EXHIBIT 10.29
THE INDEBTEDNESS HEREUNDER IS SUBORDINATE
TO CERTAIN OTHER INDEBTEDNESS OF OBLIGOR
PURSUANT TO THE PROVISIONS OF THIS NOTE
NEGOTIABLE SUBORDINATED NOTE
Original Principal Amount: $20,000,000 January 22, 2002
FOR VALUE RECEIVED, the undersigned, STATER BROS. HOLDINGS INC., a
Delaware corporation ("Obligor"), hereby promises to pay to X. Xxxxxxxx
Xxxxxxxxx, or his assigns (the "Holder"), at 0000 Xxxxxxxxx Xxxxxx, Xxxxxxxx,
Xxxxxxxxxx 00000 (or at such other place as the Holder may designate by written
notice to Obligor from time to time), the principal amount of TWENTY MILLION
DOLLARS ($20,000,000), with interest on the principal amount hereof from time to
time outstanding at the rate of five percent (5%) per annum, payable (subject to
the terms and conditions hereof) as follows:
(a) interest shall be payable semi-annually in arrears on each March 31
and September 30 during the term of this Note, commencing with March 31, 2002;
and
(b) on March 31, 2007, the entire amount of outstanding principal and
accrued but unpaid interest as of such time shall be due and payable in full.
This Note is the Seller Note referred to in the Agreement for
Liquidation of Partnership Interest and Redemption of Common Stock dated
November 30, 2001, as amended by Amendment Number One thereto, among the Obligor
and the Holder (the " Redemption Agreement"). Unless otherwise defined herein,
terms defined in the Redemption Agreement and used herein shall have the
meanings given to them in the Redemption Agreement. Payment of this Note is
subordinated pursuant to the provisions set forth in Section 4 hereof.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES LAW OF 1933 OR
THE SECURITIES LAW OF ANY STATE. NO TRANSFER OF THIS NOTE MAY BE MADE EXCEPT IN
ACCORDANCE WITH SUCH LAWS. SEE SECTION 4.11 HEREIN.
1. Allocation of Payments; Prepayments. All payments made in respect of
this Note shall first be allocated to accrued but unpaid interest and then to
unpaid principal. Payments of principal and interest due under this Note shall
be made in lawful money of the United States of America and in immediately
available funds. The principal of this Note may be prepaid, without premium,
penalty or discount, in whole or in part, at any time and from time to time.
2. Acceleration Upon Default. The Holder may declare the entire unpaid
principal amount of this Note, together with all accrued and unpaid interest, to
be immediately due and payable upon written demand, at the Holder's election, if
the Obligor fails to make a payment of principal or interest when due and such
failure continues without cure for a period of 30 days
following receipt of a written notice from the Holder of the Obligor's failure
to pay (a "Default").
3. Rights and Remedies. The Holder shall have all rights and remedies
provided for by applicable law (including all forms of legal and equitable
relief) with respect to the acceleration hereof or a Default hereunder and the
Holder shall in addition have the other rights and remedies provided for in this
Note. All rights and remedies contemplated in the preceding sentence shall be
independent and cumulative, and may, to the extent permitted by law, be
exercised concurrently or separately, and the exercise of any one right or
remedy shall not be deemed to be an election of such right or remedy or to
preclude or waive the exercise of any other right or remedy.
4. Subordination. This Note is subordinate in right of payment of
interest and principal to the Senior Debt Holders (as hereinafter defined) on
the terms and subject to the conditions hereof.
4.1 Definitions.
As used in this Note, the following terms shall have the meanings
set forth below:
"Bankruptcy Code" shall mean the Bankruptcy Code, 11 U.S.C. 101 et
seq., as amended, and any similar or successor federal statute, and the rules
and regulations thereunder, all as the same shall be in effect from time to
time.
