-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uqm4CFmvixN+xp1e0sGSO/WBo5FVvAqqt+r6g6wkYQvsww5SlcqCkb9h1SOwPCL8 E+i+IAXqtQtTtEgm9igCmw== 0000003333-00-000024.txt : 20000426 0000003333-00-000024.hdr.sgml : 20000426 ACCESSION NUMBER: 0000003333-00-000024 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 22 CONFORMED PERIOD OF REPORT: 20000203 FILED AS OF DATE: 20000425 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALBERTSONS INC /DE/ CENTRAL INDEX KEY: 0000003333 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 820184434 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-06187 FILM NUMBER: 608360 BUSINESS ADDRESS: STREET 1: 250 PARKCENTER BLVD STREET 2: P O BOX 20 CITY: BOISE STATE: ID ZIP: 83726 BUSINESS PHONE: 2083956200 MAIL ADDRESS: STREET 1: 250 PARKCENTER BLVD STREET 2: P O BOX 20 CITY: BOISE STATE: ID ZIP: 83726 10-K 1 FORM 10-K ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 03, 2000 Commission file number 1-6187 ALBERTSON'S, INC. (Exact name of Registrant as specified in its Charter) Delaware 82-0184434 - ------------------------- -------------------------------- (State of Incorporation) (Employer Identification Number) 250 Parkcenter Boulevard, P.O. Box 20, Boise, Idaho 83726 (208) 395-6200 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Name of each exchange Title of each class on which registered ------------------------------------------ ----------------------- Common Stock, $1.00 par value, 423,723,783 New York Stock Exchange shares outstanding on March 24, 2000 Pacific Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (17 CFR section 405) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (x) The aggregate market value of the voting stock held by nonaffiliates of the Registrant, computed by reference to the price at which the stock was sold as of the close of business on March 24, 2000: $11,290,033,098. Documents Incorporated by Reference Listed hereunder are the documents, any portions of which are incorporated by reference, and the Parts of this Form 10-K into which such portions are incorporated: 1. The Registrant's Annual Report to Stockholders for the fiscal year ended February 03, 2000, portions of which are incorporated by reference into Part I, Part II and Part IV of this Form 10-K; and 2. The Registrant's definitive proxy statement for use in connection with the Annual Meeting of Stockholders to be held on June 15, 2000,(the "Proxy Statement") to be filed within 120 days after the Registrant's fiscal year ended February 03, 2000, portions of which are incorporated by reference into Part III of this Form 10-K. Page 1 ALBERTSON'S, INC. FORM 10-K TABLE OF CONTENTS
Item Page PART I Cautionary Statement 3 1. Business 3 2. Properties 5 3. Legal Proceedings 8 4. Submission of Matters to a Vote of Security Holders 8 PART II 5. Market for the Registrant's Common Equity 9 and Related Stockholder Matters 6. Selected Financial Data 9 7. Management's Discussion and Analysis of Financial 9 Condition and Results of Operations 7A. Quantitative and Qualitative Disclosures about 9 Market Risk 8. Financial Statements and Supplementary Data 9 9. Changes in and Disagreements with Accountants on 9 Accounting and Financial Disclosure PART III 10. Directors and Executive Officers of the Registrant 10 11. Executive Compensation 12 12. Security Ownership of Certain Beneficial Owners and Management 12 13. Certain Relationships and Related Transactions 12 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 13
Page 2 PART I Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private Securities Litigation Reform Act of 1995 From time to time, information provided by the Company, including written or oral statements made by its representatives, may contain forward-looking information as defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as integration of the operations of acquired or merged companies, expansion and growth of the Company's business, future capital expenditures and the Company's business strategy, contain forward-looking information. In reviewing such information it should be kept in mind that actual results may differ materially from those projected or suggested in such forward-looking information. This forward-looking information is based on various factors and was derived utilizing numerous assumptions. Many of these factors have previously been identified in filings or statements made by or on behalf of the Company. Important assumptions and other important factors that could cause actual results to differ materially from those set forth in the forward-looking information include changes in the general economy, changes in consumer spending, competitive factors and other factors affecting the Company's business in or beyond the Company's control. These factors include changes in the rate of inflation, changes in state or federal legislation or regulation, adverse determinations with respect to litigation or other claims (including environmental matters), labor negotiations, the Company's ability to recruit and develop employees, its ability to develop new stores or complete remodels as rapidly as planned, its ability to implement new technology successfully, stability of product costs, and the Company's ability to integrate the operations of American Stores Company. Other factors and assumptions not identified above could also cause the actual results to differ materially from those set forth in the forward-looking information. The Company does not undertake to update forward-looking information contained herein or elsewhere to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking information. Item 1. Business The Registrant, Albertson's, Inc. ("Albertson's" or the "Company"), is incorporated under the laws of the State of Delaware and is the successor to a business founded by J. A. Albertson in 1939. On August 2, 1998, Albertson's and American Stores Company ("ASC") entered into a definitive merger agreement whereby Albertson's would acquire ASC by exchanging 0.63 share of Albertson's common stock for each share of outstanding ASC common stock, with cash being paid in lieu of fractional shares (the "Merger") and ASC would become a wholly owned subsidiary of Albertson's. The Merger was approved by the stockholders of Albertson's and ASC on November 12, 1998. The Merger was consummated on June 23, 1999, with the issuance of approximately 177 million shares of Albertson's common stock. The Merger constituted a tax-free reorganization and has been accounted for as a pooling of interests for accounting and financial reporting purposes. The pooling of interests method of accounting is intended to present as a single interest, two or more common stockholders' interests that were previously independent; accordingly, the consolidated financial statements of Albertson's restate the historical financial statements as though the companies had always been combined. The restated consolidated financial statements are adjusted to conform accounting policies and financial statement presentations. Page 3 In connection with the Merger, the Company entered into agreements with the Attorneys General of California, Nevada and New Mexico and the Federal Trade Commission to enable the Merger to proceed under applicable antitrust, competition and trade regulation law. The agreements required the Company to divest a total of 117 stores in California, 19 stores in Nevada and 9 stores in New Mexico. Of the stores required to be divested, 40 were ASC locations operated primarily under the Lucky name, and 105 were Albertson's stores operated primarily under the Albertson's name. In addition, the Company divested four supermarket real estate sites as required by the agreements. The Company divested 144 of the required 145 stores as of February 3, 2000. The Company is one of the largest retail food-drug chains in the United States. As of February 3, 2000, the Company operated 2,492 stores in 37 Northeastern, Western, Midwestern and Southern states. These stores consist of 1,326 combination food-drug stores, 802 stand-alone drug stores, 335 conventional supermarkets, 28 warehouse stores and one e-commerce retail site. Retail operations are supported by 21 major Company distribution centers. The Company's distribution centers provide product exclusively to the Company's retail stores. The Company's combination food-drug stores are super grocery/super drugstores under one roof and range in size from 35,000 to 82,000 square feet. Most of these stores offer prescription drugs and an expanded section of cosmetics and general merchandise in addition to specialty departments such as service seafood and meat, bakery, lobby/video, service delicatessen, liquor and floral. Many also offer meal centers, party supply centers, coffee bars, in-store banks, photo processing and, destination categories for beverages, snacks, pet care products, paper products and baby care merchandise. All shopping areas are served by a common set of checkstands. The Company's stand-alone drugstores are free-standing store sites that average 18,300 square feet. These stores offer convenient shopping and prescription pickup as well as a wide assortment of general merchandise, health and beauty care, over-the-counter medication, greeting cards and photo processing. The Company's new drugstores are typically located on corners and many offer a drive-thru pharmacy. The Company's conventional supermarkets range in size from 8,000 to 35,000 square feet. These stores offer a full selection in the basic departments of grocery, meat, produce, dairy and limited general merchandise. Many locations have a pharmacy, in-store bakery and service delicatessen. The Company's warehouse stores are operated primarily under the names "Max Food and Drug" and "Super Saver." These no-frills stores range in size from 17,000 to 73,000 square feet and offer significant savings with special emphasis on discounted meat and produce. The Company's e-commerce retail site located in Bellevue, Washington, is the Company's first location which combines a gourmet store (17,000 square feet) with a fulfillment center (14,000 square feet). Employees fill online orders, which can then be delivered to, or picked up by, the customer. Albertsons.com accepts on-line orders to be filled either by the Bellevue site or through the fulfillment center in Fort Worth, Texas. Sav-ondrugs.com, was piloted in October 1999, for online orders from customers in the Las Vegas, Nevada and Kansas City, Missouri areas. It offers a full range of basic sundry items, prescription refills and consumer health information. Page 4 All of the Company's stores carry a broad range of national brands and offer private label brand products in many merchandise categories. The Company's stores provide consumer information such as: nutritional signing in the meat and produce departments, freshness code dating, unit pricing, meal ideas and food information pamphlets. The Company also offers a choice of recyclable paper or plastic bags and collection bins for plastic bag recycling. As of February 3, 2000, the Company operated 76 fuel centers, in six states, which are located near existing stores. These centers feature three to six fuel pumps and a small building, ranging in size from a pay-only kiosk to a small convenience store, featuring such items as candy, soft drinks and snack foods. The Company's operations are within a single operating segment, the retail sale of food and drug merchandise. The Company's stores operate primarily under the names of Albertson's, Acme Markets, Jewel Food Stores, Seessel's, Super Saver, Max, Osco Drug and Sav-On. The Company's business is highly competitive. Competition is based primarily on price, product quality and variety, service and location. There is direct competition from many local, regional and national supermarket chains, supercenters, club stores, specialty retailers such as pet centers and toy stores and large-scale drug and pharmaceutical retailers. Increasing competition also exists from convenience stores, prepared food retailers, liquor and video stores, film developing outlets and Internet and mail-order retailers. The Company is subject to effects of seasonality. Sales are higher in the Company's fourth quarter than other quarters due to the holiday season and the increase in cold and flu occurrences. The Company has been able to efficiently supply its stores with merchandise through its distribution centers, outside suppliers or directly from manufacturers in an effort to obtain merchandise at the lowest possible cost. The Company believes that it is not dependent on any one supplier, and considers its relations with its suppliers to be satisfactory. The Company services all of its retail stores from Company distribution centers. As of February 3, 2000, the Company employed approximately 235,000 people, many of whom are covered by collective bargaining agreements. The Company considers its present relations with employees to be good. Item 2. Properties The Company has actively pursued an expansion program of adding new retail stores, enlarging and remodeling existing stores and replacing smaller stores. During the past ten years, the Company has built or acquired 1,247 stores and approximately 89% of the Company's current retail square footage has been opened or remodeled during this period. The Company continues to follow the policy of closing stores that are obsolete or lack satisfactory profit potential. Albertson's stores are located in 37 Northeastern, Western, Midwestern and Southern areas of the United States. The table on the following page is a summary of the stores by state and classification as of February 3, 2000: Page 5
Combination Conventional Warehouse Stand-Alone E-Commerce Food-Drug Stores Stores Drug Stores Store TOTAL - ------------------------ ------------------ -------------------- ---------------- ------------------ ----------------- ----------- Arizona 45 79 124 Arkansas 2 1 3 California 289 176 15 287 767 Colorado 44 7 51 Delaware 8 7 15 Florida 107 107 Georgia 1 1 Idaho 30 7 1 38 Illinois 155 17 93 265 Indiana 6 50 56 Iowa 4 33 37 Kansas 5 28 33 Louisiana 25 25 Maine 1 1 Maryland 2 9 11 Massachusetts 59 59 Michigan 1 1 Minnesota 1 1 Mississippi 6 1 7 Missouri 10 35 45 Montana 17 16 10 43 Nebraska 11 14 25 Nevada 35 5 42 82 New Hampshire 20 20 New Jersey 29 40 69 New Mexico 22 1 1 4 28 North Dakota 2 6 8 Oklahoma 28 28 Oregon 41 10 51 Pennsylvania 38 28 66 South Dakota 1 3 4 Tennessee 23 1 24 Texas 207 5 212 Utah 42 3 45 Washington 69 12 1 82 Wisconsin 12 34 46 Wyoming 10 2 12 ------------------ -------------------- ---------------- ------------------ ----------------- ----------- Total 1,326 335 28 802 1 2,492 ================== ==================== ================ ================== ================= =========== Retail Square Footage by Store Type (000's) 70,819 8,926 1,270 14,702 31 95,748 ================== ==================== ================ ================== ================= ===========
The Company has expanded and improved its distribution facilities when opportunities exist to improve service to the retail stores and generate an adequate return on investment. During 1999 approximately 75% of the merchandise purchased for resale in Company retail stores was received from Company distribution centers. Albertson's distribution system consists of 21 major Company centers located strategically throughout the Company's operating markets. The table on the following page is a summary of the Company's distribution facilities as of February 3, 2000: Page 6 Major Distribution Facilities
Frozen Meat % Ice Cream Health High Volume General Pharmaceuticals Square Grocery Food Liquor Produce Deli Plant & Beauty Health & Beauty Merch. Footage ------- ------ ------ ------- ------ --------- -------- --------------- ------- --------------- --------- Lancaster, PA X X X 1,366,000 Melrose Park, IL X X X X 1,188,000 La Habra, CA X X X 1,184,000 Fort Worth, TX X X X X 1,100,000 Brea, CA X X X X X 1,059,000 Buena Park, CA X X X 1,010,000 Irvine, CA X X 996,000 Plant City, FL X X X X X X 979,000 Elk Grove, IL X X X 933,000 Vacaville, CA X 854,000 Portland, OR X X X X 790,000 Tulsa, OK X X X X 748,000 Houston, TX X X X X 747,000 Phoenix, AZ X X X X X X 687,000 Salt Lake City, UT X X X X 680,000 San Leandro, CA X X X 453,000 Ponca City, OK X X X 422,000 Sacramento, CA X X X X X 421,000 Denver, CO X X X X 372,000 Boise, ID X X 238,000 Lancaster, PA X X 231,000 (non-food) Other Distribution Facilities Las Vegas, NV X 30,000 Phoenix, AZ X 25,000 Indianapolis, IN X 22,000 Boise, ID X 11,000 ---------- TOTAL SQUARE FOOTAGE - All Distribution Facilities 16,546,000 ==========
Page 7 The Company currently finances most retail store and distribution facilities internally, thus retaining ownership of most of its land and buildings. The Company's future expansion plans are expected to be financed primarily from cash provided by operating activities. The Company has and will continue to finance a portion of its new stores through lease transactions when it does not have the opportunity to own the property. As of February 3, 2000, the Company held title to the land and buildings of 39% of the Company's stores and held title to the buildings on leased land of an additional 7% of the Company's stores. The Company also holds title to the land and buildings of most of its administrative offices and distribution facilities. Item 3. Legal Proceedings The information required under this item is included under the caption "Legal Proceedings" on page 50 of the Company's 1999 Annual Report to Stockholders. This information is incorporated herein by this reference thereto. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted during the fourth quarter of fiscal 1999 to a vote of security holders through the solicitation of proxies or otherwise. Page 8 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters The principal markets in which the Company's common stock is traded and the related security holder matters are set forth under the caption "Company Stock Information" on page 60 of the Company's 1999 Annual Report to Stockholders. This information is incorporated herein by this reference thereto. The market value of the Company's common stock at the close of trading on March 24, 2000, was $28.6875 per share. There were approximately 32,000 stockholders of record on March 24, 2000. Item 6. Selected Financial Data Selected financial data of the Company for the fiscal years 1995 through 1999 is included under the caption "Five-Year Summary of Selected Financial Data" on page 54 of the Company's 1999 Annual Report to Stockholders. This information is incorporated herein by this reference thereto. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information required under this item is included on pages 21 to 28 of the Company's 1999 Annual Report to Stockholders. This information is incorporated herein by this reference thereto. Item 7A. Quantitative and Qualitative Disclosures about Market Risk The information required under this item is included under the caption "Quantitative and Qualitative Disclosures about Market Risk" on page 27 of the Company's 1999 Annual Report to Stockholders. This information is incorporated herein by this reference thereto. Item 8. Financial Statements and Supplementary Data The Company's consolidated financial statements and related notes thereto, together with the Independent Auditors' Reports and selected quarterly financial data of the Company are presented on pages 29 to 53 and page 55 of the Company's 1999 Annual Report to Stockholders and are incorporated herein by this reference thereto. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Page 9 PART III Item 10. Directors and Executive Officers of the Registrant Directors The information regarding directors and nominees for directors of the Company is presented under the heading "Election of Directors" in the Company's definitive proxy statement for use in connection with the 2000 Annual Meeting of Stockholders (the "Proxy Statement") to be filed within 120 days after the Company's fiscal year ended February 3, 2000, and is incorporated herein by this reference thereto. Executive and Reporting Officers
Age Date First Appointed as of as an Executive or Name 3/24/00 Position Reporting Officer - ---- -------- --------- -------------------- Gary G. Michael 59 Chairman of the Board and Chief Executive 12/02/74 Officer Peter L. Lynch 48 President and Chief Operating Officer 06/23/99 Michael F. Reuling 53 Vice Chairman of the Company 12/30/79 Thomas E. Brother 58 Executive Vice President, Distribution 07/30/89 Robert C. Butler 51 Executive Vice President, Operations 03/21/00 Romeo R. Cefalo 50 Executive Vice President, Operations 03/21/00 Wayne A. Denningham 38 Executive Vice President, Merchandising 03/21/00 Craig R. Herkert 40 Executive Vice President, Marketing 03/21/00 A. Craig Olson 48 Executive Vice President and Chief 12/22/86 Financial Officer Carl W. Pennington 62 Executive Vice President, Marketing 08/02/87 Thomas R. Saldin 53 Executive Vice President and General Counsel 12/26/83 Patrick S. Steele 50 Executive Vice President, Information 06/10/90 Systems and Technology Steven D. Young 51 Executive Vice President, Human Resources 12/02/91 Richard J. Navarro 47 Senior Vice President and Controller 12/22/86
Gary G. Michael has served as Chairman of the Board and Chief Executive Officer since 1991. Peter L. Lynch became President and Chief Operating Officer on March 21, 2000. Previously he served as Executive Vice President, Operations from June 23, 1999; Executive Vice President and General Manager of the Acme Division of American Stores Company from 1998; Senior Vice President, Store Operations of the Jewel-Osco Division of American Stores Company from December 1995; Vice President, Delta of American Stores Company from April 1995; and Senior Vice President and General Manager of Star Market from 1994. Page 10 Michael F. Reuling became Vice Chairman of the Company on June 23, 1999. Previously he served as Executive Vice President, Development from January 1999 and as Executive Vice President, Store Development since 1986. Thomas E. Brother was promoted to Executive Vice President, Distribution on January 29, 1999. Previously he served as Senior Vice President, Distribution from 1991. Robert C. Butler was promoted to Executive Vice President, Operations on March 21, 2000. Previously he served as Senior Vice President, Merchandising from June 23, 1999; Vice President, Southern California Division from 1996; and Vice President, Rocky Mountain Division from 1994. Romeo R. Cefalo was promoted to Executive Vice President, Operations on March 21, 2000. Previously he served as President, Southern California Region from June 23, 1999; Executive Vice President and General Manager of the Lucky South Division of American Stores Company from 1997; Senior Vice President and General Manager of the same division from 1995; and Senior Vice President, Operations of the Acme Division of American Stores Company from 1992. Wayne A. Denningham was promoted to Executive Vice President, Merchandising on March 21, 2000. Previously he served as President, Intermountain Region from June 23, 1999; Vice President, Florida Division from 1998; Vice President, Rocky Mountain Division from 1997; Division Manager of the same division from 1996; and District Sales Manager of the Southwest Division from 1993. Craig R. Herkert was promoted to Executive Vice President, Marketing on March 21, 2000. Previously he served as President of the Eastern Region from June 23, 1999; Senior Vice President of the Acme Division of American Stores Company in a portion of 1998; Senior Vice President Fresh Food/Procurement of American Stores Company in a portion of 1998; Vice President, Grocery Procurement of American Stores Procurement and Logistics Group from 1996; Vice President, Meat and Farmstand Merchandising of the Jewel Food Stores Division of American Stores Company from 1995; and Merchandise Manager, Frozen and Refrigerated Foods of the same division from 1994. A. Craig Olson was promoted to Executive Vice President and Chief Financial Officer on January 29, 1999. Previously he served as Senior Vice President, Finance and Chief Financial Officer from 1991. Carl W. Pennington was promoted to Executive Vice President, Marketing on January 29, 1999. Previously he served as Executive Vice President, Corporate Merchandising from 1996; and Senior Vice President, Corporate Merchandising from 1994. Thomas R. Saldin was promoted to Executive Vice President and General Counsel on January 29, 1999. Previously he served as Executive Vice President, Administration and General Counsel from 1991. Patrick S. Steele was promoted to Executive Vice President, Information Systems and Technology on January 29, 1999. Previously he served as Senior Vice President, Information Systems and Technology from 1993. Steven D. Young was promoted to Executive Vice President, Human Resources on January 29, 1999. Previously he served as Senior Vice President, Human Resources from 1993. Richard J. Navarro was promoted to Senior Vice President and Controller on January 29, 1999. Previously he served as Group Vice President and Controller from 1993. Page 11 Item 11. Executive Compensation Information concerning executive compensation is presented under the headings "Summary Compensation Table," "Option Grants in Last Fiscal Year," "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values," and "Retirement Benefits" in the Proxy Statement. This information is incorporated herein by this reference thereto. Item 12. Security Ownership of Certain Beneficial Owners and Management Information with respect to security ownership of certain beneficial owners and management is set forth under the heading "Voting Securities and Principal Holders Thereof" in the Proxy Statement. This information is incorporated herein by this reference thereto. Item 13. Certain Relationships and Related Transactions Information concerning related transactions is presented under the heading "Certain Transactions" in the Proxy Statement. This information is incorporated herein by this reference thereto. Page 12 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a)1 Financial Statements: The Independent Auditors' Reports, together with the Consolidated Financial Statements and the related notes thereto, are listed below and are incorporated herein by this reference thereto from pages 29 to 53 of the Company's Annual Report to Stockholders for the year ended February 3, 2000: Consolidated Earnings -- years ended February 3, 2000; January 28, 1999; January 29, 1998. Consolidated Balance Sheets -- February 3, 2000; January 28, 1999. Consolidated Cash Flows -- years ended February 3, 2000; January 28, 1999; January 29, 1998. Consolidated Stockholders' Equity -- years ended February 3, 2000; January 28, 1999; January 29, 1998. Notes to Consolidated Financial Statements. Independent Auditors' Reports. Quarterly Financial Data: Quarterly Financial Data for the years ended February 3, 2000, and January 28, 1999, is set forth on page 55 of the Annual Report to Stockholders for the year ended February 3, 2000, and is incorporated herein by this reference thereto. (a)2 Schedules: All schedules are omitted because they are not required or because the required information is included in the consolidated financial statements or notes thereto. (a)3 Exhibits: A list of the exhibits required to be filed as part of this report is set forth in the Index to Exhibits on page 16 hereof. (b) The following reports on Form 8-K were filed: There were no reports on Form 8-K filed during the fourteen week quarter ended February 3, 2000. For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the Company hereby undertakes as follows, which undertaking shall be incorporated by reference into the Company's Registration Statements on Form S-8 Nos. 2-80776, 33-2139, 33-7901, 33-15062, 33-43635, 33-62799, 33-59803, 333-82157, 333-82161 and 333-87773. Page 13 Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the Act) may be permitted to directors, officers and controlling persons of the Company, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company 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 Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Albertson's, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALBERTSON'S, INC. By /s/ GARY G. MICHAEL ------------------------- Gary G. Michael (Chairman of the Board and Chief Executive Officer) Page 14 Date: April 25, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of April 25, 2000. GARY G. MICHAEL A. CRAIG OLSON --------------------------------- --------------------------------- Gary G. Michael A. Craig Olson (Chairman of the Board and (Executive Vice President Chief Executive Officer and and Chief Financial Officer) Director) RICHARD J. NAVARRO A. GARY AMES --------------------------------- --------------------------------- Richard J. Navarro A. Gary Ames (Senior Vice President (Director) and Controller) CECIL D. ANDRUS PAMELA G. BAILEY - -------------------------------- --------------------------------- Cecil D. Andrus Pamela G. Bailey (Director) (Director) TERESA BECK HENRY I. BRYANT --------------------------------- --------------------------------- Teresa Beck Henry I. Bryant (Director) (Director) JOHN B. CARLEY PAUL I. CORDDRY --------------------------------- --------------------------------- John B. Carley Paul I. Corddry (Director) (Director) JOHN B. FERY FERNANDO R. GUMUCIO --------------------------------- --------------------------------- John B. Fery Fernando R. Gumucio (Director) (Director) CLARK A. JOHNSON CHARLES D. LEIN --------------------------------- --------------------------------- Clark A. Johnson Charles D. Lein (Director) (Director) VICTOR L. LUND BEATRIZ RIVERA --------------------------------- --------------------------------- Victor L. Lund Beatriz Rivera (Director) (Director) J.B. SCOTT ARTHUR K. SMITH --------------------------------- --------------------------------- J.B. Scott Arthur K. Smith (Director) (Director) THOMAS L. STEVENS, JR WILL M. STOREY --------------------------------- --------------------------------- Thomas L. Stevens, Jr. Will M. Storey (Director) (Director) STEVEN D. SYMMS THOMAS J. WILFORD --------------------------------- --------------------------------- Steven D. Symms Thomas J. Wilford (Director) (Director)
Page 15 Index to Exhibits Filed with the Annual Report on Form 10-K for the Year Ended February 3, 2000
Number Description 3.1 Restated Certificate of Incorporation (as amended) is incorporated herein by reference to Exhibit 3.1 of Form 10-Q for the quarter ended April 30, 1998. 3.1.1 Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock is incorporated herein by reference to Exhibit 3.1.1 of Form 10-K for the year ended January 30, 1997. 3.1.2 Amendment to Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock is incorporated herein by reference to Exhibit 3.1.2 of Form 10-K for the year ended January 28, 1999. 3.2 By-Laws dated March 17, 2000. 4.1 Stockholder Rights Plan Agreement is incorporated herein by reference to Exhibit 1 of Form 8-A Registration Statement filed with the Commission on March 4, 1997. 4.1.1 Amendment No. One to Stockholder Rights Plan Agreement (dated August 2, 1998) is incorporated herein by reference to Exhibit 1 of Amendment to Form 8-A Registration Statement filed with the Commission on August 6, 1998. 4.1.2 Amendment No. Two to Stockholder Rights Plan Agreement (dated March 16, 1999) is incorporated herein by reference to Exhibit 1 of Amendment to Form 8-A Registration Statement filed with the Commission on March 25, 1999. 4.2 Indenture, dated as of May 1, 1992, between Albertson's, Inc. and Morgan Guaranty Trust Company of New York as Trustee is incorporated herein by reference to Exhibit 4.1 of Form S-3 Registration Statement 333-41793 filed with the Commission on December 9, 1997.(1) 4.3 Senior Indenture dated May 1, 1995, between American Stores Company and the First National Bank of Chicago, as Trustee, is incorporated herein by reference to Exhibit 4.1 of Form 10-Q filed by American Stores Company (Commission File Number 1-5392) on June 12, 1995.(1) 9 Inapplicable 10.1 J. A. and Kathryn Albertson Foundation Inc. Stock Agreement (dated May 21, 1997) is incorporated herein by reference to Exhibit 10.1 of Form 10-Q for the quarter ended May 1, 1997.* 10.1.1 Waiver regarding Alscott Limited Partnership #1 Stock Agreement (dated May 21, 1997) is incorporated herein by reference to Exhibit 10.1.1 of Form 10-Q for the quarter ended May 1, 1997.*
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Number Description 10.1.2 Waiver regarding Kathryn Albertson Stock Agreement (dated May 21, 1997) is incorporated herein by reference to Exhibit 10.1.2 of Form 10-Q for the quarter ended May 1, 1997.* 10.5 Form of Beneficiary Agreement for Key Executive Life Insurance is incorporated herein by reference to Exhibit 10.5.1 of Form 10-K for the year ended January 30, 1986.* 10.6 Executive Deferred Compensation Plan (amended and restated February 1, 1989) is incorporated herein by reference to Exhibit 10.6 of Form 10-K for the year ended February 2, 1989.* 10.6.1 Amendment to Executive Deferred Compensation Plan (dated December 4, 1989) is incorporated herein by reference to Exhibit 10.6.1 of Form 10-Q for the quarter ended November 2, 1989.* 10.6.2 Amendment to Executive Deferred Compensation Plan (dated December 15, 1998).* 10.7 Senior Operations Executive Officer Bonus Plan is incorporated herein by reference to Exhibit 10.7 of Form 10-K for the year ended January 30, 1997.* 10.7.1 Amendment to Senior Executive Deferred Compensation Plan (dated December 15, 1998).* 10.9 Description of Bonus Incentive Plans (amended December 3, 1984)is incorporated herein by reference to Exhibit 10.9 of Form 10-K for the year ended January 31, 1985.* 10.10 2000 Deferred Compensation Plan (dated January 1, 2000).* 10.11 1982 Incentive Stock Option Plan (amended March 4, 1991) is incorporated herein by reference to Exhibit 10.11 of Form 10-K for the year ended January 31, 1991. Exhibit 10.11 expired by its terms in 1992. Notwithstanding such expiration, certain agreements for the options granted under these option plans remain outstanding.* 10.12 Form of 1982 Incentive Stock Option Agreement (amended November 30, 1987) is incorporated herein by reference to Exhibit 10.12 of Form 10-Q for the quarter ended October 29, 1987.* 10.12.1 Form of 1982 Incentive Stock Option Agreement (used in connection with certain options granted pursuant to the 1982 Incentive Stock Option Plan on or after September 5, 1989) is incorporated herein by reference to Exhibit 10.12.1 of Form 10-Q for the quarter ended August 3, 1989.* 10.13 Executive Pension Makeup Plan (amended and restated February 1, 1989) is incorporated herein by reference to Exhibit 10.13 of Form 10-K for the year ended February 2, 1989.*
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Number Description 10.13.1 First Amendment to Executive Pension Makeup Plan (dated June 8, 1989) is incorporated herein by reference to Exhibit 10.13.1 of Form 10-Q for the quarter ended May 4, 1989.* 10.13.2 Second Amendment to Executive Pension Makeup Plan (dated January 12, 1990) is incorporated herein by reference to Exhibit 10.13.2 of Form 10-K for the year ended February 1, 1990.* 10.13.3 Third Amendment to Executive Pension Makeup Plan (dated January 31, 1990) is incorporated herein by reference to Exhibit 10.13.3 of Form 10-Q for the quarter ended August 2, 1990.* 10.13.4 Fourth Amendment to Executive Pension Makeup Plan (effective January 1, 1995) is incorporated herein by reference to Exhibit 10.13.4 of Form 10-K for the year ended February 2, 1995.* 10.13.5 Amendment to Executive Pension Makeup Plan (retroactive to January 1, 1990) is incorporated herein by reference to Exhibit 10.13.5 of Form 10-K for the year ended February 1, 1996.* 10.13.6 Amendment to Executive Pension Makeup Plan (retroactive to October 1, 1999).* 10.14 Executive ASRE Makeup Plan (dated September 26, 1999).* 10.15 Senior Executive Deferred Compensation Plan (amended and restated February 1, 1989) is incorporated herein by reference to Exhibit 10.15 of Form 10-K for the year ended February 2, 1989.* 10.15.1 Amendment to Senior Executive Deferred Compensation Plan (dated December 4, 1989) is incorporated herein by reference to Exhibit 10.15.1 of Form 10-Q for the quarter ended November 2, 1989.* 10.16 1986 Nonqualified Stock Option Plan (amended March 4, 1991) is incorporated herein by reference to Exhibit 10.16 of Form 10-K for the year ended January 31, 1991. Exhibit 10.16 expired by its terms in 1996. Notwithstanding such expiration, certain agreements for the options granted under these option plans remain outstanding.* 10.17 Form of 1986 Nonqualified Stock Option Plan Stock Option Agreement (amended November 30, 1987) is incorporated herein by reference to Exhibit 10.17 of Form 10-Q for the quarter ended October 29, 1987.* 10.18 Executive Pension Makeup Trust (dated February 1, 1989) is incorporated herein by reference to Exhibit 10.18 of Form 10-K for the year ended February 2, 1989.* 10.18.1 Amendment to Executive Pension Makeup Trust (dated July 24, 1998).*
Page 18
Number Description 10.18.2 Amendment to Executive Pension Makeup Trust (dated December 1, 1998) is incorporated herein by reference to Exhibit 10.18.1 of Form 10-Q for the quarter ended October 29, 1998.* 10.18.3 Amendment to Executive Pension Makeup Trust (dated December 1, 1999).* 10.19 Executive Deferred Compensation Trust (dated February 1, 1989) is incorporated herein by reference to Exhibit 10.19 of Form 10-K for the year ended February 2, 1989.* 10.19.1 Amendment to Executive Deferred Compensation Trust (dated July 24, 1998).* 10.19.2 Amendment to Executive Deferred Compensation Trust (dated December 1, 1998) is incorporated herein by reference to Exhibit 10.19.1 of Form 10-Q for the quarter ended October 29, 1998.* 10.19.3 Amendment to Executive Deferred Compensation Trust (dated December 1, 1999).* 10.20 1990 Deferred Compensation Plan is incorporated herein by reference to Exhibit 10.20 of Form 10-K for the year ended January 31, 1991.* 10.20.1 Amendment to 1990 Deferred Compensation Plan (dated April 12, 1994) is incorporated herein by reference to Exhibit 10.20.1 of Form 10-Q for the quarter ended August 4, 1994.* 10.20.2 Amendment to 1990 Deferred Compensation Plan (dated November 5, 1997) is incorporated herein by reference to Exhibit 10.20.2 of Form 10-K for the year ended January 29, 1998.* 10.20.3 Amendment to 1990 Deferred Compensation Plan (dated November 1, 1998) is incorporated herein by reference to Exhibit 10.20.3 of Form 10-Q for the quarter ended October 29, 1998.* 10.21 Non-Employee Directors' Deferred Compensation Plan is incorporated herein by reference to Exhibit 10.21 of Form 10-K for the year ended January 31, 1991.* 10.21.1 Amendment to Non-Employee Directors' Deferred Compensation Plan (dated December 15, 1998).* 10.22 1990 Deferred Compensation Trust (dated November 20, 1990) is incorporated herein by reference to Exhibit 10.22 of Form 10-K for the year ended January 31, 1991.* 10.22.1 Amendment to 1990 Deferred Compensation Trust (date July 24, 1998).* 10.22.2 Amendment to 1990 Deferred Compensation Trust (dated December 1, 1998) is incorporated herein by reference to Exhibit 10.22.1 of Form 10-Q for the quarter ended October 29, 1998.*
Page 19
Number Description 10.22.3 Amendment to 1990 Deferred Compensation Trust (dated December 1, 1999).* 10.23 2000 Deferred Compensation Trust (dated January 1, 2000).* 10.24 1995 Stock-Based Incentive Plan (dated May 26, 1995) is incorporated herein by reference to Exhibit 10.24 of Form 10-Q for the quarter ended May 4, 1995.* 10.24.1 Form of 1995 Stock-Based Incentive Plan Stock Option Agreement (dated December 4, 1995) is incorporated herein by reference to Exhibit 10.24.1 of Form 10-K for the year ended February 1, 1996.* 10.25 1995 Stock Option Plan for Non-Employee Directors (dated May 26, 1995) is incorporated herein by reference to Exhibit 10.25 of Form 10-Q for the quarter ended May 4, 1995.* 10.25.1 Form of 1995 Stock Option Plan for Non-Employee Directors Agreement (dated May 30, 1995) is incorporated herein by reference to Exhibit 10.25.1 of Form 10-Q for the quarter ended May 4, 1995.* 10.26 Amended and Restated 1995 Stock-Based Incentive Plan (dated November 12, 1998) is incorporated herein by reference to Exhibit 10.26 of Form 10-Q for the quarter ended October 29, 1998.* 10.27 Termination and Consulting Agreement by and among American Stores Company, Albertson's, Inc. and Victor L. Lund is incorporated herein by reference to Exhibit 10.27 of Form 10-K for the year ended January 28, 1999.* 10.28 Credit Agreement (5-year)(dated March 22, 2000). 10.29 Credit Agreement (364-day)(dated March 22, 2000). 10.30 American Stores Company Supplemental Executive Retirement Plan 1998 Restatement is incorporated herein by reference to Exhibit 4.1 of Form S-8 filed by American Stores Company (Commission File Number 1-5392) on July 13, 1998.* 10.30.1 Amendment to American Stores Company Supplemental Executive Retirement Plan 1998 Restatement, dated as of September 15, 1998, is incorporated herein by reference to Exhibit 10.4 of Form 10-Q filed by American Stores Company (Commission File Number 1-5392) on December 11, 1998.* 10.31 American Stores Company 1997 Stock Option and Stock Award Plan is incorporated herein by reference to Exhibit B of the 1997 Proxy Statement filed by American Stores Company (Commission File Number 1-5392) on May 2, 1997.* 10.31.1 Amendment to American Stores Company 1997 Stock Option and Stock Award Plan, dated as of October 8, 1998, is incorporated herein by reference to Exhibit 10.1 of Form 10-Q filed by American Stores Company (Commission File Number 1-5392) on December 11, 1998.*
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Number Description 10.32 American Stores Company 1997A Stock Option and Stock Award Plan, dated as of March 27, 1997, is incorporated herein by reference to Exhibit 4.11 of the S-8 Registration Statement (Registration No. 333-8215 filed by Albertson's, Inc. on July 2, 1999.* 10.33 American Stores Company 1997 Stock Plan to Non-Employee Directors is incorporated herein by reference to Exhibit C of the 1997 Proxy Statement filed by American Stores Company (Commission file number 1-5392) on May 2, 1997.* 10.34 American Stores Company amended and restated 1989 Stock Option and Stock Award Plan is incorporated herein by reference to Exhibit 4.13 of the S-8 Registration Statement (Registration No. 333-82157) filed by Albertson's, Inc. on July 2, 1999.* 10.35 American Stores Company Amendment and Restated 1985 Stock Option and Stock Award Plan is incorporated herein by reference to the S-8 Registration Statement (Registration No. 333-82157) filed by Albertson's, Inc. on July 2, 1999.* 11 Inapplicable 12 Inapplicable 13 Exhibit 13 consists of pages 21 to 55 and page 60 of Albertson's, Inc. 1999 Annual Report to Stockholders which are numbered as pages 1 to 36 of Exhibit 13. Such report, except to the extent incorporated herein by reference, has been sent to and furnished for the information of the Securities and Exchange Commission only and is not to be deemed filed as part of this Annual Report on Form 10-K. The references to the pages incorporated by reference are to the printed Annual Report. The references to the pages of Exhibit 13 are as follows: Item 3--page 30; Item 5--page 36; Item 6-page 34; Item 7-pages 1 through 8; Item 7A-page 7; and Items 8 and 14--pages 9 through 33 and page 35. 16 Inapplicable 18 Inapplicable 21 Subsidiaries of the Registrant 22 Inapplicable 23 Independent Auditors' Consent - Deloitte & Touche LLP 23.1 Independent Auditors' Consent - Ernst & Young LLP 24 Inapplicable 27 Financial Data Schedule - Fiscal Year 1999
Page 21
Footnotes - --------- * Identifies management contracts or compensatory plans or arrangements required to be filed as an exhibit hereto. (1) In reliance upon Item 601(b)(4)(iii)(A) of Regulation S-K, various other instruments defining the rights of holders of long-term debt of the Registrant and its subsidiaries are not being filed herewith, because the total amount of securities authorized under each such instrument does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant hereby agrees to furnish a copy of any such instrument to the Commission upon request.
Page 22 EX-3.(II) 2 ALBERTSON'S, INC. BY-LAWS EXHIBIT 3.2 ALBERTSON'S, INC. BY-LAWS TABLE OF CONTENTS
Page ARTICLE I Section 1.1 Registered Office.......................................... 1 Section 1.2 Other Offices.............................................. 1 ARTICLE II MEETINGS OF THE STOCKHOLDERS Section 2.1 Place of Meetings.......................................... 1 Section 2.2 Annual Meetings............................................ 1 Section 2.3 Notice of Annual Meeting................................... 1 Section 2.4 List of Stockholders Entitled to Vote...................... 1 Section 2.5 Special Meetings........................................... 2 Section 2.6 Notice of Special Meeting.................................. 2 Section 2.7 Quorum..................................................... 2 Section 2.8 Voting..................................................... 2 Section 2.9 Proxies.................................................... 3 Section 2.10 Nature of Business at Meetings of Stockholders............. 3 A Limitation........................................ 3 B. Notice Requirement................................ 3 C. Timeliness of Notice.............................. 4 D. Form of Notice.................................... 4 E. Business Brought Improperly....................... 4 Section 2.11 Stock Ledger............................................... 4 Section 2.12 Record Date in General..................................... 4 Section 2.13 Record Date for Stockholder Action by Written Consent...... 5 Section 2.14 Inspectors of Election..................................... 5 ARTICLE III DIRECTORS Section 3.1 Number and Election of Directors........................... 6 Section 3.2 Nomination of Directors.................................... 6 A. Limitation........................................ 6 B. Notice Requirement................................ 7 C. Timeliness of Notice.............................. 7 D. Form of Notice.................................... 7 E. Defective Nomination.............................. 8
i Section 3.3 Vacancies.................................................. 8 Section 3.4 Resignations and Removals of Directors..................... 8 Section 3.5 Duties and Powers.......................................... 8 Section 3.6 Indemnification............................................ 8 A. Power to Indemnify in Actions, Suits or ProceedingsOther than Those by or in the Right of the Corporation.......................... 8 B. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation....................................... 9 C. Authorization of Indemnification.................. 9 D. Good Faith Defined ............................... 10 E. Indemnification by a Court........................ 10 F. Expenses Payable in Advance....................... 10 G. Nonexclusivity of Indemnification and Advancement of Expenses........................... 11 H. Insurance......................................... 11 I. Certain Definitions............................... 11 J. Survival of Indemnification and Advancement of Expenses....................................... 11 K. Limitation on Indemnification..................... 12 L. Indemnification of Employees and Agents........... 12 Section 3.7 Retirement Age............................................. 12 Section 3.8 Meetings................................................... 12 Section 3.9 Quorum..................................................... 12 Section 3.10 Actions of Board........................................... 12 Section 3.11 Meetings by Means of Conference Telephone.................. 13 Section 3.12 Committees................................................. 13 Section 3.13 Compensation............................................... 13 Section 3.14 Interested Directors....................................... 13 ARTICLE IV NOTICES Section 4.1 Notices.................................................... 14 Section 4.2 Waiver of Notice........................................... 14
ii ARTICLE V
OFFICERS Section 5.1 Officers Chosen by the Board............................... 14 Section 5.2 Officers Chosen by the Chief Executive Officer............. 15 Section 5.3 Qualification.............................................. 15 Section 5.4 Voting Securities Owned by the Corporation................. 15 Section 5.5 Chairman of the Board...................................... 15 Section 5.6 Chairman of the Executive Committee........................ 15 Section 5.7 Chief Operating Officer.................................... 16 Section 5.8 Vice Chairman of the Corporation........................... 16 Section 5.9 President.................................................. 16 Section 5.10 Chief Executive Officer.................................... 16 Section 5.11 Vice Presidents............................................ 16 Section 5.12 Secretary.................................................. 16 Section 5.13 Assistant Secretaries...................................... 17 Section 5.14 Treasurer.................................................. 17 Section 5.15 Assistant Treasurers....................................... 17 ARTICLE VI STOCK Section 6.1 Form of Certificates....................................... 17 Section 6.2 Signatures................................................. 18 Section 6.3 Lost, Destroyed, Stolen or Mutilated Certificates.......... 18 Section 6.4 Transfers.................................................. 18 Section 6.5 Transfer and Registry Agents............................... 18 Section 6.6 Registered Stockholders.................................... 18 ARTICLE VII GENERAL PROVISIONS Section 7.1 Dividends.................................................. 19 Section 7.2 Disbursements.............................................. 19 Section 7.3 Fiscal Year................................................ 19 Section 7.4 Corporate Seal............................................. 19 Section 7.5 Election Not to Be Subject to Idaho Business Combination Law............................................ 19 Section 7.6 Election Not to Be Subject to Idaho Control Share Acquisition Law............................................ 19 Section 7.7 Entire Board of Directors.................................. 19
iii ARTICLE VIII
AMENDMENTS Section 8.1 Amendments................................................. 20
iv ALBERTSON'S, INC. BY-LAWS ARTICLE I OFFICES Section 1.1 Registered Office. The registered office of Albertson's, Inc.(the "Corporation") shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 1.2 Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF THE STOCKHOLDERS Section 2.1 Place of Meetings. All meetings of the stockholders for the election of directors shall be held in the City of Boise, State of Idaho, at such place as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Meetings of the stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2.2 Annual Meetings. Annual meetings of stockholders shall be held on the fourth Friday of May, if not a legal holiday and, if a legal holiday, then on the next day following that is not a legal holiday, at 10:00 o'clock A.M., or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which the stockholders shall elect by written ballot a Board of Directors, and transact such other business as may be properly brought before the meeting. Section 2.3 Notice of Annual Meeting. Written notice of the annual meeting, stating the place, date and hour of the meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Section 2.4 List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the Corporation shall prepare and make, or shall cause to be prepared and made, at least ten days before every meeting of stockholders a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least Page 1 ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present; provided, however, the failure to do so shall not offset the validity of any meeting. Section 2.5 Special Meetings. Unless otherwise prescribed by statute or by the certificate of incorporation of the Corporation, as amended and restated from time to time or by one or more certificates of designation filed on behalf of the Corporation pursuant to Section 151(f) of the Delaware General Corporation Law (such certificate of incorporation and such certificate or certificates of designation being collectively referred to herein as the "Certificate of Incorporation"), special meetings of the stockholders, for any purpose or purposes, may be called only by the chairman of the Board of Directors or by the vice chairman or president of the Corporation and shall be called by the chairman or vice chairman of the Board of Directors or by the vice chairman, president or secretary of the Corporation at the request in writing of a majority of the Board of Directors. Such request shall state the purpose or purposes of the proposed meeting. At a special meeting of the stockholders, only such business shall be conducted as shall be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors. Section 2.6 Notice of Special Meeting. Written notice of a special meeting, stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Section 2.7 Quorum. The holders of a majority of the shares of common stock of the Corporation (the "Common Stock") issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by law or by the Certificate of Incorporation. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting not less than ten nor more than sixty days before the date of the meeting. Section 2.8 Voting. At all meetings of the stockholders at which a quorum is present, except as otherwise required by law, the Certificate of Incorporation or these by-laws, any question brought before any meeting of stockholders shall be decided by the affirmative vote of the holders of shares present in person or represented by proxy who properly cast a majority of the votes on such question. Each holder of Common Stock shall be entitled to cast one vote for each share of Common Stock standing in his or her name on the books of the Corporation, and each holder of preferred stock shall be entitled to cast such number of votes as is provided in the Certificate of Incorporation, voting Page 2 separately from or together with the holders of Common Stock as provided in the Certificate of Incorporation. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his or her discretion, may require that any votes cast at such meeting shall be cast by written ballot. Section 2.9 Proxies. Any stockholder entitled to vote may do so in person or by his or her proxy appointed by an instrument in writing subscribed by such stockholder or by his or her attorney thereunto authorized, delivered to the secretary of the meeting; provided, however, that no proxy shall be voted or acted upon after three years from its date, unless said proxy provides for a longer period. Without limiting the manner in which a stockholder may authorize another person or persons to act for him or her as proxy, either of the following shall constitute a valid means by which a stockholder may grant such authority: (a) a stockholder may execute a writing authorizing another person or persons to act for him or her as proxy. Execution may be accomplished by the stockholder or his or her authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature; or (b) a stockholder may authorize another person or persons to act for him or her as proxy by transmitting or authorizing the transmission of a telegram or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission; provided, however, that any such telegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram or other electronic transmission was authorized by the stockholder. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission authorizing another person or persons to act as proxy for a stockholder may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. Section 2.10 Nature of Business at Meetings of Stockholders. A. Limitation. Except as otherwise provided by law or the Certificate of Incorporation, no business may be transacted at an annual meeting of stockholders, other than business that is (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by any holder of Common Stock (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.10 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 2.10. B. Notice Requirement. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof to the secretary of the Corporation in accordance with subsection C of this Page 3 Section 2.10 in proper written form in accordance with subsection D of this Section 2.10. C. Timeliness of Notice. (1) To be timely, a stockholder's notice to the secretary of the Corporation of business to be brought before a meeting of stockholders in accordance with Rule 14a-8 promulgated pursuant to the Securities and Exchange Act of 1934 must be delivered to or mailed and received at the principal executive offices of the Corporation in accordance with the deadline specified in subsection (e) of that rule. (2) To be timely, a stockholder's notice to the secretary of the Corporation of business to be brought before an annual meeting other than in accordance with Rule 14a-8 promulgated pursuant to the Securities and Exchange Act of 1934 must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that an annual meeting is called for a date that is not within 30 days before or after such anniversary date, in order to be timely, notice by the stockholder must be so received not later than the close of business on the tenth day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever occurs first. D. Form of Notice. To be in proper written form, a stockholder's notice to the secretary of the Corporation of business to be brought before an annual meeting must set forth as to each matter such stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and record address of such stockholder, (c) the class or series and number of shares of stock of the Corporation that are owned beneficially or of record by such stockholder, (d) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest such stockholder has in such business and (e) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. E. Business Brought Improperly. No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 2.10; provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 2.10 shall be deemed to preclude discussion by any stockholder of any such business. If the chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, such chairman shall declare to the meeting that the business was not properly brought before the meeting, and such business shall not be transacted. Section 2.11 Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled (a) to examine the stock ledger, the list required by Section 2.4 of these by-laws or the books of the Corporation or (b) to vote in person or by proxy at any meeting of stockholders. Section 2.12 Record Date in General. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any Page 4 dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action (other than an action to be taken by written consent without a meeting), the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date: (a) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall not be more than sixty nor less than ten days before the date of such meeting; and (b) in the case of any other action (other than an action to be taken by written consent without a meeting), shall not be more than sixty days prior to such other action. If no record date is fixed: (a) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (b) the record date for determining stockholders for any other purpose (other than an action to be taken by written consent without a meeting) shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 2.13 Record Date for Stockholder Action by Written Consent. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the secretary of the Corporation, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of stockholders meetings are recorded, to the attention of the secretary of the Corporation. Delivery shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action. No consent to corporate action in writing without a meeting shall be effective unless delivered to the Corporation within sixty days following the record date relating thereto fixed pursuant to this Section 2.13. Section 2.14 Inspectors of Election. In advance of any meeting of stockholders, the Board of Directors by resolution or the chairman of the Board of Directors or the vice chairman, president or secretary of the Corporation Page 5 shall appoint one or more inspectors of election to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is present, ready and willing to act at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by law, inspectors may be officers, employees or agents of the Corporation. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector shall have the duties prescribed by law, shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by law. ARTICLE III DIRECTORS Section 3.1 Number and Election of Directors. The number of directors which shall constitute the whole Board shall be not less than three nor more than twenty-one. Within the limits above specified, the number of directors shall be determined by resolution of the Board or by the vote at the annual meeting of the holders of at least three-fourths of the outstanding shares of stock then entitled to vote in elections of directors. The Board shall be divided into three classes. Any increase or decrease in the number of directors shall be apportioned among the classes so as to make all classes as nearly equal in number as possible. No decrease in the authorized number of directors shall shorten the term of any incumbent director. Unless and until otherwise determined, the first and third classes shall each consist of five directors, and the second class shall consist of four directors. A separate election shall be held for each class of directors at the 1980 annual meeting of stockholders. At the 1980 annual meeting of stockholders the directors elected to the first class shall hold office for a term of one year and until their respective successors are elected and qualified; the directors elected to the second class shall hold office for a term of two years and until their respective successors are elected and qualified, and the directors elected to the third class shall hold office for a term of three years and until their respective successors are elected and qualified. At each annual meeting thereafter the successors to the class of directors whose term is then expiring shall be elected to hold office for a term of three years and until their respective successors are elected. Directors need not be stockholders. The chairman of the Board of Directors shall be an officer of the Corporation, and the vice chairman of the Board of Directors need not be an officer of the Corporation. The vice chairman of the Board of Directors shall be chosen by the Board of Directors and shall, in the absence of the chairman of the Board of Directors, preside at meetings of the Board of Directors. Section 3.2 Nomination of Directors. A. Limitation. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) Page 6 or (b) by any holder of Common Stock (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 3.2 and on the record date for the determination of stockholders entitled to vote at such meeting and (ii) who complies with the notice procedures set forth in this Section 3.2. B. Notice Requirement. In addition to any other applicable requirements, for a nomination of a director to be made by a stockholder, such stockholder must have given timely notice thereof to the secretary of the Corporation in accordance with subsection C of this Section 3.2 in proper written form in accordance with subsection D of this Section 3.2. C. Timeliness of Notice. To be timely, a stockholder's notice to the secretary of the Corporation of a nomination of a director must be delivered to or mailed and received at the principal executive offices of the Corporation (a) in the case of an annual meeting not less than 90 days nor more than 120 days prior to the first anniversary of the date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty days before or after such anniversary, in order to be timely, notice by the stockholder must be so received not later than the close of business on the tenth day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever occurs first; and (b) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever occurs first. D. Form of Notice. To be in proper written form, a stockholder's notice to the secretary of the Corporation of a nomination of a director must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of stock of the Corporation that are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice (i) the name and record address of such stockholder, (ii) the class or series and number of shares of stock of the Corporation that are owned beneficially or of record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. Page 7 E. Defective Nomination. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3.2. If the chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairman shall declare to the meeting that the nomination was defective, and such defective nomination shall be disregarded. Section 3.3 Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director so chosen shall hold office until the next election of the class for which such director has been chosen, and until his or her successor has been elected, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If at the time of filling any vacancy or any newly created directorship the directors then in office shall constitute less than a majority of the entire Board of Directors (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. Section 3.4 Resignations and Removals of Directors. Any director of the Corporation may resign at any time, by giving written notice to the chairman of the Board of Directors, or to the vice chairman, president or secretary of the Corporation. Such resignation shall take effect at the time therein specified or, if no time is specified, immediately; and, unless otherwise specified in such notice, the acceptance of such resignation shall not be necessary to make it effective. Except as otherwise required by law and subject to the rights, if any, of the holders of shares of preferred stock then outstanding, any director or the entire Board of Directors may be removed from office at any time, but only for cause, and only by the affirmative vote of the holders of at least a majority in voting power of the issued and outstanding stock of the Corporation entitled to vote in the election of directors. As used in this Section 3.4, the term "cause" shall mean (a) conviction of a crime involving moral turpitude, (b) administrative agency determination of conduct involving moral turpitude or (c) a determination in good faith, by a majority in voting power of the issued and outstanding stock of the Corporation entitled to vote in the election of directors after a hearing before at minimum such a majority in voting power, of conduct involving moral turpitude materially adverse to the interests of the Corporation. Section 3.5 Duties and Powers. The business of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these by-laws directed or required to be exercised or done by the stockholders. Section 3.6 Indemnification. A. Power to Indemnify in Actions, Suits or Proceedings Other than Those by or in the Right of the Corporation. Subject to subsection C of this Section 3.6, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by Page 8 reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director or officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, such person had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that such person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. B. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to subsection C of this Section 3.6, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. C. Authorization of Indemnification. Any indemnification under this Section 3.6 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in subsection A or subsection B of this Section 3.6, as the case may be. Such determination shall be made (a) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (b) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (c) by the stockholders. To the extent, however, that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case. Page 9 D. Good Faith Defined. For purposes of any determination under subsection C of this Section 3.6, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his or her conduct was unlawful, if such person's action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to such person by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The term "another enterprise" as used in this subsection D shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. The provisions of this subsection D shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in subsection A or subsection B of this Section 3.6, as the case may be. E. Indemnification by a Court. Notwithstanding any contrary determination in the specific case under subsection C of this Section 3.6, and notwithstanding the absence of any determination thereunder, any director or officer may apply to the Court of Chancery of the State of Delaware or any other court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under subsection A and subsection B of this Section 3.6. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standards of conduct set forth in subsection A or subsection B of this Section 3.6, as the case may be. Neither a contrary determination in the specific case under subsection C of this Section 3.6 nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this subsection E shall be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application. F. Expenses Payable in Advance. Expenses incurred by a director or officer in defending or investigating a threatened or pending action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Section 3.6. Page 10 G. Nonexclusivity of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by or granted pursuant to this Section 3.6 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Certificate of Incorporation or any by-law, agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in subsection A and subsection B of this Section 3.6 shall be made to the fullest extent permitted by law. The provisions of this Section 3.6 shall not be deemed to preclude the indemnification of any person who is not specified in subsection A or subsection B of this Section 3.6 but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware (the "GCL"), or otherwise. H. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against an liability asserted against such person and incurred by such person in any suc capacity, or arising out of such person's status as such, whether or not the Corporation would have the power or the obligation to indemnify such person against such liability under the provisions of this Section 3.6. I. Certain Definitions. For purposes of this Section 3.6, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger that, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Section 3.6 with respect to the resulting or surviving corporation as such person would have stood with respect to such constituent corporation if its separate existence had continued. For purposes of this Section 3.6, references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Section 3.6. J. Survival of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 3.6 shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. Page 11 K. Limitation on Indemnification. Notwithstanding anything contained in this Section 3.6 to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by subsection E hereof), the Corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) or advance expenses in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation. L. Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Section 3.6 to directors and officers of the Corporation. Section 3.7 Retirement Age. No director after having attained the age of 70 years shall be allowed to run for re-election or reappointment to the Board of Directors, excepting, however, that such retirement age shall not apply to directors over the age of 65 years who were serving on such board on September 9, 1974. Section 3.8 Meetings. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Regular meetings of the Board of Directors may be held at such time and at such place as may be from time to time determined by the Board of Directors and, unless required by resolution of the Board of Directors, without notice. Special meetings of the Board of Directors may be called by the chairman of the Board of Directors, by the vice chairman or president of the Corporation or by a majority of the directors then in office. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight hours before the date of the meeting, by telephone, facsimile, telegram or other electronic means on twenty-four hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. Section 3.9 Quorum. Except as may be otherwise required by law, the Certificate of Incorporation or these by-laws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the vote of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting of the time and place of the adjourned meeting, until a quorum shall be present. Section 3.10 Actions of Board. Unless otherwise restricted by the Certificate of Incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board or committee. Page 12 Section 3.11 Meetings by Means of Conference Telephone. Unless otherwise provided by the Certificate of Incorporation or these by-laws, members of the Board of Directors of the Corporation, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 3.11 shall constitute presence in person at such meeting. Section 3.12 Committees. The Board of Directors may designate one or more committees, each committee to consist of two or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in one or more resolutions adopted by of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the GCL to be submitted to stockholders for approval or (ii) adopting, amending or repealing any by-law of the Corporation. Each committee shall keep regular minutes and report to the Board of Directors when required. Section 3.13 Compensation. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors and/or a stated salary, or such other emoluments as the Board of Directors shall from time to time determine. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 3.14 Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because such person's or their votes are counted for such purpose if (a) the material facts as to such person's or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (b) the material facts as to such person's or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith Page 13 by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee that authorizes the contract or transaction. ARTICLE IV NOTICES Section 4.1 Notices. Whenever written notice is required by law, the Certificate of Incorporation or these by-laws to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at such person's address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Written notice may also be given personally or by telegram, facsimile or other electronic means. Section 4.2 Waiver of Notice. Whenever any notice is required by law, the Certificate of Incorporation or these by-laws to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting, present by person or represented by proxy, shall constitute a waiver of notice of such meeting, except where the person attends the meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of stockholders, directors or members of a committee of directors need be specified in any written waiver of notice except to the extent required by law, the Certificate of Incorporation or these by-laws. ARTICLE V OFFICERS Section 5.1 Officers Chosen by the Board. The following officers of the Corporation shall be chosen by the Board of Directors at its meeting held either the day before or the day of each annual meeting of stockholders: a chairman of the Board of Directors (who must be a director) and a president of the Corporation. The Board of Directors shall designate the chairman of the Board of Directors as the chief executive officer and the president of the Corporation as the chief operating officer. A vice chairman of the Corporation may be chosen by the Board of Directors at its meeting held either the day before or the day of each annual meeting of stockholders. Effective as of January 29, 1999, the Board of Directors may also choose a chairman of the executive committee, who shall Page 14 serve for such term as the Board of Directors shall designate, and, if no one is chosen to fill this officer position, then the chairman of the executive committee shall be an outside director pursuant to Section 3.12 of these by-laws. The Board of Directors may also choose such other officers as it deems necessary or appropriate. The officers of the Corporation chosen by the Board of Directors shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Any officer chosen or appointed by the Board of Directors may be removed from office at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any of such offices shall be filled by the Board of Directors. The salaries of the officers of the Corporation chosen by the Board of Directors shall be fixed by the Board of Directors. Section 5.2 Officers Chosen by the Chief Executive Officer. The chief executive officer may appoint any vice presidents (including executive vice presidents, senior vice presidents and group vice presidents), the secretary, any assistant secretaries, the treasurer, any assistant treasurers, presidents and other officers of subsidiary corporations and such other officers and agents as he or she may deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the chief executive officer, who may remove any such officers from office at any time. Section 5.3 Qualification. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these By-laws. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the chairman of the Board of Directors, need such officers be directors of the Corporation. Section 5.4 Voting Securities Owned by the Corporation. Instruments relating to securities owned by the Corporation, including powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the chairman of the Board of Directors or by the vice chairman or president of the Corporation, and any such officers may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities that the Corporation, as the owner thereof, might have exercised and possessed if present. The Board of Directors may from time to time confer, by resolution, like powers upon any other person or persons. Section 5.5 Chairman of the Board. The chairman of the Board of Directors shall preside at all meetings of the Board of Directors and shall possess the power to sign on behalf of the Corporation all certificates, contracts and other instruments the execution of which may be authorized by the Board of Directors. The chairman of the Board of Directors shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these by-laws or by the Board of Directors. Section 5.6 Chairman of the Executive Committee. The chairman of the executive committee shall preside at all meetings of the executive committee of the Board of Directors, shall be available for advice and consultation as to operations and administrative matters of significance and shall perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these by-laws or by the Board of Directors. Page 15 Section 5.7 Chief Operating Officer. The chief operating officer shall have responsibility for the operations of the Corporation as authorized by the Board of Directors and shall perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these by-laws or by the Board of Directors. Section 5.8 Vice Chairman of the Corporation. The vice chairman of the Corporation shall possess the power to sign on behalf of the Corporation all certificates, contracts and other instruments the execution of which may be authorized by the Board of Directors and shall perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these by-laws or by the Board of Directors. Section 5.9 President. The president shall possess the power to sign on behalf of the Corporation all certificates, contracts and other instruments the execution of which may be authorized by the Board of Directors and shall perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these by-laws or by the Board of Directors. Section 5.10 Chief Executive Officer. The chief executive officer shall preside at, or shall designate such other officer of the Corporation to preside at, meetings of stockholders. The chief executive officer shall have general and active management of the business affairs of the Corporation, including the right to appoint such officers as provided for in Section 5.2 of these by-laws, and shall see that all orders and resolutions of the Board of Directors are carried into effect. The chief executive officer shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these by-laws or by the Board of Directors. Section 5.11 Vice Presidents. The executive vice president, senior vice president or group vice president designated by the Board of Directors shall be vested with all powers and shall perform all the duties of the president in the absence or the disability of the president. Each vice president shall be vested with such powers and shall perform such duties granted or imposed upon him or her by the Board of Directors or by the chief executive officer at the time of his or her appointment to office or as from time to time may be assigned to him or her by these by-laws, by the chief executive officer or by the Board of Directors. Section 5.12 Secretary. The secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings thereat in a book or books to be kept for that purpose and shall perform like duties for the standing committees when requested. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the chief executive officer, under whose supervision the secretary shall be. If the secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no assistant secretary, then either the Board of Directors or the chief executive officer may choose another officer to cause such notice to be given. The secretary shall have custody of the corporate seal of the Corporation, and the secretary or any assistant secretary, if there be one, shall have authority to affix the same to any instrument requiring it and, when so affixed, it may be attested by the signature of the secretary or by the signature of any such assistant secretary. Page 16 The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature. The secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be. Section 5.13 Assistant Secretaries. Assistant secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the chief executive officer or the secretary, and in the absence of the secretary or in the event of his or her disability or refusal to act, shall perform the duties of the secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the secretary. Section 5.14 Treasurer. The treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the chief executive officer and the Board of Directors at its regular meetings, or when the Board of Directors so requires, an account of all of his or her transactions as treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the office of treasurer and for the restoration to the Corporation, in case of the treasurer's death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the treasurer's possession or under control of the treasurer belonging to the Corporation. Section 5.15 Assistant Treasurers. Assistant treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the chief executive officer or the treasurer, and in the absence of the treasurer or in the event of the treasurer's disability or refusal to act, shall perform the duties of the treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the treasurer. If required by the Board of Directors, an assistant treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the office of assistant treasurer and for the restoration to the Corporation, in case of the assistant treasurer's death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the assistant treasurer's possession or under control of the assistant treasurer belonging to the Corporation. ARTICLE VI STOCK Section 6.1 Form of Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed in the name of the Corporation, by (a) the chairman of the Board of Directors or the vice chairman, Page 17 the president or an executive vice president of the Corporation and (b) the treasurer or an assistant treasurer or the secretary or an assistant secretary of the Corporation certifying the number of shares of stock of the Corporation owned by such holder. Section 6.2 Signatures. Where a certificate is countersigned (a) by a transfer agent other than the Corporation or its employee or (b) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 6.3 Lost, Destroyed, Stolen or Mutilated Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or such person's legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 6.4 Transfers. Stock of the Corporation shall be transferable in the manner prescribed by law and in these by-laws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by such person's attorney lawfully constituted in writing and upon the surrender of the certificate therefor, properly endorsed for transfer and payment of all necessary transfer taxes; provided, however, that such surrender and endorsement or payment of taxes shall not be required in any case in which the officers of the Corporation shall determine to waive such requirement. Every certificate exchanged, returned or surrendered to the Corporation shall be marked "Canceled," with the date of cancellation, by the secretary or assistant secretary of the Corporation or the transfer agent thereof. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred. Section 6.5 Transfer and Registry Agents. The Corporation may from time to time maintain one or more transfer offices or agencies and registry offices or agencies at such place or places as may be determined from time to time by the Board of Directors. Section 6.6 Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner a person registered on it books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. Page 18 ARTICLE VII GENERAL PROVISIONS Section 7.1 Dividends. Subject to the requirements of the GCL and the provisions of the Certificate of Incorporation, dividends upon the stock of the Corporation may be declared by the Board of Directors at any regular or special meeting of the Board of Directors, and may be paid in cash, in property or in shares of the Corporation's stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, may deem proper as a reserve or reserves for any purpose, and the Board of Directors may modify or abolish any such reserve. Section 7.2 Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 7.3 Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. Section 7.4 Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or fixed or reproduced or otherwise. Section 7.5 Election Not to Be Subject to Idaho Business Combination Law. The Corporation expressly elects not to be subject to the provisions of the Idaho Business Combination Law, codified as Chapter 17 of Title 30 of the Idaho Code. Section 7.6 Election Not to Be Subject to Idaho Control Share Acquisition Law. The Corporation expressly elects not to be subject to the provisions of the Idaho Control Share Acquisition Law, codified as Chapter 16 of Title 30 of the Idaho Code. Section 7.7 Entire Board of Directors. As used in these by-laws, the term "entire Board of Directors" means the total number of directors that the Corporation would have if there were no vacancies. Page 19 ARTICLE VIII AMENDMENTS Section 8.1 Amendments. These by-laws may be altered, amended or repealed, in whole or in part, or new by-laws may be adopted by the Board of Directors or by the stockholders as provided in the Certificate of Incorporation. I, Kaye L. O'Riordan, do hereby certify that the foregoing are the By-Laws of the Corporation as of March 17, 2000 with subsection C. of Section 2.10 and subsection C. of Section 3.2 effective as of June 16, 2000. /s/ Kaye L. O'Riordan ------------------------------------------- Kaye L. O'Riordan Vice President and Corporate Secretary Page 20 EX-10.6.2 3 AMEDNMENT TO EXECUTIVE DEFERRED COMP PLAN Exhibit 10.6.2 AMENDMENT to the ALBERTSON'S, INC. EXECUTIVE DEFERRED COMPENSATION PLAN This Amendment is made by Albertson's, Inc., a Delaware corporation (the "Corporation"). RECITALS: A. The Corporation established the Albertson's, Inc. Executive Deferred Compensation Plan effective December 5, 1983 (the "Plan"); B. The Corporation, pursuant to Section 8.01 of the Plan, retained the right to amend the Plan and Section 8.01 provides that the Plan may be amended by the Corporation so long as such amendments are non-monetary in their effect and do not materially alter plan benefits; pursuant to resolutions duly adopted by the Board of Directors of the Corporation, the Grantor Trust Committee of the Board of Directors was granted the authority to amend the Plans; and the Committee has been granted the authority to amend the Plans by the Grantor Trust Committee so long as such amendments do not materially alter benefits; C. The Committee has determined that it is advisable to amend the Plan in the manner hereinafter set forth and that such amendment does not materially alter benefits. AMENDMENT The Plan is amended, as of December 15, 1998, in the following respects: Subsection 6.04(d) of the Plan shall be deleted and the following language shall be substituted in its place: (d) The Participant may modify the form of the distribution of all or part of the Participant's Deferred Benefit Account, provided that such modification is made on a validly executed and filed election form before the end of the calendar year which ends at least twelve (12) months prior to the date on which any distribution of the Participant's Deferred Benefit Account shall have commenced. IN WITNESS WHEREOF, this instrument has been duly executed by the undersigned as of December 15, 1998. ALBERTSON'S, INC. By: /s/ Thomas R. Saldin --------------------------------------- Thomas R. Saldin Executive Vice President, Administration and General Counsel EX-10.7.1 4 AMENDMENT TO SENIOR EXEC. DEFERRED COMP PLAN Exhibit 10.7.1 AMENDMENT to the ALBERTSON'S, INC. SENIOR EXECUTIVE DEFERRED COMPENSTION PLAN This Amendment is made by Albertson's, Inc., a Delaware corporation (the "Corporation"). RECITALS: A. The Corporation established the Albertson's, Inc. Senior Executive Deferred Compensation Plan effective December 5, 1983 (the "Plan"); B. The Corporation, pursuant to Section 8.01 of the Plan, retained the right to amend the Plan and Section 8.01 provides that the Plan may be amended by the Corporation so long as such amendments are non-monetary in their effect and do not materially alter plan benefits; pursuant to resolutions duly adopted by the Board of Directors of the Corporation, the Grantor Trust Committee of the Board of Directors was granted the authority to amend the Plans; and the Committee has been granted the authority to amend the Plans by the Grantor Trust Committee so long as such amendments do not materially alter benefits; C. The Committee has determined that it is advisable to amend the Plan in the manner hereinafter set forth and that such amendment does not materially alter benefits. AMENDMENT The Plan is amended, as of December 15, 1998, in the following respects: Subsection 6.04(d) of the Plan shall be deleted and the following language shall be substituted in its place: (d) The Participant may modify the form of the distribution of all or part of the Participant's Deferred Benefit Account, provided that such modification is made on a validly executed and filed election form before the end of the calendar year which ends at least twelve (12) months prior to the date on which any distribution of the Participant's Deferred Benefit Account shall have commenced. IN WITNESS WHEREOF, this instrument has been duly executed by the undersigned as of December 15, 1998. ALBERTSON'S, INC. By: /s/ Thomas R. Saldin -------------------------------------- Thomas R. Saldin Executive Vice President, Administration and General Counse EX-10.10 5 2000 DEFERRED COMPENSATION PLAN Exhibit 10.10 ALBERTSON'S, INC. 2000 DEFERRED COMPENSATION PLAN Established Effective January 1, 2000 TABLE OF CONTENTS -----------------
Page ---- ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . .1 ARTICLE II - ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . .3 ARTICLE III - PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . . .4 ARTICLE IV - DEFERRED AMOUNTS . . . . . . . . . . . . . . . . . . . . . .4 ARTICLE V - CREDITING OF DEFERRED AMOUNTS AND VALUATION OF ACCOUNTS . .5 ARTICLE VI - COMMENCEMENT OF BENEFITS . . . . . . . . . . . . . . . . . .6 ARTICLE VII - BENEFICIARY DESIGNATION . . . . . . . . . . . . . . . . . .9 ARTICLE VIII - FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . .9 ARTICLE IX - AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . .9 ARTICLE X - FINANCIAL HARDSHIP WITHDRAWALS . . . . . . . . . . . . . . 10 ARTICLE XI - CLAIMS PROCEDURE . . . . . . . . . . . . . . . . . . . . . 10 ARTICLE XII - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . 12
ALBERTSON'S, INC. 2000 DEFERRED COMPENSATION PLAN Established Effective January 1, 2000 Albertson's, Inc., a Delaware corporation (the "Company"), does hereby establish, effective January 1, 2000, the Albertson's, Inc. 2000 Deferred Compensation Plan (the "Plan") as an unfunded deferred compensation arrange- ment for a select group of management or highly compensated employees. The Plan is implemented with the intention that it will aid in retaining and attracting employees of exceptional ability by providing such employees with a means to supplement their income at retirement. ARTICLE I DEFINITIONS For purposes of the Plan, the following words and phrases shall have the following meanings unless a different meaning is plainly required by the context. 1.1 "Account" means the bookkeeping account on behalf of each Participant, maintained and valued in accordance with Article V. 1.2 "Base Salary" means, with respect to each Participant, the Participant's annual rate of salary before reduction pursuant to the Plan or any other deferred compensation plan or salary reduction arrangement, but excluding bonuses, option awards or other forms of remuneration not included in the Participant's annual rate of salary. 1.3 "Beneficiary" or "Beneficiaries" means the person or persons designated under Article VII to receive any benefits in the event of the Participant's death. 1.4 "Board" means the Board of Directors of the Company. 1.5 "Bonus" means, with respect to each Participant, a cash bonus (i.e., excluding options and other noncash awards) paid by the Company with respect to the Fiscal Year beginning in the respective Plan Year. 1.6 "Change in Control" shall mean the occurrence, in a single trans- action or series of transactions after January 1, 2000, or any one of the following events or circumstances: (a) merger, consolidation or reorganization where the beneficial owners of the Voting Securities immediately preceding such merger, consolidation or reorganization beneficially own less than 80% of the securities possessing the right to vote to elect directors or to authorize a merger, consolidation or reorganization with respect to the survivor, after giving effect to such merger, consolidation or reorganization, (b) merger, consolidation or reorganization of the Company where 20% or more of the incumbent directors of the Company are changed, (c) acquisition by any person or group, as defined for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, other than a trustee or other fiduciary holding Voting Securities under an employee benefit plan of the Company (or a corporation owned, directly or indirectly, by the holders of Voting Securities in substantially the same proportion as their ownership of Voting Securities) Page 1 of beneficial ownership of 20% or more of the Voting Securities (such amount to include any Voting Securities acquired prior to January 2, 2000), (d) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clauses (a), (b), (c) or (e) of this paragraph) whose election by the Company's shareholders was approved by a vote of at least two-thirds (b) of the directors still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (e) approval by the shareholders of the Company of a plan of liquidation or dissolution with respect to the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets; provided, that in the event the exact date of a Change in Control cannot be determined, such Change in Control will be deemed to have occurred on the earliest date on which it could have occurred. 1.7 "Claim" shall mean a request by a Claimant in accordance with Article XI for a benefit under the Plan. 1.8 "Claimant" means any person who claims to be entitled to a benefit under the Plan. 1.9 "Committee" means the Grantor Trust Committee appointed by the Board to administer the Plan, or such other administrative committee of not less than three (3) persons that the Board shall designate. 1.10 "Company" means Albertson's, Inc., a Delaware corporation, or its successor or successors. 1.11 "Compensation Committee" means the Compensation Committee appointed by the Board to establish and review the annual salaries and bonuses paid to the elected officers and the Executive Vice Presidents of the Company, to establish the bonus policy for all the officers of the Company and to establish stock option plans and grant options pursuant thereto, or such other committee of not less than three (3) persons that the Board shall designate. 1.12 "Deferral Agreement" means the written participation agreement (substantially in the form attached to this Plan) that shall be entered into by the Employer and a Participant pursuant to Articles III and IV to carry out the Plan with respect to such Participant. 1.13 "Deferred Amounts" means the portion of each Participant's Base Salary and/or Bonus deferred each Plan Year pursuant to a Deferral Agreement executed by the Participant. 1.14 "Effective Date" means January 1, 2000. 1.15 "Eligible Employee" means any employee of the Employer who (i)(a) holds a position of Vice President or above or is in the Company's Salary Administration Program and (b) has a Base Salary (determined as of the first day of each Plan Year and unaffected by any changes during the Plan Year) of $77,873 or more (as indexed pursuant to the Salary Schedule Adjustment), or (ii) satisfies such other criteria as may be established by the Committee. An employee shall cease to be an Eligible Employee if the employee does not receive his Base Salary for four (4) or more consecutive weeks. 1.16 "Employer" means the Company and any of its Subsidiaries. 1.17 "Fiscal Year" means the fiscal year of the Company. 1.18 "Grantor Trust Committee" means that committee created by the Board pursuant to resolutions adopted on August 29, 1988, to administer and amend certain Company deferred compensation plans and trusts. 1.19 "Investment Options" means the securities or funds identified by the Committee from time to time as the investments available as to the growth measurement mechanism for Accounts under the Plan. 1.20 "Minimum Deferral" means five percent (5%) of the Participant's Base Salary and, if the Participant elects to defer a portion of his or her Bonus, five percent (5%) of the Participant's Bonus. Page 2 1.21 "Moody's Rate" means the "corporate bond yield average" with respect to "average corporations" for the preceding calendar month, as determined from the Moody's Bond Record published by Moody's Investors Service, Inc. 1.22 "Participant" shall have the meaning provided under Section 3.3 hereof. 1.23 "Plan" means this Albertson's, Inc. 2000 Deferred Compensation Plan, as it may be amended from time to time. 1.24 "Plan Year" means the 12-month period beginning on the Effective Date and ending on December 31, 2000 and each 12-month period thereafter. 1.25 "Rate of Return" means the amount credited monthly to a Partici- pant's Account under Article V. Except as provided in Section 6.4(a), such rate shall be determined by the Committee based upon the net performance of the Investment Options selected by the Participant pursuant to Section 5.2. 1.26 "Retirement" means termination of employment with the Employer, for reasons other than death, on or after the later of (i) the date the Participant attains age 55, and (ii) completion of five (5) "years of service" (as defined in the Albertson's Savings & Retirement Estates (ASRE)) with the Employer. 1.27 "Salary Administration Program" means the program established by the Company for the administration of the salaries of employees of the Company, excluding any arrangement established pursuant to a collective bargaining agreement. 1.28 "Salary Schedule Adjustment" means the annual percentage adjustment to the medians of the pay grades (i.e., salaried grades) of the Company's Salary Administration Program. 1.29 "Subsidiary" means any corporation, partnership, limited liability company, venture or other entity in which the Company has, directly or indirectly, at least a 50% ownership interest. 1.30 "Total Disability" means the complete inability of the Eligible Employee to perform any and every duty of his or her regular occupation. 1.31 "Voting Securities" means securities possessing the right to vote to elect directors or to authorize a merger, consolidation or reorganization of the Company. ARTICLE II ADMINISTRATION 2.1 The Plan shall be administered by the Committee. The Committee shall have the authority to interpret the Plan, to establish and revise rules and regulations relating to the Plan, to make any other determinations that it believes necessary or advisable for the administration of the Plan and to delegate such administrative powers and duties as it shall determine. All decisions of the Committee shall be by a vote of the majority of its members and shall be final and binding unless the Board shall determine otherwise. Members of the Committee who are Eligible Employees shall be eligible to participate in the Plan while serving as a member of the Committee, but a member of the Committee shall not vote or act upon any matter which relates solely to such member as a Participant. 2.2 The Employer shall indemnify and hold harmless the members of the Committee and their delegates against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to the Plan, except in the case of gross negligence or willful misconduct. Page 3 ARTICLE III PARTICIPATION 3.1 By such date as the Committee shall determine, but not later than the December 31 immediately preceding the first day of any Plan Year, the Committee shall permit any employee who is, or who the Committee reasonably anticipates will be on the first day of such Plan Year, an Eligible Employee to elect to defer compensation effective as of the first day of such Plan Year by filing a completed and executed Deferral Agreement with the Committee; provided, however, that if the employee fails to qualify as an Eligible Employee on the first day of such Plan Year, such election shall be void. If at any time during the Plan Year any Participant ceases to be an Eligible Employee, the compensation deferrals of such Participant shall cease as of such date, and any amounts deferred during such Plan Year after the date of such cessation of eligibility shall be returned to the Participant as soon as practicable thereafter. 3.2 For each Fiscal Year, the Compensation Committee shall determine if an Eligible Employee who is also a "covered employee" as that term is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended ("Section 162(m)") would receive total remuneration, including bonus, for that Fiscal Year in excess of the maximum amount allowed as a deduction by the Company from income taxes pursuant to the provisions of Section 162(m) and shall (notwithstanding the limitation on deferrals set forth in Section 4.2(a)) defer to the Account of such Eligible Employee that portion of the bonus which would otherwise be paid to the Eligible Employee which, in the judgment of the Compensation Committee, would not be deductible by the Company pursuant to the provisions of Section 162(m). The Compensation Committee shall designate one of its members to file with the Committee a Deferral Agreement for the portion of bonus to be deferred. 3.3 If an Eligible Employee or Participant elects not to defer compensation in any Plan Year, or ceases, pursuant to Section 3.1, to be an Eligible Employee during any Plan Year, such Participant will not be permitted to defer compensation under the Plan until the first day of the immediately succeeding Plan Year, if eligible on such date. 3.4 An Eligible Employee shall become a Participant in the Plan as of the date he or she first commences participation in the Plan and shall remain a Participant until the earlier of the Participant's death or the complete distribution of the Participant's Account. 3.5 Notwithstanding anything in the Plan to the contrary, the Committee shall be authorized to take such steps as may be necessary to ensure that the Plan is and remains at all times an unfunded deferred compensation arrangement for a select group of management or highly compensated employees, within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Internal Revenue Code of 1986, as amended, or such other successor or applicable laws. ARTICLE IV DEFERRED AMOUNTS 4.1 An Eligible Employee electing to defer compensation in accordance with Article III shall have the right to determine his or her Deferred Amounts for each Plan Year, subject to the limitations set forth in this Article IV. Such Deferred Amounts shall reduce the amount of the Participant's Base Salary and/or Bonus that is to be paid to the Participant in the Plan Year of reference. Page 4 4.2 (a) By such date as the Committee shall determine, but not later than the December 31 immediately preceding the first day of each Plan Year, an Eligible Employee may elect to defer a percentage of his or her Base Salary and Bonus for such Plan Year; provided, however, that the amount deferred may not be less than the Minimum Deferral and may not exceed 50% of the Participant's Base Salary nor 50% of the Participant's Bonus. (b) Each validly executed and timely filed Deferral Agreement shall be effective for the first Plan Year for which it is timely filed and for each succeeding Plan Year, until (i) modified or revoked by a subsequently timely filed, validly executed Deferral Agreement applicable to any such succeeding Plan Year, (ii) the Participant's eligibility ceases or (iii) the Participant terminates employment with the Employer for any reason. Any Eligible Employee who fails to have on file with the Committee with respect to any Plan Year a timely filed, validly executed Deferral Agreement shall not defer compensation under the Plan in such Plan Year. (c) Except as provided in Articles VI and X, each validly executed Deferral Agreement filed with the Committee may not be terminated or modified by the Participant until the first day of the succeeding Plan Year by timely filing with the Committee prior to such date a validly executed Deferral Agreement. 4.3 Subject to Sections 5.2 and 6.4(e), the Participant shall at all times be 100% vested in his or her Account. ARTICLE V CREDITING OF DEFERRED AMOUNTS AND VALUATION OF ACCOUNTS 5.1 The Committee shall establish and maintain a separate bookkeeping Account on behalf of each Participant. The value of an Account as of any date shall equal the credits for Deferred Amounts elected by the Participants, adjusted for the Rate of Return pursuant to this Article V, through the day preceding such date and less all payments made by the Employer to the Participant or his/her Beneficiary through the day preceding such date. 5.2 Unless otherwise delegated, the Committee shall (a) determine the Investment Options available as the measurement mechanism for the Rate of Return on Accounts under the Plan and (b) establish procedures for the manner and extent to which elections may be made, the method of valuing the Accounts and the various Investment Options and the method of crediting the Accounts with the Rate of Return, including making other adjustments as a result of dividend equivalents, interest equivalents or other earnings or return on such Accounts. The selection of the Moody's Rate as an Investment Option shall be limited as follows: (i) Eligible Employees holding a position of Group Vice President or above may select the Moody's Rate as the Investment Option for up to 100% of their Deferred Amount for a Plan Year. (ii) Eligible Employees not described in subparagraph (i) above, holding the position of Vice President may select the Moody's Rate as the Investment Option for up to 15% of their Base Salary and Bonus for a Plan Year. (iii) Eligible Employees not described in subparagraphs (i) or (ii) above are not permitted to select the Moody's Rate as an Investment Option. 5.3 To the extent an Eligible Employee selects the Moody's Rate as the Investment Option for his or her Account, the following provisions shall apply: Page 5 (a) Each month, during the Participant's employment with the Employer, the balance of such Participant's Account shall be credited with a Rate of Return at the Moody's Rate plus 3%; provided, however, that if benefits first become distributable pursuant to Section 6.3, the Rate of Return for the period commencing on the Participant's first day of participation in the Plan until his or her date of termination of employment, shall be the Moody's Rate; and, provided further, notwithstanding the foregoing, that upon and after the occurrence of a Change in Control, the Rate of Return for such Participant, if employed by the Employer on the date of such occurrence, shall be the Moody's Rate plus 3%; (b) Each month, commencing on the first day the Participant ceases to be employed by the Employer and continuing until the earlier of the Participant's reemployment with the Employer or the complete distribution of the Participant's Account, the balance of the Participant's Account shall be credited with a Rate of Return equal to the Moody's Rate plus 3%; provided, however, that if benefits first become distributable pursuant to Section 6.3, shall be equal to the Moody's Rate: and, provided further, notwithstanding the foregoing, that upon and after the occurrence of a Change in Control, the Rate of Return for such Participant, if employed by the Employer on the date of such occurrence, shall be the Moody's Rate plus 3%. (c) For purpose of this Section 5.3, the Rate of Return for the current month shall be the appropriate Moody's Rate specified therein taken to the one-twelfth power so that when calculated for 12 months, the effective annual interest credit shall be equal to the annual rate used to determine the applicable Moody's Rate specified therein. The formula for such calculation is: 12 1 + i - 1 where "i" is the applicable Moody's Rate specified in Sections 5.2 and 5.3. (d) The selection of the Moody's Rate as the Investment Option for Deferred Amounts is irrevocable with respect to those Deferred Amounts and earnings thereon. 5.4 The Company shall not be required to purchase, hold or dispose of any securities representing the Investment Options designated by a Participant. Participants shall not have any voting rights or any other ownership rights with respect to the Investment Options in which their Accounts are deemed invested. 5.5 The Account shall be valued by the Committee as of each December 31. The Account may also be valued by the Committee as of any other date as the Committee may authorize for the purpose of determining the Account for payment of benefits, or any other reason the Committee deems appropriate. 5.6 The Committee shall submit to each Participant periodic statements, at least annually, in such form as the Committee deems desirable, setting forth the balance standing to the credit of each Participant in his/her Account. ARTICLE VI COMMENCEMENT OF BENEFITS 6.1 In the event of a Participant's Retirement, the amount credited Page 6 to such Participant's Account shall be distributed to such Participant in the form(s) provided under this Article VI commencing as soon as administratively practicable, but effective as of the first day of the month immediately following the later of (a) the date of such Retirement, or (b) the date specified in the Participant's Deferral Agreement which can in no event be later than the Participant's 65th birthday. 6.2 In the event of a Participant's death prior to the complete distribution of his or her Account, the balance of such Participant's Account shall be distributed to such Participant's Beneficiary in the form(s) provided under Section 6.4(c) commencing as soon as administratively practicable fol- lowing such death, but effective as of the first day of the month immediately following the date of such Participant's death. 6.3 In the event any Participant terminates employment with the Employer prior to Retirement, for any reason other than death, the amount credited to such Participant's Account shall be distributed to such Participant in the form(s) provided for under this Article VI commencing as soon as administratively practicable, effective as of the first day of the month immediately following the later of (a) his or her date of termination, or (b) the date specified in the Participant's Deferral Agreement which can in no event be later than the Participant's 65th birthday. A Participant may elect in his or her Deferral Agreement to have the distribution of his or her Account commence effective as of the first day of the month following the determination that the Participant has suffered a Total Disability; provided that distribution of the Participant's Account has not already commenced. 