has not previously been included in
income. If you dispose of a note with market discount in certain otherwise
nontaxable transactions, you must include accrued market discount as ordinary
income as if you had sold the note at its then fair market value.
In general, the amount of market discount that has accrued is determined on
a ratable basis. You may, however, elect to determine the amount of accrued
market discount on a constant yield to maturity basis. This election is made on
a note-by-note basis and is irrevocable.
With respect to notes with market discount, you may not be allowed to
deduct immediately a portion of the interest expense on any indebtedness
incurred or continued to purchase or to carry the notes. You may elect to
include market discount in income currently as it accrues, in which case the
interest deferral rule set forth in the preceding sentence will not apply. This
election will apply to all debt instruments that you acquire on or after the
first day of the first taxable year to which the election applies and is
irrevocable without the consent of the Internal Revenue Service. Your tax basis
in a note will be increased by the amount of market discount included in your
income under the election.
AMORTIZABLE BOND PREMIUM
If you purchase a note for an amount in excess of the stated redemption
price at maturity, you will be considered to have purchased the note with
"amortizable bond premium" equal in amount to the excess. Generally, you may
elect to amortize the premium as an offset to interest income otherwise required
to be included in income in respect of the note during the taxable year, using a
constant yield method similar to that described above, over the remaining term
of the note (or, if it results in a smaller amount of amortizable premium, until
an earlier call date). Under Treasury Regulations, the amount of amortizable
bond premium that you may deduct in any accrual period is limited to the amount
by which your total interest inclusions on the note in prior accrual periods
exceed the total amount treated by you as a bond premium deduction in prior
accrual periods. If any of the excess bond premium is not deductible, that
amount is carried forward to the next accrual period. If you elect to amortize
bond premium, you must reduce your tax basis in the note by the amount of the
premium used to offset interest income as set forth above. An election to
amortize bond premium applies to all taxable debt obligations then owned and
thereafter acquired by you and may be revoked only with the consent of the
Internal Revenue Service.
SALE, EXCHANGE OR OTHER TAXABLE DISPOSITION OF NOTES
You will generally recognize gain or loss upon the sale, exchange,
retirement or other taxable disposition of a note equal to the difference
between the amount realized upon the sale, exchange or other disposition (less
an amount attributable to any accrued stated interest not previously included in
income, which will be taxable as interest income) and your adjusted tax basis in
the note. Your adjusted tax basis in a note will generally equal the amount you
paid for the note and will be subsequently increased by market discount
previously included in income in respect of the note and will be reduced by any
amortizable bond premium in respect of the note which has been taken into
account.
Any gain or loss recognized on a disposition of the note will be capital
gain or loss except as described under "Market Discount" above. If you are an
individual and have held the note for more than
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one year, such capital gain will generally be subject to tax at a maximum rate
of 20%. Your ability to deduct capital losses may be limited.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments of interest and principal on the notes and the proceeds received
upon the sale or other disposition of such notes may be subject to information
reporting and backup withholding tax. Payments to certain holders (including,
among others, corporations and certain tax-exempt organizations) are generally
not subject to information reporting or backup withholding. Payments to you will
be subject to information reporting and backup withholding tax if you:
- fail to furnish your taxpayer identification number ("TIN"), which, if
you are an individual, is ordinarily your social security number;
- furnish an incorrect TIN;
- are notified by the Internal Revenue Service that you have failed to
properly report payments of interest or dividends; or
- fail to certify, under penalties of perjury, that you have furnished a
correct TIN and that the Internal Revenue Service has not notified you
that you are subject to backup withholding.
The amount of any reportable payments, including interest, made to you
(except if you are an exempt recipient) and the amount of tax withheld, if any,
with respect to such payments will be reported to you and to the Internal
Revenue Service for each calendar year.
You should consult your tax advisor regarding your qualification for an
exemption from backup withholding and information reporting and the procedures
for obtaining such an exemption, if applicable. The backup withholding tax is
not an additional tax, and you may use amounts withheld as a credit against your
U.S. federal income tax liability or may claim a refund as long as you timely
provide certain information to the Internal Revenue Service.
CONSEQUENCES TO NON-U.S. HOLDERS
The following is a summary of the U.S. federal tax consequences that will
apply to you if you are a non-U.S. holder of notes. The term "non-U.S. holder"
means a beneficial owner of a note that is not a U.S. holder.
Special rules may apply to certain non-U.S. holders such as "controlled
foreign corporations," "passive foreign investment companies" and "foreign
personal holding companies." Such entities should consult their tax advisors to
determine the U.S. federal, state, local and other tax consequences that may be
relevant to them.