"Indebtedness" shall mean (without duplication) (i) all indebtedness
for borrowed money or as evidenced by notes, bonds, debentures or similar
evidences of indebtedness, all obligations for the deferred and unpaid purchase
price of any property, service or business (other than trade accounts payable
and accrued liabilities incurred in the ordinary course of business and
constituting current liabilities in accordance with generally accepted
accounting principles), and all obligations under capitalized leases, (ii)
letters of credit and all reimbursement obligations related thereto, (iii) the
aggregate net liability in respect of interest rate swap agreements, currency
swap agreements and other similar agreements designed to hedge against
fluctuations in interest rates or foreign exchange rates, (iv) any liability
secured by any lien in respect of any obligation of the type described in
clauses (i) through (iii) on property owned or acquired, whether or not such
liability shall have been assumed, and (v) all guarantees or other credit
support in respect of any obligation of the type described in clauses (i)
through (iii).
"Senior Debt Holders" shall mean, at any time, the holders of Senior
Indebtedness at such time.
"Senior Indebtedness" shall mean (i) all obligations under the
credit agreement dated as of August 6, 1999 by and among the Obligor, Stater
Bros. Markets and Bank of America, N.A., (ii) all obligations under the
Indenture dated as of August 6, 1999, between the Obligor and IBJ Whitehall Bank
& Trust Company, including the related 10.75% Senior Notes due 2006, (iii) any
other borrowing arrangement between the Obligor and a bank, institutional
investor or similar financial lender or (iv) any other Indebtedness for borrowed
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money (other than, with respect to clause (iv), (A) Indebtedness incurred by the
Obligor in the ordinary course to trade creditors or others furnishing services
to the Obligor and (B) obligations under the Note), and any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, in the case of each of clauses (i) through (iv), as
incurred, amended, modified, renewed, refunded, replaced or refinanced from time
to time, in whole or in part and any loan agreements, notes, guarantees,
collateral documents, instruments and agreements executed in connection with any
such amendment, modification, renewal, refunding, replacement or refinancing
(and whether incurred before, on or after the date hereof), and all obligations
of any other person or entity as endorser, guarantor or surety of or for any of
such Indebtedness or obligation owed by the Obligor, including, without
limitation, all principal, interest (including all interest accruing after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Obligor) accruing thereon, charges,
expenses, fees and other sums chargeable to the Obligor by the holder of any
such Indebtedness or obligation, and reimbursement, indemnity or other
obligations due and payable to any holder of such Indebtedness or obligation, in
each case in such holder's capacity as a Senior Debt Holder.
4.2 Subordination of Note to Senior Indebtedness. The Obligor and the
Holder agree that, to the extent and in the manner hereinafter set forth, the
indebtedness incurred in connection with this Note and represented by this Note
and the payment of the principal and interest (including, without limitation,
any interest accruing subsequent to the commencement of any proceeding against
or with respect to the Obligor under the Bankruptcy Code or any other
proceedings in insolvency, bankruptcy, receivership, reorganization,
dissolution, assignment for the benefit of creditors or other similar case or
proceeding) on this Note and all other indebtedness, obligations and
liabilities, now existing or hereafter created, arising under or in connection
with this Note, including without limitation, all expenses, fees, indemnities,
interest and other amounts payable hereunder (all of the foregoing, the
"Subordinated Obligations") are hereby expressly made subordinated, junior and
subject in right of payment to the prior payment in full of all Senior
Indebtedness.
The expression "payment in full" or any similar term(s) or phrase(s)
when used in this Section 4 with respect to Senior Indebtedness shall mean the
indefeasible satisfaction and final payment in full of all such Senior
Indebtedness in cash, or, in the case of Senior Indebtedness consisting of
contingent obligations including, without limitation, contingent obligations in
respect of letters of credit or other reimbursement guarantees, the setting
apart of cash sufficient to discharge such portion of Senior Indebtedness in an
account for the exclusive benefit of the holder thereof, in which account such
holders shall be granted by the Obligor a first priority perfected security
interest in a manner acceptable to such holders, which payment or perfected
security interest shall have been retained by the holders of Senior
Indebtedness, in each case, for a period of time in excess of all applicable
preference or other similar periods under applicable bankruptcy, insolvency or
creditors rights laws.