6.4 (a) Except as otherwise provided in this Section 6.4, the amount credited to a Participant's Account shall be paid in one or more of the following forms: (i) a single lump sum, (ii) 60 approximately equal monthly installments, (iii) 120 approximately equal monthly installments or (iv) 180 approximately equal monthly installments, as the Participant shall elect in any Deferral Agreement; provided, however, that in the absence of such election in any Deferral Agreement, the respective amounts credited to the Participant's Account shall be payable in 120 approximately equal monthly installments. If installment payments are elected, the Account shall be amortized with an assumed Rate of Return of six percent (6%) unless the Participant selects, and the Committee approves, an alternative assumed Rate of Return. As of each January 1, the amount to be distributed in installment payments for that year shall be determined by amortizing the Participant's Account balance as of the preceding December 31 over the remainder of the installment period, using the assumed Rate of Return which was fixed under the preceding sentence at the time installment payments were elected. The Participant shall not be entitled to select a different form of distribution with respect to amounts credited to the Participant Account in each Plan Year. Instead, the distribution form(s) selected by the Participant shall apply to the entire balance of the Participant's Account. The Participant may modify the form(s) of distribution selected by the Participant's; provided that such modification is made on a validly executed and timely filed Deferral Agreement at least 12 months prior to the date on which any distributions of the Participant's Account shall have commenced. (b) In the event the amounts credited to the Participant's Account become payable pursuant to Section 6.3 prior to a Change in Control, the amounts credited to such Participant's Account shall be distributed in 60 approximately equal monthly installments without regard to paragraph (a) of this Section 6.4. (c) In the event of the Participant's death prior to the complete distribution of his or her Account pursuant to Section 6.4(b), the balance of the Participant's Account shall be paid to the Participant's Page 7 Beneficiary over the remainder of the period provided in Section 6.4(b). In the event of the Participant's death prior to the complete distribution of his or her Account other than in accordance with Section 6.4(b), the balance of the Participant's Account shall be paid to the Participant's Beneficiary in accordance with the form(s) elected by the Participant; provided, however, that prior to the commencement of benefits to such Beneficiary, upon written application to the Committee no later than 60 days following notification to the Beneficiary of his or her entitlement to benefits under the Plan, such Beneficiary may request that the Committee approve an alternative single form of distribution that would apply to the balance of the Participant's Account. The Committee, after considering all the facts and circumstances that it deems relevant (including, for example, the effect of such alternative form of distribution on the finances of the Company and the financial needs of the Beneficiary), shall determine in its sole discretion whether to permit the alternative form of distribution. In the event of the death of the Participant's last Beneficiary prior to the complete distribution of the Participant's Account, the balance of the Participant's Account shall be paid in a single lump sum to the deceased Beneficiary's estate. (d) Notwithstanding anything in this Section 6.4 to the contrary, in the event that the value of a Participant's Account does not exceed $30,000, as of the date benefits first become distributable, the Committee shall cause such Participant's Account to be distributed in a single lump sum payment. (e) Notwithstanding anything in the Plan to the contrary, benefits shall not be paid to a Participant who is a "covered employee" as that term is defined in Section 162(m) until the Participant is no longer a "covered employee". 6.5 Notwithstanding anything in this Article VI to the contrary, benefit payments under the Plan shall cease as of the first day the Participant returns to employment with the Employer. Upon such return to employment, the Participant shall, if eligible, be permitted to defer salary, as provided in Article III; provided, however, that, with respect to any such reemployed Participant whose Account prior to such reemployment was being credited with a Rate of Return under Sections 5.3 at the Moody's Rate, such reemployment shall not be effective to increase to the Moody's Rate plus 3% Rate of Return to be credited to the Participant's Account with respect to amounts deferred prior to such reemployment. 6.6 If the Participant or the Participant's Beneficiary is entitled to receive any benefits hereunder and is in his or her minority, or is, in the judgment of the Committee, legally, physically or mentally incapable of personally receiving and receipting any distribution, the Committee may make distributions to a legally appointed guardian or to such other person or institution as, in the judgment of the Committee, is then maintaining or has custody of the payee. 6.7 After all benefits have been distributed in full to the Participant or to the Participant's Beneficiary, all liability under the Plan to such Participant or to his or her Beneficiary shall cease. 6.8 No benefit shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge by the Participant or Beneficiary, and any such action shall be void for all purposes. No benefit shall in any manner be subject to the debts, contracts, liabilities, engagements or torts of the Participant or Beneficiary, nor shall it be subject to attachments or other legal process for or against the Participant or Beneficiary, except to such extent as may be required by law. Page 8 6.9 To the extent required by law in effect at the time payments are made, the Employer shall withhold from payments made hereunder the minimum taxes required to be withheld by the federal or any state or local government. ARTICLE VII BENEFICIARY DESIGNATION 7.1 The Participant may, at any time, designate a Beneficiary or Beneficiaries to receive the benefits payable in the event of his or her death and may designate a successor Beneficiary or Beneficiaries to receive any benefits payable in the event of the death of any other Beneficiary. Each Beneficiary designation shall become effective only when filed in writing with the Committee during the Participant's lifetime on a form prescribed by the Committee. The filing of a new Beneficiary designation form will cancel all Beneficiary designations previously filed. Any finalized divorce or marriage (other than a common law marriage) of a Participant subsequent to the date of filing of a Beneficiary designation form shall revoke such designation. The spouse of a Participant domiciled in a community property jurisdiction shall join in any designation of Beneficiary or Beneficiaries other than the spouse. If no Beneficiary shall be designated by the Participant, or if his or her Beneficiary designation is revoked by marriage, divorce or otherwise without execution of another designation, or if the designated Beneficiary or Bene- ficiaries shall not survive the Participant, payment of the Participant's Account shall be made to the Participant's estate in a single lump sum pay- ment. Notwithstanding any provision of this Plan to the contrary, any Bene- ficiary designation may be changed by a Participant by the written filing of such change on a form prescribed by the Committee. ARTICLE VIII FUNDING 8.1 All benefits hereunder are intended to be in the form of an unfunded obligation of the Employer. 8.2 Nothing contained herein shall create any obligation on the part of the Employer to set aside or earmark any monies or other assets specifically for payments under the Plan. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of the Employer, nor shall they be beneficiaries of, or have any rights, claims or interests in any life insurance policies, annuity contracts or the proceeds therefrom owned or which may be acquired by the Employer ("Policies"). Such Policies or other assets of the Employer shall not be held under any fund for the benefit of Participants, their Beneficiaries, heirs, successors or assigns, or held in any way as collateral security for the fulfilling of the obligations of the Employer under this Plan. Any and all of the Employer's assets and Policies shall be, and remain, for purposes of the Plan, the general unpledged, unrestricted assets of the Employer. The Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Employer to pay money in the future. 8.3 If a Participant or Beneficiary becomes entitled to a distribution of benefits under the Plan, and if at such time the Participant has outstanding any debt, obligation or other such liability representing an amount owing to the Employer, then the Employer may offset such amount owing it against the amount of benefits otherwise distributable. Such determination shall be made by the Committee. ARTICLE IX AMENDMENT AND TERMINATION 9.1 The Board, the Committee or their duly authorized delegates may at any time amend the Plan in whole or in part; provided, however, that no amendment shall be effective to decrease the benefits or rights of any Participant theretofore accrued. Written notice of such amendment shall be given to each Participant. Page 9 9.2 The Board may at any time terminate the Plan. Upon any termination of the Plan under this Section 9.2, each Participant shall cease to make deferrals under the Plan, and all amounts shall prospectively cease to be deferred for such Plan Year. Benefits payable under the Plan shall be paid at such times and pursuant to such terms and conditions as were effective immediately prior to the termination of the Plan. ARTICLE X FINANCIAL HARDSHIP WITHDRAWALS 10.1 Subject to the provisions set forth herein, a Participant may withdraw up to 100% of his or her Account as necessary to satisfy immediate and heavy financial needs of the Participant which the Participant is unable to meet from any other resource reasonably available to such Participant. The amount of such hardship withdrawal may not exceed the amount required to meet such need. 10.2 (a) Upon written application, the Committee, in its sole discretion, may grant a withdrawal to the Participant for any of the following unforeseen financial hardships: (i) unusual medical expenses incurred by the Participant for the Participant or his or her dependents; (ii) special health requirements of the Participant or his or her dependents; or (iii) any other situation which the Committee shall deem to constitute financial hardship. (b) The Participant shall be required to furnish evidence of purpose and need to the Committee on forms prescribed by the Committee. 10.3 The Rate of Return credited to the Participant's Account under Section 5.2, for purposes of determining the Participant's Account under this Article X only, shall be determined as if the Participant had terminated employment with the Employer as of the date of the relevant hardship withdrawal distribution made hereunder. 10.4 Notwithstanding any other provision of the Plan to the contrary, upon written application of the Participant, the Committee may, in the case of financial hardship, authorize the cessation of deferrals by the Participant. ARTICLE XI CLAIMS PROCEDURE 11.1 Each Claimant shall have the right to submit a Claim with respect to a benefit sought hereunder. Written notice of any Claim hereunder must be given to the Committee either personally or by certified or registered mail, return receipt requested, at the following address: Albertson's, Inc. Attn: Grantor Trust Committee c/o Corporate Secretary 250 Parkcenter Blvd. P.O. Box 20 Boise, Idaho 83726 Such Claim shall state with particularity: Page 10 (a) The benefit claimed; and (b) All facts believed to be relevant in connection with such Claim. 11.2 Upon receipt of a Claim hereunder, the Committee shall consider the merits of the Claim and shall within 90 days from the receipt of the Claim render a decision on the merits and communicate the same to the Claimant. In the event the Committee denies the Claim in whole or in part, the Claimant shall be so notified in writing, which shall be addressed and delivered to him or her personally or by mail, and shall set forth the following in a manner reasonably calculated to be understood by the Claimant: (a) The reason or reasons for rejection of the Claim; (b) The provisions of the Plan and the particular provisions of law, if any, relied upon in reaching such determination; (c) A description of any additional information needed from the Claimant in order for him or her to perfect his or her Claim and an explanation of why such information is necessary; and (d) A statement outlining the Appellate Review Procedure as set forth in Section 11.3. The failure of the Committee to render a decision on the merits of a Claim shall be deemed to be a denial of such Claim and notice of such denial shall be deemed to have been given to the Claimant on the ninetieth (90th) day from receipt by the Committee of the Claim. 11.3 Where a Claim has been or is deemed denied, the Claimant shall have the right within 60 days after the date he or she receives or is deemed to have been given notice that his or her Claim has been rejected, in whole or in part, to an Appellate Review Procedure as set forth herein. Such procedure shall enable the Claimant to appeal from an adverse decision by delivering a written request for an appeal to the Committee either personally or by certified or registered mail, return receipt requested. Such request shall set forth the reasons why the Claimant believes the decision rejecting his or her Claim is erroneous and shall be signed by the Claimant under oath. Within 30 days after such request is received, the Committee may conduct a review of the Claim at a hearing at which the Committee may invite the Claimant to present his or her views with respect to the merits of the Claim. Whether or not a hearing is held, the Claimant may submit issues and comments in writing to the Committee for consideration at the hearing and may review pertinent documents. A decision with respect to the merits of the Claim shall be rendered by the Committee not later than 60 days after the delivery of the written request for an appeal hereunder unless special circumstances (such as holding a hearing) require an extension of time for processing, and then no later than 120 days after receipt of the request. The Appellate Review decision shall include specific reasons believed to support such decision, including specific references to provisions of the Plan and of law, shall be written in a manner reasonably calculated to be under- stood by the Claimant and shall be delivered to the Claimant personally or by mail. 11.4 No action shall be commenced under Section 502(a)(1)(B) of ERISA, or under any other provision of law, until the Claimant shall first have exhausted the Claims Procedure available to him or her hereunder, provided that such Claimant would not have been irreparably and materially harmed by any delay occasioned by this Claims Procedure. Insofar as the same is not inconsistent with regulations promulgated under Section 503 of ERISA, relating to claims procedures, any Claim under this Claims Procedure must be submitted within three Page 11 (3) months from the earlier of (a) the date on which the Claimant learned of facts sufficient to enable him or her to formulate such Claim, or (b) the date on which the Claimant should reasonably have been expected to learn the facts sufficient to enable him or her to formulate such Claim. Claims submitted after such period shall be deemed to have been waived by the Claimant and shall thereafter be wholly unenforceable. No statute of limitations set forth under either Section 413 of ERISA, or any other applicable provision of law, shall be deemed to be extended in any way by the period of limitations set forth herein with respect to this Claims Procedure. 11.5 All references in this Article XI to Claimant shall include representatives who are duly authorized as such, in writing, which authoriza- tion shall have been delivered to the Committee at some stage of the Claims Procedure. After such written authorization is delivered, copies of all sub- sequent communications with the Claimant and decisions with respect to the Claim, for which such authorization has been provided, shall be delivered to the authorized representative, as well as to the Claimant. ARTICLE XII GENERAL PROVISIONS 12.1 Neither the establishment of the Plan, nor any modification thereof, nor the creation of an Account, nor the payment of any benefits shall be construed (a) as giving the Participant, Beneficiary or any other person, any legal or equitable right against the Employer unless such right shall be specifically provided for in the Plan or conferred by affirmative action of the Employer in accordance with the terms and provisions of the Plan, or (b) as giving the Participant the right to be retained in the service of the Employer, and the Participant shall remain subject to discharge to the same extent as if the Plan had never been established. 12.2 A Participant will cooperate with the Employer by furnishing any and all information requested by the Employer in order to facilitate the payment of benefits hereunder, taking such physical examinations as the Employer may deem necessary and taking such other relevant action as may be requested by the Employer. If a Participant refuses so to cooperate, the Employer shall have no further obligation to the Participant under the Plan. 12.3 All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular. 12.4 Any notice or filing required or permitted to be given to the Committee under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to the principal office of the Company, directed to the attention of the Corporate Secretary of the Company. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or receipt for registration or certification. 12.5 The validity of the Plan or any of its provisions shall be determined under and construed according to the laws of the State of Idaho, except to the extent Idaho law is preempted by federal law, including, but not limited to, ERISA. Should any provision of the Plan or any regulations adopted thereunder be deemed or held to be unlawful or invalid for any reason, such fact shall not adversely affect the other provisions or regulations unless such invalidity shall render impossible or impractical the functioning or the Plan and, in such case, the appropriate parties shall immediately adopt Page 12 a new provision or regulation to take the place of the one held illegal or invalid. 12.6 Nothing contained herein shall preclude the Employer from merging into or with, or being acquired by, another business entity. 12.7 The liabilities under the Plan shall be binding upon any successor or assign of the Employer and any purchaser of the Employer or substantially all of the assets of the Employer, and the Plan shall continue in full force and effect. 12.8 The titles of the Articles in the Plan are for convenience of reference only, and, in the event of any conflict, the text rather than such titles shall control. IN WITNESS WHEREOF, the Company has caused its officers, duly authorized by its Board of Directors, to execute the Plan this 1st day of December, 1999. ALBERTSON'S, INC. ATTEST: /s/ Kaye L. O'Riordan By /s/ Thomas R. Saldin - ---------------------- --------------------------------------- Its Executive Vice President and General Counsel --------------------------------------- Page 13 EX-10.13.6 6 EXECUTIVE PENSION MAKEUP PLAN Exhibit 10.13.6 SECOND AMENDMENT TO ALBERTSON'S, INC. EXECUTIVE PENSION MAKEUP PLAN WHEREAS, the Albertson's, Inc. Executive Pension Makeup Plan (the "Plan") was amended and restated, effective January 1, 1995; WHEREAS, Albertson's Inc. (the "Employer") has adopted the Albertson's Savings & Retirement Estates II, a profit sharing plan ("ASRE II") and the Albertson's, Inc. 2000 Deferred Compensation Plan, a nonqualified deferred compensation plan ("2000 Plan"). WHEREAS, the Employer has amended the Albertson's Salaried Employees' Pension Plan and the Albertson's Employees' Corporate Pension Plan (the "Pension Plans") to establish a floor-offset arrangement with ASRE II in order to provide a minimum level of benefits to certain participants who are also covered by the Pension Plans; WHEREAS, the Employer desires to further amend the Plan to reflect the amendments to the Pension Plans and the adoption of ASRE II and the 2000 Plan by the Employer; NOW, THEREFORE, the following amendments to the Plan are hereby adopted, effective October 1, 1999: 1. Definitions for the terms "ASRE II", "ASRE Makeup Plan" and "2000 Plan" are added to Article I of the Plan to read in their entirety as follows: "ASRE II" shall mean the Albertson's Savings & Retirement Estates II, as from time to time amended, established and maintained by the Employer. "ASRE Makeup Plan" shall mean the Albertson's, Inc. Executive ASRE Makeup Plan, as from time to time amended, established and maintained by the Employer. . . . "2000 Plan" shall mean the Albertson's, Inc. 2000 Deferred Compensation Plan, as from time to time amended, established and maintained by the Employer. Page 1 2. Section 2.01 is amended and restated to read in its entirety as follows: 2.01 Eligibility to Participate. An Employee shall be eligible to participate in the Plan only if specified, either by name or by class of employees, by resolution of the Board of Directors of the Employer. Notwith- standing the foregoing, effective November 20, 1999, only Employees who were participants in the Corporate Pension Plan or Salaried Pension Plan on such date, shall be eligible to participate in the Plan. Once an Employee becomes a Participant, the Employee shall remain a Participant until the earlier of the Participant's death or the complete distribution of the Participant's Accrued Benefit. 3. Section 3.01 is amended and restated to read in its entirety as follows: 3.01 Amount of Accrued Benefit. (a) An Officer Participant's Accrued Benefit shall be a monthly retirement benefit equal to an amount calculated pursuant to Section 4.01 (as amended from time to time), or any successor provision thereto, of the Salaried Pension Plan with the following modifications: (i) Any restrictions on the amount of such benefit contained in the Salaried Pension Plan or required by law with respect to "qualified" defined benefit plans (including, but not limited to, the limitations of Section 415 of the Internal Revenue Code of 1986, as amended, and any successor thereto) shall not be taken into account; (ii) Any limitation on the amount of annual compensation of the Officer Participant shall not be taken into account; (iii) Annual compensation shall include (A)compensation otherwise payable by the Employer to the Officer Participant which the Officer Participant elects to defer under either of the Deferred Compensation Plans, or the 1990 Plan or the 2000 Plan for the year in which the compensation is deferred, but only those components of deferred compensation which, if not deferred, would be taken into account in determining benefits under the Salaried Pension Plan; (B) compensation deferred under certain deferred compensation arrangements relating to phantom stock, which arrangements have been superseded by Employer contributions to Albertson's, Inc. Senior Executive Deferred Compensation Plan; and (C) Employer contributions to Albertson's, Inc. Senior Executive Deferred Compensation Plan; (iv) All years of credited service of the Officer Participant under the Corporate Pension Plan and all years of credited service of the Officer Participant under the Salaried Pension Plan, shall be taken into account; and Page 2 (v) Such Officer Participant's Accrued Benefit shall be reduced by the sum of (A) the Officer Participant's accrued benefit under the Salaried Pension Plan, (B) the Officer Participant's accrued benefit, if any, under the Corporate Pension Plan, and (C) the actuarial equivalent of the Officer Participant's vested account balances in the "company contribution on pay accounts" under ASRE II and ASRE Makeup Plan. If an Officer Participant becomes a Non-Officer Participant or otherwise ceases to be in the eligible class of employees under Section 2.01 without retiring or terminating employment with the Employer, the Participant's benefit shall continue to accrue and be calculated pursuant to this Section 3.01(a). (b) A Non-Officer Participant's Accrued Benefit shall be a monthly retirement benefit equal to an amount calculated pursuant to Section 4.01 (as amended from time to time), or any successor provision thereto, of the Salaried Pension Plan with the following modifications: (i) Annual compensation shall include compensation otherwise payable by the Employer to the Non-Officer Participant which the Non-Officer Participant elects to defer under the 1990 Plan or 2000 Plan for the year in which the compensation is deferred, but only those components of deferred compensation which, if not deferred, would be taken into account in determining benefits under the Salaried Pension Plan; and (ii) Such Non-officer Participant's Accrued Benefit shall be reduced by the sum of (A) the Non-Officer Participant's accrued benefit under the Salaried Pension Plan and (B) by the actuarial equivalent of the Non-officer Participant's vested account balances in the "company contribution on pay accounts" under ASRE II and ASRE Makeup Plan. If a Non-Officer Participant ceases to be in the eligible class of employees under Section 2.01 without retiring or terminating employment with the Employer, the Participant's benefit shall continue to accrue and be calculated pursuant to this Section 3.01(b). IN WITNESS WHEREOF, the Employer has caused this instrument to be executed by its officer, duly authorized by its Board of Directors, this 1st day of December, 1999. ALBERTSON'S, INC. ATTEST: By /s/ Thomas R. Saldin -------------------------------- /s/ Kaye L. O'Riordan Its Executive Vice President - ---------------------- and General Counsel -------------------------------- Page 3 EX-10.14 7 EXECUTIVE ASRE MAKEUP PLAN Exhibit 10.14 ALBERTSON'S, INC. EXECUTIVE ASRE MAKEUP PLAN Established Effective September 26, 1999 TABLE OF CONTENTS ================= Page ==== ARTICLE I - DEFINITIONS..............................................1 ARTICLE II - ADMINISTRATION...........................................4 ARTICLE III - PARTICIPATION............................................4 ARTICLE IV - MAINTENANCE AND VALUATION OF ACCOUNTS....................5 ARTICLE V - CREDITING OF ACCOUNTS....................................6 ARTICLE VI - COMMENCEMENT OF BENEFITS.................................6 ARTICLE VII - BENEFICIARY DESIGNATION..................................8 ARTICLE VIII - FUNDING..................................................8 ARTICLE IX - AMENDMENT AND TERMINATION................................9 ARTICLE X - FINANCIAL HARDSHIP WITHDRAWALS...........................9 ARTICLE XI - CLAIMS PROCEDURE.........................................9 ARTICLE XII - GENERAL PROVISIONS......................................11 ALBERTSON'S, INC. EXECUTIVE ASRE MAKEUP PLAN Established Effective September 26, 1999 Albertson's, Inc., a Delaware corporation (the "Company"), does hereby establish, effective October 1, 1999, the Albertson's, Inc. Executive ASRE Makeup Plan (the "Plan") as an unfunded deferred compensation arrangement for a select group of management or highly compensated employees. The Plan is implemented with the intention that it will aid in retaining and attracting employees of exceptional ability by providing such employees with a means to supplement their income at retirement. ARTICLE I DEFINITIONS For purposes of the Plan, the following words and phrases shall have the following meanings unless a different meaning is plainly required by the context. 1.1 "Account" means the bookkeeping account on behalf of each Participant, maintained and valued in accordance with Article VIII. 1.2 "ASRE" means the Albertson's Savings & Retirement Estates, as amended from time to time. 1.3 "Base Salary" means, with respect to each Participant, the Participant's annual rate of salary (determined as of the first day of each Plan Year and unaffected by any changes during the Plan Year) before reduction pursuant to the Plan or any other deferred compensation plan or salary reduc- tion arrangement, but excluding bonuses, option awards or other forms of remuneration not included in the Participant's annual rate of salary. 1.4 "Beneficiary" or "Beneficiaries" means the person or persons designated under Article VII to receive any benefits in the event of the Participant's death. 1.5 "Board" means the Board of Directors of the Company. 1.6 "Change in Control" shall mean the occurrence, in a single trans- action or series of transactions after September 26, 1999, of any one of the following events or circumstances: (a) merger, consolidation or reorganization where the beneficial owners of the Voting Securities immediately preceding such merger, consolidation or reorganization beneficially own less than 80% of the securities possessing the right to vote to elect directors or to authorize a merger, consolidation or reorganization with respect to the survivor, after giving effect to such merger, consolidation or reorganization; (b) merger, consolidation or reorganization of the Company where 20% or more of the incumbent directors of the Company are changed; (c) acquisition by any person or group, as defined for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, other than a trustee or other fiduciary holding Voting Securities under an employee benefit plan of the Company (or a corporation owned, directly or indirectly, by the holders of Voting Securities in substantially the same proportion as their ownership of Voting Securities) of beneficial Page 1 ownership of 20% or more of the Voting Securities (such amount to include any Voting Securities acquired prior to September 27, 1999); (d) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clauses (a), (b), (c) or (e) of this paragraph) whose election by the Company's shareholders was approved by a vote of at least two-thirds (b) of the directors still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (e) approval by the shareholders of the Company of a plan of liquidation or dissolution with respect to the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets; provided, that in the event the exact date of a Change in Control cannot be determined, such Change in Control will be deemed to have occurred on the earliest date on which it could have occurred. 1.7 "Code" means the Internal Revenue Code of 1986, as amended. 1.8 "Committee" means the Grantor Trust Committee appointed by the Board to administer the Plan, or such other administrative committee of not less than three (3) persons that the Board shall designate. 1.9 "Company" means Albertson's, Inc., a Delaware corporation, or its successor or successors. 1.10 "Compensation" means a Participant's straight-time earnings, overtime, and any bonus or other amounts paid by the Employer by reason of services performed by the Participant (including payments pursuant to amounts previously deferred under the Albertson's, Inc. 2000 Deferred Compensation Plan or any other nonqualified deferred compensation plan), and wage replacement benefits under Company-sponsored programs for either occupational or non-occupational disability benefits, except as provided in (a)(iv) below, before deductions are authorized by the Participant or required by law to be withheld. (a) Notwithstanding the foregoing, a Participant's Compensation shall be determined without taking into account any of the following: (i) Contributions or payments by the Employer on behalf of a Participant under any employee benefit plan (other than payments pursuant to a nonqualified deferred compensation plan), including but not limited to ASRE and any health or welfare plan; (ii) Compensation that is not subject to employer income tax withholding under Code Section 3402 (or any successor thereof), except such Compensation as is provided in paragraph (c) below; (iii) Income caused by the exercise of stock options and stock appreciation rights; (iv) Income attributable to benefits received under the long-term disability plan maintained by the Employer; and income attributable to severance from employment with the Employer. (b) A Participant's Compensation for purposes of the Plan shall be the Compensation paid to him/her during the relevant portion of the Plan Year, irrespective of when such Compensation is actually earned. Page 2 (c) Except as is expressly provided to the contrary herein, a Participant's Compensation shall include (i) his/her deferrals under the Albertson's, Inc. 2000 Deferred Compensation Plan, and (ii) his/her contributions and any amount covering employee contributions from the pre-tax health care premium payment arrangement under the American Stores Company Before Tax Plan or any similar arrangement sponsored by the Employer pursuant to Code Section 125. 1.11 "Compensation Committee" means the Compensation Committee appointed by the Board to establish and review the annual salaries and bonuses paid to the elected officers and the Executive Vice Presidents of the Company, to establish the bonus policy for all the officers of the Company and to establish stock option plans and grant options pursuant thereto, or such other committee of not less than three (3) persons that the Board shall designate. 1.12 "Deferral Agreement" means the written participation agreement (substantially in the form attached to this Plan) that shall be entered into by the Employer and a Participant pursuant to Article III with respect to such Participant. 1.13 "Effective Date" means September 26, 1999. 1.14 "Eligible Employee" means any employee of an Employer who (a) is a participant in ASRE, (b) (i) holds a position of Vice President or above or is in the Company's Salary Administration Program and (ii) has a Base Salary of $77,873 or more (as indexed pursuant to the Salary Schedule Adjustment), and (c) satisfies such other criteria as may be established by the Committee. An employee shall cease to be an Eligible Employee if the employee does not receive Compensation for four (4) or more consecutive weeks. Notwithstanding the foregoing, no participant in the American Stores Company Supplemental Executive Retirement Plan shall be considered an Eligible Employee prior to January 1, 2000. 1.15 "Employer" means the Company and any of its Subsidiaries. 1.16 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 1.17 "Grantor Trust Committee" means that committee created by the Board pursuant to resolutions adopted on August 29, 1988, to administer and amend certain Company deferred compensation plans and trusts. 1.18 "Fiscal Year" means the fiscal year of the Company. 1.19 "Investment Options" means the securities or funds identified by the Committee from time to time as the investments available as the growth measurement mechanism for Accounts under the Plan. 1.20 "Participant" shall have the meaning provided under Section 3.1 hereof. 1.21 "Plan" means this Albertson's, Inc. Executive ASRE Makeup Plan, as it may be amended from time to time. 1.22 "Plan Year" means the period beginning on the Effective Date and ending on December 31, 1999 and each 12-month period thereafter. Page 3 1.23 "Salary Administration Program" means the program established by the Company for the administration of the salaries of employees of the Company. 1.24 "Salary Schedule Adjustment" means the annual percentage adjustment to the medians of the pay grades (i.e., salaried grades) of the Company's Salary Administration Program. 1.25 "Subsidiary" means any corporation, partnership, limited liability company, venture or other entity in which the Company has, directly or indirectly, at least a 50% ownership interest. 1.26 "Total Disability" means the complete inability of the Eligible Employee to perform any and every duty of his or her regular occupation, as determined by the Committee in its sole and absolute discretion. 1.27 "Voting Securities" means securities possessing the right to vote to elect directors or to authorize a merger, consolidation or reorganization of the Company. ARTICLE II ADMINISTRATION 2.1 The Plan shall be administered by the Committee. The Committee shall have the authority to interpret the Plan, to establish and revise rules and regulations relating to the Plan, to make any other determinations that it believes necessary or advisable for the administration of the Plan and to delegate such administrative powers and duties as it shall determine. All decisions of the Committee shall be by a vote of the majority of its members and shall be final and binding unless the Board shall determine otherwise. Members of the Committee who are Eligible Employees shall be eligible to participate in the Plan while serving as a member of the Committee, but a member of the Committee shall not vote or act upon any matter which relates solely to such member as a Participant. 2.2 The Employer shall indemnify and hold harmless the members of the Committee and their delegates against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to the Plan, except in the case of gross negligence or willful misconduct. ARTICLE III PARTICIPATION 3.1 An Eligible Employee shall automatically become a Participant in the Plan immediately upon becoming an Eligible Employee and shall remain a Participant until the earlier of the Participant's death or the complete distribution of the Participant's Account. 3.2 An Eligible Employee electing to defer compensation in accordance with this Article III shall have the right to determine his or her deferred amounts for each Plan Year, subject to the limitations set forth in this Article III. Such deferred amounts shall reduce the amount of the Participant's Compensation that is to be paid to the Participant in the Plan Year of reference. 3.3 (a) By such date as the Committee shall determine, but not later than the December 31 immediately preceding the first day of each Plan Year, an Eligible Employee may elect to defer a percentage of his or her Compensation for such Plan Year; provided, however, that the amount deferred may not exceed the amount necessary to receive the maximum Employer matching contribution under ASRE and the Plan, as determined by Page 4 the Committee. Such election shall be effected by the execution of a valid Deferral Agreement, timely filed with the Committee. (b) Each validly executed and timely filed Deferral Agreement shall be effective for the first Plan Year for which it is timely filed and for each succeeding Play Year, until (i) modified or revoked by a subsequently timely filed, validly executed Deferral Agreement applicable to any such succeeding Play Year, (ii) the Participant's eligibility ceases or (iii) the Participant terminates employment with the Employer for any reason. Any Eligible Employee who fails to have on file with the Committee with respect to any Plan Year a timely filed, validly executed Deferral Agreement shall not defer Compensation under the Plan in such Plan Year. (c) Except as provided in Articles VI and X, each validly executed Deferral Agreement filed with the Committee may not be terminated or modified by the Participant until the first day of the succeeding Plan Year by timely filing with the Committee prior to such date a validly executed Deferral Agreement. 3.4 Notwithstanding anything in the Plan to the contrary, the Committee shall be authorized to take such steps as may be necessary to ensure that the Plan is and remains at all times an unfunded deferred compensation arrangement for a select group of management or highly compensated employees, within the meaning of ERISA and the Code or such other successor or applicable laws. ARTICLE IV MAINTENANCE AND VALUATION OF ACCOUNTS 4.1 The Committee shall establish and maintain a separate bookkeeping Account on behalf of each Participant. The value of an Account as of any date shall equal the credits for deemed Employer contributions (including deferrals elected by Participants) made by the Employer to such Account in accordance with Article V, adjusted for earnings and losses pursuant to this Article IV, through the day preceding such date and less all payments made by the Employer to the Participant or his/her Beneficiary through the day preceding such date. 4.2 Unless otherwise delegated, the Committee has the sole discretion to determine the Investment Options available as the measurement mechanism for earnings or losses on Accounts under the Plan, the manner and extent to which elections may be made, the method of valuing the Accounts and the various Investment Options and the method of crediting the Accounts with, or making other adjustments as a result of dividend equivalents, interest equivalents or other earnings or return on such Accounts. (a) The amounts in each Participant's Account shall be deemed to have been invested and reinvested in the Investment Options designated by the Participant. A Participant may make changes in his/her designation of Investment Options in the same manner and to the same extent as such changes are made under ASRE. Accounts and Investment Options shall be valued, and adjustments made, if necessary, in the same manner as under ASRE. 4.3 The Company shall not be required to purchase, hold or dispose of any securities representing the Investment Options designated by a Participant. Participants shall not have any voting rights or any other ownership rights with respect to the Investment Options in which their Accounts are deemed invested. 4.4 The Account shall be valued by the Committee as of each December 31. Page 5 The Account may also be valued by the Committee as of any other date as the Committee may authorize for the purpose of determining the Account for payment of benefits, or any other reason the Committee deems appropriate. 4.5 The Committee shall submit to each Participant periodic statements, at least annually, in such form as the Committee deems desirable, setting forth the balance standing to the credit of each Participant in his/her Account. 4.6 A Participant shall be vested in his/her Account to the same extent and in the same proportion that the Company contribution under Section 5.1(b) is treated as vested under the terms of ASRE. Notwithstanding the foregoing, a Participant shall be 100% vested in his/her Account at all times following a Change in Control. ARTICLE V CREDITING OF ACCOUNTS 5.1 A Participant under the Plan shall be credited (as a bookkeeping entry) to such Participant's Account an amount equal to the deferral amount elected by the Participant under the Deferral Agreement, together with the excess of the amount described in Section 5.1(a) over the amount described in Section 5.1(b) as follows: (a) The amount equal to the contribution the Employer would make to ASRE on behalf of the Participant for the Plan Year, without regard to any limitations imposed by the Code based on the Participant's Compensation for such Plan Year. (b) The amount equal to the Employer's actual contribution to ASRE on behalf of the Participant for such Plan Year. Although the Employer contribution shall typically be actually determined or credited in the Plan Year following the Plan Year to which it corresponds, the contribution shall be credited effective as of the date the Employer made the actual contribution to ASRE for such Plan Year. ARTICLE VI COMMENCEMENT OF BENEFITS 6.1 The amount credited to a Participant's Account shall be distributed to such Participant in the form(s) provided under this Article VI commencing as soon as administratively practicable, but effective as of the first day of the month immediately following the occurrence of the first distribution event selected by the Participant in his or her distribution form. A Participant may select any or all of the following distribution events: (a) termination of employment, (b) death, (c) Total Disability and (d) attainment of a specified age on or after age 59 1/2. 6.2 In the event of a Participant's death prior to the complete distribution of his/her Account, the balance of such Participant's Account shall be distributed to such Participant's Beneficiary in the form(s) provided under Section 6.3(b) commencing as soon as administratively practicable following such death, but effective as of the first day of the month immediately following the date of such Participant's death. 6.3 (a) Except as otherwise provided in this Section 6.3, the entire amount credited to a Participant's Account shall be paid in one of the following forms selected on the Participant's distribution form: (i) a single lump sum, (ii) 60 approximately equal monthly installments, (iii) Page 6 120 approximately equal monthly installments or (iv) 180 approximately equal monthly installments, as the Participant shall elect in any distribution form; provided, however, that in the absence of such election in any distribution form, the respective amounts credited to the Participant's Account shall be payable in 120 approximately equal monthly installments. The Participant shall not be entitled to select a different form of distribution with respect to the amounts credited to the Participant's Account in each Plan Year. Instead, the distribution form selected by the Participant shall apply to the entire balance of the Participant's Account. The Participant may modify the form of distribution selected by the Participant; provided that such modification is made on a validly executed and timely filed distribution form at least 12 months prior to the date on which any distributions of the Participant's Account shall have commenced. (b) In the event of the Participant's death prior to the complete distribution of his/her Account, the balance of the Participant's Account shall be paid to the Participant's Beneficiary over the remainder of the period provided in Section 6.3(a). Upon written application to the Committee no later than 60 days following notification to the Beneficiary of his/her entitlement to benefits under the Plan, such Beneficiary may request that the Committee approve an alternative single form of distribution that would apply to the balance of the Participant's Account. The Committee, after considering all the facts and circumstances that it deems relevant (including, for example, the effect of such alternative form of distribution on the finances of the Employer and the financial needs of the Beneficiary), shall determine in its sole discretion whether to permit the alternative form of distribution. In the event of the death of the Participant's last Beneficiary prior to the complete distribution of the Participant's Account, the balance of the Participant's Account shall be paid in a single lump sum to the deceased Beneficiary's estate. (c) Notwithstanding anything in this Section 6.3 to the contrary, in the event that the value of a Participant's Account does not exceed $30,000, as of the date benefits first become distributable, the Committee shall cause such Participant's Account to be distributed in a single lump sum payment. (d) Notwithstanding anything in this Plan to the contrary, benefits shall not be paid to a Participant who is a "covered employee" as that term is defined in Code Section 162(m) until the Participant is no longer a "covered employee". 6.4 Notwithstanding anything in this Article VI to the contrary, benefit payments under the Plan shall cease as of the first day the Participant returns to employment with an Employer. Upon such return to employment, the Participant shall, if eligible, participate in the Plan as provided in Article III. 6.5 If the Participant or the Participant's Beneficiary is entitled to receive any benefits hereunder and is in his or her minority, or is, in the judgment of the Committee, legally, physically or mentally incapable of personally receiving and receipting any distribution, the Committee may make distributions to a legally appointed guardian or to such other person or institution as, in the judgment of the Committee, is then maintaining or has custody of the payee. 6.6 After all benefits have been distributed in full to the Participant or to the Participant's Beneficiary, all liability under the Plan to such Participant or to his/her Beneficiary shall cease. Page 7 6.7 No benefit shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge by the Participant or Beneficiary, and any such action shall be void for all purposes. No benefit shall in any manner be subject to the debts, contracts, liabilities, engagements or torts of the Participant or Beneficiary, nor shall it be subject to attachments or other legal process for or against the Participant or Beneficiary, except to such extent as may be required by law. 6.8 To the extent required by law in effect at the time payments are made, the Employer shall withhold from payments made hereunder the minimum taxes required to be withheld by the federal or any state or local government. ARTICLE VII BENEFICIARY DESIGNATION 7.1 The Participant may, at any time, designate a Beneficiary or Beneficiaries to receive the benefits payable in the event of his/her death and may designate a successor Beneficiary or Beneficiaries to receive any benefits payable in the event of the death of any other Beneficiary. Each Beneficiary designation shall become effective only when filed in writing with the Committee during the Participant's lifetime on a form prescribed by the Committee. The filing of a new Beneficiary designation form will cancel all Beneficiary designations previously filed. Any finalized divorce or marriage (other than a common law marriage) of a Participant subsequent to the date of filing of a Beneficiary designation form shall revoke such designation. The spouse of a Participant domiciled in a community property jurisdiction shall join in any designation of Beneficiary or Beneficiaries other than the spouse. If no Beneficiary shall be designated by the Participant, or if his/her Beneficiary designation is revoked by marriage, divorce or otherwise without execution of another designation, or if the designated Beneficiary or Beneficiaries shall not survive the Participant, payment of the Participant's Account shall be made to the Participant's estate in a single lump sum payment. Notwithstanding any provision of this Plan to the contrary, any Beneficiary designation may be changed by a Participant by the written filing of such change on a form prescribed by the Committee. ARTICLE VIII FUNDING 8.1 All benefits hereunder are intended to be in the form of an unfunded obligation of the Employer. 8.2 Nothing contained herein shall create any obligation on the part of an Employer to set aside or earmark any monies or other assets specifically for payments under the Plan. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of the Employer, nor shall they be beneficiaries of, or have any rights, claims or interests in any life insurance policies, annuity contracts or the proceeds therefrom owned or which may be acquired by the Employer ("Policies"). Such Policies or other assets of the Employer shall not be held under any fund for the benefit of Participants, their Beneficiaries, heirs, successors or assigns, or held in any way as collateral security for the fulfilling of the obligations of the Employer under this Plan. Any and all of the Employer's assets and Policies shall be, and remain, for purposes of the Plan, the general unpledged, unrestricted assets of the Employer. The Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Employer to pay money in the future. 8.3 If a Participant or Beneficiary becomes entitled to a distribution of benefits under the Plan, and if at such time the Participant has outstanding Page 8 any debt, obligation or other such liability representing an amount owing to the Employer, then the Employer may offset such amount owing it against the amount of benefits otherwise distributable. Such determination shall be made by the Committee. ARTICLE IX AMENDMENT AND TERMINATION 9.1 The Board, the Committee or their duly authorized delegates may at any time amend the Plan in whole or in part; provided, however, that no amendment shall be effective to decrease the benefits or rights of any Participant theretofore accrued. Written notice of such amendment shall be given to each Participant. 9.2 The Board may at any time terminate the Plan. Upon any termination of the Plan under this Section 9.2, each Participant shall cease to accrue any benefit under the Plan, and all amounts shall prospectively cease to accrue for such Plan Year. Benefits payable under the Plan shall be paid at such times and pursuant to such terms and conditions as were effective immediately prior to the termination of the Plan. ARTICLE X FINANCIAL HARDSHIP WITHDRAWALS 10.1 Subject to the provisions set forth herein, a Participant may withdraw up to 100% of his/her Account as necessary to satisfy immediate and heavy financial needs of the Participant which the Participant is unable to meet from any other resource reasonably available to such Participant. The amount of such hardship withdrawal may not exceed the amount required to meet such need. 10.2 (a) Upon written application, the Committee, in its sole discretion, may grant a withdrawal to the Participant for any of the following unforeseen financial hardships: (i) unusual medical expenses incurred by the Participant for the Participant or his or her dependents; (ii) special health requirements of the Participant or his or her dependents; or (iii) any other situation which the Committee shall deem to constitute financial hardship. (b) The Participant shall be required to furnish evidence of purpose and need to the Committee on forms prescribed by the Committee. 10.3 Anything else to the contrary notwithstanding, a Participant who is covered by the floor-offset arrangement involving ASRE and the Albertson's Salaried Employees' Pension Plan or the Albertson's Employees' Corporate Pension Plan shall not be permitted to withdraw any portion of the Account representing credits for deemed Company contributions (other than matching contributions), and earnings thereon, prior to termination of employment. ARTICLE XI CLAIMS PROCEDURE 11.1 Each Claimant shall have the right to submit a Claim with respect to a benefit sought hereunder. Written notice of any Claim hereunder must be given to the Committee either personally or by certified or registered Page 9 mail, return receipt requested, at the following address: Albertson's, Inc. Attn: Grantor Trust Committee c/o Corporate Secretary 250 Parkcenter Blvd. P.O. Box 20 Boise, Idaho 83726 Such Claim shall state with particularity: (a) The benefit claimed; and (b) All facts believed to be relevant in connection with such Claim. 11.2 Upon receipt of a Claim hereunder, the Committee shall consider the merits of the Claim and shall within 90 days from the receipt of the Claim render a decision on the merits and communicate the same to the Claimant. In the event the Committee denies the Claim in whole or in part, the Claimant shall be so notified in writing, which shall be addressed and delivered to him or her personally or by mail, and shall set forth the following in a manner reasonably calculated to be understood by the Claimant: (a) The reason or reasons for rejection of the Claim; (b) The provisions of the Plan and the particular provisions of law, if any, relied upon in reaching such determination; (c) A description of any additional information needed from the Claimant in order for him or her to perfect his or her Claim and an explanation of why such information is necessary; and (d) A statement outlining the Appellate Review Procedure as set forth in Section 11.3. The failure of the Committee to render a decision on the merits of a Claim shall be deemed to be a denial of such Claim and notice of such denial shall be deemed to have been given to the Claimant on the ninetieth (90th) day from receipt by the Committee of the Claim. 11.3 Where a Claim has been or is deemed denied, the Claimant shall have the right within 60 days after the date he or she receives or is deemed to have been given notice that his or her Claim has been rejected, in whole or in part, to an Appellate Review Procedure as set forth herein. Such procedure shall enable the Claimant to appeal from an adverse decision by delivering a written request for an appeal to the Committee either personally or by certified or registered mail, return receipt requested. Such request shall set forth the reasons why the Claimant believes the decision rejecting his or her Claim is erroneous and shall be signed by the Claimant under oath. Within 30 days after such request is received, the Committee may conduct a review of the Claim at a hearing at which the Committee may invite the Claimant to present his or her views with respect to the merits of the Claim. Whether or not a hearing is held, the Claimant may submit issues and comments in writing to the Committee for consideration at the hearing and may review pertinent documents. A decision with respect to the merits of the Claim shall be rendered by the Committee not later than 60 days after the delivery of the written request for an appeal hereunder unless special circumstances (such as holding a hearing) require an extension of time for processing, and then no later than 120 days after receipt of the request. Page 10 The Appellate Review decision shall include specific reasons believed to sup- port such decision, including specific references to provisions of the Plan and of law, shall be written in a manner reasonably calculated to be understood by the Claimant and shall be delivered to the Claimant personally or by mail. 11.4 No action shall be commenced under Section 502(a)(1)(B) of ERISA, or under any other provision of law, until the Claimant shall first have exhausted the Claims Procedure available to him or her hereunder, provided that such Claimant would not have been irreparably and materially harmed by any delay occasioned by this Claims Procedure. Insofar as the same is not inconsistent with regulations promulgated under Section 503 of ERISA, relating to claims procedures, any Claim under this Claims Procedure must be submitted within three (3) months from the earlier of (a) the date on which the Claimant learned of facts sufficient to enable him or her to formulate such Claim, or (b) the date on which the Claimant should reasonably have been expected to learn the facts sufficient to enable him or her to formulate such Claim. Claims submitted after such period shall be deemed to have been waived by the Claimant and shall thereafter be wholly unenforceable. No statute of limitations set forth under either Section 413 of ERISA, or any other applicable provision of law, shall be deemed to be extended in any way by the period of limitations set forth herein with respect to this Claim(s) Procedure. 11.5 All references in this Article XI to Claimant shall include representatives who are duly authorized as such, in writing, which authori- zation shall have been delivered to the Committee at some stage of the Claims Procedure. After such written authorization is delivered, copies of all sub- sequent communications with the Claimant and decisions with respect to the Claim, for which such authorization has been provided, shall be delivered to the authorized representative, as well as to the Claimant. ARTICLE XII GENERAL PROVISIONS 12.1 Neither the establishment of the Plan, nor any modification thereof, nor the creation of an Account, nor the payment of any benefits shall be construed (a) as giving the Participant, Beneficiary or any other person, any legal or equitable right against Employer unless such right shall be specifically provided for in the Plan or conferred by affirmative action of the Employer in accordance with the terms and provisions of the Plan, or(b) as giving the Participant the right to be retained in the service of the Employer, and the Participant shall remain subject to discharge to the same extent as if the Plan had never been established. 12.2 A Participant will cooperate with the Employer by furnishing any and all information requested by the Employer in order to facilitate the payment of benefits hereunder, taking such physical examinations as the Employer may deem necessary and taking such other relevant action as may be requested by the Employer. If a Participant refuses so to cooperate, the Employer shall have no further obligation to the Participant under the Plan. 12.3 All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular. 12.4 Any notice or filing required or permitted to be given to the Committee under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to the principal office of the Company, directed to the attention of the Corporate Secretary of the Company. Page 11 Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or receipt for registration or certification. 12.5 The validity of the Plan or any of its provisions shall be determined under and construed according to the laws of the State of Idaho, except to the extent Idaho law is preempted by federal law, including but not limited to ERISA. Should any provision of the Plan or any regulations adopted thereunder be deemed or held to be unlawful or invalid for any reason, such fact shall not adversely affect the other provisions or regulations unless such invalidity shall render impossible or impractical the functioning or the Plan and, in such case, the appropriate parties shall immediately adopt a new provision or regulation to take the place of the one held illegal or invalid. 12.6 Nothing contained herein shall preclude an Employer from merging into or with, or being acquired by, another business entity. 12.7 The liabilities under the Plan shall be binding upon any successor or assign of an Employer and any purchaser of an Employer or substantially all of the assets of an Employer, and the Plan shall continue in full force and effect. 12.8 The titles of the Articles in the Plan are for convenience of reference only, and, in the event of any conflict, the text rather than such titles shall control. IN WITNESS WHEREOF, the Company has caused its officer, duly authorized by its Board of Directors, to execute the Plan this 1st day of December, 1999. ALBERTSON'S, INC. ATTEST: /S/ Kaye L. O'Riordan By /s/ Thomas R. Saldin - ---------------------- -------------------- Its Executive Vice President and General Counsel Page 13 EX-10.18.1 8 AMENDMENT TO EXECUTIVE PENSION MAKEUP TRUST Exhibit 10.18.1 AMENDMENT TO ALBERTSON'S, INC. EXECUTIVE PENSION MAKEUP TRUST This Amendment to the ALBERTSON'S, INC. EXECUTIVE PENSION MAKEUP TRUST (the "Trust" or "Trust Agreement") is made by Albertson's, Inc., a Delaware corporation (the "Employer"), pursuant to Section 6.01 of the Trust Agreement. WITNESSETH: WHEREAS, the Employer desires to change the Recordkeeper (as that term is defined in the Trust Agreement) for the Trust; WHEREAS, pursuant to Section 6.01 of the Trust Agreement, the Employer may amend the Trust Agreement by executing an instrument in writing and delivering it to the Trustee (as defined in the Trust Agreement), provided that the Trust has not become irrevocable, and, pursuant to Sections 4.14(f) and (g) of the Trust Agreement, the Employer may remove the Recordkeeper at any time prior to a Change in Control (as defined in the Trust Agreement) and may appoint a successor Recordkeeper meeting the requirements of Section 4.14(g) by delivering to the successor Recordkeeper a written instrument appointing the successor Recordkeeper; and WHEREAS, the Trust has not become irrevocable and a Change of Control has not occurred; NOW, THEREFORE, the Employer hereby amends the Trust Agreement as follows: 1. TOWERS, PERRIN, FORSTER & CROSBY, INC., a Pennsylvania corporation, is hereby removed as the Recordkeeper of the Trust and MANAGEMENT COMPENSATION GROUP, NORTHWEST, LLC, a Delaware limited liability company, which meets the requirements of Section 4.14(g) of the Trust is hereby appointed as the Recordkeeper of the Trust and Section 2.03 of the Trust Agreement is amended to reflect this change. 2. Section 7.07 of the Trust Agreement is hereby amended to read with regard to the address for communications to the Recordkeeper: Management Compensation Group, Northwest, LLC, 205 SE Spokane Street, Portland, Oregon 97202, Attention: David J. Taylor (or his successor regarding Albertson's, Inc.). The Employer hereby certifies that the Trust has not become irrevocable and that a Change of Control has not occurred. Page 1 IN WITNESS WHEREOF, the Employer has executed this amendment this 24th day of July, 1998 and has caused it to be delivered to the Trustee and to the successor Recordkeeper. EMPLOYER: ALBERTSON'S, INC. By: /s/ Thomas R. Saldin --------------------------------------------- Thomas R. Saldin Executive Vice President, Administration and General Counsel Page 2 EX-10.18.3 9 AMENDMENT TO EXECUTIVE PENSION MAKEUP TRUST Exhibit 10.18.3 AMENDMENT to the ALBERTSON'S, INC. EXECUTIVE PENSION MAKEUP TRUST This Amendment is made by Albertson's, Inc., a Delaware corporation (the "Corporation" or the "Employer"). RECITALS: A. The Corporation has established the Albertson's, Inc. Executive Pension Makeup Trust, effective February 1, 1989 (the "Trust"); B. The Corporation, pursuant to Section 6.01 of the Trust, retains the right to amend the Trust at any time prior to the time when the Trust shall become irrevocable pursuant to Section 6.02 thereof; and C. The Corporation certifies that the Trust has not become irrevocable pursuant to Section 6.02 thereof; and D. The Corporation has determined that it is advisable to amend the Trust in the manner hereinafter set forth. AMENDMENT The Trust is hereby amended, as of December 1, 1999, as follows: 1. To change the first sentence of Section 4.06. Creditors of Employer to read as follows: The Trust Fund shall at all times be subject to the claims of the Employer's general creditors but shall be utilized to satisfy any such claims only in the case of the Employer's bankruptcy or insolvency. 2. To change the first two sentences of subsection (b) of Section 4.13. Resignation and Removal to read as follows: Prior to a Change in Control the Employer shall fill a vacancy in the office of Trustee as soon as practicable by a written instrument filed with the person(s) appointed to fill the vacancy, which person(s) must be a financial institution that is independent of the Employer, and with a copy to the predecessor Trustee and the Recordkeeper. Following a Change in Control, the Employer shall be entitled to fill a vacancy in the office of Trustee, but only with the consent and approval of the Majority Participants, as evidenced in a written instrument filed with the person(s) appointed to fill the vacancy which person(s) must be a financial institution that is independent of the Employer. Page 1 3. To change the first two sentences of subsection (g) of Section 4.13. Resignation and Removal to read as follows: Prior to a Change in Control, the Employer shall fill a vacancy in the office of Recordkeeper as soon as practicable by a written instrument filed with the person(s) appointed to fill the vacancy, which person(s) must be independent from the Employer and must be a certified consulting actuary of firm of actuaries or accountants, and with a copy to the predecessor Recordkeeper and the Trustee. Following a Change in Control, the Employer shall be entitled to fill a vacancy in the office of Recordkeeper, but only with the consent and approval of the Majority Participants as evidenced in a written instrument filed with the person(s) appointed to fill the vacancy, which person(s) must be independent from the Employer and must be a certified consulting actuary or firm of actuaries or accountants. 4. To change the first sentence of subsection (b) of Section 4.16. Rights of Trustee to read as follows: Before the Trustee acts or refrains from acting, and in making any determination with respect to a Change in Control, a Potential Change in Control, the Value of the Trust Fund or any other determination hereunder (including but not limited to determination of the validity of consents of the Majority Participants), the Trustee may require and rely on an Expert's Certificate or an Opinion of Counsel or both covering such matters as the Trustee may reasonably require. IN WITNESS WHEREOF, this instrument has been duly executed by the undersigned on this 1st day of December, 1999 and has been delivered by facsimile to the Trustee (as that term is defined in the Trust) of the Trust on this 1st day of December, 1999. ALBERTSON'S, INC. By: /s/ Thomas R. Saldin --------------------------- Thomas R. Saldin Executive Vice President and General Counsel Page 2 EX-10.19.1 10 AMENDMENT TO EXECUTIVE DEFERRED COMP TRUST Exhibit 10.19.1 AMENDMENT TO ALBERTSON'S, INC. EXECUTIVE DEFERRED COMPENSATION TRUST This Amendment to the ALBERTSON'S, INC. EXECUTIVE DEFERRED COMPENSATION TRUST (the "Trust" or "Trust Agreement") is made by Albertson's, Inc., a Delaware corporation (the "Employer"), pursuant to Section 6.01 of the Trust Agreement. WITNESSETH: WHEREAS, the Employer desires to change the Recordkeeper (as that term is defined in the Trust Agreement) for the Trust; WHEREAS, pursuant to Section 6.01 of the Trust Agreement, the Employer may amend the Trust Agreement by executing an instrument in writing and delivering it to the Trustee (as defined in the Trust Agreement), provided that the Trust has not become irrevocable, and, pursuant to Sections 4.14(f) and (g) of the Trust Agreement, the Employer may remove the Recordkeeper at any time prior to a Change in Control (as defined in the Trust Agreement) and may appoint a successor Recordkeeper meeting the requirements of Section 4.14(g) by delivering to the successor Recordkeeper a written instrument appointing the successor Recordkeeper; and WHEREAS, the Trust has not become irrevocable and a Change of Control has not occurred; NOW, THEREFORE, the Employer hereby amends the Trust Agreement as follows: 1. TOWERS, PERRIN, FORSTER & CROSBY, INC., a Pennsylvania corporation, is hereby removed as the Recordkeeper of the Trust and MANAGEMENT COMPENSATION GROUP, NORTHWEST, LLC, a Delaware limited liability company, which meets the requirements of Section 4.14(g) of the Trust is hereby appointed as the Recordkeeper of the Trust and Section 2.03 of the Trust Agreement is amended to reflect this change. 2. Section 7.07 of the Trust Agreement is hereby amended to read with regard to the address for communications to the Recordkeeper: Management Compensation Group, Northwest, LLC, 205 SE Spokane Street, Portland, Oregon 97202, Attention: David J. Taylor (or his successor regarding Albertson's, Inc.). The Employer hereby certifies that the Trust has not become irrevocable and that a Change of Control has not occurred. Page 1 IN WITNESS WHEREOF, the Employer has executed this amendment this 24th day of July, 1998 and has caused it to be delivered to the Trustee and to the successor Recordkeeper. EMPLOYER: ALBERTSON'S, INC. By: /s/ Thomas R. Saldin --------------------------------------------- Thomas R. Saldin Executive Vice President, Administration and General Counsel Page 2 EX-10.19.3 11 AMENDMENT TO EXECUTIVE DEFERRED COMP TRUST Exhibit 10.19.3 AMENDMENT to the ALBERTSON'S, INC. EXECUTIVE DEFERRED COMPENSATION TRUST This Amendment is made by Albertson's, Inc., a Delaware corporation (the "Corporation" or the "Employer"). RECITALS: A. The Corporation has established the Albertson's, Inc. Executive Deferred Compensation Trust, effective February 1, 1989 (the "Trust"); B. The Corporation, pursuant to Section 6.01 of the Trust, retains the right to amend the Trust at any time prior to the time when the Trust shall become irrevocable pursuant to Section 6.02 thereof; and C. The Corporation certifies that the Trust has not become irrevocable pursuant to Section 6.02 thereof; and D. The Corporation has determined that it is advisable to amend the Trust in the manner hereinafter set forth. AMENDMENT The Trust is hereby amended, as of December 1, 1999, as follows: 1. To change the first sentence of Section 4.06. Creditors of Employer to read as follows: The Trust Fund shall at all times be subject to the claims of the Employer's general creditors but shall be utilized to satisfy any such claims only in the case of the Employer's bankruptcy or insolvency. 2. To change the first two sentences of subsection (b) of Section 4.13. Resignation and Removal to read as follows: Prior to a Change in Control the Employer shall fill a vacancy in the office of Trustee as soon as practicable by a written instrument filed with the person(s) appointed to fill the vacancy, which person(s) must be a financial institution that is independent of the Employer, and with a copy to the predecessor Trustee and the Recordkeeper. Following a Change in Control, the Employer shall be entitled to fill a vacancy in the office of Trustee, but only with the consent and approval of the Majority Participants, as evidenced in a written instrument filed with the person(s) appointed to fill the vacancy which person(s) must be a financial institution that is independent of the Employer. Page 1 3. To change the first two sentences of subsection (g) of Section 4.13. Resignation and Removal to read as follows: Prior to a Change in Control, the Employer shall fill a vacancy in the office of Recordkeeper as soon as practicable by a written instrument filed with the person(s) appointed to fill the vacancy, which person(s) must be independent from the Employer and must be a certified consulting actuary of firm of actuaries or accountants, and with a copy to the predecessor Recordkeeper and the Trustee. Following a Change in Control, the Employer shall be entitled to fill a vacancy in the office of Recordkeeper, but only with the consent and approval of the Majority Participants as evidenced in a written instrument filed with the person(s) appointed to fill the vacancy, which person(s) must be independent from the Employer and must be a certified consulting actuary or firm of actuaries or accountants. 4. To change the first sentence of subsection (b) of Section 4.16. Rights of Trustee to read as follows: Before the Trustee acts or refrains from acting, and in making any determination with respect to a Change in Control, a Potential Change in Control, the Value of the Trust Fund or any other determination hereunder (including but not limited to determination of the validity of consents of the Majority Participants), the Trustee may require and rely on an Expert's Certificate or an Opinion of Counsel or both covering such matters as the Trustee may reasonably require. IN WITNESS WHEREOF, this instrument has been duly executed by the undersigned on this 1st day of December, 1999 and has been delivered by facsimile to the Trustee (as that term is defined in the Trust) of the Trust on this 1st day of December, 1999. ALBERTSON'S, INC. By: /s/ Thomas R. Saldin -------------------------- Thomas R. Saldin Executive Vice President and General Counsel Page 2 EX-10.21.1 12 AMEND. TO NON-EMP DIR. DEFERRED COMP PLAN Exhibit 10.21.1 AMENDMENT to the ALBERTSON'S, INC. NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN This Amendment is made by Albertson's, Inc., a Delaware corporation (the "Corporation"). RECITALS: A. The Corporation established the Albertson's, Inc. Non-Employee Directors' Deferred Compensation Plan effective January 1, 1990 (the "Plan"); B. The Corporation, pursuant to Section 10.1 of the Plan, retained the right to amend the Plan; Section 10.1 provides that the Plan may be amended by the Non-Employee Directors' Deferred Compensation Committee appointed by the Board of Directors of Albertson's, Inc.; and the Committee has been granted the authority to amend the Plan by the Non-Employee Directors' Deferred Compensation Committee so long as such amendments do not materially alter benefits; and C. The Committee has determined that it is advisable to amend the Plan in the manner hereinafter set forth and that such amendments do not materially alter benefits. AMENDMENT The Plan is amended, as of December 15, 1998, in the following respects: The last two sentences of Section 6.4 (a) of the Plan shall be deleted and the following language shall be substituted in their place: The Participant may modify the form of the distribution of all or part of the Participant's Account, provided that such modification is made on a validly executed and timely filed Deferral Agreement before the end of the calendar year which ends at least twelve (12) months prior to the date on which any distribution of the Participant's Account shall have commenced. IN WITNESS WHEREOF, this instrument has been duly executed by the undersigned as of December 15, 1998. ALBERTSON'S, INC. By: /s/ Thomas R. Saldin --------------------------------------- Thomas R. Saldin Executive Vice President, Administration and General Counsel EX-10.22.1 13 AMENDMENT TO 1990 DEFERRED COMP TRUST Exhibit 10.22.1 AMENDMENT TO ALBERTSON'S, INC. 1990 DEFERRED COMPENSATION TRUST This Amendment to the ALBERTSON'S, INC. 1990 DEFERRED COMPENSATION TRUST (the "Trust" or "Trust Agreement") is made by Albertson's, Inc., a Delaware corporation (the "Employer"), pursuant to Section 6.01 of the Trust Agreement. WITNESSETH: WHEREAS, the Employer desires to change the Recordkeeper (as that term is defined in the Trust Agreement) for the Trust; WHEREAS, pursuant to Section 6.01 of the Trust Agreement, the Employer may amend the Trust Agreement by executing an instrument in writing and delivering it to the Trustee (as defined in the Trust Agreement), provided that the Trust has not become irrevocable, and, pursuant to Sections 4.14(f) and (g) of the Trust Agreement, the Employer may remove the Recordkeeper at any time prior to a Change in Control (as defined in the Trust Agreement) and may appoint a successor Recordkeeper meeting the requirements of Section 4.14(g) by delivering to the successor Recordkeeper a written instrument appointing the successor Recordkeeper; and WHEREAS, the Trust has not become irrevocable and a Change of Control has not occurred; NOW, THEREFORE, the Employer hereby amends the Trust Agreement as follows: 1. TOWERS, PERRIN, FORSTER & CROSBY, INC., a Pennsylvania corporation, is hereby removed as the Recordkeeper of the Trust and MANAGEMENT COMPENSATION GROUP, NORTHWEST, LLC, a Delaware limited liability company, which meets the requirements of Section 4.14(g) of the Trust is hereby appointed as the Recordkeeper of the Trust and Section 2.03 of the Trust Agreement is amended to reflect this change. 2. Section 7.07 of the Trust Agreement is hereby amended to read with regard to the address for communications to the Recordkeeper: Management Compensation Group, Northwest, LLC, 205 SE Spokane Street, Portland, Oregon 97202, Attention: David J. Taylor (or his successor regarding Albertson's, Inc.). The Employer hereby certifies that the Trust has not become irrevocable and that a Change of Control has not occurred. Page 1 IN WITNESS WHEREOF, the Employer has executed this amendment this 24th day of July, 1998 and has caused it to be delivered to the Trustee and to the successor Recordkeeper. EMPLOYER: ALBERTSON'S, INC. By: /s/ Thomas R. Saldin --------------------------------------------- Thomas R. Saldin Executive Vice President, Administration and General Counsel Page 2 EX-10.22.3 14 AMENDMENT TO 1990 DEFERRED COMPENSATION TRUST Exhibit 10.22.3 AMENDMENT to the ALBERTSON'S, INC. 1990 DEFERRED COMPENSATION TRUST This Amendment is made by Albertson's, Inc., a Delaware corporation (the "Corporation" or the "Employer"). RECITALS: A. The Corporation has established the Albertson's, Inc. Deferred Compensation Trust, effective November 20, 1990 (the "Trust"); B. The Corporation, pursuant to Section 6.01 of the Trust, retains the right to amend the Trust at any time prior to the time when the Trust shall become irrevocable pursuant to Section 6.02 thereof; and C. The Corporation certifies that the Trust has not become irrevocable pursuant to Section 6.02 thereof; and D. The Corporation has determined that it is advisable to amend the Trust in the manner hereinafter set forth. AMENDMENT The Trust is hereby amended, as of December 1, 1999, as follows: 1. To change the definition in Article I, Definitions of "Insurance Policies" to read as follows: "Insurance Policies" shall mean life insurance policies purchased on the life of any Participant or Eligible Person from any Insurance Company. 2. To change the first sentence of Section 4.06. Creditors of Employer to read as follows: The Trust Fund shall at all times be subject to the claims of the Employer's general creditors but shall be utilized to satisfy any such claims only in the case of the Employer's bankruptcy or insolvency. 3. To change the first two sentences of subsection (b) of Section 4.14. Resignation and Removal to read as follows: Prior to a Change in Control the Employer shall fill a vacancy in the office of Trustee as soon as practicable by a written instrument filed with the person(s) appointed to fill the vacancy, which person(s) must be a financial institution that is independent of the Employer, and with a copy to the predecessor Trustee and the Recordkeeper. Following a Change in Control, the Employer shall be entitled to fill a vacancy in the office of Trustee, but only with the consent and approval of the Majority Participants, as evidenced in a written instrument filed with the person(s) appointed to fill the vacancy which person(s) must be a financial institution that is independent of the Employer. 4. To change the first two sentences of subsection (g) of Section 4.14. Resignation and Removal to read as follows: Prior to a Change in Control, the Employer shall fill a vacancy in the office of Recordkeeper as soon as practicable by a written instrument filed with the person(s) appointed to fill the vacancy, which person(s) must be independent from the Employer and must be a certified consulting actuary of firm of actuaries or accountants, and with a copy to the predecessor Recordkeeper and the Trustee. Following a Change in Control, the Employer shall be entitled to fill a vacancy in the office of Recordkeeper, but only with the consent and approval of the Majority Participants as evidenced in a written instrument filed with the person(s) appointed to fill the vacancy, which person(s) must be independent from the Employer and must be a certified consulting actuary or firm of actuaries or accountants. 5. To change the first sentence of subsection (b) of Section 4.17. Rights of Trustee to read as follows: Before the Trustee acts or refrains from acting, and in making any determination with respect to a Change in Control, a Potential Change in Control, the Value of the Trust Fund or any other determination hereunder (including but not limited to determination of the validity of consents of the Majority Participants), the Trustee may require and rely on an Expert's Certificate or an Opinion of Counsel or both covering such matters as the Trustee may reasonably require. IN WITNESS WHEREOF, this instrument has been duly executed by the undersigned on this 1st day of December, 1999 and has been delivered by facsimile to the Trustee (as that term is defined in the Trust) of the Trust on this 1st day of December, 1999. ALBERTSON'S, INC. By: /s/ Thomas R. Saldin ----------------------- Thomas R. Saldin Executive Vice President and General Counsel EX-10.23 15 2000 DEFERRED COMPENSATION TRUST Exhibit 10.23 ALBERTSON'S, INC. 2000 DEFERRED COMPENSATION TRUST ALBERTSON'S, INC. 2000 DEFERRED COMPENSATION TRUST TABLE OF CONTENTS PREAMBLE 1 ARTICLE I: DEFINITIONS 1 ARTICLE II: NAME AND ESTABLISHMENT OF TRUST 7 Section 2.01 Name and Purpose 7 Section 2.02 Appointment of Trustee; Acceptance 7 Section 2.03 Appointment of Recordkeeper; Acceptance 8 Section 2.04 Grantor Trust 8 ARTICLE III: PROVISIONS RELATING TO THE EMPLOYER 8 Section 3.01 Contributions 8 Section 3.02 Insurance Policies 8 Section 3.03 Letters of Credit 9 Section 3.04 Return of Employer Contributions 9 Section 3.05 Certain Employer Notices 10 Section 3.06 Action by Employer 10 Section 3.07 Employer Liability 10 ARTICLE IV: PROVISIONS RELATING TO TRUSTEE AND RECORDKEEPER 10 Section 4.01 Receiving Contributions 10 Section 4.02 Management and Control of Trust Assets 10 Section 4.03 Investment of Trust Assets 11 Section 4.04 Distribution of Trust Assets; Limitations 12 Section 4.05 Protection of Trustee 14 Section 4.06 Creditors of Employer 14 Section 4.07 Compensation and Expenses 15 Section 4.08 Limitation of Administrative Duties 15 Section 4.09 Accountings 15 Section 4.10 General Management Powers 16 Section 4.11 Insurance Policies 18 Section 4.12 Liability for Breach of Fiduciary Duty 20 Section 4.13 Consultation and Indemnification 20 Section 4.14 Resignation and Removal 21 Section 4.15 Duties of the Recordkeeper 24 Section 4.16 Determinations by the Trustee; Notices 24 Section 4.17 Rights of Trustee 24 Section 4.18 Priority of Distribution and Liquidation of Trust Assets 25 i ARTICLE V: GENERAL ADMINISTRATIVE PROVISIONS 26 Section 5.01 Exchange of Information by the Employer and the Trustee 26 Section 5.02 Information to the Recordkeeper and Trustee 26 Section 5.03 Mistake of Fact 26 Section 5.04 Taxes 26 Section 5.05 Investment Company Act 27 ARTICLE VI: AMENDMENT AND TERMINATION 27 Section 6.01 Right to Amend 27 Section 6.02 Termination of Trust and Reversion of Assets 28 ARTICLE VII: MISCELLANEOUS PROVISIONS 28 Section 7.01 Entire Agreement 28 Section 7.02 Successors 28 Section 7.03 Headings 29 Section 7.04 Controlling Law 29 Section 7.05 Third-Party Inquiries 29 Section 7.06 Courts; Arbitration 29 Section 7.07 Addresses For Communications 29 Section 7.08 Waiver of Notice 30 Section 7.09 Accounting Period 30 Section 7.10 Interest in the Trust Fund 30 Section 7.11 Counterparts 30 EXHIBIT A - Form of Irrevocable Letter of Credit 31 EXHIBIT B - Real Estate Leases 35 EXHIBIT C - Actuarial Assumptions 36 EXHIBIT D - Trust Property 38 EXHIBIT E - Form of Certificate to the Trustee Certificate 39 EXHIBIT F - Individuals Eligible to be Participants 40 EXHIBIT G - Assignment Agreement 41
ii ALBERTSON'S, INC. 2000 DEFERRED COMPENSATION TRUST THIS TRUST AGREEMENT is made and entered into the 1st day of January, 2000, by and between ALBERTSON'S, INC., a Delaware corporation, as grantor, IBJ Whitehall Bank & Trust Company, a New York banking corporation, as trustee, and Management Compensation Group, Northwest, LLC, a Delaware limited liability company, as recordkeeper. WITNESSETH: WHEREAS, Albertson's, Inc. is adopting, effective January 1, 2000, the Albertson's, Inc. 2000 Deferred Compensation Plan as amended from time to time (the "Plan"); and WHEREAS, Albertson's, Inc. has incurred or expects to incur liability under the terms of the Plan with respect to individuals participating in the Plan; and WHEREAS, Albertson's, Inc. wishes to establish a grantor trust (the "Trust") for the purpose of accumulating assets to assist it in fulfilling its obligations under the Plan, to which Trust Albertson's, Inc. shall make contributions in the amounts determined in accordance with the terms of the Plan and this trust agreement; and WHEREAS, Albertson's, Inc. desires the Trustee to hold and administer all funds and other property contributed by Albertson's, Inc. and the Trustee is willing to hold and administer such funds pursuant to the terms of this trust agreement; and WHEREAS, Albertson's, Inc. desires that the assets of the Trust shall be available to satisfy the claims of Albertson's, Inc. general creditors in case of insolvency or bankruptcy; NOW, THEREFORE, in consideration of the promises, covenants, agreements, terms, obligations and duties herein set forth, the Trust to be named the "Albertson's, Inc. 2000 Deferred Compensation Trust" is hereby established effective from and after the date first above written, and the parties do hereby covenant and agree, as follows: ARTICLE I DEFINITIONS The following words and phrases are used in this trust agreement and shall have the meaning set forth in this Article unless a different meaning is clearly required by the context: Page 1 "Additional Premium Payment Obligation" shall mean any additional premiums, assessments, dues, charges and interest on any Insurance Policies held in the Trust as may be necessary following the satisfaction of the Premium Payment Obligation to cause each of such Insurance Policies to be paid in full. "Additional Premium Payment Obligation Amount" shall mean the aggregate payments required to be made by the Employer to the Trustee in order to satisfy any Additional Premium Payment Obligation. "Application" shall mean a written application from a Participant or a beneficiary of a deceased Participant received by the Recordkeeper requesting a payment from the Trust by reason of a benefit being due to such Participant or beneficiary under the Plan. "Bank" shall mean the commercial bank issuing a Letter of Credit. "Board of Directors" shall mean the Board of Directors of the Employer. "Change in Control" shall mean the occurrence in a single transaction or series of transactions after January 1, 2000, of any one of the following events or circumstances: (a) merger, consolidation or reorganization where the beneficial owners of the Voting Securities immediately preceding such merger, consolidation or reorganization beneficially own less than 80% of the securities possessing the right to vote to elect directors or to authorize a merger, consolidation or reorganization with respect to the survivor, after giving effect to such merger, consolidation or reorganization, (b) merger, consolidation or reorganization of the Employer where 20% or more of the incumbent directors of the Employer are changed, (c) acquisition by any person or group, as defined for purposes of Section 13(d) of the Exchange Act, other than a trustee or other fiduciary holding Voting Securities under an employee benefit plan of the Employer (or a corporation owned, directly or indirectly, by the holders of Voting Securities in substantially the same proportion as their ownership of Voting Securities) of beneficial ownership of 20% or more of the Voting Securities (such amount to include any Voting Securities acquired prior to January 2, 2000), (d) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors and any new director (other than a director designated by a person who has entered into an agreement with the Employer to effect a transaction described in clauses (a), (b), (c) or (e) of this paragraph) whose election by the Employer's shareholders was approved by a vote of at least two-thirds (2/3) of the directors still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (e) approval by the shareholders of the Employer of a plan of liquidation or dissolution with respect to the Employer or an agreement for the sale or disposition by the Employer of all or substantially all the Employer's assets; provided, that in the event the exact date of a Change in Control cannot be determined, such Change in Control will be deemed to have occurred on the earliest date on which it could have occurred. The Trustee and the Recordkeeper shall rely upon notice from the Employer pursuant to Section 3.05, provided such notice concludes that a Change in Page 2 Control has occurred. In the absence of such a notice, the Trustee and the Recordkeeper may require and rely upon an Opinion of Counsel relating to whether a Change in Control has occurred. Any Opinion of Counsel with respect to a Change in Control shall specify the date on which the Change in Control occurred, or if an exact date cannot be determined, the earliest date on which such Change in Control could have occurred and cover such other matters as the Trustee or the Recordkeeper shall reasonably require. Notwithstanding the foregoing, the occurrence of any of the foregoing events or transactions shall not be deemed to be a Change in Control of the Employer, if prior to the consummation of any of the foregoing events or transactions, the Continuing Directors (as defined in paragraph 1 of Article TWELFTH of the Employer's Restated Certificate of Incorporation, dated May 27, 1998) adopt a resolution to the effect that a Change in Control for the purposes of this Trust shall not be deemed to have occurred upon the consummation of any such event or transaction. "Code" shall mean the Internal Revenue Code of 1986, as from time to time amended. Reference to a section of the Code shall include that section and any comparable section or any future legislation that amends, supplements or supersedes said section. "Deficiency Amount" shall mean, with respect to each Participant and beneficiary of a deceased Participant, the amount of unpaid benefits, if any, and interest thereon, determined in accordance with Section 4.04(c). "Eligible Person" shall mean an employee of the Employer who is eligible to participate in the Plan but is not a Participant. "Employer" shall mean Albertson's, Inc., a corporation organized and existing under the laws of the State of Delaware, or its successor or successors. "Exchange Act" shall mean the Securities Exchange Act of 1934, all subsequent amendments thereto and any successor statute(s) adopted which addresses substantially the same subject matter. Further, a reference to any section of the Exchange Act shall refer to the section in effect on September 1, 1988, all subsequent amendments thereto and any successor section(s) adopted which addresses substantially the same subject matter. "Expert" shall mean the Recordkeeper, the Insurance Adviser, the Real Estate Adviser and any consultant, adviser, engineer, accountant, appraiser, actuary or other expert hired or retained by the Trustee to provide advice or to make or assist in making any determination hereunder. "Expert's Certificate" shall wean a certificate signed by an Expert or, if the Expert is a corporation or partnership, by two of its executive officers or partners. Page 3 "Insurance Adviser" shall mean a person, firm or corporation hired or retained by the Employer or Trustee to assist it in procuring, modifying, liquidating or valuing any Insurance Policies held by the Trust. "Insurance Company" shall mean any insurance company or companies from which the Employer or Trustee shall have procured Insurance Policies. "Insurance Policies" shall mean life insurance policies purchased on the life of any Participant or Eligible Person from any Insurance Company. "Letter of Credit" shall mean an irrevocable letter of credit issued for the benefit of the Trustee pursuant to Article III, substantially in the form attached hereto as Exhibit "A", by a United States commercial bank, or a United States office of a foreign bank, which issuing bank is acceptable to the Trustee, has a long-term debt rating by Standard & Poor's Corp. of no less than A (or the equivalent rating by Moody's Investors Service, Inc.), and whose combined capital and surplus is no less than $1,000,000,000. "Majority Participants" shall mean at any time Participants whose Value of Accrued Benefits then aggregate more than 66-2/3% of the then Value of Total Accrued Benefits. For purposes of determining "Majority Participants," "Participants" shall include persons then considered Participants under the Plan and beneficiaries of deceased Participants, and the Trustee shall be entitled to rely on the determination of the Recordkeeper as to whether or not a Participant or beneficiary of a deceased Participant or a group of Participants or beneficiaries of deceased Participants constitute "Majority Participants". "Opinion of Counsel" shall mean a written opinion from legal counsel acceptable to the Trustee. Such counsel may but need not be legal counsel regularly retained by the Employer or the Trustee. "Participant" shall mean an employee of the Employer participating in the Plan, as well as all former Participants whose benefits under the Plan have not been fully distributed. "Plan" shall mean the Albertson's, Inc. 2000 Deferred Compensation Plan, adopted effective January 1, 2000, as from time to time amended. "Potential Change in Control" shall mean the occurrence in a transaction or series of transactions after January 1, 2000, of any one or more of the following events or circumstances: (a) a tender offer or its substantial equivalent made by any person or group, as defined for the purposes of Section 13(d) of the Exchange Act, to purchase or otherwise acquire securities of the Employer which if consummated, together with securities already owned, directly or indirectly, by the offeror, would give the offeror beneficial ownership, directly or indirectly, of 20% or more of the Voting Securities, (b) acquisition by any person or group (other than acquisitions by a trustee or other fiduciary Page 4 under an employee benefit plan of the Employer, and other than acquisitions by the personal representative(s), when acting in such capacity, of the estates of J.A. Albertson and/or Kathryn Albertson), as defined for purposes of Section 13(d) of the Exchange Act, of beneficial ownership of 20% or more of the Voting Securities (such amount to include any Voting Securities acquired prior to January 2, 2000), (c) filing or the requirement for filing by any person or group, as defined for purposes of Section 13(d) of the Exchange Act, of an initial Schedule 13D or 13G with the Securities and Exchange Commission, or of an amendment to an existing Schedule 13D or 13G indicating a cumulative increase in beneficial ownership by any person or group of at least an additional 5% of the Voting Securities in comparison with such person's or group's Schedule 13D or 13G on file with the Securities and Exchange Commission as of September 1, 1988, (d) solicitation of proxies by a person or group, as defined for purposes of Section 13(d) of the Exchange Act (other than management or the Board of Directors), having beneficial ownership of 1% or more of the Voting Securities for election, removal or change of directors of the Employer or with respect to resolutions seeking or directing (1) any transaction or series of transactions with a person or group, as defined for purposes of Section 13(d) of the Exchange Act, beneficially owning 5% or more of the Voting Securities, (2) to impose any restriction, supermajority requirement or other limitation on the power of the Board of Directors, or (3) sale, merger or other disposition involving more than 20% of the Voting Securities or assets (by book value) of the Employer or (e) receipt by the Employer of an offer to acquire beneficial ownership of 20% or more of the Voting Securities by merger, acquisition or otherwise; provided that in the event the exact date of a Potential Change in Control cannot be determined, such Potential Change in Control will be deemed to have occurred on the earliest date on which it could have occurred; and, provided further, that a particular occurrence of any of the foregoing events or circumstances shall not be deemed to be a Potential Change in Control if within 15 days after receipt by the Board of Directors of actual notice from the Employer of the occurrence of a particular event or circumstance, the Board of Directors adopts a resolution to the effect that a Potential Change in Control for the purposes of this Trust shall not be deemed to have occurred (but only if at least a two-thirds majority of the members of the Board of Directors at the time of adoption of such resolution were members immediately prior to such event or circumstance). The Trustee and the Recordkeeper shall rely upon notice from the Employer pursuant to Section 3.05, provided such notice concludes that a Potential Change in Control has occurred. In the absence of such a notice, the Trustee and the Recordkeeper may require and rely upon an Opinion of Counsel relating to whether a Potential Change in Control has occurred. Any Opinion of Counsel with respect to a Potential Change in Control shall specify the date on which the Potential Change in Control occurred, or if an exact date cannot be determined, the earliest date on which such Potential Change in Control could have occurred and cover such other matters as the Trustee or the Recordkeeper shall reasonably require. "Premium Payment Obligation" shall mean all premiums, assessments, dues, charges and interest on all the Insurance Policies held in the Trust necessary to cause each of such Insurance Policies to be paid in full. Page 5 "Premium Payment Obligation Amount" shall mean the aggregate payments required to be paid by the Employer to the Trustee in order to satisfy in full the Premium Payment Obligation. "Real Estate Adviser" shall mean a person, firm or corporation hired or retained by the Trustee to manage, or to assist in managing, the real estate assets and/or the Real Estate Leases held by the Trust or to assist in the sale by the Trustee of any of the real estate assets held by the Trust. "Real Estate Leases" shall mean the lease agreements set forth and described in Exhibit "B" attached hereto and by this reference made a part hereof, if any, and shall include any future real estate leases entered into between the Employer and the Trustee pursuant to Section 3.01 with respect to real property contributed by the Employer to the Trust. "Recordkeeper" shall mean the person or persons from time to time serving as recordkeeper with respect to the Trust. "Repurchase Obligation" shall mean the requirement in each Real Estate Lease that the Employer repurchase in cash from the Trustee the property which is the subject of such Real Estate Lease upon a Change in Control or at the termination of the Real Estate Lease. "Repurchase Obligation Amount" shall mean the purchase price required by each Real Estate Lease to be paid by the Employer to the Trustee to repurchase the property which is the subject of such Real Estate Lease upon a Change in Control or at the termination of the Real Estate Lease. "Retention Amount" shall mean $50,000.00. "Trust" shall mean the trust set forth in and created by this document, and all subsequent amendments thereto. "Trust Fund" shall mean all assets held by the Trustee under the Trust. "Trust Year" shall mean the fiscal year of the Employer. "Trustee" shall mean the person or persons from time to time serving as trustee of the Trust. "Value of Accrued Benefits" shall mean at any time with respect to a Participant or beneficiary of a deceased Participant an amount equal to the present value of his or her benefit accrued under the Plan determined based on the actuarial assumptions described on Exhibit "C" attached hereto, but without taking into account any changes in pay out options under the Plan made following a Change in Control, as calculated by the Recordkeeper. Page 6 "Value of the Trust Fund" shall mean at any time an amount equal to the then total of the following: (a) the Value of Trust Insurance Policies, (b) the Value of Trust Real Estate, (c) any undrawn amount under a Letter of Credit (other than any letter of credit delivered to the Trustee pursuant to the Real Estate Leases), and (d) the fair market value of all other assets of the Trust Fund, each as determined by the Trustee. "Value of Total Accrued Benefits" shall mean at any time an amount equal to the aggregate of the Value of Accrued Benefits for all Participants and beneficiaries of deceased Participants as of the date of determination, as calculated by the Recordkeeper. "Value of Trust Insurance Policies" shall mean the cash surrender value at any time of the Insurance Policies held in the Trust, as determined by the Insurance Adviser. "Value of Trust Real Estate" shall mean at any time an amount equal to the aggregate of all Repurchase Obligation Amounts. "Voting Securities" shall mean securities possessing the right to vote to elect directors or to authorize a merger, consolidation or reorganization of the Employer. In this agreement the singular includes the plural and the plural the singular; words importing any gender include any other gender; and references to "days" shall mean calendar days, unless otherwise specified. ARTICLE II NAME AND ESTABLISHMENT OF TRUST Section 2.01. Name and Purpose. The name of the Trust shall be the "Albertson's, Inc. 2000 Deferred Compensation Trust." This Trust is established in conjunction with the Plan, and any successor of the foregoing, for the purpose of holding, investing and distributing assets as a reserve for the discharge of the Employer's obligations to Participants or beneficiaries of deceased Participants entitled to benefits pursuant to the provisions of the Plan. Section 2.02. Appointment of Trustee; Acceptance. The Employer hereby appoints IBJ Whitehall Bank & Trust Company, a New York banking corporation, as sole Trustee for the Trust. The Trustee hereby accepts the appointment as Trustee under the Trust. In accepting such appointment, the Trustee agrees to act solely as trustee hereunder and not in its individual capacity; and all persons having any claim against the Trustee by reason of the transactions contemplated hereby shall look only to the Trust Fund for payment or satisfaction thereof, except to the extent otherwise provided in Section 4.17(d) hereof. Page 7 Section 2.03. Appointment of Recordkeeper; Acceptance. The Employer hereby appoints Management Compensation Group, Northwest, LLC, a Delaware limited liability company, as its Recordkeeper under this Trust. The Recordkeeper hereby accepts the appointment as Recordkeeper under the Trust. It is recognized that Management Compensation Group, Northwest, LLC also acts as the independent consulting actuary of the Employer with respect to the Plan. Section 2.04. Grantor Trust. The Trust is intended to be a grantor trust, within the meaning of Section 671 of the Code, and shall be construed accordingly. The Employer, therefore, agrees that all income, deductions and credits of this Trust belong to it as owner for income tax purposes and will be included on the Employer's income tax returns. ARTICLE III PROVISIONS RELATING TO THE EMPLOYER Section 3.01. Contributions. With the execution of this trust agreement the Employer has transferred to the Trustee the property listed on Exhibit "D" attached hereto. The Employer may from time to time deliver to the Trustee one or more Insurance Policies, Letters of Credit, or contribute cash or real property to the Trust which is acceptable to the Trustee and enter into Real Estate Leases with the Trustee which are acceptable to the Trustee, in order to fund all or a portion of its obligation to make contributions to this Trust. All Employer contributions and all investments thereof, together with all accumulations, accruals, earnings and income with respect thereto, shall be held by the Trustee in trust hereunder as the Trust Fund. Section 3.02. Insurance Policies. The Employer shall give the Trustee the original of each Insurance Policy established for the benefit of the Trust, executed by the Insurance Company issuing such Insurance Policy. Upon the earlier of the occurrence of a Change in Control or Potential Change in Control, the Employer shall (i) irrevocably assign to the Trustee all ownership interest the Employer may have in any Insurance Policies held in the Trust, pursuant to an assignment agreement substantially in the form attached hereto as Exhibit G; and (ii) pay to the Trustee the Premium Payment Obligation Amount with respect to the Insurance Policies held in the Trust. If, following the satisfaction of the Premium Payment Obligation, the Trustee receives a notice from any Insurance Company regarding the existence of an Additional Premium Payment Obligation, the Trustee shall so notify the Employer promptly and the Employer shall pay to the Trustee any Additional Premium Payment Obligation Amount with respect to such Insurance Policies. Page 8 Section 3.03. Letters of Credit. The Employer shall give the Trustee the original of each Letter of Credit established for the benefit of the Trust, executed by the Bank issuing such Letter of Credit. The Trustee shall draw on every Letter of Credit to the full extent thereof on the earlier of: (a) Receipt of an Opinion of Counsel stating that a Change in Control has occurred;and (b) On the tenth business day preceding the last day of the term of each Letter of Credit that is due to expire and has not been extended, unless, prior to taking such action, the Trustee receives the original of a replacement Letter of Credit, executed by the Bank issuing such Letter of Credit, and in at least the amount of the Letter of Credit which is due to expire; except to the extent the Trustee has received cash contributions from the Employer up to the amount of, and in substitution for, the Letter of Credit which is due to expire. Section 3.04. Return of Employer Contributions. Subject to Sections 4.06 and 6.02, Employer contributions shall be irrevocable upon the earlier of the occurrence of a Change in Control or Potential Change in Control. The foregoing notwithstanding, after the Employer has satisfied its Premium Payment Obligation or Additional Premium Payment Obligation with respect to all Insurance Policies, has satisfied its Repurchase Obligation with respect to all Real Estate Leases, and provided there is then no unpaid Deficiency Amount with respect to any Participant or beneficiary of a deceased Participant, or at any time prior to the time when the Trust shall become irrevocable as provided in Section 6.02 (and without revoking the Trust), the Employer shall be entitled to a return of a portion of the Trust Fund in accordance with the following: (a) The Employer shall give not less than 30 days advance written notice to the Trustee and the Recordkeeper that the Employer is invoking its rights to a return of a portion of the Trust Fund pursuant to this Section 3.04. (b) The Employer may exercise its rights under this Section 3.04 no more frequently than twice during any 12 month period. (c) Upon receipt of a notice from the Employer pursuant to Section 3.04(a) the Trustee shall determine the then Value of the Trust Fund and the Recordkeeper shall determine the then Value of Total Accrued Benefits. To the extent the then Value of the Trust Fund exceeds an amount equal to 1.3 times the sum of (1) the then Value of Total Accrued Benefits, plus (2) the Retention Amount, the Trustee shall liquidate sufficient Trust assets (or, notwithstanding Section 4.18, distribute Trust assets in kind, as directed by the Employer) and return such excess to the Employer. Page 9 Section 3.05. Certain Employer Notices. The Employer hereby agrees to give prompt notice to the Trustee, the Recordkeeper and each Participant and beneficiary of a deceased Participant of the occurrence of a Potential Change in Control or a Change in Control. Section 3.06. Action by Employer. Whenever the Employer is permitted or required to perform any act hereunder, it shall be done and performed by an officer or other delegate duly authorized by the Employer. Promptly following the execution of this trust agreement, the Employer shall file with the Trustee and the Recordkeeper a certified list of the names and specimen signatures of any person authorized to act for the Employer. The Employer shall promptly notify the Trustee and the Recordkeeper of the addition or deletion of any person's name to or from such list, respectively. Until receipt of notice that any person is no longer authorized so to act, the Trustee or the Recordkeeper may continue to rely on the authority of the person. All certifications, notices and directions by any such authorized person or persons to the Trustee or the Recordkeeper shall be in writing signed by such person or persons. The Trustee and the Recordkeeper may rely on any such certification, notice or direction purporting to have been signed by or on behalf of such person or persons. Section 3.07. Employer Liability. Nothing in this trust agreement shall relieve the Employer of its liabilities to pay the benefits provided for under the Plan except to the extent such liabilities are met by the application of Trust assets. ARTICLE IV PROVISIONS RELATING TO TRUSTEE AND RECORDKEEPER Section 4.01. Receiving Contributions. The Trustee shall receive and accept contributions from the Employer in accordance with this trust agreement as a reserve for the discharge of the Employer's obligations to Participants and beneficiaries of deceased Participants entitled to benefits pursuant to the Plan. Section 4.02. Management and Control of Trust Assets. The Trustee shall have exclusive authority and discretion to manage and control all assets in the Trust Fund, except as may otherwise be provided herein. Notwithstanding the foregoing, upon the appointment of an Insurance Adviser or Real Estate Adviser the Trustee shall rely exclusively on the advice of such Insurance Adviser or Real Estate Adviser, regarding the management and control of the Insurance Policies or real estate assets and/or Real Estate Leases held by the Trustee, respectively. Page 10 Section 4.03. Investment of Trust Assets. The Trustee shall promptly invest and re-invest the assets of the Trust Fund. Prior to a Change in Control and so long as a Potential Change in Control has not occurred and continued to the date of determination, the Trustee shall rely upon any investment directions from the Employer, and the Trustee shall not be required to inquire into the propriety of such directions; provided, however, the Trustee shall not be required to invest assets of the Trust Fund in a manner that it reasonably believes could result in any damage or liability on the part of the Trustee in its individual capacity. The Trustee shall not be liable for the consequences of following such directions. Following a Change in Control and during any period of time when a Potential Change in Control shall have occurred and be continuing, the Trustee shall invest and re-invest the assets of the Trust Fund as it shall determine but only in investments constituting one or more of the following: (a) Obligations of the United States Government or any agency thereof which are supported by the full faith and credit of the United States Government, and obligations guaranteed by the United States Government. (b) Commercial paper rated no less than Prime-l by Moody's Investors Service, Inc. or as A-l by Standard & Poor's Corp., or bankers' acceptances or certificates in United States commercial banks (but only with banks which at the time of purchase have a combined capital and surplus in excess of $200,000,000 and whose long-term debt is rated no less than A by Standard & Poor's Corp., or the equivalent rating by Moody's Investors Service, Inc.), or such instruments similarly rated by any successor to either of such investment rating services; provided, no purchases shall be made of commercial paper which is credit enhanced or which is issued by a company whose headquarters is outside the United States, and no more than $2,000,000 shall be invested in the commercial paper of any one company. (c) Direct and general obligations of any state within the United States, to the payment of the principal of and interest on which the full faith and credit of such state is pledged, provided at the time of their purchase such obligations are rated no less than A by Standard & Poor's Corp. with respect to long-term obligations, or the equivalent rating by Moody's Investors Service, Inc., and no less than MIG-l by Moody's Investors Service, Inc. with respect to short-term obligations, or the equivalent rating by Standard & Poor's Corp.; provided, no more than $1,000,000 shall be invested in any one issue of notes or bonds and no more than 15% of