Document:

EX-10.1

 

Exhibit 10.1

AMENDED AND RESTATED

EMPLOYMENT AND NON-COMPETITION AGREEMENT

     This EMPLOYMENT AND NON-COMPETITION AGREEMENT (this “Agreement”) is made and entered into as
of August 15, 2007 by and between Metretek Technologies, Inc., a Delaware corporation (the
“Company”), and Sidney Hinton, an individual who resides in Wake Forest, North Carolina
(“Officer”).

Recitals

     WHEREAS, Officer is the President and Chief Executive Officer of the Company and of
PowerSecure, Inc. (“PowerSecure”), a Delaware corporation and wholly-owned subsidiary of the
Company; and

     WHEREAS, PowerSecure and Officer had previously entered into an Employment and Non-Competition
Agreement, dated as of January 1, 2003, which was amended and restated as of November 15, 2005 (the
“PowerSecure Employment Agreement”); and

     WHEREAS, Officer was appointed as the President and Chief Executive Officer of the Company on
April 16, 2007; and

     WHEREAS, the continued involvement and leadership of Officer in the business and affairs of
the Company and its subsidiaries, including PowerSecure, is vital to the success of the Company and
its subsidiaries; and

     WHEREAS, the Company desires to continue to employ Officer and to extend the term of his
employment, and Officer desires to continue to serve the Company during such extended term of
employment, upon the terms and subject to the conditions set forth herein; and

     WHEREAS, the Company and Officer desire to set forth the terms and conditions of such extended
term of employment in this Agreement;

Agreement

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements
set forth herein, and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and Officer, intending to be legally bound hereby, agree
as follows:

     Section 1. Employment. The Company hereby agrees to continue to employ
Officer, and Officer hereby agrees to continue to serve as an employee of the Company, upon
the terms and subject to the conditions set forth herein.

     Section 2. Term. The term of Officer’s employment hereunder shall continue
until and expire on August 8, 2012, unless earlier terminated in accordance with the
provisions of Section 5.

 

 

In the event that this Agreement has not been earlier terminated in accordance with the provisions of Section 5, the term of Officer’s employment hereunder
shall be automatically extended without further action by the Company or Officer for
additional successive one-year periods unless either party, for any reason or no reason,
shall have given written notice of termination to the other party no less than 90 days prior
to the commencement of any one-year extension period. The term of Officer’s employment
hereunder, including any extension period, is sometimes hereinafter referred to as the
“Employment Term.”

     Section 3. Duties of Officer.

          (a) General Duties and Responsibilities. During and throughout the Employment Term,
Officer shall faithfully and diligently, to the best of his ability, serve as the President and
Chief Executive Officer and a member of the Board of Directors of the Company and of PowerSecure,
and in such additional management offices and capacities and with such additional titles and duties
as shall be designated by the Company’s Board of Directors (the “Board”) during the Employment
Term, shall have the authority and perform the duties and responsibilities customary for such
offices, and shall have such other duties as may be assigned to him from time to time by the Board.
Officer shall perform his duties hereunder in accordance with the policies from time to time
established and amended by the Company and in accordance with all applicable laws and regulations.
Officer shall use his best efforts to promote the best interests of the Company. Officer shall
always be subject to the direction, approval and control of the Board in the performance of his
duties. Officer acknowledges and agrees that he may be required by the Company, without additional
compensation, to perform services for any other entity controlling, controlled by, under common
control with or otherwise affiliated with, the Company (any such entity hereinafter referred to as
an “Affiliate”), and to accept such office or position with any Affiliate as the Board may
reasonably require, including but not limited to service as an officer and/or director of an
Affiliate.

          (b) Performance of Services. During and throughout the Employment Term, Officer shall
devote his full time, attention, skill, ability and energy during normal business hours (and
outside such hours when reasonably necessary to perform Officer’s duties hereunder) exclusively to
the business and affairs of the Company and the performance of his duties under this Agreement.
Officer shall not, directly or indirectly, render any services of a business, commercial or
professional nature to any Person without the prior written consent of the Board; provided,
however, that the provisions this Section 3(b) shall not preclude Officer from devoting time,
ability, energy and attention outside normal business hours throughout the Employment Term to
reasonable participation in community, civic, charitable or similar organizations, or the pursuit
of personal legal and financial affairs which do not interfere or conflict with the performance of
Officer’s duties hereunder and are not adverse to the business or best interests of the Company.

          (c) Place of Employment. Officer shall perform his services hereunder at the Company’s
principal executive offices in Wake Forest, North Carolina or at such other location as mutually
agreed with the Board; provided, however, that Officer agrees to undertake all reasonable travel
required by the Company to be conducted in connection with the business of the Company and the
performance of Officer’s duties hereunder.

     Section 4. Compensation. During and throughout the Employment Term, as
compensation for the services performed and other covenants made by Officer to the
Company hereunder, the Company shall pay and provide or cause to be provided to Officer
the following:

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          (a) Base Salary. The Company shall pay Officer a base salary equal to $485,000
per year (the “Base Salary”), payable in approximately equal installments in accordance with
the Company’s customary payroll practices. Officer’s Base Salary shall be reviewed by or
under the authority of the Board (through its Compensation Committee) no less frequently
than annually and may be increased (but never decreased) in the sole discretion of the Board
or the Compensation Committee (although neither the Board nor the Compensation Committee has
any obligation to do so) based upon whatever factors the Board or the Compensation Committee
deems appropriate including, but not limited to, Officer’s individual performance, the
overall performance, profitability and prospects of the Company and prevailing economic and
industry factors.