4.3 Subordination Upon Bankruptcy or Insolvency. In the event of (a) any
insolvency or bankruptcy case or proceeding under the Bankruptcy Code or any
other similar federal or state law, or any receivership, liquidation,
reorganization or other similar case or proceeding in connection therewith,
against or with respect to the Obligor as debtor, (b) any involuntary
liquidation, dissolution or other winding-up of the Obligor, whether or not
involving insolvency
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or bankruptcy, or (c) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Obligor, then and in any such
event:
(a) the Holder irrevocably authorizes and empowers the Senior Debt
Holders to receive payment in full of all amounts due or to become due on or in
respect of all Senior Indebtedness, before the Holder receives any payment on
account of the Subordinated Obligations;
(b) the Holder irrevocably authorizes and empowers the Senior Debt
Holders to receive any payment or distribution of any kind or character, whether
in cash, property or securities, by set-off or otherwise, to which the Holder
would be entitled but for the provisions of this Section 4, including any such
payment or distribution which may be payable or deliverable by reason of the
payment of any other Indebtedness of the Obligor being subordinated to the
payment of this Note, which shall be paid by the liquidating trustee or agent or
other person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or otherwise, directly to the
Senior Debt Holders or any agent thereof, to the extent necessary to make
Payment in full of all Senior Indebtedness remaining unpaid, after giving effect
to any current payment or distribution to the Senior Debt Holders; and
(c) in the event that, notwithstanding the foregoing provisions of
this subsection 4.3 or otherwise contrary to any provisions hereof, the Holder
of this Note shall have received such payment or distribution of any kind or
character, whether in cash, property or securities, before all Senior
Indebtedness is paid in full, then and in such event such payment or
distribution shall be deemed to be the property of, segregated, received and
held in trust for the benefit of, and shall be immediately paid over or
delivered forthwith to the agent of, the Senior Debt Holders for application to
the payment of all Senior Indebtedness remaining unpaid until all such Senior
Indebtedness shall have been paid in full, after giving effect to any concurrent
payment or distribution to the Senior Debt Holders.
The Holder agrees that while it shall retain the right to vote its
claims and otherwise act in any such reorganization proceeding relative to the
Obligor (including, without limitation, the right to vote to accept or reject
any plan of partial or complete liquidation, reorganization, arrangement,
composition, or extension), the Holder shall not take any action or vote in any
way so as to contest (i) the validity or enforceability of the subordination
provisions of this Note or any agreement or instrument to the extent evidencing
or relating to the Senior Indebtedness or (ii) without prejudicing the rights of
the Holder to seek the same, any motion by the Senior Debt Holders for
post-petition interest in any proceeding referred to in this subsection 4.3, it
being understood that the above restrictions shall not prevent or restrict any
action or vote in favor of any such plan, provided that the Holder complies with
the provisions of subsection 4.3 hereof.
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4.4 Subordination Upon Default of Senior Indebtedness or of Subordinated
Obligations.
(a) No payment shall be made by the Obligor and no payment shall be
received by the Holder on account of the Subordinated Obligations, and the
Holder shall not assert, participate in or bring any sort of action, suit or
proceeding (including, without limitation, bankruptcy or insolvency proceedings)
either at law or in equity for the enforcement, collection or realization of all
or any part of the Subordinated Obligations, if:
(i) a default in the payment of principal, interest, or other
obligations due on any Senior Indebtedness occurs and is continuing,
unless and until such default shall have been cured or waived or shall
have ceased to exist; or
(ii) a default, other than a payment default, on Senior
Indebtedness occurs and is continuing that then permits holders of
Senior Indebtedness to accelerate its maturity and the Holder receives a
notice of the default (a "Payment Blockage Notice") from a holder of
Senior Indebtedness.
If the Holder receives any Payment Blockage Notice pursuant to
clause (ii) above, no subsequent Payment Blockage Notice shall be effective for
purposes of this subsection unless and until (a) at least 365 days shall have
elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice; and (b) all scheduled payments on this Note that have come due
have been paid in full in cash. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the Holder
(unless such default was waived, cured or otherwise ceased to exist and
thereafter subsequently reoccurred) shall be, or be made, the basis for a
subsequent Payment Blockage Notice.