PAYMENT OF INTEREST
The 30% U.S. federal withholding tax will not apply to any payment to you
of principal or interest on a note provided that:
- you do not actually or constructively own 10% or more of the total
combined voting power of all classes of our stock that are entitled to
vote within the meaning of Section 871(h)(3) of the Code;
- you are not a controlled foreign corporation that is related to us
through stock ownership;
- you are not a bank whose receipt of interest on a note is described in
section 881(c)(3)(A) of the Code; and
- (a) you provide your name and address, and certify, under penalties of
perjury, that you are not a U.S. person (which certification may be made
on an Internal Revenue Service Form W-8BEN (or a successor form)) or (b)
a securities clearing organization, bank, or other financial institution
that holds customers' securities in the ordinary course of its business
holds the note on your behalf and
106
certifies, under penalties of perjury, that it has received Internal
Revenue Service Form W-8BEN from you or from another qualifying financial
institution intermediary, and, in certain circumstances, provides a copy
of the Internal Revenue Service Form W-8BEN. If the notes are held by or
through certain foreign intermediaries or certain foreign partnerships,
such foreign intermediaries or partnerships must also satisfy the
certification requirements of applicable Treasury Regulations.
If you cannot satisfy the requirements described above, payments of
interest will be subject to the 30% U.S. federal withholding tax, unless you
provide us with a properly executed (1) Internal Revenue Service Form W-8BEN
claiming an exemption from or reduction in withholding under the benefit of an
applicable tax treaty or (2) Internal Revenue Service Form W-8ECI stating that
interest paid on the note is not subject to withholding tax because it is
effectively connected with your conduct of a trade or business in the U.S.
Alternative documentation may be applicable in certain circumstances.
If you are engaged in a trade or business in the U.S. and interest on a
note is effectively connected with the conduct of that trade or business, you
will be required to pay U.S. federal income tax on that interest on a net income
basis (although exempt from the 30% withholding tax provided the certification
requirement described above is met) in the same manner as if you were a U.S.
person as defined under the Code, except as otherwise provided by applicable tax
treaty. In addition, if you are a foreign corporation, you may be subject to a
branch profits tax equal to 30% (or lower applicable treaty rate) of your
earnings and profits for the taxable year, subject to adjustments, that are
effectively connected with your conduct of a trade or business in the U.S. For
this purpose, interest will be included in your earnings and profits.
SALE, EXCHANGE OR OTHER TAXABLE DISPOSITION OF NOTES
Any gain realized upon the sale, exchange or other taxable disposition of a
note (except with respect to accrued and unpaid interest, which would be taxable
as described above) generally will not be subject to U.S. federal income tax
unless:
- that gain is effectively connected with your conduct of a trade or
business in the U.S.;
- you are an individual who is present in the U.S. for 183 days or more in
the taxable year of that disposition, and certain other conditions are
met; or
- you are subject to Code provisions applicable to certain U.S.
expatriates.
If you are a holder described in the first bullet point above, you will be
required to pay U.S. federal income tax on the net gain derived from the sale,
except as otherwise required by an applicable tax treaty, and if you are a
foreign corporation, you may also be required to pay a branch profits tax at a
30% rate or a lower rate if so specified by an applicable income tax treaty. If
you are a holder described in the second bullet point above, you will be subject
to a 30% U.S. federal income tax on the gain derived from the sale, which may be
offset by U.S. source capital losses, even though you are not considered a
resident of the U.S. If you are a holder described in the third bullet point
above, you should consult your tax advisor to determine the U.S. federal, state,
local and other tax consequences that may be relevant to you.
U.S. FEDERAL ESTATE TAX
The U.S. federal estate tax will not apply to the notes owned by you at the
time of your death, provided that (1) you do not own actually or constructively
10% or more of the total combined voting power of all classes of our voting
stock (within the meaning of the Code and the Treasury Regulations) and (2)
interest on the note would not have been, if received at the time of your death,
effectively connected with your conduct of a trade or business in the U.S.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Backup withholding will likely not apply to payments made by us or our
paying agents, in their capacities as such, to you if you have provided the
required certification that you are not a U.S. person as
107
described above. However, certain information reporting may still apply with
respect to interest payments even if certification is provided. Payments of the
proceeds of a disposition by you made to or through a foreign office of a broker
will not be subject to information reporting or backup withholding, except that
information reporting (but not backup withholding) will apply to those payments,
unless such broker has documentary evidence in its records that you are not a
U.S. person and certain other conditions are met, or you otherwise establish an
exemption, if the broker is:
- a U.S. person;
- a controlled foreign corporation for U.S. federal income tax purposes;
- a foreign person 50% or more of whose gross income is effectively
connected with a U.S. trade or business for a specified three-year
period; or
- a foreign partnership, if at any time during its tax year, one or more of
its partners are U.S. persons, as defined in Treasury Regulations, who in
the aggregate hold more than 50% of the income or capital interest in the
partnership or if, at any time during its tax year, the foreign
partnership is engaged in a U.S. trade or business.
You will be subject to backup withholding and information reporting with
respect to any payment of the proceeds of a sale of a note effected by the U.S.
office of a broker unless you properly certify under penalties of perjury as to
your foreign status and certain other conditions are met or you otherwise
establish an exemption.
Currently applicable Treasury Regulations establish reliance standards with
regard to the certification requirements described above.
You should consult your tax advisor regarding application of withholding
and backup withholding in your particular circumstance and the availability of
and procedure for obtaining an exemption from withholding and backup withholding
under current Treasury Regulations. In this regard, the current Treasury
Regulations provide that a certification may not be relied on if we or our agent
(or other payor) knows or has reasons to know that the certification may be
false. Any amounts withheld under the backup withholding rules from a payment to
you will be allowed as a credit against your U.S. federal income tax liability
or you may claim a refund, provided the required information is furnished timely
to the Internal Revenue Service.