the Trust Fund shall be invested at any time in state obligations; and, provided further, no purchases shall be made of state obligations which are credit enhanced. Page 11 (d) Non-interest bearing operating accounts of the Trust with the Trustee, even though the Trustee does not otherwise meet the investment requirements of this Section 4.03; provided that if the Trustee does not meet the investment requirements of this Section 4.03, such accounts may not in the aggregate exceed $100,000. (e) Insurance Policies, Real Estate Leases, the property listed on Exhibit "D" and real property contributed to the Trust by the Employer. (f) Temporary investment funds and/or money market funds, including the IBJ Whitehall Bank & Trust Company Money Market Fund, which meet the criteria described in Section 4.03(a) through (c). Section 4.04. Distribution of Trust Assets; Limitations. (a) At the direction of the Employer to the Recordkeeper prior to a Change in Control or upon the Application of a Participant or beneficiary of a deceased Participant after a Change in Control, the Recordkeeper shall prepare a certification to the Trustee that benefits under the Plan have become payable, which certification shall be in substantially the form attached hereto as Exhibit "E." Such certification shall include the amount of such benefits, the terms of payment, and the name, address and social security number of the recipient. Upon the receipt of such certified statement and subject to Section 4.06, the Trustee shall liquidate such Trust assets as may be available and necessary to pay the benefits set forth in such certification and shall make or commence cash distributions from the Trust Fund in accordance therewith to the person or persons so indicated and to the appropriate taxing authorities with respect to taxes required to be withheld; provided, however, that the Trustee shall not be required to make any distribution which would reduce the value of the assets of the Trust Fund described in Section 4.03(a) through (d) to less than the Retention Amount. The Recordkeeper shall also furnish a copy of such certification to the Participant or the beneficiary of a deceased Participant. The Trustee shall furnish each Participant or beneficiary of a deceased Participant with the appropriate tax information form evidencing such payment and the amount thereof. The Trustee shall provide the Employer with written confirmation of any payments hereunder within 10 business days after such payments are made or commenced to a Participant or beneficiary of a deceased Participant. Notwithstanding any provision of the Trust to the contrary, the Trustee shall make payments hereunder before such payments are otherwise due if, and to the extent that, it (l) receives a written request therefor from a Participant or beneficiary of a deceased Participant, which written request specifies the amount to be distributed, Page 12 and (2) determines, based on an Opinion of Counsel, that a change in the federal tax laws, a published ruling or similar announcement issued by the Internal Revenue Service, the issuance of Treasury Regulations, a decision by a court of competent jurisdiction involving a Participant or beneficiary of a deceased Participant, or a closing agreement involving a Participant or beneficiary of a deceased Participant made under Section 7121 of the Code, has caused or will cause a Participant or beneficiary of a deceased Participant to recognize income for federal income tax purposes with respect to such amounts before they otherwise would be paid to him or her. (b) Subject to Section 4.06, the only persons who shall be entitled to payments from this Trust pursuant to this Section 4.04 following a Change in Control shall be Participants and beneficiaries of deceased Participants under the Plan as of the Change in Control, and persons who become beneficiaries of such persons. Following a Change in Control, no Participant or beneficiary of a deceased Participant shall be entitled to receive distributions from this Trust with respect to any benefit accrued under the Plan attributable to contributions after a Change in Control or to an election made after a Change in Control to lengthen pay out options under the Plan. The Trustee shall make distributions pursuant to this Section 4.04 only as directed by the Recordkeeper and shall be entitled to rely on any certification received from the Recordkeeper for purposes of complying with this Section 4.04(b). (c) Following a Change in Control, payments from the Trust shall be adjusted for the 12 month period commencing each June 1 in accordance with the following: (1) Adjustments to payments from the Trust shall be made only in the event the Value of the Trust Fund as of the last day of the immediately preceding Trust Year was less than an amount equal to the sum of (A) the Value of Total Accrued Benefits as of the last day of the immediately preceding Trust Year, plus (B) the Retention Amount. Page 13 (2) If an adjustment is required, all payments otherwise payable from the Trust during the applicable 12 month period shall be reduced to an amount equal to the payment which would otherwise have been made, multiplied by a fraction, the numerator of which is the Value of the Trust Fund as of the last day of the immediately preceding Trust Year, and the denominator of which is an amount equal to the sum of (A) the Value of Total Accrued Benefits as of the last day of the immediately preceding Trust Year, plus (B) the Retention Amount. (3) Any amount not paid to a Participant or beneficiary of a deceased Participant by reason of this Section 4.04(c) shall be considered a Deficiency Amount and shall accrue interest from the date payment would otherwise have been made, until paid, at the interest crediting rate provided for in Exhibit "C". (4) Deficiency Amounts shall be paid to Participants and beneficiaries of deceased Participants as soon as practicable following any Trust Year when, and to the extent that, the Value of the Trust Fund as of the last day of such Trust Year exceeds an amount equal to the sum of (A) the Value of Total Accrued Benefits as of the last day of such Trust Year, plus (B) the Retention Amount. Payment of Deficiency Amounts shall be pro rata based on the unpaid Deficiency Amounts as of the date of payment. Section 4.05. Protection of Trustee. The Trustee shall be fully protected in making or refraining from making any payments in accordance with the terms of this trust agreement. Section 4.06. Creditors of Employer. The Trust Fund shall at all times be subject to the claims of the Employer's general creditors but shall be utilized to satisfy any such claims only in the case of the Employer's bankruptcy or insolvency. The Employer shall be considered "bankrupt" or "insolvent" if the Employer is either unable to pay its debts when due or is subject to a proceeding under the Bankruptcy Code, 11 U.S.C. ss. 101, et seq. The Board of Directors and chief executive officer of the Employer are responsible to give written notice to the Trustee and the Recordkeeper of the Employer's bankruptcy or insolvency as soon as practicable following the occurrence of such event. Upon receipt of such notice of the Employer's bankruptcy or insolvency, or in the case of the Trustee's receipt of a written notice from a creditor of the Employer alleging the Employer's bankruptcy or insolvency, the Trustee shall discontinue payments to Participants and beneficiaries of deceased Participants and shall hold the Trust Fund for the Page 14 benefit of the Employer's general creditors. The Trustee shall resume payments to Participants and beneficiaries of deceased Participants only after it has been notified by the Employer (or has received an Expert's Certificate or Opinion of Counsel stating) that the Employer is no longer bankrupt or insolvent or pursuant to an order of a court of competent jurisdiction. If the Trustee discontinues payments to Participants and beneficiaries of deceased Participants, the first payment following such discontinuance shall include the aggregate of all payments which would have been made to the Participants and beneficiaries of deceased Participants Together with interest calculated at the interest crediting rate provided for in Exhibit "C" on the amount of the delayed distributions). Section 4.07. Compensation and Expenses. The Trustee and the Recordkeeper shall be entitled to receive compensation for services rendered. Such compensation shall be the usual and customary fees of the Trustee or Recordkeeper in effect from time to time for similar services unless in the case of the Trustee, an amount is agreed upon in writing by the Employer and the Trustee and in the case of the Recordkeeper, the Employer and the Recordkeeper, and shall, unless paid directly by the Employer, be a lien against and paid out of the assets of the Trust Fund; provided, an individual serving as Trustee who receives compensation from the Employer for full-time employment shall not receive additional compensation from the Trust. The Recordkeeper and the Trustee (whether or not the Trustee is a full-time employee of the Employer) shall be reimbursed for any reasonable expenses, including reasonable counsel and Expert fees, incurred by the Recordkeeper or the Trustee in connection with the acceptance or administration of the Trust Fund or Trust and the exercise or performance of any of their respective powers or duties hereunder, and such expenses shall, unless paid directly by the Employer, be a lien against and paid out of the assets of the Trust Fund. Section 4.08. Limitation of Administrative Duties. Nothing contained in the Plan, either expressly or by implication, shall be deemed to impose any responsibilities, obligations or duties on the Trustee or the Recordkeeper other than those set forth herein. Without limiting the generality of the foregoing, the Trustee shall have no responsibility, obligation or duty with respect to any action required by the Plan, or this Trust to be taken by the Employer, the Recordkeeper, the Insurance Adviser, the Real Estate Adviser or any other Expert, any employee, Participant, beneficiary or any other person, and the Recordkeeper shall have no responsibility, obligation or duty with respect to any action required by the Plan or this Trust to be taken by the Employer, the Trustee, any employee, Participant, beneficiary or any other person. Section 4.09. Accountings. Within 15 days following the close of each Trust Year, the Trustee shall file with the Employer and the Recordkeeper, and with each Participant with respect to each Trust Year ending after a Change in Control, a written statement and accounting setting forth: (a) A categorized schedule of the assets and liabilities of the Trust Fund, at cost and current value, as of the end of the Trust Year; provided, that the Insurance Policies shall be valued at their Page 15 cash surrender value; and, provided further, that real estate which is the subject of a Real Estate Lease shall be valued at its Repurchase Obligation Amount and all other real estate shall be valued at zero; (b) A categorized schedule of the receipts, disbursements and other transactions for the Trust Year; and (c) A description of all assets purchased and sold during the Trust Year. Such accountings shall be in a form and format usable in preparing and filing returns and reports with the Internal Revenue Service and in accordance with generally accepted accounting principles. Upon receipt of written approval of the accounting from the Employer (or upon the passage of 60 days without written objections having been delivered to the Trustee) such accounting shall be deemed to be approved, and the Trustee shall be released and discharged as to all items, matters and things set forth in such accounting. Section 4.10. General Management Powers. Subject to Section 4.03, with respect to the Trust Fund the Trustee shall have the following powers, rights and duties in addition to those otherwise vested in the Trustee herein or by law: (a) To sell, exchange, transfer and otherwise deal with the Trust Fund in such manner, for such consideration and on such terms and conditions as the Trustee shall determine; (b) To retain in cash so much of the Trust Fund as the Trustee shall from time to time determine and to deposit cash with any depositary; (c) To register any securities or other property held by it hereunder in its own name or in the name of its nominees with or without the addition of words indicating that such securities are held in a fiduciary capacity, and to hold any securities in bearer form, but the books and records of the Trustee shall at all times show that all such investments are part of the Trust Fund; (d) To pay all reasonable costs, charges and expenses incurred in the administration of the Trust Fund, including fees for reasonable services rendered to the Trustee by any person, firm or corporation other than the Employer, and all taxes that may be levied or assessed under existing or future laws upon or in respect to the Trust or the Trust Fund or the income thereof; Page 16 (e) To employ suitable agents (including a Real Estate Adviser) and counsel who may be counsel for the Employer; (f) To credit and distribute the Trust Fund pursuant to the terms of the trust agreement; (g) To compromise, contest, arbitrate or abandon claims and demands, all in the Trustee's discretion; (h) To perform any and all other acts which, in the Trustee's judgment, are necessary or appropriate for the proper management, investment and distribution of the Trust Fund; (i) To retain any funds or property subject to any dispute (and without liability for the payment of interest) and to refuse to make payment or delivery thereof until final adjudication by a court of competent jurisdiction; (j) To begin, maintain or defend any litigation necessary in connection with the administration of this Trust and the Trust Fund; (k) To make such deposits (including certificates of deposit) and open such number of bank accounts (including interest and noninterest bearing accounts) in such bank(s) (including the Trustee, and any bank which is an agent of the Trustee or otherwise a fiduciary with respect to the Plan and Trust) in the name of the Trustee, and to make deposits therein in order to facilitate the payment of benefits, as the Trustee shall determine. The amounts on deposit in each such account shall constitute a part of the Trust Fund until paid out in accordance with the Plan; (l) To maintain accurate records and accounts of all investments, receipts, disbursements and other transactions of the Trust Fund and to open such records and accounts to the inspection by the Employer and its duly authorized representatives during normal business hours of the Trustee, and to the Participants and their duly authorized representatives following a Change in Control, during normal business hours of the Trustee; (m) To adopt such rules and regulations for the operation and administration of the Trust as the Trustee shall determine to be necessary and appropriate and in keeping with the terms and purposes of the Trust; (n) To construe and interpret the terms and provisions of this Trust, and any such construction or interpretation adopted in good faith shall be binding on the Employer, and any employees, dependents Page 17 and beneficiaries, and their successors, assigns, executors, administrators and/or legal representatives; (o) To withhold any taxes with respect to the property or income of the Trust Fund or to withhold any amounts otherwise payable from the Trust Fund; and to dispose of any amounts so withheld as determined by the Trustee; (p) To hold the Trust Fund assets for the benefit of the creditors of the Employer and to deliver assets to satisfy such creditor's claims as directed by a court of competent jurisdiction pursuant to Section 4.06; and (q) To do any and all other acts and things necessary, proper or advisable to effectuate the purposes of this Trust to the extent the same are permissible under applicable laws. Section 4.11. Insurance Policies. (a) Prior to the occurrence of a Change in Control or Potential Change in Control, the Trustee, upon written direction of the Employer, shall pay from the Trust Fund such sums to any Insurance Company as the Employer may direct. The Employer shall prepare the application for any Insurance Policies to be applied for. Subject to Section 3.02 and the provisions hereinafter set forth in this Section 4.11, the Employer, prior to the occurrence of a Change in Control or Potential Change in Control may, in its sole discretion, retain complete and absolute ownership of all or any portion of the Insurance Policies held in the Trust or may, in its discretion, cause the Trustee to retain ownership of all or any portion of the Insurance Policies held in the Trust. The Trustee shall receive and hold in the Trust, subject to the provisions hereinafter set forth in this Section 4.11, all Insurance Policies so obtained. (b) Prior to the occurrence of a Change in Control or a Potential Change in Control, the Trustee, irrespective of any ownership interest it may hold in any Insurance Policies held in the Trust, shall have no discretion (i) with respect to the exercise of any of the powers enumerated or implied under this Section 4.11 or (ii) to take any other action permitted by any Insurance Policy held in the Trust, but shall exercise such powers or take such action only upon the written direction of the Employer. Prior to the occurrence of a Change in Control or a Potential Change in Control, the Trustee shall have no duty to exercise any of such powers or to take any such action unless and until it shall have received such direction. Page 18 (c) Prior to the occurrence of a Change in Control or Potential Change in Control, the Employer shall direct the Insurance Company to notify the Employer of all premiums and other payments due or to become due, the respective amounts of any said premiums or amounts, and the respective dates when such amounts are due, whereupon the Employer shall verify the names of the individual Participants covered under such Insurance Policies; thereafter, the Trustee, upon written direction of the Employer, shall promptly pay from the Trust Fund as soon as practicable thereafter any premiums, assessments, dues, charges and interest, if any, with respect to any Insurance Policy held in the Trust Fund. Prior to the occurrence of a Change in Control or a Potential Change in Control, the Trustee shall have no duty to make such payment unless and until it shall have received such direction. (d) Upon the occurrence of a Change in Control or a Potential Change in Control, the Trustee, pursuant to the assignment stipulated in Section 3.02, shall be the complete and absolute owner of the Insurance Policies held in the Trust, shall have power without consent of any other person, to exercise any and all the rights, options or privileges that belong to the absolute owner of any Insurance Policy held in the Trust or that are granted by the terms of any such Insurance Policy or by the terms of this trust agreement. (e) In the event of a sale, assignment or surrender of any Insurance Policy held in the Trust Fund, or the receipt by the Trustee of any interest, dividend or other payments in respect of any Insurance Policy, the Trustee shall hold in the Trust Fund the proceeds of any such sale, assignment or surrender, any and all interest and other payments of any kind received in respect of any Insurance Policy and shall invest such funds in accordance with Section 4.03. (f) No Insurance Company that may issue any Insurance Policy shall be deemed to be a party to this trust agreement for any purpose, or to be responsible in any way for the validity of this trust agreement or have any liability under this trust agreement other than as stated in each Insurance Policy that it may issue. Upon the occurrence of a Change in Control or a Potential Change in Control, any Insurance Company may deal with the Trustee as sole owner of any Insurance Policy issued by it and held in the Trust Fund, without inquiry as to the authority of the Trustee to act, and may accept and rely upon written notice, instruction, direction, certificate or other communication from the Trustee believed by it to be genuine and to be signed by an officer of the Trustee and shall incur no liability or responsibility for so doing. Any sums paid out by any Insurance Company, under any of the terms of the Insurance Policies issued by it and held in the Trust Fund, either to the Trustee, or, in accordance Page 19 with its direction, to any other person or persons the Trustee shall designate as payces shall be a full and complete discharge of the liability to pay such sums, and the Insurance Company shall have no obligation to look to the disposition of any sums so paid. No Insurance Company shall be required to look into the terms of this trust agreement, to question any action of the Trustee or to see that any action of the Trustee is authorized under the terms of this trust agreement. (g) Anything contained in this trust agreement to the contrary notwithstanding, neither the Employer nor the Trustee shall be liable for the refusal of any Insurance Company to issue or change any Insurance Policy or Insurance Policies or to take any action requested by the Trustee; nor for the form, genuineness, validity, sufficiency or effect of any Insurance Policy or Insurance Policies held in the Trust Fund; nor for the act of any person or persons that may render any such Insurance Policy or Insurance Policies null and void; nor for the failure of any Insurance Company to pay the proceeds and avails of any such Insurance Policy or Insurance Policies as and when the same shall become payable. (h) In the event any conflict occurs between the provisions of any Insurance Policy and either this trust agreement or the Plan, the provisions of the trust agreement or Plan shall govern and control, as applicable. Section 4.12. Liability for Breach of Fiduciary Duty. Except as provided in Section 4.17(d), the Trustee shall not be liable for any losses to the Trust Fund resulting from the breach of any of the responsibilities, obligations or duties imposed upon the Trustee herein or by applicable laws. Section 4.13. Consultation and Indemnification. (a) The Trustee and the Recordkeeper may consult with counsel, and neither the Trustee nor the Recordkeeper shall be deemed imprudent by reason of taking or refraining from taking any action in accordance with an Opinion of Counsel. (b) The Employer hereby indemnifies the Trustee and holds it harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, claims, demands, costs and expenses of any kind or nature whatsoever, including, without limitation, attorney's fees and disbursements (except those caused by the Trustee's gross negligence or willful misconduct) that may be imposed on, incurred by or asserted against the Trustee in any way relating to or arising out of or in connection with this trust agreement, the acceptance or administration by the Trustee of the Trust or the Trust Fund, the exercise or performance by the Trustee of any of Page 20 its powers or duties hereunder and any of the transactions contemplated by this trust agreement, including (but not limited to) distributions to Participants, beneficiaries of deceased Participants and upon the termination of the Plan or Trust. (c) The Employer hereby indemnifies the Recordkeeper and holds it harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, claims, demands, costs and expenses of any kind or nature whatsoever, including, without limitation, attorney's fees and disbursements (except those caused by the Recordkeeper's gross negligence or willful misconduct) that may be imposed on, incurred by or asserted against the Recordkeeper in any way relating to or arising out of or in connection with this trust agreement, the exercise or performance by the Recordkeeper of any of its powers or duties hereunder and any of the transactions contemplated by this trust agreement. (d) Neither the Trustee nor the Recordkeeper shall be required to give any bond or any other security for the faithful performance of their respective duties under this trust agreement, except as such may be required by any law which prohibits the waiver thereof. (e) The Employer shall assume, at its own expense, the defense of any action commenced against the Trustee or the Recordkeeper asserting any claim which would be covered by the indemnities set forth in this Section 4.13. The Trustee and the Recordkeeper shall each have the right to employ its own counsel in any such action to which it is a party, and the reasonable fees and expenses of such counsel shall be borne by the Employer. (f) The Employer's obligations under this Section 4.13 shall survive the termination of this trust agreement and the resignation or removal of any Trustee. Section 4.14. Resignation and Removal. The Trustee and/or the Recordkeeper shall resign or be removed and a successor Trustee and/or Recordkeeper appointed according to the following procedures: (a) The Trustee may be removed by the Employer at any time prior to a Change in Control, with or without cause, and following a Change in Control, with or without cause but only with the written consent of the Majority Participants, upon the giving of not less than 31 days prior written notice. The Trustee may resign upon the giving of not less than 31 days prior written notice to the Employer and all Participants and beneficiaries of deceased Participants. No resignation Page 21 or removal of the Trustee pursuant to this Section 4.14 shall become effective until the acceptance of appointment by the successor Trustee. (b) Prior to a Change in Control the Employer shall fill a vacancy in the office of Trustee as soon as practicable by a written instrument filed with the person(s) appointed to fill the vacancy, which person(s) must be a financial institution that is independent of the Employer, and a copy to the predecessor Trustee and the Recordkeeper. Following a Change in Control, the Employer shall be entitled to fill a vacancy in the office of Trustee, but only with the consent and approval of the Majority Participants, as evidenced in a written instrument filed with the person(s) appointed to fill the vacancy which person(s) must be a financial institution that is independent of the Employer. If the vacancy in the office of Trustee has not been filled within 20 days following the Trustee's resignation or removal, the Trustee shall have the right to petition a court of competent jurisdiction to appoint a successor Trustee. (c) The appointment of a successor Trustee shall take effect upon delivery to the Trustee of a written appointment of such successor Trustee, duly executed by the Employer, the Majority Participants, or the predecessor Trustee as the case may be, and a written acceptance by such successor Trustee, duly executed thereby. Except as described in the preceding sentence, a successor Trustee shall succeed to the title to the assets in the Trust Fund without the signing or filing of any document and the rights and obligations of the Trustee under each Insurance Policy or Letter of Credit shall automatically become the rights and obligations of the successor Trustee, and the Trustee shall have no further rights, duties, obligations or liabilities with respect to any Insurance Policy, Letter of Credit or Real Estate Lease. The resigning or removed Trustee shall execute all documents and do all acts reasonably necessary to vest such title of record in the successor Trustee. A successor Trustee shall have all of the powers conferred by this trust agreement as if originally named Trustee. (d) Within 60 days after transfer of the assets in the Trust Fund, the resigning or removed Trustee shall render to the Employer a statement and accounting in the form and manner prescribed by Section 4.09. Unless the Employer shall, within 60 days after receipt of such accounting, object in writing delivered to such Trustee, such accounting shall be deemed approved, and the Trustee shall be released and discharged as to all items, matters and things set forth in such accounting. (e) A successor Trustee shall not be liable or responsible for any acts or defaults of a predecessor Trustee or co-Trustee, or for any losses or expenses resulting from or occasioned by anything done or Page 22 neglected to be done in the administration of the Trust Fund or Trust prior to its appointment as Trustee, nor shall it be required to inquire into or take notice of the prior administration of the Trust Fund or Trust. (f) The Recordkeeper may be removed by the Employer at any time prior to a Change in Control, with or without cause, and following a Change in Control, with or without cause but only with the written consent of the Majority Participants, upon the giving of not less than 31 days prior written notice to the Recordkeeper. The Recordkeeper may resign on the giving of not less than 31 days prior written notice to the Trustee, the Employer and all Participants and beneficiaries of deceased Participants. No resignation or removal of the Recordkeeper pursuant to this Section 4.14 shall become effective until the acceptance of appointment by the successor Recordkeeper. (g) Prior to a Change in Control, the Employer shall fill a vacancy in the office of Recordkeeper as soon as practicable by a written instrument filed with the person(s) appointed to fill the vacancy, which person(s) must be independent from the Employer and must be a certified consulting actuary or firm of actuaries or certified public accountant or firm of certified public accountants, and a copy to the predecessor Recordkeeper and the Trustee. Following a Change in Control, the Employer shall be entitled to fill a vacancy in the office of Recordkeeper, but only with the consent and approval of the Majority Participants, as evidenced in a written instrument filed with the person(s) appointed to fill the vacancy, which person(s) must be independent from the Employer and must be a certified consulting actuary or firm of actuaries or certified public accountant or firm of certified public accountants. If the vacancy in the office of Recordkeeper has not been filled within 20 days following the Recordkeeper's resignation or removal, the Trustee shall have the right to appoint a successor Recordkeeper. The appointment of a successor Recordkeeper shall take effect upon delivery to the Recordkeeper, with a copy to the Trustee, Employer and all Participants and beneficiaries of deceased Participants, of a written appointment of such successor Recordkeeper, duly executed by the Employer, the Majority Participants or the Trustee, as the case may be, and a written acceptance by such successor Recordkeeper, duly executed thereby. As soon as practicable after the Recordkeeper has resigned or has been removed hereunder, it shall deliver to the successor Recordkeeper all reports, records, documents and other written information in its possession regarding the Elan, the Trust Fund and the Participants, and thereupon shall be entitled to all unpaid fees, compensation and reimbursements to which it is entitled under this Trust and shall be relieved of all responsibilities and duties under this Trust. Page 23 (h) If the Trustee consolidates, merges or converts into, or transfers all or substantially all its trust business or assets to another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. Section 4.15. Duties of the Recordkeeper. Within 10 days following the close of each Trust Year ending after a Change in Control, the Recordkeeper shall file with the Employer and the Trustee a written statement setting forth for each Participant and beneficiary of a deceased Participant his or her Value of Accrued Benefits and account balance(s) as of the last day of such Trust Year. In the event the Employer fails to provide the Recordkeeper with the information necessary to prepare such written statement, the Recordkeeper shall file the written statement based on a good faith estimate of the Value of Accrued Benefits and account balance(s). In addition, the Recordkeeper shall maintain or cause to be maintained all the Participant records required by this Trust and shall perform such other duties and responsibilities necessary or advisable to achieve the objectives of this Trust. Following a Change in Control, the Recordkeeper shall prepare and distribute to the Employer, Participants and beneficiaries of deceased Participants, Participant statements which shall include income tax information, if that information is supplied to the Recordkeeper by the Employer, or its delegate, with respect to payments to Participants and beneficiaries of deceased Participants. In the event that the Employer refuses or neglects to provide updated Participant information, as contemplated herein, the Recordkeeper shall be entitled to rely on the most recent information furnished to it by the Employer. The Recordkeeper shall have no responsibility to verify information provided to it by the Employer; provided, however, no information provided by the Employer following a Change in Control shall reduce any benefit to which a Participant or beneficiary of a deceased Participant was entitled under the Plan or this Trust as of the Change in Control. Section 4.16. Determinations by the Trustee; Notices. Within 21 days following receipt by the Trustee of written notice from any Participant or beneficiary of a deceased Participant that such Participant or beneficiary believes a Potential Change in Control or Change in Control has taken place, the Trustee shall determine if a Potential Change in Control or Change in Control has in fact occurred, in accordance with the procedures set forth in the definitions of such terms. Within 5 days of making the foregoing determination the Trustee shall give written notice of its determination to the Employer, Recordkeeper and all Participants and beneficiaries of deceased Participants, which notice shall attach a complete copy of any Opinion of Counsel rendered to the Trustee with regard to the foregoing, a complete copy of the notice to the Trustee alleging that a Potential Change in Control or Change in Control has occurred as well as all materials in the possession of the Trustee which relate to the foregoing determinations. Section 4.17. Rights of Trustee. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. Page 24 (b) Before the Trustee acts or refrains from acting, and in making any determination with respect to a Change in Control, a Potential Change in Control, the Value of the Trust Fund or any other determination hereunder (including but not limiting to determinations of the validity of consents of the Majority Participants), the Trustee may require and rely on an Expert's Certificate or an Opinion of Counsel or both covering such matters as the Trustee may reasonably require The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Expert's Certificate or Opinion of Counsel or with the consent of the Majority Participants. (c) The Trustee may act through agents and Experts and shall not be responsible for the misconduct or negligence of any agent or Expert appointed and retained with due care or with the consent of the Employer or the Majority Participants. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers, provided that the Trustee's conduct does not constitute gross negligence or willful misconduct. The Trustee shall be liable for any action it takes or omits to take and which constitutes gross negligence or willful misconduct. (e) No provision of this trust agreement shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Section 4.18. Priority of Distribution and Liquidation of Trust Assets. Whenever Trust assets are required to be distributed pursuant to this trust agreement, the Trustee shall pay such distributions with cash on hand, if any. To the extent cash on hand (not including the Retention Amount) is not sufficient to pay such distributions, the Trustee shall in the following priority: (a) liquidate investments described in Section 4.03 other than paragraph (e) thereof, (b) draw on any Letter of Credit held by the Trust to the extent necessary to pay the required distribution, (c) liquidate real estate assets and/or Real Estate Leases held by the Trust and (d) liquidate any Insurance Policies held by the Trust. Page 25 ARTICLE V GENERAL ADMINISTRATIVE PROVISIONS Section 5.01. Exchange of Information by the Employer and the Trustee. The Trustee shall furnish to or on the order of the Employer whatever information relating to the Trust Fund is necessary for the performance by the Employer of its functions with respect to the Plan or this Trust. The Employer shall furnish to or on the order of the Trustee whatever information relating to the Trust Fund and Participants and beneficiaries of deceased Participants is necessary for the performance by the Trustee of its functions hereunder. The Employer and Trustee may each rely and act upon information so furnished without further inquiry. Section 5.02. Information to the Recordkeeper and Trustee. The Employer shall provide the Recordkeeper with a certified copy of the Plan and all amendments thereto, and the resolutions or other actions of the Employer approving the Plan and all amendments thereto, promptly upon their adoption and all information necessary to determine the benefits payable to or with respect to each Participant, including any benefits payable after each Participant's death and the recipient of the same. The Employer shall regularly, at least annually, or promptly on the request of the Recordkeeper, furnish revised updated information to the Recordkeeper. In addition, promptly after the last day of each calendar year quarter the Employer agrees to notify the Trustee and Recordkeeper as to those persons who are then Participants or beneficiaries of deceased Participants, which notice shall specify the name, address and social security number of such persons. The Trustee shall be entitled to rely on the latest available written notice from the Employer regarding such information. The Employer shall be responsible for keeping accurate books and records with respect to the employees of the Employer, their compensation and their rights and interests in the Trust Fund and under the Plan. Section 5.03. Mistake of Fact. Any misstatement or any other mistake of fact in any certificate, notice or other document filed with the Employer, the Recordkeeper or the Trustee shall be corrected when it becomes known and proper adjustment shall be made by reason thereof; provided, however, the Trustee shall offset any overpayment to any Participant or beneficiary of a deceased Participant against future payments to such Participant or beneficiary but shall have no obligation to seek reimbursement from any Participant, beneficiary of a deceased Participant or other person to whom the Trustee has disbursed amounts from the Trust Fund pursuant to any such certificate, notice or other document. Section 5.04. Taxes. The Employer may from time to time pay taxes of any and all kinds whatsoever which at any time are levied or assessed upon or become payable in respect of the Trust Fund, the income therefrom or any property forming a part thereof, or any purchase, sale, collateral security or other transaction pertaining thereto. To the extent that any taxes levied or Page 26 assessed upon the Trust Fund or in respect of such income, property or transaction are not paid by the Employer, the Trustee shall pay such taxes out of the Trust Fund and the Employer shall reimburse the Trustee for any amounts so paid. The Trustee shall, at the Employer's expense, contest the validity of such taxes in any manner deemed appropriate by the Employer or its counsel, but only if the Trustee has received an indemnity bond or other security satisfactory to it to pay all of its fees and expenses with respect to such contest; provided, however, the Trustee shall have no obligation to contest if it receives an Opinion of Counsel to the effect that there is no reasonable basis in law or fact for such contest. Alternatively, the Employer may itself contest the validity of any such taxes. Section 5.05. Investment Company Act. Notwithstanding any other provision of this trust agreement, the Employer and the Trustee agree that in the event the Trust may be deemed to be an "investment company" as defined under the Investment Company Act of 1940, as amended (the "Investment Company Act"), they shall use their best efforts to take such action as shall be necessary so that either (i) the Trust will qualify for an exemption from the provisions of the Investment Company Act or (ii) the Trust will not be deemed to be such an investment company. ARTICLE VI AMENDMENT AND TERMINATION Section 6.01. Right to Amend. Prior to the time when the Trust shall become irrevocable as provided in Section 6.02, this trust agreement may be amended by an instrument in writing, duly executed by the Employer and delivered to the Trustee, which instrument shall certify to the Trustee that the Trust has not become irrevocable. When the Trust shall become irrevocable as provided in Section 6.02, this trust agreement may not thereafter be amended in whole or part by the Employer; provided, however, that this trust agreement may nonetheless be amended by an instrument in writing, duly executed by the Employer, and delivered to the Trustee and all Participants and beneficiaries of deceased Participants only (a) with the express written consent of the Majority Participants on the date of such amendment, (b) as necessary to obtain a favorable ruling from the Internal Revenue Service with respect to the tax consequences of the establishment or settlement of the Trust as a grantor trust within the meaning of Section 671 of the Code, (c) as necessary to obtain an Opinion of Counsel that the Plan is an unfunded plan of deferred compensation or (d) as necessary to prevent the Trust from being deemed an "investment company" as defined under the Investment Company Act or to ensure that the Trust qualifies for an exemption from the provisions of such act. Provided, that the duties, powers and liabilities of the Trustee shall not be increased without the Trustee's written consent, and, provided further, that the amount or time for payment of any benefit hereunder to any Participant or beneficiary of a deceased Participant may not be reduced or adversely affected without the written consent of the affected Participant or beneficiary. Page 27 Section 6.02. Termination of Trust and Reversion of Assets. Following the occurrence of a Change in Control or Potential Change in Control, and regardless of whether or not such Potential Change in Control shall exist as of a later date of determination, the Trust shall be irrevocable; provided that the Trust shall nonetheless terminate upon the earlier of (a) the payment of all amounts due Participants and beneficiaries of deceased Participants under the Plan, as determined by the Recordkeeper, and (b) the later of (i) January 1, 2025, and (ii) the date which is 21 years following the death of the last surviving individual eligible to be a Participant listed on Exhibit "F" attached hereto and by this reference made a part hereof. At any time prior to a Change in Control or Potential Change in Control the Trust may be revoked by the Employer by an instrument in writing delivered to the Trustee and accompanied by an Opinion of Counsel stating that the Trust is revocable and that neither a Change in Control nor a Potential Change in Control has occurred. The foregoing to the contrary notwithstanding, if the Trustee has received notice, pursuant to Section 3.05 or Section 4.16, that a Change in Control or Potential Change in Control may have occurred, the Trust may not be revoked until the Trustee has determined that a Change in Control or Potential Change in Control has not occurred. Upon revocation of the Trust, any and all assets remaining in the Trust Fund after payment of the Trustee's and Recordkeeper's compensation and other expenses of the Trust, shall revert to the Employer and the Trustee shall promptly transfer any such assets to the Employer. Upon termination of the Trust other than by revocation, the Trustee shall pay all amounts due Participants and beneficiaries of deceased Participants under the Plan, as determined by the Recordkeeper, and any and all assets remaining in the Trust Fund after payment of the Trustee's and Recordkeeper's compensation and other expenses of the Trust, shall revert to the Employer and the Trustee shall promptly transfer any such assets to the Employer. Upon termination of the Trust for whatever reason the Trustee shall prepare and file a final statement and accounting with the Employer and all necessary returns, statements, forms and reports as may be required of the Trustee by law. Upon receipt of written approval of the accounting from the Employer (or upon the passage of 60 days without written objections having been delivered to the Trustee) such accounting shall be deemed approved, and the Trustee shall be released and discharged as to all items, matters and things set forth in such accounting. ARTICLE VII MISCELLANEOUS PROVISIONS Section 7.01. Entire Agreement. This trust agreement constitutes the entire understanding and agreement between the parties and supersedes all prior agreements, representations and understandings relating to the subject matter hereof. Section 7.02. Successors. This trust agreement shall be binding upon all persons entitled to benefits under the Plan and their respective heirs and personal representatives, upon the Employer, its successors and assigns, and upon the Trustee and its successors. Page 28 Section 7.03. Headings. The headings used in this trust agreement are inserted for reference purposes only and shall not be deemed to limit or affect in any way the meaning or interpretation of any of the terms or provisions of this trust agreement. Section 7.04. Controlling Law. Except to the extent superseded by the laws of the United States of America, the laws of the State of Idaho (other than the choice of law principles thereof) shall govern all questions arising with respect to this trust agreement and the interpretation and validity of its provisions. Section 7.05. Third-Party Inquiries. No person dealing with the Trustee shall be obliged to see to the application of any money paid or property delivered to the Trustee, or as to whether or not the Trustee has acted pursuant to any authorization required or set forth in this trust agreement. Section 7.06. Courts; Arbitration. The Employer agrees that by the establishment of this Trust it hereby foregoes any judicial review of certification by the Recordkeeper as to the benefit payable to any person hereunder. If a dispute arises as to the amounts or timing of any such benefits or the persons entitled thereto under the Plan or this Trust, the Employer agrees that such dispute shall be resolved by binding arbitration proceedings initiated in accordance with the rules of the American Arbitration Association and that the results of such proceeds shall be conclusive and shall not be subject to judicial review. It is expressly understood and agreed that pending a resolution of any such dispute, payment of benefits shall be made and continued by the Trustee in accordance with the certification by the Recordkeeper and that the Trustee and the Recordkeeper shall have no liability with respect to such payments. The Employer agrees to pay the entire cost of any arbitration or legal proceeding, including the legal fees of the Trustee, the Recordkeeper and the Participant or the beneficiary of any deceased Participant regardless of the outcome of any such proceeding or the party which initiated any such proceeding, and until so paid the expenses thereof shall be a charge on and lien against the Trust Fund. The Employer agrees to pay the foregoing costs as such costs are incurred, but not more frequently than on a monthly basis. Nothing in this Section shall be construed to in any way limit any right or remedy a Participant or beneficiary may have under the Plan. Section 7.07. Addresses For Communications. All communications, directions, notices and requests required or permitted to be given hereunder shall be in writing and shall be given to the following: If to Employer, to: Albertson's, Inc. 250 Parkcenter Blvd. Boise, Idaho 83726 Attention: Corporate Secretary Page 29 If to Trustee, to: IBJ Whitehall Bank & Trust Company One State Street New York, New York 10004 Attention: Nicholas J. Cascio and Hughes, Hubbard and Reed One Battery Park Plaza New York, New York 10004-1482 Attention: Gilson Gray, Esq. If to Recordkeeper, to: Management Compenstion Group, Northwest LLC 205 SE Spokane Street Portland, Oregon 97202 Attention: David J. Taylor (or his successor regarding Albertson's, Inc.) If to a Participant or beneficiary of a deceased participant, to the last known address of the Participant or beneficiary on the books and records of the Employer, the Trustee or the Recordkeeper; provided, however, the Trustee shall be entitled to rely on the latest available written notice from the Employer regarding the names and addresses of such persons. Either the Employer, the Recordkeeper or the Trustee shall have the right to specify in writing in the manner above provided, another address to which subsequent communications, directions, notices and requests to such party shall be given. Any communications, directions, notices and requests given hereunder shall be deemed to have been given as of the date received in writing by the party to whom given. Section 7.08. Waiver of Notice. Any notice required by this trust agreement may be waived by the person entitled thereto. Section 7.09. Accounting Period. The annual accounting period for this Trust shall be the Trust Year. Section 7.10. Interest in the Trust Fund. No employee of the Employer, no dependent or personal representative of an employee of the Employer or person claiming through such an employee and no beneficiary under the Plan shall have any right, title or interest in the Trust or Trust Fund at any time prior to satisfaction of all conditions to a right to payment to such beneficiary from the Trust pursuant to the terms of the Plan and Trust. No benefit, right or interest, if any exists, is transferable or assignable by any employee, dependent or beneficiary and any attempt to effect a transfer or assignment is void. No portion of the Trust Fund shall be subject to attachment, garnishment, levy of execution, bankruptcy proceedings or other legal process of any creditor of any of the Participants or beneficiaries. Notwithstanding any other provision of this Trust to the contrary, the Trust Fund shall at all times remain subject to claims of creditors of the Employer in the event the Employer is adjudicated to be bankrupt or insolvent as provided herein. Section 7.11. Counterparts. This trust agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which shall together constitute only one agreement. IN WITNESS WHEREOF, the parties hereto have caused this trust agreement to be executed the day and year first above written. EMPLOYER: ALBERTSON'S, INC. /s/ Thomas R. Saldin By: Thomas R. Saldin Its: Executive Vice President and General Counsel TRUSTEE: IBJ WHITEHALL BANK & TRUST COMPANY /s/ Nicholas J. Cascio By: Nicholas J. Cascio Its: Vice President RECORDKEEPER: MANAGEMENT COMPENSATION GROUP, NORTHWEST, LLC /s/ David J. Taylor By: David J. Taylor Its: Vice President, Account Executive Page 30 EXHIBIT "A" FORM OF IRREVOCABLE LETTER OF CREDIT [Date of Issuance] IBJ Whitehall Bank & Trust Company, as Trustee [Address] Attention: [ ] Dear Ladies and Gentlemen: At the request and for the account of Albertson's, Inc., a Delaware corporation ("Albertson' s"), we hereby establish in your favor (and in favor of your successors, the terms "you" and "yours" referring to you and any successor), as Trustee under the Albertson's, Inc. 2000 Deferred Compensation Trust established pursuant to the trust agreement between Albertson's, Management Compensation Group, Northwest, LLC, a Delaware limited liability company, and IBJ Whitehall Bank & Trust Company, dated [ ] (the "Trust Agreement"), this Irrevocable Letter of Credit No. [ ] in the amount of U.S. $[ ] (the "Maximum Amount"). This Letter of Credit is effective immediately and shall expire at the close of banking business at our office at [address] on [expiration date] unless terminated earlier, or extended, in either case in accordance with the provisions hereof. The amount of this Letter of Credit will be reduced from time to time as hereinafter provided. Funds under this Letter of Credit are available to you, in multiple, partial drawings or as a single lump sum drawing hereunder, against delivery to us of the following documents presented (which presentation may be made by facsimile transmission) on a Business Day (as hereinafter defined) at our letter of credit department at [insert address] or at [insert telecopier number], to the specific attention of [ ] or at any other office or telecopier number which may be designated by us by written notice delivered to you: 1. A sight draft in the form of Annex I hereto, appropriately completed and drawn on us bearing the number of this Letter of Credit and in an amount not in excess of the Maximum Amount, less the amount of any sight draft previously presented under this Letter of Credit. 2. Your signed certificate in the form of Annex II, appropriately completed. 3. A copy of this Letter of Credit. For purposes of this Letter of Credit, the term "Business Day" shall mean a day on which our letter of credit department specified above as the place for presentation of documents hereunder is open for business. Page 31 This Letter of Credit shall be payable at sight on first demand without prior notice being given to Albertson's by either you or us. Payment of any sight draft shall be made in immediately available funds at or before the close of business on the Business Day next following the day of your presentation of documents, if such presentation is made prior to 2:00 p.m., New York City time, on any Business Day. The amount available under this Letter of Credit shall be automatically reduced by the amount of each draft paid hereunder (effective on the date of payment of such draft). Upon the earlier to occur of any one of the following events: (i) the surrender to us by you of this Letter of Credit for cancellation, and (ii) the expiration date stated in the initial paragraph hereof, this Letter of Credit shall automatically expire. Communications with respect to this Letter of Credit shall be addressed to us at [address], specifically referring to the number of this Letter of Credit. We hereby agree that drafts drawn and presented in compliance with this Letter of Credit will be paid in accordance with the terms hereof. It is a condition of this Letter of Credit that it will be automatically extended for periods of one year from the then relevant expiry date, unless sixty (60) days prior to that relevant expiry date we notify you by registered mail, return receipt requested, that we elect not to extend this Letter of Credit for any additional period. We hereby agree that all notices to you under this Letter of Credit will be sent to you by registered mail, return receipt requested, at the address noted above, or such other address as from time to time specified by you in writing. To the extent not inconsistent with the express terms hereof, this Letter of Credit shall be governed by, and construed in accordance with, the terms of the Uniform Customs and Practices for Documentary Credits (1983 Revision) International Chamber of Commerce, Publication No. 400 (the "UCP"). This Letter of Credit shall be deemed to be issued under the laws of the State of [State] (including the Uniform Commercial Code as in effect in said State), and as to matters not governed by the UCP, shall be governed by, and construed in accordance with, the laws of the State of [State]. Very truly yours, [Name of Bank] By: Vice President Page 32 ANNEX I SIGHT DRAFT [Date] For Value Received, pay on demand (by wire transfer in same day funds) to Account No. [insert number of account to which payment is to be made and name and address of bank] [ ] United States Dollars ($[ ]). Charge to Account of (name of account party] Irrevocable Letter of Credit No. [ ] To: [Name of Bank] [Address] Attention: [ ], Letter of Credit Operations [Name of beneficiary under above-captioned Letter of Credit] By: Title: [Vice President, Assistant Vice President, Senior Trust Officer or Trust Officer] Page 33 ANNEX II CERTIFICATE The undersigned hereby certifies to [ ], with reference to the Irrevocable Letter of Credit No. [ ] (the "Letter of Credit") in favor of IBJ Whitehall Bank & Trust Company, as trustee (the "Trustee"), as follows (capitalized terms not otherwise defined in this Certificate shall have the meanings given them in the Letter of Credit): 1. The person signing this Certificate on behalf of the Trustee is a duly authorized representative or Attorney-in-Fact or an officer of the Trustee duly authorized to execute this Certificate. 2. The amount of the sight draft presented with this Certificate does not exceed the Maximu Amount and is authorized by the Trust Agreement. IBJ Whitehall Bank & Trust Company as Trustee By: ------------------------------------------ Authorized Representative Officer, or Attorney-in-Fact Page 34 EXHIBIT "B" REAL ESTATE LEASES NONE Page 35 EXHIBIT "C" ACTUARIAL ASSUMPTIONS The calculation of the Value of Accrued Benefits of a Participant or beneficiary of a deceased Participant under the Plan shall be performed based on the Investment Option selected by the Participant as a measurement mechanism for the Rate of Return. A. Moody's Investment Option 1. Interest Crediting Rate: For Participants who have selected Moody's as their Investment Option for all or a portion of their balance, the value of the Accrued Benefits shall be performed using the Participant's appropriate Account Balance under the Plan as of the date of calculation, increased at the interest crediting rate compounded annually to his assumed payment date (based on his assumed benefit commencement date and the benefit option elected), decreased at the discount rate compounded annually, and subject to the following: (a) During Employment with the Employer. The interest rate used to credit a Participant's account balance for the period of employment with the Employer beginning on the date of calculation and ending on the Participant's assumed payment date shall be the annual "corporate bond yield average" with respect to "average corporations" as determined from the Moody's Bond Record published by Moody's Investors Service, Inc. closest to the calculation date ("Moody's"), plus 3 percent. Notwithstanding the foregoing, the interest crediting rate used to credit the account balance of a Participant who has separated from service and according to the provisions of the Plan is not eligible for Moody's, plus 3 percent, shall be Moody's, without further adjustment. (b) During Periods not Employed with the Employer. The interest rate used to credit a Participant's account balance for the period of non-employment with the Employer beginning on the date of calculation and ending on the Participant's assumed payment date shall be the "corporate bond yield average" with respect to "average corporations" as determined from the Moody's Bond Record published by Moody's Investors Service, Inc. for the five-year period immediately preceding the calculation date ("Moody's Average"), plus 3 percent. Notwithstanding the foregoing, the interest crediting rate used to credit the account balance of a Participant who has separated from service and according to the provisions of the Plan is not eligible for Moody's Average, plus 3 percent, shall be Moody's Average, without further adjustment. Page 36 2. Discount Rate: The rate used to discount the Participant's assumed benefit payments from the assumed payment date to the calculation date shall be the rate credited to the most recently issued five-year U.S. Treasury notes as of the calculation date. 3. Assumed Benefit Commencement Date: The Participant's assumed benefit commencement date shall be the later of (1) and (2): (a) Age 62. (b) Five years from date of calculation. Provided, under no circumstances shall a Participant's assumed benefit commencement date be later than age 65. 4. Timing of Payments and Contributions: All payments to be paid to the Participant shall be assumed paid at the end of the year. All contributions deferred by the Participant shall be assumed contributed as of the beginning of each year. 5. Mortality: No mortality shall be assumed. B. Investment Options Other Than Moody's For Participants with Account Balances in which they have selected an Investment Option other than the applicable Moody's, the Value of the Accrued Benefits shall be one hundred ten percent (110%) of the Participant's Account Balance on the date of calculation. Page 37 EXHIBIT "D" TRUST PROPERTY $---------- Page 38 EXHIBIT "E" FORM OF CERTIFICATE TO THE TRUSTEE CERTIFICATE [Date] To: [Name and Address of the Trustee] Ladies and Gentlemen: 1. The undersigned, a duly authorized officer of [Recordkeeper] (in such capacity the "Recordkeeper"), as Recordkeeper under that certain Albertson's, Inc. 2000 Deferred Compensation Trust (the "Trust"), dated the ___ day of ______________ , 1999, between Albertson's, Inc., IBJ Whitehall Bank & Trust Company, as trustee, and Management Compensation Group, Northwest, LLC as recordkeeper, HEREBY CERTIFIES as follows with respect to Section 4.04(a) of the Trust. 2. Benefits have become payable under the Albertson's, Inc. 2000 Deferred Compensation Plan. 3. The name, address and social security number of the recipient of such benefits are as follows: Name: Address: Social Security Number: 4. The amount and terms of payment of such benefits are as follows: Amount: Terms of Payment: [Specify payment dates, number of payments, and any other relevant information] IN WITNESS WHEREOF, the undersigned has executed this Certificate this [ ] day of [ ], [ ]. [Recordkeeper] By: ----------------------------------- Name: Title: Page 39 EXHIBIT "F" INDIVIDUALS ELIGIBLE TO BE PARTICIPANTS [TO BE SUPPLIED] Page 40 EXHIBIT "G" FORM OF ASSIGNMENT AGREEMENT This ASSIGNMENT AGREEMENT, dated as of _______________, ____ is entered into between Albertson's, Inc. ("Assignor"), a Delaware corporation, and IBJ Whitehall Bank & Trust Company ("Assignee"), the Trustee of the Albertson's, Inc. 2000 Deferred Compensation Plan Trust (the "Trust"). WHEREAS, pursuant to the trust agreement (the "Trust Agreement"), dated as of _________________, 1999, among Assignee and IBJ Whitehall Bank & Trust Company, a New York banking corporation, as Trustee of the Trust, the Assignor is obligated to assign its ownership interest in any insurance policies held in the Trust upon the occurrence of a Change in Control or Potential Change in Control (as defined in the Trust Agreement); WHEREAS, a determination has been made that a Change in Control or Potential Change in Control has occurred, effective as of [ ]; WHEREAS, the Assignor has retained ownership of certain insurance policies held in the Trust, a list of which policies is provided in the attached Exhibit A (the "Insurance Policies"); and WHEREAS, Assignor is obligated to assign to Assignee and Assignee is obligated to accept an assignment of Assignor's ownership in the Insurance Policies. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Assignment and Assumption. Assignor hereby assigns to Assignee all of Assignor's rights, options or privileges of ownership under the Insurance Policies. Assignee hereby accepts such assignment and assumes all of Assignor's rights, options or privileges of ownership under the Insurance Policies. 2. Obligation for Premiums. Nothing in this Assignment Agreement shall be interpreted as (i) obligating the Assignee in any way not specifically provided in the Trust Agreement to pay any Premium Payment Obligation or Additional Premium Payment Obligation (as defined in the Trust Agreement), or (ii) modifying in any way the Assignor's sole and continuing obligation to pay any Premium Payment Obligation or Additional Premium Payment Obligation, as provided in the Trust Agreement. 3. Successors and Assigns. This Assignment Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns. Page 41 4. Amendment. This Assignment Agreement shall be irrevocable and may not hereafter be amended in whole or in part by the parties. ALBERTSON'S, INC. By: Its: IBJ WHITEHALL BANK & TRUST COMPANY By: Its: Page 42 EX-10.28 16 CREDIT AGREEMENT 3/22/00 Exhibit 10.28 [5-Year Agreement] EXECUTION COPY ================================================================================ CREDIT AGREEMENT Dated as of March 22, 2000 among ALBERTSON'S, INC., BANK OF AMERICA, N.A. as Administrative Agent, WACHOVIA BANK, N.A. as Syndication Agent, BANK ONE, NA, as Documentation Agent, FIRST UNION NATIONAL BANK, UNION BANK OF CALIFORNIA, N.A., U.S. BANK NATIONAL ASSOCIATION, and WELLS FARGO BANK, N.A., as Senior Managing Agents, FIRST SECURITY BANK, N.A. and THE NORTHERN TRUST COMPANY, as Managing Agent and THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO Arranged by Banc of America Securities LLC, Sole Lead Arranger and Sole Book Manager ================================================================================ TABLE OF CONTENTS Section Page ARTICLE I DEFINITIONS 1 1.01 Certain Defined Terms...............................................1 1.02 Other Interpretive Provisions......................................14 1.03 Accounting Principles..............................................15 ARTICLE II THE CREDITS........................................................16 2.01 Amounts and Terms of Commitments...................................16 2.02 Loan Accounts......................................................16 2.03 Procedure for Committed Borrowing..................................16 2.04 Conversion and Continuation Elections for Committed Borrowings.....17 2.05 Bid Borrowings.....................................................19 2.06 Procedure for Bid Borrowings.......................................19 2.07 Swingline Loans....................................................22 2.08 Voluntary Termination or Reduction of Commitments..................24 2.09 Optional Prepayments...............................................25 2.10 Repayment..........................................................25 2.11 Interest...........................................................26 2.12 Fees...............................................................27 2.13 Computation of Fees and Interest...................................27 2.14 Payments by the Company............................................28 2.15 Payments by the Banks to the Agent.................................28 2.16 Sharing of Payments, Etc...........................................29 2.17 Revolving Termination Date Extensions..............................30 2.18 Optional Increase in Commitments...................................30 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY............................32 3.01 Taxes..............................................................32 3.02 Illegality.........................................................34 3.03 Increased Costs and Reduction of Return............................34 3.04 Funding Losses.....................................................35 3.05 Inability to Determine Rates.......................................36 3.06 Certificates of Banks and Designated Bidders.......................37 3.07 Base Rate Committed Loans Substituted for Affected Offshore Rate Committed Loans....................................................37 3.08 Reserves on Offshore Rate Committed Loans..........................37 3.09 Substitution of Banks..............................................37 3.10 Survival...........................................................38 ARTICLE IV CONDITIONS PRECEDENT...............................................38 4.01 Conditions of Initial Loans........................................38 4.02 Conditions to All Borrowings.......................................40 i ARTICLE V REPRESENTATIONS AND WARRANTIES......................................40 5.01 Corporate Existence and Power......................................40 5.02 Subsidiaries.......................................................41 5.03 Corporate and Governmental Authorization; No Contravention.........41 5.04 Binding Effect.....................................................41 5.05 Litigation.........................................................41 5.06 ERISA Compliance...................................................41 5.07 Use of Proceeds; Margin Regulations................................41 5.08 Title to Properties; Liens.........................................41 5.09 Taxes..............................................................41 5.10 Financial Information..............................................42 5.11 Environmental Matters..............................................42 5.12 Regulated Entities.................................................42 5.13 Insurance..........................................................42 5.14 Full Disclosure....................................................43 5.15 Year 2000..........................................................43 ARTICLE VI AFFIRMATIVE COVENANTS..............................................43 6.01 Information........................................................43 6.02 Conduct of Business and Maintenance of Existence...................45 6.03 Maintenance of Property............................................45 6.04 Insurance..........................................................45 6.05 Payment of Obligations.............................................45 6.06 Compliance with Laws...............................................45 6.07 Inspection of Property, Books and Records..........................45 6.08 Use of Proceeds....................................................46 6.09 Further Assurances.................................................46 ARTICLE VII NEGATIVE COVENANTS................................................46 7.01 Limitation on Liens................................................46 7.02 Disposition of Assets..............................................47 7.03 Limitation on Subsidiary Indebtedness and Swap Contracts...........48 7.04 Use of Proceeds....................................................48 7.05 Minimum Consolidated Tangible Net Worth............................49 ARTICLE VIII EVENTS OF DEFAULT................................................49 8.01 Event of Default...................................................49 8.02 Remedies...........................................................51 8.03 Rights Not Exclusive...............................................51 ARTICLE IX THE AGENT 51 9.01 Appointment and Authorization; "Agent."............................51 9.02 Delegation of Duties...............................................52 9.03 Liability of Agent.................................................52 9.04 Reliance by Agent..................................................52 ii 9.05 Notice of Default..................................................53 9.06 Credit Decision....................................................53 9.07 Indemnification of Agent...........................................53 9.08 Agent in Individual Capacity.......................................54 9.09 Successor Agent....................................................54 9.10 Withholding Tax....................................................54 9.11 Co-Agents..........................................................56 ARTICLE X MISCELLANEOUS.......................................................56 10.01 Amendments and Waivers.............................................56 10.02 Notices............................................................57 10.03 No Waiver; Cumulative Remedies.....................................57 10.04 Costs and Expenses.................................................57 10.05 Company Indemnification............................................58 10.06 Payments Set Aside.................................................58 10.07 Binding Effect; Successors and Assigns.............................58 10.08 Assignments, Participations, Etc...................................59 10.09 Designated Bidders.................................................60 10.10 Confidentiality....................................................61 10.11 Set-off............................................................61 10.12 Notification of Addresses, Lending Offices, Etc....................62 10.13 Counterparts.......................................................62 10.14 Severability.......................................................62 10.15 No Third Parties Benefited.........................................62 10.16 Governing Law and Jurisdiction.....................................62 10.17 Waiver of Jury Trial...............................................63 10.18 Entire Agreement...................................................63 ANNEXES Annex I Pricing Grid SCHEDULES Schedule 2.01 Commitments and Pro Rata Shares Schedule 10.02 Payment Offices; Addresses for Notices; Lending Offices EXHIBITS Exhibit A Form of Notice of Borrowing Exhibit B Form of Notice of Conversion/Continuation Exhibit C Form of Compliance Certificate Exhibit D Form of Legal Opinion of Counsel to the Company Exhibit E Form of Assignment and Acceptance iii Exhibit F Form of Invitation for Competitive Bids Exhibit G Form of Competitive Bid Request Exhibit H Form of Competitive Bid Exhibit I Form of Committed Loan Note Exhibit J Form of Bid Loan Note Exhibit K Form of Designation Agreement Exhibit L Form of Commitment Increase Agreement Exhibit M Form of New Bank Agreement iv CREDIT AGREEMENT This CREDIT AGREEMENT is entered into as of March 22, 2000, among Albertson's, Inc., a Delaware corporation (the "Company"), the several financial institutions from time to time party to this Agreement (individually, a "Bank" and, collectively, the "Banks"), Bank One, NA, as documentation agent (the "Documentation Agent"), Wachovia Bank, N.A., as syndication agent (in such capacity, the "Syndication Agent"), First Security Bank, N.A. and The Northern Trust Company, as managing agents (in such capacity, the "Managing Agents"), First Union National Bank, Union Bank Of California, N.A., U.S. Bank National Association and Wells Fargo Bank, N.A., as senior managing agents (in such capacity, the "Senior Managing Agents"), and Bank of America, N.A., as Swingline Bank and as administrative agent for itself, the Designated Bidders and the Banks (in such capacity, the "Agent"). WHEREAS, the Banks have agreed to make available to the Company a revolving credit and bid loan facility with a swingline subfacility, upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: ARTICLE I......... DEFINITIONS 1.01 Certain Defined Terms. The following terms have the following meanings when used herein (including in the recitals hereof): "Absolute Rate" has the meaning specified in subsection 2.06(c). "Absolute Rate Auction" means a solicitation of Competitive Bids setting forth Absolute Rates pursuant to Section 2.06. "Absolute Rate Bid Loan" means a Bid Loan that bears interest at a rate determined with reference to the Absolute Rate. "Affiliate" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, membership interests, by contract, or otherwise. "Agent" means BofA in its capacity as administrative agent for the Banks and the Designated Bidders hereunder, and any successor agent arising under Section 9.09. Page 1 "Agent-Related Persons" means BofA and any successor agent arising under Section 9.09, together with their respective Affiliates (including, in the case of BofA, the Lead Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Agent's Payment Office" means the address for payments set forth on Schedule 10.02 or such other address as the Agent may from time to time specify. "Aggregate Commitment" means the combined Commitments of the Banks. "Agreement" means this Credit Agreement. "Applicable Fee Amount" means with respect to the fees payable hereunder, the amount set forth opposite the indicated Indebtedness Rating or Facility Usage Percentage, as the case may be, below the headings "Facility Fee" and "Utilization Fee" in the pricing grid set forth on Annex I in accordance with the parameters for calculations of such amount also set forth on Annex I. "Applicable Margin" means, with respect to Base Rate Committed Loans and Offshore Rate Committed Loans, the amount set forth opposite the indicated Indebtedness Rating below the heading "Base Rate Spread" or "Offshore Rate Spread" in the pricing grid set forth on Annex I in accordance with the parameters for calculations of such amounts also set forth on Annex I. "Assignee" has the meaning specified in subsection 10.08(a). "Attorney Costs" means and includes all reasonable fees and disbursements of any law firm or other external counsel. "Bank" has the meaning specified in the introductory clause hereto. References to the "Banks" shall include the Swingline Bank in its capacity as such unless the context otherwise clearly requires. For purposes of clarification only, to the extent that the Swingline Bank may have any rights or obligations in addition to those of the Banks due to its status as Swingline Bank, its status as such will be specifically referenced. "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.ss.101, et seq.). "Base Rate" means, for any day, the higher of: (a) 0.50% per annum above the latest Federal Funds Rate; and (b) the rate of interest in effect for such day as publicly announced from time to time by BofA as its "prime rate." The "prime rate" is a rate set by BofA based upon various factors including BofA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in the prime rate announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change. Page 2 "Base Rate Committed Loan" means a Committed Loan that bears interest based on the Base Rate. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Bid Borrowing" means a borrowing of Loans under Article II consisting of one or more Bid Loans made to the Company on the same day by the Bid Loan Banks and Designated Bidders participating in such borrowing. "Bid Loan" means an Absolute Rate Bid Loan by a Bid Loan Bank or a Designated Bidder to the Company under Section 2.05. "Bid Loan Bank" means each Bank party hereto. "Bid Loan Note" has the meaning specified in Section 2.02. "BofA" means Bank of America, N.A., a national banking association. "Borrowing" means (i) a Committed Borrowing or a Bid Borrowing and (ii) a borrowing hereunder consisting of a Swingline Loan (or Swingline Loans) made to the Company on the same day by the Swingline Bank, and, other than in the case of Base Rate Committed Loans, having the same Interest Period. "Borrowing Date" means any date on which a Committed Borrowing occurs under Section 2.03 or a Bid Borrowing occurs under Section 2.06. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Committed Loan, means such a day on which dealings are carried on in the applicable offshore Dollar interbank market. "Capital Adequacy Regulation" means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. "Change of Control" means any person or group of persons (within the meaning of Section 13 or 14 of the Exchange Act) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under said Act) of 40% or more of the outstanding shares of common stock of the Company; or, during any period of twelve consecutive calendar months, individuals who were directors of the Company on the first day of such period shall cease to constitute a majority of the board of directors of the Company. Page 3 "Closing Date" means the date occurring on or before March 29, 2000 on which all conditions precedent set forth in Section 4.01 are satisfied or waived by all Banks (or, in the case of subsection 4.01(e), waived by the Person entitled to receive such payment). "Co-Agents" means each of the Syndication Agent, Documentation Agent, Senior Managing Agents and Managing Agents, in its respective capacity as a syndication agent, documentation agent, senior managing agents or managing agent hereunder. "Code" means the Internal Revenue Code of 1986. "Commitment" as to each Bank, has the meaning specified in Section 2.01. "Committed Borrowing" means a borrowing of Loans under Article II consisting of Committed Loans of the same Type made on the same day by the Banks ratably according to their respective Pro Rata Shares and, in the case of Offshore Rate Committed Loans, having the same Interest Periods. "Committed Loan" means a Loan made by a Bank to the Company under Section 2.01 or a Swingline Loan made by the Swingline Bank under Section 2.07. "Committed Loan Note" has the meaning specified in Section 2.02. "Company's 1998 Form 10-K" means the Company's Annual Report on Form 10-K for the fiscal year ended January 28,1999, as filed with the SEC pursuant to the Exchange Act. "Competitive Bid" means an offer by a Bid Loan Bank or a Designated Bidder to make a Bid Loan in accordance with subsection 2.06(c). "Competitive Bid Request" has the meaning specified in subsection 2.06(a). "Compliance Certificate" means a certificate substantially in the form of Exhibit C. "Consolidated Subsidiary" means at any date any Subsidiary or other Person the accounts of which would be consolidated with those of the Company in its consolidated financial statements as of such date. "Consolidated Tangible Net Worth" means at any date (a) the consolidated stockholders' equity of the Company and its Consolidated Subsidiaries as reflected on the Company's consolidated balance sheet, plus their consolidated deferred investment tax credits as reflected on the Company's consolidated balance sheet, minus (b) their consolidated Intangible Assets, all determined as of such date. For purposes of this definition, "Intangible Assets" means the amount (to the extent reflected in determining such consolidated stockholders' equity) of (i) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of assets of a going concern business made within twelve months after the acquisition of such business) subsequent to January 28, 1999 in the book value of any asset owned by the Company Page 4 or a Consolidated Subsidiary, (ii) all investments in unconsolidated Subsidiaries and all equity investments in Persons which are not Subsidiaries and (iii) all unamortized debt discount and expense, unamortized deferred charges (except deferred income taxes), goodwill, patents, trademarks, service marks, trade names, copyrights, organization or developmental expenses and other intangible items (except leasehold improvements and liquor licenses). "Conversion/Continuation Date" means any date on which, under Section 2.04, the Company (a) converts Committed Loans of one Type to another Type, or (b) continues as Committed Loans of the same Type, but with a new Interest Period, Committed Loans having Interest Periods expiring on such date. "Default" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. "Designated Bidder" means an Affiliate of a Bid Loan Bank that is a Person described in clause (c)(i) or (ii) of the definition of "Eligible Assignee" and that has become a party hereto pursuant to Section 10.09. "Designation Agreement" means a Designation Agreement entered into by a Bank and a Designated Bidder and accepted by the Agent, in substantially the form of Exhibit K. "Documentation Agent" means Bank One, NA in its capacity as documentation agent hereunder. "Dollars", "dollars" and "$" each mean lawful money of the United States. "Eligible Assignee" means (a) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $250,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $250,000,000, provided that such bank is acting through a branch or agency located in the United States; and (c) a Person that is primarily engaged in the business of commercial lending and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of a Person of which a Bank is a Subsidiary, or (iii) a Person of which a Bank is a Subsidiary. "Environmental Laws" means all federal, state, local or foreign laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to the environment or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment including ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Page 5 petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974. "ERISA Group" means the Company and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Company, are treated as a single employer under Section 414 of the Code. "Event of Default" means any of the events or circumstances specified in Section 8.01. "Exchange Act" means the Securities Exchange Act of 1934. "Excluded Taxes" means any and all present or future taxes, levies, assessments, imposts, duties, deductions, fees, withholding or similar charges and all liabilities with respect thereto, other than those taxes included in the definition of Taxes. "Existing Credit Facilities" means (i) the Credit Agreement dated as of March 30, 1999, among the Company, BofA as agent, and the other financial institutions party thereto, and (ii) the Credit Agreement dated as of October 5, 1994, among the Company, BofA as co-agent, Morgan Guaranty Trust Company of New York as agent, and the other financial institutions party thereto. "Facility Period" means the period from the Closing Date to the Revolving Termination Date, or, if earlier, the date of termination of the Aggregate Commitment in its entirety and the repayment of all Loans outstanding hereunder. "Federal Funds Rate" means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York with respect to the preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published with respect to any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Agent. "Fee Letter" has the meaning specified in subsection 2.12(a). "Foundation Stock Agreement" means the agreement dated May 21, 1997, between the Company and the J.A.and Kathryn Albertson Foundation, Inc. and any successor agreement. "FRB" means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions. Page 6 "GAAP" means generally accepted accounting principles as in effect from time to time. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Guaranty Obligation" means, as to any Person, any direct or indirect liability of that Person, whether or not contingent, with or without recourse, with respect to any obligation (the "primary obligations") of another Person (the "primary obligor"), including any obligation of that Person (i) to purchase, repurchase or otherwise acquire such primary obligations or any security therefor, (ii) to advance or provide funds for the payment or discharge of any such primary obligation, or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof. The amount of any Guaranty Obligation shall be deemed equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof. "Increased Commitment Date" has the meaning specified in subsection 2.18(b). "Indebtedness" of any Person means, without duplication, (a) all indebtedness for borrowed money; (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, (d) all obligations with respect to capital leases (but not obligations with respect to operating leases), (e) all obligations of such Person to purchase securities or other property which arise out of or in connection with the sale of the same or substantially similar securities or property, (f) all non-contingent obligations (and, for purposes of Section 7.01 and the definition of Material Indebtedness all contingent obligations) of such Person to reimburse any bank or other Person in respect of amounts paid under any Surety Instrument, (g) all indebtedness of others of the type referred to in clauses (a) through (f) secured by a Lien on any asset of such Person, whether or not such indebtedness is assumed by such Person, (h) all Guaranty Obligations of such Person in respect of indebtedness of others of the type referred to in clauses (a) through (f), and (i) all preferred stock of such Person redeemable at the option of the holder during the Facility Period. Insurance reserves, tax reserves and interest thereon, salaries payable, taxes payable, dividends payable, trade accounts payable arising in the ordinary course of business, deferred investment tax credits, deferred compensation, deferred rents payable under non-capital leases, benefits payable, unearned income and other similar liabilities shall not constitute "Indebtedness." Page 7 "Indebtedness Rating" has the meaning set forth in Annex I. "Indemnified Liabilities" has the meaning specified in Section 10.05. "Indemnified Person" has the meaning specified in Section 10.05. "Independent Auditor" has the meaning specified in subsection 6.01(a). "Insolvency Proceeding" means, with respect to any Person, (a) any case, action or proceeding with respect to such Person before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other similar arrangement in respect of its creditors generally or any substantial portion of its creditors, in either case undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code. "Interest Payment Date" means, (i) as to any Loan other than a Base Rate Committed Loan, the last day of each Interest Period applicable to such Loan, (ii) as to any Base Rate Committed Loan which is not a Swingline Loan, or any Bid Loan, the last day of each calendar quarter and the Revolving Termination Date and (iii) as to any Base Rate Committed Loan which is a Swingline Loan, the Business Day on which the principal of such Swingline Loan is repaid or as otherwise provided in Section 2.07(e); provided, however, that (a) if any Interest Period for an Offshore Rate Committed Loan exceeds three months, the date that falls three months after the beginning of such Interest Period and after each Interest Payment Date thereafter is also an Interest Payment Date, and (b) as to any Bid Loan, such other intervening date prior to the maturity thereof as may be specified by the Company and agreed to by the applicable Bid Loan Bank or Designated Bidder in the applicable Competitive Bid shall also be Interest Payment Dates. "Interest Period" means, (a) as to any Offshore Rate Committed Loan, the period commencing on the Borrowing Date of such Loan, or on the Conversion/Continuation Date on which the Loan is converted into or continued as an Offshore Rate Committed Loan, and ending on the date one, two, three or six months thereafter as selected by the Company in its Notice of Borrowing, Notice of Conversion/Continuation or Competitive Bid Request, as the case may be; and (b) as to any Absolute Rate Bid Loan, a period of not less than 7 days and not more than 183 days as selected by the Company in the applicable Competitive Bid Request; provided that: (i) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of an Offshore Rate Committed Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; Page 8 (ii) any Interest Period pertaining to an Offshore Rate Committed Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii)no Interest Period for any Loan shall extend beyond the Revolving Termination Date. "Invitation for Competitive Bids" means an Invitation for Competitive Bids, substantially in the form of Exhibit F. "IRS" means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions under the Code. "Lead Arranger" means Banc of America Securities LLC, a Delaware limited liability company, in its capacity as Sole Lead Arranger and Sole Book Manager. "Lending Office" means, (i) as to any Bank, the office or offices of such Bank specified as its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office", as the case may be, on Schedule 10.02; (ii), as to any Designated Bidder, the office or offices of such Designated Bidder specified as its "Lending Office" in its Designation Agreement; and (iii) such other office or offices as such Bank or Designated Bidder may from time to time notify to the Company and the Agent. "Lien" means with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means an extension of credit by a Bank or a Designated Bidder to the Company in the form of a Revolving Loan or a Swingline Loan under Article II, and may be a Committed Loan or a Bid Loan. "Loan Documents" means this Agreement, the Notes, any Commitment Increase Agreement (as defined in Section 2.18), any New Bank Agreement (as defined in Section 2.18), the Fee Letter and all other documents delivered to the Agent or any Bank or Designated Bidder in connection herewith. "Majority Banks" means at any time Banks then having more than 50% of the Aggregate Commitment or, if the Commitments have been terminated, Banks then holding more than 50% of the then aggregate unpaid principal amount of the Credit Exposure. As used in this definition, the "Credit Exposure" of any Bank means (i) with respect to any outstanding Revolving Loans or Term Loans, the aggregate outstanding principal amount of the Loans made by such Bank, and (ii) with respect to any outstanding Swingline Loans, the participating interest therein equal to such Bank's Pro Rata Share thereof. For Page 9 purposes of this definition, each Bank shall be deemed to hold all outstanding Bid Loans of such Bank's Designated Bidders. "Managing Agents" means each of First Security Bank, N.A. and The Northern Trust Company in its capacity as a managing agent hereunder. "Margin Stock" means "margin stock" as such term is defined in Regulation T, U or X of the FRB. "Markus-Stiftung Stock Agreement" means the agreement dated February 15, 1980, among the Company, Theo Albrecht Stiftung (now known as Markus-Stiftung) and Theo Albrecht, as amended by the First Amendment thereto dated as of April 11, 1984, the Second Amendment thereto dated as of September 25, 1989 and the Third Amendment thereto dated as of December 5, 1994 and any successor agreement. "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the operations, business, assets, liabilities or financial condition of the Company and its Consolidated Subsidiaries taken as a whole; (b) a material impairment of the ability of the Company to perform under any Loan Document and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Company of any Loan Document. "Material Indebtedness" means Indebtedness (other than the Loans) of the Company and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate outstanding principal amount exceeding $30,000,000. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $30,000,000. "Minimum Amount" means (i) in respect of any Committed Borrowing, conversion or continuation of Committed Loans, (a) in the case of Base Rate Committed Loans (other than Swingline Loans), an aggregate minimum amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof, (b) in the case of Swingline Loans, an aggregate minimum amount of $500,000 or any integral multiple of $100,000 in excess thereof, and (c) in the case of Offshore Rate Committed Loans, an aggregate minimum amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof, and (ii) in the case of any reduction of the Commitments under Section 2.08, or optional prepayment of Committed Loans under Section 2.09, $5,000,000 or any multiple of $1,000,000 in excess thereof. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA, to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. Page 10 "Non-Continuing Bank" means, at any time, each Bank the Revolving Termination Date of which has not been extended pursuant to Section 2.17. "Notes" means the Committed Loan Notes and the Bid Loan Notes. "Notice of Borrowing" means a notice in substantially the form of Exhibit A. "Notice of Conversion/Continuation" means a notice in substantially the form of Exhibit B. "Obligations" means all advances, debts, liabilities, obligations, covenants and duties arising under any Loan Document, owing by the Company to any Bank, any Designated Bidder, the Swingline Bank, the Agent, or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising. "Offshore Rate" means, for any Interest Period, with respect to Offshore Rate Committed Loans comprising part of the same Borrowing: (i) the rate of interest per annum determined by the Agent to be the rate of interest per annum (rounded upwards to the nearest 1/100th of 1%) appearing on Dow Jones Page 3750 (as defined below) for deposits in Dollars having a maturity comparable to such Interest Period, at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period, subject to clause (ii) below; or (ii) if for any reason the rate is not available as provided in the preceding clause (i) of this definition, the "Offshore Rate" instead means the rate of interest per annum determined by the Agent to be the arithmetic mean (rounded upward to the nearest 1/100th of 1%) of the rates of interest per annum notified to the Agent by each Reference Bank as the rate of interest at which deposits in Dollars in the approximate amount of the Offshore Rate Committed Loan to be made, continued or converted by such Reference Bank, and having a maturity comparable to such Interest Period, would be offered to major banks in the London interbank market or other applicable interbank market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period. As used in this definition, "Dow Jones Page 3750" means the display designated as "3750" on the Dow Jones Market Service (formerly known as the Telerate Service) or any replacement page thereof. "Offshore Rate Committed Loan" means any Committed Loan that bears interest based on the Offshore Rate. "Other Taxes" means any present or future stamp or documentary taxes or any other excise taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, this Agreement or any other Loan Documents. "Participant" has the meaning specified in subsection 10.08(d). Page 11 "PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under ERISA. "Person" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or any other entity of whatever nature. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Pro Rata Share" means, as to any Bank at any time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Bank's Commitment divided by the Aggregate Commitment (or, if all Commitments have been terminated, the aggregate principal amount of such Bank's Loans divided by the aggregate principal amount of the Loans then held by all Banks). The initial Pro Rata Share of each Bank is set forth opposite such Bank's name in Schedule 2.01 under the heading "Pro Rata Share." "Reference Bank" means each of BofA, Wachovia Bank, N.A. and Bank One, NA. "Replacement Bank" has the meaning specified in Section 3.09. "Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject. "Responsible Officer" means, as to any Person, the chief executive officer, the chief financial officer, or the treasurer or the president of such Person, or any other officer having substantially the same authority and responsibility; or, with respect to compliance with financial covenants, the chief financial officer or the treasurer of such Person, or any other officer having substantially the same authority and responsibility. "Revolving Loan" has the meaning specified in Section 2.01. "Revolving Termination Date" means the earlier to occur of: (a) March 22, 2005 as the same may be extended from time to time pursuant to Section 2.17; and (b) the date on which the Commitments terminate in accordance with the provisions of this Agreement. Page 12 "SEC" means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions. "Senior Managing Agents" means each of First Union National Bank, Union Bank Of California, N.A., U.S.Bank National Association and Wells Fargo Bank, N.A in its capacity as a senior managing agent hereunder. "Subsidiary" of a Person means any corporation or other business entity of which more than 50% of the voting stock, membership interests or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of the Company. "Surety Instruments" means all letters of credit (including standby and commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments. "Swap Contract" means any agreement, whether or not in writing, relating to any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond, note or bill option, interest rate option, forward foreign exchange transaction, cap, collar or floor transaction, currency swap, cross-currency rate swap, swaption, currency option or any other, similar transaction (including any option to enter into any of the foregoing) or any combination of the foregoing, and, unless the context otherwise clearly requires, any master agreement relating to or governing any or all of the foregoing. "Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined by the Company based upon one or more mid- market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include any Bank). "Swingline Bank" means BofA, in its capacity as maker of Swingline Loans hereunder. Specific reference to the Swingline Bank shall exclude the Swingline Bank in its capacity as a Bank hereunder. "Swingline Commitment" has the meaning specified in subsection 2.07(a). "Swingline Loan" has the meaning specified in subsection 2.07(a). "Swingline Loan Borrowing" means a Borrowing consisting of one or more Swingline Loans. Page 13 "Syndication Agent" means Wachovia Bank, N.A., in its capacity as syndication agent hereunder. "Taxes" means any and all present or future taxes, levies, assessments, imposts, duties, deductions, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, respectively, (a) income or franchise taxes imposed on or measured by its net income, (i) by the United States, (ii) by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located, (iii) by any jurisdiction solely as a result of such Bank's activities in or contact with such jurisdiction unrelated to the transactions contemplated by this Agreement, or (iv) by the jurisdiction in which in the Lending Office of the recipient is located, and (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which any recipient is located. "364-Day Credit Agreement" means the Credit Agreement dated as of the date hereof, among the Company, BofA as agent, and the other financial institutions party thereto, providing for a 364 day revolving credit facility. "Type" means, as to any Committed Loan, its nature as an Offshore Rate Committed Loan or a Base Rate Committed Loan. "Unfunded Liability" means with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "United States" and "U.S." each means the United States of America. "Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Company. 1.02 Other Interpretive Provisions(a) . (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. (b) The words "hereof", "herein", "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (c) (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. (ii) The term "including" is not limiting and means "including without limitation." Page 14 (iii) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including." (iv) The term "property" includes any kind of property or asset, real, personal or mixed, tangible or intangible. (d) Unless otherwise expressly provided herein, (i) references to agreements(including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. (e) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (f) This Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. (g) This Agreement and the other Loan Documents are the result of negotiations among the Agent, the Company and the other parties, have been reviewed by counsel to the Agent, the Company and such other parties, and are the products of all parties. Accordingly, they shall not be construed against the Banks or the Agent merely because of the Agent's or Banks' involvement in their preparation. 1.03 Accounting Principles. (a) Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, applied on a basis consistent (except for changes concurred in by the Company's Independent Auditor) with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Banks, except that accounting terms used in Sections 7.01, 7.03 and 7.05 shall be interpreted, and all accounting determinations and calculations required to establish whether the Company is or was in compliance with the requirements of said Sections shall be prepared in accordance with generally accepted accounting principles as in effect on the date hereof, applied on a basis consistent with the audited consolidated financial statements of the Company and its Consolidated Subsidiaries referred to in Section 5.10(a). (b) References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Company. Page 15 ARTICLE II THE CREDITS 2.01 Amounts and Terms of Commitments. Each Bank severally agrees, on the terms and conditions set forth herein, to make loans to the Company (each such loan, a "Revolving Loan") from time to time on any Business Day during the period from the Closing Date to the Revolving Termination Date, in an aggregate amount not to exceed at any time outstanding the amount set forth opposite such Bank's name on Schedule 2.01 under the heading "Commitment" (such amount as the same may be reduced under Section 2.08 or reduced or increased as a result of one or more assignments under Section 10.08, such Bank's "Commitment"); provided, however, that, after giving effect to any Committed Borrowing of Revolving Loans, the aggregate principal amount of all outstanding Committed Loans plus the aggregate principal amount of all outstanding Bid Loans, shall not at any time exceed the Aggregate Commitment. Within the limits of each Bank's Commitment, and subject to the other terms and conditions hereof, the Company may borrow under this Section 2.01, prepay under Section 2.09 and reborrow under this Section 2.01. 2.02 Loan Accounts. (a) The Loans made by each Bank or Designated Bidder shall be evidenced by one or more loan accounts or records maintained by such Bank or Designated Bidder in the ordinary course of business. The loan accounts or records maintained by the Agent and each Bank or Designated Bidder shall be conclusive absent manifest error of the amount of the Loans made by the Banks and Designated Bidders to the Company and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Company hereunder to pay any amount owing with respect to the Loans. (b) The Committed Loans made by such Bank shall be evidenced by one or more notes of the Company, substantially in the form of Exhibit I, with appropriate insertions (the "Committed Loan Notes"), and upon the request of any Bank or Designated Bidder made through the Agent, the Bid Loans made by such Bank or Designated Bidder shall be evidenced by one or more notes of the Company, substantially in the form of Exhibit J, with appropriate insertions (the "Bid Loan Notes"), instead of or in addition to loan accounts. Each such Bank or Designated Bidder shall endorse on the schedules annexed to its Note(s) the date and amount of each Loan made by it, the maturity (in the case of any Bid Loan)and the amount of each payment of principal made by the Company with respect thereto. Each such Bank and Designated Bidder is irrevocably authorized by the Company to endorse its Note(s) and each Bank's or Designated Bidder's record shall be conclusive absent manifest error; provided, however, that the failure of a Bank or Designated Bidder to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of the Company hereunder or under any such Note to such Bank or Designated Bidder. 2.03 Procedure for Committed Borrowing. (a) Each Committed Borrowing shall be made upon the Company's irrevocable written notice delivered to the Agent in the form of a Notice of Borrowing (which notice must be received by the Agent prior to 11:00 a.m. (San Francisco time) (i) at least three Business Days Page 16 prior to the requested Borrowing Date, in the case of Offshore Rate Committed Loans, and (ii) on the requested Borrowing Date, in the case of Base Rate Committed Loans, specifying: (A) the amount of the Committed Borrowing, which shall be in a Minimum Amount; (B) the requested Borrowing Date, which shall be a Business Day; (C) the Type of Loans comprising the Committed Borrowing; and (D) the duration of the Interest Period applicable to such Committed Loans included in such notice (subject to the provisions of the definition of "Interest Period" herein). If the Notice of Borrowing fails to specify the duration of the Interest Period for any Committed Borrowing comprised of Offshore Rate Committed Loans, such Interest Period shall be three months. (b) The Agent will promptly notify each Bank of its receipt of any Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that Committed Borrowing. (c) Each Bank will make the amount of its Pro Rata Share of each Committed Borrowing available to the Agent for the account of the Company at the Agent's Payment Office by 1:00 p.m. San Francisco time) on the Borrowing Date requested by the Company in funds immediately available to the Agent. The proceeds of each such Committed Borrowing will then be made available to the Company by the Agent at such office by crediting the account of the Company on the books of BofA with the aggregate of the amounts made available to the Agent by the Banks and in like funds as received by the Agent, or if requested by the Company, by wire transfer in accordance with written instructions provided to the Agent by the Company of such funds as received by the Agent, unless on the date of the Committed Borrowing all or any portion of the proceeds thereof shall then be required to be applied to the repayment of any outstanding Loans, in which case such proceeds or portion thereof shall be applied to the payment of such Loans. (d) After giving effect to any Committed Borrowing, unless the Agent shall otherwise consent, there may not be more than fifteen different Interest Periods in effect in respect of all Committed Loans then outstanding. 2.04 Conversion and Continuation Elections for Committed Borrowings(a). (a) The Company may, upon irrevocable written notice to the Agent in accordance with subsection 2.04(b): (i) elect, as of any Business Day, in the case of Base Rate Committed Loans (other than Swingline Loans), or as of the last day of the applicable Interest Period in the case of any other Type of Committed Loans, to convert into Committed Loans of any other Type any such Committed Loans (or any part thereof in a Minimum Amount); or Page 17 (ii) elect, as of the last day of the applicable Interest Period, to continue any Offshore Rate Committed Loans having Interest Periods expiring on such day (or any part thereof in a Minimum Amount); provided, that if at any time the aggregate amount of Offshore Rate Committed Loans in respect of any Committed Borrowing is reduced, by payment, prepayment, or conversion of part thereof to be less than $5,000,000, such Offshore Rate Committed Loans shall automatically convert into Base Rate Committed Loans, and on and after such date the right of the Company to continue such Committed Loans as, and convert such Committed Loans into, Offshore Rate Committed Loans shall terminate. (b) The Company shall deliver a Notice of Conversion/Continuation to be received by the Agent not later than 11:00 a.m. (San Francisco time) (i) at least three Business Days in advance of the Conversion/ Continuation Date, if the Committed Loans are to be converted into or continued as Offshore Rate Committed Loans, and (ii) on the Conversion/Continuation Date, if the Committed Loans are to be converted into Base Rate Committed Loans, specifying: (A) the proposed Conversion/Continuation Date; (B) the aggregate amount of Committed Loans to be converted or continued; (C) the Type of Committed Loans resulting from the proposed conversion or continuation; and (D) other than in the case of conversions into Base Rate Committed Loans, the duration of the requested Interest Period (subject to the provisions of the definition of "Interest Period" herein). (c) If upon the expiration of any Interest Period applicable to Offshore Rate Committed Loans, the Company has failed to select timely a new Interest Period to be applicable to such Offshore Rate Committed Loans, or if any Default or Event of Default then exists, the Company shall be deemed to have elected to convert such Offshore Rate Committed Loans into Base Rate Committed Loans effective as of the expiration date of such Interest Period. (d) The Agent will promptly notify each Bank of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by the Company, the Agent will promptly notify each Bank of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Committed Loans held by each Bank with respect to which the notice was given. (e) Unless the Majority Banks otherwise consent, during the existence of a Default or Event of Default, the Company may not elect to have a Committed Loan converted into or continued as an Offshore Rate Committed Loan. Page 18 (f) After giving effect to any conversion or continuation of Committed Loans, unless the Agent shall otherwise consent, there may not be more than fifteen different Interest Periods in effect in respect of all Committed Loans and Bid Loans together then outstanding. 2.05 Bid Borrowings. In addition to Committed Borrowings pursuant to Section 2.03, each Bid Loan Bank severally agrees that the Company may, as set forth in Section 2.06, from time to time request the Bid Loan Banks prior to the Revolving Termination Date to submit offers to make Bid Loans to the Company; provided, however, that the Bid Loan Banks may, but shall have no obligation to, submit such offers and the Company may, but shall have no obligation to, accept any such offers, and any Bid Loan Bank may designate Designated Bidders to make such offers from time to time and, if such offers are accepted by the Company, to make such Bid Loans; and provided, further, that at no time shall (a) the outstanding aggregate principal amount of all Bid Loans made by all Bid Loan Banks and Designated Bidders, plus the outstanding aggregate principal amount of all Committed Loans made by all Banks, exceed the Aggregate Commitment; or (b) unless the Agent shall otherwise consent, the number of Interest Periods for Bid Loans then outstanding, plus the number of Interest Periods for Committed Loans then outstanding, exceed fifteen. 