The Obligor may and shall resume payments of this Note upon the
earlier of:
(1) in the case of a default referred to in clause (i) above,
the date upon which the default is cured or waived or ceases to exist,
or
(2) in the case of a default referred to in clause (ii) above,
the earlier of the date on which such default is cured or waived or
ceases to exist or 179 days pass after the date on which the applicable
Payment Blockage Notice is received, if the maturity of such Senior
Indebtedness has not been accelerated, unless this Note otherwise
prohibits the payment or distribution at the time of such payment or
distribution.
In the event such Senior Debt Holder waives the default or
determines that the default has been cured to its satisfaction, such Senior Debt
Holder shall so notify the Holder and the Obligor in writing and the suspended
payments may resume. Such resumed payments shall be subject to all of the terms
and subordination provisions of this Note. The cessation of the restrictions set
forth in subsection 4.4(a) shall not impair the senior priority of payment of
the Senior Indebtedness or the senior priority of all security interests
securing the Senior Indebtedness, and the Senior Debt Holders shall remain
entitled to receive payment in full of all
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amounts due or to become due on or in respect of all Senior Indebtedness before
the Holder receives any payment on account of the Subordinated Obligations.
(b) In the event that default occurs under any document governing
the Subordinated Obligations, the restrictions set forth in subsection 4.4(a)
above shall apply as if Obligor had received a Payment Blockage Notice on the
date of such default (whether or not a Payment Blockage Notice was previously
received by the Obligor). During the period of the restrictions set forth in
subsection 4.4(a), the Holder shall immediately cease any action, suit or
proceeding for the enforcement, collection or realization of all or any part of
the Subordinated Obligations then being pursued by the Holder (regardless of
whether such Senior Debt Xxxxxx has demanded payment of its Senior Indebtedness
or commenced action to enforce the Senior Indebtedness or to realize upon such
Senior Debt Xxxxxx's security interests, mortgages and/or other liens in the
collateral security for such Senior Indebtedness under the agreements and
instruments relating to such Senior Debt Xxxxxx's Senior Indebtedness or as
otherwise authorized by applicable law).
(c) In the event that, notwithstanding the foregoing provisions of
this subsection 4.4, the Holder shall have received any payment or distribution
of any kind or character, whether in cash, property or securities, that it is
prohibited from receiving pursuant to this subsection 4.4, before all Senior
Indebtedness is paid in full, then and in such event such payment or
distribution shall be deemed to be the property of, segregated, received and
held in trust for the benefit of, and shall be immediately paid over or
delivered forthwith to, the Senior Debt Holders for application to the payment
of all Senior Indebtedness remaining unpaid until all such Senior Indebtedness
shall have been paid in full, after giving effect to any concurrent payment or
distribution to the Senior Debt Holders.
(d) The provisions of this subsection 4.4 shall not apply to any
payment with respect to which subsection 4.3 would be applicable.
4.5 Holder's Rights and Remedies. If the Holder in violation of this
Section 4 shall assert or bring any action, suit or proceeding against the
Obligor, the Obligor may interpose as a defense or dilatory plea the making of
this Note. If the Holder shall attempt to enforce, collect or realize upon this
Note in violation of this Section 4, the Obligor may restrain any such
enforcement, collection or realization.
With respect to the holders of the Senior Indebtedness, the Holder
agrees that there are no implied covenants or obligations of such holders of the
Senior Indebtedness with respect to the delivery of notices to the Holder other
than to deliver a Payment Blockage Notice to cause the Holder to be subject to
the restrictions contained in subsection 4.4.
Subject to the payment in full of all Senior Indebtedness, the
Holder of this Note shall be subrogated, to the extent permitted by applicable
law, to the rights of the Senior Debt Holders to receive payments and
distributions of cash, property and securities applicable to the Senior
Indebtedness until the principal of and interest on this Note and any fees or
other amounts payable by the Obligor under this Note shall be paid in full.