LEGAL MATTERS
Certain legal matters in connection with the notes offered hereby will be
passed upon for us by Latham & Watkins, San Francisco, California and McAfee &
Taft, Oklahoma City, Oklahoma.
INDEPENDENT AUDITORS
The Company's financial statements incorporated in this prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 29, 2001 and Core-Mark's consolidated financial statements as of
December 31, 2001 and 2000, and for each of the three years in the period ended
December 31, 2001 incorporated in this prospectus by reference to the Company's
Current Report on Form 8-K filed with the Securities and Exchange Commission on
May 20, 2002 have been audited by Deloitte & Touche LLP, independent auditors,
as stated in their reports, which are also incorporated in this prospectus by
reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
With respect to the Company's unaudited interim financial information for
the sixteen weeks ended April 20, 2002 which is incorporated herein by
reference, Deloitte & Touche LLP have applied limited procedures in accordance
with professional standards for a review of such information. However, as stated
in their report included in the Company's Quarterly Report on Form 10-Q for the
sixteen weeks ended April 20, 2002 and incorporated by reference herein, they
did not audit and they do not express an opinion
108
on that interim financial information. Accordingly, the degree of reliance on
their report on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not subject
to the liability provisions of Section 11 of the Securities Act of 1933 for
their report on the unaudited interim financial information because that report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the Act.
AVAILABLE INFORMATION
We are subject to the information requirements of the Securities Exchange
Act of 1934, as amended. Accordingly, we file annual, quarterly and periodic
reports, proxy statements and other information with the SEC relating to our
business, financial statements and other matters (File No. 001-08140). You may
read and copy any documents we have filed with the SEC at prescribed rates at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, DC 20549.
You can obtain copies of these materials at prescribed rates by writing to the
SEC's Public Reference Section at the address set forth above, or by calling
(800) SEC-0330. Our SEC filings are also available to you free of charge at the
SEC's web site at http://www.sec.gov. Information contained in our web site is
not part of this prospectus.
INCORPORATION BY REFERENCE
We have elected to "incorporate by reference" certain information into this
prospectus. By incorporating by reference, we can disclose important information
to you by referring you to another document we have filed with the SEC. The
information incorporated by reference is deemed to be part of this prospectus,
except for information incorporated by reference that is superseded by
information contained in this prospectus. This prospectus incorporates by
reference the documents set forth below that we have previously filed with the
SEC:
<Table>
<Caption>
FLEMING SEC FILINGS (FILE NO. 001-08140) FILED ON
- ---------------------------------------- --------
Annual Report on Form 10-K (including information
specifically incorporated by reference into our Form 10-K
from our Proxy Statement for our 2002 Annual Meeting of
Shareholders)............................................. March 6, 2002
Current Report on Form 8-K.................................. April 2, 2002
Current Report on Form 8-K.................................. April 16, 2002
Current Report on Form 8-K (other than the information
furnished pursuant to Item 9 of such report, which
information is deemed not to be filed).................... April 24, 2002
Quarterly Report on Form 10-Q............................... May 17, 2002
Current Report on Form 8-K.................................. May 20, 2002
Amended Current Report on Form 8-K/A........................ May 29, 2002
Amended Current Report on Form 8-K/A........................ June 14, 2002
Current Report on Form 8-K.................................. June 25, 2002
</Table>
We are also incorporating by reference all other reports that we file with
the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
between the date of this prospectus and the date of the completion of the
exchange offer.
Our trademarks, service marks and trade names include "Fleming," "FlexPro,"
"FlexStar," "FlexMate," "Piggly Wiggly," "Sentry," "Super 1 Foods," "Festival
Foods," "Head Distributing Company," "Jubilee Foods," "Jamboree Foods,"
"MEGAMARKET," "Minter-Weisman Co.," "Shop "N Kart," "American Family," "ABCO
Desert Market," "Big Star," "Big T," "Buy for Less," "County Pride Markets,"
"Rainbow Foods," "Red Fox," "Shop N Bag," "Super Duper," "Super Foods," "Super
Thrift," "Thriftway," "Value King," "PWPETRO," "Piggly Wiggly xpress,"
"yes!less," "Big Bear," "Big Dollar, "Core-Mark," and "Best Buy." This
prospectus also contains trademarks, service marks, copyrights and trade names
of other companies.
109
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- --------------------------------------------------------------------------------
[FLEMING LOGO]
FLEMING COMPANIES, INC.
OFFER TO EXCHANGE UP TO $260,000,000 AGGREGATE PRINCIPAL AMOUNT
OF ITS 9 7/8% SENIOR SUBORDINATED NOTES DUE 2012,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR ANY AND ALL OF
ITS OUTSTANDING 9 7/8% SENIOR SUBORDINATED NOTES DUE 2012
-------------------------
PROSPECTUS
-------------------------
, 2002
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article Thirteen of our Restated Certificate of Incorporation contains a
provision, permitted by Section 1006B.7 of the Oklahoma General Corporation Act
(the "OGCA"), limiting the personal monetary liability of directors for breach
of fiduciary duty as a director. The OGCA and our Restated Certificate of
Incorporation provide that such provision does not eliminate or limit liability,
(1) for any breach of the director's duty of loyalty to the company or our
shareholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) for unlawful payments
of dividends or unlawful stock repurchases or redemptions, as provided in
Section 1053 of the OGCA, or (4) for any transaction from which the director
derived an improper personal benefit.