2.06 Procedure for Bid Borrowings(a) . (a) When the Company wishes to request the Bid Loan Banks to submit offers to make Bid Loans hereunder, it shall transmit to the Agent by telephone call followed promptly by facsimile transmission a notice in substantially the form of Exhibit G (a "Competitive Bid Request") so as to be received no later than 8:00 a.m. (San Francisco time) one Business Day prior to the date of a proposed Bid Borrowing, specifying: (i) the date of such Bid Borrowing, which shall be a Business Day; (ii) the aggregate amount of such Bid Borrowing, which shall be a minimum amount of $5,000,000 or in integral multiples of $1,000,000 in excess thereof; and (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of "Interest Period" herein. Subject to subsection 2.06(c), the Company may not request Competitive Bids for more than three Interest Periods in a single Competitive Bid Request and may not request Competitive Bids more than once in any period of five Business Days. (b) Upon receipt of a Competitive Bid Request, the Agent will promptly send to the Bid Loan Banks and Designated Bidders by facsimile transmission an Invitation for Competitive Bids, which shall constitute an invitation by the Company to each Bid Loan Bank and Designated Bidder to submit Competitive Bids offering to make the Bid Loans to which such Competitive Bid Request relates in accordance with this Section 2.06. (c) (i) Each Bid Loan Bank and Designated Bidder may at its discretion submit a Competitive Bid containing an offer or offers to make Bid Loans in response to any Invitation for Competitive Bids. Each Competitive Bid shall comply with the requirements of this subsection 2.06(c) and shall be submitted Page 19 to the Agent by facsimile transmission at the Agent's office for notices set forth on Schedule 10.02 not later than 7:30 a.m. (San Francisco time) on the proposed Borrowing Date; provided that Competitive Bids submitted by the Agent (or any Affiliate of the Agent) in the capacity of a Bid Loan Bank or Designated Bidder may be submitted, and may only be submitted, if the Agent or such Affiliate notifies the Company of the terms of the offer or offers contained therein not later than 7:15 a.m. (San Francisco time) on the proposed Borrowing Date. (ii) Each Competitive Bid shall be in substantially the form of Exhibit H, specifying therein: (A) the proposed Borrowing Date; (B) the principal amount of each Bid Loan for which such Competitive Bid is being made, which principal amount (1) may be equal to, greater than or less than the Commitment of the quoting Bid Loan Bank or the quoting Designated Bidder's affiliated Bid Loan Bank, (2) shall be $5,000,000 or in integral multiples of $1,000,000 in excess thereof, and (3) may not exceed the principal amount of Bid Loans for which Competitive Bids were requested; (C) the rate of interest per annum expressed in multiples of 1/1000th of one basis point (the "Absolute Rate") offered for each such Bid Loan and the Interest Period applicable thereto; and (D) the identity of the quoting Bid Loan Bank or Designated Bidder. A Competitive Bid may contain up to three separate offers by the quoting Bid Loan Bank or Designated Bidder with respect to each Interest Period specified in the related Invitation for Competitive Bids. (iii) Any Competitive Bid shall be disregarded if it: (A) is not substantially in conformity with Exhibit H or does not specify all of the information required by subsection (c)(ii) of this Section; (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bids; or (D) arrives after the time set forth in subsection (c)(i). (iv) Notwithstanding anything to the contrary contained in this subsection 2.06(c), a Competitive Bid by BofA may contain, and will not be disregarded if it does contain, a restriction on the use of proceeds thereof. Page 20 (d) Promptly on receipt and not later than 8:00 a.m. (San Francisco time) on the proposed Borrowing Date, the Agent will notify the Company of the terms (i) of any Competitive Bid submitted by a Bid Loan Bank or Designated Bidder that is in accordance with subsection 2.06(c), and (ii) of any Competitive Bid that amends, modifies or is otherwise inconsistent with a previous Competitive Bid submitted by such Bid Loan Bank or Designated Bidder with respect to the same Competitive Bid Request. Any such subsequent Competitive Bid shall be disregarded by the Agent unless such subsequent Competitive Bid is submitted solely to correct a manifest error in such former Competitive Bid and only if received within the times set forth in subsection 2.06(c). The Agent's notice to the Company shall specify (1) the aggregate principal amount of Bid Loans for which offers have been received for each Interest Period specified in the related Competitive Bid Request; and (2) the respective principal amounts and Absolute Rates so offered. Subject only to the provisions of Sections 3.02, 3.05 and 4.02 hereof and the provisions of this subsection (d), any Competitive Bid shall be irrevocable except with the written consent of the Agent given on the written instructions of the Company. (e) Not later than 8:30 a.m. (San Francisco time) on the proposed Borrowing Date, in the case of an Absolute Rate Auction, the Company shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection 2.06(d). The Company shall be under no obligation to accept any offer and may choose to reject all offers. In the case of acceptance, such notice shall specify the aggregate principal amount of offers for each Interest Period that is accepted. The Company may accept any Competitive Bid in whole or in part; provided that: (i) the aggregate principal amount of each Bid Borrowing may not exceed the applicable amount set forth in the related Competitive Bid Request; (ii) the principal amount of each Bid Borrowing shall be $5,000,000 or in any integral multiple of $1,000,000 in excess thereof; (iii) acceptance of offers may only be made on the basis of ascending Absolute Rates within each Interest Period; and (iv) the Company may not accept any offer that is described in subsection 2.06(c)(iii) or that otherwise fails to comply with the requirements of this Agreement. (f) If offers are made by two or more Bid Loan Banks or Designated Bidders with the same Absolute Rates for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Bid Loans in respect of which such offers are accepted shall be allocated by the Agent among such Bid Loan Banks or Designated Bidders as nearly as possible (in such multiples, not less than $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determination by the Agent of the amounts of Bid Loans shall be conclusive in the absence of manifest error. Page 21 (g) (i) The Agent will promptly notify each Bid Loan Bank or Designated Bidder having submitted a Competitive Bid if its offer has been accepted and, if its offer has been accepted, of the amount of the Bid Loan or Bid Loans to be made by it on the Borrowing Date. (ii) Each Bid Loan Bank or Designated Bidder which has received notice pursuant to subsection 2.06(g)(i) that its Competitive Bid has been accepted shall make the amounts of such Bid Loans available to the Agent for the account of the Company at the Agent's Payment Office, by 11:00 a.m. (San Francisco time), on such Borrowing Date, in funds immediately available to the Agent for the account of the Company at the Agent's Payment Office. The proceeds of such Bid Loans will in each case then be made available to the Company by the Agent at such office by crediting the account of the Company on the books of BofA with the aggregate of the amounts made available to the Agent by the Bid Loan Banks and in like funds as received by the Agent. (iii) Promptly following each Bid Borrowing, the Agent will notify each Bank and Designated Bidder of the ranges of bids submitted and the highest and lowest Bids accepted for each Interest Period requested by the Company and the aggregate amount borrowed pursuant to such Bid Borrowing. (iv) From time to time, the Company and the Bid Loan Banks and Designated Bidders shall furnish such information to the Agent as the Agent may request relating to the making of Bid Loans, including the amounts, interest rates, dates of borrowings and maturities thereof, for purposes of the allocation of amounts received from the Company for payment of all amounts owing hereunder. (h) Nothing in this Section 2.06 shall be construed as a right of first offer in favor of the Bid Loan Banks or Designated Bidders or otherwise to limit the ability of the Company to request and accept credit facilities from any Person (including any of the Bid Loan Banks or Designated Bidders), provided that no Default or Event of Default would otherwise arise or exist as a result of the Company executing, delivering or performing under such credit facilities. 2.07 Swingline Loans(a) . (a) Subject to the terms and conditions hereof, the Swingline Bank agrees to make a portion of the Aggregate Commitment available to the Company by making swingline loans (individually, a "Swingline Loan", and, collectively, the "Swingline Loans") to the Company on any Business Day during the period from the Closing Date to the Revolving Termination Date in accordance with the procedures set forth in this Section 2.07 in an aggregate principal amount at any one time outstanding not to exceed Twenty-Five Million Dollars ($25,000,000), notwithstanding the fact that such Swingline Loans, when aggregated with any other Loans made by or participated in by the Swingline Bank, may exceed the Swingline Bank's Commitment (the amount of such commitment of the Swingline Bank to make Swingline Loans to the Company pursuant to this subsection 2.07(a), as the same shall be reduced pursuant to subsection 2.08(b) or as a result of any assignment pursuant to Section 10.08, the Swingline Bank's "Swingline Commitment"); provided, that at no time shall (i) the sum of the Page 22 aggregate principal amount of all outstanding Swingline Loans plus the aggregate principal amount of all outstanding Revolving Loans plus the aggregate principal amount of all Bid Loans exceed the Aggregate Commitment, or (ii) the aggregate principal amount of outstanding Swingline Loans exceed the Swingline Commitment. Additionally, no more than three Swingline Loans may be outstanding at any one time, and all Swingline Loans shall at all times be Base Rate Committed Loans or accrue interest at such other rate as may be agreed to by the Swingline Bank and the Company. Within the foregoing limits, and subject to the other terms and conditions hereof, the Company may borrow under this subsection 2.07(a), prepay pursuant to Section 2.09 and reborrow pursuant to this subsection 2.07(a). (b) The Company shall provide the Agent irrevocable written notice (including notice by a telephone call confirmed immediately via facsimile) in the form of a Notice of Borrowing of any Swingline Loan requested hereunder (which notice must be received by the Agent prior to 1:00 p.m. (San Francisco time) on the requested Borrowing Date) specifying (i) the amount to be borrowed, which shall be in a Minimum Amount (unless otherwise agreed by the Swingline Bank), and (ii) the requested Borrowing Date, which shall be a Business Day. Unless the Swingline Bank has received notice prior to 1:00 p.m. (San Francisco time) on such Borrowing Date from the Agent (including at the request of any Bank) (A) directing the Swingline Bank not to make the requested Swingline Loan as a result of the limitations set forth in the proviso set forth in the first sentence of subsection 2.07(a); or (B) that one or more conditions specified in Article IV are not then satisfied; then, subject to the terms and conditions hereof, the Swingline Bank will, not later than 3:00 p.m. (San Francisco time) on the Borrowing Date specified in such Notice of Borrowing, make the amount of its Swingline Loan available to the Company by crediting the account of the Company on the books of BofA or if requested by the Company, by wire transfer in accordance with written instructions provided to the Agent by the Company. The Agent will notify the Banks on a quarterly basis if any Swingline Loan Borrowings occurred during such quarter. (c) The Company shall repay to the Swingline Bank in full on the Revolving Termination Date the aggregate principal amount of the Swingline Loans outstanding on the Revolving Termination Date. (d) For one Business Day during each successive 30 Business Day period the aggregate principal amount of Swingline Loans shall be $0 (a "Clean-Up Day"). The Company shall prepay the outstanding principal amount of the Swingline Loans in whole to the extent required so that a Clean-Up Day may occur in each such 30 Business Day period as provided in this subsection 2.07(d) (which Swingline Loans may not be reborrowed until such Clean-Up Day has ended); provided that the foregoing may be from the proceeds of Revolving Loans hereunder. (e) If:(i) any Swingline Loans shall remain outstanding at 5:00 p.m. (San Francisco time) on the Business Day immediately prior to a Clean-Up Day and by such time on such Business Day the Agent shall have received neither: (A) a Notice of Borrowing delivered pursuant to Section 2.03 requesting that Revolving Loans be made pursuant to subsection 2.01 on the Clean-Up Day in an amount at least equal to the aggregate principal amount of such Swingline Loans; nor Page 23 (B) any other notice indicating the Company's intent to repay such Swingline Loans with funds obtained from other sources; or (ii) any Swingline Loans shall remain outstanding during the existence of a Default or Event of Default and the Swingline Bank shall in its sole discretion notify the Agent that the Swingline Bank desires that such Swingline Loans be converted into Revolving Loans; then the Agent shall be deemed to have received a Notice of Borrowing from the Company pursuant to Section 2.03 requesting that Base Rate Committed Loans be made pursuant to subsection 2.01 on such Clean-Up Day (in the case of the circumstances described in clause (i) above) or on the first Business Day subsequent to the date of such notice from the Swingline Bank (in the case of the circumstances described in clause (ii) above) in an amount equal to the aggregate amount of such Swingline Loans, and the procedures set forth in subsections 2.03(b) and 2.03(c) shall be followed in making such Base Rate Committed Loans; provided that such Base Rate Committed Loans shall be made notwithstanding the Company's failure to comply with Section 4.02; and provided, further, that if a Borrowing of Revolving Loans becomes legally impracticable and if so required by the Swingline Bank at the time such Revolving Loans are required to be made by the Banks in accordance with this subsection 2.07(e), each Bank agrees that in lieu of making Revolving Loans as described in this subsection 2.07(e), such Bank shall purchase a participation from the Swingline Bank in the applicable Swingline Loans in an amount equal to such Bank's Pro Rata Share of such Swingline Loans, and the procedures set forth in subsections 2.03(b) and 2.03(c) shall be followed in connection with the purchases of such participations. Upon such purchases of participations the prepayment requirements of subsection 2.07(d) shall be deemed waived with respect to such Swingline Loans. If any Swingline Loan shall remain outstanding in lieu of a Borrowing of Revolving Loans as provided above, interest on such Swingline Loan shall be due and payable on demand, and 1% per annum shall be added to the interest rate applicable to such Swingline Loan. The proceeds of such Base Rate Committed Loans, or participations purchased, shall be applied to repay such Swingline Loans. A copy of each notice given by the Agent to the Banks pursuant to this subsection 2.07(e) with respect to the making of Revolving Loans, or the purchases of participations, shall be promptly delivered by the Agent to the Company. Each Bank's obligation in accordance with this Agreement to make the Revolving Loans, or purchase the participations, as contemplated by this subsection 2.07(e), shall be absolute and unconditional and shall not be affected by any circumstance, including (1) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against the Swingline Bank, the Company or any other Person for any reason whatsoever; (2) the occurrence or continuance of a Default, an Event of Default or a Material Adverse Effect; or (3) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. 2.08 Voluntary Termination or Reduction of Commitments. (a) (a) The Company may, upon not less than three Business Days' prior notice to the Agent, terminate the Commitments, or permanently reduce the Commitments, provided that the aggregate amount of any partial reduction is in a Minimum Amount; unless, after giving effect thereto and to any prepayments of any Loans made on the Page 24 effective date thereof, the then outstanding principal amount of the Loans would exceed the amount of the Aggregate Commitment. A notice of termination of the Commitments delivered by the Company may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Company by notice to the Agent on or prior to the specified date if such condition is not satisfied. Once reduced in accordance with this Section 2.08, the Commitments may not be increased. Any reduction of the Commitments shall be applied to each Bank according to its Pro Rata Share. If and to the extent specified by the Company in the notice to the Agent, some or all of the reduction in the Aggregate Commitment shall be applied to reduce the Swingline Commitment. All accrued commitment fees to, but not including, the effective date of any reduction or termination of the Commitments, shall be paid on the effective date of such reduction or termination. (b) At no time shall the Swingline Commitment exceed the Aggregate Commitment, and any reduction of the Commitments which reduces the Aggregate Commitment below the then-current amount of the Swingline Commitment shall result in an automatic corresponding reduction of the Swingline Commitment to the amount of the Aggregate Commitment, as so reduced, without any action on the part of the Swingline Bank. At no time shall the Swingline Commitment exceed the Commitment of the Swingline Bank, and any reduction of the Commitments which reduces the Commitment of the Swingline Bank below the then-current amount of the Swingline Commitment shall result in an automatic corresponding reduction of the Swingline Commitment to the amount of the Commitment of the Swingline Bank, as so reduced, without any action on the part of the Swingline Bank. 2.09 Optional Prepayments(a) . (a) Committed Loans. Subject to Section 3.04, the Company may, at any time or from time to time, upon notice to the Agent, ratably prepay Committed Loans in whole or in part, in Minimum Amounts, or, with respect to Swingline Loans, in other amounts with the consent of the Swingline Bank. The Company shall deliver a notice of prepayment in accordance with Section 10.02 to be received by the Agent not later than 10:00 a.m. (San Francisco time) (i) at least three Business Days in advance of the prepayment date if the Loans to be prepaid are Offshore Rate Committed Loans and (ii) at least one Business Day in advance of the prepayment date if the Loans to be prepaid are Base Rate Committed Loans. Such notice shall not thereafter be revocable by the Company and the Agent will promptly notify the Swingline Bank thereof (in the case of any prepayment of Swingline Loans) and each Bank thereof and of such Bank's Pro Rata Share of such prepayment if any. Such notice of prepayment shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid and whether such prepayment is of Base Rate Committed Loans, Offshore Rate Committed Loans or Swingline Loans (or any combination thereof). If such notice is given by the Company, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount of Offshore Rate Committed Loans prepaid and any amounts required pursuant to Section 3.04. (b) Bid Loans. Bid Loans may not be voluntarily prepaid. 2.10 Repayment. Page 25 (a) The Committed Loans. The Company shall repay to the Agent for the account of the Banks on the Revolving Termination Date the aggregate principal amount of Committed Loans outstanding on such date. (b) The Bid Loans. The Company shall repay to the Agent for the account of each Bid Loan Bank or Designated Bidder, as the case may be, that makes any Bid Loan the principal amount of such Bid Loan on the last day of the relevant Interest Period for such Bid Loan. 2.11 Interest(a) . (a) (i) Each Committed Loan (other than a Swingline Loan) shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a rate per annum equal to the Offshore Rate or the Base Rate, as the case may be (and subject to the Company's right to convert to other Types of Loans under Section 2.04), plus the Applicable Margin. (ii) Each Bid Loan shall bear interest on the outstanding principal amount thereof from the relevant Borrowing Date at a rate per annum equal to the Absolute Rate. (iii) Each Swingline Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a rate per annum equal to the Base Rate plus the Applicable Margin, or at such other rate as may be agreed to by the Swingline Bank. (b) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Committed Loans under Section 2.09 for the portion of the Loans so prepaid and upon payment (including prepayment) in full thereof. (c) Notwithstanding subsection (a) of this Section, if any amount of principal of or interest on any Loan, or any other amount payable hereunder or under any other Loan Document is not paid in full when due (whether at stated maturity, by acceleration, demand or otherwise), the Company agrees to pay interest on such unpaid principal or other amount, from the date such amount becomes due until the date such amount is paid in full, and after as well as before any entry of judgment thereon to the extent permitted by law, payable on demand, at a rate per annum which is determined by adding 1% per annum to the Applicable Margin then in effect for such Loans and, in the case of Obligations not subject to an Applicable Margin, at a rate per annum equal to the Base Rate, plus the Applicable Margin then in effect for Base Rate Committed Loans, plus 1% per annum. (d) Anything herein to the contrary notwithstanding, the obligations of the Company to any Bank or Designated Bidder hereunder shall be subject to the limitation that payments of interest shall not be required for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by such Bank or Designated Bidder would be contrary to the provisions of any law applicable to such Bank or Designated Bidder limiting the highest rate of interest that may be lawfully contracted for, charged or received by such Bank or Designated Bidder, and in such event the Company shall pay such Bank or Designated Bidder interest at the highest rate permitted by applicable law. Page 26 2.12 Fees(a)... (a) Arrangement and Agency Fees. The Company shall pay fees as required by the letter agreement (the "Fee Letter") between the Company and the Lead Arranger and Agent dated February 29, 2000. (b) Competitive Bid Fee. The Company shall pay to the Agent, for the Agent's own account, a competitive bid fee in the amount set forth in the Fee Letter, each time the Company requests the Bid Loan Banks to submit offers to make Bid Loans. (c) Facility Fee. The Company shall pay to the Agent for the account of each Bank a facility fee on such Bank's Commitment, regardless of usage, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter at a rate per annum equal to the Applicable Fee Amount. Such facility fee shall accrue from the Closing Date to the Revolving Termination Date and shall be due and payable quarterly in arrears on the last Business Day of each quarter following the Closing Date through the Revolving Termination Date, with the final payment to be made on the Revolving Termination Date; provided that, in connection with any reduction or termination of Commitments under Section 2.08, the accrued facility fee calculated for the period ending on such date shall also be paid on the date of such reduction or termination, with the following quarterly payment being calculated on the basis of the period from such reduction or termination date to such quarterly payment date. The facility fee provided in this subsection shall accrue at all times after the above-mentioned commencement date, including at any time during which one or more conditions in Article IV are not met. (d) Utilization Fee. The Company shall pay to the Agent for the account of each Bank a utilization fee on the outstanding Loans (including Swingline Loans and Bid Loans) at any time that the aggregate outstanding Loans exceed the levels of the Aggregate Commitment determined in accordance with Annex I, at a rate per annum equal to the Applicable Fee Amount. Such utilization fee shall be computed on a quarterly basis in arrears on the last Business Day of each calendar quarter, shall accrue from the Closing Date to the Revolving Termination Date and shall be payable in arrears on the last Business Day of each quarter commencing on the last Business Day of the fiscal quarter following the Closing Date through the Revolving Termination Date, with the final payment to be made on the Revolving Termination Date. The utilization fee, if applicable, will be added to the Applicable Margin. 2.13 Computation of Fees and Interest(a). (a) All computations of interest hereunder when the Base Rate is determined by BofA's "prime rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day year). Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof. (b) Each determination of an interest rate by the Agent shall be conclusive and binding on the Company, the Banks and the Designated Bidders in the absence of manifest error. (c) The Agent will, at the request of the Company or any Bank or Designated Bidder, deliver to the Company or such Bank or Designated Bidder, as the case may be, a statement showing the quotations used by the Agent in determining any interest rate. Page 27 (d) If any Reference Bank's Commitment terminates (other than on termination of all the Commitments), or for any reason whatsoever any Reference Bank ceases to be a Bank hereunder, that Reference Bank shall thereupon cease to be a Reference Bank, and the Offshore Rate shall be determined on the basis of the rates as notified by the remaining Reference Banks; provided that if, as a result, there shall only be one Reference Bank remaining, the Agent (after consultation with the Banks and with the consent of the Company (which shall not be unreasonably withheld)) shall, by notice to the Company and the Banks, designate another Bank as a Reference Bank so that there shall at all times be at least two Reference Banks. (e) Each Reference Bank shall use its best efforts to furnish quotations of rates to the Agent as contemplated hereby. If any of the Reference Banks fails to supply such rates to the Agent upon its request, the rate of interest shall be determined on the basis of the quotations of the remaining Reference Bank(s). 2.14 Payments by the Company(a) . (a) Except as otherwise expressly provided herein, all payments by the Company shall be made to the Agent for the account of the Banks and Designated Bidders at the Agent's Payment Office, and shall be made from an account of the Company maintained within the United States, in Dollars, and in immediately available funds, no later than 12:00 noon (San Francisco time) on the date specified herein. The Agent will promptly distribute to each Bank (or Designated Bidder) its Pro Rata Share (or other applicable share as expressly provided herein) of such payment in like funds as received. Any payment received by the Agent later than 12:00 noon (San Francisco time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue. (b) Subject to the provisions set forth in the definition of "Interest Period" herein, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. (c) Unless the Agent receives notice from the Company prior to the date on which any payment is due to the Banks or Designated Bidders that the Company will not make such payment in full as and when required, the Agent may assume that the Company has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Bank or Designated Bidder on such due date an amount equal to the amount then due such Bank or Designated Bidder. If and to the extent the Company has not made such payment in full to the Agent, each Bank or Designated Bidder shall repay to the Agent on demand such amount distributed to such Bank or Designated Bidder, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Bank or Designated Bidder until the date repaid. 2.15 Payments by the Banks to the Agent(a) . (a) Unless the Agent receives notice from a Bank or Designated Bidder, as the case may be, on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, on the date of such Borrowing, that such Bank or Designated Bidder will not make available as and when required hereunder to the Agent for the account of the Company the amount of that Bank's or Designated Bidder's Loan, the Agent may Page 28 assume that such Bank or Designated Bidder has made such amount available to the Agent in immediately available funds on the Borrowing Date and the Agent may (but shall not be so required), in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent any Bank or Designated Bidder shall not have made its full amount available to the Agent in immediately available funds and the Agent in such circumstances has made available to the Company such amount, that Bank or Designated Bidder shall on the Business Day following such Borrowing Date make such amount available to the Agent, together with interest at the Federal Funds Rate for each day during such period. A notice of the Agent submitted to any Bank or Designated Bidder with respect to amounts owing under this subsection (a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Bank's or Designated Bidder's Loan on the Borrowing Date for all purposes of this Agreement. If such amount is not made available to the Agent on the Business Day following the Borrowing Date, the Agent will notify the Company of such failure to fund and, upon demand by the Agent, the Company shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing. (b) The failure of any Bank or Designated Bidder to make any Loan on any Borrowing Date shall not relieve any other Bank or Designated Bidder of any obligation hereunder to make a Loan on such Borrowing Date, but no Bank or Designated Bidder shall be responsible for the failure of any other Bank or Designated Bidder to make the Loan to be made by such other Bank or Designated Bidder on any Borrowing Date. 2.16 Sharing of Payments, Etc. If, other than as expressly provided elsewhere herein, any Bank or Designated Bidder shall obtain on account of the Loans made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Pro Rata Share (or other share contemplated hereunder) of (i) payments in respect of the Committed Loans obtained by all the Banks, or (ii) payments in respect of Bid Loans having the same Borrowing Date, Interest Payment Date and maturity date, such Bank or Designated Bidder shall immediately (a) notify the Agent of such fact, and (b) purchase from the other Banks and, if applicable, Designated Bidders, such participations in the Committed Loans or Bid Loans, as applicable, made by them as shall be necessary to cause such purchasing Bank or Designated Bidder to share the excess payment pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Bank or Designated Bidder, such purchase shall to that extent be rescinded and each other Bank or Designated Bidder shall repay to the purchasing Bank or Designated Bidder the purchase price paid therefor, together with an amount equal to such paying Bank's or Designated Bidder's ratable share (according to the proportion of (i) the amount of such paying Bank's or Designated Bidder's required repayment to (ii) the total amount so recovered from the purchasing Bank or Designated Bidder) of any interest or other amount paid or payable by the purchasing Bank or Designated Bidder in respect of the total amount so recovered. The Company agrees that any Bank or Designated Bidder so purchasing a participation from another Bank or Designated Bidder may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 10.11) with respect to such participation as fully as if such Bank or Designated Bidder were the direct creditor of the Company in the amount of such participation. The Agent will keep records (which shall be conclusive and binding in the absence of Page 29 manifest error) of participations purchased under this Section 2.16 and will in each case notify the Banks and, if applicable, Designated Bidders, following any such purchases or repayments. 2.17 Revolving Termination Date Extensions. (a) (a) Not less than 30 days and not more than 60 days prior to the Revolving Termination Date then in effect, the Company may make a written request to the Agent, who shall forward a copy of each such request to each of the Banks, that the Revolving Termination Date then in effect be extended to the date which occurs one year after the Revolving Termination Date then in effect. Each request by the Company pursuant to the immediately preceding sentence shall specify a date (the "Requested Extension Effective Date"), which shall be not earlier than 20 days after the giving of the respective notice and not later than 15 days prior to the Revolving Termination Date then in effect, as the date by which the Banks should respond to the requested extension request and which would be the date of the effectiveness of the change to the Revolving Termination Date. Each request pursuant to the first sentence of this Section 2.17 shall also be accompanied by a certificate of an officer of the Company stating that no Default or Event of Default has occurred and is continuing. Each Bank, acting in its sole discretion and with no obligation to grant any extension pursuant to this Section 2.17, shall, by written notice to the Company and the Agent, such notice to be given on or prior to the Requested Extension Effective Date, advise the Company and the Agent whether or not such Bank agrees to such extension, provided that any Bank which fails to so notify the Company and the Agent as provided above shall be deemed to have elected not to grant such extension. If less than all the Banks shall agree to such extension, the extension contemplated in this Section may nonetheless occur with respect to the consenting Banks, provided that any such extension shall be conditioned upon an agreement to such extension by Banks with at least 75% of the Aggregate Commitment. The Agent shall notify the Company and each of the Banks as to which Banks have agreed to such extension and as to the new Revolving Termination Date as a result thereof, or that such extension shall not occur, as the case may be. (b) In the event that the Revolving Termination Date is extended by some but not all of the Banks, on the existing Revolving Termination Date for any Bank not extending (each a "Non-Continuing Bank"), the Company shall repay all Revolving Loans of such Non-Continuing Bank, together with all accrued and unpaid interest thereon, and all fees and other amounts owing to such Non-Continuing Bank, and upon such payment each such Non-Continuing Bank shall cease to constitute a Bank hereunder, except with respect to the indemnification provisions under this Agreement, which shall survive as to such Non-Continuing Bank. 2.18 Optional Increase in Commitments(a). (a) Effective as of the Closing Date, or at any time thereafter prior to the Revolving Termination Date but no more than once per month, if no Default or Event of Default has occurred and is continuing both before and after giving effect to an increase, the Company shall have the option to increase the Aggregate Commitment by (i) increasing the Commitment of one or more Banks already party to this Agreement (each such Bank increasing its Commitment, an "Increasing Bank"), in each case pursuant to a Commitment Increase Agreement, in substantially the form of Exhibit L (a "Commitment Increase Agreement") and/or (ii) adding one or more lending institutions not a party hereto (each such new bank, a "New Bank") as a party to this Agreement, in each case pursuant to a New Bank Agreement, in substantially the form of Exhibit M (a "New Bank Agreement"). The effectiveness of any such increase is subject to the satisfaction of the following conditions: Page 30 (A) that any request for increase of the Commitment of an Increasing Bank be made through the Agent (it being understood that an Increasing Bank may accept or reject any increase request in its sole and absolute discretion); (B) that the Company shall provide prior written notice of any proposed increase (whether involving an Increasing Bank or a New Bank) to the Agent, at least 15 Business Days (or such shorter period as the Agent may agree to in the given instance) prior to the effectiveness of such increase, who shall promptly notify the Banks; (C) in the case of a Commitment increase by an Increasing Bank, that the Company and such Increasing Bank shall have entered into a Commitment Increase Agreement, and such Commitment Increase Agreement shall have been delivered to the Agent; (D) in the case of an accession hereto by a New Bank, that the Company and such New Bank shall have entered into a New Bank Agreement, and such New Bank Agreement shall have been delivered to the Agent; (E) that the Swingline Bank and the Agent shall have acknowledged and accepted the Commitment Increase Agreement or New Bank Agreement, as the case may be (such acknowledgment and acceptance not to be unreasonably withheld); (F) that each New Bank shall be an Eligible Assignee; (G) that the Aggregate Commitment, following such increase, shall not exceed $1,250,000,000; (H) that any fees payable to any Increasing Bank or New Bank in connection with such increase shall have been paid; and (I) that any other amounts then due hereunder in connection therewith, including any amounts payable under Section 3.04 as a result of any assignments of Offshore Rate Committed Loans under subsection 2.18(b) on a day other than the last day of an Interest Period, shall have been paid. (b) Upon the effectiveness of any Commitment Increase Agreement, the Commitment of the Increasing Bank party thereto shall be increased in the amount set forth in the Commitment Increase Agreement, and upon the effectiveness of any New Bank Agreement, the New Bank party thereto shall be and become a party hereto and shall constitute a Bank hereunder with the rights and obligations of a Bank under the Loan Documents (each such date of effectiveness, an "Increased Commitment Date"). Effective on each Increased Commitment Date, the amount of Loans then outstanding and held by each Bank shall be adjusted to reflect any such changes in such Bank's Pro Rata Share, subject to Section 3.04. Each Bank Page 31 having Loans then outstanding and whose Pro Rata Share has been decreased as a result of the increase in the Aggregate Commitment shall be deemed to have assigned, without recourse, to any Increasing Banks increasing their Commitments and New Banks, such portion of such Loans as shall be necessary to effectuate such adjustment. Each Increasing Bank and New Bank shall (A) be deemed to have assumed such portion of such Loans and (B) fund on the Increased Commitment Date such assumed amounts to the Agent for the account of the assigning Banks in accordance with the provisions hereof. (c) The Agent shall promptly notify the Banks of the Agent's receipt of notice of any proposed Commitment increase under clause (B) of subsection 2.18(a). Additionally, promptly following the Increased Commitment Date for a Commitment increase the Agent shall cause Schedule 2.01 to be modified to accurately reflect the Commitments and Pro Rata Shares of the Banks, whereupon such amended Schedule 2.01 shall be substituted for the pre-existing Schedule 2.01, be deemed a part of this Agreement without any further action or consent of any party and be promptly distributed to each Bank and the Company by the Agent. Within five Business Days of any Increased Commitment Date (whether as to an Increasing Bank or a New Bank), the Company shall execute and deliver to the Agent (i) a replacement Committed Loan Note in favor of each Increasing Bank, evidencing the increased Commitment of such Increasing Bank, and (ii) a new Committed Loan Note in favor of each New Bank, in the principal amount of such New Bank's Commitment. Additionally, the Agent shall promptly notify each Increasing Bank and New Bank of the amount of its funding obligations under subsection 2.18(b). (d) Any fees paid by the Company for any such increase shall not be required to be ratable and shall be paid only to Increasing Banks, or New Banks, as the case may be, as shall be separately agreed from time to time by the Company and any such Increasing Bank or New Bank. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 Taxes(a).. (a) Unless otherwise required by applicable law, any and all payments by the Company to each Bank, each Designated Bidder, or the Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for, any Taxes. (b) If the Company shall be required by law to deduct or withhold any United States federal Taxes from or in respect of any sum payable hereunder to any Bank, any Designated Bidder or the Agent, and subject to Section 9.10, then: (i) the sum payable shall be increased as necessary so that, after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section), such Bank, such Designated Bidder or the Agent, as the Page 32 case may be, receives and retains an amount equal to the sum it would have received and retained had no such deductions or withholdings been made; (ii) the Company shall make such deductions and withholdings; and (iii) the Company shall pay the full amount deducted or withheld to the relevant taxing authority in accordance with applicable law (c) In addition, the Company shall pay any Other Taxes. (d) The Company agrees to indemnify and hold harmless each Bank, each Designated Bidder and the Agent for the full amount of Other Taxes, and, subject to Section 9.10, Taxes referred to in Subsection 3.01(b). Without limiting the generality of the foregoing, if the Company fails to pay any Other Taxes or any such Taxes when due to the appropriate taxing authority or fails to remit to the Banks and the Agent the required documentary evidence referred to in Subsection 3.01(c) and the Company received from the Agent or the affected Bank prior notice of its obligation to make the payment of Other Taxes or such Taxes, the Company agrees to indemnify and hold harmless each Bank and the Agent for any incremental taxes, interest or penalties that may become payable by any Bank or the Agent as a result of any such failure. Payment pursuant to this indemnification shall be made within 30 days after the date such Bank or the Agent makes written demand therefor setting forth in reasonable detail the basis of the Company's obligation to indemnify such Bank or the Agent pursuant to this Section 3.01. (e) Within 60 days after the date of any payment of any Taxes or Other Taxes pursuant to Subsections 3.01(a), (b) or (c), the Company shall furnish to each Bank, each Designated Bidder and the Agent, at its address referred to in Section 10.02, documentary evidence reasonably satisfactory to each Bank, each Designated Bidder and the Agent of payment thereof, but only to the extent such documentary evidence is furnished to the Company by the relevant taxing authority. (f) If the Company is required to pay any additional amount to the Agent, any Designated Bidder or any Bank or any taxing authority for the account of the Agent, any Designated Bidder or any Bank pursuant to this Section 3.01, the Company shall have the right, upon notice to such Bank or such Designated Bidder, to (i) prepay, on a non-pro rata basis, the principal amount or any portion thereof held by such Bank or such Designated Bidder plus all interest, fees, and other amounts owing to such Bank or such Designated Bidder as of the date of such prepayment (including any amounts owing under Section 3.04), or (ii) require such Bank or such Designated Bidder to use reasonable efforts to designate a different Lending Office for funding or booking its Loan (or any Loan participation) hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the sole judgment of such Bank, such designation or assignment (A) would eliminate or reduce amounts payable pursuant to Subsection 3.01(b) in the future and (B) would not subject such Bank or such Designated Bidder to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Bank or such Designated Bidder. With respect to the foregoing clause (ii) the Company hereby agrees to pay all reasonable costs and expenses incurred by any Bank or any Designated Bidder in connection with any such designation or assignment. Page 33 (g) Each Bank and each Designated Bidder agrees that it will (i) take all reasonable actions requested in writing by the Company that are without material cost or risk to such Bank to maintain all exemptions, if any, available to it from withholding taxes (whether available by treaty or existing administrative waiver), and (ii) to the extent reasonable and without material cost or risk to it, otherwise cooperate with the Company to minimize any amounts payable by the Company under this Section 3.01. (h) Each non-United States Bank and each non-United States Designated Bidder represents and warrants to the Agent and the Company as of the date hereof that under applicable law and treaties such Bank or such Designated Bidder is entitled to claim the benefit of complete exemption from imposition of United States withholding tax or that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. 3.02 Illegality(a) . (a) If any Bank determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Bank or its applicable Lending Office to make Offshore Rate Committed Loans, then, on notice thereof by such Bank to the Company through the Agent, any obligation of that Bank to make Offshore Rate Committed Loans or convert Base Rate Committed Loans into Offshore Rate Committed Loans shall be suspended until such Bank notifies the Agent and the Company that the circumstances giving rise to such determination no longer exist. (b) If a Bank determines that it is unlawful for such Bank to maintain any Offshore Rate Committed Loan, the Company shall, upon its receipt of notice of such fact and demand from such Bank (with a copy to the Agent), prepay in full such Offshore Rate Committed Loans of that Bank then outstanding, together with interest accrued thereon and amounts required under Section 3.04, either on the last day of the Interest Period thereof, if such Bank may lawfully continue to maintain such Offshore Rate Committed Loans to such day, or immediately, if such Bank may not lawfully continue to maintain such Offshore Rate Committed Loan. If the Company is required so to prepay any Offshore Rate Committed Loan, then concurrently with such prepayment, the Company shall borrow from the affected Bank, in the amount of such repayment, a Base Rate Committed Loan. (c) If the obligation of any Bank to make or maintain Offshore Rate Committed Loans has been so terminated or suspended, the Company may elect, by giving notice to such Bank through the Agent that all Loans which would otherwise be made by such Bank as Offshore Rate Committed Loans shall be instead Base Rate Committed Loans. (d) Before giving any notice to the Agent under this Section 3.02, the affected Bank shall designate a different Lending Office with respect to its Offshore Rate Committed Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of such Bank, be illegal or otherwise disadvantageous to such Bank. 3.03 Increased Costs and Reduction of Return(a) . (a) If any Bank determines that, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation (other than any such introduction or Page 34 change in respect of any law or regulation relating to Taxes or Excluded Taxes which shall be governed solely by Section 3.01) or (ii) the compliance by such Bank with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining any Offshore Rate Committed Loans, by an amount deemed by such Bank to be material, then the Company shall be liable for, and shall from time to time, within 15 days after demand by such Bank (with a copy of such demand to be sent to the Agent), pay to the Agent for the account of such Bank, additional amounts as are sufficient to compensate such Bank for such increased costs. (b) If any Bank or Designated Bidder shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by such Bank or Designated Bidder (or its Lending Office) or any corporation controlling such Bank or Designated Bidder with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by such Bank or Designated Bidder or any corporation controlling such Bank or Designated Bidder and (taking into consideration such Bank's, such Designated Bidder's or such corporation's policies with respect to capital adequacy and such Bank's or Designated Bidder's desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitment, Loans, credits or obligations under this Agreement, by an amount deemed by such Bank or such Designated Bidder to be material, then, within 15 days after demand by such Bank or Designated Bidder to the Company through the Agent, the Company shall pay to such Bank or Designated Bidder, as the case may be, from time to time as specified by such Bank or Designated Bidder, such additional amounts as are sufficient to compensate such Bank or Designated Bidder for such increase. (c) Each Bank and each Designated Bidder will promptly notify the Company and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank or such Designated Bidder to compensation pursuant to this Section and will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole judgment of such Bank or such Designated Bidder, be otherwise disadvantageous to such Bank or such Designated Bidder. Notwithstanding the foregoing subsections (a) and (b) of this Section 3.03, the Company shall only be obligated to compensate any Bank or any Designated Bidder for any amount arising or accruing during (i) any time or period commencing not more than 30 days prior to the date on which such Bank or such Designated Bidder notifies the Agent and the Company that it proposes to demand such compensation and identifies to the Agent and the Company the statute, regulation or other basis upon which the claimed compensation is or will be based and (ii) any time or period during which, because of the retroactive application of such statute, regulation or other such basis, such Bank or such Designated Bidder did not know that such amount would arise or accrue. 3.04 Funding Losses. The Company shall reimburse each Bank and each Designated Bidder, and hold each Bank and each Designated Bidder harmless from, any loss or expense which such Bank or such Designated Bidder may sustain or incur as a consequence of: Page 35 (a) the failure of the Company to make on a timely basis any payment of principal of any Offshore Rate Committed Loan; (b) the failure of the Company to borrow, continue or convert a Committed Loan after the Company has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation; (c) the failure of the Company to make any prepayment of any Committed Loan in accordance with any notice delivered under Section 2.09; (d) the prepayment (including pursuant to Section 2.09 or 3.02(b)) or other payment (including after acceleration thereof) of any Offshore Rate Committed Loan or Absolute Rate Bid Loan on a day that is not the last day of the relevant Interest Period; or (e) the conversion under Section 2.04 of any Offshore Rate Committed Loan to a Base Rate Committed Loan on a day that is not the last day of the relevant Interest Period; including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Offshore Rate Committed Loans or from fees payable to terminate the deposits from which such funds were obtained. For purposes of calculating amounts payable by the Company to the Banks and the Designated Bidders under this Section and under subsection 3.03(a), each Offshore Rate Committed Loan made by a Bank or Designated Bidder (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the London interbank offered rate used in determining the Offshore Rate for such Offshore Rate Committed Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Offshore Rate Committed Loan is in fact so funded. 3.05 Inability to Determine Rates. If on or prior to the first day of any Interest Period: (a) the Agent is advised by the Reference Banks that deposits in Dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) the Majority Banks advise the Agent that the Offshore Rate, as determined by the Agent, will not adequately and fairly reflect the cost to such Banks of funding their Offshore Rate Committed Loans for such Interest Period, the Agent will promptly so notify the Company and each Bank. Thereafter, the obligation of the Banks to make or maintain Offshore Rate Committed Loans, hereunder shall be suspended until the Agent upon the instruction of the Majority Banks revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it. If the Company does not revoke such Notice as to any such proposed Committed Loans, the Banks shall make, convert or continue any such Committed Loans, as proposed by the Company, in the amount specified in the applicable Notice submitted by the Company, but such Committed Loans shall be made, converted or continued as Base Rate Committed Loans instead of Offshore Rate Committed Loans. Page 36 3.06 Certificates of Banks and Designated Bidders. Any Bank or Designated Bidder claiming reimbursement or compensation under this Article III shall deliver to the Company (with a copy to the Agent) a certificate setting forth in reasonable detail the amount payable to such Bank or such Designated Bidder hereunder and such certificate shall be conclusive and binding on the Company in the absence of manifest error. In determining any amount due under this Article III, a Bank or Designated Bidder may use any reasonable averaging and attribution methods. 3.07 Base Rate Committed Loans Substituted for Affected Offshore Rate Committed Loans. If (i) the obligation of any Bank to make Offshore Rate Committed Loans has been suspended pursuant to Section 3.02 or (ii) any Bank has demanded compensation under Section 3.03(a) and the Company shall, by at least five Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Company that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans which would otherwise be made by such Bank as Offshore Rate Committed Loans, shall be made instead as Base Rate Committed Loans (on which interest and principal shall be payable contemporaneously with the related Offshore Rate Committed Loans of the other Banks); and (b) after each of its Offshore Rate Committed Loans has been repaid, all payments of principal which would otherwise be applied to repay such Offshore Rate Committed Loans shall be applied to repay its Base Rate Committed Loans instead. 3.08 Reserves on Offshore Rate Committed Loans. The Company shall pay to each Bank, as long as such Bank shall be required under regulations of the FRB to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities"), additional costs on the unpaid principal amount of each Offshore Rate Committed Loan equal to the actual costs of such reserves allocated to such Offshore Rate Committed Loan by the Bank (as determined by the Bank in good faith, which determination shall be conclusive), payable on each date on which interest is payable on such Committed Loan, provided the Company shall have received at least 15 days' prior written notice (with a copy to the Agent) of such additional interest from the Bank. If a Bank fails to give notice 15 days prior to the relevant Interest Payment Date, such additional interest shall be payable 15 days from receipt of such notice. 3.09 Substitution of Banks. Upon the receipt by the Company from any Bank (an "Affected Bank") of a claim for compensation under Section 3.03, upon notice to the Agent from any Bank that it shall not consent to a request by the Company for an extension of the Revolving Termination Date pursuant to subsection 2.17(a), or if the Company is required to pay any additional amount to the Agent or any Bank pursuant to Section 3.01, the Company may: (i) request one or more of the other Banks to acquire and assume all or part of such Affected Bank's Loans and Commitment; or (ii) designate a replacement commercial bank (which shall be an Eligible Assignee) satisfactory to the Company to acquire and assume all or a ratable part of such Affected Bank's Loans and Commitment (a "Replacement Bank"); provided, however, that the Company shall be liable for the payment upon demand of all costs and other amounts arising under Section 3.04 Page 37 that result from the acquisition of any Affected Bank's Loan and/or Commitment (or any portion thereof) by a Bank or Replacement Bank, as the case may be, on a date other than the last day of the applicable Interest Period with respect to any Offshore Rate Committed Loan then outstanding. Any such designation of a Replacement Bank under clause (i) shall be effected in accordance with, and subject to the terms and conditions of, the assignment provisions contained in Section 10.08, and shall in any event be subject to the prior written consent of the Agent and the Swingline Bank (which consents shall not be unreasonably withheld). 3.10 Survival. The agreements and obligations of the Company in this Article III shall survive the payment of all other Obligations. ARTICLE IV CONDITIONS PRECEDENT 4.01 Conditions of Initial Loans. The obligation of each Bank and the Swingline Bank to make its initial Committed Loan hereunder, and the obligation of each Bid Loan Bank and Designated Bidder to receive through the Agent the initial Competitive Bid Request, is subject to the condition that the Agent shall have received on or before the Closing Date all of the following, in form and substance satisfactory to the Agent and each Bank, and in sufficient copies for each Bank: (a) Credit Agreement and Notes. This Agreement executed by each party hereto, and the Committed Loan Notes executed by the Company; (b) Resolutions; Incumbency. (i) Copies of the resolutions of the board of directors of the Company authorizing the transactions contemplated hereby, certified as of the Closing Date by the Secretary or an Assistant Secretary of the Company; and (ii) A certificate of the Secretary or Assistant Secretary of the Company, dated the Closing Date, certifying the names, titles and true signatures of the officers of the Company authorized to execute, deliver and perform, as applicable, this Agreement, and all other Loan Documents to be delivered by it hereunder; (c) Organization Documents; Good Standing. Each of the following documents: (i) the articles or certificate of incorporation and the bylaws of the Company as in effect on the Closing Date, certified by the Secretary or Assistant Secretary of the Company as of the Closing Date; and Page 38 (ii) good standing certificates for the Company from the Secretary of State (or similar, applicable Governmental Authority) of its state of incorporation and the state of its principal offices; (d) Legal Opinions. (i) an opinion of Thomas R. Saldin, Executive Vice-President and General Counsel to the Company, dated as of the Closing Date and addressed to the Agent and the Banks, substantially in the form of Exhibit D; and (ii) a favorable opinion of Brobeck, Phleger & Harrison LLP, special counsel to the Agent, dated as of the Closing Date. (e) Payment of Fees. Evidence of payment by the Company of all accrued and unpaid fees, costs and expenses to the extent then due and payable on the Closing Date, together with Attorney Costs of BofA and the Lead Arranger to the extent invoiced prior to or on the Closing Date, plus such additional amounts of Attorney Costs as shall constitute BofA's reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude final settling of accounts between the Company and BofA), including any such costs, fees and expenses arising under or referenced in Sections 2.12 and 10.04; (f) Certificate. A certificate signed by a Responsible Officer, dated as of the Closing Date, stating that: (i) the representations and warranties contained in Article V are true and correct on and as of such date, as though made on and as of such date; (ii) no Default or Event of Default exists or would result from the initial Borrowing; and (iii) there has occurred since January 28, 1999 (or since the date of any Form 10-Q or other public disclosure document filed by the Company with the SEC prior to the Closing Date, to the extent any such event or circumstance is disclosed in such document), no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; (g) Existing Credit Facilities. Evidence satisfactory to the Agent that the commitments to extend credit under the Existing Credit Facilities have been terminated and that all principal, interest, charges and fees due thereunder have been paid or that arrangements reasonably satisfactory to the Agent for the payment thereof have been made by the Company (the Company and each Bank party hereto that is a lender under the Existing Credit Facilities acknowledging that such commitments shall be terminated simultaneously with the closing hereunder); (h) Documents and Actions Relating to the 364-Day Credit Agreement. A certificate of a Responsible Officer of the Company certifying that all conditions precedent to the closing of the 364-Day Credit Agreement shall have Page 39 been satisfied in accordance with the terms and conditions thereof (other than any conditions relating to the closing of the transactions contemplated by this Agreement); and (i) Other Documents. Such other approvals, opinions, documents or materials as the Agent or any Bank may reasonably request. 4.02 Conditions to All Borrowings. The obligation of each Bank and the Swingline Bank to make any Committed Loan to be made by it, and the obligation of any Bid Loan Bank or Designated Bidder to make any Bid Loan as to which the Company has accepted the relevant Competitive Bid (including its initial Loan), is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date: (a) Notice of Borrowing. As to any Committed Loan, the Agent shall have received a Notice of Borrowing; (b) Continuation of Representations and Warranties. The representations and warranties in Article V shall be true and correct on and as of such Borrowing Date with the same effect as if made on and as of such Borrowing Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date; and except that this subsection (b) shall be deemed instead to refer to the last day of the most recent quarter and year for which financial statements have then been delivered, and to the most recent Form 10-K filed by the Company with the SEC, in respect of the representations and warranties made in Section 5.10(a)); (c) No Material Adverse Effect. There has occurred since January 28, 1999 (or since the date of any Form 10-Q or other public disclosure document filed by the Company with the SEC prior to the Closing Date, to the extent any such event or circumstance is disclosed in such document), no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; and (d) No Existing Default. No Default or Event of Default shall exist or shall result from such Borrowing. Each Notice of Borrowing and Competitive Bid Request submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such notice or request and as of each Borrowing Date, that the conditions in this Section 4.02 are satisfied. ARTICLE V REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Agent and each Bank that: 5.01 Corporate Existence and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and has all corporate powers and all material governmental licenses, Page 40 authorizations, consents and approvals required to carry on its business as now conducted. 5.02 Subsidiaries. Each of the Company's corporate Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. 5.03 Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Company of the Loan Documents are within the Company's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any Governmental Authority and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Company or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries. 5.04 Binding Effect. This Agreement and each other Loan Document to which the Company is a party constitutes a valid and binding agreement of the Company, and each Note, when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with their respective terms. 5.05 Litigation. Except as disclosed in the Company's 1998 Form 10-K, there is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any Governmental Authority in which there is a reasonable possibility of an adverse decision which could have a Material Adverse Effect. 5.06 ERISA Compliance. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Plan. 5.07 Use of Proceeds; Margin Regulations. The proceeds of the Loans are to be used solely for the purposes set forth in and permitted by Section 6.08 and Section 7.04. 5.08 Title to Properties; Liens. The Company and each Subsidiary have good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of their respective businesses, except for such defects in title as could not, individually or in the aggregate, have a Material Adverse Effect. The property of the Company and its Subsidiaries is subject to no Liens, other than Liens permitted under Section 7.01. 5.09 Taxes. The Company and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company or any Subsidiary, other than any such taxes being contested in good faith and for which appropriate reserves Page 41 have been established on the books and records of the Company in accordance with GAAP. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Company, adequate. 5.10 Financial Information(a) . (a) The consolidated balance sheet of the Company and its Consolidated Subsidiaries as of January 28, 1999 and the related consolidated statements of earnings, cash flows and stockholders' equity for the fiscal year then ended, reported on by Deloitte & Touche and set forth or as incorporated by reference in the Company's 1998 Form 10-K, a copy of which has been delivered to each of the Banks, fairly present, in conformity with GAAP, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheet of the Company and its Consolidated Subsidiaries as of October 29, 1999 and the related unaudited consolidated statements of earnings and cash flows for the thirty-nine weeks then ended, set forth in the Company's quarterly report for the third quarter ended October 29, 1999 filed with the SEC on Form 10-Q, a copy of which has been delivered to each of the Banks, fairly present, in conformity with GAAP applied on a basis consistent with the financial statements referred to in Subsection 5.10(a), the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such thirty-nine week period (subject to normal year-end adjustments). (c) Since January 28, 1999 (or since the date of any Form 10-Q or other public disclosure document filed by the Company with the SEC prior to the Closing Date, to the extent any such event or circumstance is disclosed in such document), there has been no Material Adverse Effect. 5.11 Environmental Matters. In the ordinary course of its business, the Company considers the effect of Environmental Laws on the business, operations and properties of the Company and its Subsidiaries as such business, operations and properties exist at the time. On this basis, the Company has reasonably concluded that Environmental Laws at the time in effect are unlikely to have a Material Adverse Effect. 5.12 Regulated Entities. The Company is not an "Investment Company" within the meaning of the Investment Company Act of 1940. The Company is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute or regulation limiting its ability to incur Indebtedness. 5.13 Insurance. The properties of the Company and its Consolidated Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Company, in such amounts, with such deductibles (and with such risk retention) and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Company or such Subsidiary operates. Page 42 5.14 Full Disclosure. All information heretofore furnished by the Company to the Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Company to the Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified. 5.15 Year 2000. The Company has (a) completed a review and assessment of critical areas within its and each of its Subsidiaries' business and operations (including those affected by customers and vendors) that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications and devices containing imbedded computer chips used by the Company or any of its Subsidiaries (or their respective customers and vendors) may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and after December 31, 1999), (b) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (c) substantially completed implementation of that plan in accordance with that timetable. The Year 2000 Problem has not resulted in, and the Company reasonably believes that the Year 2000 Problem will not result in, a Material Adverse Effect. ARTICLE VI AFFIRMATIVE COVENANTS So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing: 6.01 Information. The Company will deliver to each of the Banks: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of earnings, cash flows and stockholders' equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the SEC by Deloitte & Touche or other independent public accountants of nationally recognized standing (the "Independent Auditor"). Such report shall not be qualified as to (i) going concern or (ii) any limitation in the scope of the audit; (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of earnings for such quarter and for the portion of the Company's fiscal year ended at the end of such quarter and the related consolidated statement of cash flows for the portion of the Company's fiscal year ended at the end of such quarter, setting forth in comparative form the corresponding statements for the corresponding portions of the Company's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, GAAP and consistency by the chief financial officer or the chief accounting officer of the Company; Page 43 (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a Compliance Certificate of the chief financial officer or the chief accounting officer of the Company; (d) simultaneously with the delivery of each set of financial statements referred to in subsection (a), a statement of the Independent Auditor which reported on such statements (i) whether anything has come to their attention to cause them to believe that any Default existed on the date of such statements and (ii) confirming the calculations set forth in the Compliance Certificate delivered simultaneously therewith pursuant to subsection (c); (e) forthwith upon the occurrence of any Default, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed and not previously delivered to each Bank pursuant to this Section 6.01; (g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, l0-Q and 8-K (or their equivalents) which the Company shall have filed with the SEC and not previously delivered to each Bank pursuant to this Section 6.01; (h) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA, or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth details as to such occurrence and action, if any, which the Company or applicable member of the ERISA Group is required or proposes to take; and (i) from time to time such additional information regarding the consolidated financial position of the Company as the Agent, at the request of any Bank, may reasonably request. Page 44 As to any information contained in materials furnished pursuant to subsection 6.01(g), the Company shall not be separately required to furnish such information under subsection (a) or (b) above, but the foregoing shall not be in derogation of the obligation of the Company to furnish the information and materials described in subsection (a) and (b) above at the times specified therein. 6.02 Conduct of Business and Maintenance of Existence. The Company will continue, and will cause each Subsidiary to continue, to engage in business of the same general type as now conducted by the Company and its Subsidiaries, and will preserve, renew and keep in full force and effect, and will cause each Subsidiary to preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that the Company may (a) discontinue operations or dispose of property in the normal conduct of its business and (b) cause the dissolution of Subsidiaries or the merger of a Subsidiary into the Company or into another Subsidiary as it may from time to time reasonably deem necessary or desirable in the conduct of its business. 6.03 Maintenance of Property. The Company will keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted; provided that the Company and each of its Subsidiaries may discontinue operations and dispose of property in the normal conduct of its business. 6.04 Insurance. The Company will maintain, and will cause each Subsidiary to maintain with financially sound and reputable insurance companies, insurance on all their real and personal property in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against by companies of established repute engaged in the same or similar business as the Company or such Subsidiary, and the Company will promptly furnish to the Banks such information as to insurance carried as may be reasonably requested in writing by the Agent. 6.05 Payment of Obligations. The Company will pay and discharge, and will cause each Subsidiary to pay and discharge, at or before maturity, all their respective material obligations and liabilities, including tax liabilities, except where the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Subsidiary to maintain, in accordance with GAAP, appropriate reserves for the accrual of any of the same. 6.06 Compliance with Laws. The Company will comply, and cause each Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of Governmental Authorities (including Environmental Laws and ERISA), except where the necessity of compliance therewith is contested in good faith by appropriate proceedings and non-compliance during the period of such contest could not reasonably be expected to have a Material Adverse Effect. 6.07 Inspection of Property, Books and Records. The Company will keep, and will cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities. Upon the occurrence and during the Page 45 continuance of a Default, the Company will permit, and will cause each Subsidiary to permit, representatives of any Bank at such Bank's expense, to examine any of their respective books and records (except as they relate to the Company's trade secrets or other proprietary information of the Company other than any information required to be delivered to the Banks by the Company under Section 6.01) and to discuss their respective finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired. 6.08 Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Company for commercial paper back-up liquidity and other lawful corporate purposes. 6.09 Further Assurances. Promptly upon request by the Agent or the Majority Banks, the Company shall do, execute, acknowledge, and deliver, any and all such further acts, certificates, assurances and other instruments the Agent or such Banks, as the case may be, may reasonably require from time to time in order to carry out more effectively the purposes of this Agreement or any other Loan Document. ARTICLE VII NEGATIVE COVENANTS So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing: 7.01 Limitation on Liens. Neither the Company nor any Consolidated Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement securing Indebtedness outstanding on the date of this Agreement in an aggregate principal amount not exceeding $500,000,000; (b) any Lien existing on any specific tangible asset or assets of any Person at the time such Person becomes a Consolidated Subsidiary and not created in contemplation of such event, subject to subsection 7.01(e); (c) any Lien on any asset securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that (i) in the case of land acquired for the purpose of constructing new business or operating facilities thereon, (A) such Lien attaches to such land within 24 months after the acquisition thereof and (B) construction of such new business or operating facilities thereon is substantially complete within 24 months after the acquisition of such land and (ii) in the case of any asset other than an asset of the type described in the preceding clause (i), such Lien attaches to such asset concurrently with or within 180 days after the acquisition thereof; Page 46 (d) any Lien on any specific tangible asset or assets of any Person existing at the time such Person is merged or consolidated with or into the Company or a Consolidated Subsidiary and not created in contemplation of such event, subject to subsection 7.01(e); (e) any Lien existing on any specific tangible asset or assets prior to the acquisition thereof by the Company or a Consolidated Subsidiary and not created in contemplation of such acquisition; provided that in the case of any Lien permitted under this subsection (e) or under subsections (b) and (d), any such Lien does not by its terms cover any such tangible assets after the time the Company directly or indirectly acquires such assets which were not covered immediately prior thereto, and any such Lien does not by its terms secure any Indebtedness other than Indebtedness existing immediately prior to the time of acquisition of such assets; (f) any Lien arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Indebtedness is not increased and is not secured by any additional assets; (g) Liens arising in the ordinary course of its business which (i) do not secure Indebtedness and (ii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (h) Liens arising from the Company's or a Subsidiary's pledging of equipment, not otherwise permitted by the foregoing clauses of this Section, securing Indebtedness in an aggregate principal amount at any time outstanding not to exceed $500,000,000; and (i) Liens on real property; provided that the aggregate value of real property owned by the Company (not including for purposes of this proviso any real property acquired or held by the Company subject to the interest of a lessor under a capital lease relating to such real property), as determined on a lower of cost or Fair Market Value basis (as defined below), exceeds the aggregate principal amount of Indebtedness secured by Liens on such real property in an amount not less than $250,000,000. For the purposes of Section 7.01, "Fair Market Value" means with respect to any real property of the Company or any Subsidiary at any date the open market cash purchase price that an informed and willing purchaser would pay for such real property in an arm's-length transaction to a willing and informed owner under no compulsion to sell, all as determined (i) if no Default has occurred and is continuing, at the option of the Majority Banks either (A) in good faith by the Board of Directors of the Company or (B) by an appraisal conducted by an independent appraiser satisfactory to the Agent and the Company, the cost of such appraisal to be shared equally by the Company and the Banks, and (ii) if a Default has occurred and is continuing, by an appraisal conducted by an independent appraiser satisfactory to the Agent and the Company, the cost of such appraisal to be borne solely by the Company. 7.02 Disposition of Assets. The Company will not (i) consolidate or merge with or into any other Person or (ii) directly or indirectly sell, lease or otherwise transfer all or any substantial part of the assets of the Company and its Consolidated Subsidiaries, considered as a whole, to any other Person; Page 47 provided that the Company may merge with another Person if (A) the Company is the Person surviving such merger and (B) immediately after giving effect to such merger, no Default shall have occurred and be continuing. 7.03 Limitation on Subsidiary Indebtedness and Swap Contracts. The Company shall not permit any Subsidiary to create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness or Swap Contracts except: (a) Indebtedness incurred pursuant to this Agreement; (b) endorsements for collection or deposit in the ordinary course of business; (c) Swap Contracts outstanding as of the Closing Date or entered into thereafter in the ordinary course of business; (d) Surety Instruments in the ordinary course of business; (e) Indebtedness existing on the Closing Date in an amount not to exceed $3,200,000,000; (f) Indebtedness secured by Liens permitted by subsections 7.01(b), (c), (d), (e) and (i); (g) capital leases entered into by any Subsidiary after the Closing Date to finance the acquisition of equipment; (h) Indebtedness of Wholly-Owned Consolidated Subsidiaries of the Company to the Company or to other Wholly-Owned Consolidated Subsidiaries of the Company; and (i) additional Indebtedness incurred after the Closing Date not exceeding $500,000,000 in aggregate principal amount at any time outstanding. 7.04 Use of Proceeds. (a) The Company shall not, and shall not suffer or permit any Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance Indebtedness of the Company or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock or (iv) for any other purpose which violates Regulations T, U or X of the FRB. (b) The Company shall not, directly or indirectly, use any portion of the Loan proceeds to purchase during the underwriting period, or for thirty days thereafter, Ineligible Securities underwritten by the Arranger. The Arranger is a wholly-owned subsidiary of BankAmerica Corporation and a registered broker-dealer which is permitted to underwrite and deal in certain Ineligible Securities; and "Ineligible Securities" means securities which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. ss. 24, Seventh). Page 48 7.05 Minimum Consolidated Tangible Net Worth. The Company shall not permit its Consolidated Tangible Net Worth at any time to be less than $2,100,000,000; provided that upon (a) the purchase from time to time of common stock of the Company by the Company from one or more of the J.A. and Kathryn Albertson Foundation, Inc., or donees pursuant to the terms of the Foundation Stock Agreement, or (b) the purchase from time to time of common stock of the Company by the Company from Theo Albrecht or from Markus-Stiftung pursuant to the terms of the Markus-Stiftung Stock Agreement, Consolidated Tangible Net Worth shall be increased, for purposes of subsequent calculations hereunder, by an amount (the "CTNW Adjustment") equal to the excess (if any) of (i) the amount by which the purchase price of such common stock reduces Consolidated Tangible Net Worth over (ii) the amount by which Consolidated Tangible Net Worth has been increased through the sale of common stock subsequent to the date of such purchase, excluding the effect of the exercise of employee stock options, all as determined in accordance with GAAP. ARTICLE VIII EVENTS OF DEFAULT 8.01 Event of Default. Any of the following shall constitute an "Event of Default": (a) Non-Payment. The Company fails to make, (i) when and as required to be made herein, payments of any amount of principal of any Loan, or (ii) within five Business Days after the same becomes due, payment of any interest, fee or any other amount payable hereunder or under any other Loan Document; or (b) Representation or Warranty. Any representation, warranty, certification or statement made by the Company in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect on or as of the date made (or deemed made); or (c) Specific Defaults. The Company shall fail to observe or perform any covenant contained in Sections 7.01 through 7.05, inclusive; or (d) Other Defaults. The Company shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a), (b) or (c) above) for 15 Business Days after the earlier of (i) the date upon which the chief financial officer, chief accounting officer or other senior officer of the Company knew or reasonably should have known of such failure or (ii) notice thereof has been given to the Company by the Agent at the request of any Bank; or (e) Cross-Default. (i) The Company or any Subsidiary (A) fails to make any payment in respect of any Material Indebtedness (other than in respect of Swap Contracts), when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure; or (B) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any Material Indebtedness, and such failure Page 49 continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Material Indebtedness or beneficiary or beneficiaries of such Material Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Material Indebtedness to be declared to be due and payable, or to be prepaid prior to its stated maturity, or to become payable, or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (1) any event of default under such Swap Contract as to which the Company or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (2) any Termination Event (as so defined) as to which the Company or any Subsidiary is an Affected Party (as so defined), and, in either event, the Swap Termination Value owed by the Company or such Subsidiary as a result thereof is greater than $30,000,000; or (f) Insolvency; Voluntary Proceedings. The Company or any Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business in the ordinary course; (iii) consents to or commences a voluntary Insolvency Proceeding with respect to itself, or (iv) takes any corporate action to authorize any of the foregoing; or (g) Involuntary Proceedings. (i) An involuntary Insolvency Proceeding shall be commenced or filed against the Company or any Subsidiary, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of the Company's or any Subsidiary's properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 60 days after commencement, filing or levy; (ii) the Company or any Subsidiary admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company or any Subsidiary acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its property or business; or (h) ERISA. Any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $30,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $30,000,000; or Page 50 (i) Monetary Judgments. A judgment or order for the payment of money in excess of $30,000,000 shall be rendered against the Company or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; or (j) Change of Control. There occurs any Change of Control. 8.02 Remedies. If any Event of Default occurs, then, and in every such event, the Agent shall (i) if requested or consented to by the Majority Banks, by notice to the Company terminate the Commitments and they shall thereupon terminate, (ii) if requested or consented to by the Majority Banks, by notice to the Company declare the Loans (together with accrued interest thereon and all other amounts owing under the Loan Documents) to be, and the Loans (and such interest and other amounts) shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and (iii) if requested or consented to by the Majority Banks, exercise on behalf of itself and the Banks all rights and remedies available to it and the Banks under the Loan Documents or applicable law; provided that in the case of any of the Events of Default specified in subsections (f) or (g) (in the case of clause (i) of subsection (g) upon the expiration of the 60-day period mentioned therein), without any notice to the Company or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Loans (together with accrued interest thereon and all other amounts owing under the Loan Documents) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company. 8.03 Rights Not Exclusive. The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. ARTICLE IX THE AGENT 9.01 Appointment and Authorization; "Agent." Each Bank hereby irrevocably (subject to Section 9.09) appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Page 51 Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. 9.02 Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 9.03 Liability of Agent. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by the Company or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Company or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Company or any of the Company's Subsidiaries or Affiliates. 9.04 Reliance by Agent(a) . (a) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Majority Banks and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks. (b) For purposes of determining compliance with the conditions specified in Section 4.01, each Bank that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent (or made available) by the Agent to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Bank. Page 52 9.05 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Banks, unless the Agent shall have received written notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". The Agent will notify the Banks of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be requested by the Banks in accordance with Article VIII; provided, however, that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Banks. 9.06 Credit Decision. Each Bank acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agent hereinafter taken, including any review of the affairs of the Company and its Subsidiaries, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Company and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Company hereunder. Each Bank also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agent, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Company or any Subsidiary which may come into the possession of any of the Agent-Related Persons. 9.07 Indemnification of Agent. Whether or not the transactions contemplated hereby are consummated, the Banks shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), in accordance with the Banks' Pro Rata Shares, from and against any and all Indemnified Liabilities; provided, however, that no Bank shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Company. The Page 53 undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent. 9.08 Agent in Individual Capacity. BofA and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Company and its Subsidiaries and Affiliates as though BofA were not the Agent hereunder and without notice to or consent of the Banks. The Banks acknowledge that, pursuant to such activities, BofA or its Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Subsidiary) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to its Loans, BofA shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Agent, and the terms "Bank" and "Banks" include BofA in its individual capacity. 9.09 Successor Agent. The Agent may, and at the request of the Majority Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent resigns under this Agreement, the Majority Banks shall appoint from among the Banks a successor agent for the Banks which successor agent shall be approved by the Company (such approval not to be unreasonably withheld). If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Banks and the Company, a successor agent from among the Banks. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article IX and Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Agent hereunder until such time, if any, as the Majority Banks appoint a successor agent as provided for above. Notwithstanding the foregoing, however, BofA may not be removed as the Agent at the request of the Majority Banks unless BofA shall also simultaneously be replaced as "Swingline Bank" hereunder pursuant to documentation in form and substance reasonably satisfactory to BofA. 9.10 Withholding Tax. (a) (a) Each Bank organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement, and on the Assignment and Acceptance Date pursuant to which it becomes a party to this Agreement in the case of each other Bank, and from time to time thereafter if requested in writing by the Company or the Agent (but only so long thereafter as such Bank remains lawfully able to do so), provide the Agent and the Company with (i) an accurate, complete, and duly executed Internal Revenue Service form W-8BEN or W-8ECI, as appropriate, or any successor or substitute form prescribed or permitted by the Internal Revenue Service, certifying that such Bank is entitled to claim the benefit of complete exemption from imposition of United States withholding tax under an income tax treaty to which the United States is a party in respect of payments made under this Agreement or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade Page 54 or business in the United States and (ii) in the event that, by virtue of a change in law or regulations, such forms are no longer valid evidence of a Person's exemption from withholding which is reasonably satisfactory to the Company, other appropriate evidence supporting such Person's exemption from withholding as the Company may reasonably request. (b) For any period with respect to which a Bank or an Assignee has failed to provide the Company with the appropriate form described in Subsection 9.10(a) (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under Subsection 9.10(a)), such Bank or Assignee shall not be entitled to indemnification under Section 3.01(b) or (d) with respect to Taxes imposed by the United States. (c) If any Bank claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form W-8BEN and such Bank sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company owing to such Bank, such Bank agrees to notify the Company and Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of the Company owing to such Bank. To the extent of such percentage amount, the Agent will treat such Bank's IRS Form W-8BEN as no longer valid. (d) If any Bank claiming exemption from United States withholding tax by filing IRS Form W-8ECI with the Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company owing to such Bank, such Bank agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code. (e) If any Bank is entitled to a reduction in the applicable withholding tax, the Agent may withhold from any interest payment to such Bank an amount equivalent to the applicable withholding tax after taking into account such reduction. However, if the forms or other documentation required by subsection (a) of this Section are not delivered to the Company and Agent, then the Company or Agent may withhold from any interest payment to such Bank not providing such forms or other documentation an amount equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code, without reduction. (f) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Bank (because the appropriate form was not delivered or was not properly executed, or because such Bank failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Bank shall indemnify the Company or the Agent, as the case may be, fully for all amounts paid, directly or indirectly, by the Company or the Agent, as the case may be, as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Company or the Agent, as the case may be, under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Banks under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Agent. Page 55 9.11 Co-Agents. None of the Banks identified on the facing page or signature pages of this Agreement as a "Documentation Agent," "Syndication Agent," "Senior Managing Agent" or "Managing Agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Banks as such. Without limiting the foregoing, none of the Banks so identified shall have or be deemed to have any fiduciary relationship with any Bank. Each Bank acknowledges that it has not relied, and will not rely, on any of the Banks so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. ARTICLE X MISCELLANEOUS 10.01 Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Company or any applicable Subsidiary therefrom, shall be effective unless the same shall be in writing and signed by the Majority Banks (or by the Agent at the written request of the Majority Banks) and the Company and acknowledged by the Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all the Banks and the Company and acknowledged by the Agent, do any of the following: (a) increase or extend the Commitment of any Bank or the Swingline Commitment of the Swingline Bank (or reinstate any Commitment terminated pursuant to Section 8.02); (b) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder or under any other Loan Document (including the date of any mandatory prepayment hereunder); (c) reduce the principal of, or the rate of interest specified herein on any Loan, or (subject to clause (ii) below) any fees or other amounts payable hereunder or under any other Loan Document; (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Banks or any of them to take any action hereunder; or (e) amend this Section 10.01, subsection 2.04(e), Section 2.17, Section 2.18, the definition of "Majority Banks" herein, or any provision herein providing for consent or other action by all Banks or some specified amount of Banks; and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of the Agent under this Agreement or any other Loan Document, (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swingline Bank in addition to the Page 56 Majority Banks or all the Banks, as the case may be, increase the Swingline Commitment or otherwise affect the rights or duties of the Swingline Bank under this Agreement, and (iii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed by the parties thereto. 10.02 Notices(a) . (a) All notices, requests, consents, approvals, waivers and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission) and mailed, faxed or delivered, to the address or facsimile number specified for notices on Schedule 10.02; or, as directed to the Company or the Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to the Company and the Agent. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the mails, or if delivered, upon delivery; except that notices pursuant to Article II or IX to the Agent shall not be effective until actually received by the Agent; and notices pursuant to Article II to the Swingline Bank shall not be effective until actually received by the Swingline Bank at the address specified for such Person on Schedule 10.02. (c) Any agreement of the Agent and the Banks herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Company. The Agent and the Banks shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Company to give such notice and the Agent and the Banks shall not have any liability to the Company or other Person on account of any action taken or not taken by the Agent or the Banks in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans shall not be affected in any way or to any extent by any failure by the Agent and the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agent and the Banks of a confirmation which is at variance with the terms understood by the Agent and the Banks to be contained in the telephonic or facsimile notice. 10.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Agent, any Designated Bidder or any Bank, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. 10.04 Costs and Expenses. The Company shall: (a) whether or not the transactions contemplated hereby are consummated, pay or reimburse BofA (including in its capacity as Agent) within five Business Days after demand (subject to subsection 4.01(e)) for all reasonable costs and expenses incurred by BofA (including in its capacity as Agent) and the Lead Arranger in connection with (i) the development, preparation, delivery and execution of, and any amendment, supplement, waiver or modification to (in each Page 57 case, whether or not consummated), this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith and (ii) the consummation of the transactions contemplated hereby and thereby, including reasonable Attorney Costs incurred by BofA (including in its capacity as Agent) with respect thereto; and (b) pay or reimburse the Agent, the Lead Arranger, each Designated Bidder and each Bank within five Business Days after demand (subject to subsection 4.01(e)) for all costs and expenses (including Attorney Costs) incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or any other Loan Document during the existence of an Event of Default or after acceleration of the Loans (including in connection with any "workout" or restructuring regarding the Loans, and including in any Insolvency Proceeding or appellate proceeding). 10.05 Company Indemnification. Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify, defend and hold the Agent-Related Persons, and each Bank, each Designated Bidder and each of its respective officers, directors, employees, counsel, agents and attorneys-in-fact (each an "Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or replacement of any Bank) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement, the other Loan Documents or any document contemplated by or referred to therein, or the transactions contemplated hereby, or any action taken or omitted by any such Indemnified Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided that the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities to the extent resulting from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section and in Section 10.04 shall survive payment of all other Obligations. 10.06 Payments Set Aside. To the extent that the Company makes a payment to the Agent, any Designated Bidder or any Bank or the Agent, any Designated Bidder or any Bank exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent, such Designated Bidder or such Bank in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Bank and each Designated Bidder severally agrees to pay to the Agent upon demand its pro rata share of any amount so recovered from or repaid by the Agent. 10.07 Binding Effect; Successors and Assigns. This Agreement shall become effective when it shall have been executed by the Company, the Agent and the Banks and thereafter shall be binding upon and inure to the benefit of the Page 58 parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Bank. 10.08 Assignments, Participations, Etc(a). (a) Any Bank may, with the written consent of the Company, the Swingline Bank and the Agent (which in each case shall not be unreasonably withheld), at any time assign and delegate to one or more Eligible Assignees (each an "Assignee") all, or any ratable part of all, of the Loans, the Commitment and the other rights and obligations of such Bank hereunder; provided, however, that (i) no written consent of the Company shall be required during the existence of a Default or an Event of Default; (ii) no written consent of the Company or the Agent or the Swingline Bank shall be required in connection with any assignment and delegation by a Bank to an Eligible Assignee that is a United States Affiliate of such Bank or another Bank; and (iii) except in connection with an assignment of all of a Bank's rights and obligations with respect to its Commitment and Loans, any such assignment (A) to an Eligible Assignee that is a Bank or an Affiliate of a Bank hereunder shall be equal to or greater than $5,000,000 or (B) to an Eligible Assignee that is not a Bank or an Affiliate of a Bank hereunder shall be equal to or greater than $10,000,000; and (iv) each such partial assignment shall be of a ratable part of the Loans, the Commitment and the other interests, rights and obligations hereunder of such assigning Bank; and provided further, however, that the Company, the Swingline Bank and the Agent may continue to deal solely and directly with such Bank in connection with the interest so assigned to an Assignee until (A) such Bank and its Assignee shall have delivered to the Company and the Agent an Assignment and Acceptance Agreement substantially in the form of Exhibit E (an "Assignment and Acceptance") together with any Note or Notes subject to such assignment; (B) a written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, in substantially the form of the Notice of Assignment and Acceptance attached as Schedule 1 to the Assignment and Acceptance, shall have been given to the Company and the Agent by such Bank and the Assignee; and (C) the assignor Bank or Assignee shall have paid to the Agent a processing fee in the amount of $3,500; and (D) the Agent, the Swingline Bank and the Company each shall have provided any required consent to such assignment in accordance with this Section. In connection with any assignment by BofA, its Swingline Commitment may be assigned in whole (and not part) and only in connection with an assignment transaction involving an assignment of all of its Commitment and Loans, and the Assignment and Acceptance may be appropriately modified to include an assignment and delegation of its Swingline Commitment and any outstanding Swingline Loans. (b) From and after the date that the Agent notifies the assignor Bank that the Agent has received (and, if required, provided its consent with respect thereto and, if necessary, received any other consents required under this Section 10.08) an executed Assignment and Acceptance and payment of the above-referenced processing fee (such date referred to herein as the "Assignment and Acceptance Date", (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Bank under the Loan Documents, (ii) this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom, and (iii) the assignor Bank shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be Page 59 released from its obligations under the Loan Documents; provided, however, that the assignor Bank shall not relinquish its rights under Article III or under Sections 10.04 and 10.05 (and any equivalent provisions of the other Loan Documents) to the extent such rights relate to the time prior to the effective date of the Assignment and Acceptance. The Commitment allocated to each Assignee shall reduce the Commitment of the assigning Bank pro tanto. (c) Within five Business Days after the Company's receipt of notice from the Agent that it has received (and, if necessary, consented to) an executed Assignment and Acceptance and payment of the processing fee (and provided that the Company and the Swingline Bank consent to such assignment in accordance with subsection 10.08(a)), the Company shall execute and deliver to the Agent any new Notes requested by such Assignee evidencing such Assignee's assigned Loans and Commitment and, if the assignor Bank has retained a portion of its Loans and its Commitment, replacement Notes as requested by the assignor Bank evidencing the Loans and Commitment retained by the assignor Bank (such Notes to be in exchange for, but not in payment of, the Notes held by such Bank, if any). (d) Any Bank or Designated Bidder may at any time sell to one or more commercial banks or other Persons not Affiliates of the Company (a "Participant") participating interests in any Loans, the Commitment of that Bank and the other interests of that Bank or Designated Bidder (the "Originator") hereunder and under the other Loan Documents; provided, however, that (i) the Originator's obligations under this Agreement shall remain unchanged, (ii) the Originator shall remain solely responsible for the performance of such obligations, (iii) the Company and the Agent shall continue to deal solely and directly with the Originator in connection with the Originator's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Bank shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment, consent or waiver would require unanimous consent of the Banks as described in the first proviso to Section 10.01. In the case of any such participation, the Participant shall not have any rights under this Agreement, or any of the other Loan Documents, and all amounts payable by the Company hereunder shall be determined as if such Originator had not sold such participation; except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Bank or Designated Bidder (as the case may be) under this Agreement. (e) Notwithstanding any other provision in this Agreement, any Bank or Designated Bidder may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement and any Note held by it (other than in respect of Swingline Loans) in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. 10.09 Designated Bidders. Any Bid Loan Bank may designate one Designated Bidder to have a right to offer and make Bid Loans pursuant to Section 2.06; provided, however, that (i) no such Bid Loan Bank may make more than one such Page 60 designation, (ii) each such Bid Loan Bank making any such designation shall retain the right to make Bid Loans, and (iii) the parties to each such designation shall execute and deliver to the Agent a Designation Agreement. Upon its receipt of an appropriately completed Designation Agreement executed by a designating Bid Loan Bank and a designee representing that it is a Designated Bidder, the Agent will accept such Designation Agreement and give prompt notice thereof to the Company, whereupon such designation of such Designated Bidder shall become effective and such Designated Bidder shall become a party to this Agreement as a "Designated Bidder." 10.10 Confidentiality. Each Bank and each Designated Bidder agrees to take and to cause its Affiliates to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as "confidential" or "secret" by the Company and provided to it by the Company or any Subsidiary, or by the Agent on the Company's or such Subsidiary's behalf, under this Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such information other than in connection with or in enforcement of this Agreement and the other Loan Documents or in connection with other business now or hereafter existing or contemplated with the Company or any Subsidiary; except to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by such Bank or Designated Bidder, or (ii) was or becomes available on a non-confidential basis from a source other than the Company, provided that such source is not bound by a confidentiality agreement with the Company known to such Bank or Designated Bidder; provided, however, that any Bank or Designated Bidder may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which such Bank or Designated Bidder is subject or in connection with an examination of such Bank or Designated Bidder by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any applicable Requirement of Law; (D) to the extent required in connection with any litigation or proceeding to which the Agent, any Bank, Designated Bidder or their respective Affiliates may be party; (E) to the extent required in connection with the exercise of any remedy hereunder or under any other Loan Document; (F) to such Bank's or Designated Bidder's independent auditors, legal counsel and other professional advisors; (G) to any Participant or Assignee, actual or potential, provided that such Person agrees in writing to keep such information confidential to the same extent required of the Banks hereunder; (H) as to any Bank or Designated Bidder or its Affiliate, as expressly permitted under the terms of any other document or agreement regarding confidentiality to which the Company or any Subsidiary is party or is deemed party with such Bank or Designated Bidder or such Affiliate; and (I) to its Affiliates. 10.11 Set-off. In addition to any rights and remedies of the Banks provided by law, if an Event of Default exists or the Loans have been accelerated, each Bank and Designated Bidder is authorized at any time and from time to time, without prior notice to the Company, any such notice being waived by the Company to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Bank or Designated Bidder to or for the credit or the account of the Company against any and all Obligations owing to such Bank or Designated Bidder, now or hereafter existing. Each Bank and Designated Bidder agrees promptly to notify the Company and the Agent after any such set-off and application made by such Bank or Designated Bidder; provided, however, that the failure to give such notice shall not affect Page 61 the validity of such set-off and application. Any Bank having outstanding both Committed Loans and Bid Loans at any time a right of set-off is exercised by such Bank and applying such setoff to the Loans shall apply the proceeds of such set-off first to such Bank's Committed Loans, until its Committed Loans are reduced to zero, and thereafter to its Bid Loans. 10.12 Notification of Addresses, Lending Offices, Etc. Each Bank and each Designated Bidder shall notify the Agent in writing of any changes in the address to which notices to such Bank or Designated Bidder should be directed, of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Agent shall reasonably request. 10.13 Counterparts. This Agreement may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. 10.14 Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 10.15 No Third Parties Benefited. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Banks, the Designated Bidders, the Agent, the Agent-Related Persons, the Indemnified Persons and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. 10.16 Governing Law and Jurisdiction(a) . (a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT THE COMPANY, THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT, THE DESIGNATED BIDDERS AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT, THE DESIGNATED BIDDERS AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT, THE DESIGNATED BIDDERS AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW. Page 62 10.17 Waiver of Jury Trial. THE COMPANY, THE BANKS, THE DESIGNATED BIDDERS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS, THE DESIGNATED BIDDERS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 10.18 Entire Agreement. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Company, the Banks, the Designated Bidders, the Swingline Bank and the Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, oral or written, relating to the subject matter hereof and thereof. (remainder of page intentionally left blank) Page 63 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in San Francisco, California by their proper and duly authorized officers as of the day and year first above written. ALBERTSON'S, INC. By: Title: BANK OF AMERICA, N.A., as Agent By: Title: BANK OF AMERICA, N.A., as Swingline Bank and as a Bank By: Title: BANK ONE, NA, as Documentation Agent and as a Bank By: Title: Page 64 WACHOVIA BANK, N.A., as Syndication Agent and as a Bank By: Title: BANCA DI ROMA, SAN FRANCISCO BRANCH By: Title: THE BANK OF NEW YORK By: Title: BANK OF OKLAHOMA, N.A. By: Title: FIRSTAR BANK, NATIONAL ASSOCIATION By: Title: Page 65 FIRST UNION NATIONAL BANK By: Title: FIRST SECURITY BANK, N.A. By: Title: HUNTINGTON NATIONAL BANK By: Title: INTERNATIONAL BANK OF COMMERCE By: Title: KEYBANK NATIONAL ASSOCIATION By: Title: Page 66 THE NORTHERN TRUST COMPANY By: Title: SOUTHTRUST BANK, N.A. By: Title: SUNTRUST BANK, CENTRAL FLORIDA, N.A. By: Title: UMB BANK, N.A. By: Title: UNION BANK OF CALIFORNIA, N.A. By: Title: Page 67 U.S. BANK NATIONAL ASSOCIATION By: Title: WELLS FARGO BANK, N.A. By: Title: MERRILL LYNCH BANK USA By: Title: Page 68 ANNEX I PRICING GRID Applicable Margin and Applicable Fee Amount (Facility Fee): The Facility Fee and the Applicable Margin for Offshore Rate Committed Loans and Base Rate Committed Loans shall be, at any time, the rate per annum set forth in the tables below. "Indebtedness Rating" means the long term unsecured senior, non-credit enhanced debt rating of the Company by Standard & Poor's Ratings Group or Moody's Investors Service Inc. (in the case of a split rating, the higher rating will apply, unless the split results in a difference of more than one rating, in which case the rating one rating below the highest rating will apply). Any change in the Applicable Margin or Applicable Fee Amount for the Facility Fee shall become effective five Business Days after any public announcement of Indebtedness Rating requiring such a change.