Notwithstanding the foregoing, the Senior Debt Holders make no representations
or warranties whatsoever as to the validity or enforceability of the Senior
Indebtedness or any collateral thereunder. For purposes of such
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subrogation, no payments or distributions to the Senior Debt Holders of any
cash, property or securities to which the holder of this Note would be entitled
except for the provisions of this Section 4, and no payments over pursuant to
the provisions of this Section 4 to the Senior Debt Holders by the holder of
this Note, shall, among the Obligor, its creditors, other than the Senior Debt
Holders, and the Holder of this Note, be deemed to be a payment or distribution
by the Obligor to or on account of the Senior Indebtedness. The provisions of
this subsection 4.5 shall survive the termination of this Note.
4.6 No Waiver of Subordination Provisions. No right of any present or
future Senior Debt Holder to enforce subordination as herein provided shall at
any time in any way be prejudiced or impaired by any act or failure to act on
the part of the Obligor, or by any non-compliance by the Obligor with the terms,
provisions and covenants of this Note, regardless of any knowledge thereof any
such Senior Debt Holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the Senior Debt Holders may, at any time and from time to time,
without the consent of or notice to the Holder, without incurring responsibility
to the Holder and without impairing or releasing the subordination provided in
this Note or the obligations hereunder of the Holder to the Senior Debt Holders,
do any one or more of the following: (a) change the manner, place or terms of
payment or extend the time of payment of, or renew, amend, modify or alter, any
Senior Indebtedness or any instrument evidencing the same or any agreement
evidencing, governing, creating, guaranteeing or securing any Senior
Indebtedness; (b) sell, exchange, release or otherwise deal with any guarantees,
property pledged, mortgaged or otherwise securing Senior Indebtedness and make
any settlements and compromises thereof; (c) release any person liable in any
manner for the collection of Senior Indebtedness; and (d) exercise or refrain
from exercising any rights against the Obligor, Guarantor and any other person.
No knowledge of any breach or other non-observance by the Holder of
the terms and provisions of this Note shall constitute a waiver hereof, nor a
waiver of any obligations to be performed by the Holder hereunder.
4.7 Reliance on Judicial Order or Certificate of Liquidating Agent. Upon
any payment or distribution of assets of the Obligor referred to in this Section
4, the Holder shall be entitled to rely upon any order or decree by any court of
competent jurisdiction in which such insolvency, bankruptcy, receivership,
liquidation, reorganization, dissolution, winding-up or similar case or
proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other person making such payment or distribution, delivered to the Holder, for
the purpose of ascertaining the persons entitled to participate in such payment
or distribution, the holders of Senior Indebtedness of the Obligor and other
indebtedness of the Obligor, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Section 4.
4.8 Holder Entitled to Assume Payments Not Prohibited in Absence of
Notice. The Holder shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to the
Holder pursuant to subsection 4.4(a), unless and until the Holder shall have
received a Payment Blockage Notice thereof at its principal place
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of business set forth above (or such other address which shall have been given
in writing to the trustee for any Senior Debt issued pursuant to an indenture,
and the Obligor) from the Obligor or from one or more Senior Debt Holders or
from any representative or representatives thereof; and prior to the receipt of
any such Payment Blockage Notice the Holder shall be entitled to assume
conclusively that no such facts exist.
The Holder shall be entitled to rely on the delivery to him of a
Payment Blockage Notice by a person representing itself to be a Senior Debt
Holder to establish that such notice has been given by a Senior Debt Holder. In
the event that the Holder determines in good faith that further evidence is
required with respect to the right of any person as a Senior Debt Holder to
participate in any payment or distribution pursuant to this Section 4, the
Holder may request such person to furnish evidence to the reasonable
satisfaction of the Holder as to the amount of Senior Indebtedness held by such
person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Section 4 and, if such evidence is not furnished, the Holder
may defer any payment to such person pending judicial determination as to the
right of such person to receive such payment.