Section 1031 of the OGCA permits indemnification against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with actions, suits or
proceedings in which a director, officer, employee or agent is a party by reason
of the fact that he or she is or was such a director, officer, employee or
agent, if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the company and with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. However, in connection with actions by or in
our right, such indemnification is not permitted if such person has been
adjudged liable to us unless the court determines that, under all of the
circumstances, such person is nonetheless fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
Section 1031 also permits us to purchase and maintain insurance on behalf
of our directors and officers against any liability which may be asserted
against, or incurred by, such persons in their capacities as our directors or
officers whether or not we would have the power to indemnify such persons
against such liabilities under the provisions of such section.
Section 1031 further provides that the statutory provision is not exclusive
of any other right to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
independent directors, or otherwise, both as to action in such person's official
capacity and as to action in another capacity while holding such office.
Article 8 of our bylaws contains provisions regarding indemnification which
parallel those described above. We maintain insurance policies that insure our
officers and directors against certain liabilities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A list of exhibits filed with this registration statement on Form S-4 is
set forth on the Exhibit Index and is incorporated in this Item 21 by reference.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
II-1
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by a controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into this prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
FLEMING COMPANIES, INC.,
an Oklahoma corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Senior Vice President,
General Counsel and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Mark S. Hansen, Neal J. Rider
and Carlos M. Hernandez, with full power of substitution and full power to act
without the other, his or her true and lawful attorney-in-fact and agent to act
for him or her in his or her name, place and stead, in any and all capacities,
to sign to sign this registration statement and any and all amendments thereto
(including without limitation any post-effective amendments thereto and any
registration statement pursuant to Rule 462(b)), and to file each of the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, and every act and thing necessary or
desirable to be done, as fully to all intents and purposes as he or she might or
could do in person, thereby ratifying and confirming all that said
attorney-in-fact and agent, each acting alone, or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by each of the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ MARK S. HANSEN Chairman and Chief Executive Officer
----------------------------------------------- (Principal Executive Officer)
Mark S. Hansen
/s/ NEAL J. RIDER Executive Vice President and Chief Financial
----------------------------------------------- Officer
Neal J. Rider (Principal Financial and Accounting Officer)
/s/ MARK D. SHAPIRO Senior Vice President, Finance and Operations
----------------------------------------------- Control (Principal Accounting Officer)
Mark D. Shapiro
/s/ HERBERT M. BAUM Director
-----------------------------------------------
Herbert M. Baum
/s/ KENNETH M. DUBERSTEIN Director
-----------------------------------------------
Kenneth M. Duberstein
</Table>
II-3
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ ARCHIE R. DYKES Director
-----------------------------------------------
Archie R. Dykes
/s/ CAROL B. HALLETT Director
-----------------------------------------------
Carol B. Hallett
/s/ ROBERT S. HAMADA Director
-----------------------------------------------
Robert S. Hamada
/s/ ALICE M. PETERSON Director
-----------------------------------------------
Alice M. Peterson
</Table>
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
ABCO FOOD GROUP, INC.,
a Nevada corporation
BAKER'S FOOD GROUP, INC.,
a Nevada corporation
By: /s/ TIMOTHY M. OTTE
------------------------------------
Timothy M. Otte
Vice President, Secretary and
Treasurer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Timothy M. Otte and Carlos M.
Hernandez, with full power of substitution and full power to act without the
other, his true and lawful attorney-in-fact and agent to act for him in his
name, place and stead, in any and all capacities, to sign to sign this
registration statement and any and all amendments thereto (including without
limitation any post-effective amendments thereto and any registration statement
pursuant to Rule 462(b)), and to file each of the same, with all exhibits
thereto and all other documents in connection therewith, with the Securities and
Exchange Commission, and every act and thing necessary or desirable to be done,
as fully to all intents and purposes as he might or could do in person, thereby
ratifying and confirming all that said attorney-in-fact and agent, each acting
alone, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ JAMES R. VAUGHAN President and Director
----------------------------------------------- (Principal Executive Officer)
James R. Vaughan
/s/ TIMOTHY M. OTTE Vice President, Secretary, Treasurer and Director
----------------------------------------------- (Principal Financial and Accounting Officer)
Timothy M. Otte
</Table>
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
ABCO MARKETS INC.,
an Arizona corporation
ABCO REALTY CORP.,
an Arizona corporation
RETAIL SUPERMARKETS, INC.,
a Texas corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ J.R. CAMPBELL President and Director
----------------------------------------------- (Principal Executive Officer)
J.R. Campbell
/s/ NEAL J. RIDER Vice President, Treasurer and Director
----------------------------------------------- (Principal Financial and Accounting Officer)
Neal J. Rider
/s/ CARLOS M. HERNANDEZ Director
-----------------------------------------------
Carlos M. Hernandez
</Table>
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
AG, L.L.C., an Oklahoma limited
liability company
By: FLEMING COMPANIES, INC., its sole
member
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Senior Vice President,
General Counsel and Secretary
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
AMERICAN LOGISTICS GROUP, INC.,
a Delaware corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his or her true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ WILLIAM A. MERRIGAN President and Director
----------------------------------------------- (Principal Executive Officer)
William A. Merrigan
/s/ NEAL J. RIDER Vice President, Treasurer, Assistant Secretary and
----------------------------------------------- Director (Principal Financial and Accounting
Neal J. Rider Officer)
/s/ CARLOS M. HERNANDEZ Director
-----------------------------------------------
Carlos M. Hernandez
</Table>
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of South San Francisco,
state of California, on the 11th day of July, 2002.