Indebtedness Offshore Rating Facility Fee Rate Spread Base Rate Spread ------ ------------ ----------- ---------------- - ------------------------------ ---------------------- ------------------------- ----------------------------- - ------------------------------ ---------------------- ------------------------- ----------------------------- => A or A2 8.0 bps 17.0 bps 0 bps - ------------------------------ ---------------------- ------------------------- ----------------------------- - ------------------------------ ---------------------- ------------------------- ----------------------------- => A- or A3 9.0 bps 21.0 bps 0 bps - ------------------------------ ---------------------- ------------------------- ----------------------------- - ------------------------------ ---------------------- ------------------------- ----------------------------- => BBB+ or Baa1 10.0 bps 25.0 bps 0 bps - ------------------------------ ---------------------- ------------------------- ----------------------------- - ------------------------------ ---------------------- ------------------------- ----------------------------- < BBB+ or Baa1 12.5 bps 32.5 bps 0 bps - ------------------------------ ---------------------- ------------------------- -----------------------------
Applicable Fee Amount (Utilization Fee): The Utilization Fee applicable to Loans shall be, at any time, the rate per annum set forth in the table below, determined in accordance with usage: - --------------------------------------------------------------------------------
-------------------------- ----------------------- Facility Usage % Utilization Fee -------------------------- ----------------------- -------------------------- ----------------------- 50% 10.0 bps -------------------------- -----------------------
If usage shall equal or exceed the applicable percentage specified above, the utilization fee corresponding to such percentage shall apply with respect to all outstanding Loans. Annex 1-1. SCHEDULE 2.01 COMMITMENTS AND PRO RATA SHARES
PRO RATA BANK COMMITMENT SHARE ---- ------------ ------------- BANK OF AMERICA, N.A. $135,000,000 14.594594595%* WACHOVIA BANK, N.A. $125,000,000 13.513513514%* BANK ONE, NA $125,000,000 13.513513514%* WELLS FARGO BANK, N.A. $75,000,000 8.108108108%* U.S. BANK NATIONAL ASSOCIATION $75,000,000 8.108108108%* FIRST UNION NATIONAL BANK $75,000,000 8.108108108%* UNION BANK OF CALIFORNIA, N.A. $75,000,000 8.108108108%* THE NORTHERN TRUST COMPANY $42,500,000 4.594594595%* FIRST SECURITY BANK, N.A. $42,500,000 4.594594595%* SUNTRUST BANK $25,000,000 2.702702703%* KEYBANK NATIONAL ASSOCIATION $25,000,000 2.702702703%* THE HUNTINGTON NATIONAL BANK $25,000,000 2.702702703%* THE BANK OF NEW YORK $12,500,000 1.351351351%* INTERNATIONAL BANK OF COMMERCE $12,500,000 1.351351351%* UMB BANK, N.A. $12,500,000 1.351351351%* SOUTHTRUST BANK, N.A. $12,500,000 1.351351351%* BANCA DI ROMA, SAN FRANCISCO BRANCH $12,500,000 1.351351351%* FIRSTAR BANK, NATIONAL ASSOCIATION $12,500,000 1.351351351%* BANK OF OKLAHOMA, N.A. $5,000,000 0.540540541%* TOTAL $925,000,000.00 100%
* [9 DECIMAL PTS.] S-2.01-1. SCHEDULE 10.02 PAYMENT OFFICES; ADDRESSES FOR NOTICES; LENDING OFFICES COMPANY Address for Notices: Albertson's, Inc. 250 Park Center Blvd. Box 20 Boise, Idaho 83726 Attention: Finance Department Telephone: (208) 395-6534 Facsimile: (208) 395-6631 BANK OF AMERICA, N.A. as Agent Notices for Borrowing, Conversions/Continuations, and Payments: Bank of America, N.A. Mail Code: CA4-706-05-09 Agency Services #5596 1850 Gateway Boulevard, 5th Floor Concord, California 94520 Attention: Tosha Clements Telephone: (925) 675-8409 Facsimile: (925) 969-2805 Other Notices: Bank of America, N.A. Retail Industry Group #33751 Mail Code: CA5-705-41-89 555 California Street, 41st Floor San Francisco, California 94104 Attention: James P. Johnson Telephone: (415) 622-6177 Facsimile: (415) 622-4585 S-10.02-1. Agent's Payment Office: Bank of America, N.A. Attention: Agency Services #5596 Reference: Albertson's, Inc. For credit to Acct. No. 3750836479 ABA No. 111000012 BANK OF AMERICA, N.A. as Swingline Bank and as a Bank Domestic and Offshore Lending Office: (Borrowing Notices, Notices of Conversion/Continuation and Payments) Bank of America, N.A. Mail Code: CA4-706-05-09 1850 Gateway Boulevard, 4th Floor Concord, California 94520 Attention: Tosha Clements Telephone: (925) 675-8409 Facsimile: (925) 969-2805 All other Notices: Bank of America, N.A. Retail Industry Group # 33751 Mail Code: CA5-705-41-89 555 California Street, 41st Floor San Francisco, California 94104 Attention: James P. Johnson Telephone: (415) 622-6177 Facsimile: (415) 622-4585 WACHOVIA BANK, N.A. as Syndication Agent and as a Bank Domestic and Offshore Lending Office: Wachovia Bank, N.A. 191 Peachtree Street NE MC-GA 370 Atlanta, Georgia 30303 Attention: Bill Allen Telephone: (404) 332-5271 Facsimile: (404) 332-4320 S-10.02-2. Notices (other than Borrowing Notice and Notices of Conversion/Continuation): Wachovia Bank, N.A. 191 Peachtree Street NE MC-GA 370 Atlanta, Georgia 30303 Attention: John A. Whitner Telephone: (404) 332-6738 Facsimile: (404) 332-6898 BANK ONE, NA as Documentation Agent and as a Bank Domestic and Offshore Lending Office: Bank One, NA One Bank One Plaza IL1-0088, 14th Floor Chicago, Illinois 60670 Attention: Karen Hannusch Telephone: (312) 732-9868 Facsimile: (312) 732-2715 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Bank One, NA One Bank One Plaza IL1-0086, 14th Floor Chicago, Illinois 60670 Attention: Eva Drinis Telephone: (312) 732-5037 Facsimile: (312) 336-4380 WELLS FARGO BANK, N.A. as Senior Managing Agent and as a Bank Domestic and Offshore Lending Office: Wells Fargo Bank, N.A. 707 Wilshire Boulevard, 16th Floor MAC E28-18-165 Los Angeles, California 90017 Attention: Matthew Frey Telephone: (213) 614-5038 Facsimile: (213) 614-2305 S-10.02-3. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Wells Fargo Bank, N.A. 999 Third Avenue Seattle, Washington 98104 Attention: Steve Andersen Telephone: (206) 292-3666 Facsimile: (206) 292-3595 U.S. BANK NATIONAL ASSOCIATION as Senior Managing Agent and as a Bank Domestic and Offshore Lending Office: U.S. Bank National Association 101 South Capital Boulevard Boise, Idaho 83702 Attention: Kathy O'Grady Telephone: (503) 275-3805 Facsimile: (503) 275-8181 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): U.S. Bank National Association 101 South Capital Boulevard Boise, Idaho 83702 Attention: James W. Henken Telephone: (208) 383-7823 Facsimile: (208) 383-7563 FIRST UNION NATIONAL BANK as Senior Managing Agent and as a Bank Domestic and Offshore Lending Office: First Union National Bank 301 South College Street, 4th Floor Charlotte, North Carolina 28288-0479 Attention: Todd Tucker Telephone: (704) 383-0905 Facsimile: (704) 383-7999 S-10.02-4. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): First Union National Bank One First Union Center Charlotte, North Carolina 28288 Attention: Mike Grady Telephone: (704) 383-7514 Facsimile: (704) 383-7236 UNION BANK OF CALIFORNIA, N.A. as Senior Managing Agent and as a Bank Domestic and Offshore Lending Office: Union Bank of California, N.A. Commercial Customer Service Unit 1980 Saturn Street Monterey Park, California 91755 Attention: Ruby Gonzales Telephone: (323) 720-7055 Facsimile: (323) 724-6198 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Union Bank of California, N.A. 350 California Street, 6th Floor San Francisco, California 94104 Attention: Timothy P. Streb Telephone: (415) 705-7021 Facsimile: (415) 705-7085 THE NORTHERN TRUST COMPANY as Managing Agent and as a Bank Domestic and Offshore Lending Office: The Northern Trust Company 50 South LaSalle Chicago, Illinois 60675 Attention: Linda Honda Telephone: (312) 444-3532 Facsimile: (312) 630-1566 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): The Northern Trust Company 50 South LaSalle Chicago, Illinois 60675 Attention: Patrick J. Connelly Telephone: (312) 444-5048 Facsimile: (312) 444-5055 FIRST SECURITY BANK, N.A. as Managing Agent and as a Bank Domestic and Offshore Lending Office: First Security Bank, N.A. Commercial Loan Account Center P.O. Box 7666 Boise, Idaho 83707-1666 Attention: Mary Wissel Telephone: (208) 393-4046 Facsimile: (208) 393-4540 S-10.02-5. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): First Security Bank, N.A. Idaho Corporate Banking 119 North 9th Street Boise, Idaho 83702 Attention: Mary Monroe Telephone: (208) 393-2106 Facsimile: (208) 393-2472 THE BANKS SUNTRUST BANK, CENTRAL FLORIDA, N.A. Domestic and Offshore Lending Office: Suntrust Bank, Central Florida, N.A. 200 South Orange Avenue Orlando, Florida 32801 Attention: Joanna Contreras Telephone: (407) 237-5283 Facsimile: (407) 237-5342 S-10.02-6. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Suntrust Bank, Central Florida, N.A. 303 Peachtree Street, 3rd Floor Atlanta, Georgia 30308 Attention: Ann Ford Telephone: (407) 724-3899 Facsimile: (407) 827-6270 KEYBANK NATIONAL ASSOCIATION Domestic and Offshore Lending Office: KeyBank National Association 831 East Parkcenter Boulevard Boise, Idaho 88705 Attention: Specialty Services Team Telephone: (800) 297-5518 Facsimile: (800) 297-5495 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): KeyBank National Association 700 Fifth Avenue WA31-10-4612 Seattle, Washington 98104 Attention: Patrick Kennedy Telephone: (206) 684-6079 Facsimile: (206) 684-6035 THE HUNTINGTON NATIONAL BANK Domestic and Offshore Lending Office: The Huntington National Bank 7450 Huntington Park Drive Mail Code HZ0338 Columbus, Ohio 43235 Attention: Alla Kier Telephone: (614) 480-1200 Facsimile: (614) 480-2533 S-10.02-7. Notices (other than Borrowing Notice and Notices of Conversion/Continuation): The Huntington National Bank 240 South Pineapple Avenue Mail Code FL631 Sarasota, Florida 34236 Attention: James C. Wardlaw Telephone: (941) 951-4686 Facsimile: (941) 951-4659 THE BANK OF NEW YORK Domestic and Offshore Lending Office: The Bank of New York One Wall Street, 8th Floor New York, New York 10286 Attention: Charlotte Sohn Telephone: (212) 635-7869 Facsimile: (212) 635-1481/1483 Notices (other than Borrowing Notice and Notices of Conversion/Continuation): The Bank of New York One Wall Street, 8th Floor New York, New York 10286 Attention: Charlotte Sohn Telephone: (212) 635-7869 Facsimile: (212) 635-1481/1483 INTERNATIONAL BANK OF COMMERCE Domestic and Offshore Lending Office: International Bank of Commerce 130 East Travis San Antonio, Texas 78205 Attention: Christine D. McCullar Telephone: (210) 518-2507 Facsimile: (210) 518-2591 S-10.02-8. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): International Bank of Commerce 130 East Travis San Antonio, Texas 78205 Attention: Thomas Travis Telephone: (210) 518-2502 Facsimile: (210) 518-2590 UMB BANK, N.A. Domestic and Offshore Lending Office: UMB Bank, n.a. 1010 Grand Boulevard Kansas City, Missouri 64106 Attention: Vaughnda Ritchie Telephone: (816) 860-7019 Facsimile: (816) 860-3772 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): UMB Bank, n.a. 1010 Grand Boulevard Kansas City, Missouri 64106 Attention: David A. Proffitt Telephone: (816) 860-7935 Facsimile: (816) 860-7143 SOUTHTRUST BANK Domestic and Offshore Lending Office: SouthTrust Bank 600 West Peachtree Street, 27th Floor Atlanta, Georgia 30308 Attention: Robert M. Searson Telephone: (404) 853-5754 Facsimile: (404) 853-5766 S-10.02-9. Notices (other than Borrowing Notice and Notices of Conversion/Continuation): SouthTrust Bank 600 West Peachtree Street, 27th Fl Atlanta, Georgia 30308 Attention: Donna King Telephone: (404) 853-5763 Facsimile: (404) 853-5766 BANCA DI ROMA, SAN FRANCISCO BRANCH Domestic and Offshore Lending Office: Banca di Roma, San Francisco Branch One Market Steuart Tower, Suite 1000 San Francisco, California 94105 Attention: Richard G. Dietz Telephone: (415) 977-7320 Facsimile: (415) 357-9869 Notices (other than Borrowing Notice and Notices of Conversion/Continuation): Banca di Roma, San Francisco Branch One Market Steuart Tower, Suite 1000 San Francisco, California 94105 Attention: Thomas C. Woodruff Telephone: (415) 977-7308 Facsimile: (415) 357-9869 FIRSTAR BANK, NATIONAL ASSOCIATION Domestic and Offshore Lending Office: Firstar Bank, National Association Commercial Loan Operations 1850 Osborn Avenue Oshkosh, Wisconsin 54901 Attention: Patti Gumbert Telephone: (920) 426-7913 Facsimile: (920) 426-7655 S-10.02-10. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Firstar Bank, National Association 425 Walnut Street, 8th Floor Mail Location 8160 Cincinnati, Ohio 45202 Attention: Richard W. Neltner Telephone: (513) 632-4073 Facsimile: (513) 632-2068 BANK OF OKLAHOMA, N.A. Domestic and Offshore Lending Office: Bank Of Oklahoma, N.A. P.O. Box 2300 Tulsa, Oklahoma 94192 Attention: Sharon Shannon Telephone: (918) 588-6335 Facsimile: (918) 588-8231 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Bank Of Oklahoma, N.A. One Williams Tower Tulsa, Oklahoma 94192 Attention: Jane Faulkenberry Telephone: (918) 588-6272 Facsimile: (918) 588-8231 S-10.02-11. EXHIBIT A FORM OF NOTICE OF BORROWING Date: ______________ To: Bank of America, N.A., as Agent Ladies and Gentlemen: The undersigned, Albertson's, Inc. (the "Company"), refers to the Credit Agreement, dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "5-Year Credit Agreement"), among the Company, the several financial institutions from time to time party thereto (the "Banks"), the Co-Agents party thereto, and Bank of America, N.A., as Agent (the "Agent"), the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 2.03 of the 5-Year Credit Agreement, of the Committed Borrowing specified below: 1. The Business Day of the proposed Committed Borrowing is _______________. 2. The aggregate amount of the proposed Committed Borrowing is $______________. 3. The Committed Borrowing is to be comprised of $___________ of [Base Rate Committed Loans] [Offshore Rate Committed Loans]. 4. [The duration of the Interest Period for the Offshore Rate Committed Loans included in the Committed Borrowing shall be _____ months.] The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Committed Borrowing, before and after giving effect thereto and to the application of the proceeds therefrom: (a) the representations and warranties of the Company contained in Article V of the 5-Year Credit Agreement are true and correct as though made on and as of such date, except to the extent such representations and warranties expressly refer to an earlier date, in which case they are true and correct as of such date, and except that this notice shall be deemed instead to refer to the last day of the most recent year for which financial statements have then been delivered in respect of the representation and warranty made in Section 5.10(a) of the 5-Year Credit Agreement; (b) no Default or Event of Default has occurred and is continuing, or would result from such proposed Borrowing; (c) there has occurred since January 28, 1999 no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; and A-1. (d) after giving effect to the proposed Committed Borrowing, the aggregate principal amount of all outstanding Committed Loans plus the aggregate principal amount of all Bid Loans outstanding, shall not at any time exceed the Aggregate Commitments. ALBERTSON'S, INC. By: Title: A-2. EXHIBIT B FORM OF NOTICE OF CONVERSION/CONTINUATION Date: _______________ To: Bank of America, N.A., as Agent Ladies and Gentlemen: The undersigned, Albertson's (the "Company"), refers to the Credit Agreement, dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "5-Year Credit Agreement"), among the Company, the several financial institutions from time to time party thereto (the "Banks"), the Co-Agents party thereto, and Bank of America, N.A., as Agent (the "Agent"), the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 2.04 of the 5-Year Credit Agreement, of the [conversion] [continuation] of Committed Loans specified below: 1. The Conversion/Continuation Date is ______________. 2. The aggregate amount of the Committed Loans to be [converted] [continued] is $_______________. 3. The Committed Loans are to be [converted into] [continued as] [Offshore Rate Committed Loans] [Base Rate Committed Loans]. 4. [The duration of the Interest Period for the [Offshore Rate Committed Loans] included in the [conversion][continuation] shall be [____ months].] ALBERTSON'S, INC. By: Title: B-1. EXHIBIT C FORM OF COMPLIANCE CERTIFICATE ALBERTSON'S, INC. Financial Statements Date: ______________ Reference is made to that certain Credit Agreement dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "5-Year Credit Agreement"), among ______________ (the "Company"), the several financial institutions from time to time party thereto (the "Banks"), the Co-Agents party thereto, and Bank of America, N.A., as Agent (in such capacity, the "Agent"). Unless otherwise defined herein, capitalized terms used herein have the respective meanings assigned to them in the 5-Year Credit Agreement. The undersigned Responsible Officer of the Company hereby certifies as of the date hereof that he/she is the [_______________] of the Company, and that, as such, he/she is authorized to execute and deliver this Certificate to the Banks and the Agent on the behalf of the Company and its consolidated Subsidiaries, and that: [Use the following paragraph if this Certificate is delivered in connection with the financial statements required by subsection 6.01(a) of the 5-Year Credit Agreement.] 1. Attached hereto are true and correct copies of the audited consolidated balance sheet of the Company and its Consolidated Subsidiaries as at the end of the fiscal year ended _______________ and the related consolidated statements of income or operations, shareholders' equity and cash flows for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the SEC, accompanied by the unqualified opinion of the Independent Auditor, which opinion (a) shall state that such consolidated financial statements present fairly the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years and (b) is not qualified as to (i) going concern, or (ii) any limitation in the scope of audit. or [Use the following paragraph if this Certificate is delivered in connection with the financial statements required by subsection 6.01(b) of the 5-Year Credit Agreement.] 1. Attached hereto are true and correct copies of the unaudited consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of the fiscal quarter ended _________ and the related consolidated statements of income, shareholders' equity and cash flows for the period commencing on the first day and ending on the last day of such quarter, which are complete and accurate in all material respects and fairly present, in accordance with GAAP (subject to ordinary, good faith year-end audit adjustments), the financial position, the results of operations and the cash flows of the Company and the Consolidated Subsidiaries. C-1 2. The undersigned has reviewed and is familiar with the terms of the 5-Year Credit Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and condition (financial or otherwise) of the Company and its Subsidiaries during the accounting period covered by the attached financial statements. 3. The Company and its Subsidiaries, during such period, have observed, performed or satisfied all of the covenants and other agreements, and satisfied every condition in the 5-Year Credit Agreement to be observed, performed or satisfied by the Company and its Subsidiaries, and the undersigned has no knowledge of any Default or Event of Default. 4. The financial covenant analyses and information set forth on Schedule 1 attached hereto are true and accurate on and as of the date of this Certificate. IN WITNESS WHEREOF, the undersigned has executed this Certificate as the ____________ of the Company as of ____________, ________. ALBERTSON'S, INC. By: Title: C-2 SCHEDULE 1 to the Compliance Certificate ALBERTSON'S, INC. 5-YEAR CREDIT AGREEMENT DATED AS OF MARCH 22, 2000 Dated _________________ For the fiscal quarter ended __________ (in thousands) Consolidated Tangible Net Worth Calculation: Common stock $___________ Capital in excess ___________ Retained earnings ___________ Stockholders' equity ___________ Plus: Deferred investment tax credits ___________ Minus: Intangible assets: (specify) ___________ Plus: CTNW Adjustments, if any: (specify) ___________ Consolidated Tangible Net Worth $__________ Section 7.05: Consolidated Tangible Net Worth shall be not less than $2.1 billion $__________ 1 EXHIBIT D FORM OF LEGAL OPINION OF COMPANY'S COUNSEL [Form of opinion of Thomas R. Saldin, Esq., Executive Vice-President and General Counsel to the Company] March 22, 2000 To the Banks and the Agent Referred to Below c/o Bank of America N.A., as Agent Re: Albertson's, Inc. Ladies and Gentlemen: I have acted as counsel for Albertson's, Inc. (the "Company") in connection with the Credit Agreement, dated as of March 22, 2000 (the "5-Year Credit Agreement") among the Company, the financial institutions party thereto (the "Banks"), the Documentation Agent and the Syndication Agent party thereto, and Bank of America N.A., as Agent (the "Agent"). This opinion is being delivered to you pursuant to Section 4.01(d) of the 5-Year Credit Agreement. Capitalized terms used herein and not otherwise defined herein shall have the same meanings herein as ascribed thereto in the 5-Year Credit Agreement. I have examined originals or copies, certified or otherwise identified to my satisfaction, of the Loan Documents and such other documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. In my examination I have assumed the legal capacity of all natural persons, the genuineness of all signatures, including endorsements, the authority of all persons signing each of the documents on behalf of the parties thereto (other than the Company), the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified or photostatic copies, and the authenticity of the originals of such copies. As to any facts material to this opinion which I did not independently establish or verify, I have relied upon oral or written statements and representations of officers and other representatives of the Company and others, and factual representations contained in the Loan Documents. I am a member of the Bar of the State of Idaho, and I express no opinion as to the laws of any jurisdiction, or the effect of any such laws on the opinions herein stated, other than (i) the laws of the State of Idaho, (ii) the General Corporation Law of the State of Delaware (the "Delaware Statute") with respect to the opinions set forth in paragraph 1 hereof, and (iii) the federal laws of the United States of America to the extent specifically referred to herein. Upon the basis of the foregoing, I am of the opinion that: D-1 1. The Company is a corporation duly incorporated, validly existing and in good standing under the Delaware Statute, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. The Company is qualified as a foreign corporation and is in good standing in the State of Idaho. 2. The execution, delivery and performance by the Company of the Loan Documents are within the Company's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Company or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries. 3. The Loan Documents have been duly executed and delivered by the Company and constitute valid and binding agreements of the Company, in each case enforceable in accordance with their terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. Insofar as this opinion addresses instruments or agreements expressed to be governed by New York law, it is my opinion (i) that an Idaho court would give effect to such choice of New York Law and (ii) in any event, the conclusion stated in this paragraph would be correct as a matter of Idaho law. 4. Except as disclosed in the Company's 1998 Form 10-K, there is no action, suit or proceeding pending against, or to the best of my knowledge threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is a reasonable possibility of an adverse decision which could materially adversely effect the business, consolidated financial position or consolidated reports of operations of the Company and its Consolidated Subsidiaries, considered as a whole or which in any manner draws into question the validity of the Loan Documents. 5. The Company is not an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. This opinion is being furnished only to you solely for your benefit in connection with the 5-Year Credit Agreement and is not to be used, circulated, quoted, referred to or relied upon by any other person or for any other purpose without my prior express written consent; provided, the Agent and each Bank may deliver a copy to its legal counsel in connection with the 5-Year Credit Agreement, to any prospective Assignee or Participant of any Bank and to any successor Agent, and such legal counsel, any Assignee or Participant and any successor Agent shall be entitled to rely hereon, it being understood that this opinion is rendered only as of the date hereof. Very truly yours, D-2 EXHIBIT E FORM OF ASSIGNMENT AND ACCEPTANCE This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and Acceptance") dated as of _____________ is made between __________________ (the "Assignor") and ________________ (the "Assignee"). RECITALS WHEREAS, the Assignor is party to that certain Credit Agreement dated as of March 22, 2000 (as amended, restated, modified, supplemented or renewed from time to time, the "5-Year Credit Agreement"), among Albertson's, Inc. (the "Company"), the several financial institutions from time to time party thereto (including the Assignor, the "Banks"), the Co-Agents party thereto, and Bank of America, N.A., as agent for the Banks (the "Agent"). Any terms defined in the 5-Year Credit Agreement and not defined in this Assignment and Acceptance are used herein as defined in the 5-Year Credit Agreement; WHEREAS, as provided under the 5-Year Credit Agreement, the Assignor has committed to making Loans to the Company in an aggregate amount not to exceed $__________ (the "Commitment"); WHEREAS, [the Assignor has made Loans in the aggregate principal amount of $__________ to the Company consisting of $___________ principal amount of Committed Loans [and $____________ principal amount of Bid Loans]] [no Loans are outstanding under the 5-Year Credit Agreement]; and WHEREAS, the Assignor wishes to assign to the Assignee [part of the] [all] rights and obligations of the Assignor under the 5-Year Credit Agreement in respect of its Commitment, [together with a corresponding portion of each of its outstanding Loans], in an amount equal to ___% of the Assignor's Commitment and Loans, on the terms and subject to the conditions set forth herein, and the Assignee wishes to accept assignment of such rights and to assume such obligations from the Assignor on such terms and subject to such conditions; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: 1. Assignment and Acceptance. (a) Subject to the terms and conditions of this Assignment and Acceptance, (i) the Assignor hereby sells, transfers and assigns to the Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from the Assignor, without recourse and without representation or warranty (except as provided in this Assignment and Acceptance) ___% (the "Assignee's Percentage Share") of (A) the Commitment [and the Loans] of the Assignor and (B) all related rights, benefits, obligations, liabilities and indemnities of the Assignor under and in connection with the 5-Year Credit Agreement and the Loan Documents. E-1 (b) With effect on and after the Effective Date (as defined in Section 5 hereof), the Assignee shall be a party to the 5-Year Credit Agreement and succeed to all of the rights and be obligated to perform all of the obligations of a Bank under the 5-Year Credit Agreement, including the requirements concerning confidentiality and the payment of indemnification, with a Commitment in the amount set forth in subsection (c) below. The Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the 5-Year Credit Agreement are required to be performed by it as a Bank. It is the intent of the parties hereto that the Commitment of the Assignor shall, as of the Effective Date, be reduced by an amount equal to the portion thereof assigned to the Assignee hereunder, and the Assignor shall relinquish its rights and be released from its obligations under the 5-Year Credit Agreement to the extent such obligations have been assumed by the Assignee; provided, however, that the Assignor shall not relinquish its rights under Article III or Sections 10.04 and 10.05 of the 5-Year Credit Agreement to the extent such rights relate to the time prior to the Effective Date. (c) After giving effect to the assignment and assumption set forth herein, on the Effective Date: (i) the Assignee's Commitment will be $__________; and (ii) the Assignee's aggregate outstanding Committed Loans will be $_______________ [and its aggregate outstanding Bid Loans will be $___________]. (d) After giving effect to the assignment and assumption set forth herein, on the Effective Date: (i) the Assignor's Commitment will be $__________; and (ii) the Assignor's aggregate outstanding Committed Loans will be $_______________ [and its aggregate outstanding Bid Loans will be $___________]. 2. Payments. (a) As consideration for the sale, assignment and transfer contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the Effective Date in immediately available funds an amount equal to $__________, representing the Assignee's Percentage Share of the principal amount of all Loans previously made by the Assignor to the Company under the 5-Year Credit Agreement and outstanding on the Effective Date. (b) The [Assignor] [Assignee] further agrees to pay to the Agent a processing fee in the amount specified in Section 10.08 of the 5-Year Credit Agreement. 3. Reallocation of Payments. Any interest, fees and other payments accrued to the Effective Date with respect to the Commitment [and Loans] of the Assignor shall be for the account of the Assignor. Any interest, fees and other payments accrued on and after the Effective Date with respect to the portion of such Commitment [and Loans] assigned to the Assignee shall be for the account of the Assignee. Each of the Assignor and the Assignee agrees that it will hold in trust for the other party any interest, fees and other amounts which it may receive to which the other party is entitled pursuant to the preceding sentence and pay to the other party any such amounts which it may receive promptly upon receipt. 4. Independent Credit Decision. The Assignee: (a) acknowledges that it has received a copy of the 5-Year Credit Agreement and the Schedules and Exhibits E-2 thereto, together with copies of the most recent financial statements referred to in Section 5.10 or Section 6.01 of the 5-Year Credit Agreement, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into this Assignment and Acceptance; and (b) agrees that it will, independently and without reliance upon the Assignor, the Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit and legal decisions in taking or not taking action under the 5-Year Credit Agreement. 5. Effective Date; Notices. (a) As between the Assignor and the Assignee, the effective date for this Assignment and Acceptance shall be ______________ (the "Effective Date"); provided that the following conditions precedent have been satisfied on or before the Effective Date: (i) this Assignment and Acceptance shall be executed and delivered by the Assignor and the Assignee; (ii) any consent of the Company, the Swingline Bank and the Agent required under Section 10.08 of the 5-Year Credit Agreement for the effectiveness of the assignment hereunder by the Assignor to the Assignee shall have been duly obtained and shall be in full force and effect as of the Effective Date; (iii) the Assignee shall pay to the Assignor all amounts due to the Assignor under this Assignment and Acceptance; (iv) the processing fee referred to in Section 2(b) hereof and in Section 10.08 of the 5-Year Credit Agreement shall have been paid to the Agent; and (v) the Assignor and Assignee shall have complied with the other requirements of Section 10.08 of the 5-Year Credit Agreement and with the requirements of Sections 9.10 and 10.10 of the 5-Year Credit Agreement (in each case to the extent applicable). (b) Promptly following the execution of this Assignment and Acceptance, the Assignor shall deliver to the Company and the Agent for acknowledgement by the Agent, a Notice of Assignment substantially in the form attached hereto as Schedule 1. 6. Agent. The Assignee hereby appoints and authorizes the Assignor to take such action as agent on its behalf and to exercise such powers under the 5-Year Credit Agreement as are delegated to the Agent by the Banks pursuant to the terms of the 5-Year Credit Agreement. [The Assignee shall assume no duties or obligations held by the Assignor in its capacity as Agent under the 5-Year Credit Agreement.] [INCLUDE ONLY IF ASSIGNOR IS AGENT] 7. Withholding Tax. The Assignee (a) represents and warrants to the Assignor, the Agent and the Company that under applicable law and treaties no tax will be required to be withheld by the Bank with respect to any payments to be made to the Assignee hereunder, and (b) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United States or any State thereof) to the Agent and the Company prior to the time that the Agent or E-3 Company is required to make any payment of interest or fees under the 5-Year Credit Agreement, duplicate executed originals of either U.S. Internal Revenue Service Form W-8BEN or U.S. Internal Revenue Service Form W-8ECI (wherein the Assignee claims entitlement to the benefits of a tax treaty that provides for a complete exemption from U.S. federal income withholding tax on all payments hereunder) and agrees to provide new Forms W-8BEN or W-8ECI upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by the Assignee, as and when required under the 5-Year Credit Agreement. 8. Representations and Warranties. (a) The Assignor represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any Lien or other adverse claim; (ii) it is duly organized and existing and it has the full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance and to fulfill its obligations hereunder; (iii) no notices to, or consents, authorizations or approvals of, any Person are required (other than those referred to in Section 5(a)(ii) hereof and any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance, and apart from any agreements or undertakings or filings required by the 5-Year Credit Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; and (iv) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignor, enforceable against the Assignor in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles. (b) The Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the 5-Year Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the 5-Year Credit Agreement or any other instrument or document furnished pursuant thereto. The Assignor makes no representation or warranty in connection with, and assumes no responsibility with respect to, the solvency, financial condition or statements of the Company, or the performance or observance by the Company, of any of its respective obligations under the 5-Year Credit Agreement or any other instrument or document furnished in connection therewith. (c) The Assignee represents and warrants that (i) it is duly organized and existing and it has full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance, and to fulfill its obligations hereunder; (ii) no notices to, or consents, authorizations or approvals of, any Person are required (other than those referred to in Section 5(a)(ii) hereof and any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance; and apart from any agreements or undertakings or filings required by the 5-Year Credit Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or E-4 performance; (iii) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignee, enforceable against the Assignee in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles; and (iv) it is an Eligible Assignee. 9. Further Assurances. (a) The Company shall ensure that all written information, exhibits and reports furnished to the Agent or the Banks do not and will not contain any untrue statement of a material fact and do not and will not omit to state any material fact or any fact necessary to make the statements contained therein not misleading in light of the circumstances in which made, and will promptly disclose to the Agent and the Banks and correct any defect or error that may be discovered therein or in any Loan Document or in the execution, acknowledgement or recordation thereof. (b) Promptly upon request by the Agent or the Majority Banks, the Company shall (and shall cause any of its Subsidiaries to) do, execute, acknowledge, and deliver, any and all such further acts, certificates, assurances and other instruments the Agent or such Banks, as the case may be, may reasonably require from time to time in order to carry out more effectively the purposes of this Agreement or any other Loan Document. 10. Miscellaneous. (a) Any amendment or waiver of any provision of this Assignment and Acceptance shall be in writing and signed by the parties hereto. No failure or delay by either party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof and any waiver of any breach of the provisions of this Assignment and Acceptance shall be without prejudice to any rights with respect to any other or further breach thereof. (b) All payments made hereunder shall be made without any set-off or counterclaim. (c) The Assignor and the Assignee shall each pay its own costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Assignment and Acceptance. (d) This Assignment and Acceptance may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. (e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. THE ASSIGNOR AND THE ASSIGNEE EACH IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS ASSIGNMENT AND ACCEPTANCE AND IRREVOCABLY AGREES THAT E-5 ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. EACH PARTY TO THIS ASSIGNMENT AND ACCEPTANCE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS ASSIGNMENT AND ACCEPTANCE OR ANY DOCUMENT RELATED HERETO, AND PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW. (f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, AND ANY RELATED DOCUMENTS AND AGREEMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY EITHER OF THE PARTIES AGAINST THE OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF THE PARTIES ALSO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. [Other provisions to be added as may be negotiated between the Assignor and the Assignee, provided that such provisions are not inconsistent with the 5-Year Credit Agreement.] IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment and Acceptance to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By: Title: [ASSIGNEE] By: Title: E-6 SCHEDULE 1 to the Assignment and Acceptance NOTICE OF ASSIGNMENT AND ACCEPTANCE Date: ___________________ Bank of America, N.A. Retail Industry Group #33751 [Mail Code: CA5-705-41-89] 555 California Street, 41st Floor San Francisco, CA 94104 Attention: James P. Johnson Telephone: (415) 622-6177 Facsimile: (415) Albertson's, Inc. 250 Park Center Blvd. Box 20 Boise, ID 83726 Attention: Finance Department Telephone: (208) 395-6534 Facsimile: (208) 395-6631 Ladies and Gentlemen: We refer to the Credit Agreement dated as of March 22, 2000 (as amended, restated, modified, supplemented or renewed from time to time, the "5-Year Credit Agreement") among Albertson's, Inc. (the "Company"), the Banks referred to therein, the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"). Terms defined in the 5-Year Credit Agreement are used herein as therein defined. 1. We hereby give you notice of[, and request the consent of the Swingline Bank, [the Company and] the Agent to,] the assignment by ________________________ (the "Assignor") to ____________________ (the "Assignee") of ____% of the right, title and interest of the Assignor in and to the 5-Year Credit Agreement (including, without limitation, ____% of the right, title and interest of the Assignor in and to the Commitment of the Assignor [and all outstanding Loans made by the Assignor]) pursuant to that certain Assignment and Acceptance Agreement, dated as of ___________ (the "Assignment and Acceptance") between Assignor and Assignee, a copy of which Assignment and Acceptance is attached hereto. Before giving effect to such assignment the Assignor's Commitment is $___________. [The Assignor has made Loans in the aggregate principal amount of $__________ to the Company consisting of $___________ principal amount of Committed Loans [and $____________ principal amount of Bid Loans].] [No Loans are outstanding under the 5-Year Credit Agreement.] 1. 2. The Assignee agrees that, upon receiving the consent of the Company and the Agent to such assignment (if applicable) and from and after the Effective Date (as such term is defined in Section 5 of the Assignment and Acceptance), the Assignee shall be bound by the terms of the 5-Year Credit Agreement, with respect to the interest in the 5-Year Credit Agreement assigned to it as specified above, as fully and to the same extent as if the Assignee were the Bank originally holding such interest in the 5-Year Credit Agreement. 3. The following administrative details apply to the Assignee: (A) Lending Office(s): Assignee name: Address: Attention: Telephone: ( ) ------ Facsimile: ( ) ------ Assignee name: Address: Attention: Telephone: ( ) ------ Facsimile: ( ) ------ (B) Notice Address: Assignee name: Address: Attention: Telephone: ( ) ------ Facsimile: ( ) ------ (C) Payment Instructions: Account No.: At: 2. Reference: Attention: 4. You are entitled to rely upon the representations, warranties and covenants of each of the Assignor and Assignee contained in the Assignment and Acceptance. 5. This Notice of Assignment and Acceptance may be executed by the Assignor and the Assignee in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same notice and agreement. IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice of Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned. Very truly yours, Adjusted Commitment: [ASSIGNOR] - ------------------- $ By: ----------------------------- Title: Adjusted Pro Rata Share: - ----------------------- - -------% Commitment: [ASSIGNEE] - ---------- $ ] By: ---------------------------- Title: Pro Rata Share: - -------------- - -------% [CONSENTED TO this _____ day of ___________________: ALBERTSON'S, INC. By: Title: ] ------------------------------------------- 3. ACKNOWLEDGED [AND CONSENTED TO] this ____ day of ________: BANK OF AMERICA, N.A., as Agent and as Swingline Bank By: Title: 4. EXHIBIT F FORM OF INVITATION FOR COMPETITIVE BIDS Via Facsimile Date: __________________ To the Bid Loan Banks and Designated Bidders Listed on Annex A Attached Hereto ------- Ladies and Gentlemen: Reference is made to that certain Credit Agreement dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "5-Year Credit Agreement"), among _______________ (the "Company"), the Banks party thereto, the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"). Capitalized terms used herein have the meanings specified in the 5-Year Credit Agreement. Pursuant to subsection 2.06(b) of the 5-Year Credit Agreement, you are hereby invited to submit offers to make Bid Loans to the Company based on the following specifications: 1. Date of Bid Borrowing: _______________; 2. Aggregate amount of Bid Borrowing: $___________________; 3. The Bid Loans shall be Absolute Rate Bid Loans; and 4. Interest Period[s] and requested Interest Payment Dates, if any: [____________________], [________________] and [________________]. All Competitive Bids shall be in the form of Exhibit H to the 5-Year Credit Agreement and shall be received by the Agent no later than 7:30 a.m. (San Francisco time) on ___________, 2000; provided that terms of the offer or offers contained in any Competitive Bid(s) to be submitted by the Agent (or any Affiliate of the Agent) in the capacity of a Bid Loan Bank or Designated Bidder shall be notified to the Company not later than 7:15 a.m. (San Francisco time) on ________________. BANK OF AMERICA, N.A., as Agent By: Title: F-1 ANNEX A to the Invitation for Competitive Bids List of Bid Loan Banks and Designated Bidders [Bank] Facsimile: (415) 622-____ [Bank] Facsimile: (___) ___-____ [Bank] Facsimile: (___) ___-____ [Bank] Facsimile: (___) ___-____ [Bank] Facsimile: (___) ___-____ 1 EXHIBIT G FORM OF COMPETITIVE BID REQUEST Date: _______________ To: Bank of America, N.A., as Agent Ladies and Gentlemen: Reference is made to the Credit Agreement dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "5-Year Credit Agreement"), among Albertson's, Inc. (the "Company"), the Banks party thereto, the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"). Capitalized terms used herein have the meanings specified in the 5-Year Credit Agreement. This is a Competitive Bid Request for Bid Loans pursuant to Section 2.06 of the 5-Year Credit Agreement as follows: (i) The Business Day of the proposed Bid Borrowing is: ______________. (ii) The aggregate amount of the proposed Bid Borrowing is: $___________________. (iii) The proposed Bid Borrowing to be made pursuant to Section 2.06 shall be comprised of Absolute Rate Bid Loans. (iv) The Interest Period[s] and Interest Payment Dates, if any, for the Bid Loans comprised in the Bid Borrowing shall be: _______________, [_________________] and [___________________]. [The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Bid Borrowing, before and after giving effect thereto and to the application of the proceeds therefrom: (a) the representations and warranties of the Company contained in Article V of the 5-Year Credit Agreement are true and correct as though made on and as of such date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they are true and correct as of such date and except that this notice shall be deemed instead to refer to the last day of the most recent quarter and year for which financial statements have then been delivered in respect of the representation and warranty made in Section 5.10(a) of the 5-Year Credit Agreement); (b) no Default or Event of Default has occurred and is continuing, or would result from such proposed Bid Borrowing; and G-1 (c) after giving effect to the Bid Borrowing requested hereby the outstanding aggregate principal amount of all Bid Loans made by all Bid Loan Banks and Designated Bidders, plus the outstanding aggregate principal amount of all Committed Loans made by all Banks, will not exceed the Aggregate Commitment. ALBERTSON'S, INC. By: ______________________________ Title: _____________________________ G-2 EXHIBIT H FORM OF COMPETITIVE BID Date: _______________ To: Bank of America, N.A., as Agent Ladies and Gentlemen: Reference is made to the Credit Agreement dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "5-Year Credit Agreement"), among Albertson's, Inc. (the "Company"), the Banks party thereto, the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"). Capitalized terms used herein have the meanings specified in the 5-Year Credit Agreement. In response to the Competitive Bid Request of the Company dated ___________ and in accordance with subsection 2.06(c)(ii) of the 5-Year Credit Agreement, the undersigned [Bank] [Designated Bidder] offers to make Bid Loan[s] thereunder in the following principal amounts[s], at the following interest rates and for the following Interest Period[s], with Interest Payment Dates as specified by the Company: Date of Bid Borrowing: _____________________ Aggregate Maximum Bid Amount: $________________ Offer 1 (Maximum Bid Amount: $________________) Principal Amount $_______ Principal Amount $________ Principal Amount $_________ Interest: Interest: Interest: [Absolute Rate __%] [Absolute Rate __%] [Absolute Rate __%] Interest Period _________ Interest Period __________ Interest Period ___________ Offer 2 (Maximum Bid Amount: $________________) Principal Amount $________ Principal Amount $________ Principal Amount $________ H-1 Interest: Interest: Interest: [Absolute Rate __%] [Absolute Rate __%] [Absolute Rate __%] Interest Period __________ Interest Period ___________ Interest Period _________ Principal Amount $________ Principal Amount $________ Principal Amount $________ Interest: Interest: Interest: [Absolute Rate __%] [Absolute Rate __%] [Absolute Rate __%] Interest Period __________ Interest Period __________ Interest Period __________ [NAME OF BANK/DESIGNATED BIDDER] By: _____________________ Title: __________________ H-2 EXHIBIT I FORM OF COMMITTED LOAN NOTE U.S. $___________________ Date: _______________ FOR VALUE RECEIVED, the undersigned, Albertson's, Inc., a Delaware corporation (the "Company"), hereby promises to pay to the order of _________________________ (the "Bank") the principal sum of ___________________ Dollars ($_____________) or, if less, the aggregate unpaid principal amount of all Committed Loans made by the Bank to the Company pursuant to the Credit Agreement, dated as of March 22, 2000 (as amended, restated, supplemented or otherwise modified from time to time, the "5-Year Credit Agreement"), among the Company, the Bank, the other financial institutions from time to time party thereto (the "Banks"), the Documentation Agent and the Syndication Agent party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"), on the dates and in the amounts provided in the 5-Year Credit Agreement. The Company further promises to pay interest on the unpaid principal amount of the Committed Loans evidenced hereby from time to time at the rates, on the dates, and otherwise as provided in the 5-Year Credit Agreement. The Bank is authorized to endorse the amount of each Committed Loan, the date on which each Committed Loan is made, and each payment of principal with respect thereto on the schedule annexed hereto and made a part hereof, or on continuations thereof which shall be attached hereto and made a part hereof; provided that any failure to endorse such information on such schedule or continuation thereof shall not in any manner affect any obligation of the Company under the 5-Year Credit Agreement and this Promissory Note (this "Note"). This Note is one of the Committed Loan Notes referred to in, and is entitled to the benefits of, the 5-Year Credit Agreement, which 5-Year Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. Terms defined in the 5-Year Credit Agreement are used herein with their defined meanings therein unless otherwise defined herein. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. ALBERTSON'S, INC. By: Title: I-1 SCHEDULE to Committed Loan Note
Date Loan Disbursed Amount of Loan Principal Payment Date Principal Paid - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ----------------------------
I-2 EXHIBIT J FORM OF BID LOAN NOTE Date: ________________ FOR VALUE RECEIVED, the undersigned, Albertson's, Inc., a Delaware corporation (the "Company"), hereby promises to pay to the order of _________________________ (the "Bank") the aggregate unpaid principal amount of all Bid Loans made by the Bank to the Company pursuant to the Credit Agreement, dated as of March 22, 2000 (as amended, restated, supplemented or otherwise modified from time to time, the "5-Year Credit Agreement"), among the Company, the Bank, the other financial institutions from time to time party thereto (the "Banks"), the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"), on the dates and in the amounts provided in the 5-Year Credit Agreement. The Company further promises to pay interest on the unpaid principal amount of the Bid Loans evidenced hereby from time to time at the rates, on the dates, and otherwise as provided in the 5-Year Credit Agreement. The Bank is authorized to endorse the amount of and the date on which each Bid Loan is made, the maturity date therefor and each payment of principal with respect thereto on the schedules annexed hereto and made a part hereof, or on continuations thereof which shall be attached hereto and made a part hereof; provided that any failure to endorse such information on such schedule or continuation thereof shall not in any manner affect any obligation of the Company under the 5-Year Credit Agreement and this Promissory Note (this "Note"). This Note is one of the Bid Loan Notes referred to in, and is entitled to the benefits of, the 5-Year Credit Agreement, which 5-Year Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. Terms defined in the 5-Year Credit Agreement are used herein with their defined meanings therein unless otherwise defined herein. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. ALBERTSON'S, INC. By: ______________________________ Title: ____________________________ J-1 SCHEDULE to Bid Loan Note
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J-2 EXHIBIT K FORM OF DESIGNATION AGREEMENT Dated ______________ Reference is made to the Credit Agreement dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "5-Year Credit Agreement") among _______________________ (the Company"), the Banks party thereto, the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"). Capitalized terms used herein have the meanings specified in the 5-Year Credit Agreement. _________________ (the "Designator") and ___________________ the ("Designee") agree as follows: 1. The Designator hereby designates the Designee, and the Designee hereby accepts such designation, to have a right to make Bid Loans pursuant to Section 2.06 of the 5-Year Credit Agreement. 2. The Designator makes no representation or warranty and assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the 5-Year Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the 5-Year Credit Agreement or any other instrument or document furnished pursuant thereto or (ii) the financial condition of the Company or the performance or observance by the Borrower of any of its obligations under the 5-Year Credit Agreement or any other instrument or document furnished pursuant thereto. 3. The Designee (i) confirms that it has received a copy of the 5-Year Credit Agreement, together with copies of the financial statements referred to in Section 5.10 or Section 6.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Designation Agreement; (ii) agrees that it will, independently and without reliance upon the Agent, the Designator or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the 5-Year Credit Agreement; (iii) confirms that it is an entity qualified to be a Designated Bidder; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the 5-Year Credit Agreement as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the 5-Year Credit Agreement are required to be performed by it as a Designated Bidder; (vi) agrees to and accepts all duties, obligations and responsibilities of a Bank set forth in Article IX of the 5-Year Credit Agreement and confirms that said Article shall otherwise apply to the Designated Bidder as if it were a Bank named therein; and (vii) specifies as its Lending Office with respect to Bid Loans (and address for notices) the offices set forth beneath its name on the signature page hereof. 4. Following the execution of this Designation Agreement by the Designator and its Designee, it will be delivered to the Agent for acceptance by the Agent. K-1 The effective date of this Designation Agreement shall be the date of acceptance thereof by the Agent (the "Effective Date"). 5. Upon such acceptance and recording by the Agent, as of the Effective Date, the Designee shall be a party to the 5-Year Credit Agreement as a "Designated Bidder" with a right to make Bid Loans pursuant to Section 2.06 of the 5-Year Credit Agreement and the rights and obligations of a Designated Bidder related thereto. 6. THIS DESIGNATION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Designation Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. [NAME OF DESIGNATOR] By: Title: [NAME OF DESIGNEE] By: Title: Lending Office(s) (and address for notices): Attn.: Tel.: Fax: K-2 Attn.: Tel.: Fax: Accepted [as of] the ___ day of ____________, _______ BANK OF AMERICA, N.A., as Agent and Swingline Bank By: Title: K-3 EXHIBIT L FORM OF COMMITMENT INCREASE AGREEMENT Date: ___________________ Bank of America, N.A., as Agent and as a Bank Ladies and Gentlemen: We refer to the Credit Agreement dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "5-Year Credit Agreement") among Albertson's, Inc. (the Company"), the Banks party thereto, the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"). Terms defined in the 5-Year Credit Agreement are used herein as therein defined. This Commitment Increase Agreement is made and delivered pursuant to Section 2.18 of the 5-Year Credit Agreement. Subject to the terms and conditions of Section 2.18 of the 5-Year Credit Agreement, _______________________________ (the "Increasing Bank") will increase its Commitment to an amount equal to $___________, on the Increased Commitment Date applicable to it. The Increasing Bank hereby confirms and agrees that with effect on and after such Increased Commitment Date, the Commitment of the Increasing Bank shall be increased to the amount set forth above, and the Increasing Bank shall have all of the rights and be obligated to perform all of the obligations of a Bank under the 5-Year Credit Agreement with a Commitment in the amount set forth above. Effective on the Increased Commitment Date applicable to it, the Increasing Bank (i) accepts and assumes from the assigning Bank(s), without recourse, such assignment of Loans as shall be necessary to effectuate the adjustments in the Pro Rata Shares of the Banks contemplated by Section 2.18 of the 5-Year Credit Agreement, and (ii) agrees to fund on such Increased Commitment Date such assumed amounts to the Agent for the account of the assigning Banks in accordance with the provisions of the 5-Year Credit Agreement, in the amount notified to the Increasing Bank by the Agent. This Commitment Increase Agreement shall constitute a Loan Document under the 5-Year Credit Agreement. THIS COMMITMENT INCREASE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. L-1 IN WITNESS WHEREOF, the Increasing Bank has caused this Commitment Increase Agreement to be duly executed and delivered in _____________, ______________, by its proper and duly authorized officer as of the day and year first above written. [INCREASING BANK] By: ___________________________ Title: ________________________ CONSENTED TO as of _________: ALBERTSON'S, INC. By: Title: ACKNOWLEDGED AND CONSENTED TO as of ____________: BANK OF AMERICA, N.A., as Agent By: Title: L-2 EXHIBIT M FORM OF NEW BANK AGREEMENT Date: ___________________ Bank of America, N.A. as Agent Ladies and Gentlemen: We refer to the Credit Agreement dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "5-Year Credit Agreement") among Albertson's, Inc. (the Company"), the Banks party thereto, the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"). Terms defined in the 5-Year Credit Agreement are used herein as therein defined. This New Bank Agreement is made and delivered pursuant to Section 2.18 of the 5-Year Credit Agreement. Subject to the terms and conditions of Section 2.18 of the 5-Year Credit Agreement, _________________________ (the "New Bank") will become a party to the 5-Year Credit Agreement as a Bank, with a Commitment equal to $___________, on the Increased Commitment Date applicable to it. The New Bank hereby confirms and agrees that with effect on and after such Increased Commitment Date, the New Bank shall be and become a party to the 5-Year Credit Agreement as a Bank and have all of the rights and be obligated to perform all of the obligations of a Bank thereunder with a Commitment in the amount set forth above. Effective on the Increased Commitment Date applicable to it, the New Bank (i) accepts and assumes from the assigning Bank(s), without recourse, such assignment of Loans as shall be necessary to effectuate the adjustments in the Pro Rata Shares of the Banks contemplated by Section 2.18 of the 5-Year Credit Agreement, and (ii) agrees to fund on such Increased Commitment Date such assumed amounts to the Agent for the account of the assigning Bank(s) in accordance with the provisions of the 5-Year Credit Agreement, in the amount notified to the New Bank by the Agent. The following administrative details apply to the New Bank: (A) Lending Office(s): Bank name: Address: M-1 Attention: Telephone: ( ) ------ Facsimile: ( ) ------ Bank name: Address: Attention: Telephone: ( ) ------ Facsimile: ( ) ------ (B) Notice Address: -------------- Bank name: Address: Attention: Telephone: ( ) ------ Facsimile: ( ) ------ M-2 (C) Payment Instructions: -------------------- Account No.: At: Reference: Attention: This New Bank Agreement shall constitute a Loan Document under the 5-Year Credit Agreement. THIS NEW BANK AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the New Bank has caused this New Bank Agreement to be duly executed and delivered in _____________, ______________, by its proper and duly authorized officer as of the day and year first above written. [NEW BANK] By: ___________________________ Title: ________________________ CONSENTED TO as of ___________: ALBERTSON'S, INC. By: Title: ACKNOWLEDGED AND CONSENTED TO as of _________: M-3 BANK OF AMERICA, N.A., as Agent and Swingline Bank By: Title: M-4 EX-10.29 17 CREDIT 364 DAY AGREEMENT Exhibit 10.29 [364-Day Agreement] EXECUTION COPY CREDIT AGREEMENT Dated as of March 22, 2000 among ALBERTSON'S, INC., BANK OF AMERICA, N.A. as Administrative Agent, WACHOVIA BANK, N.A. as Syndication Agent, BANK ONE, NA, as Documentation Agent, FIRST UNION NATIONAL BANK, UNION BANK OF CALIFORNIA, N.A., U.S. BANK NATIONAL ASSOCIATION, and WELLS FARGO BANK, N.A., as Senior Managing Agents, FIRST SECURITY BANK, N.A. and THE NORTHERN TRUST COMPANY, as Managing Agent and THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO Arranged by Banc of America Securities LLC, Sole Lead Arranger and Sole Book Manager TABLE OF CONTENTS Section Page ARTICLE I DEFINITIONS 1 1.01 Certain Defined Terms...............................................1 1.02 Other Interpretive Provisions......................................14 1.03 Accounting Principles..............................................15 ARTICLE II THE CREDITS........................................................15 2.01 Amounts and Terms of Commitments...................................15 2.02 Loan Accounts......................................................16 2.03 Procedure for Committed Borrowing..................................16 2.04 Conversion and Continuation Elections for Committed Borrowings.....17 2.05 Bid Borrowings.....................................................19 2.06 Procedure for Bid Borrowings.......................................19 2.07 Voluntary Termination or Reduction of Commitments..................22 2.08 Optional Prepayments...............................................23 2.09 Repayment..........................................................23 2.10 Interest...........................................................23 2.11 Fees...............................................................24 2.12 Computation of Fees and Interest...................................25 2.13 Payments by the Company............................................25 2.14 Payments by the Banks to the Agent.................................26 2.15 Sharing of Payments, Etc...........................................27 2.16 Revolving Termination Date Extensions..............................27 2.17 Optional Increase in Commitments...................................28 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY............................30 3.01 Taxes..............................................................30 3.02 Illegality.........................................................31 3.03 Increased Costs and Reduction of Return............................32 3.04 Funding Losses.....................................................33 3.05 Inability to Determine Rates.......................................34 3.06 Certificates of Banks and Designated Bidders.......................34 3.07 Base Rate Committed Loans Substituted for Affected Offshore Rate Committed Loans....................................................34 3.08 Reserves on Offshore Rate Committed Loans..........................35 3.09 Substitution of Banks..............................................35 3.10 Survival...........................................................35 ARTICLE IV CONDITIONS PRECEDENT...............................................36 4.01 Conditions of Initial Loans........................................36 4.02 Conditions to All Borrowings.......................................37 ARTICLE V REPRESENTATIONS AND WARRANTIES......................................38 5.01 Corporate Existence and Power......................................38 i 5.02 Subsidiaries.......................................................38 5.03 Corporate and Governmental Authorization; No Contravention.........38 5.04 Binding Effect.....................................................39 5.05 Litigation.........................................................39 5.06 ERISA Compliance...................................................39 5.07 Use of Proceeds; Margin Regulations................................39 5.08 Title to Properties; Liens.........................................39 5.09 Taxes..............................................................39 5.10 Financial Information..............................................39 5.11 Environmental Matters..............................................40 5.12 Regulated Entities.................................................40 5.13 Insurance..........................................................40 5.14 Full Disclosure....................................................40 5.15 Year 2000..........................................................40 ARTICLE VI AFFIRMATIVE COVENANTS..............................................41 6.01 Information........................................................41 6.02 Conduct of Business and Maintenance of Existence...................42 6.03 Maintenance of Property............................................43 6.04 Insurance..........................................................43 6.05 Payment of Obligations.............................................43 6.06 Compliance with Laws...............................................43 6.07 Inspection of Property, Books and Records..........................43 6.08 Use of Proceeds....................................................43 6.09 Further Assurances.................................................43 ARTICLE VII NEGATIVE COVENANTS................................................44 7.01 Limitation on Liens................................................44 7.02 Disposition of Assets..............................................45 7.03 Limitation on Subsidiary Indebtedness and Swap Contracts...........45 7.04 Use of Proceeds....................................................46 7.05 Minimum Consolidated Tangible Net Worth............................46 ARTICLE VIII EVENTS OF DEFAULT................................................46 8.01 Event of Default...................................................46 8.02 Remedies...........................................................48 8.03 Rights Not Exclusive...............................................49 ARTICLE IX THE AGENT 49 9.01 Appointment and Authorization; "Agent."............................49 9.02 Delegation of Duties...............................................49 9.03 Liability of Agent.................................................49 9.04 Reliance by Agent..................................................50 9.05 Notice of Default..................................................50 9.06 Credit Decision....................................................50 9.07 Indemnification of Agent...........................................51 ii 9.08 Agent in Individual Capacity.......................................51 9.09 Successor Agent....................................................51 9.10 Withholding Tax....................................................52 9.11 Co-Agents..........................................................53 ARTICLE X MISCELLANEOUS.......................................................53 10.01 Amendments and Waivers.............................................53 10.02 Notices............................................................54 10.03 No Waiver; Cumulative Remedies.....................................55 10.04 Costs and Expenses.................................................55 10.05 Company Indemnification............................................55 10.06 Payments Set Aside.................................................56 10.07 Binding Effect; Successors and Assigns.............................56 10.08 Assignments, Participations, Etc...................................56 10.09 Designated Bidders.................................................58 10.10 Confidentiality....................................................58 10.11 Set-off............................................................59 10.12 Notification of Addresses, Lending Offices, Etc....................59 10.13 Counterparts.......................................................59 10.14 Severability.......................................................59 10.15 No Third Parties Benefited.........................................59 10.16 Governing Law and Jurisdiction.....................................59 10.17 Waiver of Jury Trial...............................................60 10.18 Entire Agreement...................................................60 ANNEXES Annex I Pricing Grid SCHEDULES Schedule 2.01 Commitments and Pro Rata Shares Schedule 10.02 Payment Offices; Addresses for Notices; Lending Offices EXHIBITS Exhibit A Form of Notice of Borrowing Exhibit B Form of Notice of Conversion/Continuation Exhibit C Form of Compliance Certificate Exhibit D Form of Legal Opinion of Counsel to the Company Exhibit E Form of Assignment and Acceptance Exhibit F Form of Invitation for Competitive Bids Exhibit G Form of Competitive Bid Request Exhibit H Form of Competitive Bid iii Exhibit I Form of Committed Loan Note Exhibit J Form of Bid Loan Note Exhibit K Form of Designation Agreement Exhibit L Form of Commitment Increase Agreement Exhibit M Form of New Bank Agreement iv CREDIT AGREEMENT This CREDIT AGREEMENT is entered into as of March 22, 2000, among Albertson's, Inc., a Delaware corporation (the "Company"), the several financial institutions from time to time party to this Agreement (individually, a "Bank" and, collectively, the "Banks"), Bank One, NA, as documentation agent (the "Documentation Agent"), Wachovia Bank, N.A., as syndication agent (in such capacity, the "Syndication Agent"), First Security Bank, N.A. and The Northern Trust Company, as managing agents (in such capacity, the "Managing Agents"), First Union National Bank, Union Bank Of California, N.A., U.S. Bank National Association and Wells Fargo Bank, N.A., as senior managing agents (in such capacity, the "Senior Managing Agents"), and Bank of America, N.A., as administrative agent for itself, the Designated Bidders and the Banks (in such capacity, the "Agent"). WHEREAS, the Banks have agreed to make available to the Company a revolving credit and bid loan facility with a term loan option, upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: ARTICLE I DEFINITIONS 1.01 Certain Defined Terms. The following terms have the following meanings when used herein (including in the recitals hereof): "Absolute Rate" has the meaning specified in subsection 2.06(c). "Absolute Rate Auction" means a solicitation of Competitive Bids setting forth Absolute Rates pursuant to Section 2.06. "Absolute Rate Bid Loan" means a Bid Loan that bears interest at a rate determined with reference to the Absolute Rate. "Affiliate" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, membership interests, by contract, or otherwise. "Agent" means BofA in its capacity as administrative agent for the Banks and the Designated Bidders hereunder, and any successor agent arising under Section 9.09. 1. "Agent-Related Persons" means BofA and any successor agent arising under Section 9.09, together with their respective Affiliates (including, in the case of BofA, the Lead Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Agent's Payment Office" means the address for payments set forth on Schedule 10.02 or such other address as the Agent may from time to time specify. "Aggregate Commitment" means the combined Commitments of the Banks. "Agreement" means this Credit Agreement. "Applicable Fee Amount" means with respect to the fees payable hereunder, the amount set forth opposite the indicated Indebtedness Rating or Facility Usage Percentage, as the case may be, below the headings "Facility Fee" and "Utilization Fee" in the pricing grid set forth on Annex I in accordance with the parameters for calculations of such amount also set forth on Annex I. "Applicable Margin" means, with respect to Base Rate Committed Loans and Offshore Rate Committed Loans, the amount set forth opposite the indicated Indebtedness Rating below the heading "Base Rate Spread" or "Offshore Rate Spread" in the pricing grid set forth on Annex I in accordance with the parameters for calculations of such amounts also set forth on Annex I. "Assignee" has the meaning specified in subsection 10.08(a). "Attorney Costs" means and includes all reasonable fees and disbursements of any law firm or other external counsel. "Bank" has the meaning specified in the introductory clause hereto. "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.ss.101, et seq.). "Base Rate" means, for any day, the higher of: (a) 0.50% per annum above the latest Federal Funds Rate; and (b) the rate of interest in effect for such day as publicly announced from time to time by BofA as its "prime rate." The "prime rate" is a rate set by BofA based upon various factors including BofA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in the prime rate announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Committed Loan" means a Committed Loan that bears interest based on the Base Rate. 2. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Bid Borrowing" means a borrowing of Loans under Article II consisting of one or more Bid Loans made to the Company on the same day by the Bid Loan Banks and Designated Bidders participating in such borrowing. "Bid Loan" means an Absolute Rate Bid Loan by a Bid Loan Bank or a Designated Bidder to the Company under Section 2.05. "Bid Loan Bank" means each Bank party hereto. "Bid Loan Note" has the meaning specified in Section 2.02. "BofA" means Bank of America, N.A., a national banking association. "Borrowing" means a Committed Borrowing or a Bid Borrowing. "Borrowing Date" means any date on which a Committed Borrowing occurs under Section 2.03 or a Bid Borrowing occurs under Section 2.06. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Committed Loan, means such a day on which dealings are carried on in the applicable offshore Dollar interbank market. "Capital Adequacy Regulation" means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. "Change of Control" means any person or group of persons (within the meaning of Section 13 or 14 of the Exchange Act) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under said Act) of 40% or more of the outstanding shares of common stock of the Company; or, during any period of twelve consecutive calendar months, individuals who were directors of the Company on the first day of such period shall cease to constitute a majority of the board of directors of the Company. "Closing Date" means the date occurring on or before March 29, 2000 on which all conditions precedent set forth in Section 4.01 are satisfied or waived by all Banks (or, in the case of subsection 4.01(e), waived by the Person entitled to receive such payment). "Co-Agents" means each of the Syndication Agent, Documentation Agent, Senior Managing Agents and Managing Agents, in its respective capacity as a syndication agent, documentation agent, senior managing agents or managing agent hereunder. 3. "Code" means the Internal Revenue Code of 1986. "Commitment" as to each Bank, has the meaning specified in Section 2.01. "Committed Borrowing" means a borrowing of Loans under Article II consisting of Committed Loans of the same Type made on the same day by the Banks ratably according to their respective Pro Rata Shares and, in the case of Offshore Rate Committed Loans, having the same Interest Periods. "Committed Loan" means a Loan made by a Bank to the Company under Section 2.01. "Committed Loan Note" has the meaning specified in Section 2.02. "Company's 1998 Form 10-K" means the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 1999, as filed with the SEC pursuant to the Exchange Act. "Competitive Bid" means an offer by a Bid Loan Bank or a Designated Bidder to make a Bid Loan in accordance with subsection 2.06(c). "Competitive Bid Request" has the meaning specified in subsection 2.06(a). "Compliance Certificate" means a certificate substantially in the form of Exhibit C. "Consolidated Subsidiary" means at any date any Subsidiary or other Person the accounts of which would be consolidated with those of the Company in its consolidated financial statements as of such date. "Consolidated Tangible Net Worth" means at any date (a) the consolidated stockholders' equity of the Company and its Consolidated Subsidiaries as reflected on the Company's consolidated balance sheet, plus their consolidated deferred investment tax credits as reflected on the Company's consolidated balance sheet, minus (b) their consolidated Intangible Assets, all determined as of such date. For purposes of this definition, "Intangible Assets" means the amount (to the extent reflected in determining such consolidated stockholders' equity) of (i) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of assets of a going concern business made within twelve months after the acquisition of such business) subsequent to January 28, 1999 in the book value of any asset owned by the Company or a Consolidated Subsidiary, (ii) all investments in unconsolidated Subsidiaries and all equity investments in Persons which are not Subsidiaries and (iii) all unamortized debt discount and expense, unamortized deferred charges (except deferred income taxes), goodwill, patents, trademarks, service marks, trade names, copyrights, organization or developmental expenses and other intangible items (except leasehold improvements and liquor licenses). "Conversion/Continuation Date" means any date on which, under Section 2.04, the Company (a) converts Committed Loans of one Type to 4. another Type, or (b) continues as Committed Loans of the same Type, but with a new Interest Period, Committed Loans having Interest Periods expiring on such date. "Default" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. "Designated Bidder" means an Affiliate of a Bid Loan Bank that is a Person described in clause (c)(i) or (ii) of the definition of "Eligible Assignee" and that has become a party hereto pursuant to Section 10.09. "Designation Agreement" means a Designation Agreement entered into by a Bank and a Designated Bidder and accepted by the Agent, in substantially the form of Exhibit K. "Documentation Agent" means Bank One, NA in its capacity as documentation agent hereunder. "Dollars", "dollars" and "$" each mean lawful money of the United States. "Eligible Assignee" means (a) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $250,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $250,000,000, provided that such bank is acting through a branch or agency located in the United States; and (c) a Person that is primarily engaged in the business of commercial lending and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of a Person of which a Bank is a Subsidiary, or (iii) a Person of which a Bank is a Subsidiary. "Environmental Laws" means all federal, state, local or foreign laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to the environment or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment including ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974. "ERISA Group" means the Company and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) 5. under common control which, together with the Company, are treated as a single employer under Section 414 of the Code. "Event of Default" means any of the events or circumstances specified in Section 8.01. "Exchange Act" means the Securities Exchange Act of 1934. "Excluded Taxes" means any and all present or future taxes, levies, assessments, imposts, duties, deductions, fees, withholding or similar charges and all liabilities with respect thereto, other than those taxes included in the definition of Taxes. "Existing Credit Facilities" means (i) the Credit Agreement dated as of March 30, 1999, among the Company, BofA as agent, and the other financial institutions party thereto, and (ii) the Credit Agreement dated as of October 5, 1994, among the Company, BofA as co-agent, Morgan Guaranty Trust Company of New York as agent, and the other financial institutions party thereto. "Facility Period" means the period from the Closing Date to the Revolving Termination Date (or, if Term Loans are made hereunder, the Term Maturity Date), or, if earlier, the date of termination of the Aggregate Commitment in its entirety and the repayment of all Loans outstanding hereunder. "Federal Funds Rate" means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York with respect to the preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published with respect to any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Agent. "Fee Letter" has the meaning specified in subsection 2.12(a). "Foundation Stock Agreement" means the agreement dated May 21, 1997, between the Company and the J.A. and Kathryn Albertson Foundation, Inc. and any successor agreement. "FRB" means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions. "GAAP" means generally accepted accounting principles as in effect from time to time. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, 6. legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Guaranty Obligation" means, as to any Person, any direct or indirect liability of that Person, whether or not contingent, with or without recourse, with respect to any obligation (the "primary obligations") of another Person (the "primary obligor"), including any obligation of that Person (i) to purchase, repurchase or otherwise acquire such primary obligations or any security therefor, (ii) to advance or provide funds for the payment or discharge of any such primary obligation, or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof. The amount of any Guaranty Obligation shall be deemed equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof. "Increased Commitment Date" has the meaning specified in subsection 2.17(b). "Indebtedness" of any Person means, without duplication, (a) all indebtedness for borrowed money; (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, (d) all obligations with respect to capital leases (but not obligations with respect to operating leases), (e) all obligations of such Person to purchase securities or other property which arise out of or in connection with the sale of the same or substantially similar securities or property, (f) all non-contingent obligations (and, for purposes of Section 7.01 and the definition of Material Indebtedness all contingent obligations) of such Person to reimburse any bank or other Person in respect of amounts paid under any Surety Instrument, (g) all indebtedness of others of the type referred to in clauses (a) through (f) secured by a Lien on any asset of such Person, whether or not such indebtedness is assumed by such Person, (h) all Guaranty Obligations of such Person in respect of indebtedness of others of the type referred to in clauses (a) through (f), and (i) all preferred stock of such Person redeemable at the option of the holder during the Facility Period. Insurance reserves, tax reserves and interest thereon, salaries payable, taxes payable, dividends payable, trade accounts payable arising in the ordinary course of business, deferred investment tax credits, deferred compensation, deferred rents payable under non-capital leases, benefits payable, unearned income and other similar liabilities shall not constitute "Indebtedness." "Indebtedness Rating" has the meaning set forth in Annex I. "Indemnified Liabilities" has the meaning specified in Section 10.05. "Indemnified Person" has the meaning specified in Section 10.05. 7. "Independent Auditor" has the meaning specified in subsection 6.01(a). "Insolvency Proceeding" means, with respect to any Person, (a) any case, action or proceeding with respect to such Person before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other similar arrangement in respect of its creditors generally or any substantial portion of its creditors, in either case undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code. "Interest Payment Date" means, as to any Loan other than a Base Rate Committed Loan, the last day of each Interest Period applicable to such Loan and, as to any Base Rate Committed Loan or Bid Loan, the last Business Day of each calendar quarter and the Revolving Termination Date and, if applicable, the Term Maturity Date; provided, however, that (a) if any Interest Period for an Offshore Rate Committed Loan exceeds three months, the date that falls three months after the beginning of such Interest Period and after each Interest Payment Date thereafter is also an Interest Payment Date, and (b) as to any Bid Loan, such other intervening date(s) prior to the maturity thereof as may be specified by the Company and agreed to by the applicable Bid Loan Bank or Designated Bidder in the applicable Competitive Bid shall also be Interest Payment Dates. "Interest Period" means, (a) as to any Offshore Rate Committed Loan, the period commencing on the Borrowing Date of such Loan, or on the Conversion/Continuation Date on which the Loan is converted into or continued as an Offshore Rate Committed Loan, and ending on the date one, two, three or six months thereafter as selected by the Company in its Notice of Borrowing, Notice of Conversion/Continuation or Competitive Bid Request, as the case may be; and (b) as to any Absolute Rate Bid Loan, a period of not less than 7 days and not more than 183 days as selected by the Company in the applicable Competitive Bid Request; provided that: (i) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of an Offshore Rate Committed Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (ii) no Interest Period applicable to a Term Loan or portion thereof shall extend beyond any date upon which is due any scheduled principal payment in respect of the Term Loans unless the aggregate principal amount of Term Loans represented by Base Rate Committed Loans, or Offshore Rate Committed Loans having Interest Periods that will expire on or before such date, equals or exceeds the amount of such principal payment; 8. (iii) any Interest Period pertaining to an Offshore Rate Committed Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iv) no Interest Period for any Term Loan shall extend beyond the Term Maturity Date and no Interest Period for any Revolving Loan shall extend beyond the Revolving Termination Date. "Invitation for Competitive Bids" means an Invitation for Competitive Bids, substantially in the form of Exhibit F. "IRS" means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions under the Code. "Lead Arranger" means Banc of America Securities LLC, a Delaware limited liability company, in its capacity as Sole Lead Arranger and Sole Book Manager. "Lending Office" means, (i) as to any Bank, the office or offices of such Bank specified as its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office", as the case may be, on Schedule 10.02; (ii), as to any Designated Bidder, the office or offices of such Designated Bidder specified as its "Lending Office" in its Designation Agreement; and (iii) such other office or offices as such Bank or Designated Bidder may from time to time notify to the Company and the Agent. "Lien" means with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means an extension of credit by a Bank or a Designated Bidder to the Company under Article II, and may be a Committed Loan or a Bid Loan. "Loan Documents" means this Agreement, the Notes, any Commitment Increase Agreement (as defined in Section 2.17), any New Bank Agreement (as defined in Section 2.17), the Fee Letter and all other documents delivered to the Agent or any Bank or Designated Bidder in connection herewith. "Majority Banks" means at any time Banks then having more than 50% of the Aggregate Commitment or, if the Commitments have been terminated, Banks then holding more than 50% of the then aggregate unpaid principal amount of the Loans. For purposes of this definition, each Bank shall be deemed to hold all outstanding Bid Loans of such Bank's Designated Bidders. 9. "Managing Agents" means each of First Security Bank, N.A. and The Northern Trust Company in its capacity as a managing agent hereunder. "Margin Stock" means "margin stock" as such term is defined in Regulation T, U or X of the FRB. "Markus-Stiftung Stock Agreement" means the agreement dated February 15, 1980, among the Company, Theo Albrecht Stiftung (now known as Markus-Stiftung) and Theo Albrecht, as amended by the First Amendment thereto dated as of April 11, 1984, the Second Amendment thereto dated as of September 25, 1989 and the Third Amendment thereto dated as of December 5, 1994 and any successor agreement. "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the operations, business, assets, liabilities or financial condition of the Company and its Consolidated Subsidiaries taken as a whole; (b) a material impairment of the ability of the Company to perform under any Loan Document and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Company of any Loan Document. "Material Indebtedness" means Indebtedness (other than the Loans) of the Company and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate outstanding principal amount exceeding $30,000,000. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $30,000,000. "Minimum Amount" means (i) in respect of any Committed Borrowing, conversion or continuation of Committed Loans, (a) in the case of Base Rate Committed Loans, an aggregate minimum amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof, and (b) in the case of Offshore Rate Committed Loans, an aggregate minimum amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof, and (ii) in the case of any reduction of the Commitments under Section 2.07, or optional prepayment of Committed Loans under Section 2.08, $5,000,000 or any multiple of $1,000,000 in excess thereof. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA, to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Multi-year Credit Agreement" means the Credit Agreement dated as of the date hereof, among the Company, BofA as agent, and the other financial institutions party thereto, providing for a five year revolving credit facility. "Non-Continuing Bank" means, at any time, each Bank the Revolving Termination Date of which has not been extended pursuant to Section 2.16. 10. "Notes" means the Committed Loan Notes and the Bid Loan Notes. "Notice of Borrowing" means a notice in substantially the form of Exhibit A. "Notice of Conversion/Continuation" means a notice in substantially the form of Exhibit B. "Obligations" means all advances, debts, liabilities, obligations, covenants and duties arising under any Loan Document, owing by the Company to any Bank, any Designated Bidder, the Agent, or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising. "Offshore Rate" means, for any Interest Period, with respect to Offshore Rate Committed Loans comprising part of the same Borrowing: (i) the rate of interest per annum determined by the Agent to be the rate of interest per annum (rounded upwards to the nearest 1/100th of 1%) appearing on Dow Jones Page 3750 (as defined below) for deposits in Dollars having a maturity comparable to such Interest Period, at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period, subject to clause (ii) below; or (ii) if for any reason the rate is not available as provided in the preceding clause (i) of this definition, the "Offshore Rate" instead means the rate of interest per annum determined by the Agent to be the arithmetic mean (rounded upward to the nearest 1/100th of 1%) of the rates of interest per annum notified to the Agent by each Reference Bank as the rate of interest at which deposits in Dollars in the approximate amount of the Offshore Rate Committed Loan to be made, continued or converted by such Reference Bank, and having a maturity comparable to such Interest Period, would be offered to major banks in the London interbank market or other applicable interbank market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period. As used in this definition, "Dow Jones Page 3750" means the display designated as "3750" on the Dow Jones Market Service (formerly known as the Telerate Service) or any replacement page thereof. "Offshore Rate Committed Loan" means any Committed Loan that bears interest based on the Offshore Rate. "Other Taxes" means any present or future stamp or documentary taxes or any other excise taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, this Agreement or any other Loan Documents. "Participant" has the meaning specified in subsection 10.08(d). "PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under ERISA. 11. "Person" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or any other entity of whatever nature. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Pro Rata Share" means, as to any Bank at any time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Bank's Commitment divided by the Aggregate Commitment (or, if all Commitments have been terminated, the aggregate principal amount of such Bank's Loans divided by the aggregate principal amount of the Loans then held by all Banks). The initial Pro Rata Share of each Bank is set forth opposite such Bank's name in Schedule 2.01 under the heading "Pro Rata Share." "Reference Bank" means each of BofA, Wachovia Bank, N.A. and Bank One, NA. "Replacement Bank" has the meaning specified in Section 3.09. "Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject. "Responsible Officer" means, as to any Person, the chief executive officer, the chief financial officer, or the treasurer or the president of such Person, or any other officer having substantially the same authority and responsibility; or, with respect to compliance with financial covenants, the chief financial officer or the treasurer of such Person, or any other officer having substantially the same authority and responsibility. "Revolving Loan" has the meaning specified in Section 2.01. "Revolving Termination Date" means the earlier to occur of: (a) March 21, 2001 as the same may be extended from time to time pursuant to Section 2.16; and (b) the date on which the Commitments terminate in accordance with the provisions of this Agreement. "SEC" means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions. 12. "Senior Managing Agents" means each of First Union National Bank, Union Bank Of California, N.A., U.S. Bank National Association and Wells Fargo Bank, N.A in its capacity as a senior managing agent hereunder. "Subsidiary" of a Person means any corporation or other business entity of which more than 50% of the voting stock, membership interests or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of the Company. "Surety Instruments" means all letters of credit (including standby and commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments. "Swap Contract" means any agreement, whether or not in writing, relating to any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond, note or bill option, interest rate option, forward foreign exchange transaction, cap, collar or floor transaction, currency swap, cross-currency rate swap, swaption, currency option or any other, similar transaction (including any option to enter into any of the foregoing) or any combination of the foregoing, and, unless the context otherwise clearly requires, any master agreement relating to or governing any or all of the foregoing. "Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined by the Company based upon one or more mid- market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include any Bank). "Syndication Agent" means Wachovia Bank, N.A., in its capacity as syndication agent hereunder. "Taxes" means any and all present or future taxes, levies, assessments, imposts, duties, deductions, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, respectively, (a) income or franchise taxes imposed on or measured by its net income, (i) by the United States, (ii) by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located, (iii) by any jurisdiction solely as a result of such Bank's activities in or contact with such jurisdiction unrelated to the transactions contemplated by this Agreement, or (iv) by the jurisdiction in which in the Lending Office of the recipient is located, and (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which any recipient is located. 13. "Term Loan" has the meaning specified in Section 2.01. "Term Maturity Date" means the one year anniversary date of the borrowing date of the Term Loans. "Type" means, as to any Committed Loan, its nature as an Offshore Rate Committed Loan or a Base Rate Committed Loan. "Unfunded Liability" means with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "United States" and "U.S." each means the United States of America. "Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Company. 1.02 Other Interpretive Provisions.(a) (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. (b) The words "hereof", "herein", "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (c) (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. (ii) The term "including" is not limiting and means "including without limitation." (iii) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including." (iv) The term "property" includes any kind of property or asset, real, personal or mixed, tangible or intangible. (d) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as 14. including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. (e) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (f) This Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. (g) This Agreement and the other Loan Documents are the result of negotiations among the Agent, the Company and the other parties, have been reviewed by counsel to the Agent, the Company and such other parties, and are the products of all parties. Accordingly, they shall not be construed against the Banks or the Agent merely because of the Agent's or Banks' involvement in their preparation. 1.03 Accounting Principles.(a) (a) Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, applied on a basis consistent (except for changes concurred in by the Company's Independent Auditor) with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Banks, except that accounting terms used in Sections 7.01, 7.03 and 7.05 shall be interpreted, and all accounting determinations and calculations required to establish whether the Company is or was in compliance with the requirements of said Sections shall be prepared in accordance with generally accepted accounting principles as in effect on the date hereof, applied on a basis consistent with the audited consolidated financial statements of the Company and its Consolidated Subsidiaries referred to in Section 5.10(a). (b) References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Company. ARTICLE II THE CREDITS 2.01 Amounts and Terms of Commitments. (a) The Revolving Credit. Each Bank severally agrees, on the terms and conditions set forth herein, to make loans to the Company (each such loan, a "Revolving Loan") from time to time on any Business Day during the period from the Closing Date to the Revolving Termination Date, in an aggregate amount not to exceed at any time outstanding the amount set forth opposite such Bank's name on Schedule 2.01 under the heading "Commitment" (such amount as the same may be reduced under Section 2.07 or reduced or increased as a result of one or more assignments under Section 10.08, such Bank's "Commitment"); provided, however, that, after giving effect to any Committed Borrowing of Revolving Loans, the aggregate principal amount of all outstanding Committed Loans plus the aggregate principal amount of all 15. Bid Loans outstanding, shall not at any time exceed the Aggregate Commitment. Within the limits of each Bank's Commitment, and subject to the other terms and conditions hereof, the Company may borrow under this Section 2.01, prepay under Section 2.08 and reborrow under this Section 2.01. (b) The Term Loan Option. Not less than five days and not more than thirty days prior to the Revolving Termination Date then in effect, and in lieu of any extension of the Revolving Termination Date under Section 2.16(a), the Company may provide written notice to the Agent, who shall forward a copy of such notice to each of the Banks, that the Revolving Loans outstanding as of the Revolving Termination Date shall be converted into Term Loans. If such notice is given, each Bank severally agrees, on the terms and conditions hereinafter set forth, to make a term loan (each a "Term Loan" and, collectively, the "Term Loans") to the Company on the Revolving Termination Date, in a principal amount up to but not exceeding such Bank's outstanding Revolving Loans. Any amount of any Bank's Term Loan repaid may not be reborrowed. 2.02 Loan Accounts.(a) (a) The Loans made by each Bank or Designated Bidder shall be evidenced by one or more loan accounts or records maintained by such Bank or Designated Bidder in the ordinary course of business. The loan accounts or records maintained by the Agent and each Bank or Designated Bidder shall be conclusive absent manifest error of the amount of the Loans made by the Banks and Designated Bidders to the Company and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Company hereunder to pay any amount owing with respect to the Loans. (b) The Committed Loans made by such Bank shall be evidenced by one or more notes of the Company, substantially in the form of Exhibit I, with appropriate insertions (the "Committed Loan Notes"), and upon the request of any Bank or Designated Bidder made through the Agent, the Bid Loans made by such Bank or Designated Bidder shall be evidenced by one or more notes of the Company, substantially in the form of Exhibit J, with appropriate insertions (the "Bid Loan Notes"), instead of or in addition to loan accounts. Each such Bank or Designated Bidder shall endorse on the schedules annexed to its Note(s) the date and amount of each Loan made by it, the maturity (in the case of any Bid Loan) and the amount of each payment of principal made by the Company with respect thereto. Each such Bank and Designated Bidder is irrevocably authorized by the Company to endorse its Note(s) and each Bank's or Designated Bidder's record shall be conclusive absent manifest error; provided, however, that the failure of a Bank or Designated Bidder to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of the Company hereunder or under any such Note to such Bank or Designated Bidder. 2.03 Procedure for Committed Borrowing.(a) (a) Each Committed Borrowing shall be made upon the Company's irrevocable written notice delivered to the Agent in the form of a Notice of Borrowing (which notice must be received by the Agent prior to 11:00 a.m. (San Francisco time) (i) at least three Business Days prior to the requested Borrowing Date, in the case of Offshore Rate Committed Loans, and (ii) on the requested Borrowing Date, in the case of Base Rate Committed Loans, specifying: 16. (A) the amount of the Committed Borrowing, which shall be in a Minimum Amount; (B) the requested Borrowing Date, which shall be a Business Day; (C) the Type of Loans comprising the Committed Borrowing; and (D) the duration of the Interest Period applicable to such Committed Loans included in such notice (subject to the provisions of the definition of "Interest Period" herein). If the Notice of Borrowing fails to specify the duration of the Interest Period for any Committed Borrowing comprised of Offshore Rate Committed Loans, such Interest Period shall be three months. (b) The Agent will promptly notify each Bank of its receipt of any Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that Committed Borrowing. (c) Each Bank will make the amount of its Pro Rata Share of each Committed Borrowing available to the Agent for the account of the Company at the Agent's Payment Office by 1:00 p.m. San Francisco time) on the Borrowing Date requested by the Company in funds immediately available to the Agent. The proceeds of each such Committed Borrowing will then be made available to the Company by the Agent at such office by crediting the account of the Company on the books of BofA with the aggregate of the amounts made available to the Agent by the Banks and in like funds as received by the Agent, or if requested by the Company, by wire transfer in accordance with written instructions provided to the Agent by the Company of such funds as received by the Agent, unless on the date of the Committed Borrowing all or any portion of the proceeds thereof shall then be required to be applied to the repayment of any outstanding Loans, in which case such proceeds or portion thereof shall be applied to the payment of such Loans. (d) After giving effect to any Committed Borrowing, unless the Agent shall otherwise consent, there may not be more than fifteen different Interest Periods in effect in respect of all Committed Loans then outstanding. 2.04 Conversion and Continuation Elections for Committed Borrowings.(a) (a) The Company may, upon irrevocable written notice to the Agent in accordance with subsection 2.04(b): (i) elect, as of any Business Day, in the case of Base Rate Committed Loans, or as of the last day of the applicable Interest Period in the case of any other Type of Committed Loans, to convert into Committed Loans of any other Type any such Committed Loans (or any part thereof in a Minimum Amount); or 17. (ii) elect, as of the last day of the applicable Interest Period, to continue any Offshore Rate Committed Loans having Interest Periods expiring on such day (or any part thereof in a Minimum Amount); provided, that if at any time the aggregate amount of Offshore Rate Committed Loans in respect of any Committed Borrowing is reduced, by payment, prepayment, or conversion of part thereof to be less than $5,000,000, such Offshore Rate Committed Loans shall automatically convert into Base Rate Committed Loans, and on and after such date the right of the Company to continue such Committed Loans as, and convert such Committed Loans into, Offshore Rate Committed Loans shall terminate. (b) The Company shall deliver a Notice of Conversion/Continuation to be received by the Agent not later than 11:00 a.m. (San Francisco time) (i) at least three Business Days in advance of the Conversion/ Continuation Date, if the Committed Loans are to be converted into or continued as Offshore Rate Committed Loans, and (ii) on the Conversion/Continuation Date, if the Committed Loans are to be converted into Base Rate Committed Loans, specifying: (A) the proposed Conversion/Continuation Date; (B) the aggregate amount of Committed Loans to be converted or continued; (C) the Type of Committed Loans resulting from the proposed conversion or continuation; and (D) other than in the case of conversions into Base Rate Committed Loans, the duration of the requested Interest Period (subject to the provisions of the definition of "Interest Period" herein). (c) If upon the expiration of any Interest Period applicable to Offshore Rate Committed Loans, the Company has failed to select timely a new Interest Period to be applicable to such Offshore Rate Committed Loans, or if any Default or Event of Default then exists, the Company shall be deemed to have elected to convert such Offshore Rate Committed Loans into Base Rate Committed Loans effective as of the expiration date of such Interest Period. (d) The Agent will promptly notify each Bank of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by the Company, the Agent will promptly notify each Bank of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Committed Loans held by each Bank with respect to which the notice was given. (e) Unless the Majority Banks otherwise consent, during the existence of a Default or Event of Default, the Company may not elect to have a Committed Loan converted into or continued as an Offshore Rate Committed Loan. 18. (f) After giving effect to any conversion or continuation of Committed Loans, unless the Agent shall otherwise consent, there may not be more than fifteen different Interest Periods in effect in respect of all Committed Loans and Bid Loans together then outstanding. 