4.9 Reliance. The Holder acknowledges and agrees that the provisions of
this Section 4 are, and are intended to be, an inducement and a consideration to
each Senior Debt Holder, whether the Senior Indebtedness was created or acquired
before or after the issuance of this Note, to acquire and/or continue to hold
such Senior Indebtedness and each Senior Debt Holder shall be deemed
conclusively to have relied on the provisions of this Section 4 in acquiring
and/or continuing to hold such Senior Indebtedness. In furtherance of the
foregoing, the Holder represents and warrants to the holders of the Senior
Indebtedness: the Obligor owes to the Holder, as of the date hereof, the
aggregate principal amount of this Note; there are no guarantees for this Note;
and this Note is not as of the date hereof subject to any lien, security
interest, guarantees, subordination or collateral assignment, except the
subordination in favor of holders of Senior Indebtedness pursuant hereto and
contemplated by subsection 4.10 hereof..
4.10 Further Assurances. The Holder agrees to cooperate with the Obligor
in connection with implementing the subordination of this Note to such Senior
Indebtedness as may be incurred by the Obligor after the date hereof and
encumbrances granted to secure such Senior Indebtedness, including without
limitation by executing such agreements of subordination as may be reasonably
required by the Senior Debt Holders of such Senior Indebtedness.
4.11 Limitations on Transfer. The Holder acknowledges that this Note has
not been registered under the Securities Act of 1933 or under the corporate
securities law of California or of any other state. Any transfer of this Notes
is subject to the limitations created by such laws; and the Obligor has no
obligation to register the Note, or take any other action with respect to the
qualification of this Note for sale under any of such laws. No transfer of this
Note may be made, or shall be recognized by the Obligor, unless and until the
Obligor has received an opinion of legal counsel satisfactory to it to the
effect that such transfer may be made in accordance with law.
In addition, transfer of this Note is subject to a right of first
refusal on the part of Obligor, Xx Xxxxxx Investments and Stater Bros. Markets,
as set forth in Section 7.4 of the Redemption Agreement.
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5. Miscellaneous.
(a) Severability. If any provision of this Note or the application
thereof to any person(s) or circumstances shall be invalid or unenforceable to
any extent, (i) the remainder of this Note and the application of such provision
to other persons or circumstances) shall not be affected thereby and (ii) each
such provision shall, as to such person or circumstances as to which it is not
enforceable in full, be enforced to the greatest extent permitted by law.
(b) Amendments; No Waiver; Successors and Assigns. No amendment,
modification, rescission, waiver, forbearance or release of any provision of
this Note shall be valid or binding unless made in writing and executed by a
duly authorized representative of Obligor and the Holder. No consent or waiver,
express or implied, by the Holder to or of the breach by Obligor in the
performance by it of any of its obligations hereunder shall be deemed or
construed to be a consent to or waiver of the breach in the performance of the
same or any other obligation of Obligor hereunder. Failure on the part of the
Holder to complain of the act or failure to act by Xxxxxxx or to declare Obligor
in breach irrespective of how long such failure continues, shall not constitute
a waiver by the Holder of any of its rights hereunder. All consents and waivers
shall be in writing. All of the terms, covenants and conditions contained in
this Note shall be binding upon and inure to the benefit of the parties hereto
and their respective legal representatives, personal representatives, estates,
successors and permitted assigns.
(c) Governing Law. This Note, and the rights and obligations
hereunder, including the performance and enforceability hereof, shall be
governed and enforced by and construed in accordance with the laws of the State
of California, without regard to the principles of conflicts of law.
(d) Waiver of Notice. The Obligor hereby waives demand, presentment,
protest, notice of protest, notice of dishonor or nonpayment, and any other
condition precedent to action against the Obligor for the payment hereof.
(e) Attorney Fees. If any judicial proceeding shall be brought to
enforce the terms and provisions of this Note, the prevailing party shall be
entitled to recover its reasonable costs and expenses incurred in connection
with such proceeding, including attorney fees and disbursements.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
and delivered by its duly authorized representative as of the date first set
forth above.
OBLIGOR:
STATER BROS. HOLDINGS INC.,
a Delaware corporation
By:_______________________________
Xxxx X. Xxxxx
Its: Chairman of the Board, President
& CEO
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Acknowledged and agreed with
respect to the obligations of
the Holder hereunder:
-----------------------------------
X. Xxxxxxxx Xxxxxxxxx
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