ASI OFFICE AUTOMATION, INC.,
a California corporation
C/M PRODUCTS, INC.,
a California corporation
CORE-MARK INTERRELATED COMPANIES,
INC.,
a California corporation
CORE-MARK MIDCONTINENT, INC.,
an Arkansas corporation
GENERAL ACCEPTANCE CORPORATION,
a California corporation
MARQUISE VENTURES COMPANY, INC.,
a California corporation
By: /s/ LEO F. KORMAN
------------------------------------
Leo F. Korman
Senior Vice President, Chief
Financial Officer and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ ROBERT A. ALLEN Chairman of the Board and President
----------------------------------------------- (Principal Executive Officer)
Robert A. Allen
/s/ LEO F. KORMAN Senior Vice President, Chief Financial Officer and
----------------------------------------------- Secretary
Leo F. Korman (Principal Financial Officer)
/s/ GREGORY P. ANTHOLZNER Controller and Assistant Secretary
----------------------------------------------- (Principal Accounting Officer)
Gregory P. Antholzner
</Table>
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
CARDINAL WHOLESALE, INC.,
a Minnesota corporation
MINTER-WEISMAN CO.,
a Minnesota corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ E. STEPHEN DAVIS Chief Executive Officer, President and Director
----------------------------------------------- (Principal Executive Officer)
E. Stephen Davis
/s/ NEAL J. RIDER Vice President, Treasurer and Director
----------------------------------------------- (Principal Financial and Accounting Officer)
Neal J. Rider
/s/ CARLOS M. HERNANDEZ Director
-----------------------------------------------
Carlos M. Hernandez
</Table>
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
CORE-MARK INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Senior Vice President and General
Counsel
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ ROBERT A. ALLEN President and Chief Executive Officer
----------------------------------------------- (Principal Executive Officer)
Robert A. Allen
/s/ LEO F. KORMAN Senior Vice President, Chief Financial Officer and
----------------------------------------------- Secretary (Principal Financial Officer)
Leo F. Korman
/s/ GREGORY P. ANTHOLZNER Controller and Assistant Secretary
----------------------------------------------- (Principal Accounting Officer)
Gregory P. Antholzner
/s/ CARLOS M. HERNANDEZ Director
-----------------------------------------------
Carlos M. Hernandez
/s/ MATTHEW H. HILDRETH Director
-----------------------------------------------
Matthew H. Hildreth
</Table>
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
DUNIGAN FUELS, INC.,
a Texas corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his or her true and lawful
attorney-in-fact and agent to act for him or her in his or her name, place and
stead, in any and all capacities, to sign to sign this registration statement
and any and all amendments thereto (including without limitation any
post-effective amendments thereto and any registration statement pursuant to
Rule 462(b)), and to file each of the same, with all exhibits thereto and all
other documents in connection therewith, with the Securities and Exchange
Commission, and every act and thing necessary or desirable to be done, as fully
to all intents and purposes as he or she might or could do in person, thereby
ratifying and confirming all that said attorney-in-fact and agent may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ J.R. CAMPBELL Chief Executive Officer, President and Director
----------------------------------------------- (Principal Executive Officer)
J.R. Campbell
/s/ NEAL J. RIDER Vice President and Treasurer
----------------------------------------------- (Principal Financial and Accounting Officer)
Neal J. Rider
/s/ CARLOS M. HERNANDEZ Director
-----------------------------------------------
Carlos M. Hernandez
/s/ MARK D. SHAPIRO Director
-----------------------------------------------
Mark D. Shapiro
</Table>
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Richmond, province of
British Columbia, Canada, on the 11th day of July, 2002.