2.05 Bid Borrowings. In addition to Committed Borrowings pursuant to Section 2.03, each Bid Loan Bank severally agrees that the Company may, as set forth in Section 2.06, from time to time request the Bid Loan Banks prior to the Revolving Termination Date to submit offers to make Bid Loans to the Company; provided, however, that the Bid Loan Banks may, but shall have no obligation to, submit such offers and the Company may, but shall have no obligation to, accept any such offers, and any Bid Loan Bank may designate Designated Bidders to make such offers from time to time and, if such offers are accepted by the Company, to make such Bid Loans; and provided, further, that at no time shall (a) the outstanding aggregate principal amount of all Bid Loans made by all Bid Loan Banks and Designated Bidders, plus the outstanding aggregate principal amount of all Committed Loans made by all Banks, exceed the Aggregate Commitment; or (b) unless the Agent shall otherwise consent, the number of Interest Periods for Bid Loans then outstanding, plus the number of Interest Periods for Committed Loans then outstanding, exceed fifteen. 2.06 Procedure for Bid Borrowings.(a) (a) When the Company wishes to request the Bid Loan Banks to submit offers to make Bid Loans hereunder, it shall transmit to the Agent by telephone call followed promptly by facsimile transmission a notice in substantially the form of Exhibit G (a "Competitive Bid Request") so as to be received no later than 8:00 a.m. (San Francisco time) one Business Day prior to the date of a proposed Bid Borrowing, specifying: (i) the date of such Bid Borrowing, which shall be a Business Day; (ii) the aggregate amount of such Bid Borrowing, which shall be a minimum amount of $5,000,000 or in integral multiples of $1,000,000 in excess thereof; and (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of "Interest Period" herein. Subject to subsection 2.06(c), the Company may not request Competitive Bids for more than three Interest Periods in a single Competitive Bid Request and may not request Competitive Bids more than once in any period of five Business Days. (b) Upon receipt of a Competitive Bid Request, the Agent will promptly send to the Bid Loan Banks and Designated Bidders by facsimile transmission an Invitation for Competitive Bids, which shall constitute an invitation by the Company to each Bid Loan Bank and Designated Bidder to submit Competitive Bids offering to make the Bid Loans to which such Competitive Bid Request relates in accordance with this Section 2.06. (c)(i) Each Bid Loan Bank and Designated Bidder may at its discretion submit a Competitive Bid containing an offer or offers to make Bid Loans in response to any Invitation for Competitive Bids. Each Competitive Bid shall comply with the requirements of this subsection 2.06(c) and shall be submitted to the Agent by facsimile transmission at the Agent's office for 19. notices set forth on Schedule 10.02 not later than 7:30 a.m. (San Francisco time) on the proposed Borrowing Date; provided that Competitive Bids submitted by the Agent (or any Affiliate of the Agent) in the capacity of a Bid Loan Bank or Designated Bidder may be submitted, and may only be submitted, if the Agent or such Affiliate notifies the Company of the terms of the offer or offers contained therein not later than 7:15 a.m. (San Francisco time) on the proposed Borrowing Date. (ii) Each Competitive Bid shall be in substantially the form of Exhibit H, specifying therein: (A) the proposed Borrowing Date; (B) the principal amount of each Bid Loan for which such Competitive Bid is being made, which principal amount (1) may be equal to, greater than or less than the Commitment of the quoting Bid Loan Bank or the quoting Designated Bidder's affiliated Bid Loan Bank, (2) shall be $5,000,000 or in integral multiples of $1,000,000 in excess thereof, and (3) may not exceed the principal amount of Bid Loans for which Competitive Bids were requested; (C) the rate of interest per annum expressed in multiples of 1/1000th of one basis point (the "Absolute Rate") offered for each such Bid Loan and the Interest Period applicable thereto; and (D) the identity of the quoting Bid Loan Bank or Designated Bidder. A Competitive Bid may contain up to three separate offers by the quoting Bid Loan Bank or Designated Bidder with respect to each Interest Period specified in the related Invitation for Competitive Bids. (iii) Any Competitive Bid shall be disregarded if it: (A) is not substantially in conformity with Exhibit H or does not specify all of the information required by subsection (c)(ii) of this Section; (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bids; or (D) arrives after the time set forth in subsection (c)(i). (iv) Notwithstanding anything to the contrary contained in this subsection 2.06(c), a Competitive Bid by BofA may contain, and will not be disregarded if it does contain, a restriction on the use of proceeds thereof. 20. (d) Promptly on receipt and not later than 8:00 a.m. (San Francisco time) on the proposed Borrowing Date, the Agent will notify the Company of the terms (i) of any Competitive Bid submitted by a Bid Loan Bank or Designated Bidder that is in accordance with subsection 2.06(c), and (ii) of any Competitive Bid that amends, modifies or is otherwise inconsistent with a previous Competitive Bid submitted by such Bid Loan Bank or Designated Bidder with respect to the same Competitive Bid Request. Any such subsequent Competitive Bid shall be disregarded by the Agent unless such subsequent Competitive Bid is submitted solely to correct a manifest error in such former Competitive Bid and only if received within the times set forth in subsection 2.06(c). The Agent's notice to the Company shall specify (1) the aggregate principal amount of Bid Loans for which offers have been received for each Interest Period specified in the related Competitive Bid Request; and (2) the respective principal amounts and Absolute Rates so offered. Subject only to the provisions of Sections 3.02, 3.05 and 4.02 hereof and the provisions of this subsection (d), any Competitive Bid shall be irrevocable except with the written consent of the Agent given on the written instructions of the Company. (e) Not later than 8:30 a.m. (San Francisco time) on the proposed Borrowing Date, in the case of an Absolute Rate Auction, the Company shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection 2.06(d). The Company shall be under no obligation to accept any offer and may choose to reject all offers. In the case of acceptance, such notice shall specify the aggregate principal amount of offers for each Interest Period that is accepted. The Company may accept any Competitive Bid in whole or in part; provided that: (i) the aggregate principal amount of each Bid Borrowing may not exceed the applicable amount set forth in the related Competitive Bid Request; (ii) the principal amount of each Bid Borrowing shall be $5,000,000 or in any integral multiple of $1,000,000 in excess thereof; (iii) acceptance of offers may only be made on the basis of ascending Absolute Rates within each Interest Period; and (iv) the Company may not accept any offer that is described in subsection 2.06(c)(iii) or that otherwise fails to comply with the requirements of this Agreement. (f) If offers are made by two or more Bid Loan Banks or Designated Bidders with the same Absolute Rates for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Bid Loans in respect of which such offers are accepted shall be allocated by the Agent among such Bid Loan Banks or Designated Bidders as nearly as possible (in such multiples, not less than $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determination by the Agent of the amounts of Bid Loans shall be conclusive in the absence of manifest error. 21. (g)(i) The Agent will promptly notify each Bid Loan Bank or Designated Bidder having submitted a Competitive Bid if its offer has been accepted and, if its offer has been accepted, of the amount of the Bid Loan or Bid Loans to be made by it on the Borrowing Date. (ii) Each Bid Loan Bank or Designated Bidder which has received notice pursuant to subsection 2.06(g)(i) that its Competitive Bid has been accepted shall make the amounts of such Bid Loans available to the Agent for the account of the Company at the Agent's Payment Office, by 11:00 a.m. (San Francisco time), on such Borrowing Date, in funds immediately available to the Agent for the account of the Company at the Agent's Payment Office. The proceeds of such Bid Loans will in each case then be made available to the Company by the Agent at such office by crediting the account of the Company on the books of BofA with the aggregate of the amounts made available to the Agent by the Bid Loan Banks and in like funds as received by the Agent. (iii) Promptly following each Bid Borrowing, the Agent will notify each Bank and Designated Bidder of the ranges of bids submitted and the highest and lowest Bids accepted for each Interest Period requested by the Company and the aggregate amount borrowed pursuant to such Bid Borrowing. (iv) From time to time, the Company and the Bid Loan Banks and Designated Bidders shall furnish such information to the Agent as the Agent may request relating to the making of Bid Loans, including the amounts, interest rates, dates of borrowings and maturities thereof, for purposes of the allocation of amounts received from the Company for payment of all amounts owing hereunder. (h) Nothing in this Section 2.06 shall be construed as a right of first offer in favor of the Bid Loan Banks or Designated Bidders or otherwise to limit the ability of the Company to request and accept credit facilities from any Person (including any of the Bid Loan Banks or Designated Bidders), provided that no Default or Event of Default would otherwise arise or exist as a result of the Company executing, delivering or performing under such credit facilities. 2.07 Voluntary Termination or Reduction of Commitments. The Company may, upon not less than three Business Days' prior notice to the Agent, terminate the Commitments, or permanently reduce the Commitments, provided that the aggregate amount of any partial reduction is in a Minimum Amount; unless, after giving effect thereto and to any prepayments of any Loans made on the effective date thereof, the then outstanding principal amount of the Loans would exceed the amount of the Aggregate Commitment then in effect. A notice of termination of the Commitments delivered by the Company may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Company by notice to the Agent on or prior to the specified date if such condition is not satisfied. Once reduced in accordance with this Section 2.07, the Commitments may not be increased. Any reduction of the Commitments shall be applied to each Bank according to its Pro Rata Share. All accrued commitment fees to, but not including, the effective date of any reduction 22. or termination of the Commitments, shall be paid on the effective date of such reduction or termination. 2.08 Optional Prepayments. (a) Committed Loans. Subject to Section 3.04, the Company may, at any time or from time to time, upon notice to the Agent, ratably prepay Committed Loans in whole or in part, in Minimum Amounts. The Company shall deliver a notice of prepayment in accordance with Section 10.02 to be received by the Agent not later than 10:00 a.m. (San Francisco time) (i) at least three Business Days in advance of the prepayment date if the Loans to be prepaid are Offshore Rate Committed Loans and (ii) at least one Business Day in advance of the prepayment date if the Loans to be prepaid are Base Rate Committed Loans. Such notice shall not thereafter be revocable by the Company and the Agent will promptly notify each Bank thereof and of such Bank's Pro Rata Share of such prepayment if any. Such notice of prepayment shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid and whether such prepayment is of Base Rate Committed Loans or Offshore Rate Committed Loans (or any combination thereof). If such notice is given by the Company, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount of Offshore Rate Committed Loans prepaid and any amounts required pursuant to Section 3.04. (b) Bid Loans. Bid Loans may not be voluntarily prepaid. 2.09 Repayment. (a) The Committed Loans. The Company shall repay to the Agent for the account of the Banks on the Revolving Termination Date the aggregate principal amount of Committed Loans outstanding on such date. (b) The Term Loans. The Company shall repay to the Agent for the account of the Banks on the Term Maturity Date the aggregate principal amount of the Term Loans outstanding on the Term Maturity Date. (c) The Bid Loans. The Company shall repay to the Agent for the account of each Bid Loan Bank or Designated Bidder, as the case may be, that makes any Bid Loan the principal amount of such Bid Loan on the last day of the relevant Interest Period for such Bid Loan. 2.10 Interest.(a) (a) Each Committed Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a rate per annum equal to the Offshore Rate or the Base Rate, as the case may be (and subject to the Company's right to convert to other Types of Loans under Section 2.04), plus the Applicable Margin. Each Bid Loan shall bear interest on the outstanding principal amount thereof from the relevant Borrowing Date at a rate per annum equal to the Absolute Rate. (b) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Committed Loans under Section 2.08 for the portion of the Loans so prepaid and upon payment (including prepayment) in full thereof. 23. (c) Notwithstanding subsection (a) of this Section, if any amount of principal of or interest on any Loan, or any other amount payable hereunder or under any other Loan Document is not paid in full when due (whether at stated maturity, by acceleration, demand or otherwise), the Company agrees to pay interest on such unpaid principal or other amount, from the date such amount becomes due until the date such amount is paid in full, and after as well as before any entry of judgment thereon to the extent permitted by law, payable on demand, at a rate per annum which is determined by adding 1% per annum to the Applicable Margin then in effect for such Loans and, in the case of Obligations not subject to an Applicable Margin, at a rate per annum equal to the Base Rate, plus the Applicable Margin then in effect for Base Rate Committed Loans, plus 1% per annum. (d) Anything herein to the contrary notwithstanding, the obligations of the Company to any Bank or Designated Bidder hereunder shall be subject to the limitation that payments of interest shall not be required for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by such Bank or Designated Bidder would be contrary to the provisions of any law applicable to such Bank or Designated Bidder limiting the highest rate of interest that may be lawfully contracted for, charged or received by such Bank or Designated Bidder, and in such event the Company shall pay such Bank or Designated Bidder interest at the highest rate permitted by applicable law. 2.11 Fees. (a) Arrangement and Agency Fees. The Company shall pay fees as required by the letter agreement (the "Fee Letter") between the Company and the Lead Arranger and Agent dated February 29, 2000. (b) Competitive Bid Fee. The Company shall pay to the Agent, for the Agent's own account, a competitive bid fee in the amount set forth in the Fee Letter, each time the Company requests the Bid Loan Banks to submit offers to make Bid Loans. (c) Facility Fee. The Company shall pay to the Agent for the account of each Bank a facility fee on such Bank's Commitment, regardless of usage, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter at a rate per annum equal to the Applicable Fee Amount. Such facility fee shall accrue from the Closing Date to the Revolving Termination Date and shall be due and payable quarterly in arrears on the last Business Day of each quarter following the Closing Date through the Revolving Termination Date, with the final payment to be made on the Revolving Termination Date; provided that, in connection with any reduction or termination of Commitments under Section 2.07, the accrued facility fee calculated for the period ending on such date shall also be paid on the date of such reduction or termination, with the following quarterly payment being calculated on the basis of the period from such reduction or termination date to such quarterly payment date. The facility fee provided in this subsection shall accrue at all times after the above-mentioned commencement date, including at any time during which one or more conditions in Article IV are not met. (a) Utilization Fee. The Company shall pay to the Agent for the account of each Bank a utilization fee on the outstanding Loans (including all Bid Loans) at any time that the aggregate outstanding Loans exceed the levels of the Aggregate Commitment determined in accordance with Annex I, at a rate per annum equal to the Applicable Fee Amount. Such utilization 24. fee shall be computed on a quarterly basis in arrears on the last Business Day of each calendar quarter, shall accrue from the Closing Date to the Revolving Termination Date and shall be payable in arrears on the last Business Day of each quarter commencing on the last Business Day of the fiscal quarter following the Closing Date through the Revolving Termination Date, with the final payment to be made on the Revolving Termination Date. The utilization fee, if applicable, will be added to the Applicable Margin. 2.12 Computation of Fees and Interest. (a) (a) All computations of interest hereunder when the Base Rate is determined by BofA's "prime rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day year). Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof. (b) Each determination of an interest rate by the Agent shall be conclusive and binding on the Company, the Banks and the Designated Bidders in the absence of manifest error. (c) The Agent will, at the request of the Company or any Bank or designated Bidder, deliver to the Company or such Bank or Designated Bidder, as the case may be, a statement showing the quotations used by the Agent in determining any interest rate. (d) If any Reference Bank's Commitment terminates (other than on termination of all the Commitments), or for any reason whatsoever any Reference Bank ceases to be a Bank hereunder, that Reference Bank shall thereupon cease to be a Reference Bank, and the Offshore Rate shall be determined on the basis of the rates as notified by the remaining Reference Banks; provided that if, as a result, there shall only be one Reference Bank remaining, the Agent (after consultation with the Banks and with the consent of the Company (which shall not be unreasonably withheld)) shall, by notice to the Company and the Banks, designate another Bank as a Reference Bank so that there shall at all times be at least two Reference Banks. (e) Each Reference Bank shall use its best efforts to furnish quotations of rates to the Agent as contemplated hereby. If any of the Reference Banks fails to supply such rates to the Agent upon its request, the rate of interest shall be determined on the basis of the quotations of the remaining Reference Bank(s). 2.13 Payments by the Company(a) . (a) Except as otherwise expressly provided herein, all payments by the Company shall be made to the Agent for the account of the Banks and Designated Bidders at the Agent's Payment Office, and shall be made from an account of the Company maintained within the United States, in Dollars, and in immediately available funds, no later than 12:00 noon (San Francisco time) on the date specified herein. The Agent will promptly distribute to each Bank (or Designated Bidder) its Pro Rata Share (or other applicable share as expressly provided herein) of such payment in like funds as received. Any payment received by the Agent later than 12:00 noon (San Francisco time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue. 25. (b) Subject to the provisions set forth in the definition of "Interest Period" herein, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. (c) Unless the Agent receives notice from the Company prior to the date on which any payment is due to the Banks or Designated Bidders that the Company will not make such payment in full as and when required, the Agent may assume that the Company has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Bank or Designated Bidder on such due date an amount equal to the amount then due such Bank or Designated Bidder. If and to the extent the Company has not made such payment in full to the Agent, each Bank or Designated Bidder shall repay to the Agent on demand such amount distributed to such Bank or Designated Bidder, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Bank or Designated Bidder until the date repaid. 2.14 Payments by the Banks to the Agent. (a) Unless the Agent receives notice from a Bank or Designated Bidder, as the case may be, on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, on the date of such Borrowing, that such Bank or Designated Bidder will not make available as and when required hereunder to the Agent for the account of the Company the amount of that Bank's or Designated Bidder's Loan, the Agent may assume that such Bank or Designated Bidder has made such amount available to the Agent in immediately available funds on the Borrowing Date and the Agent may (but shall not be so required), in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent any Bank or Designated Bidder shall not have made its full amount available to the Agent in immediately available funds and the Agent in such circumstances has made available to the Company such amount, that Bank or Designated Bidder shall on the Business Day following such Borrowing Date make such amount available to the Agent, together with interest at the Federal Funds Rate for each day during such period. A notice of the Agent submitted to any Bank or Designated Bidder with respect to amounts owing under this subsection (a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Bank's or Designated Bidder's Loan on the Borrowing Date for all purposes of this Agreement. If such amount is not made available to the Agent on the Business Day following the Borrowing Date, the Agent will notify the Company of such failure to fund and, upon demand by the Agent, the Company shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing. (a) The failure of any Bank or Designated Bidder to make any Loan on any Borrowing Date shall not relieve any other Bank or Designated Bidder of any obligation hereunder to make a Loan on such Borrowing Date, but no Bank or Designated Bidder shall be responsible for the failure of any other Bank or Designated Bidder to make the Loan to be made by such other Bank or Designated Bidder on any Borrowing Date. 26. 2.15 Sharing of Payments, Etc. If, other than as expressly provided elsewhere herein, any Bank or Designated Bidder shall obtain on account of the Loans made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Pro Rata Share (or other share contemplated hereunder) of (i) payments in respect of the Committed Loans obtained by all the Banks, or (ii) payments in respect of Bid Loans having the same Borrowing Date, Interest Payment Date and maturity date, such Bank or Designated Bidder shall immediately (a) notify the Agent of such fact, and (b) purchase from the other Banks and, if applicable, Designated Bidders, such participations in the Committed Loans or Bid Loans, as applicable, made by them as shall be necessary to cause such purchasing Bank or Designated Bidder to share the excess payment pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Bank or Designated Bidder, such purchase shall to that extent be rescinded and each other Bank or Designated Bidder shall repay to the purchasing Bank or Designated Bidder the purchase price paid therefor, together with an amount equal to such paying Bank's or Designated Bidder's ratable share (according to the proportion of (i) the amount of such paying Bank's or Designated Bidder's required repayment to (ii) the total amount so recovered from the purchasing Bank or Designated Bidder) of any interest or other amount paid or payable by the purchasing Bank or Designated Bidder in respect of the total amount so recovered. The Company agrees that any Bank or Designated Bidder so purchasing a participation from another Bank or Designated Bidder may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 10.11) with respect to such participation as fully as if such Bank or Designated Bidder were the direct creditor of the Company in the amount of such participation. The Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section 2.16 and will in each case notify the Banks and, if applicable, Designated Bidders, following any such purchases or repayments. 2.16 Revolving Termination Date Extensions. (a) Not less than 30 days and not more than 60 days prior to the Revolving Termination Date then in effect, and in lieu of the exercise at such time of the term out option under Section 2.01(b), the Company may make a written request to the Agent, who shall forward a copy of each such request to each of the Banks, that the Revolving Termination Date then in effect be extended to the date which occurs 364 days after the Revolving Termination Date then in effect. Each request by the Company pursuant to the immediately preceding sentence shall specify a date (the "Requested Extension Effective Date"), which shall be not earlier than 20 days after the giving of the respective notice and not later than 15 days prior to the Revolving Termination Date then in effect, as the date by which the Banks should respond to the requested extension request and which would be the date of the effectiveness of the change to the Revolving Termination Date. Each request pursuant to the first sentence of this Section 2.16 shall also be accompanied by a certificate of an officer of the Company stating that no Default or Event of Default has occurred and is continuing. Each Bank, acting in its sole discretion and with no obligation to grant any extension pursuant to this Section 2.16, shall, by written notice to the Company and the Agent, such notice to be given on or prior to the Requested Extension Effective Date, advise the Company and the Agent whether or not such Bank agrees to such extension, provided that any Bank which fails to so notify the Company and the Agent as provided above shall be deemed to have elected not to grant such extension. If less than all the Banks shall agree to such extension, the extension contemplated in this Section may nonetheless occur 27. with respect to the consenting Banks, provided that any such extension shall be conditioned upon an agreement to such extension by Banks with at least 75% of the Aggregate Commitment. The Agent shall notify the Company and each of the Banks as to which Banks have agreed to such extension and as to the new Revolving Termination Date as a result thereof, or that such extension shall not occur, as the case may be. (b) In the event that the Revolving Termination Date is extended by some but not all of the Banks, on the existing Revolving Termination Date for any Bank not extending (each a "Non-Continuing Bank"), the Company shall either (i) repay all Revolving Loans of such Non-Continuing Bank, together with all accrued and unpaid interest thereon, and all fees and other amounts owing to such Non-Continuing Bank, and upon such payment each such Non-Continuing Bank shall cease to constitute a Bank hereunder, except with respect to the indemnification provisions under this Agreement, which shall survive as to such Non-Continuing Bank or (ii) in lieu of an extension of the Revolving Loan Termination Date under this Section 2.16, elect to convert the outstanding Revolving Loans into Term Loans pursuant to Section 2.01(b). 2.17 Optional Increase in Commitments.(a) (a) Effective as of the Closing Date, or at any time thereafter (prior to the Revolving Termination Date) but no more than once per month, if no Default or Event of Default has occurred and is continuing both before and after giving effect to an increase, the Company shall have the option to increase the Aggregate Commitment by (i) increasing the Commitment of one or more Banks already party to this Agreement (each such Bank increasing its Commitment, an "Increasing Bank"), in each case pursuant to a Commitment Increase Agreement, in substantially the form of Exhibit L (a "Commitment Increase Agreement") and/or (ii) adding one or more lending institutions not a party hereto (each such new bank, a "New Bank") as a party to this Agreement, in each case pursuant to a New Bank Agreement, in substantially the form of Exhibit M (a "New Bank Agreement"). The effectiveness of any such increase is subject to the satisfaction of the following conditions: (A) that any request for increase of the Commitment of an Increasing Bank be made through the Agent (it being understood that an Increasing Bank may accept or reject any increase request in its sole and absolute discretion); (B) that the Company shall provide prior written notice of any proposed increase (whether involving an Increasing Bank or a New Bank) to the Agent, at least 15 Business Days (or such shorter period as the Agent may agree to in the given instance) prior to the effectiveness of such increase, who shall promptly notify the Banks; (C) in the case of a Commitment increase by an Increasing Bank, that the Company and such Increasing Bank shall have entered into a Commitment Increase Agreement, and such Commitment Increase Agreement shall have been delivered to the Agent; (D) in the case of an accession hereto by a New Bank, that the Company and such New Bank shall have entered into a New Bank Agreement, and such New Bank Agreement shall have been delivered to the Agent; 28. (E) that the Agent shall have acknowledged and accepted the Commitment Increase Agreement or New Bank Agreement, as the case may be (such acknowledgment and acceptance not to be unreasonably withheld); (F) that each New Bank shall be an Eligible Assignee; (G) that the Aggregate Commitment, following such increase, shall not exceed $1,250,000,000; (H) that any fees payable to any Increasing Bank or New Bank in connection with such increase shall have been paid; and (I) that any other amounts then due hereunder in connection therewith, including any amounts payable under Section 3.04 as a result of any assignments of Offshore Rate Committed Loans under subsection 2.16(b) on a day other than the last day of an Interest Period, shall have been paid. (b) Upon the effectiveness of any Commitment Increase Agreement, the Commitment of the Increasing Bank party thereto shall be increased in the amount set forth in the Commitment Increase Agreement, and upon the effectiveness of any New Bank Agreement, the New Bank party thereto shall be and become a party hereto and shall constitute a Bank hereunder with the rights and obligations of a Bank under the Loan Documents (each such date of effectiveness, an "Increased Commitment Date"). Effective on each Increased Commitment Date, the amount of Loans then outstanding and held by each Bank shall be adjusted to reflect any such changes in such Bank's Pro Rata Share, subject to Section 3.04. Each Bank having Loans then outstanding and whose Pro Rata Share has been decreased as a result of the increase in the Aggregate Commitment shall be deemed to have assigned, without recourse, to any Increasing Banks increasing their Commitments and New Banks, such portion of such Loans as shall be necessary to effectuate such adjustment. Each Increasing Bank and New Bank shall (A) be deemed to have assumed such portion of such Loans and (B) fund on the Increased Commitment Date such assumed amounts to the Agent for the account of the assigning Banks in accordance with the provisions hereof. (c) The Agent shall promptly notify the Banks of the Agent's receipt of notice of any proposed Commitment increase under clause (B) of subsection 2.17(a). Additionally, promptly following the Increased Commitment Date for a Commitment increase the Agent shall cause Schedule 2.01 to be modified to accurately reflect the Commitments and Pro Rata Shares of the Banks, whereupon such amended Schedule 2.01 shall be substituted for the pre-existing Schedule 2.01, be deemed a part of this Agreement without any further action or consent of any party and be promptly distributed to each Bank and the Company by the Agent. Within five Business Days of any Increased Commitment Date (whether as to an Increasing Bank or a New Bank), the Company shall execute and deliver to the Agent (i) a replacement Committed Loan Note in favor of each Increasing Bank, 29. evidencing the increased Commitment of such Increasing Bank, and (ii) a new Committed Loan Note in favor of each New Bank, in the principal amount of such New Bank's Commitment. Additionally, the Agent shall promptly notify each Increasing Bank and New Bank of the amount of its funding obligations under subsection 2.17(b). (d) Any fees paid by the Company for any such increase shall not be required to be ratable and shall be paid only to Increasing Banks, or New Banks, as the case may be, as shall be separately agreed from time to time by the Company and any such Increasing Bank or New Bank. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 Taxes.(a) (a) Unless otherwise required by applicable law, any and all payments by the Company to each Bank, each Designated Bidder, or the Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for, any Taxes. (b) If the Company shall be required by law to deduct or withhold any United States federal Taxes from or in respect of any sum payable hereunder to any Bank, any Designated Bidder or the Agent, and subject to Section 9.10, then: (i) the sum payable shall be increased as necessary so that, after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section), such Bank, such Designated Bidder or the Agent, as the case may be, receives and retains an amount equal to the sum it would have received and retained had no such deductions or withholdings been made; (ii) the Company shall make such deductions and withholdings; and (iii) the Company shall pay the full amount deducted or withheld to the relevant taxing authority in accordance with applicable law. (c) In addition, the Company shall pay any Other Taxes. (d) The Company agrees to indemnify and hold harmless each Bank, each Designated Bidder and the Agent for the full amount of Other Taxes, and, subject to Section 9.10, Taxes referred to in Subsection 3.01(b). Without limiting the generality of the foregoing, if the Company fails to pay any Other Taxes or any such Taxes when due to the appropriate taxing authority or fails to remit to the Banks and the Agent the required documentary evidence referred to in Subsection 3.01(c) and the Company received from the Agent or the affected Bank prior notice of its obligation to make the payment of Other Taxes or such Taxes, the Company agrees to indemnify and hold harmless each Bank and the Agent for any incremental taxes, interest 30. or penalties that may become payable by any Bank or the Agent as a result of any such failure. Payment pursuant to this indemnification shall be made within 30 days after the date such Bank or the Agent makes written demand therefor setting forth in reasonable detail the basis of the Company's obligation to indemnify such Bank or the Agent pursuant to this Section 3.01. (e) Within 60 days after the date of any payment of any Taxes or Other Taxes pursuant to Subsection 3.01(a), (b) or (c), the Company shall furnish to each Bank, each Designated Bidder and the Agent, at its address referred to in Section 10.02, documentary evidence reasonably satisfactory to each Bank, each Designated Bidder and the Agent of payment thereof, but only to the extent such documentary evidence is furnished to the Company by the relevant taxing authority. (f) If the Company is required to pay any additional amount to the Agent, any Designated Bidder or any Bank or any taxing authority for the account of the Agent, any Designated Bidder or any Bank pursuant to this Section 3.01, the Company shall have the right, upon notice to such Bank or such Designated Bidder, to (i) prepay, on a non-pro rata basis, the principal amount or any portion thereof held by such Bank or such Designated Bidder plus all interest, fees, and other amounts owing to such Bank or such Designated Bidder as of the date of such prepayment (including any amounts owing under Section 3.04), or (ii) require such Bank or such Designated Bidder to use reasonable efforts to designate a different Lending Office for funding or booking its Loan (or any Loan participation) hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the sole judgment of such Bank, such designation or assignment (A) would eliminate or reduce amounts payable pursuant to Subsection 3.01(b) in the future and (B) would not subject such Bank or such Designated Bidder to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Bank or such Designated Bidder. With respect to the foregoing clause (ii) the Company hereby agrees to pay all reasonable costs and expenses incurred by any Bank or any Designated Bidder in connection with any such designation or assignment. (g) Each Bank and each Designated Bidder agrees that it will (i) take all reasonable actions requested in writing by the Company that are without material cost or risk to such Bank to maintain all exemptions, if any, available to it from withholding taxes (whether available by treaty or existing administrative waiver), and (ii) to the extent reasonable and without material cost or risk to it, otherwise cooperate with the Company to minimize any amounts payable by the Company under this Section 3.01. (h) Each non-United States Bank and each non-United States Designated Bidder represents and warrants to the Agent and the Company as of the date hereof that under applicable law and treaties such Bank or such Designated Bidder is entitled to claim the benefit of complete exemption from imposition of United States withholding tax or that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. 3.02 Illegality.(a) If any Bank determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Bank or its applicable Lending Office 31. to make Offshore Rate Committed Loans, then, on notice thereof by such Bank to the Company through the Agent, any obligation of that Bank to make Offshore Rate Committed Loans or convert Base Rate Committed Loans into Offshore Rate Committed Loans shall be suspended until such Bank notifies the Agent and the Company that the circumstances giving rise to such determination no longer exist. (b) If a Bank determines that it is unlawful for such Bank to maintain any Offshore Rate Committed Loan, the Company shall, upon its receipt of notice of such fact and demand from such Bank (with a copy to the Agent), prepay in full such Offshore Rate Committed Loans of that Bank then outstanding, together with interest accrued thereon and amounts required under Section 3.04, either on the last day of the Interest Period thereof, if such Bank may lawfully continue to maintain such Offshore Rate Committed Loans to such day, or immediately, if such Bank may not lawfully continue to maintain such Offshore Rate Committed Loan. If the Company is required so to prepay any Offshore Rate Committed Loan, then concurrently with such prepayment, the Company shall borrow from the affected Bank, in the amount of such repayment, a Base Rate Committed Loan. (c) If the obligation of any Bank to make or maintain Offshore Rate Committed Loans has been so terminated or suspended, the Company may elect, by giving notice to such Bank through the Agent that all Loans which would otherwise be made by such Bank as Offshore Rate Committed Loans shall be instead Base Rate Committed Loans. (d) Before giving any notice to the Agent under this Section 3.02, the affected Bank shall designate a different Lending Office with respect to its Offshore Rate Committed Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of such Bank, be illegal or otherwise disadvantageous to such Bank. 3.03 Increased Costs and Reduction of Return.(a) (a) If any Bank determines that, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation (other than any such introduction or change in respect of any law or regulation relating to Taxes or Excluded Taxes which shall be governed solely by Section 3.01) or (ii) the compliance by such Bank with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining any Offshore Rate Committed Loans, by an amount deemed by such Bank to be material, then the Company shall be liable for, and shall from time to time, within 15 days after demand by such Bank (with a copy of such demand to be sent to the Agent), pay to the Agent for the account of such Bank, additional amounts as are sufficient to compensate such Bank for such increased costs. (b) If any Bank or Designated Bidder shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by such Bank or Designated 32. Bidder (or its Lending Office) or any corporation controlling such Bank or Designated Bidder with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by such Bank or Designated Bidder or any corporation controlling such Bank or Designated Bidder and (taking into consideration such Bank's, such Designated Bidder's or such corporation's policies with respect to capital adequacy and such Bank's or Designated Bidder's desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitment, Loans, credits or obligations under this Agreement, by an amount deemed by such Bank or such Designated Bidder to be material, then, within 15 days after demand by such Bank or Designated Bidder to the Company through the Agent, the Company shall pay to such Bank or Designated Bidder, as the case may be, from time to time as specified by such Bank or Designated Bidder, such additional amounts as are sufficient to compensate such Bank or Designated Bidder for such increase. (c) Each Bank and each Designated Bidder will promptly notify the Company and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank or such Designated Bidder to compensation pursuant to this Section and will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole judgment of such Bank or such Designated Bidder, be otherwise disadvantageous to such Bank or such Designated Bidder. Notwithstanding the foregoing subsections (a) and (b) of this Section 3.03, the Company shall only be obligated to compensate any Bank or any Designated Bidder for any amount arising or accruing during (i) any time or period commencing not more than 30 days prior to the date on which such Bank or such Designated Bidder notifies the Agent and the Company that it proposes to demand such compensation and identifies to the Agent and the Company the statute, regulation or other basis upon which the claimed compensation is or will be based and (ii) any time or period during which, because of the retroactive application of such statute, regulation or other such basis, such Bank or such Designated Bidder did not know that such amount would arise or accrue. 3.04 Funding Losses. The Company shall reimburse each Bank and each Designated Bidder, and hold each Bank and each Designated Bidder harmless from, any loss or expense which such Bank or such Designated Bidder may sustain or incur as a consequence of: (a) the failure of the Company to make on a timely basis any payment of principal of any Offshore Rate Committed Loan; (b) the failure of the Company to borrow, continue or convert a Committed Loan after the Company has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation; (c) the failure of the Company to make any prepayment of any Committed Loan in accordance with any notice delivered under Section 2.08; (d) the prepayment (including pursuant to Section 2.08 or 3.02(b)) or other payment (including after acceleration thereof) of any Offshore Rate Committed Loan or Absolute Rate Bid Loan on a day that is not the last day of the relevant Interest Period; or (e) the conversion under Section 2.04 of any Offshore Rate Committed Loan to a Base Rate Committed Loan on a day that is not the last day of the relevant Interest Period; 33. including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Offshore Rate Committed Loans or from fees payable to terminate the deposits from which such funds were obtained. For purposes of calculating amounts payable by the Company to the Banks and the Designated Bidders under this Section and under subsection 3.03(a), each Offshore Rate Committed Loan made by a Bank or Designated Bidder (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the London interbank offered rate used in determining the Offshore Rate for such Offshore Rate Committed Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Offshore Rate Committed Loan is in fact so funded. 3.05 Inability to Determine Rates. If on or prior to the first day of any Interest Period: (a) the Agent is advised by the Reference Banks that deposits in Dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) the Majority Banks advise the Agent that the Offshore Rate, as determined by the Agent, will not adequately and fairly reflect the cost to such Banks of funding their Offshore Rate Committed Loans for such Interest Period, the Agent will promptly so notify the Company and each Bank. Thereafter, the obligation of the Banks to make or maintain Offshore Rate Committed Loans hereunder shall be suspended until the Agent upon the instruction of the Majority Banks revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it. If the Company does not revoke such Notice as to any such proposed Committed Loans, the Banks shall make, convert or continue any such Committed Loans, as proposed by the Company, in the amount specified in the applicable Notice submitted by the Company, but such Committed Loans shall be made, converted or continued as Base Rate Committed Loans instead of Offshore Rate Committed Loans. 3.06 Certificates of Banks and Designated Bidders. Any Bank or Designated Bidder claiming reimbursement or compensation under this Article III shall deliver to the Company (with a copy to the Agent) a certificate setting forth in reasonable detail the amount payable to such Bank or such Designated Bidder hereunder and such certificate shall be conclusive and binding on the Company in the absence of manifest error. In determining any amount due under this Article III, a Bank or Designated Bidder may use any reasonable averaging and attribution methods. 3.07 Base Rate Committed Loans Substituted for Affected Offshore Rate Committed Loans. If (i) the obligation of any Bank to make Offshore Rate Committed Loans has been suspended pursuant to Section 3.02 or (ii) any Bank has demanded compensation under Section 3.03(a) and the Company shall, by at least five Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Company that the circumstances giving rise to such suspension or demand for compensation no longer apply: 34. (a) all Loans which would otherwise be made by such Bank as Offshore Rate Committed Loans, shall be made instead as Base Rate Committed Loans (on which interest and principal shall be payable contemporaneously with the related Offshore Rate Committed Loans of the other Banks); and (b) after each of its Offshore Rate Committed Loans has been repaid, all payments of principal which would otherwise be applied to repay such Offshore Rate Committed Loans shall be applied to repay its Base Rate Committed Loans instead. 3.08 Reserves on Offshore Rate Committed Loans. The Company shall pay to each Bank, as long as such Bank shall be required under regulations of the FRB to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities"), additional costs on the unpaid principal amount of each Offshore Rate Committed Loan equal to the actual costs of such reserves allocated to such Offshore Rate Committed Loan by the Bank (as determined by the Bank in good faith, which determination shall be conclusive), payable on each date on which interest is payable on such Committed Loan, provided the Company shall have received at least 15 days' prior written notice (with a copy to the Agent) of such additional interest from the Bank. If a Bank fails to give notice 15 days prior to the relevant Interest Payment Date, such additional interest shall be payable 15 days from receipt of such notice. 3.09 Substitution of Banks. Upon the receipt by the Company from any Bank (an "Affected Bank") of a claim for compensation under Section 3.03, upon notice to the Agent from any Bank that it shall not consent to a request by the Company for an extension of the Revolving Termination Date pursuant to subsection 2.16(a), or if the Company is required to pay any additional amount to the Agent or any Bank pursuant to Section 3.01, the Company may: (i) request one or more of the other Banks to acquire and assume all or part of such Affected Bank's Loans and Commitment; or (ii) designate a replacement commercial bank (which shall be an Eligible Assignee) satisfactory to the Company to acquire and assume all or a ratable part of such Affected Bank's Loans and Commitment (a "Replacement Bank"); provided, however, that the Company shall be liable for the payment upon demand of all costs and other amounts arising under Section 3.04 that result from the acquisition of any Affected Bank's Loan and/or Commitment (or any portion thereof) by a Bank or Replacement Bank, as the case may be, on a date other than the last day of the applicable Interest Period with respect to any Offshore Rate Committed Loan then outstanding. Any such designation of a Replacement Bank under clause (i) shall be effected in accordance with, and subject to the terms and conditions of, the assignment provisions contained in Section 10.08, and shall in any event be subject to the prior written consent of the Agent (which consent shall not be unreasonably withheld). 3.10 Survival. The agreements and obligations of the Company in this Article III shall survive the payment of all other Obligations. 35. ARTICLE IV CONDITIONS PRECEDENT 4.01 Conditions of Initial Loans. The obligation of each Bank to make its initial Committed Loan hereunder, and the obligation of each Bid Loan Bank and Designated Bidder to receive through the Agent the initial Competitive Bid Request, is subject to the condition that the Agent shall have received on or before the Closing Date all of the following, in form and substance satisfactory to the Agent and each Bank, and in sufficient copies for each Bank: (a) Credit Agreement and Notes. This Agreement executed by each party hereto, and the Committed Loan Notes executed by the Company; (b) Resolutions; Incumbency. (i) Copies of the resolutions of the board of directors of the Company authorizing the transactions contemplated hereby, certified as of the Closing Date by the Secretary or an Assistant Secretary of the Company; and (ii) A certificate of the Secretary or Assistant Secretary of the Company, dated the Closing Date, certifying the names, titles and true signatures of the officers of the Company authorized to execute, deliver and perform, as applicable, this Agreement, and all other Loan Documents to be delivered by it hereunder; (c) Organization Documents; Good Standing. Each of the following documents: (i) the articles or certificate of incorporation and the bylaws of the Company as in effect on the Closing Date, certified by the Secretary or Assistant Secretary of the Company as of the Closing Date; and (ii) good standing certificates for the Company from the Secretary of State (or similar, applicable Governmental Authority) of its state of incorporation and the state of its principal offices; (d) Legal Opinions. (i) an opinion of Thomas R. Saldin, Executive Vice-President and General Counsel to the Company, dated as of the Closing Date and addressed to the Agent and the Banks, substantially in the form of Exhibit D; and (ii) a favorable opinion of Brobeck, Phleger & Harrison LLP, special counsel to the Agent, dated as of the Closing Date. (e) Payment of Fees. Evidence of payment by the Company of all accrued and unpaid fees, costs and expenses to the extent then due and payable on the Closing Date, together with Attorney Costs of BofA and the Lead Arranger to the extent invoiced prior to or on the Closing Date, plus such additional amounts of Attorney Costs as shall constitute BofA's reasonable 36. estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude final settling of accounts between the Company and BofA), including any such costs, fees and expenses arising under or referenced in Sections 2.12 and 10.04; (f) Certificate. A certificate signed by a Responsible Officer, dated as of the Closing Date, stating that: (i) the representations and warranties contained in Article V are true and correct on and as of such date, as though made on and as of such date; (ii) no Default or Event of Default exists or would result from the initial Borrowing; and (iii) there has occurred since January 28, 1999 (or since the date of any Form 10-Q or other public disclosure document filed by the Company with the SEC prior to the Closing Date, to the extent any such event or circumstance is disclosed in such document), no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; (g) Existing Credit Facilities. Evidence satisfactory to the Agent that the commitments to extend credit under the Existing Credit Facilities have been terminated and that all principal, interest, charges and fees due thereunder have been paid or that arrangements reasonably satisfactory to the Agent for the payment thereof have been made by the Company (the Company and each Bank party hereto that is a lender under the Existing Credit Facilities acknowledging that such commitments shall be terminated simultaneously with the closing hereunder); (h) Documents and Actions Relating to the Multi-year Credit Agreement. A certificate of a Responsible Officer of the Company certifying that all conditions precedent to the closing of the Multi-year Credit Agreement shall have been satisfied in accordance with the terms and conditions thereof (other than any conditions relating to the closing of the transactions contemplated by this Agreement); and (i) Other Documents. Such other approvals, opinions, documents or materials as the Agent or any Bank may reasonably request. 4.02 Conditions to All Borrowings. The obligation of each Bank to make any Committed Loan to be made by it, and the obligation of any Bid Loan Bank or Designated Bidder to make any Bid Loan as to which the Company has accepted the relevant Competitive Bid (including its initial Loan), is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date: (a) Notice of Borrowing. As to any Committed Loan, the Agent shall have received a Notice of Borrowing; 37. (b) Continuation of Representations and Warranties. The representations and warranties in Article V shall be true and correct on and as of such Borrowing Date with the same effect as if made on and as of such Borrowing Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date; and except that this subsection (b) shall be deemed instead to refer to the last day of the most recent quarter and year for which financial statements have then been delivered, and to the most recent Form 10-K filed by the Company with the SEC, in respect of the representations and warranties made in Section 5.10(a)); (c) No Material Adverse Effect. There has occurred since January 28, 1999 (or since the date of any Form 10-Q or other public disclosure document filed by the Company with the SEC prior to the Closing Date, to the extent any such event or circumstance is disclosed in such document), no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; and (d) No Existing Default. No Default or Event of Default shall exist or shall result from such Borrowing. Each Notice of Borrowing and Competitive Bid Request submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such notice or request and as of each Borrowing Date, that the conditions in this Section 4.02 are satisfied. ARTICLE V REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Agent and each Bank that: 5.01 Corporate Existence and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. 5.02 Subsidiaries. Each of the Company's corporate Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. 5.03 Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Company of the Loan Documents are within the Company's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any Governmental Authority and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Company or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries. 38. 5.04 Binding Effect. This Agreement and each other Loan Document to which the Company is a party constitutes a valid and binding agreement of the Company, and each Note, when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with their respective terms. 5.05 Litigation. Except as disclosed in the Company's 1998 Form 10-K, there is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any Governmental Authority in which there is a reasonable possibility of an adverse decision which could have a Material Adverse Effect. 5.06 ERISA Compliance. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Plan. 5.07 Use of Proceeds; Margin Regulations. The proceeds of the Loans are to be used solely for the purposes set forth in and permitted by Section 6.08 and Section 7.04. 5.08 Title to Properties; Liens. The Company and each Subsidiary have good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of their respective businesses, except for such defects in title as could not, individually or in the aggregate, have a Material Adverse Effect. The property of the Company and its Subsidiaries is subject to no Liens, other than Liens permitted under Section 7.01. 5.09 Taxes. The Company and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company or any Subsidiary, other than any such taxes being contested in good faith and for which appropriate reserves have been established on the books and records of the Company in accordance with GAAP. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Company, adequate. 5.10 Financial Information(a) . (a) The consolidated balance sheet of the Company and its Consolidated Subsidiaries as of January 28, 1999 and the related consolidated statements of earnings, cash flows and stockholders' equity for the fiscal year then ended, reported on by Deloitte & Touche and set forth or as incorporated by reference in the Company's 1998 Form 10-K, a copy of which has been delivered to each of the Banks, fairly present, in conformity with GAAP, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheet of the Company and its Consolidated Subsidiaries as of October 29, 1999 and the related unaudited 39. consolidated statements of earnings and cash flows for the thirty-nine weeks then ended, set forth in the Company's quarterly report for the third quarter ended October 29, 1999 filed with the SEC on Form 10-Q, a copy of which has been delivered to each of the Banks, fairly present, in conformity with GAAP applied on a basis consistent with the financial statements referred to in Subsection 5.10(a), the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such thirty-nine week period (subject to normal year-end adjustments). (c) Since January 28, 1999 (or since the date of any Form 10-Q or other public disclosure document filed by the Company with the SEC prior to the Closing Date, to the extent any such event or circumstance is disclosed in such document), there has been no Material Adverse Effect. 5.11 Environmental Matters. In the ordinary course of its business, the Company considers the effect of Environmental Laws on the business, operations and properties of the Company and its Subsidiaries as such business, operations and properties exist at the time. On this basis, the Company has reasonably concluded that Environmental Laws at the time in effect are unlikely to have a Material Adverse Effect. 5.12 Regulated Entities. The Company is not an "Investment Company" within the meaning of the Investment Company Act of 1940. The Company is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute or regulation limiting its ability to incur Indebtedness. 5.13 Insurance. The properties of the Company and its Consolidated Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Company, in such amounts, with such deductibles (and with such risk retention) and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Company or such Subsidiary operates. 5.14 Full Disclosure. All information heretofore furnished by the Company to the Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Company to the Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified. 5.15 Year 2000. The Company has (a) completed a review and assessment of critical areas within its and each of its Subsidiaries' business and operations (including those affected by customers and vendors) that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications and devices containing imbedded computer chips used by the Company or any of its Subsidiaries (or their respective customers and vendors) may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and after December 31, 1999), (b) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (c) substantially completed implementation of that plan in accordance with that timetable. The Year 2000 Problem has not resulted in, and the Company reasonably believes that the Year 2000 Problem will not result in, a Material Adverse Effect. 40. ARTICLE VI AFFIRMATIVE COVENANTS So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing: 6.01 Information. The Company will deliver to each of the Banks: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of earnings, cash flows and stockholders' equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the SEC by Deloitte & Touche or other independent public accountants of nationally recognized standing (the "Independent Auditor"). Such report shall not be qualified as to (i) going concern or (ii) any limitation in the scope of the audit; (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of earnings for such quarter and for the portion of the Company's fiscal year ended at the end of such quarter and the related consolidated statement of cash flows for the portion of the Company's fiscal year ended at the end of such quarter, setting forth in comparative form the corresponding statements for the corresponding portions of the Company's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, GAAP and consistency by the chief financial officer or the chief accounting officer of the Company; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a Compliance Certificate of the chief financial officer or the chief accounting officer of the Company; (d) simultaneously with the delivery of each set of financial statements referred to in subsection (a), a statement of the Independent Auditor which reported on such statements (i) whether anything has come to their attention to cause them to believe that any Default existed on the date of such statements and (ii) confirming the calculations set forth in the Compliance Certificate delivered simultaneously therewith pursuant to subsection (c); (e) forthwith upon the occurrence of any Default, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed and not previously delivered to each Bank pursuant to this Section 6.01; 41. (g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, l0-Q and 8-K (or their equivalents) which the Company shall have filed with the SEC and not previously delivered to each Bank pursuant to this Section 6.01; (h) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA, or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth details as to such occurrence and action, if any, which the Company or applicable member of the ERISA Group is required or proposes to take; and (i) from time to time such additional information regarding the consolidated financial position of the Company as the Agent, at the request of any Bank, may reasonably request. As to any information contained in materials furnished pursuant to subsection 6.01(g), the Company shall not be separately required to furnish such information under subsection (a) or (b) above, but the foregoing shall not be in derogation of the obligation of the Company to furnish the information and materials described in subsection (a) and (b) above at the times specified therein. 6.02 Conduct of Business and Maintenance of Existence. The Company will continue, and will cause each Subsidiary to continue, to engage in business of the same general type as now conducted by the Company and its Subsidiaries, and will preserve, renew and keep in full force and effect, and will cause each Subsidiary to preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that the Company may (a) discontinue operations or dispose of property in the normal conduct of its business and (b) cause the dissolution of Subsidiaries or the merger of a Subsidiary into the Company or into another Subsidiary as it may from time to time reasonably deem necessary or desirable in the conduct of its business. 42. 6.03 Maintenance of Property. The Company will keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted; provided that the Company and each of its Subsidiaries may discontinue operations and dispose of property in the normal conduct of its business. 6.04 Insurance. The Company will maintain, and will cause each Subsidiary to maintain with financially sound and reputable insurance companies, insurance on all their real and personal property in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against by companies of established repute engaged in the same or similar business as the Company or such Subsidiary, and the Company will promptly furnish to the Banks such information as to insurance carried as may be reasonably requested in writing by the Agent. 6.05 Payment of Obligations. The Company will pay and discharge, and will cause each Subsidiary to pay and discharge, at or before maturity, all their respective material obligations and liabilities, including tax liabilities, except where the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Subsidiary to maintain, in accordance with GAAP, appropriate reserves for the accrual of any of the same. 6.06 Compliance with Laws. The Company will comply, and cause each Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of Governmental Authorities (including Environmental Laws and ERISA), except where the necessity of compliance therewith is contested in good faith by appropriate proceedings and non-compliance during the period of such contest could not reasonably be expected to have a Material Adverse Effect. 6.07 Inspection of Property, Books and Records. The Company will keep, and will cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities. Upon the occurrence and during the continuance of a Default, the Company will permit, and will cause each Subsidiary to permit, representatives of any Bank at such Bank's expense, to examine any of their respective books and records (except as they relate to the Company's trade secrets or other proprietary information of the Company other than any information required to be delivered to the Banks by the Company under Section 6.01) and to discuss their respective finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired. 6.08 Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Company for commercial paper back-up liquidity and other lawful corporate purposes. 6.09 Further Assurances. Promptly upon request by the Agent or the Majority Banks, the Company shall do, execute, acknowledge, and deliver, any and all such further acts, certificates, assurances and other instruments the Agent or such Banks, as the case may be, may reasonably require from time to time in order to carry out more effectively the purposes of this Agreement or any other Loan Document. 43. ARTICLE VII NEGATIVE COVENANTS So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing: 7.01 Limitation on Liens. Neither the Company nor any Consolidated Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement securing Indebtedness outstanding on the date of this Agreement in an aggregate principal amount not exceeding $500,000,000; (b) any Lien existing on any specific tangible asset or assets of any Person at the time such Person becomes a Consolidated Subsidiary and not created in contemplation of such event, subject to subsection 7.01(e); (c) any Lien on any asset securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that (i) in the case of land acquired for the purpose of constructing new business or operating facilities thereon, (A) such Lien attaches to such land within 24 months after the acquisition thereof and (B) construction of such new business or operating facilities thereon is substantially complete within 24 months after the acquisition of such land and (ii) in the case of any asset other than an asset of the type described in the preceding clause (i), such Lien attaches to such asset concurrently with or within 180 days after the acquisition thereof; (d) any Lien on any specific tangible asset or assets of any Person existing at the time such Person is merged or consolidated with or into the Company or a Consolidated Subsidiary and not created in contemplation of such event, subject to subsection 7.01(e); (e) any Lien existing on any specific tangible asset or assets prior to the acquisition thereof by the Company or a Consolidated Subsidiary and not created in contemplation of such acquisition; provided that in the case of any Lien permitted under this subsection (e) or under subsections (b) and (d), any such Lien does not by its terms cover any such tangible assets after the time the Company directly or indirectly acquires such assets which were not covered immediately prior thereto, and any such Lien does not by its terms secure any Indebtedness other than Indebtedness existing immediately prior to the time of acquisition of such assets; (f) any Lien arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Indebtedness is not increased and is not secured by any additional assets; 44. (g) Liens arising in the ordinary course of its business which (i) do not secure Indebtedness and (ii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (h) Liens arising from the Company's or a Subsidiary's pledging of equipment, not otherwise permitted by the foregoing clauses of this Section, securing Indebtedness in an aggregate principal amount at any time outstanding not to exceed $500,000,000; and (i) Liens on real property; provided that the aggregate value of real property owned by the Company (not including for purposes of this proviso any real property acquired or held by the Company subject to the interest of a lessor under a capital lease relating to such real property), as determined on a lower of cost or Fair Market Value basis (as defined below), exceeds the aggregate principal amount of Indebtedness secured by Liens on such real property in an amount not less than $250,000,000. For the purposes of Section 7.01, "Fair Market Value" means with respect to any real property of the Company or any Subsidiary at any date the open market cash purchase price that an informed and willing purchaser would pay for such real property in an arm's-length transaction to a willing and informed owner under no compulsion to sell, all as determined (i) if no Default has occurred and is continuing, at the option of the Majority Banks either (A) in good faith by the Board of Directors of the Company or (B) by an appraisal conducted by an independent appraiser satisfactory to the Agent and the Company, the cost of such appraisal to be shared equally by the Company and the Banks, and (ii) if a Default has occurred and is continuing, by an appraisal conducted by an independent appraiser satisfactory to the Agent and the Company, the cost of such appraisal to be borne solely by the Company. 7.02 Disposition of Assets. The Company will not (i) consolidate or merge with or into any other Person or (ii) directly or indirectly sell, lease or otherwise transfer all or any substantial part of the assets of the Company and its Consolidated Subsidiaries, considered as a whole, to any other Person; provided that the Company may merge with another Person if (A) the Company is the Person surviving such merger and (B) immediately after giving effect to such merger, no Default shall have occurred and be continuing. 7.03 Limitation on Subsidiary Indebtedness and Swap Contracts. The Company shall not permit any Subsidiary to create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness or Swap Contracts except: (a) Indebtedness incurred pursuant to this Agreement; (b) endorsements for collection or deposit in the ordinary course of business; (c) Swap Contracts outstanding as of the Closing Date or entered into thereafter in the ordinary course of business; (d) Surety Instruments in the ordinary course of business; (e) Indebtedness existing on the Closing Date in an amount not to exceed $3,200,000,000; 45. (f) Indebtedness secured by Liens permitted by subsections 7.01(b), (c), (d), (e) and (i); (g) capital leases entered into by any Subsidiary after the Closing Date to finance the acquisition of equipment; (h) Indebtedness of Wholly-Owned Consolidated Subsidiaries of the Company to the Company or to other Wholly-Owned Consolidated Subsidiaries of the Company; and (i) additional Indebtedness incurred after the Closing Date not exceeding $500,000,000 in aggregate principal amount at any time outstanding. 7.04 Use of Proceeds. (a) The Company shall not, and shall not suffer or permit any Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance Indebtedness of the Company or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock or (iv) for any other purpose which violates Regulations T, U or X of the FRB. (b) The Company shall not, directly or indirectly, use any portion of the Loan proceeds to purchase during the underwriting period, or for thirty days thereafter, Ineligible Securities underwritten by the Arranger. The Arranger is a wholly-owned subsidiary of BankAmerica Corporation and a registered broker-dealer which is permitted to underwrite and deal in certain Ineligible Securities; and "Ineligible Securities" means securities which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. ss. 24, Seventh). 7.05 Minimum Consolidated Tangible Net Worth. The Company shall not permit its Consolidated Tangible Net Worth at any time to be less than $2,100,000,000; provided that upon (a) the purchase from time to time of common stock of the Company by the Company from one or more of the J.A. and Kathryn Albertson Foundation, Inc., or donees pursuant to the terms of the Foundation Stock Agreement, or (b) the purchase from time to time of common stock of the Company by the Company from Theo Albrecht or from Markus-Stiftung pursuant to the terms of the Markus-Stiftung Stock Agreement, Consolidated Tangible Net Worth shall be increased, for purposes of subsequent calculations hereunder, by an amount (the "CTNW Adjustment") equal to the excess (if any) of (i) the amount by which the purchase price of such common stock reduces Consolidated Tangible Net Worth over (ii) the amount by which Consolidated Tangible Net Worth has been increased through the sale of common stock subsequent to the date of such purchase, excluding the effect of the exercise of employee stock options, all as determined in accordance with GAAP. ARTICLE VIII EVENTS OF DEFAULT 8.01 Event of Default. Any of the following shall constitute an "Event of Default": 46. (a) Non-Payment. The Company fails to make, (i) when and as required to be made herein, payments of any amount of principal of any Loan, or (ii) within five Business Days after the same becomes due, payment of any interest, fee or any other amount payable hereunder or under any other Loan Document; or (b) Representation or Warranty. Any representation, warranty, certification or statement made by the Company in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect on or as of the date made (or deemed made); or (c) Specific Defaults. The Company shall fail to observe or perform any covenant contained in Sections 7.01 through 7.05, inclusive; or (d) Other Defaults. The Company shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a), (b) or (c) above) for 15 Business Days after the earlier of (i) the date upon which the chief financial officer, chief accounting officer or other senior officer of the Company knew or reasonably should have known of such failure or (ii) notice thereof has been given to the Company by the Agent at the request of any Bank; or (e) Cross-Default. (i) The Company or any Subsidiary (A) fails to make any payment in respect of any Material Indebtedness (other than in respect of Swap Contracts), when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure; or (B) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any Material Indebtedness, and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Material Indebtedness or beneficiary or beneficiaries of such Material Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Material Indebtedness to be declared to be due and payable, or to be prepaid prior to its stated maturity, or to become payable, or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (1) any event of default under such Swap Contract as to which the Company or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (2) any Termination Event (as so defined) as to which the Company or any Subsidiary is an Affected Party (as so defined), and, in either event, the Swap Termination Value owed by the Company or such Subsidiary as a result thereof is greater than $30,000,000; or (f) Insolvency; Voluntary Proceedings. The Company or any Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business in the ordinary course; (iii) consents to or commences a voluntary Insolvency Proceeding with respect to itself, or (iv) takes any corporate action to authorize any of the foregoing; or 47. (g) Involuntary Proceedings. (i) An involuntary Insolvency Proceeding shall be commenced or filed against the Company or any Subsidiary, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of the Company's or any Subsidiary's properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 60 days after commencement, filing or levy; (ii) the Company or any Subsidiary admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company or any Subsidiary acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its property or business; or (h) ERISA. Any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $30,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $30,000,000; or (i) Monetary Judgments. A judgment or order for the payment of money in excess of $30,000,000 shall be rendered against the Company or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; or (j) Change of Control. There occurs any Change of Control. 8.02 Remedies. If any Event of Default occurs, then, and in every such event, the Agent shall (i) if requested or consented to by the Majority Banks, by notice to the Company terminate the Commitments and they shall thereupon terminate, (ii) if requested or consented to by the Majority Banks, by notice to the Company declare the Loans (together with accrued interest thereon and all other amounts owing under the Loan Documents) to be, and the Loans (and such interest and other amounts) shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and (iii) if requested or consented to by the Majority Banks, exercise on behalf of itself and the Banks all rights and remedies available to it and the Banks under the Loan Documents or applicable law; provided that in the case of any of the Events of Default specified in subsections (f) or (g) (in the case of clause (i) of subsection (g) upon the expiration of the 60-day period mentioned therein), without any notice to the Company or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Loans (together with accrued interest thereon and all other amounts owing under the Loan Documents) shall become immediately due 48. and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company. 8.03 Rights Not Exclusive. The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. ARTICLE IX THE AGENT 9.01 Appointment and Authorization; "Agent." Each Bank hereby irrevocably (subject to Section 9.09) appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. 9.02 Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 9.03 Liability of Agent. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by the Company or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Company or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements 49. contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Company or any of the Company's Subsidiaries or Affiliates. 9.04 Reliance by Agent. (a) (a) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Majority Banks and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks. (b) For purposes of determining compliance with the conditions specified in Section 4.01, each Bank that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent (or made available) by the Agent to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Bank. 9.05 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Banks, unless the Agent shall have received written notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". The Agent will notify the Banks of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be requested by the Banks in accordance with Article VIII; provided, however, that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Banks. 9.06 Credit Decision. Each Bank acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agent hereinafter taken, including any review of the affairs of the Company and its Subsidiaries, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Company and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Company hereunder. Each Bank 50. also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agent, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Company or any Subsidiary which may come into the possession of any of the Agent-Related Persons. 9.07 Indemnification of Agent. Whether or not the transactions contemplated hereby are consummated, the Banks shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), in accordance with the Banks' Pro Rata Shares, from and against any and all Indemnified Liabilities; provided, however, that no Bank shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Company. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent. 9.08 Agent in Individual Capacity. BofA and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Company and its Subsidiaries and Affiliates as though BofA were not the Agent hereunder and without notice to or consent of the Banks. The Banks acknowledge that, pursuant to such activities, BofA or its Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Subsidiary) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to its Loans, BofA shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Agent, and the terms "Bank" and "Banks" include BofA in its individual capacity. 9.09 Successor Agent. The Agent may, and at the request of the Majority Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent resigns under this Agreement, the Majority Banks shall appoint from among the Banks a successor agent for the Banks which successor agent shall be approved by the Company (such approval not to be unreasonably withheld). If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Banks and the Company, a successor agent from among the Banks. Upon the acceptance of its appointment as successor agent hereunder, such 51. successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article IX and Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Agent hereunder until such time, if any, as the Majority Banks appoint a successor agent as provided for above. 9.10 Withholding Tax. (a) Each Bank organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement, and on the Assignment and Acceptance Date pursuant to which it becomes a party to this Agreement in the case of each other Bank, and from time to time thereafter if requested in writing by the Company or the Agent (but only so long thereafter as such Bank remains lawfully able to do so), provide the Agent and the Company with (i) an accurate, complete, and duly executed Internal Revenue Service form W-8BEN or W-8ECI, as appropriate, or any successor or substitute form prescribed or permitted by the Internal Revenue Service, certifying that such Bank is entitled to claim the benefit of complete exemption from imposition of United States withholding tax under an income tax treaty to which the United States is a party in respect of payments made under this Agreement or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States and (ii) in the event that, by virtue of a change in law or regulations, such forms are no longer valid evidence of a Person's exemption from withholding which is reasonably satisfactory to the Company, other appropriate evidence supporting such Person's exemption from withholding as the Company may reasonably request. (b) For any period with respect to which a Bank or an Assignee has failed to provide the Company with the appropriate form described in Subsection 9.10(a) (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under Subsection 9.10(a)), such Bank or Assignee shall not be entitled to indemnification under Section 3.01(b) or (d) with respect to Taxes imposed by the United States. (c) If any Bank claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form W-8BEN and such Bank sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company owing to such Bank, such Bank agrees to notify the Company and Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of the Company owing to such Bank. To the extent of such percentage amount, the Agent will treat such Bank's IRS Form W-8BEN as no longer valid. (d) If any Bank claiming exemption from United States withholding tax by filing IRS Form W-8ECI with the Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of 52. the Company owing to such Bank, such Bank agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code. (e) If any Bank is entitled to a reduction in the applicable withholding tax, the Agent may withhold from any interest payment to such Bank an amount equivalent to the applicable withholding tax after taking into account such reduction. However, if the forms or other documentation required by subsection (a) of this Section are not delivered to the Company and Agent, then the Company or Agent may withhold from any interest payment to such Bank not providing such forms or other documentation an amount equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code, without reduction. (f) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Bank (because the appropriate form was not delivered or was not properly executed, or because such Bank failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Bank shall indemnify the Company or the Agent, as the case may be, fully for all amounts paid, directly or indirectly, by the Company or the Agent, as the case may be, as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Company or the Agent, as the case may be, under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Banks under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Agent. 9.11 Co-Agents. None of the Banks identified on the facing page or signature pages of this Agreement as a "Documentation Agent," "Syndication Agent," "Senior Managing Agent" or "Managing Agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Banks as such. Without limiting the foregoing, none of the Banks so identified shall have or be deemed to have any fiduciary relationship with any Bank. Each Bank acknowledges that it has not relied, and will not rely, on any of the Banks so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. ARTICLE X MISCELLANEOUS 10.01 Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Company or any applicable Subsidiary therefrom, shall be effective unless the same shall be in writing and signed by the Majority Banks (or by the Agent at the written request of the Majority Banks) and the Company and acknowledged by the Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all the Banks and the Company and acknowledged by the Agent, do any of the following: 53. (a) increase or extend the Commitment of any Bank (or reinstate any Commitment terminated pursuant to Section 8.02); (b) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder or under any other Loan Document (including the date of any mandatory prepayment hereunder); (c) reduce the principal of, or the rate of interest specified herein on any Loan, or (subject to clause (ii) below) any fees or other amounts payable hereunder or under any other Loan Document; (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Banks or any of them to take any action hereunder; or (e) amend this Section 10.01, subsection 2.04(e), Section 2.16, Section 2.17, the definition of "Majority Banks" herein, or any provision herein providing for consent or other action by all Banks or some specified amount of Banks; and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of the Agent under this Agreement or any other Loan Document and (ii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed by the parties thereto. 10.02 Notices.(a) (a) All notices, requests, consents, approvals, waivers and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission) and mailed, faxed or delivered, to the address or facsimile number specified for notices on Schedule 10.02; or, as directed to the Company or the Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to the Company and the Agent. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the mails, or if delivered, upon delivery; except that notices pursuant to Article II or IX to the Agent shall not be effective until actually received by the Agent. (c) Any agreement of the Agent and the Banks herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Company. The Agent and the Banks shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Company to give such notice and the Agent and the Banks shall not have any liability to the Company or other Person on account of any action taken or not taken by the Agent or the Banks in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans shall not be affected in any way or to any extent by any failure by the Agent and 54. the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agent and the Banks of a confirmation which is at variance with the terms understood by the Agent and the Banks to be contained in the telephonic or facsimile notice. 10.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Agent, any Designated Bidder or any Bank, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. 10.04 Costs and Expenses. The Company shall: (a) whether or not the transactions contemplated hereby are consummated, pay or reimburse BofA (including in its capacity as Agent) within five Business Days after demand (subject to subsection 4.01(e)) for all reasonable costs and expenses incurred by BofA (including in its capacity as Agent) and the Lead Arranger in connection with (i) the development, preparation, delivery and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith and (ii) the consummation of the transactions contemplated hereby and thereby, including reasonable Attorney Costs incurred by BofA (including in its capacity as Agent) with respect thereto; and (b) pay or reimburse the Agent, the Lead Arranger, each Designated Bidder and each Bank within five Business Days after demand (subject to subsection 4.01(e)) for all costs and expenses (including Attorney Costs) incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or any other Loan Document during the existence of an Event of Default or after acceleration of the Loans (including in connection with any "workout" or restructuring regarding the Loans, and including in any Insolvency Proceeding or appellate proceeding). 10.05 Company Indemnification. Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify, defend and hold the Agent-Related Persons, and each Bank, each Designated Bidder and each of its respective officers, directors, employees, counsel, agents and attorneys-in-fact (each an "Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or replacement of any Bank) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement, the other Loan Documents or any document contemplated by or referred to therein, or the transactions contemplated hereby, or any action taken or omitted by any such Indemnified Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided that the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities to the extent resulting from the gross 55. negligence or willful misconduct of such Indemnified Person. The agreements in this Section and in Section 10.04 shall survive payment of all other Obligations. 10.06 Payments Set Aside. To the extent that the Company makes a payment to the Agent, any Designated Bidder or any Bank or the Agent, any Designated Bidder or any Bank exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent, such Designated Bidder or such Bank in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Bank and each Designated Bidder severally agrees to pay to the Agent upon demand its pro rata share of any amount so recovered from or repaid by the Agent. 10.07 Binding Effect; Successors and Assigns. This Agreement shall become effective when it shall have been executed by the Company, the Agent and the Banks and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Bank. 10.08 Assignments, Participations, Etc.(a) (a) Any Bank may, with the written consent of the Company and the Agent (which in each case shall not be unreasonably withheld), at any time assign and delegate to one or more Eligible Assignees (each an "Assignee") all, or any ratable part of all, of the Loans, the Commitment and the other rights and obligations of such Bank hereunder; provided, however, that (i) no written consent of the Company shall be required during the existence of a Default or an Event of Default; (ii) no written consent of the Company or the Agent shall be required in connection with any assignment and delegation by a Bank to an Eligible Assignee that is a United States Affiliate of such Bank or another Bank; and (iii) except in connection with an assignment of all of a Bank's rights and obligations with respect to its Commitment and Loans, any such assignment (A) to an Eligible Assignee that is a Bank or an Affiliate of a Bank hereunder shall be equal to or greater than $5,000,000 or (B) to an Eligible Assignee that is not a Bank or an Affiliate of a Bank hereunder shall be equal to or greater than $10,000,000; and (iv) each such partial assignment shall be of a ratable part of the Loans, the Commitment and the other interests, rights and obligations hereunder of such assigning Bank; and provided further, however, that the Company and the Agent may continue to deal solely and directly with such Bank in connection with the interest so assigned to an Assignee until (A) such Bank and its Assignee shall have delivered to the Company and the Agent an Assignment and Acceptance Agreement substantially in the form of Exhibit E (an "Assignment and Acceptance") together with any Note or Notes subject to such assignment; (B) a written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, in substantially the form of the Notice of Assignment and Acceptance attached as Schedule 1 to the Assignment and Acceptance, shall have been given to the Company and the Agent by such Bank and the Assignee; and (C) the assignor Bank or Assignee shall have paid to the Agent a processing fee in the amount of $3,500; and (D) the Agent and the Company each shall have provided any required consent to such assignment in accordance with this Section. 56. (b) From and after the date that the Agent notifies the assignor Bank that the Agent has received (and, if required, provided its consent with respect thereto and, if necessary, received any other consents required under this Section 10.08) an executed Assignment and Acceptance and payment of the above-referenced processing fee (such date referred to herein as the "Assignment and Acceptance Date", (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Bank under the Loan Documents, (ii) this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom, and (iii) the assignor Bank shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents; provided, however, that the assignor Bank shall not relinquish its rights under Article III or under Sections 10.04 and 10.05 (and any equivalent provisions of the other Loan Documents) to the extent such rights relate to the time prior to the effective date of the Assignment and Acceptance. The Commitment allocated to each Assignee shall reduce the Commitment of the assigning Bank pro tanto. (c) Within five Business Days after the Company's receipt of notice from the Agent that it has received (and, if necessary, consented to) an executed Assignment and Acceptance and payment of the processing fee (and provided that the Company consents to such assignment in accordance with subsection 10.08(a)), the Company shall execute and deliver to the Agent any new Notes requested by such Assignee evidencing such Assignee's assigned Loans and Commitment and, if the assignor Bank has retained a portion of its Loans and its Commitment, replacement Notes as requested by the assignor Bank evidencing the Loans and Commitment retained by the assignor Bank (such Notes to be in exchange for, but not in payment of, the Notes held by such Bank, if any). (d) Any Bank or Designated Bidder may at any time sell to one or more commercial banks or other Persons not Affiliates of the Company (a "Participant") participating interests in any Loans, the Commitment of that Bank and the other interests of that Bank or Designated Bidder (the "Originator") hereunder and under the other Loan Documents; provided, however, that (i) the Originator's obligations under this Agreement shall remain unchanged, (ii) the Originator shall remain solely responsible for the performance of such obligations, (iii) the Company and the Agent shall continue to deal solely and directly with the Originator in connection with the Originator's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Bank shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment, consent or waiver would require unanimous consent of the Banks as described in the first proviso to Section 10.01. In the case of any such participation, the Participant shall not have any rights under this Agreement, or any of the other Loan Documents, and all amounts payable by the Company hereunder shall be determined as if such Originator had not sold such participation; except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts 57. owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Bank or Designated Bidder (as the case may be) under this Agreement. (e) Notwithstanding any other provision in this Agreement, any Bank or Designated Bidder may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement and any Note held by it in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. 10.09 Designated Bidders. Any Bid Loan Bank may designate one Designated Bidder to have a right to offer and make Bid Loans pursuant to Section 2.06; provided, however, that (i) no such Bid Loan Bank may make more than one such designation, (ii) each such Bid Loan Bank making any such designation shall retain the right to make Bid Loans, and (iii) the parties to each such designation shall execute and deliver to the Agent a Designation Agreement. Upon its receipt of an appropriately completed Designation Agreement executed by a designating Bid Loan Bank and a designee representing that it is a Designated Bidder, the Agent will accept such Designation Agreement and give prompt notice thereof to the Company, whereupon such designation of such Designated Bidder shall become effective and such Designated Bidder shall become a party to this Agreement as a "Designated Bidder." 10.10 Confidentiality. Each Bank and each Designated Bidder agrees to take and to cause its Affiliates to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as "confidential" or "secret" by the Company and provided to it by the Company or any Subsidiary, or by the Agent on the Company's or such Subsidiary's behalf, under this Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such information other than in connection with or in enforcement of this Agreement and the other Loan Documents or in connection with other business now or hereafter existing or contemplated with the Company or any Subsidiary; except to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by such Bank or Designated Bidder, or (ii) was or becomes available on a non-confidential basis from a source other than the Company, provided that such source is not bound by a confidentiality agreement with the Company known to such Bank or Designated Bidder; provided, however, that any Bank or Designated Bidder may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which such Bank or Designated Bidder is subject or in connection with an examination of such Bank or Designated Bidder by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any applicable Requirement of Law; (D) to the extent required in connection with any litigation or proceeding to which the Agent, any Bank, Designated Bidder or their respective Affiliates may be party; (E) to the extent required in connection with the exercise of any remedy hereunder or under any other Loan Document; (F) to such Bank's or Designated Bidder's independent auditors, legal counsel and other professional advisors; (G) to any Participant or Assignee, actual or potential, provided that such Person agrees in writing to keep such information confidential to the same extent required of the Banks hereunder; (H) as to any Bank or Designated Bidder or its Affiliate, as expressly permitted under the terms of any other document or agreement regarding confidentiality to which the Company or any 58. Subsidiary is party or is deemed party with such Bank or Designated Bidder or such Affiliate; and (I) to its Affiliates. 10.11 Set-off. In addition to any rights and remedies of the Banks provided by law, if an Event of Default exists or the Loans have been accelerated, each Bank and Designated Bidder is authorized at any time and from time to time, without prior notice to the Company, any such notice being waived by the Company to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Bank or Designated Bidder to or for the credit or the account of the Company against any and all Obligations owing to such Bank or Designated Bidder, now or hereafter existing. Each Bank and Designated Bidder agrees promptly to notify the Company and the Agent after any such set-off and application made by such Bank or Designated Bidder; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. Any Bank having outstanding both Committed Loans and Bid Loans at any time a right of set-off is exercised by such Bank and applying such setoff to the Loans shall apply the proceeds of such set-off first to such Bank's Committed Loans, until its Committed Loans are reduced to zero, and thereafter to its Bid Loans. 10.12 Notification of Addresses, Lending Offices, Etc. Each Bank and each Designated Bidder shall notify the Agent in writing of any changes in the address to which notices to such Bank or Designated Bidder should be directed, of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Agent shall reasonably request. 10.13 Counterparts. This Agreement may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. 10.14 Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 10.15 No Third Parties Benefited. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Banks, the Designated Bidders, the Agent, the Agent-Related Persons, the Indemnified Persons and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. 10.16 Governing Law and Jurisdiction.(a) (a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT THE COMPANY, THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY 59. EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT, THE DESIGNATED BIDDERS AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT, THE DESIGNATED BIDDERS AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT, THE DESIGNATED BIDDERS AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW. 10.17 Waiver of Jury Trial. THE COMPANY, THE BANKS, THE DESIGNATED BIDDERS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS, THE DESIGNATED BIDDERS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 10.18 Entire Agreement. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Company, the Banks, the Designated Bidders and the Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, oral or written, relating to the subject matter hereof and thereof. (remainder of page intentionally left blank) 60. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in San Francisco, California by their proper and duly authorized officers as of the day and year first above written. ALBERTSON'S, INC. By: Title: BANK OF AMERICA, N.A., as Agent By: Title: BANK OF AMERICA, N.A., as a Bank By: Title: BANK ONE, NA, as Documentation Agent and as a Bank By: Title: WACHOVIA BANK, N.A., as Syndication Agent and as a Bank By: Title: BANCA DI ROMA, SAN FRANCISCO BRANCH By: Title: THE BANK OF NEW YORK By: Title: BANK OF OKLAHOMA, N.A. By: Title: FIRSTAR BANK, NATIONAL ASSOCIATION By: Title: FIRST UNION NATIONAL BANK By: Title: FIRST SECURITY BANK, N.A. By: Title: THE HUNTINGTON NATIONAL BANK By: Title: INTERNATIONAL BANK OF COMMERCE By: Title: KEYBANK NATIONAL ASSOCIATION By: Title: THE NORTHERN TRUST COMPANY By: Title: SOUTHTRUST BANK, N.A. By: Title: SUNTRUST BANK By: Title: UMB BANK, N.A. By: Title: UNION BANK OF CALIFORNIA, N.A. By: Title: U.S. BANK NATIONAL ASSOCIATION By: Title: WELLS FARGO BANK, N.A. By: Title: MERRILL LYNCH BANK USA By: Title: ANNEX I PRICING GRID Applicable Margin and Applicable Fee Amount (Facility Fee): The Facility Fee and the Applicable Margin for Offshore Rate Committed Loans and Base Rate Committed Loans shall be, at any time, the rate per annum set forth in the tables below. "Indebtedness Rating" means the long term unsecured senior, non-credit enhanced debt rating of the Company by Standard & Poor's Ratings Group or Moody's Investors Service Inc. (in the case of a split rating, the higher rating will apply, unless the split results in a difference of more than one rating, in which case the rating one rating below the highest rating will apply). If the Term Loan option is utilized, the rate of interest on all Loans outstanding will include the Applicable Margin plus 25 basis points. Any change in the Applicable Margin or Applicable Fee Amount for the Facility Fee shall become effective five Business Days after any public announcement of Indebtedness Rating requiring such a change.