E.A. MORRIS DISTRIBUTORS LIMITED,
a Canadian corporation
By: /s/ CYRIL WAN
------------------------------------
Cyril Wan
Treasurer and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ BASIL P. PROKOP President
----------------------------------------------- (Principal Executive Officer)
Basil P. Prokop
/s/ CYRIL WAN Treasurer and Secretary
----------------------------------------------- (Principal Financial Officer and Accounting
Cyril Wan Officer)
</Table>
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
FAVAR CONCEPTS, LTD.,
a Delaware corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ SCOTT M. NORTHCUTT President and Director
----------------------------------------------- (Principal Executive Officer)
Scott M. Northcutt
/s/ NEAL J. RIDER Vice President, Treasurer and Director
----------------------------------------------- (Principal Financial and Accounting Officer)
Neal J. Rider
/s/ CARLOS M. HERNANDEZ Director
-----------------------------------------------
Carlos M. Hernandez
</Table>
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
FLEMING FOOD MANAGEMENT CO., L.L.C.,
an Oklahoma limited liability company
By: FLEMING COMPANIES, INC., its sole
member
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Senior Vice President,
General Counsel and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ E. STEPHEN DAVIS Chairman, President, Chief Executive Officer and
----------------------------------------------- Manager (Principal Executive Officer)
E. Stephen Davis
/s/ MARK D. SHAPIRO Vice President and Treasurer
----------------------------------------------- (Principal Financial and Accounting Officer)
Mark D. Shapiro
/s/ CARLOS M. HERNANDEZ Manager
-----------------------------------------------
Carlos M. Hernandez
</Table>
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
FLEMING FOODS OF TEXAS, L.P.,
an Oklahoma limited partnership
By: FLEMING COMPANIES, INC., its
general partner
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Senior Vice President,
General Counsel and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ E. STEPHEN DAVIS President and Chief Executive Officer
----------------------------------------------- (Principal Executive Officer)
E. Stephen Davis
/s/ MARK D. SHAPIRO Vice President and Treasurer
----------------------------------------------- (Principal Financial and Accounting Officer)
Mark D. Shapiro
</Table>
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
FLEMING INTERNATIONAL LTD.,
an Oklahoma corporation
FLEMING WHOLESALE, INC.,
a Nevada corporation
LAS, INC.,
an Oklahoma corporation
RFS MARKETING SERVICES, INC.,
an Oklahoma corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ NEAL J. RIDER President and Director
----------------------------------------------- (Principal Executive Officer)
Neal J. Rider
/s/ MARK D. SHAPIRO Vice President, Treasurer, Assistant Secretary and
----------------------------------------------- Director (Principal Financial and Accounting
Mark D. Shapiro Officer)
/s/ CARLOS M. HERNANDEZ Director
-----------------------------------------------
Carlos M. Hernandez
</Table>
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
FLEMING SUPERMARKETS OF FLORIDA, INC.,
a Florida corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ SCOTT NICHOLSON President
------------------------------------------------ (Principal Executive Officer)
Scott Nicholson
/s/ MARK D. SHAPIRO Vice President, Treasurer, Assistant Secretary
------------------------------------------------ and Director (Principal Financial and Accounting
Mark D. Shapiro Officer)
/s/ NEAL J. RIDER Director
------------------------------------------------
Neal J. Rider
/s/ CARLOS M. HERNANDEZ Director
------------------------------------------------
Carlos M. Hernandez
</Table>
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
FLEMING TRANSPORTATION SERVICE, INC.,
an Oklahoma corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ E. STEPHEN DAVIS President and Director
------------------------------------------------ (Principal Executive Officer)
E. Stephen Davis
/s/ NEAL J. RIDER Vice President, Treasurer and Assistant Secretary
------------------------------------------------ (Principal Financial and Accounting Officer)
Neal J. Rider
/s/ CARLOS M. HERNANDEZ Director
------------------------------------------------
Carlos M. Hernandez
/s/ WILLIAM A. MERRIGAN Director
------------------------------------------------
William A. Merrigan
</Table>
II-19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
FOOD 4 LESS BEVERAGE COMPANY, INC.,
a Texas corporation
By: /s/ CHARLES L. HALL
------------------------------------
Charles L. Hall
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ CHARLES L. HALL President, Secretary and Director
------------------------------------------------ (Principal Executive Officer)
Charles L. Hall
</Table>
II-20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
FUELSERV, INC.,
a Delaware corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ J.R. CAMPBELL Chief Executive Officer, President and Director
------------------------------------------------ (Principal Executive Officer)
J.R. Campbell
/s/ MATTHEW H. HILDRETH Vice President and Treasurer
------------------------------------------------ (Principal Financial and Accounting Officer)
Matthew H. Hildreth
/s/ CARLOS M. HERNANDEZ Director
------------------------------------------------
Carlos M. Hernandez
/s/ MARK D. SHAPIRO Director
------------------------------------------------
Mark D. Shapiro
</Table>
II-21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
GATEWAY INSURANCE AGENCY, INC.