Indebtedness Offshore Rating Facility Fee Rate Spread Base Rate Spread ------ ------------ ----------- ---------------- - ------------------------------ ---------------------- ------------------------- ----------------------------- - ------------------------------ ---------------------- ------------------------- ----------------------------- => A or A2 6.5 bps 18.5 bps 0 bps - ------------------------------ ---------------------- ------------------------- ----------------------------- - ------------------------------ ---------------------- ------------------------- ----------------------------- => A- or A3 7.5 bps 22.5 bps 0 bps - ------------------------------ ---------------------- ------------------------- ----------------------------- - ------------------------------ ---------------------- ------------------------- ----------------------------- => BBB+ or Baa1 8.5 bps 26.5 bps 0 bps - ------------------------------ ---------------------- ------------------------- ----------------------------- - ------------------------------ ---------------------- ------------------------- ----------------------------- < BBB+ or Baa1 10.0 bps 35.0 bps 0 bps - ------------------------------ ---------------------- ------------------------- -----------------------------
Applicable Fee Amount (Utilization Fee): The Utilization Fee applicable to Loans shall be, at any time, the rate per annum set forth in the table below, determined in accordance with usage: - --------------------------------------------------------------------------------
- ------------------------- ---------------------- Facility Usage % Utilization Fee - ------------------------- ---------------------- - ------------------------- ---------------------- 50% 10.0 bps - ------------------------- ----------------------
If usage shall equal or exceed the applicable percentage specified above, the utilization fee corresponding to such percentage shall apply with respect to all outstanding Loans. Annex 1-1. SCHEDULE 2.01 COMMITMENTS AND PRO RATA SHARES
BANK COMMITMENT PRO RATA SHARE BANK OF AMERICA, N.A. $135,000,000 14.594594595%* WACHOVIA BANK, N.A. $125,000,000 13.513513514%* BANK ONE, NA $125,000,000 13.513513514%* WELLS FARGO BANK, N.A. $75,000,000 8.108108108%* U.S. BANK NATIONAL ASSOCIATION $75,000,000 8.108108108%* FIRST UNION NATIONAL BANK $75,000,000 8.108108108%* UNION BANK OF CALIFORNIA, N.A. $75,000,000 8.108108108%* THE NORTHERN TRUST COMPANY $42,500,000 4.594594595%* FIRST SECURITY BANK, N.A. $42,500,000 4.594594595%* SUNTRUST BANK, CENTRAL FLORIDA $25,000,000 2.702702703%* KEYBANK NATIONAL ASSOCIATION $25,000,000 2.702702703%* THE HUNTINGTON NATIONAL BANK $25,000,000 2.702702703%* THE BANK OF NEW YORK $12,500,000 1.351351351%* INTERNATIONAL BANK OF COMMERCE $12,500,000 1.351351351%* UMB BANK, N.A. $12,500,000 1.351351351%* SOUTHTRUST BANK, N.A. $12,500,000 1.351351351%* BANCA DI ROMA, SAN FRANCISCO BRANCH $12,500,000 1.351351351%* FIRSTAR BANK, NATIONAL ASSOCIATION $12,500,000 1.351351351%* BANK OF OKLAHOMA, N.A. $5,000,000 0.540540541%* TOTAL $925,000,000.00 100%
* [9 DECIMAL PTS.] - -------------------------------------------------------------------------------- S-2.01-1. SCHEDULE 10.02 PAYMENT OFFICES; ADDRESSES FOR NOTICES; LENDING OFFICES COMPANY Address for Notices: Albertson's, Inc. 250 Park Center Blvd. Box 20 Boise, Idaho 83726 Attention: Finance Department Telephone: (208) 395-6534 Facsimile: (208) 395-6631 BANK OF AMERICA, N.A. as Agent Notices for Borrowing, Conversions/Continuations, and Payments: Bank of America, N.A. Mail Code: CA4-706-05-09 Agency Services #5596 1850 Gateway Boulevard, 5th Floor Concord, California 94520 Attention: Tosha Clements Telephone: (925) 675-8409 Facsimile: (925) 969-2805 Other Notices: Bank of America, N.A. Retail Industry Group #33751 Mail Code: CA5-705-41-89 555 California Street, 41st Floor San Francisco, California 94104 Attention: James P. Johnson Telephone: (415) 622-6177 Facsimile: (415) 622-4585 S-10.02-1. Agent's Payment Office: Bank of America, N.A. Attention: Agency Services #5596 Reference: Albertson's, Inc. For credit to Acct. No. 3750836479 ABA No. 111000012 BANK OF AMERICA, N.A. as a Bank Domestic and Offshore Lending Office: (Borrowing Notices, Notices of Conversion/Continuation and Payments) Bank of America, N.A. Mail Code: CA4-706-05-09 1850 Gateway Boulevard, 4th Floor Concord, California 94520 Attention: Tosha Clements Telephone: (925) 675-8409 Facsimile: (925) 969-2805 All other Notices: Bank of America, N.A. Retail Industry Group # 33751 Mail Code: CA5-705-41-89 555 California Street, 41st Floor San Francisco, California 94104 Attention: James P. Johnson Telephone: (415) 622-6177 Facsimile: (415) 622-4585 WACHOVIA BANK, N.A. as Syndication Agent and as a Bank Domestic and Offshore Lending Office: Wachovia Bank, N.A. 191 Peachtree Street NE MC-GA 370 Atlanta, Georgia 30303 Attention: Bill Allen Telephone: (404) 332-5271 Facsimile: (404) 332-4320 S-10.02-2. Notices (other than Borrowing Notice and Notices of Conversion/Continuation): Wachovia Bank, N.A. 191 Peachtree Street NE MC-GA 370 Atlanta, Georgia 30303 Attention: John A. Whitner Telephone: (404) 332-6738 Facsimile: (404) 332-6898 BANK ONE, NA as Documentation Agent and as a Bank Domestic and Offshore Lending Office: Bank One, NA One Bank One Plaza IL1-0088, 14th Floor Chicago, Illinois 60670 Attention: Karen Hannusch Telephone: (312) 732-9868 Facsimile: (312) 732-2715 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Bank One, NA One Bank One Plaza IL1-0086, 14th Floor Chicago, Illinois 60670 Attention: Eva Drinis Telephone: (312) 732-5037 Facsimile: (312) 336-4380 WELLS FARGO BANK, N.A. as Senior Managing Agent and as a Bank Domestic and Offshore Lending Office: Wells Fargo Bank, N.A. 707 Wilshire Boulevard, 16th Floor MAC E28-18-165 Los Angeles, California 90017 Attention: Matthew Frey Telephone: (213) 614-5038 Facsimile: (213) 614-2305 S-10.02-3. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Wells Fargo Bank, N.A. 999 Third Avenue Seattle, Washington 98104 Attention: Steve Andersen Telephone: (206) 292-3666 Facsimile: (206) 292-3595 U.S. BANK NATIONAL ASSOCIATION as Senior Managing Agent and as a Bank Domestic and Offshore Lending Office: U.S. Bank National Association 101 South Capital Boulevard Boise, Idaho 83702 Attention: Kathy O'Grady Telephone: (503) 275-3805 Facsimile: (503) 275-8181 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): U.S. Bank National Association 101 South Capital Boulevard Boise, Idaho 83702 Attention: James W. Henken Telephone: (208) 383-7823 Facsimile: (208) 383-7563 FIRST UNION NATIONAL BANK as Senior Managing Agent and as a Bank Domestic and Offshore Lending Office: First Union National Bank 301 South College Street, 4th Floor Charlotte, North Carolina 28288-0479 Attention: Todd Tucker Telephone: (704) 383-0905 Facsimile: (704) 383-7999 S-10.02-4. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): First Union National Bank One First Union Center Charlotte, North Carolina 28288 Attention: Mike Grady Telephone: (704) 383-7514 Facsimile: (704) 383-7236 UNION BANK OF CALIFORNIA, N.A. as Senior Managing Agent and as a Bank Domestic and Offshore Lending Office: Union Bank of California, N.A. Commercial Customer Service Unit 1980 Saturn Street Monterey Park, California 91755 Attention: Ruby Gonzales Telephone: (323) 720-7055 Facsimile: (323) 724-6198 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Union Bank of California, N.A. 350 California Street, 6th Floor San Francisco, California 94104 Attention: Timothy P. Streb Telephone: (415) 705-7021 Facsimile: (415) 705-7085 THE NORTHERN TRUST COMPANY as Managing Agent and as a Bank Domestic and Offshore Lending Office: The Northern Trust Company 50 South LaSalle Chicago, Illinois 60675 Attention: Linda Honda Telephone: (312) 444-3532 Facsimile: (312) 630-1566 S-10.02-5. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): The Northern Trust Company 50 South LaSalle Chicago, Illinois 60675 Attention: Patrick J. Connelly Telephone: (312) 444-5048 Facsimile: (312) 444-5055 FIRST SECURITY BANK, N.A. as Managing Agent and as a Bank Domestic and Offshore Lending Office: First Security Bank, N.A. Commercial Loan Account Center P.O. Box 7666 Boise, Idaho 83707-1666 Attention: Mary Wissel Telephone: (208) 393-4046 Facsimile: (208) 393-4540 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): First Security Bank, N.A. Idaho Corporate Banking 119 North 9th Street Boise, Idaho 83702 Attention: Mary Monroe Telephone: (208) 393-2106 Facsimile: (208) 393-2472 THE BANKS SUNTRUST BANK, CENTRAL FLORIDA, N.A. Domestic and Offshore Lending Office: Suntrust Bank, Central Florida, N.A. 200 South Orange Avenue Orlando, Florida 32801 Attention: Joanna Contreras Telephone: (407) 237-5283 Facsimile: (407) 237-5342 S-10.02-6. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Suntrust Bank, Central Florida, N.A. 303 Peachtree Street, 3rd Floor Atlanta, Georgia 30308 Attention: Ann Ford Telephone: (407) 724-3899 Facsimile: (407) 827-6270 KEYBANK NATIONAL ASSOCIATION Domestic and Offshore Lending Office: KeyBank National Association 831 East Parkcenter Boulevard Boise, Idaho 88705 Attention: Specialty Services Team Telephone: (800) 297-5518 Facsimile: (800) 297-5495 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): KeyBank National Association 700 Fifth Avenue WA31-10-4612 Seattle, Washington 98104 Attention: Patrick Kennedy Telephone: (206) 684-6079 Facsimile: (206) 684-6035 THE HUNTINGTON NATIONAL BANK Domestic and Offshore Lending Office: The Huntington National Bank 7450 Huntington Park Drive Mail Code HZ0338 Columbus, Ohio 43235 Attention: Alla Kier Telephone: (614) 480-1200 Facsimile: (614) 480-2533 S-10.02-7. Notices (other than Borrowing Notice and Notices of Conversion/Continuation): Huntington National Bank 240 South Pineapple Avenue Mail Code FL631 Sarasota, Florida 34236 Attention: James C. Wardlaw Telephone: (941) 951-4686 Facsimile: (941) 951-4659 THE BANK OF NEW YORK Domestic and Offshore Lending Office: The Bank of New York One Wall Street, 8th Floor New York, New York 10286 Attention: Charlotte Sohn Telephone: (212) 635-7869 Facsimile: (212) 635-1481/1483 Notices (other than Borrowing Notice and Notices of Conversion/Continuation): The Bank of New York One Wall Street, 8th Floor New York, New York 10286 Attention: Charlotte Sohn Telephone: (212) 635-7869 Facsimile: (212) 635-1481/1483 INTERNATIONAL BANK OF COMMERCE Domestic and Offshore Lending Office: International Bank of Commerce 130 East Travis San Antonio, Texas 78205 Attention: Christine D. McCullar Telephone: (210) 518-2507 Facsimile: (210) 518-2591 S-10.02-8. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): International Bank of Commerce 130 East Travis San Antonio, Texas 78205 Attention: Thomas Travis Telephone: (210) 518-2502 Facsimile: (210) 518-2590 UMB BANK, N.A. Domestic and Offshore Lending Office: UMB Bank, n.a. 1010 Grand Boulevard Kansas City, Missouri 64106 Attention: Vaughnda Ritchie Telephone: (816) 860-7019 Facsimile: (816) 860-3772 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): UMB Bank, n.a. 1010 Grand Boulevard Kansas City, Missouri 64106 Attention: David A Proffitt Telephone: (816) 860-7935 Facsimile: (816) 860-7143 SOUTHTRUST BANK Domestic and Offshore Lending Office: SouthTrust Bank 600 West Peachtree Street, 27th Floor Atlanta, Georgia 30308 Attention: Robert M. Searson Telephone: (404) 853-5754 Facsimile: (404) 853-5766 S-10.02-9. Notices (other than Borrowing Notice and Notices of Conversion/Continuation): SouthTrust Bank 600 West Peachtree Street, 27th Fl Atlanta, Georgia 30308 Attention: Donna King Telephone: (404) 853-5763 Facsimile: (404) 853-5766 BANCA DI ROMA, SAN FRANCISCO BRANCH Domestic and Offshore Lending Office: Banca di Roma, San Francisco Branch One Market Steuart Tower, Suite 1000 San Francisco, California 94105 Attention: Richard G. Dietz Telephone: (415) 977-7320 Facsimile: (415) 357-9869 Notices (other than Borrowing Notice and Notices of Conversion/Continuation): Banca di Roma, San Francisco Branch One Market Steuart Tower, Suite 1000 San Francisco, California 94105 Attention: Thomas C. Woodruff Telephone: (415) 977-7308 Facsimile: (415) 357-9869 FIRSTAR BANK, NATIONAL ASSOCIATION Domestic and Offshore Lending Office: Firstar Bank, National Association Commercial Loan Operations 1850 Osborn Avenue Oshkosh, Wisconsin 54901 Attention: Patti Gumbert Telephone: (920) 426-7913 Facsimile: (920) 426-7655 S-10.02-10. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Firstar Bank, National Association 425 Walnut Street, 8th Floor Mail Location 8160 Cincinnati, Ohio 45202 Attention: Richard W. Neltner Telephone: (513) 632-4073 Facsimile: (513) 632-2068 BANK OF OKLAHOMA, N.A. Domestic and Offshore Lending Office: Bank Of Oklahoma, N.A. P.O. Box 2300 Tulsa, Oklahoma 94192 Attention: Sharon Shannon Telephone: (918) 588-6335 Facsimile: (918) 588-8231 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Bank Of Oklahoma, N.A. One Williams Tower Tulsa, Oklahoma 94192 Attention: Jane Faulkenberry Telephone: (918) 588-6272 Facsimile: (918) 588-8231 S-10.02-11. EXHIBIT A FORM OF NOTICE OF BORROWING Date: ______________ To: Bank of America, N.A., as Agent Ladies and Gentlemen: The undersigned, Albertson's, Inc. (the "Company"), refers to the Credit Agreement, dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "364-Day Credit Agreement"), among the Company, the several financial institutions from time to time party thereto (the "Banks"), the Co-Agents party thereto, and Bank of America, N.A., as Agent (the "Agent"), the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 2.03 of the 364-Day Credit Agreement, of the Committed Borrowing specified below: 1. The Business Day of the proposed Committed Borrowing is ____________________. 2. The aggregate amount of the proposed Committed Borrowing is $_______________. 3. The Committed Borrowing is to be comprised of $___________ of [Base Rate Committed Loans] [Offshore Rate Committed Loans]. 4. [The duration of the Interest Period for the Offshore Rate Committed Loans included in the Committed Borrowing shall be _____ months.] The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Committed Borrowing, before and after giving effect thereto and to the application of the proceeds therefrom: (a) the representations and warranties of the Company contained in Article V of the 364-Day Credit Agreement are true and correct as though made on and as of such date, except to the extent such representations and warranties expressly refer to an earlier date, in which case they are true and correct as of such date, and except that this notice shall be deemed instead to refer to the last day of the most recent year for which financial statements have then been delivered in respect of the representation and warranty made in Section 5.10(a) of the 364-Day Credit Agreement; (b) no Default or Event of Default has occurred and is continuing, or would result from such proposed Borrowing; (c) there has occurred since January 28, 1999 no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; and A-1. (d) after giving effect to the proposed Committed Borrowing, the aggregate principal amount of all outstanding Committed Loans plus the aggregate principal amount of all Bid Loans outstanding, shall not at any time exceed the Aggregate Commitment. ALBERTSON'S, INC. By: Title: A-2. EXHIBIT B FORM OF NOTICE OF CONVERSION/CONTINUATION Date: _______________ To: Bank of America, N.A., as Agent Ladies and Gentlemen: The undersigned, Albertson's (the "Company"), refers to the Credit Agreement, dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "364-Day Credit Agreement"), among the Company, the several financial institutions from time to time party thereto (the "Banks"), the Co-Agents party thereto, and Bank of America, N.A., as Agent (the "Agent"), the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 2.04 of the 364-Day Credit Agreement, of the [conversion] [continuation] of Committed Loans specified below: 1. The Conversion/Continuation Date is ______________. 2. The aggregate amount of the Committed Loans to be [converted] [continued] is $_______________. 3. The Committed Loans are to be [converted into] [continued as] [Offshore Rate Committed Loans] [Base Rate Committed Loans]. 4. [The duration of the Interest Period for the [Offshore Rate Committed Loans] included in the [conversion] [continuation] shall be [____ months].] ALBERTSON'S, INC. By: Title: B-1. EXHIBIT C FORM OF COMPLIANCE CERTIFICATE ALBERTSON'S, INC. Financial Statements Date: ______________ Reference is made to that certain Credit Agreement dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "364-Day Credit Agreement"), among ______________ (the "Company"), the several financial institutions from time to time party thereto (the "Banks"), the Co-Agents party thereto, and Bank of America, N.A., as Agent (in such capacity, the "Agent"). Unless otherwise defined herein, capitalized terms used herein have the respective meanings assigned to them in the 364-Day Credit Agreement. The undersigned Responsible Officer of the Company hereby certifies as of the date hereof that he/she is the [_______________] of the Company, and that, as such, he/she is authorized to execute and deliver this Certificate to the Banks and the Agent on the behalf of the Company and its consolidated Subsidiaries, and that: [Use the following paragraph if this Certificate is delivered in connection with the financial statements required by subsection 6.01(a) of the 364-Day Credit Agreement.] 1. Attached hereto are true and correct copies of the audited consolidated balance sheet of the Company and its Consolidated Subsidiaries as at the end of the fiscal year ended _______________ and the related consolidated statements of income or operations, shareholders' equity and cash flows for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the SEC, accompanied by the unqualified opinion of the Independent Auditor, which opinion (a) shall state that such consolidated financial statements present fairly the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years and (b) is not qualified as to (i) going concern, or (ii) any limitation in the scope of audit. or [Use the following paragraph if this Certificate is delivered in connection with the financial statements required by subsection 6.01(b) of the 364-Day Credit Agreement.] 1. Attached hereto are true and correct copies of the unaudited consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of the fiscal quarter ended _________ and the related consolidated statements of income, shareholders' equity and cash flows for the period commencing on the first day and ending on the last day of such quarter, which are complete and accurate in all material respects and fairly present, in accordance with GAAP (subject to ordinary, good faith year-end audit adjustments), the financial position, the results of operations and the cash flows of the Company and the Consolidated Subsidiaries. C-1 2. The undersigned has reviewed and is familiar with the terms of the 364-Day Credit Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and condition (financial or otherwise) of the Company and its Subsidiaries during the accounting period covered by the attached financial statements. 3. The Company and its Subsidiaries, during such period, have observed, performed or satisfied all of the covenants and other agreements, and satisfied every condition in the 364-Day Credit Agreement to be observed, performed or satisfied by the Company and its Subsidiaries, and the undersigned has no knowledge of any Default or Event of Default. 4. The financial covenant analyses and information set forth on Schedule 1 attached hereto are true and accurate on and as of the date of this Certificate. IN WITNESS WHEREOF, the undersigned has executed this Certificate as the ____________ of the Company as of ___________, _______. ALBERTSON'S, INC. By: Title: C-2 SCHEDULE 1 to the Compliance Certificate ALBERTSON'S, INC. 364-DAY CREDIT AGREEMENT DATED AS OF MARCH 22, 2000 Dated _________________ For the fiscal quarter ended __________ (in thousands) Consolidated Tangible Net Worth Calculation: Common stock $___________ Capital in excess ___________ Retained earnings ___________ Stockholders' equity ___________ Plus: Deferred investment tax credits ___________ Minus: Intangible assets: (specify) ___________ Plus: CTNW Adjustments, if any: (specify) ___________ Consolidated Tangible Net Worth $__________ Section 7.05: Consolidated Tangible Net Worth shall be not less than $2.1 billion $__________ 1 EXHIBIT D FORM OF LEGAL OPINION OF COMPANY'S COUNSEL [Form of opinion of Thomas R. Saldin, Esq., Executive Vice-President and General Counsel to the Company] March 22, 2000 To the Banks and the Agent Referred to Below c/o Bank of America N.A., as Agent Re: Albertson's, Inc. Ladies and Gentlemen: I have acted as counsel for Albertson's, Inc. (the "Company") in connection with the Credit Agreement, dated as of March 22, 2000 (the "364-Day Credit Agreement") among the Company, the financial institutions party thereto (the "Banks"), the Documentation Agent and the Syndication Agent party thereto, and Bank of America N.A., as Agent (the "Agent"). This opinion is being delivered to you pursuant to Section 4.01(d) of the 364-Day Credit Agreement. Capitalized terms used herein and not otherwise defined herein shall have the same meanings herein as ascribed thereto in the 364-Day Credit Agreement. I have examined originals or copies, certified or otherwise identified to my satisfaction, of the Loan Documents and such other documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. In my examination I have assumed the legal capacity of all natural persons, the genuineness of all signatures, including endorsements, the authority of all persons signing each of the documents on behalf of the parties thereto (other than the Company), the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified or photostatic copies, and the authenticity of the originals of such copies. As to any facts material to this opinion which I did not independently establish or verify, I have relied upon oral or written statements and representations of officers and other representatives of the Company and others, and factual representations contained in the Loan Documents. I am a member of the Bar of the State of Idaho, and I express no opinion as to the laws of any jurisdiction, or the effect of any such laws on the opinions herein stated, other than (i) the laws of the State of Idaho, (ii) the General Corporation Law of the State of Delaware (the "Delaware Statute") with respect to the opinions set forth in paragraph 1 hereof, and (iii) the federal laws of the United States of America to the extent specifically referred to herein. Upon the basis of the foregoing, I am of the opinion that: D-1 1. The Company is a corporation duly incorporated, validly existing and in good standing under the Delaware Statute, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. The Company is qualified as a foreign corporation and is in good standing in the State of Idaho. 2. The execution, delivery and performance by the Company of the Loan Documents are within the Company's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Company or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries. 3. The Loan Documents have been duly executed and delivered by the Company and constitute valid and binding agreements of the Company, in each case enforceable in accordance with their terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. Insofar as this opinion addresses instruments or agreements expressed to be governed by New York law, it is my opinion (i) that an Idaho court would give effect to such choice of New York Law and (ii) in any event, the conclusion stated in this paragraph would be correct as a matter of Idaho law. 4. Except as disclosed in the Company's 1998 Form 10-K, there is no action, suit or proceeding pending against, or to the best of my knowledge threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is a reasonable possibility of an adverse decision which could materially adversely effect the business, consolidated financial position or consolidated reports of operations of the Company and its Consolidated Subsidiaries, considered as a whole or which in any manner draws into question the validity of the Loan Documents. 5. The Company is not an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. This opinion is being furnished only to you solely for your benefit in connection with the 364-Day Credit Agreement and is not to be used, circulated, quoted, referred to or relied upon by any other person or for any other purpose without my prior express written consent; provided, the Agent and each Bank may deliver a copy to its legal counsel in connection with the 364-Day Credit Agreement, to any prospective Assignee or Participant of any Bank and to any successor Agent, and such legal counsel, any Assignee or Participant and any successor Agent shall be entitled to rely hereon, it being understood that this opinion is rendered only as of the date hereof. Very truly yours, D-2 EXHIBIT E FORM OF ASSIGNMENT AND ACCEPTANCE This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and Acceptance") dated as of _____________ is made between __________________ (the "Assignor") and ________________ (the "Assignee"). RECITALS WHEREAS, the Assignor is party to that certain Credit Agreement dated as of March 22, 2000 (as amended, restated, modified, supplemented or renewed from time to time, the "364-Day Credit Agreement"), among Albertson's, Inc. (the "Company"), the several financial institutions from time to time party thereto (including the Assignor, the "Banks"), the Co-Agents party thereto, and Bank of America, N.A., as agent for the Banks (the "Agent"). Any terms defined in the 364-Day Credit Agreement and not defined in this Assignment and Acceptance are used herein as defined in the 364-Day Credit Agreement; WHEREAS, as provided under the 364-Day Credit Agreement, the Assignor has committed to making Loans to the Company in an aggregate amount not to exceed $__________ (the "Commitment"); WHEREAS, [the Assignor has made Loans in the aggregate principal amount of $__________ to the Company consisting of $___________ principal amount of Committed Loans [and $____________ principal amount of Bid Loans]] [no Loans are outstanding under the 364-Day Credit Agreement]; and WHEREAS, the Assignor wishes to assign to the Assignee [part of the] [all] rights and obligations of the Assignor under the 364-Day Credit Agreement in respect of its Commitment, [together with a corresponding portion of each of its outstanding Loans], in an amount equal to ___% of the Assignor's Commitment and Loans, on the terms and subject to the conditions set forth herein, and the Assignee wishes to accept assignment of such rights and to assume such obligations from the Assignor on such terms and subject to such conditions; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: Assignment and Acceptance. (a) Subject to the terms and conditions of this Assignment and Acceptance, (i) the Assignor hereby sells, transfers and assigns to the Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from the Assignor, without recourse and without representation or warranty (except as provided in this Assignment and Acceptance) ___% (the "Assignee's Percentage Share") of (A) the Commitment [and the Loans] of the Assignor and (B) all related rights, benefits, obligations, liabilities and indemnities of the Assignor under and in connection with the 364-Day Credit Agreement and the Loan Documents. E-1 (b) With effect on and after the Effective Date (as defined in Section 5 hereof), the Assignee shall be a party to the 364-Day Credit Agreement and succeed to all of the rights and be obligated to perform all of the obligations of a Bank under the 364-Day Credit Agreement, including the requirements concerning confidentiality and the payment of indemnification, with a Commitment in the amount set forth in subsection (c) below. The Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the 364-Day Credit Agreement are required to be performed by it as a Bank. It is the intent of the parties hereto that the Commitment of the Assignor shall, as of the Effective Date, be reduced by an amount equal to the portion thereof assigned to the Assignee hereunder, and the Assignor shall relinquish its rights and be released from its obligations under the 364-Day Credit Agreement to the extent such obligations have been assumed by the Assignee; provided, however, that the Assignor shall not relinquish its rights under Article III or Sections 10.04 and 10.05 of the 364-Day Credit Agreement to the extent such rights relate to the time prior to the Effective Date. (c) After giving effect to the assignment and assumption set forth herein, on the Effective Date: (i) the Assignee's Commitment will be $__________; and (ii) the Assignee's aggregate outstanding Committed Loans will be $_______________ [and its aggregate outstanding Bid Loans will be $___________]. (d) After giving effect to the assignment and assumption set forth herein, on the Effective Date: (i) the Assignor's Commitment will be $__________; and (ii) the Assignor's aggregate outstanding Committed Loans will be $_______________ [and its aggregate outstanding Bid Loans will be $___________]. Payments. (e) As consideration for the sale, assignment and transfer contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the Effective Date in immediately available funds an amount equal to $__________, representing the Assignee's Percentage Share of the principal amount of all Loans previously made by the Assignor to the Company under the 364-Day Credit Agreement and outstanding on the Effective Date. (f) The [Assignor] [Assignee] further agrees to pay to the Agent a processing fee in the amount specified in Section 10.08 of the 364-Day Credit Agreement. Reallocation of Payments. Any interest, fees and other payments accrued to the Effective Date with respect to the Commitment [and Loans] of the Assignor shall be for the account of the Assignor. Any interest, fees and other payments accrued on and after the Effective Date with respect to the portion of such Commitment [and Loans] assigned to the Assignee shall be for the account of the Assignee. Each of the Assignor and the Assignee agrees that it will hold in trust for the other party any interest, fees and other amounts which it may receive to which the other party is entitled pursuant to the preceding sentence and pay to the other party any such amounts which it may receive promptly upon receipt. Independent Credit Decision. The Assignee: (a) acknowledges that it has received a copy of the 364-Day Credit Agreement and the Schedules and Exhibits thereto, together with copies of the most recent financial statements referred E-2 to in Section 5.10 or Section 6.01 of the 364-Day Credit Agreement, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into this Assignment and Acceptance; and (b) agrees that it will, independently and without reliance upon the Assignor, the Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit and legal decisions in taking or not taking action under the 364-Day Credit Agreement. Effective Date; Notices. (g) As between the Assignor and the Assignee, the effective date for this Assignment and Acceptance shall be ______________ (the "Effective Date"); provided that the following conditions precedent have been satisfied on or before the Effective Date: (i) this Assignment and Acceptance shall be executed and delivered by the Assignor and the Assignee; (ii) any consent of the Company and the Agent required under Section 10.08 of the 364-Day Credit Agreement for the effectiveness of the assignment hereunder by the Assignor to the Assignee shall have been duly obtained and shall be in full force and effect as of the Effective Date; (iii) the Assignee shall pay to the Assignor all amounts due to the Assignor under this Assignment and Acceptance; (iv) the processing fee referred to in Section 2(b) hereof and in Section 10.08 of the 364-Day Credit Agreement shall have been paid to the Agent; and (v) the Assignor and Assignee shall have complied with the other requirements of Section 10.08 of the 364-Day Credit Agreement and with the requirements of Sections 9.10 and 10.10 of the 364-Day Credit Agreement (in each case to the extent applicable). (h) Promptly following the execution of this Assignment and Acceptance, the Assignor shall deliver to the Company and the Agent for acknowledgement by the Agent, a Notice of Assignment substantially in the form attached hereto as Schedule 1. Agent. The Assignee hereby appoints and authorizes the Assignor to take such action as agent on its behalf and to exercise such powers under the 364-Day Credit Agreement as are delegated to the Agent by the Banks pursuant to the terms of the 364-Day Credit Agreement. [The Assignee shall assume no duties or obligations held by the Assignor in its capacity as Agent under the 364-Day Credit Agreement.] [INCLUDE ONLY IF ASSIGNOR IS AGENT] Withholding Tax. The Assignee (a) represents and warrants to the Assignor, the Agent and the Company that under applicable law and treaties no tax will be required to be withheld by the Bank with respect to any payments to be made to the Assignee hereunder, and (b) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United States or any State thereof) to the Agent and the Company prior to E-3 the time that the Agent or Company is required to make any payment of interest or fees under the 364-Day Credit Agreement, duplicate executed originals of either U.S. Internal Revenue Service Form W-8BEN or U.S. Internal Revenue Service Form W-8ECI (wherein the Assignee claims entitlement to the benefits of a tax treaty that provides for a complete exemption from U.S. federal income withholding tax on all payments hereunder) and agrees to provide new Forms W-8BEN or W-8ECI upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by the Assignee, as and when required under the 364-Day Credit Agreement. Representations and Warranties. (i) The Assignor represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any Lien or other adverse claim; (ii) it is duly organized and existing and it has the full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance and to fulfill its obligations hereunder; (iii) no notices to, or consents, authorizations or approvals of, any Person are required (other than those referred to in Section 5(a)(ii) hereof and any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance, and apart from any agreements or undertakings or filings required by the 364-Day Credit Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; and (iv) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignor, enforceable against the Assignor in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles. (j) The Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the 364-Day Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the 364-Day Credit Agreement or any other instrument or document furnished pursuant thereto. The Assignor makes no representation or warranty in connection with, and assumes no responsibility with respect to, the solvency, financial condition or statements of the Company, or the performance or observance by the Company, of any of its respective obligations under the 364-Day Credit Agreement or any other instrument or document furnished in connection therewith. (k) The Assignee represents and warrants that (i) it is duly organized and existing and it has full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance, and to fulfill its obligations hereunder; (ii) no notices to, or consents, authorizations or approvals of, any Person are required (other than those referred to in Section 5(a)(ii) hereof and any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance; and apart from any agreements or undertakings or filings required by the 364-Day Credit Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or E-4 performance; (iii) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignee, enforceable against the Assignee in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles; and (iv) it is an Eligible Assignee. Further Assurances. (a) The Company shall ensure that all written information, exhibits and reports furnished to the Agent or the Banks do not and will not contain any untrue statement of a material fact and do not and will not omit to state any material fact or any fact necessary to make the statements contained therein not misleading in light of the circumstances in which made, and will promptly disclose to the Agent and the Banks and correct any defect or error that may be discovered therein or in any Loan Document or in the execution, acknowledgement or recordation thereof. (b) Promptly upon request by the Agent or the Majority Banks, the Company shall (and shall cause any of its Subsidiaries to) do, execute, acknowledge, and deliver, any and all such further acts, certificates, assurances and other instruments the Agent or such Banks, as the case may be, may reasonably require from time to time in order to carry out more effectively the purposes of this Agreement or any other Loan Document. Miscellaneous. (l) Any amendment or waiver of any provision of this Assignment and Acceptance shall be in writing and signed by the parties hereto. No failure or delay by either party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof and any waiver of any breach of the provisions of this Assignment and Acceptance shall be without prejudice to any rights with respect to any other or further breach thereof. (m) All payments made hereunder shall be made without any set-off or counterclaim (n) The Assignor and the Assignee shall each pay its own costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Assignment and Acceptance. (o) This Assignment and Acceptance may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. (p) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. THE ASSIGNOR AND THE ASSIGNEE EACH IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS ASSIGNMENT AND ACCEPTANCE AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING E-5 MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. EACH PARTY TO THIS ASSIGNMENT AND ACCEPTANCE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS ASSIGNMENT AND ACCEPTANCE OR ANY DOCUMENT RELATED HERETO, AND PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW. (q) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, AND ANY RELATED DOCUMENTS AND AGREEMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY EITHER OF THE PARTIES AGAINST THE OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF THE PARTIES ALSO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. [Other provisions to be added as may be negotiated between the Assignor and the Assignee, provided that such provisions are not inconsistent with the 364-Day Credit Agreement.] IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment and Acceptance to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By: Title: [ASSIGNEE] By: Title: E-6 SCHEDULE 1 to the Assignment and Acceptance NOTICE OF ASSIGNMENT AND ACCEPTANCE Date: ___________________ Bank of America, N.A., as Agent Bank of America, N.A. Retail Industry Group #33751 [Mail Code: CA5-705-41-89] 555 California Street, 41st Floor San Francisco, CA 94104 Attention: James P. Johnson Telephone: (415) 622-6177 Facsimile: (415) Albertson's, Inc. 250 Park Center Blvd. Box 20 Boise, ID 83726 Attention: Finance Department Telephone: (208) 395-6534 Facsimile: (208) 395-6631 Ladies and Gentlemen: We refer to the Credit Agreement dated as of March 22, 2000 (as amended, restated, modified, supplemented or renewed from time to time, the "364-Day Credit Agreement") among Albertson's, Inc. (the "Company"), the Banks referred to therein, the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"). Terms defined in the 364-Day Credit Agreement are used herein as therein defined. 1. We hereby give you notice of[, and request the consent of [the Company and] the Agent to,] the assignment by ________________________ (the "Assignor") to ____________________ (the "Assignee") of ____% of the right, title and interest of the Assignor in and to the 364-Day Credit Agreement (including, without limitation, ____% of the right, title and interest of the Assignor in and to the Commitment of the Assignor [and all outstanding Loans made by the Assignor]) pursuant to that certain Assignment and Acceptance Agreement, dated as of ___________ (the "Assignment and Acceptance") between Assignor and Assignee, a copy of which Assignment and Acceptance is attached hereto. Before giving effect to such assignment the Assignor's Commitment is $___________. [The Assignor has made Loans in the aggregate principal amount of $__________ to the Company consisting of $___________ principal amount of 1. Committed Loans [and $____________ principal amount of Bid Loans].] [No Loans are outstanding under the 364-Day Credit Agreement.] 2. The Assignee agrees that, upon receiving the consent of the Company and the Agent to such assignment (if applicable) and from and after the Effective Date (as such term is defined in Section 5 of the Assignment and Acceptance), the Assignee shall be bound by the terms of the 364-Day Credit Agreement, with respect to the interest in the 364-Day Credit Agreement assigned to it as specified above, as fully and to the same extent as if the Assignee were the Bank originally holding such interest in the 364-Day Credit Agreement. 3. The following administrative details apply to the Assignee: (A) Lending Office(s): Assignee name: Address: Attention: Telephone: ( ) ------ Facsimile: ( ) ------ Assignee name: Address: Attention: Telephone: ( ) ------ Facsimile: ( ) ------ (B) Notice Address: Assignee name: Address: Attention: Telephone: ( ) ------ Facsimile: ( ) ------ (C) Payment Instructions: Account No.: At: 2. Reference: Attention: 4. You are entitled to rely upon the representations, warranties and covenants of each of the Assignor and Assignee contained in the Assignment and Acceptance. 5. This Notice of Assignment and Acceptance may be executed by the Assignor and the Assignee in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same notice and agreement. IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice of Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned. Very truly yours, Adjusted Commitment: [ASSIGNOR] - ------------------- $ By: ------------------------------ Title: Adjusted Pro Rata Share: - ----------------------- - -------% Commitment: [ASSIGNEE] - ---------- $ ] By: ------------------------------- Title: Pro Rata Share: - -------------- - -------% [CONSENTED TO this _____ day of ___________________: ALBERTSON'S, INC. By: 3. Title: ] ------------------------------------ ACKNOWLEDGED [AND CONSENTED TO] this ____ day of ________: BANK OF AMERICA, N.A., as Agent By: Title: 4. EXHIBIT F FORM OF INVITATION FOR COMPETITIVE BIDS Via Facsimile Date: __________________ To the Bid Loan Banks and Designated Bidders Listed on Annex A Attached Hereto Ladies and Gentlemen: Reference is made to that certain Credit Agreement dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "364-Day Credit Agreement"), among _______________ (the "Company"), the Banks party thereto, the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"). Capitalized terms used herein have the meanings specified in the 364-Day Credit Agreement. Pursuant to subsection 2.06(b) of the 364-Day Credit Agreement, you are hereby invited to submit offers to make Bid Loans to the Company based on the following specifications: 1. Date of Bid Borrowing: _______________; 2. Aggregate amount of Bid Borrowing: $___________________; 3. The Bid Loans shall be Absolute Rate Bid Loans; and 4. Interest Period[s] and requested Interest Payment Dates, if any: [____________________], [________________] and [_______________]. All Competitive Bids shall be in the form of Exhibit H to the 364-Day Credit Agreement and shall be received by the Agent no later than 7:30 a.m. (San Francisco time) on ___________, 2000; provided that terms of the offer or offers contained in any Competitive Bid(s) to be submitted by the Agent (or any Affiliate of the Agent) in the capacity of a Bid Loan Bank or Designated Bidder shall be notified to the Company not later than 7:15 a.m. (San Francisco time) on ___________. BANK OF AMERICA, N.A., as Agent By: Title: F-1 ANNEX A to the Invitation for Competitive Bids List of Bid Loan Banks and Designated Bidders [Bank] Facsimile: (415) 622-____ [Bank] Facsimile: (___) ___-____ [Bank] Facsimile: (___) ___-____ [Bank] Facsimile: (___) ___-____ [Bank] Facsimile: (___) ___-____ 1 EXHIBIT G FORM OF COMPETITIVE BID REQUEST Date: _______________ To: Bank of America, N.A., as Agent Ladies and Gentlemen: Reference is made to the Credit Agreement dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "364-Day Credit Agreement"), among Albertson's, Inc. (the "Company"), the Banks party thereto, the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"). Capitalized terms used herein have the meanings specified in the 364-Day Credit Agreement. This is a Competitive Bid Request for Bid Loans pursuant to Section 2.06 of the 364-Day Credit Agreement as follows: (i) The Business Day of the proposed Bid Borrowing is: ______________. (ii) The aggregate amount of the proposed Bid Borrowing is: $_____________. (iii) The proposed Bid Borrowing to be made pursuant to Section 2.06 shall be comprised of Absolute Rate Bid Loans. (iv) The Interest Period[s] and Interest Payment Dates, if any, for the Bid Loans comprised in the Bid Borrowing shall be: _______________, [_________________] and [___________________]. [The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Bid Borrowing, before and after giving effect thereto and to the application of the proceeds therefrom: (a) the representations and warranties of the Company contained in Article V of the 364-Day Credit Agreement are true and correct as though made on and as of such date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they are true and correct as of such date and except that this notice shall be deemed instead to refer to the last day of the most recent quarter and year for which financial statements have then been delivered in respect of the representation and warranty made in Section 5.10(a) of the 364-Day Credit Agreement); (b) no Default or Event of Default has occurred and is continuing, or would result from such proposed Bid Borrowing; and G-1 (c) after giving effect to the Bid Borrowing requested hereby the outstanding aggregate principal amount of all Bid Loans made by all Bid Loan Banks and Designated Bidders, plus the outstanding aggregate principal amount of all Committed Loans made by all Banks, will not exceed the Aggregate Commitment. ALBERTSON'S, INC. By: ______________________________ Title: _____________________________ G-2 EXHIBIT H FORM OF COMPETITIVE BID Date: _______________ To: Bank of America, N.A., as Agent Ladies and Gentlemen: Reference is made to the Credit Agreement dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "364-Day Credit Agreement"), among Albertson's, Inc. (the "Company"), the Banks party thereto, the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"). Capitalized terms used herein have the meanings specified in the 364-Day Credit Agreement. In response to the Competitive Bid Request of the Company dated ___________ and in accordance with subsection 2.06(c)(ii) of the 364-Day Credit Agreement, the undersigned [Bank] [Designated Bidder] offers to make Bid Loan[s] thereunder in the following principal amounts[s], at the following interest rates and for the following Interest Period[s], with Interest Payment Dates as specified by the Company: Date of Bid Borrowing: _____________________ Aggregate Maximum Bid Amount: $________________ Offer 1 (Maximum Bid Amount: $________________) Principal Amount $______ Principal Amount $______ Principal Amount $______ Interest: Interest: Interest: [Absolute Rate __%] [Absolute Rate __%] [Absolute Rate __%] Interest Period ________ Interest Period ________ Interest Period ________ Offer 2 (Maximum Bid Amount: $________________) Principal Amount $______ Principal Amount $______ Principal Amount $______ H-1 Interest: Interest: Interest: [Absolute Rate __%] [Absolute Rate __%] [Absolute Rate __%] Interest Period ________ Interest Period ________ Interest Period ________ Principal Amount $______ Principal Amount $______ Principal Amount $______ Interest: Interest: Interest: [Absolute Rate __%] [Absolute Rate __%] [Absolute Rate __%] Interest Period ________ Interest Period ________ Interest Period ________ [NAME OF BANK/DESIGNATED BIDDER] By: _____________________ Title: __________________ H-2 EXHIBIT I FORM OF COMMITTED LOAN NOTE U.S. $___________________ Date: _______________ FOR VALUE RECEIVED, the undersigned, Albertson's, Inc., a Delaware corporation (the "Company"), hereby promises to pay to the order of _________________________ (the "Bank") the principal sum of ___________________ Dollars ($_____________) or, if less, the aggregate unpaid principal amount of all Committed Loans made by the Bank to the Company pursuant to the Credit Agreement, dated as of March 22, 2000 (as amended, restated, supplemented or otherwise modified from time to time, the "364-Day Credit Agreement"), among the Company, the Bank, the other financial institutions from time to time party thereto (the "Banks"), the Documentation Agent and the Syndication Agent party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"), on the dates and in the amounts provided in the 364-Day Credit Agreement. The Company further promises to pay interest on the unpaid principal amount of the Committed Loans evidenced hereby from time to time at the rates, on the dates, and otherwise as provided in the 364-Day Credit Agreement. The Bank is authorized to endorse the amount of each Committed Loan, the date on which each Committed Loan is made, and each payment of principal with respect thereto on the schedule annexed hereto and made a part hereof, or on continuations thereof which shall be attached hereto and made a part hereof; provided that any failure to endorse such information on such schedule or continuation thereof shall not in any manner affect any obligation of the Company under the 364-Day Credit Agreement and this Promissory Note (this "Note"). This Note is one of the Committed Loan Notes referred to in, and is entitled to the benefits of, the 364-Day Credit Agreement, which 364-Day Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. Terms defined in the 364-Day Credit Agreement are used herein with their defined meanings therein unless otherwise defined herein. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. ALBERTSON'S, INC. By: Title: I-1
SCHEDULE to Committed Loan Note Date Loan Disbursed Amount of Loan Principal Payment Date Principal Paid - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ---------------------------- - ------------------------------- -------------------------- ---------------------------- ----------------------------
I-2 EXHIBIT J FORM OF BID LOAN NOTE Date: ________________ FOR VALUE RECEIVED, the undersigned, Albertson's, Inc., a Delaware corporation (the "Company"), hereby promises to pay to the order of _________________________ (the "Bank") the aggregate unpaid principal amount of all Bid Loans made by the Bank to the Company pursuant to the Credit Agreement, dated as of March 22, 2000 (as amended, restated, supplemented or otherwise modified from time to time, the "364-Day Credit Agreement"), among the Company, the Bank, the other financial institutions from time to time party thereto (the "Banks"), the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"), on the dates and in the amounts provided in the 364-Day Credit Agreement. The Company further promises to pay interest on the unpaid principal amount of the Bid Loans evidenced hereby from time to time at the rates, on the dates, and otherwise as provided in the 364-Day Credit Agreement. The Bank is authorized to endorse the amount of and the date on which each Bid Loan is made, the maturity date therefor and each payment of principal with respect thereto on the schedules annexed hereto and made a part hereof, or on continuations thereof which shall be attached hereto and made a part hereof; provided that any failure to endorse such information on such schedule or continuation thereof shall not in any manner affect any obligation of the Company under the 364-Day Credit Agreement and this Promissory Note (this "Note"). This Note is one of the Bid Loan Notes referred to in, and is entitled to the benefits of, the 364-Day Credit Agreement, which 364-Day Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. Terms defined in the 364-Day Credit Agreement are used herein with their defined meanings therein unless otherwise defined herein. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. ALBERTSON'S, INC. By: ______________________________ Title: _____________________________ J-1
SCHEDULE to Bid Loan Note Date Loan Disbursed Amount of Loan Maturity Date Principal Payment Date Principal Paid - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ---------------------- - ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
J-2 EXHIBIT K FORM OF DESIGNATION AGREEMENT Dated ______________ Reference is made to the Credit Agreement dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "364-Day Credit Agreement") among _______________________ (the Company"), the Banks party thereto, the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"). Capitalized terms used herein have the meanings specified in the 364-Day Credit Agreement. _________________ (the "Designator") and ___________________ the ("Designee") agree as follows: 1. The Designator hereby designates the Designee, and the Designee hereby accepts such designation, to have a right to make Bid Loans pursuant to Section 2.06 of the 364-Day Credit Agreement. 2. The Designator makes no representation or warranty and assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the 364-Day Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the 364-Day Credit Agreement or any other instrument or document furnished pursuant thereto or (ii) the financial condition of the Company or the performance or observance by the Borrower of any of its obligations under the 364-Day Credit Agreement or any other instrument or document furnished pursuant thereto. 3. The Designee (i) confirms that it has received a copy of the 364-Day Credit Agreement, together with copies of the financial statements referred to in Section 5.10 or Section 6.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Designation Agreement; (ii) agrees that it will, independently and without reliance upon the Agent, the Designator or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the 364-Day Credit Agreement; (iii) confirms that it is an entity qualified to be a Designated Bidder; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the 364-Day Credit Agreement as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the 364-Day Credit Agreement are required to be performed by it as a Designated Bidder; (vi) agrees to and accepts all duties, obligations and responsibilities of a Bank set forth in Article IX of the 364-Day Credit Agreement and confirms that said Article shall otherwise apply to the Designated Bidder as if it were a Bank named therein; and (vii) specifies as its Lending Office with respect to Bid Loans (and address for notices) the offices set forth beneath its name on the signature page hereof. 4. Following the execution of this Designation Agreement by the Designator and its Designee, it will be delivered to the Agent for acceptance by the Agent. The K-1 effective date of this Designation Agreement shall be the date of acceptance thereof by the Agent (the "Effective Date"). 5. Upon such acceptance and recording by the Agent, as of the Effective Date, the Designee shall be a party to the 364-Day Credit Agreement as a "Designated Bidder" with a right to make Bid Loans pursuant to Section 2.06 of the 364-Day Credit Agreement and the rights and obligations of a Designated Bidder related thereto. 6. THIS DESIGNATION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Designation Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. [NAME OF DESIGNATOR] By: Title: [NAME OF DESIGNEE] By: Title: Lending Office(s) (and address for notices): Attn.: Tel.: Fax: K-2 Attn.: Tel.: Fax: Accepted [as of] the ___ day of ____________, _______ BANK OF AMERICA, N.A., as Agent By: Title: K-3 EXHIBIT L FORM OF COMMITMENT INCREASE AGREEMENT Date: ___________________ Bank of America, N.A., as Agent and as a Bank Ladies and Gentlemen: We refer to the Credit Agreement dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "364-Day Credit Agreement") among Albertson's, Inc. (the Company"), the Banks party thereto, the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"). Terms defined in the 364-Day Credit Agreement are used herein as therein defined. This Commitment Increase Agreement is made and delivered pursuant to Section 2.17 of the 364-Day Credit Agreement. Subject to the terms and conditions of Section 2.17 of the 364-Day Credit Agreement, _______________________________ (the "Increasing Bank") will increase its Commitment to an amount equal to $___________, on the Increased Commitment Date applicable to it. The Increasing Bank hereby confirms and agrees that with effect on and after such Increased Commitment Date, the Commitment of the Increasing Bank shall be increased to the amount set forth above, and the Increasing Bank shall have all of the rights and be obligated to perform all of the obligations of a Bank under the 364-Day Credit Agreement with a Commitment in the amount set forth above. Effective on the Increased Commitment Date applicable to it, the Increasing Bank (i) accepts and assumes from the assigning Bank(s), without recourse, such assignment of Loans as shall be necessary to effectuate the adjustments in the Pro Rata Shares of the Banks contemplated by Section 2.17 of the 364-Day Credit Agreement, and (ii) agrees to fund on such Increased Commitment Date such assumed amounts to the Agent for the account of the assigning Bank(s) in accordance with the provisions of the 364-Day Credit Agreement, in the amount notified to the Increasing Bank by the Agent. This Commitment Increase Agreement shall constitute a Loan Document under the 364-Day Credit Agreement. THIS COMMITMENT INCREASE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. L-1 IN WITNESS WHEREOF, the Increasing Bank has caused this Commitment Increase Agreement to be duly executed and delivered in _____________, ______________, by its proper and duly authorized officer as of the day and year first above written. [INCREASING BANK] By: ___________________________ Title: ________________________ CONSENTED TO as of _________: ALBERTSON'S, INC. By: Title: ACKNOWLEDGED AND CONSENTED TO as of ____________: BANK OF AMERICA, N.A., as Agent By: Title: L-2 EXHIBIT M FORM OF NEW BANK AGREEMENT Date: ___________________ Bank of America, N.A. as Agent Ladies and Gentlemen: We refer to the Credit Agreement dated as of March 22, 2000 (as extended, renewed, amended or restated from time to time, the "364-Day Credit Agreement") among Albertson's, Inc. (the Company"), the Banks party thereto, the Co-Agents party thereto, and Bank of America, N.A., as Agent for the Banks (the "Agent"). Terms defined in the 364-Day Credit Agreement are used herein as therein defined. This New Bank Agreement is made and delivered pursuant to Section 2.17 of the Credit Agreement. Subject to the terms and conditions of Section 2.17 of the 364-Day Credit Agreement, _________________________ (the "New Bank") will become a party to the 364-Day Credit Agreement as a Bank, with a Commitment equal to $___________, on the Increased Commitment Date applicable to it. The New Bank hereby confirms and agrees that with effect on and after such Increased Commitment Date, the New Bank shall be and become a party to the 364-Day Credit Agreement as a Bank and have all of the rights and be obligated to perform all of the obligations of a Bank thereunder with a Commitment in the amount set forth above. Effective on the Increased Commitment Date applicable to it, the New Bank (i) accepts and assumes from the assigning Bank(s), without recourse, such assignment of Loans as shall be necessary to effectuate the adjustments in the Pro Rata Shares of the Banks contemplated by Section 2.17 of the 364-Day Credit Agreement, and (ii) agrees to fund on such Increased Commitment Date such assumed amounts to the Agent for the account of the assigning Bank(s) in accordance with the provisions of the 364-Day Credit Agreement, in the amount notified to the New Bank by the Agent. The following administrative details apply to the New Bank: (A) Lending Office(s): Bank name: Address: M-1. Attention: Telephone: ( ) ------ Facsimile: ( ) ------ Bank name: Address: Attention: Telephone: ( ) ------ Facsimile: ( ) ------ (B) Notice Address: Bank name: Address: Attention: Telephone: ( ) ------ Facsimile: ( ) ------ M-2 (C) Payment Instructions: Account No.: At: Reference: Attention: This New Bank Agreement shall constitute a Loan Document under the 364-Day Credit Agreement. THIS NEW BANK AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the New Bank has caused this New Bank Agreement to be duly executed and delivered in _____________, ______________, by its proper and duly authorized officer as of the day and year first above written. [NEW BANK] By: ___________________________ Title: ________________________ CONSENTED TO as of ___________: ALBERTSON'S, INC. By: Title: ACKNOWLEDGED AND CONSENTED TO as of _________: M-3 BANK OF AMERICA, N.A., as Agent By: Title: M-4 EX-13 18 FINANCIAL REVIEW EXHIBIT 13 Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions, except per share data) Business Combinations On August 2, 1998, Albertson's, Inc. ("Albertson's" or the "Company") and American Stores Company ("ASC") entered into a definitive merger agreement ("Merger Agreement") whereby Albertson's would acquire ASC by exchanging 0.63 share of Albertson's common stock for each outstanding share of ASC common stock, with cash being paid in lieu of fractional shares (the "Merger") and ASC would become a wholly owned subsidiary of Albertson's. In addition, outstanding rights to receive ASC common stock under ASC stock option plans would be converted into rights to receive equivalent Albertson's common stock. The Merger was consummated on June 23, 1999, with the issuance of approximately 177 million shares of Albertson's common stock. The Merger constituted a tax-free reorganization and has been accounted for as a pooling of interests for accounting and financial reporting purposes. The pooling of interests method of accounting is intended to present as a single interest, two or more common stockholders' interests that were previously independent; accordingly, these consolidated financial statements restate the historical financial statements as though the companies had always been combined. The restated consolidated financial statements are adjusted to conform accounting policies and financial statement presentations. The following table compares amounts previously reported by Albertson's and ASC prior to the Merger transaction and the combined amounts for fiscal 1998 and 1997:
- ----------------------------------------------------------------- Albertson's ASC Combined - ----------------------------------------------------------------- 1998: Net revenues $ 16,005 $ 19,867 $ 35,872 Net earnings 567 234 801 1997: Net revenues 14,690 19,138 33,828 Net earnings 517 280 797
In connection with the Merger, the Company entered into agreements with the Attorneys General of California, Nevada and New Mexico and the Federal Trade Commission to enable the Merger to proceed under applicable antitrust, competition and trade regulation law. The agreements required the Company to divest a total of 117 stores in California, 19 stores in Nevada and 9 stores in New Mexico. Of the stores required to be divested, 40 were ASC locations operated primarily under the Lucky name, and 105 were Albertson's stores operated primarily under the Albertson's name. In addition, the Company divested four supermarket real estate sites as required by the agreements. The stores identified for disposition had sales of $2,300 in fiscal 1998. The Company had divested 144 of the required 145 stores as of February 3, 2000. Future growth comparisons will be affected by these divestitures. During 1998 the Company acquired the stock of three separate operating companies representing 64 retail food and drug stores in transactions accounted for using the purchase method of accounting. In accordance with an agreement with the Federal Trade Commission, nine acquired stores and six previously owned stores were divested. Reported results include these operations from the date of consummation of the acquisition. Page 1 Results of Operations Sales for 1999 (a 53-week year) were $37,478 compared to $35,872 in 1998 and $33,828 in 1997. During fiscal 1999, ASC's fiscal year was converted from a Saturday year end to a Thursday year end. The following table sets forth certain income statement components expressed as a percent to sales and the year-to-year percentage changes in the amounts of such components:
Percent To Sales Percentage Change - ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1999 1998 1997 vs. 1998 vs. 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Sales 100.00 100.00 100.00 4.5 6.0 Gross profit 27.52 27.08 26.63 6.2 7.9 Selling, general and administrative expenses 23.06 21.87 21.67 10.1 7.0 Merger-related and exit costs 1.06 0.54 0.04 n.m. n.m. Litigation settlement 0.10 n.m. Impairment - store closures 0.07 n.m. n.m. Operating profit 3.31 4.60 4.92 (24.9) (0.8) Interest expense, net 0.94 0.94 0.87 4.6 14.6 Earnings before income taxes and extraordinary item 2.40 3.73 3.99 (35.1) (0.9) Net earnings 1.08 2.23 2.36 (49.5) 0.4 n.m. - not meaningful
Sales for 1999 increased 5.4% when compared on a 52-week basis to the prior year and excluding sales from divested stores from both years. Increases in sales are primarily attributable to the continued development of new stores and identical and comparable store sales increases. During 1999 the Company opened or acquired 147 stores, remodeled 100 stores, and closed or sold 219 stores (144 of which were required divestitures). Net retail square footage decreased by 1.7%. This includes the effect of required divestitures, which reduced square footage by 6.1 million square feet or 6.2% from the prior year. Net retail square footage increased 7.8% in 1998. Identical store sales, stores that have been in operation for two full fiscal years, increased 1.7% in 1999 and 0.5% in 1998. Comparable store sales, which include replacement stores, increased 2.1% in 1999 and 1.2% in 1998. Identical and comparable store sales continued to increase through higher average ticket sales per customer. Management estimates that there was overall inflation in products the Company sells of approximately 0.2% in 1999 and overall deflation of 0.1% in 1998. In addition to store development, the Company has increased sales through implementation of best practices across the Company and its investment in programs initiated in recent years which are designed to provide solutions to customer needs. In 1999 and 1998, these programs included the Front End Manager program; the home meal solutions process called "Quick Fixin' Ideas(R)"; special destination categories; and increased emphasis on training programs utilizing Computer Guided Training. To provide additional solutions to customer needs, in 1999 the Company added new gourmet-quality bakery products and organic grocery and produce items. Other solutions include neighborhood marketing, targeted advertising and exciting new and remodeled stores. Gross profit, as a percent to sales, increased primarily as a result of continued improvements made in retail stores, including improvements in underperforming stores and improved sales mix of partially prepared, value-added products. Gross profit improvements were also realized through the continued utilization of Company distribution facilities and increased buying efficiencies. The merger has created buying synergies and margin improvements from the implementation of best practices across the Company. The pre-tax LIFO adjustment, as a percent to sales, reduced gross margin by $30 (0.08%) in 1999, $16 (0.04%) in 1998 and $12 (0.03%) in 1997. Selling, general and administrative expenses, as a percent to sales, increased in 1999 primarily due to integration costs associated with the Merger, including activities associated with the banner change in California, Nevada and New Mexico. The increase in 1998 over 1997 was primarily due to increased salary and related benefit costs resulting from the Company's initiatives to increase sales, increased depreciation expense associated with the Company's expansion program and integration costs associated with the various 1998 acquisitions. Page 2 Results of operations for year ended February 3, 2000, include $683 of merger-related costs ($529 after tax). The following table presents the pre-tax costs incurred by category of expenditure and merger-related accruals included in the Company's Consolidated Balance Sheet:
Exit Merger Extraordinary Period Costs Charge Loss Costs Total - ------------------------------------------------------------------------------------------------------------------------------------ Severance costs $ 99 $ 8 $ 9 $ 116 Write-down of assets to net realizable value 239 12 251 Transaction and financing costs $ 31 71 102 Integration costs 3 164 167 Stock option charge 47 47 - ------------------------------------------------------------------------------------------------------------------------------------ Total costs 338 58 31 256 683 Cash expenditures (75) (8) (31) (252) (366) Write-down of assets to net realizable value (237) (237) Stock option charge (47) (47) - ------------------------------------------------------------------------------------------------------------------------------------ Merger-related accruals at February 3, 2000 $ 26 $ 3 $ 4 $ 33 - ------------------------------------------------------------------------------------------------------------------------------------
Severance costs consist of obligations to employees who were terminated or were notified of termination under a plan authorized by senior management. Approximately 625 employees will be severed as a result of the Merger, of which 499 were terminated as of February 3, 2000. The write-down of assets to net realizable value includes the expected loss on disposal of stores required to be divested and duplicate and abandoned facilities, including administrative offices, intangibles and information technology equipment which were abandoned by the Company or are being held for sale. The estimated fair value of assets held for sale has been determined using negotiated sales prices or independent appraisals. Transaction and financing costs consist primarily of professional fees paid for investment banking, legal, accounting, printing and regulatory filing fees. Financing costs also include the extraordinary loss on extinguishment of debt. Integration costs consist primarily of incremental transition and integration costs associated with integrating the operations of Albertson's and ASC and are being expensed as incurred. The Company's stock option award plans contain provisions for automatic vesting upon a change of control. Under ASC plans, option holders had the right (limited stock appreciation right or LSAR), during an exercise period of up to 60 days after the occurrence of a change of control (but prior to consummation of the Merger), to elect to surrender all or part of their options in exchange for shares of Albertson's common stock having a value equal to the excess of the change of control price over the exercise price. Certain stock option plans of ASC defined change of control as the date of stockholder approval of the Merger. Approval of the Merger Agreement on November 12, 1998, by ASC's stockholders accelerated the vesting of 6.4 million equivalent stock options granted under pre-1997 ASC plans and permitted the holders of these options to exercise LSARs. The exercisability of the 6.4 million LSARs resulted in the Company recognizing a pre-tax $195 merger-related stock option charge during 1998. In the first quarter of 1999, a market price adjustment of $29 was recorded as a reduction of merger-related costs to reflect a decline in the relevant stock price at the end of the first fiscal quarter relative to LSARs. The actual change of control price used to measure the value of these exercised LSARs became determinable at the date the Merger was consummated and resulted in no further adjustments. Upon Merger consummation, the change of control price was $53.77 per share, resulting in the issuance of approximately 1.7 million Albertson's shares. LSARs relating to approximately 4.0 million equivalent stock options became exercisable upon regulatory approval of the Merger, which resulted in recognition of an additional charge of $76 in the second quarter of fiscal 1999. This charge was based upon a change of control price of $56.96 per share, which included an adjustment factor for the early termination of the LSAR feature. A total of 0.8 million Albertson's shares were issued in satisfaction of those options for which the LSAR feature was elected and the remaining options were converted into options to acquire approximately 1.2 million Albertson's shares. Page 3 The Company recorded a $37 pre-tax one-time charge to earnings during the third quarter of 1999 resulting from an agreement in principle reached to settle eight purported multi-state cases combined in the United States District Court in Boise, Idaho, which raised various issues including "off-the-clock" work allegations. The proposed settlement is subject to court approval. Under the proposed settlement agreement, current and former employees who meet eligibility criteria may present their claims to a settlement administrator. While the Company cannot specify the exact number of individuals who are likely to submit claims and the exact amount of their claims, the one-time charge is the Company's current estimate of the total monetary liability, including attorney fees, for all eight cases. The Company recorded an impairment charge to earnings during 1998 related to management's decision to close 16 underperforming stores in eight states. The $24 pre-tax charge included impaired real estate and equipment, as well as the present value of remaining liabilities under leases, net of expected sublease recoveries. Results of operations for 1997 included a pre-tax charge of $34 related to the sale of stock by a major stockholder and pre-tax charges of $13 related to the sale of a division of ASC's communication subsidiary. The Company's effective income tax rate from continuing operations for 1999 was 52.5%, as compared to 40.2% for 1998 and 41.0% for 1997. The increase for 1999 is primarily due to the non-deductible portion of merger-related costs. Due to the significance of the merger-related costs and other one-time expenses and their effect on operating results, the following table is presented to assist in the comparison of income statement components without these costs and expenses:
- ------------------------------------------------------------------------------------------------------------------------------------ 53 Weeks Ended 52 Weeks Ended 52 Weeks Ended February 3, 2000 January 28, 1999 January 29, 1998 - ------------------------------------------------------------------------------------------------------------------------------------ As Reported One-Time W/O One-Time W/O One-Time W/O One-Time - ------------------------------------------------------------------------------------------------------------------------------------ Sales $ 37,478 $ 37,478 100.00% $ 35,872 100.00% $ 33,828 100.00% Cost of sales 27,164 $ (42) 27,122 72.37 26,156 72.92 24,821 73.37 - ------------------------------------------------------------------------------------------------------------------------------------ Gross profit 10,314 42 10,356 27.63 9,716 27.08 9,007 26.63 Selling, general and administrative expense 8,641 (214) 8,427 22.49 7,845 21.87 7,330 21.67 Merger-related and exit costs 396 (396) Litigation settlement 37 (37) - ------------------------------------------------------------------------------------------------------------------------------------ Operating profit 1,240 689 1,929 5.15 1,871 5.22 1,677 4.96 Interest expense, net (353) 1 (352) (0.94) (337) (0.94) (294) (0.87) Other income, net 12 12 0.03 24 0.07 14 0.04 - ------------------------------------------------------------------------------------------------------------------------------------ Earnings before income taxes and extraordinary item 899 690 1,589 4.24 1,558 4.34 1,397 4.13 Income taxes 472 162 634 1.69 609 1.70 559 1.66 - ------------------------------------------------------------------------------------------------------------------------------------ Earnings before extraordinary item 427 528 955 2.55 949 2.65 838 2.48 Extraordinary loss on extinguishment of debt, net of tax benefit of $7 (23) 23 - ------------------------------------------------------------------------------------------------------------------------------------ Net earnings $ 404 $ 551 $ 955 2.55% $ 949 2.65% $ 838 2.48% - ------------------------------------------------------------------------------------------------------------------------------------
Page 4 The costs of integrating the two companies have and will result in significant non-recurring charges and incremental expenses. These costs had a material effect on 1999 results of operations of the Company and may have a significant effect on results of operations for the year 2000. The actual timing of the costs is, in part, dependent upon the actual timing of certain integration actions. Non-recurring charges and expenses of implementing integration actions are estimated to total $700 after income tax benefits. The cash portion of these charges is estimated at approximately $367. When reduced by the cash received from the sale of the stores required to be divested and the net proceeds from the sale of assets that will not be used in the combined company, the net positive cash flow will be approximately $276. The Company expects to incur additional after-tax merger-related costs of approximately $157 in future periods, which consist primarily of expected integration costs and costs associated with other consolidation activities for which plans have not yet been finalized. Liquidity and Capital Resources Cash provided by operating activities during 1999 was $1,397, compared to $1,447 in 1998 and $1,815 in 1997. Cash provided by operating activities during 1999 was negatively impacted by $230 for merger-related after-tax expenditures (the offsetting proceeds from divestitures is included with cash flow from investing activities). These expenditures include severance, transaction financing and integration costs. In addition, for fiscal 1999 a combination of increased inventories and the reduction of accounts payable leverage negatively impacted cash provided from operating activities. Fiscal 1998 cash provided from operating activities decreased from 1997 primarily due to higher inventories and the timing of cash payments related to insurance programs for workers' compensation and general liability. The Company has implemented several initiatives designed to enhance working capital which include reducing inventory levels and increasing accounts payable leverage. These improvements are expected to reduce the cash requirements of the business. The Company's financing activities for 1999 included net new borrowings of $441 and $265 for the payment of dividends (which represents 27.7% of 1999 net earnings without merger-related costs and one-time expenses). The Board of Directors at its March 2000 meeting increased the regular quarterly cash dividend to $0.19 per share, for an annual rate of $0.76 per share. The Company utilizes its commercial paper and bank line programs primarily to supplement cash requirements for seasonal fluctuations in working capital and to fund its capital expenditure program. Accordingly, commercial paper and bank line borrowings will fluctuate between reporting periods. The Company had $1,628 of commercial paper borrowings outstanding at February 3, 2000. Following the Merger, the Company consolidated several of the commercial paper, bank lines and other financing arrangements. The consolidation of debt included the repayment of ASC debt containing change of control provisions and the tender for, or open market purchases of, certain higher coupon debt. At the effective date of the Merger, approximately $900 of ASC's debt became due or callable by the creditors due to change of control provisions, of which approximately $700 was repaid, and a $200 term loan was amended to waive the change of control provision. In support of the Company's commercial paper program, the Company had two credit facilities totaling $2,100 during fiscal 1999. Effective March 2000, the Company entered into two new revolving credit agreements for $1,900. One agreement expires in 364 days for $950 and the second agreement expires in 5 years for the remaining $950. At the expiration of the 364-day credit agreement and upon due notice, the Company may extend the term for an additional 364-day period if the lenders holding at least 75% of the commitments agree. The 364-day agreement also contains an option which would allow the Company, upon due notice, to convert any outstanding amounts at the expiration date to term loans. The agreements contain certain covenants, the most restrictive of which requires the Company to maintain consolidated tangible net worth, as defined, of at least $2,100. In addition, the Company has uncommitted bank lines of credit totaling $345 million. As of February 3, 2000, no amounts were outstanding under the credit facilities or bank lines. Albertson's filed a shelf registration statement with the Securities and Exchange Commission (SEC), which became effective in February 1999 (the "1999 Registration Statement") to authorize the issuance of up to $2,500 in debt securities. The Company intends to use the net proceeds of any securities sold pursuant to the 1999 Registration Statement for retirement of debt and general corporate purposes. Page 5 In July 1999, the Company issued $1,300 of term notes under the 1999 Registration Statement. The notes are composed of $300 of principal bearing interest at 6.55% due August 1, 2004; $350 of principal bearing interest at 6.95% due August 1, 2009; and $650 of principal bearing interest at 7.45% due August 1, 2029. Proceeds were used primarily to repay borrowings under the Company's commercial paper program. Additional securities up to $1,200 remain available for issuance under the Company's 1999 Registration Statement. During 1998 Albertson's issued a total of $317 in medium-term notes under a shelf registration statement filed with the SEC in December 1997. Under a shelf registration statement filed with the SEC in May 1996, Albertson's issued $200 of medium-term notes in 1997. Proceeds from these issuances were used to reduce borrowings under Albertson's commercial paper program. On March 19, 1998, ASC issued $45 of 6.5% notes due March 20, 2008, under an outstanding Series B Medium-Term Note Program. On March 30, 1998, ASC issued an additional $100 of 7.1% notes due March 20, 2028, under the same program. Proceeds were used to refinance short-term debt and for general corporate purposes. The Company's operating results continue to enhance its financial position and ability to continue its planned expansion program. Cash flows from operations and available borrowings are sufficient for the future operating and capital needs of the Company. The following leverage ratios demonstrate the Company's levels of long-term financing as of the indicated year end:
- ------------------------------------------------------------------------------------------------------------------------------------ February 3, January 28, 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Long-term debt and capitalized lease obligations to capital (1) 46.7% 48.1% Long-term debt and capitalized lease obligations to total assets 31.8 33.8
(1) Capital includes long-term debt, capitalized lease obligations and stockholders' equity The Company continues to retain ownership of real estate when possible. As of February 3, 2000, the Company held title to the land and buildings of 39% of the Company's stores and held title to the buildings on leased land of an additional 7% of the Company's stores. The Company also holds title to the land and buildings of most of its administrative offices and distribution facilities. The Company is committed to keeping its stores up to date. In the last three years, the Company has opened or remodeled 796 stores representing 35% of the Company's retail square footage as of February 3, 2000. The following summary of historical capital expenditures includes capital leases, stores acquired in business and asset acquisitions, assets acquired with related debt and the estimated fair value of property financed by operating leases:
- ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ New and acquired stores $ 1,126 $ 1,146 $ 948 Remodels 296 299 216 Retail replacement equipment and technological upgrades 151 239 280 Distribution facilities and equipment 198 139 110 Other 97 50 105 - ------------------------------------------------------------------------------------------------------------------------------------ Total capital expenditures 1,868 1,873 1,659 Estimated fair value of property financed by operating leases 230 224 205 - ------------------------------------------------------------------------------------------------------------------------------------ $ 2,098 $ 2,097 $ 1,864 - ------------------------------------------------------------------------------------------------------------------------------------
The Company's strong financial position provides the flexibility for the Company to grow through its store development program and future acquisitions. Page 6 Recent Accounting Standards In June 1998 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." This new standard establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This standard, as amended by SFAS No. 137, is effective for the Company's 2001 fiscal year. The Company has not yet completed its evaluation of this standard or its impact on the Company's accounting and reporting requirements. Quantitative and Qualitative Disclosures about Market Risk The Company is exposed to certain market risks that are inherent in the Company's financial instruments which arise from transactions entered into in the normal course of business. From time to time, the Company enters into derivative transactions. The objective of these derivative transactions is to reduce the Company's exposure to changes in interest rates, and each transaction is evaluated periodically by the Company for changes in market value and counterparty credit exposure. The Company is subject to interest rate risk on its fixed interest rate debt obligations. Commercial paper borrowings do not give rise to significant interest rate risk because these borrowings have maturities of less than three months. Generally, the fair value of debt with a fixed interest rate will increase as interest rates fall, and the fair value will decrease as interest rates rise. The Company manages its exposure to interest rate risk by utilizing a combination of fixed rate borrowings and commercial paper borrowings. During 1997 ASC entered into a $300 five-year LIBOR basket swap. The LIBOR basket swap agreement diversified the indices used to determine the interest rate on a portion of ASC's variable rate debt by providing for payments based on an average of foreign LIBOR indices which are reset every three months and also provided for a maximum interest rate of 8.0%. The Company recognized no income or expense in 1998 or 1997 related to this swap. During 1999 ASC terminated the LIBOR basket swap and recognized a loss of $1. There have been no material changes in the primary risk exposures or management of the risks since the prior year. The Company expects to continue to manage risks in accordance with the current policy. The table below provides information about the Company's debt obligations that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates:
- ------------------------------------------------------------------------------------------------------------------------------------ There- Fair 2000 2001 2002 2003 2004 after Total Value - ------------------------------------------------------------------------------------------------------------------------------------ Debt obligations (excluding commercial paper): Fixed rate $ 395 $ 43 $ 105 $ 104 $ 504 $ 2,649 $ 3,800 $ 3,718 Weighted average interest rate 6.7% 5.3% 10.4% 7.3% 6.6% 7.3% 7.2%