a Wisconsin corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ NEAL J. RIDER President and Director
------------------------------------------------ (Principal Executive Officer)
Neal J. Rider
/s/ MATTHEW H. HILDRETH Vice President, Treasurer, Assistant Secretary
------------------------------------------------ and Director
Matthew H. Hildreth (Principal Financial and Accounting Officer)
/s/ CARLOS M. HERNANDEZ Director
------------------------------------------------
Carlos M. Hernandez
</Table>
II-22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
HEAD DISTRIBUTING COMPANY,
a Georgia corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ NEAL J. RIDER President and Director
------------------------------------------------ (Principal Executive Officer)
Neal J. Rider
/s/ MATTHEW H. HILDRETH Treasurer and Director
------------------------------------------------ (Principal Financial and Accounting Officer)
Matthew H. Hildreth
/s/ CARLOS M. HERNANDEZ Secretary and Director
------------------------------------------------
Carlos M. Hernandez
</Table>
II-23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
PIGGLY WIGGLY COMPANY,
an Oklahoma corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ JIMMY D. GARRISON President
------------------------------------------------ (Principal Executive Officer)
Jimmy D. Garrison
/s/ NEAL J. RIDER Vice President, Treasurer, Assistant Secretary and
------------------------------------------------ Director (Principal Financial and Accounting
Neal J. Rider Officer)
/s/ CARLOS M. HERNANDEZ Director
------------------------------------------------
Carlos M. Hernandez
/s/ J. R. CAMPBELL Director
------------------------------------------------
J. R. Campbell
</Table>
II-24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
PROGRESSIVE REALTY, INC.,
an Oklahoma corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ CHARLES L. HALL President and Director
------------------------------------------------ (Principal Executive Officer)
Charles L. Hall
/s/ NEAL J. RIDER Vice President, Treasurer, Assistant Secretary
------------------------------------------------ and Director
Neal J. Rider (Principal Financial and Accounting Officer)
/s/ CARLOS M. HERNANDEZ Director
------------------------------------------------
Carlos M. Hernandez
</Table>
II-25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
RAINBOW FOOD GROUP, INC.,
a Nevada corporation
RETAIL INVESTMENTS, INC.
a Nevada corporation
By: /s/ TIMOTHY M. OTTE
------------------------------------
Timothy M. Otte
Vice President, Secretary and
Treasurer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint John D. Simrell and Carlos M.
Hernandez, with full power of substitution and full power to act without the
other, his true and lawful attorney-in-fact and agent to act for him in his
name, place and stead, in any and all capacities, to sign to sign this
registration statement and any and all amendments thereto (including without
limitation any post-effective amendments thereto and any registration statement
pursuant to Rule 462(b)), and to file each of the same, with all exhibits
thereto and all other documents in connection therewith, with the Securities and
Exchange Commission, and every act and thing necessary or desirable to be done,
as fully to all intents and purposes as he might or could do in person, thereby
ratifying and confirming all that said attorney-in-fact and agent, each acting
alone, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ JAMES R. VAUGHAN President and Director
------------------------------------------------ (Principal Executive Officer)
James R. Vaughan
/s/ TIMOTHY M. OTTE Vice President, Secretary, Treasurer and Director
------------------------------------------------ (Principal Financial and Accounting Officer)
Timothy M. Otte
/s/ MONTE L. MILLER Director
------------------------------------------------
Monte L. Miller
</Table>
II-26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
RICHMAR FOODS, INC.,
a California corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ J. R. CAMPBELL President and Director
------------------------------------------------ (Principal Executive Officer)
J. R. Campbell
/s/ MARK D. SHAPIRO Vice President, Treasurer and Assistant Secretary
------------------------------------------------ (Principal Financial and Accounting Officer)
Mark D. Shapiro
/s/ NEAL J. RIDER Director
------------------------------------------------
Neal J. Rider
/s/ CARLOS M. HERNANDEZ Director
------------------------------------------------
Carlos M. Hernandez
</Table>
II-27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lewisville, state of
Texas, on the 11th day of July, 2002.
SCRIVNER TRANSPORTATION, INC.,
an Oklahoma corporation
By: /s/ CARLOS M. HERNANDEZ
------------------------------------
Carlos M. Hernandez
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Carlos M. Hernandez, with full
power of substitution and full power to act as his true and lawful
attorney-in-fact and agent to act for him in his name, place and stead, in any
and all capacities, to sign to sign this registration statement and any and all
amendments thereto (including without limitation any post-effective amendments
thereto and any registration statement pursuant to Rule 462(b)), and to file
each of the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, and every act
and thing necessary or desirable to be done, as fully to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of July, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ NEAL J. RIDER President and Director
------------------------------------------------ (Principal Executive Officer)
Neal J. Rider
/s/ MATTHEW H. HILDRETH Vice President, Treasurer, Assistant Secretary
------------------------------------------------ and Director
Matthew H. Hildreth (Principal Financial and Accounting Officer)
/s/ CARLOS M. HERNANDEZ Director
------------------------------------------------
Carlos M. Hernandez
</Table>
II-28
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
4.1 Indenture, dated as of June 18, 2002, by and between the
Company and Manufacturers and Traders Trust Company, as
Trustee, regarding the 9 1/4% Senior Notes due 2010, filed
as Exhibit 4.1 to the Current Report on Form 8-K filed on
June 25, 2002 and incorporated herein by reference.
4.2 First Supplemental Indenture, dated as of June 18, 2002, by
and among the Company, the Subsidiary Guarantors party
thereto and Manufacturers and Traders Trust Company, as
Trustee, regarding the 9 1/4% Senior Subordinated Notes due
2010, filed as Exhibit 4.2 to the Current Report on Form 8-K
filed on June 25, 2002 and incorporated herein by reference.