Page 7 Environmental The Company has identified environmental contamination sites related primarily to underground petroleum storage tanks and ground water contamination at various store, warehouse, office and manufacturing facilities (related to current operations as well as previously disposed of businesses). The Company conducts an ongoing program for the inspection and evaluation of new sites proposed to be acquired by the Company and the remediation/monitoring of contamination at existing and previously owned sites. Undiscounted reserves have been established for each environmental contamination site unless an unfavorable outcome is remote. Although the ultimate outcome and expense of environmental remediation is uncertain, the Company believes that required remediation and continuing compliance with environmental laws, in excess of current reserves, will not have a material adverse effect on the financial condition of the Company. Charges against earnings for environmental remediation were not material in 1999, 1998 or 1997. Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private Securities Litigation Reform Act of 1995 From time to time, information provided by the Company, including written or oral statements made by its representatives, may contain forward-looking information as defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as integration of the ASC operations, expansion and growth of the Company's business, future capital expenditures and the Company's business strategy, contain forward-looking information. In reviewing such information it should be kept in mind that actual results may differ materially from those projected or suggested in such forward-looking information. This forward-looking information is based on various factors and was derived utilizing numerous assumptions. Many of these factors have previously been identified in filings or statements made by or on behalf of the Company. Important assumptions and other important factors that could cause actual results to differ materially from those set forth in the forward-looking information include changes in the general economy, changes in consumer spending, competitive factors and other factors affecting the Company's business in or beyond the Company's control. These factors include changes in the rate of inflation, changes in state or federal legislation or regulation, adverse determinations with respect to litigation or other claims (including environmental matters), labor negotiations, the Company's ability to recruit and develop associates, its ability to develop new stores or complete remodels as rapidly as planned, its ability to implement new technology successfully, stability of product costs and the Company's ability to integrate the operations of ASC. Other factors and assumptions not identified above could also cause the actual results to differ materially from those set forth in the forward-looking information. The Company does not undertake to update forward-looking information contained herein or elsewhere to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking information. Page 8 Consolidated Earnings
- ------------------------------------------------------------------------------------------------------------------------------------ 53 Weeks 52 Weeks 52 Weeks February 3, January 28, January 29, (In millions, except per share data) 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Sales $ 37,478 $ 35,872 $ 33,828 Cost of sales 27,164 26,156 24,821 - ------------------------------------------------------------------------------------------------------------------------------------ Gross profit 10,314 9,716 9,007 Selling, general and administrative expenses 8,641 7,846 7,330 Merger-related and exit costs 396 195 13 Litigation settlement 37 Impairment - store closures 24 - ------------------------------------------------------------------------------------------------------------------------------------ Operating profit 1,240 1,651 1,664 Other (expenses) income: Interest, net (353) (337) (294) Shareholder related expense (34) Other, net 12 24 14 - ------------------------------------------------------------------------------------------------------------------------------------ Earnings before income taxes and extraordinary item 899 1,338 1,350 Income taxes 472 537 553 - ------------------------------------------------------------------------------------------------------------------------------------ Earnings before extraordinary item 427 801 797 Extraordinary loss on extinguishment of debt, net of tax benefit of $7 (23) - ------------------------------------------------------------------------------------------------------------------------------------ Net Earnings $ 404 $ 801 $ 797 - ------------------------------------------------------------------------------------------------------------------------------------ Basic Earnings Per Share: Earnings before extraordinary item $ 1.01 $ 1.91 $ 1.89 Extraordinary item (.05) - ------------------------------------------------------------------------------------------------------------------------------------ Net Earnings $ 0.96 $ 1.91 $ 1.89 - ------------------------------------------------------------------------------------------------------------------------------------ Diluted Earnings Per Share: Earnings before extraordinary item $ 1.00 $ 1.90 $ 1.88 Extraordinary item (.05) - ------------------------------------------------------------------------------------------------------------------------------------ Net Earnings $ 0.95 $ 1.90 $ 1.88 - ------------------------------------------------------------------------------------------------------------------------------------ Weighted Average Common Shares Outstanding: Basic 422 419 422 Diluted 423 422 423
See Notes to Consolidated Financial Statements Page 9 Consolidated Balance Sheets
- ------------------------------------------------------------------------------------------------------------------------------------ February 3, January 28, (In millions, except per share data) 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Assets Current Assets: Cash and cash equivalents $ 231 $ 116 Accounts and notes receivable, net 587 612 Inventories 3,481 3,249 Prepaid expenses 154 98 Property held for resale 100 Deferred income taxes 29 133 - ------------------------------------------------------------------------------------------------------------------------------------ Total Current Assets 4,582 4,208 Land, Buildings and Equipment, net 8,913 8,545 Goodwill, net 1,582 1,738 Other Assets 624 640 - ------------------------------------------------------------------------------------------------------------------------------------ Total Assets $ 15,701 $ 15,131 - ------------------------------------------------------------------------------------------------------------------------------------ Liabilities and Stockholders' Equity Current Liabilities Accounts payable $ 2,132 $ 2,185 Salaries and related liabilities 555 512 Taxes other than income taxes 172 169 Income taxes 82 50 Self-insurance 184 173 Unearned income 110 101 Merger-related reserves 33 Current portion of capitalized lease obligations 19 18 Current maturities of long-term debt 623 50 Other 145 93 - ------------------------------------------------------------------------------------------------------------------------------------ Total Current Liabilities 4,055 3,351 Long-Term Debt 4,805 4,905 Capitalized Lease Obligations 187 202 Self-Insurance 219 315 Deferred Income Taxes 52 208 Other Long-Term Liabilities and Deferred Credits 681 628 Commitments and Contingencies Stockholders' Equity: Preferred stock - $1.00 par value; authorized - 10 shares; designated - 3 shares of Series A Junior Participating; issued - none Common stock - $1.00 par value; authorized - 1,200 shares; issued - 424 shares and 435 shares, respectively 424 435 Capital in excess of par 145 579 Retained earnings 5,133 5,027 Treasury stock - 15 shares as of January 28, 1999 (519) - ------------------------------------------------------------------------------------------------------------------------------------ Total Stockholders' Equity 5,702 5,522 - ------------------------------------------------------------------------------------------------------------------------------------ Total Liabilities and Stockholders' Equity $ 15,701 $ 15,131 - ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements Page 10 Consolidated Cash Flows
- ------------------------------------------------------------------------------------------------------------------------------------ 53 Weeks 52 Weeks 52 Weeks February 3, January 28, January 29, (In millions) 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Cash Flows From Operating Activities: Net earnings $ 404 $ 801 $ 797 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 854 806 745 Goodwill amortization 58 57 53 Noncash merger-related charges 271 195 Impairment - store closures 24 Net (gain) loss on asset sales (2) (14) 6 Net deferred income taxes (52) (72) 4 Increase in cash surrender value of Company-owned life insurance (12) (23) (14) Changes in operating assets and liabilities, net of business acquisitions: Receivables and prepaid expenses 45 (56) (105) Inventories (233) (157) (96) Accounts payable (53) 7 377 Other current liabilities 138 54 37 Self-insurance (85) (134) (14) Unearned income 76 (12) 42 Other long-term liabilities (12) (29) (17) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 1,397 1,447 1,815 - ------------------------------------------------------------------------------------------------------------------------------------ Cash Flows From Investing Activities: Capital expenditures (1,837) (1,626) (1,632) Proceeds from divestitures and duplicate assets 393 Proceeds from disposals of land, buildings and equipment 83 162 70 Business acquisitions, net of cash acquired (260) Increase in other assets (115) (97) (138) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash used in investing activities (1,476) (1,821) (1,700) - ------------------------------------------------------------------------------------------------------------------------------------ Cash Flows From Financing Activities: Proceeds from long-term borrowings 1,841 462 734 Payments on long-term borrowings (970) (213) (179) Net commercial paper activity and bank borrowings (430) 300 210 Proceeds from stock options exercised 32 66 50 Cash dividends paid (265) (263) (253) Tax payments for options exercised (14) Treasury stock purchases and retirements (18) (745) Issuance of common stock 96 - ------------------------------------------------------------------------------------------------------------------------------------ Net cash provided by (used in) financing activities 194 334 (87) - ------------------------------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) in Cash and Cash Equivalents 115 (40) 28 Cash and Cash Equivalents at Beginning of Year 116 156 128 - ------------------------------------------------------------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Year $ 231 $ 116 $ 156 - ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements Page 11 Consolidated Stockholders' Equity
- ------------------------------------------------------------------------------------------------------------------------------------ Common Capital Stock In Excess $1.00 Par of Par Retained Treasury (Dollars in millions) Value Value Earnings Stock Total - ------------------------------------------------------------------------------------------------------------------------------------ Balance at January 30, 1997 $ 439 $ 324 $ 4,145 $ (114) $ 4,794 Net earnings 797 797 Issuance of 1,041,010 shares of stock for stock options, awards and Employee Stock Purchase Plan (ESPP) 6 25 31 Exercise of stock options 3 3 Tax benefits related to stock options 4 4 Stock purchase incentive plan 10 10 Treasury stock purchases and retirements (4) (3) (185) (551) (743) Shares related to directors' stock compensation plan - 121,590 shares 4 4 Stock issuance - 2,912,094 shares 36 60 96 Dividends (255) (255) - ------------------------------------------------------------------------------------------------------------------------------------ Balance at January 29, 1998 435 384 4,502 (580) 4,741 Net earnings 801 801 Issuance of 1,989,505 shares of stock for stock options, awards and ESPP (11) 63 52 Merger-related stock option charge 195 195 Exercise of stock options 3 3 Tax benefits related to stock options 10 10 Treasury stock purchases and retirements (6) (10) (2) (18) Stock purchase incentive plan 1 1 Shares related to directors' stock compensation plan - 12,633 shares 3 3 Dividends (266) (266) - ------------------------------------------------------------------------------------------------------------------------------------ Balance at January 28, 1999 435 579 5,027 (519) 5,522 Net earnings 404 404 Issuance of 131,099 shares of stock for stock options and awards (1) 4 3 Merger-related stock option charge 47 47 Exercise of stock options 1 19 20 Tax benefits related to stock options 11 11 Treasury and fractional share retirements (14) (496) 510 Shares issued for limited stock appreciation rights 2 (16) (14) Stock purchase incentive plan 2 5 7 Dividends (298) (298) - ------------------------------------------------------------------------------------------------------------------------------------ Balance at February 3, 2000 $ 424 $ 145 $ 5,133 $ 5,702 - ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements Page 12 Notes to Consolidated Financial Statements (Dollars in millions, except per share data) Basis of Presentation On August 2, 1998, Albertson's, Inc. ("Albertson's" or the "Company") and American Stores Company ("ASC") entered into a definitive merger agreement ("Merger Agreement") whereby Albertson's would acquire ASC by exchanging 0.63 share of Albertson's common stock for each outstanding share of ASC common stock, with cash being paid in lieu of fractional shares (the "Merger") and ASC would become a wholly owned subsidiary of Albertson's. In addition, outstanding rights to receive ASC common stock under ASC stock option plans would be converted into rights to receive equivalent Albertson's common stock. The Merger was consummated on June 23, 1999, with the issuance of approximately 177 million shares of Albertson's common stock. The Merger constituted a tax-free reorganization and has been accounted for as a pooling of interests for accounting and financial reporting purposes. The pooling of interests method of accounting is intended to present as a single interest, two or more common stockholders' interests that were previously independent; accordingly, these consolidated financial statements restate the historical financial statements as though the companies had always been combined. The restated consolidated financial statements are adjusted to conform accounting policies and financial statement presentations. There were no material conforming adjustments. The Company The Company is incorporated under the laws of the State of Delaware and is the successor to a business founded by J. A. Albertson in 1939. Based on sales, the Company is the second largest retail food and drug chain in the United States. As of February 3, 2000, the Company operated 2,492 stores in 37 Western, Midwestern, Eastern and Southern states. Retail operations are supported by 21 major Company distribution operations, strategically located in the Company's operating markets. Summary of Significant Accounting Policies Fiscal Year End The Company's fiscal year is generally 52 weeks and periodically consists of 53 weeks because the fiscal year ends on the Thursday nearest to January 31 (the Saturday nearest to January 31 for ASC during fiscal years 1998 and 1997). During fiscal 1999, ASC's fiscal year was converted from a Saturday year end to a Thursday year end. Unless the context otherwise indicates, reference to a fiscal year of the Company refers to the calendar year in which such fiscal year commences. Consolidation The consolidated financial statements include the results of operations, account balances and cash flows of the Company and its subsidiaries. All material intercompany balances have been eliminated. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Investments, which consist of government-backed money market funds and repurchase agreements backed by government securities, are recorded at cost which approximates market value. Inventories The Company values inventories at the lower of cost or market. Cost of substantially all inventories is determined on a last-in, first-out (LIFO) basis. Capitalization, Depreciation and Amortization Land, buildings and equipment are recorded at cost. Depreciation is provided on the straight-line method over the estimated useful life of the asset. Estimated useful lives are generally as follows: buildings and improvements--10 to 35 years; fixtures and equipment--3 to 10 years; leasehold improvements--10 to 25 years; and capitalized leases--20 to 30 years. Long-lived assets are reviewed for impairment whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable. The costs of major remodeling and improvements on leased stores are capitalized as leasehold improvements. Leasehold improvements are amortized on the straight-line method over the shorter of the life of the applicable lease or the useful life of the asset. Capital leases are recorded at the lower of the fair market value of the asset or the present value of future minimum lease payments. These leases are amortized on the straight-line method over their primary term. Page 13 Beneficial lease rights and lease liabilities are recorded on purchased leases based on differences between contractual rents under the respective lease agreements and prevailing market rents at the date of the acquisition of the lease. Beneficial lease rights are amortized over the lease term using the straight-line method. Lease liabilities are amortized over the lease term using the interest method. Goodwill Goodwill resulting from business acquisitions represents the excess of cost over fair value of net assets acquired and is being amortized over 40 years using the straight-line method. Goodwill is principally from the acquisition of Lucky Stores, Inc. in 1988. Accumulated amortization amounted to $602 and $581 in 1999 and 1998, respectively. Periodically, the Company re-evaluates goodwill and other intangibles based on undiscounted operating cash flows whenever significant events or changes occur which might impair recovery of recorded asset costs. Self-Insurance The Company is partially self-insured for property loss, workers' compensation and general liability costs. For ASC, beginning in fiscal 1998, insurance was purchased for workers' compensation, general liability and automotive liability coverage. Self-insurance liabilities are based on claims filed and estimates for claims incurred but not reported. These liabilities are not discounted. Unearned Income Unearned income consists primarily of buying and promotional allowances received from vendors in connection with the Company's buying and merchandising activities. These funds are recognized as revenue when earned by purchasing amounts of product, promoting certain products or passage of time, as specified in the related agreements. Store Opening and Closing Costs Noncapital expenditures incurred in opening new stores or remodeling existing stores are expensed in the year in which they are incurred. When a store is closed, the remaining investment in land, buildings and equipment, net of expected recovery value, is expensed. For properties under operating lease agreements, the present value cost of any remaining liability under the lease, net of expected sublease recovery, is also expensed. Advertising Advertising costs incurred to produce media advertising for major new campaigns are expensed in the year in which the advertising first takes place. Other advertising costs are expensed when incurred. Cooperative advertising income from vendors is recorded in the period in which the related expense is incurred. Gross advertising expenses of $583, $518 and $497 excluding cooperative advertising income from vendors, were included with cost of sales in the Company's Consolidated Earnings for 1999, 1998 and 1997, respectively. Stock Options Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. Accordingly, compensation cost of stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the option exercise price and is charged to operations over the vesting period. Income tax benefits attributable to stock options exercised are credited to capital in excess of par value. Company-owned Life Insurance The Company has purchased life insurance policies to cover its obligations under certain deferred compensation plans for officers and directors. Cash surrender values of these policies are adjusted for fluctuations in the market value of underlying investments. The cash surrender value is adjusted each reporting period and any gain or loss is included with other income (expense) in the Company's Consolidated Earnings Statement. Income Taxes The Company provides for deferred income taxes resulting from temporary differences in reporting certain income and expense items for income tax and financial accounting purposes. The major temporary differences and their net effect are shown in the "Income Taxes" note. Amortization of goodwill is generally not deductible for purposes of calculating income tax provisions. Earnings Per Share (EPS) Basic EPS is computed by dividing consolidated net earnings by the weighted average number of common shares outstanding. Diluted EPS is computed by dividing consolidated net earnings by the sum of the weighted average number of common shares outstanding and the weighted average number of potential common shares outstanding. Potential common shares consist solely of outstanding options under the Company's stock option plans. Outstanding options excluded in 1999 and 1997 (option price exceeded the average market price during the period) amounted to 3.5 million shares and 4.3 million shares, respectively. There were no outstanding options excluded from the computation of potential common shares in 1998. For purposes of the EPS calculation, all shares and potential Page 14 common shares of ASC were converted at the 0.63 to 1 exchange ratio. In connection with the Merger, certain options of ASC were exchanged for shares of Albertson's based on the fair value of the options, including contractual rights. Reclassifications Certain reclassifications have been made in prior years' financial statements to conform to classifications used in the current year. Use of Estimates The preparation of the Company's consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Merger, Divestitures and Related Costs The following table compares amounts previously reported by Albertson's and ASC prior to the Merger transaction and the combined amounts for fiscal 1998 and 1997:
- ------------------------------------------------------------------------------------------------------------------------------------ Albertson's ASC Combined - ------------------------------------------------------------------------------------------------------------------------------------ 1998: Net revenues $ 16,005 $ 19,867 $ 35,872 Net earnings 567 234 801 1997: Net revenues 14,690 19,138 33,828 Net earnings 517 280 797
In connection with the Merger, the Company entered into agreements with the Attorneys General of California, Nevada and New Mexico and the Federal Trade Commission to enable the Merger to proceed under applicable antitrust, competition and trade regulation law. The agreements required the Company to divest a total of 117 stores in California, 19 stores in Nevada and 9 stores in New Mexico. Of the stores required to be divested, 40 were ASC locations operated primarily under the Lucky name, and 105 were Albertson's stores operated primarily under the Albertson's name. In addition, the Company divested four supermarket real estate sites as required by the agreements. The stores identified for disposition had sales of $2,300 in fiscal 1998. The Company had divested 144 of the required 145 stores as of February 3, 2000. Results of operations for year ended February 3, 2000, include $683 of merger-related costs ($529 after tax). The following table presents the pre-tax costs incurred by category of expenditure and merger-related accruals included in the Company's Consolidated Balance Sheet:
- ------------------------------------------------------------------------------------------------------------------------------------ Exit Merger Extraordinary Period Costs Charge Loss Costs Total - ------------------------------------------------------------------------------------------------------------------------------------ Severance costs $ 99 $ 8 $ 9 $ 116 Write-down of assets to net realizable value 239 12 251 Transaction and financing costs $ 31 71 102 Integration costs 3 164 167 Stock option charge 47 47 - ------------------------------------------------------------------------------------------------------------------------------------ Total costs 338 58 31 256 683 Cash expenditures (75) (8) (31) (252) (366) Write-down of assets to net realizable value (237) (237) Stock option charge (47) (47) - ------------------------------------------------------------------------------------------------------------------------------------ Merger-related accruals at February 3, 2000 $ 26 $ 3 $ 4 $ 33 - ------------------------------------------------------------------------------------------------------------------------------------
Page 15 Severance costs consist of obligations to employees who were terminated or were notified of termination under a plan authorized by senior management. Approximately 625 employees will be severed as a result of the Merger, of which 499 were terminated as of February 3, 2000. The write-down of assets to net realizable value includes the expected loss on disposal of stores required to be divested and duplicate and abandoned facilities, including administrative offices, intangibles and information technology equipment which were abandoned by the Company or are being held for sale. The estimated fair value of assets held for sale has been determined using negotiated sales prices or independent appraisals. Transaction and financing costs consist primarily of professional fees paid for investment banking, legal, accounting, printing and regulatory filing fees. Financing costs also include the extraordinary loss on extinguishment of debt. Integration costs consist primarily of incremental transition and integration costs associated with integrating the operations of Albertson's and ASC and are being expensed as incurred. As discussed in the Stock Options and Stock Awards Note, the Company recorded net pre-tax charges through the first two quarters of 1999 of $47 related to limited stock appreciation rights (LSARs). The actual change of control price used to measure the value of these exercised LSARs became determinable at the date the Merger was consummated. The costs of integrating the two companies have and will result in significant non-recurring charges and incremental expenses. These costs have had a material effect on 1999 results of operations of the Company and may have a significant effect on results of operations for the year 2000. The actual timing of the costs is, in part, dependent upon the actual timing of certain integration actions. Non-recurring charges and expenses of implementing integration actions are estimated to total $700 after income tax benefits. The cash portion of these charges is estimated at approximately $367. When reduced by the cash received from the sale of the stores required to be divested and the net proceeds from the sale of assets that will not be used in the combined company, the net positive cash flow will be approximately $276. The Company expects to incur additional after-tax merger-related costs of approximately $157 in future periods, which consist primarily of expected integration costs and costs associated with other consolidation activities for which plans have not yet been finalized. Supplemental Cash Flow Information Selected cash payments and noncash activities were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Cash payments for income taxes $ 520 $ 589 $ 547 Cash payments for interest, net of amounts capitalized 413 331 270 Noncash investing and financing activities: Tax benefits related to stock options 11 10 4 Capitalized lease obligations incurred 24 25 27 Capitalized lease obligations terminated 14 6 2 Liabilities assumed in connection with asset acquisitions 7 2
Business Acquisitions During 1998, the Company acquired 64 stores in three separate stock purchase acquisitions and 15 stores in an asset acquisition transaction. In connection with one of the stock purchase acquisitions, the Company agreed with the Federal Trade Commission to divest nine of the acquired stores and six previously owned stores. These four acquisition transactions had a combined purchase price of $302. The above acquisitions were accounted for using the purchase method of accounting. The results of operations of the acquired businesses have been included in the consolidated financial statements from their date of acquisition. Pro forma results of operations have not been presented due to the immaterial effects of these acquisitions on the Company's consolidated operations. For these acquisitions, the excess of the purchase price over the fair market value of net assets acquired, of $151, was allocated to goodwill which is being amortized over 40 years. Page 16 Accounts and Notes Receivable Accounts and notes receivable consist of the following:
- ------------------------------------------------------------------------------------------------------------------------------------ February 3, January 28, 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Trade and other accounts receivable $ 603 $ 620 Current portion of notes receivable 15 11 Allowance for doubtful accounts (31) (19) - ------------------------------------------------------------------------------------------------------------------------------------ $ 587 $ 612 - ------------------------------------------------------------------------------------------------------------------------------------
Inventories Approximately 96% of the Company's inventories are valued using the last-in, first-out (LIFO) method. If the first-in, first-out (FIFO) method had been used, inventories would have been $615 and $585 higher at the end of 1999 and 1998, respectively. Net earnings (basic and diluted earnings per share) would have been higher by $18 ($0.04) in 1999, $10 ($0.02) in 1998 and $7 ($0.02) in 1997. The replacement cost of inventories valued at LIFO approximates FIFO cost. Land, Buildings and Equipment, net Land, buildings and equipment, net, consist of the following:
- ------------------------------------------------------------------------------------------------------------------------------------ February 3, January 28, 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Land $ 1,999 $ 1,878 Buildings 4,908 4,748 Fixtures and equipment 5,309 5,044 Leasehold improvements 1,456 1,301 Capitalized leases 328 350 - ------------------------------------------------------------------------------------------------------------------------------------ 14,000 13,321 Accumulated depreciation and amortization (5,087) (4,776) - ------------------------------------------------------------------------------------------------------------------------------------ $ 8,913 $ 8,545 - ------------------------------------------------------------------------------------------------------------------------------------
Page 17 Indebtedness Long-term debt consists of the following (borrowings are unsecured unless indicated):
- ------------------------------------------------------------------------------------------------------------------------------------ February 3, January 28, 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Commercial paper and bank lines of credit $ 1,628 $ 1,719 7.45% Debentures due August 1, 2029 650 6.95% Notes due August 1, 2009 350 6.55% Notes due August 1, 2004 300 Medium-term notes, due 2013 through 2028, average interest rate of 6.5% 317 317 Medium-term notes, due 2007 through 2027, average interest rate of 6.8% 200 200 7.75% Debentures due June 2026 200 200 6.375% Notes due June 2000 200 200 Medium-term notes due 2000, average interest rate of 6.1% 90 90 7.5% Debentures due 2037 200 200 8.0% Debentures due 2026 272 350 7.9% Debentures due 2017 95 100 7.4% Notes due 2005 200 200 Medium-term notes, due 2000 through 2028, average interest rate of 7.3% 295 295 9.125% Notes due 2002 80 249 Notes due 2004, average interest rates of 6.5% and 6.3%, respectively 200 200 Revolving credit facilities, effectively due 2002, average interest rate of 5.8% 325 Other bank borrowings due 2000, average interest rate of 6.6% 75 10.63% Notes, due 2004 93 Industrial revenue bonds, average interest rate of 6.1% 14 15 Secured mortgage notes and other notes payable, average interest rates of 8.2% and 11.0%, respectively 137 127 - ------------------------------------------------------------------------------------------------------------------------------------ 5,428 4,955 Current maturities (623) (50) - ------------------------------------------------------------------------------------------------------------------------------------ $ 4,805 $ 4,905 - ------------------------------------------------------------------------------------------------------------------------------------
Interest rates on the outstanding commercial paper borrowings as of February 3, 2000, ranged from 4.6% to 6.0% with an effective weighted average rate of 5.2%. The Company has established the necessary credit facilities, through its revolving credit agreements, to refinance the commercial paper and bank line borrowings on a long-term basis. The majority of these borrowings have been classified as noncurrent because it is the Company's intent to refinance these obligations on a long-term basis. Following the Merger the Company consolidated several of the commercial paper, bank lines and other financing arrangements. The consolidation of debt included the repayment of outstanding amounts under ASC's revolving credit facilities and other debt containing change of control provisions and the tender for, or open market purchases of, certain higher coupon debt. As a result, the following debt was extinguished:
- ------------------------------------------------------------------------------------------------------------------------------------ Triggering Factor Amount Extinguished - ------------------------------------------------------------------------------------------------------------------------------------ Revolving Credit Facility Change of control $ 500 Bank borrowing due 2000 Change of control 75 10.63% Note due in 2004 Change of control 93 9.125% Notes due 2002 Tender offer 169 8.0% Debentures due 2026 Open market purchases 78 7.9% Debentures due 2017 Open market purchases 5
Page 18 In July 1999 the Company issued $500 million of floating rate notes. The notes are due July 2000 and bear interest based on LIBOR commercial paper rates that reset monthly. As of February 3, 2000, the interest rate was 5.8% on the outstanding notes. These notes were issued under the Company's commercial paper program. The Company had two credit facilities totaling $2,100 during fiscal 1999. In addition, the Company had uncommitted bank lines of credit totaling $345. No borrowings were outstanding under either credit facility or bank lines as of February 3, 2000. Effective March 2000, the Company entered into two new revolving credit agreements for $1,900. One agreement expires in 364 days for $950 and the second agreement expires in 5 years for the remaining $950. At the expiration of the 364-day credit agreement and upon due notice, the Company may extend the term for an additional 364-day period if lenders holding at least 75% of commitments agree. The 364-day agreement also contains an option which would allow the Company, upon due notice, to convert any outstanding amounts at the expiration date to term loans. The agreements contain certain covenants, the most restrictive of which requires the Company to maintain consolidated tangible net worth, as defined, of at least $2,100. Albertson's filed a shelf registration statement with the Securities and Exchange Commission (SEC), which became effective in February 1999 (the "1999 Registration Statement") to authorize the issuance of up to $2,500 in debt securities. The Company intends to use the net proceeds of any securities sold pursuant to the 1999 Registration Statement for retirement of debt and general corporate purposes. In July 1999 the Company issued $1,300 of term notes under the 1999 Registration Statement. The notes are comprised of: $300 of principal bearing interest at 6.55% due August 1, 2004; $350 of principal bearing interest at 6.95% due August 1, 2009; and $650 of principal bearing interest at 7.45% due August 1, 2029. Proceeds were used primarily to repay borrowings under the Company's commercial paper program. Additional securities up to $1,200 remain available for issuance under the Company's 1999 Registration Statement. In July 1999 the Company negotiated an amendment to a $200 term loan agreement between ASC and a group of commercial banks. The amended fixed rate loans carry interest based upon a pricing schedule (which averages 6.45%) dependent upon the Company's long-term debt rating, and mature July 3, 2004. During 1998 Albertson's issued a total of $317 in medium-term notes under a $500 shelf registration statement filed with the SEC in December 1997. The remaining authorization of $183 under the 1997 shelf registration statement was rolled into the 1999 Registration Statement. Under a shelf registration statement filed with the SEC in May 1996, Albertson's issued $200 of medium-term notes in 1997. Proceeds from these issuances were used to reduce borrowings under Albertson's commercial paper program. On March 19, 1998, ASC issued $45 of 6.5% notes due March 20, 2008, under an outstanding Series B Medium-term Note Program. On March 30, 1998, ASC issued an additional $100 of 7.1% notes due March 20, 2028, under the same program. Proceeds were used to refinance short-term debt and for general corporate purposes. The Company has pledged real estate with a cost of $11 as collateral for a mortgage note which is payable semiannually, including interest at a rate of 16.5%. The note matures from 2000 to 2013. Medium-term notes of $30 due July 2027 contain a put option which would require the Company to repay the notes in July 2007 if the holder of the note so elects by giving the Company a 60-day notice. Medium-term notes of $50 due April 2028 contain a put option which would require the Company to repay the notes in April 2008 if the holder of the note so elects by giving the Company a 60-day notice. The $200 of 7.5% debentures due 2037 contain a put option which will require the Company to repay the note in 2009 if the holder of the notes so elects by giving the Company a 60-day notice. Page 19 Net interest expense was as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Debt $ 350 $ 322 $ 288 Capitalized leases 27 25 22 Capitalized interest (26) (17) (25) - ------------------------------------------------------------------------------------------------------------------------------------ Interest expense 351 330 285 Net bank service charges 2 7 9 - ------------------------------------------------------------------------------------------------------------------------------------ $ 353 $ 337 $ 294 - ------------------------------------------------------------------------------------------------------------------------------------
The scheduled aggregate maturities of long-term debt outstanding at February 3, 2000, are summarized as follows: $623 in 2000, $1,443 in 2001, $105 in 2002, $104 in 2003, $504 in 2004 and $2,649 thereafter. Capital Stock On December 2, 1996, the Board of Directors adopted a stockholder rights plan, which was amended on August 2, 1998, and March 16, 1999, under which all stockholders receive one right for each share of common stock held. Each right will entitle the holder to purchase, under certain circumstances, one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $1.00 per share, of the Company (the "preferred stock") at a price of 160 dollars. Subject to certain exceptions, the rights will become exercisable for shares of preferred stock 10 business days (or such later date as may be determined by the Board of Directors) following the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning 15% or more of the outstanding shares of common stock. Under the plan, subject to certain exceptions, if any person or group as defined by the plan, becomes the beneficial owner of 15% or more of the outstanding common stock or takes certain other actions, each right will then entitle its holder as defined by the plan, other than such person or group, upon payment of the 160 dollars exercise price, to purchase common stock (or, in certain circumstances, cash, property or other securities of the Company) with a value equal to twice the exercise price. The rights may be redeemed by the Board of Directors at a price of $0.001 per right under certain circumstances. The rights, which do not vote and are not entitled to dividends, will expire at the close of business on March 21, 2007, unless earlier redeemed or extended by the Board of Directors of the Company. In connection with the Merger, no person or group became the beneficial owner of 15% or more of the common stock. The Board of Directors adopted a program on March 2, 1998 which authorized the Company to purchase and retire up to 5 million shares of its common stock. On August 2, 1998, the Board of Directors rescinded the remaining authorization in connection with the Merger. On April 8, 1997, ASC (i) repurchased 15 million equivalent common shares from its former chairman, certain of his family members and charitable trusts (the "Selling Stockholders") for an aggregate price of $550 and (ii) sold 3 million equivalent common shares for net proceeds of $96 pursuant to the exercise of an over-allotment option by the underwriters in connection with a public offering of shares by the Selling Stockholders. Page 20 Income Taxes Deferred tax assets and liabilities consist of the following:
- ------------------------------------------------------------------------------------------------------------------------------------ February 3, January 28, 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Deferred tax assets (no valuation allowance considered necessary): Basis in fixed assets $ 123 $ 76 Self-insurance 174 199 Compensation and benefits 181 204 Unearned income 36 31 Other, net 140 127 - ------------------------------------------------------------------------------------------------------------------------------------ Total deferred tax assets 654 637 - ------------------------------------------------------------------------------------------------------------------------------------ Deferred tax liabilities: Basis in fixed assets and capitalized leases (515) (564) Inventories (105) (94) Compensation and benefits (33) (30) Other, net (24) (24) - ------------------------------------------------------------------------------------------------------------------------------------ Total deferred tax liabilities (677) (712) - ------------------------------------------------------------------------------------------------------------------------------------ Net deferred tax liability $ (23) $ (75) - ------------------------------------------------------------------------------------------------------------------------------------
As a result of an acquisition that occurred during 1998, the Company acquired federal and state net operating loss carryforwards with a remaining balance of $13 and $14, respectively, that will expire in various years through 2010. Based on management's assessment, it is more likely than not that all of the deferred tax assets associated with the net operating loss carryforwards will be realized; therefore, no valuation allowance is considered necessary. Income tax expense on continuing operations consists of the following:
- ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Current: Federal $ 476 $ 537 $ 488 State 48 72 61 - ------------------------------------------------------------------------------------------------------------------------------------ 524 609 549 - ------------------------------------------------------------------------------------------------------------------------------------ Deferred: Federal (47) (63) 4 State (5) (9) - ------------------------------------------------------------------------------------------------------------------------------------ (52) (72) 4 - ------------------------------------------------------------------------------------------------------------------------------------ $ 472 $ 537 $ 553 - ------------------------------------------------------------------------------------------------------------------------------------
Page 21 The reconciliations between the federal statutory tax rate and the Company's effective tax rates are as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ 1999 Percent 1998 Percent 1997 Percent - ------------------------------------------------------------------------------------------------------------------------------------ Taxes computed at statutory rate $ 315 35.0 $ 468 35.0 $ 473 35.0 State income taxes net of federal income tax benefit 28 3.2 51 3.8 53 3.9 Expenses for repurchase of major stockholder's common stock 12 0.9 Goodwill amortization 22 2.4 22 1.6 21 1.6 Merger-related charges 115 12.8 15 1.1 Other (8) (0.9) (19) (1.3) (6) (0.4) - ------------------------------------------------------------------------------------------------------------------------------------ $ 472 52.5 $ 537 40.2 $ 553 41.0 - ------------------------------------------------------------------------------------------------------------------------------------
Stock Options and Stock Awards The Company's stock option plans provide for the grant of options to purchase shares of common stock and stock awards. At February 3, 2000, Albertson's had one stock option plan in effect under which grants could be made with respect to 30 million shares of the Company's common stock. Under this plan, approved by the stockholders in 1998, options may be granted to officers and key employees to purchase the Company's common stock. During 1999, the Company's stock option plan was amended to, among other things, include the grant of options and other awards to non-employee members of the Board of Directors. Generally, options are granted with an exercise price at not less than 100% of the closing market price on the date of the grant. The Company's options generally become exercisable in installments of 20% per year on each of the first through fifth anniversaries of the grant date and have a maximum term of 10 years. In connection with the Merger, all outstanding options under prior Albertson's and ASC plans became exercisable in accordance with the change of control provisions included in the stock option plans and all outstanding ASC options were converted into a right to acquire an equivalent number of Albertson's shares. No further options will be granted under ASC plans. Additionally, all restrictions lapsed with respect to all outstanding stock awards under the ASC stock award plans. Variable Accounting Treatment for Option Plans The Company's stock option award plans contain provisions for automatic vesting upon a change of control. Under ASC plans, option holders had the right (limited stock appreciation right or LSAR), during an exercise period of up to 60 days after the occurrence of a change of control (but prior to consummation of the Merger), to elect to surrender all or part of their options in exchange for shares of Albertson's common stock having a value equal to the excess of the change of control price over the exercise price. Certain stock option plans of ASC defined change of control as the date of stockholder approval of the Merger. Approval of the Merger Agreement on November 12, 1998, by ASC's stockholders accelerated the vesting of 6.4 million equivalent stock options granted under pre-1997 ASC plans and permitted the holders of these options to exercise LSARs. The exercisability of the 6.4 million LSARs resulted in the Company recognizing a pre-tax $195 merger-related stock option charge during 1998. In the first quarter of 1999, a market price adjustment of $29 was recorded as a reduction of merger-related costs to reflect a decline in the relevant stock price at the end of the first fiscal quarter relative to LSARs. The actual change of control price used to measure the value of these exercised LSARs became determinable at the date the Merger was consummated and resulted in no further adjustments. Upon Merger consummation, the change of control price was $53.77 per share, resulting in the issuance of approximately 1.7 million Albertson's shares. LSARs relating to approximately 4.0 million equivalent stock options became exercisable upon regulatory approval of the Merger, which resulted in recognition of an additional charge of $76 in the second quarter of fiscal 1999. This charge was based upon a change of control price of $56.96 per share, which included an adjustment factor for the early termination of the LSAR feature. A total of 0.8 million Albertson's shares were issued in satisfaction of those options for which the LSAR feature was elected and the remaining options were converted into options to acquire approximately 1.2 million Albertson's shares. Page 22 Stock Options A summary of shares reserved for outstanding options as of the fiscal year end, changes during the year and related weighted average exercise price is presented below (shares in thousands, all ASC amounts included based upon the conversion ratio of 0.63 to 1):
- ------------------------------------------------------------------------------------------------------------------------------------ February 3, 2000 January 28, 1999 January 29, 1998 ---------------- ---------------- ---------------- Shares Price Shares Price Shares Price - ------------------------------------------------------------------------------------------------------------------------------------ Outstanding at beginning of year 9,989 $ 35.01 16,527 $ 32.74 7,856 $ 24.08 Granted 12,536 39.76 159 40.39 9,846 38.08 Exercised (3,907) 33.00 (5,858) 29.16 (782) 15.46 Forfeited (603) 39.43 (839) 32.11 (393) 28.09 - ------------------------------------------------------------------------------------------------------------------------------------ Outstanding at end of year 18,015 $ 38.34 9,989 $ 35.01 16,527 $ 32.74 - ------------------------------------------------------------------------------------------------------------------------------------
As of February 3, 2000, there were 14.5 million shares of Company common stock reserved for the granting of additional options. The following table summarizes options outstanding and options exercisable as of February 3, 2000, and the related weighted average remaining contractual life (years) and weighted average exercise price (shares in thousands):
- ------------------------------------------------------------------------------------------------------------------------------------ . Options Outstanding .. Options Exercisable . -------------------------------------------------------------------------------- Shares Remaining Shares Option Price per Share Outstanding Life Price Exercisable Price - ------------------------------------------------------------------------------------------------------------------------------------ $13.44 to $22.63 421 1.8 $ 18.03 421 $ 18.03 24.32 to 33.25 8,493 8.9 30.28 1,596 29.31 35.00 to 45.94 3,576 6.7 40.08 3,576 40.08 47.00 to 51.19 5,525 9.4 51.15 47 47.00 - ------------------------------------------------------------------------------------------------------------------------------------ $13.44 to $51.19 18,015 8.4 $ 38.34 5,640 $ 35.44 - ------------------------------------------------------------------------------------------------------------------------------------
The weighted average fair value at date of grant for Albertson's options granted during 1999 was $10.42 per option. Pre-merger Albertson's grants per option were $17.14 and $15.26 for 1998 and 1997, respectively. Pre-merger ASC grants per option were $11.86 and $11.58 for 1998 and 1997, respectively. The fair value of options at date of grant was estimated using the Black-Scholes model with the following weighted average assumptions:
- ------------------------------------------------------------------------------------------------------------------------------------ 1999 . 1998 .. 1997 . ----------------------------------------------------------------- ABS ASC ABS ASC - ------------------------------------------------------------------------------------------------------------------------------------ Expected life (years) 3.0 8.0 6.5 6.5 7.0 Risk-free interest rate 5.96% 5.74% 4.70% 5.92% 6.60% Volatility 37.03 26.70 21.20 26.53 21.20 Dividend yield 1.81 1.48 1.80 1.41 1.80
Page 23 The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Had compensation cost been determined based on the fair value at the grant date consistent with the provisions of this statement, the Company's pro forma net earnings and earnings per share would have been as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Net earnings: As reported $ 404 $ 801 $ 797 Pro forma 375 914 782 Basic earnings per share: As reported 0.96 1.91 1.89 Pro forma 0.89 2.16 1.85 Diluted earnings per share: As reported 0.95 1.90 1.88 Pro forma 0.89 2.14 1.85
The 1999 pro forma income of $375 resulted from net income of $404, less the 1999 pro forma after-tax compensation expense of $67 ($49 of which related to an adjustment for the acceleration of unamortized compensation expense for the stock options granted prior to 1999 which vested in connection with the Merger) and the elimination of net merger-related after-tax stock option charges of $38 included with as reported net earnings. The 1998 pro forma net income of $914 resulted from reported net income of $801, less the 1998 pro forma after-tax compensation expense of $19 and the elimination of the merger-related after-tax stock option charge of $132 included with as reported net earnings. The pro forma effect on net earnings is not representative of the pro forma effect on net earnings in future years. Former ASC Plans The following ASC Plans were terminated in connection with the Merger on June 23, 1999. Performance Incentive Program The 1998 Performance Incentive Program provided certain of the ASC key executives an incentive award of shares of two-year restricted stock if certain ASC performance objectives were attained for the 1998 fiscal year. Employee Stock Purchase Plan The ASC Employee Stock Purchase Plan, which began January 1, 1996, enabled eligible employees of the Company to subscribe for shares of common stock on quarterly offering dates at a purchase price which was the lesser of 85% of the fair market value of the shares on the first day or the last day of the quarterly offering period. Employee Benefit Plans Substantially all employees working over 20 hours per week are covered by retirement plans. Union employees participate in multi-employer retirement plans under collective bargaining agreements. The Company sponsors both defined benefit and defined contribution plans. The Albertson's Salaried Employees Pension Plan and Albertson's Employees Corporate Pension Plan are funded, qualified, defined benefit, noncontributory plans for eligible Albertson's employees who are 21 years of age with one or more years of service and (with certain exceptions) are not covered by collective bargaining agreements. Benefits paid to retirees are based upon age at retirement, years of credited service and average compensation. The Company's funding policy for these plans is to contribute the larger of the amount required to fully fund the Plan's current liability or the amount necessary to meet the funding requirements as defined by the Internal Revenue Code. The Company also sponsors the Albertson's Savings and Retirement Estates (ASRE) Plan (formerly the American Stores Retirement Estates Plan) which is a defined contribution retirement plan. ASRE was originally authorized by the ASC Board of Directors for the purpose of providing retirement benefits for employees of ASC and its subsidiaries. During 1999, ASRE was authorized by Albertson's Board of Directors to provide retirement benefits for all qualified employees of the Company and its subsidiaries. In conjunction with the authorization of ASRE, the Company-sponsored defined benefit plans were amended to close the plans to future new entrants. Future accruals for participants in the defined benefit plans are offset by the value of Company profit sharing contributions to the new defined contribution plan. Page 24 The Company sponsors a tax-deferred savings plan which is a salary deferral plan pursuant to Section 401(k) of the Internal Revenue Code. The plan covers employees meeting age and service eligibility requirements, except those represented by a labor union, unless the collective bargaining agreement provides for participation. In addition, the Company provides a matching contribution based on the amount of eligible compensation contributed by the employee. All Company contributions to ASRE and the Company sponsored 401(k) plan are made at the discretion of the Board of Directors. The total amount contributed by the Company is included with the ASRE defined contribution plan expense. The Company also sponsors an unfunded Executive Pension Makeup Plan and an Executive ASRE Makeup Plan. These plans are nonqualified and provide certain key employees retirement benefits which supplement those provided by the Company's other retirement plans. Net periodic benefit cost for defined benefit plans is determined using assumptions as of the beginning of each year. The projected benefit obligation and related funded status is determined using assumptions as of the end of each year. Assumptions used at the end of each year for the Company-sponsored defined benefit pension plans were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Weighted-average discount rate 7.50% 6.25% 6.60% Annual salary increases 4.35-4.50 4.50-4.95 4.50-5.00 Expected long-term rate of return on assets 9.50 9.50 9.50
Net periodic benefit cost for Company-sponsored defined benefit pension plans was as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Service cost - benefits earned during the period $ 45 $ 42 $ 27 Interest cost on projected benefit obligations 34 30 23 Expected return on assets (49) (42) (34) Amortization of prior service cost 1 1 Recognized net actuarial loss 1 2 - ------------------------------------------------------------------------------------------------------------------------------------ $ 31 $ 33 $ 17 - ------------------------------------------------------------------------------------------------------------------------------------
Page 25 The following table sets forth the funded status of the Company-sponsored defined benefit pension plans:
- ------------------------------------------------------------------------------------------------------------------------------------ February 3, January 28, 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Change in projected benefit obligation: Beginning of year benefit obligation $ 547 $ 412 Service cost 45 42 Interest cost 34 30 Actuarial (gain) loss (105) 72 Amendments (88) Benefits paid (10) (9) - ------------------------------------------------------------------------------------------------------------------------------------ End of year benefit obligation 423 547 - ------------------------------------------------------------------------------------------------------------------------------------ Change in plan assets: Plan assets at fair value at beginning of year 549 414 Actual return on plan assets 89 96 Employer contributions (return) (46) 48 Benefit payments (10) (9) - ------------------------------------------------------------------------------------------------------------------------------------ Plan assets at fair value at end of year 582 549 - ------------------------------------------------------------------------------------------------------------------------------------ Funded status 159 2 Unrecognized net (gain) loss (100) 46 Unrecognized prior service cost (85) 4 Additional minimum liability (4) - ------------------------------------------------------------------------------------------------------------------------------------ Net (accrued) prepaid pension cost $ (26) $ 48 - ------------------------------------------------------------------------------------------------------------------------------------ Prepaid pension cost included with other assets $ 8 $ 64 Accrued pension cost included with other long-term liabilities (34) (16) - ------------------------------------------------------------------------------------------------------------------------------------ Net (accrued) prepaid pension cost $ (26) $ 48 - ------------------------------------------------------------------------------------------------------------------------------------
The following table summarizes the projected benefit obligation and the accumulated benefit obligation of the unfunded Executive Pension Makeup Plan:
- ------------------------------------------------------------------------------------------------------------------------------------ February 3, January 28, 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Projected benefit obligation $ 15 $ 19 Accumulated benefit obligation 13 16 Assets of the two funded Company defined benefit pension plans are invested in directed trusts. Assets in the directed trusts are invested in common stocks (including $33 and $68 of the Company's common stock at February 3, 2000 and January 28, 1999, respectively), U.S. government obligations, corporate bonds, international equity funds, real estate and money market funds.
Page 26 The Company also contributes to various plans under industrywide collective bargaining agreements, primarily for defined benefit pension plans. Total contributions to these plans were $98 for 1999, $100 for 1998, and $94 for 1997. Retirement plans expense was as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Defined benefit pension plans $ 31 $ 33 $ 17 ASRE defined contribution plan 110 93 93 Multi-employer plans 98 100 94 - ------------------------------------------------------------------------------------------------------------------------------------ $ 239 $ 226 $ 204 - ------------------------------------------------------------------------------------------------------------------------------------
Most retired employees of the Company are eligible to remain in its health and life insurance plans. Retirees who elect to remain in the Albertson's-sponsored plans are charged a premium which is equal to the difference between the estimated costs of the benefits for the retiree group and a fixed contribution amount made by the Company. The Company also provides certain health care benefits to eligible ASC retirees of certain defined employee groups under two unfunded plans, a defined dollar and a full coverage plan. The net periodic postretirement benefit cost was as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Service cost $ 3 $ 3 $ 2 Interest cost 4 5 5 Amortization of unrecognized gain (1) (1) - ------------------------------------------------------------------------------------------------------------------------------------ $ 6 $ 7 $ 7 - ------------------------------------------------------------------------------------------------------------------------------------
The following table sets forth the funded status of the Company-sponsored postretirement health and life insurance benefit plans:
- ------------------------------------------------------------------------------------------------------------------------------------ February 3, January 28, 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Change in accumulated benefit obligation: Beginning of year benefit obligation $ 69 $ 71 Service cost 3 3 Interest cost 4 5 Plan participants' contributions 2 2 Actuarial gain (12) (6) Benefits paid (4) (6) - ------------------------------------------------------------------------------------------------------------------------------------ End of year benefit obligation 62 69 - ------------------------------------------------------------------------------------------------------------------------------------ Plan assets activity: Employer contributions 2 4 Plan participants' contributions 2 2 Benefit payments (4) (6) - ------------------------------------------------------------------------------------------------------------------------------------ Funded status (62) (69) Unrecognized net gain (21) (15) - ------------------------------------------------------------------------------------------------------------------------------------ Accrued postretirement benefit obligations included with other long-term liabilities $ (83) $ (84) - ------------------------------------------------------------------------------------------------------------------------------------ Discount rates as of end of year 7.5% 6.25-7.0% - ------------------------------------------------------------------------------------------------------------------------------------
Page 27 For measurement purposes, a 7% annual rate of increase in the per capita cost of covered health care benefits was assumed for plans covering ASC retirees for 1999. For the full coverage plan, the rate was assumed to decrease to 6% for 2000 and remain at that level thereafter. For the ASC defined dollar plan, no future increases in the subsidy level were assumed. Annual rates of increases in health care costs are not applicable in the calculation of the Albertson's benefit obligation because Albertson's contribution is a fixed amount per participant. With the exception of the plans covering ASC grandfathered retirees, all postretirement plans are contributory, with participants' contributions adjusted annually. The accounting for the health care plans anticipates that the Company will not increase its contribution for health care benefits for non-grandfathered retirees in future years. Since the subsidy levels for the Albertson's and the ASC defined dollar plans are fixed and the proportion of grandfathered ASC retirees is small, a health care cost trend increase or decrease has no material impact on the accumulated postretirement benefit obligation or the postretirement benefit expense. Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" requires employers to recognize an obligation for benefits provided to former or inactive employees after employment but before retirement. The Company is self-insured for certain of its employees' short-term and long-term disability plans which are the primary benefits paid to inactive employees prior to retirement. Following is a summary of the obligation for postemployment benefits included in the Company's Consolidated Balance Sheets:
- -------------------------------------------------------------------------------- February 3, January 28, 2000 1999 - -------------------------------------------------------------------------------- Included with salaries and related liabilities $ 11 $ 7 Included with other long-term liabilities 53 64 - -------------------------------------------------------------------------------- $ 64 $ 71 - --------------------------------------------------------------------------------
The Company also contributes to various plans under industrywide collective bargaining agreements which provide for health care benefits to both active employees and retirees. Total contributions to these plans were $316 for 1999, $270 for 1998, and $288 for 1997. Employment Contracts During 1994 and 1995 ASC entered into Key Executive Agreements with 17 of ASC's key executive officers. Each agreement contained certain terms of employment and provided the officers with a special long-range payout. Under change of control provisions activated by the Merger, the executives became fully vested in the benefits which have been fully accrued for as part of the severance costs as discussed in the Merger, Divestitures and Related Costs Note. Leases The Company leases a portion of its real estate. The typical lease period is 20 to 30 years and most leases contain renewal options. Exercise of such options is dependent on the level of business conducted at the location. In addition, the Company leases certain equipment. Some leases contain contingent rental provisions based on sales volume at retail stores or miles traveled for trucks. Capitalized leases are calculated using interest rates appropriate at the inception of each lease. Following is an analysis of the Company's assets under capitalized leases:
- ------------------------------------------------------------------------------ February 3, January 28, 2000 1999 - ------------------------------------------------------------------------------ Real estate and equipment $ 328 $ 350 Accumulated amortization (160) (170) - ------------------------------------------------------------------------------ $ 168 $ 180 - ------------------------------------------------------------------------------
Page 28 Future minimum lease payments for noncancelable operating leases which exclude the amortization of acquisition-related fair value adjustments, related subleases and capital leases at February 3, 2000, were as follows:
- ------------------------------------------------------------------------------------------ Operating Capital Leases Subleases Leases - ------------------------------------------------------------------------------------------ 2000 $ 307 $ (60) $ 42 2001 292 (66) 39 2002 272 (61) 30 2003 254 (36) 28 2004 243 (17) 27 Remainder 2,059 (122) 295 - ------------------------------------------------------------------------------------------ Total minimum obligations (receivables) $ 3,427 $ (362) 461 - ------------------------------------------------------------------------------------------ Interest (255) - ------------------------------------------------------------------------------------------ Present value of net minimum obligations 206 Current portion (19) - ------------------------------------------------------------------------------------------ Long-term obligations at February 3, 2000 $ 187 - ------------------------------------------------------------------------------------------
The Company is contingently liable as a guarantor of certain leases that were assigned to third parties in connection with various store closures and dispositions. The Company believes the likelihood of a significant loss from these agreements is remote because of the wide dispersion among third parties and remedies available to the Company should the primary party fail to perform under the agreements. Rent expense under operating leases, excluding the amortization of acquisition-related fair value adjustments of $14 in 1999, 1998 and 1997, was as follows:
- -------------------------------------------------------------------------------- 1999 1998 1997 - -------------------------------------------------------------------------------- Minimum rent $ 330 $ 309 $ 288 Contingent rent 29 25 26 - -------------------------------------------------------------------------------- 359 334 314 Sublease rent (58) (60) (48) - -------------------------------------------------------------------------------- $ 301 $ 274 $ 266 - --------------------------------------------------------------------------------
Financial Instruments Financial instruments which potentially subject the Company to concentration of credit risk consist principally of cash equivalents and receivables. The Company limits the amount of credit exposure to each individual financial institution and places its temporary cash into investments of high credit quality. Concentrations of credit risk with respect to receivables are limited due to their dispersion across various companies and geographies. The estimated fair values of cash and cash equivalents, accounts receivable, accounts payable, short-term debt and commercial paper borrowings approximate their carrying amounts. Substantially all of the fair values were estimated using quoted market prices. The estimated fair values and carrying amounts of outstanding debt (excluding commercial paper) were as follows:
- -------------------------------------------------------------------------------- February 3, January 28, 2000 1999 - -------------------------------------------------------------------------------- Fair value $ 3,718 $ 3,956 Carrying amount 3,800 3,628
Page 29 Environmental The Company has identified environmental contamination sites related primarily to underground petroleum storage tanks and ground water contamination at various store, warehouse, office and manufacturing facilities (related to current operations as well as previously disposed of businesses). The Company conducts an ongoing program for the inspection and evaluation of new sites proposed to be acquired by the Company and the remediation/monitoring of contamination at existing and previously owned sites. Undiscounted reserves have been established for each environmental contamination site unless an unfavorable outcome is remote. Although the ultimate outcome and expense of environmental remediation is uncertain, the Company believes that required remediation and continuing compliance with environmental laws, in excess of current reserves, will not have a material adverse effect on the financial condition of the Company. Charges against earnings for environmental remediation were not material in 1999, 1998 or 1997. Legal Proceedings An agreement in principle has been reached to settle eight purported multi-state cases combined in the United States District Court in Boise, Idaho, which raise various issues including "off the clock" work allegations. The proposed settlement is subject to court approval. Under the proposed settlement agreement, current and former employees who met eligibility criteria may present their claims to a settlement administrator. While the Company cannot specify the exact number of individuals who are likely to submit claims and the exact amount of their claims, the $37 pre-tax ($22 after tax) one-time charge recorded by the Company in 1999 is the Company's current estimate of the total monetary liability, including attorney fees, for all eight cases. The Company is also involved in routine litigation incidental to operations. The Company utilizes various methods of alternative dispute resolution, including settlement discussions, to manage the costs and uncertainties inherent in the litigation process. In the opinion of management, the ultimate resolution of these legal proceedings will not have a material adverse effect on the Company's financial condition. Segment Information In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which establishes annual and interim reporting standards for an enterprise's operating segments and related disclosures about its products, services, geographic areas and major customers. The Company has analyzed the reporting requirements of the new standard and has determined that its operations are within a single operating segment. Recent Accounting Standard In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." This new standard establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This standard, as amended by SFAS No. 137, is effective for the Company's 2001 fiscal year. The Company has not yet completed its evaluation of this standard or its impact on the Company's accounting and reporting requirements. Page 30 Responsibility for Financial Reporting The management of Albertson's, Inc., is responsible for the preparation and integrity of the consolidated financial statements of the Company. The accompanying consolidated financial statements have been prepared by the management of the Company, in accordance with accounting principles generally accepted in the United States of America, using management's best estimates and judgment where necessary. Financial information appearing throughout this Annual Report is consistent with that in the consolidated financial statements. To help fulfill its responsibility, management maintains a system of internal controls designed to provide reasonable assurance that assets are safeguarded against loss or unauthorized use and that transactions are executed in accordance with management's authorizations and are reflected accurately in the Company's records. The concept of reasonable assurance is based on the recognition that the cost of maintaining a system of internal accounting controls should not exceed benefits expected to be derived from the system. The Company believes that its long-standing emphasis on the highest standards of conduct and ethics, set forth in comprehensive written policies, serves to reinforce its system of internal controls. Deloitte & Touche LLP, independent auditors, audited the consolidated financial statements in accordance with auditing standards generally accepted in the United States of America to independently assess the fair presentation of the Company's financial position, results of operations and cash flows. The Audit Committee of the Board of Directors, composed entirely of outside directors, oversees the fulfillment by management of its responsibilities over financial controls and the preparation of financial statements. The Audit Committee meets with internal and external auditors four times per year to review audit plans and audit results. This provides internal and external auditors direct access to the Board of Directors. Management recognizes its responsibility to conduct the business of Albertson's, Inc., in accordance with high ethical standards. This responsibility is reflected in key policy statements that, among other things, address potentially conflicting outside business interests of Company employees and specify proper conduct of business activities. Ongoing communications and review programs are designed to help ensure compliance with these policies. /s/ Gary G. Michael /s/ A. Craig Olson ------------------------- ---------------------------- Gary G. Michael A. Craig Olson Chairman of the Board and Executive Vice President and Chief Executive Officer Chief Financial Officer Page 31 Independent Auditors' Report The Board of Directors and Stockholders of Albertson's, Inc.: We have audited the accompanying consolidated balance sheets of Albertson's, Inc., and subsidiaries as of February 3, 2000 and January 28, 1999, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended February 3, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits. The consolidated financial statements give retroactive effect to the merger of Albertson's, Inc. and American Stores Company, which has been accounted for as a pooling of interests as described in the Basis of Presentation Note to the consolidated financial statements. We did not audit the balance sheet of American Stores Company as of January 28, 1999, or the related statements of earnings, stockholders' equity, and cash flows for each of the two years in the period ended January 28, 1999, which statements reflect total assets of approximately $8.9 billion as of January 28, 1999, and net earnings of approximately $234 million and $280 million for the years ended January 28, 1999 and January 29, 1998, respectively. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for American Stores Company for 1998 and 1997, is based solely on the report of such other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Albertson's, Inc., and subsidiaries at February 3, 2000 and January 28, 1999, and the results of their operations and their cash flows for each of the three years in the period ended February 3, 2000, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP ------------------------- Deloitte & Touche LLP Boise, Idaho March 24, 2000 Page 32 Independent Auditors' Report Shareholders and Board of Directors of American Stores Company We have audited the accompanying consolidated balance sheet of American Stores Company and subsidiaries as of January 30, 1999 and the related consolidated statements of earnings, shareholders' equity and cash flows for the years ended January 30, 1999 and January 31, 1998 (not presented herein). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Stores Company and subsidiaries at January 30, 1999 and the consolidated results of their operations and their cash flows for the years ended January 30, 1999 and January 31, 1998 in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP --------------------- Ernst & Young LLP Salt Lake City, Utah March 17, 1999 Page 33 Five-Year Summary of Selected Financial Data
- ------------------------------------------------------------------------------------------------------------------------------------ (Dollars in millions, except 53 weeks 52 weeks 52 weeks 52 weeks 52 weeks per share data) February 3, January 28, January 29, January 30, February 1, 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Operating Results: Sales $ 37,478 $ 35,872 $ 33,828 $ 32,455 $ 30,894 Earnings before extraordinary item 427 801 797 781 782 Extraordinary item (23) Net earnings 404 801 797 781 782 Net earnings as a percent to sales 1.08% 2.23% 2.36% 2.41% 2.53% Common Stock Data: Earnings per share before extraordinary item: Basic $ 1.01 $ 1.91 $ 1.89 $ 1.79 $ 1.78 Diluted 1.00 1.90 1.88 1.79 1.78 Extraordinary item: Basic (0.05) Diluted (0.05) Earnings per share: Basic 0.96 1.91 1.89 1.79 1.78 Diluted 0.95 1.90 1.88 1.79 1.78 Cash dividends per share: Albertson's, Inc. 0.72 0.68 0.64 0.60 0.52 American Stores Company Equivalent 0.14 0.57 0.56 0.51 0.44 Financial Position: Total assets $ 15,701 $ 15,131 $ 13,767 $ 12,608 $ 11,511 Long-term debt and capitalized lease obligations 4,992 5,108 4,333 3,665 2,837 Other Year End Statistics: Number of stores 2,492 2,564 2,435 2,355 2,261
All fiscal years consist of 52 weeks, except for 1999 which is a 53-week year, and fiscal 1995 which included 52 weeks of operations for Albertson's and 53 weeks of operations for ASC. 1999 operating results included pre-tax merger-related costs of $683 ($529 after tax or $1.25 per share), and a pre-tax charge of $37 ($22 after tax or $0.05 per share) for a litigation settlement. Merger-related costs included severance, the write-down of assets to net realizable value, transaction and financing costs, integration costs and stock option charges. During 1999 American Stores Company paid only one quarterly dividend due to the consummation of the Merger. 1998 operating results included a pre-tax merger-related stock option charge of $195 ($132 after tax or $0.31 per share) related to the exercisability of 6 million equivalent limited stock appreciation rights due to the approval by ASC's stockholders of the Merger Agreement and a $24 pre-tax charge ($16 after tax or $0.04 per share) related to management's decision to close 16 underperforming stores. 1997 operating results included pre-tax charges of $34 related to the sale of stock by a major stockholder and pre-tax charges of $13 related to the sale of a division of ASC's communications subsidiary (total of $41 after tax or $0.10 per share). 1996 operating results included pre-tax charges of $100 ($60 after tax or $0.14 per share) primarily related to ASC's re-engineering activities. Page 34 Quarterly Financial Data
- ------------------------------------------------------------------------------------------------------------------------------------ (Dollars in millions, except per share data - unaudited) First Second Third Fourth Year - ------------------------------------------------------------------------------------------------------------------------------------ 1999 Sales $ 9,215 $ 9,381 $ 8,983 $ 9,899 $ 37,478 Gross profit 2,503 2,555 2,465 2,791 10,314 Operating profit (loss) 473 (75) 301 541 1,240 Net earnings (loss) 238 (228) 130 264 404 Earnings (loss) per share: Basic 0.57 (0.54) 0.31 0.62 0.96 Diluted 0.56 (0.54) 0.31 0.62 0.95 - ------------------------------------------------------------------------------------------------------------------------------------ 1998 Sales $ 8,721 $ 8,945 $ 8,838 $ 9,368 $ 35,872 Gross profit 2,298 2,395 2,412 2,611 9,716 Operating profit 365 443 448 395 1,651 Net earnings 176 217 219 189 801 Earnings per share: Basic 0.42 0.52 0.52 0.45 1.91 Diluted 0.42 0.52 0.52 0.45 1.90 - ------------------------------------------------------------------------------------------------------------------------------------
During 1999 all four quarters` operating results were affected by pre-tax merger-related costs totaling $683 ($529 after tax). Merger-related costs included severance, the write-down of assets to net realizable value, transaction and financing costs, integration costs and stock option charges. The third quarter included a pre-tax one-time charge of $37 ($22 after tax) for a litigation settlement. The following table reflects the net earnings (loss) and earnings per share (EPS) effect of these items.
- ------------------------------------------------------------------------------------------------------------------------------------ First Second Third Fourth Annual Net EPS Net EPS Net EPS Net EPS Net EPS Earnings Effect Loss Effect Loss Effect Loss Effect Loss Effect - ------------------------------------------------------------------------------------------------------------------------------------ Merger- related costs $ 15 $ 0.03 $ (464) $ (1.10) $ (34) $ (0.08) $ (46) $ (0.11) $ (529) $ (1.25) Litigation settlement (22) (0.05) (22) (0.05)
Fourth quarter 1998 operating results included a pre-tax merger-related stock option charge of $195 ($132 after tax or $0.31 per share) related to the exercisability of 6 million equivalent limited stock appreciation rights due to the approval by ASC's stockholders of the Merger Agreement. A $24 pre-tax charge ($16 after tax or $0.04 per share) was recorded in fiscal 1998 related to management's decision to close 16 underperforming stores. An initial pre-tax charge of $29 ($18 after tax or $0.04 per share) was recorded in the first quarter and a pre-tax adjustment of $5 ($3 after tax or $0.01 per share) of income was recorded in the fourth quarter. The Company estimates the quarterly LIFO reserves, which cannot be accurately determined until year end. The LIFO method of valuing inventories (decreased) increased net earnings and EPS as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ (Dollars in thousands except per share data -Unaudited) First Second Third Fourth Year - ------------------------------------------------------------------------------------------------------------------------------------ 1999 Net earnings $ (5,400) $ (5,400) $ (5,400) $ (1,772) $ (17,972) Basic and diluted EPS (0.01) (0.01) (0.01) (0.01) (0.04) - ------------------------------------------------------------------------------------------------------------------------------------ 1998 Net earnings $ (7,846) $ (4,935) $ (6,159) $ 9,185 $ (9,755) Basic and diluted EPS (0.02) (0.01) (0.01) 0.02 (0.02)
Due to rounding and different periods used to compute weighted average outstanding shares, the sum of the quarterly EPS does not equal the annual EPS. Page 35 Company Stock Information The Company's stock is traded on the New York and Pacific stock exchanges under the symbol ABS. The high and low stock prices by quarter were as follows:
First Second Third Fourth Year High Low High Low High Low High Low High Low - ------------------------------------------------------------------------------------------------------------------------------------ 1999 61 15/16 49 1/16 56 15/16 48 9/16 52 1/4 37 38 5/16 29 61 15/16 29 1998 54 15/16 46 5/16 53 11/16 44 58 1/8 44 1/2 67 1/8 53 3/8 67 1/8 44 1997 37 30 1/2 38 11/16 31 7/8 37 3/4 32 3/4 48 5/8 36 5/16 48 5/8 30 1/2
Cash dividends declared per share were:
First Second Third Fourth Year - ------------------------------------------------------------------------------------------------------------------------------------ 1999 $ 0.18 $ 0.18 $ 0.18 $ 0.18 $ 0.72 1998 0.17 0.17 0.17 0.17 0.68 1997 0.16 0.16 0.16 0.16 0.64
In March 2000 the Board of Directors increased the regular quarterly cash dividend 5.6% to $0.19 per share from $0.18 per share, for an annual rate of $0.76 per share. The new quarterly rate will be paid on May 10, 2000, to stockholders of record on April 14, 2000. Page 36 EX-21 19 PRINCIPAL SUBSIDIARIES Exhibit 21 ALBERTSON'S, INC. PRINCIPAL SUBSIDIARIES As Of February 3, 2000
Subsidiary State of Incorporation American Stores Company DE
EX-23 20 INDEPENDENT AUDITORS' CONSENT EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statement No. 333-70967 on Form S-3 and Registration Statement Nos. 2-80776, 33-2139, 33-7901, 33-15062, 33-43635, 33-62799, 33-59803, 333-82157, 333-82161, and 333-87773 on Form S-8 of Albertson's, Inc. and subsidiaries of our report dated March 24, 2000, incorporated by reference in the Annual Report on Form 10-K, of Albertson's, Inc. and subsidiaries for the year ended February 3, 2000, to be filed with the Securities and Exchange Commission on April 25, 2000. /s/ Deloitte & Touche LLP - ------------------------- Deloitte & Touche LLP Boise, Idaho April 25, 2000 EX-23.1 21 INDEPENDENT AUDITORS' CONSENT Exhibit 23.1 Independent Auditors' Consent We consent to the incorporation by reference in the Registration Statements (Form S-3 No. 333-70967 and related Prospectus and Forms S-8 No. 2-80776, 33-2139, 33-7901, 33-15062, 33-43635, 33-62799, 33-59803, 333-82157, 333-82161 and 333-87773) of Albertson's Inc. and subsidiaries of our report dated March 17, 1999 with respect to the consolidated financial statements of American Stores Company, included in the Annual Report (Form 10-K) for the year ended February 3, 2000 of Albertson's Inc. and subsidiaries filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP - --------------------- Ernst & Young LLP Salt Lake City, Utah April 25, 2000 EX-27 22 FDS
5 THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM ALBERTSON'S FINANCIAL STATEMENTS FOR THE 53 WEEKS ENDED FEBRUARY 3, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 12-MOS FEB-03-2000 JAN-29-1999 FEB-03-2000 231 0 618 31 3,481 4,582 13,999 5,087 15,701 4,055 4,992 0 0 424 5,278 15,701 37,478 37,478 27,164 27,164 0 0 353 899 472 427 0 23 0 404 0.96 0.95
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