4.3 Credit Agreement dated as of June 18, 2002 by and among the
Company, the lenders from time to time party thereto,
Deutsche Bank Trust Company Americas, as Administrative
Agent, JPMorgan Chase Bank and Citicorp North America, Inc.,
as Syndication Agents, Lehman Commercial Paper Inc. and
Wachovia Bank, National Association, as Documentation
Agents, Deutsche Bank Securities Inc. and J.P. Morgan
Securities Inc., as Joint Book Managers, and Deutsche Bank
Securities Inc., J.P. Morgan Securities Inc. and Salomon
Smith Barney Inc., as Joint Lead Arrangers, filed as Exhibit
10.1 to the Current Report on Form 8-K filed on June 25,
2002 and incorporated herein by reference.
4.4 Security Agreement dated as of June 18, 2002 by and among
the Company, the Grantors party thereto and Deutsche Bank
Trust Company Americas, as Collateral Agent, filed as
Exhibit 10.2 to the Current Report on Form 8-K filed on June
25, 2002 and incorporated herein by reference.
4.5 Guarantee Agreement dated as of June 18, 2002 by and among
the Guarantors party thereto and Deutsche Bank Trust Company
Americas, as Administrative Agent, filed as Exhibit 10.3 to
the Current Report on Form 8-K filed on June 25, 2002 and
incorporated herein by reference.
4.6 Pledge Agreement dated as of June 18, 2002 by and among the
Company, the Pledgors party thereto and Deutsche Bank Trust
Company Americas, as Collateral Agent, filed as Exhibit 10.4
to the Current Report on Form 8-K filed on June 25, 2002 and
incorporated herein by reference.
4.7 Indenture, dated as of April 15, 2002, among Fleming
Companies, Inc., the Subsidiary Guarantors named therein and
Manufacturers and Traders Trust Company, as Trustee,
regarding the 9 7/8% Senior Subordinated Notes due 2012,
filed as Exhibit 4.20 to Quarterly Report on Form 10-Q for
the quarter ended April 20, 2002 and incorporated herein by
reference.
4.8 Registration Rights Agreement, dated as of April 15, 2002,
by and among Fleming Companies, the Subsidiary Guarantors
named therein and the Initial Purchasers named therein
regarding the registration of the 9 7/8% Senior Subordinated
Notes due 2012, filed as Exhibit 4.21 to Quarterly Report on
Form 10-Q for the quarter ended April 20, 2002 and
incorporated herein by reference.
4.9 Form of 9 7/8% Senior Subordinated Note due 2012.
4.10 Indenture, dated as of October 15, 2001, among Fleming
Companies, Inc., the Subsidiary Guarantors named therein and
Manufacturers and Traders Trust Company, as Trustee,
regarding the 10 5/8% Senior Subordinated Notes due 2007,
filed as Exhibit 4.20 to Quarterly Report on Form 10-Q for
the quarter ended October 6, 2001 and incorporated herein by
reference.
4.11 Indenture, dated as of March 15, 2001, among Fleming
Companies, Inc., the Subsidiary Guarantors named therein and
Bankers Trust Company, as Trustee, regarding the 10 1/8%
Senior Notes due 2008, filed as Exhibit 4.9 to the
Registration Statement on Form S-4 (333-60176) filed on May
3, 2001 and incorporated herein by reference.
4.12 Indenture, dated as of March 15, 2001, among Fleming
Companies, Inc., the Subsidiary Guarantors named therein and
Bank One, N.A., as Trustee, regarding the 5 1/4% Convertible
Senior Subordinated Notes due 2009, filed as Exhibit 4.3 to
the Registration Statement on Form S-3 (333-60178) filed on
May 3, 2001 and incorporated herein by reference.
4.13 Indenture, dated as of July 25, 1997, among Fleming
Companies, Inc., the Subsidiary Guarantors named therein and
Manufacturers and Traders Trust Company, as Trustee,
regarding the 10 5/8% Senior Subordinated Notes due 2007,
filed as Exhibit 4.20 to the Quarterly Report on Form 10-Q
for the quarter ended July 12, 1997 and incorporated herein
by reference.
</Table>
<Table>
<Caption>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
4.14 Supplement, dated as of September 20, 2001, to the
Indenture, dated as of July 25, 1997, among Fleming
Companies, Inc., the Subsidiary Guarantors named therein and
Manufacturers and Traders Trust Company regarding the
10 5/8% Senior Subordinated Notes due 2007, filed as Exhibit
4.18 to the Quarterly Report on Form 10-Q for quarter ended
October 6, 2001 and incorporated herein by reference.
5.1 Opinion of Latham & Watkins.
5.2 Opinion of McAfee & Taft.
12.1 Statement of Computation of Ratios.
15.1 Letter from Independent Accountants as to Unaudited Interim
Financial Information.
23.1 Consent of Latham & Watkins (included in Exhibit 5.1).
23.2 Consent of McAfee & Taft (included in Exhibit 5.2).
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of Deloitte & Touche LLP.
24.1 Powers of Attorney (included on signature pages hereto).
25.1 Statement of Eligibility under the Trust Indenture Act of
1939 of a Corporation Designated to Act as Trustee of
Manufacturers and Traders Trust Company (Form T-1).
99.1 Letter of Transmittal with Respect to the Exchange Offer.
99.2 Notice of Guaranteed Delivery with Respect to the Exchange
Offer.
99.3 Letter to DTC Participants Regarding the Exchange Offer.
99.4 Letter to Beneficial Holders Regarding the Exchange Offer.
99.5 Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
</Table>