          (b) Bonuses. So long as he remains employed with the Company, Officer shall be
entitled to receive the following bonuses:

               (i) Cash Flow Bonus. Officer shall be entitled to receive a bonus in the amount of 7%
of PowerSecure’s “Cash Flow from Operations” (the “Cash Flow Bonus”) for each fiscal year of
PowerSecure during the Employment Term, on the following terms and conditions:

                    (A) PowerSecure’s “Cash Flow from Operations” for any fiscal year shall be an amount equal
to PowerSecure’s net income (loss) before federal income taxes, depreciation and
amortization but after interest (including interest reasonably allocated by the Company
from its interest cost due to PowerSecure’s use of funds from the Company’s credit facility) during
such fiscal year, determined in accordance with generally accepted accounting principles
consistently applied, adjusted to exclude (I) all items of income, gain, loss or expense during
such fiscal year determined by the Board to be extraordinary or unusual in nature and not incurred
or realized in the ordinary course of business, whether or not such items would otherwise be
considered to be extraordinary or unusual in accordance with generally accepted accounting
principles, and (II) any profit or loss attributable to the business operations of any entity
acquired by PowerSecure during such fiscal year, and shall be determined by the Board in its sole
discretion based upon the Company’s financial statements for such fiscal year.

                    (B) As a condition to Officer’s receiving the Cash Flow Bonus for any fiscal year,
PowerSecure must meet the “Threshold Performance Level” applicable to that fiscal year. For
purposes of this Agreement, the “Threshold Performance Level” shall be equal to the following: (I)
for fiscal 2007, the Threshold Performance Level shall be equal to 50% of the amount of
PowerSecure’s unconsolidated operating income included, within the Company’s internal projections,
in the lower end of the range of the Company’s consolidated net income forecast for 2007 as
included in its guidance issued publicly on August 8, 2007, and (II) for fiscal year 2008 and each
fiscal year thereafter, the Threshold Performance Level shall be increased by 25% per annum over
the prior fiscal year’s Threshold Performance Level.

                    (C) The Company shall pay any Cash Flow Bonus for a fiscal year within 90 days after the
expiration of that fiscal year.

                    (D) It is the intention of the Company and Officer that the terms and conditions of the Cash
Flow Bonus shall survive for the duration of Officer’s employment, regardless
of whether such employment continues under this Agreement, a successor employment agreement, or
without an employment agreement.

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               (ii) General Bonus Program. Officer’s eligibility to participate in any other bonus
program or any other form of profit-sharing participation for senior executive officers of the
Company not expressly provided for in this Agreement shall be in the sole discretion of the Board
or the Compensation Committee.

          (c) Restricted Stock Grant. The Company hereby grants to Officer an award of
“Restricted Stock” under the Company’s 1998 Stock Incentive Plan, as amended and restated from time
to time, upon the following terms and conditions. The award consists of 600,000 shares of Common
Stock, par value $.01 per share, of the Company (the “Restricted Shares”) that are subject to the
terms and conditions of a Restricted Stock Agreement approved by the Compensation Committee of the
Board of Directors of the Company, consistent with the terms and conditions of the grant as set
forth in this Agreement. The Restricted Shares shall vest in accordance with the following vesting
schedule: (i) 300,000 Restricted Shares shall vest on August 8, 2012, provided Officer has been
employed continuously with the Company from the date hereof through such vesting date (the “Service
Restricted Shares”); and (ii) 300,000 Restricted Shares shall vest in five equal annual
installments for fiscal years 2007 through 2011 only if the Company achieves the “Restricted Share
Performance Goal” for each such fiscal year (the “Performance Restricted Shares”). The “Restricted
Share Performance Goal” for fiscal year 2007 shall be equal to 90% of the lower end of the range of
the Company’s consolidated net income forecast for 2007 as included in its guidance issued publicly
on August 8, 2007. For fiscal year 2008 and each fiscal year thereafter, the Restricted Share
Performance Goal shall be increased by 20% over the prior fiscal year’s Restricted Share
Performance Goal. In the event that the Company fails to achieve the Restricted Share Performance
Goal for any fiscal year, the Performance Restricted Shares that did not vest for that fiscal year
shall vest in the subsequent fiscal year but only if the Company exceeds by 10% the Restricted
Share Performance Goal for that subsequent fiscal year. In the event of a Change in Control of the
Company (as defined below), any unvested Restricted Shares (regardless of whether they are Service
Restricted Shares or Performance Restricted Shares) shall immediately vest in full upon the
effective date of the Change in Control.

          (d) Vehicle. The Company shall provide to Officer a Company-owned or leased vehicle
suitable and appropriate for Officer to perform his duties hereunder, and Officer shall be
permitted to use such vehicle for personal use so long as it is not used for any purpose that
violates applicable law or is detrimental to the Company. In lieu of the foregoing, but only with
the consent of Officer, the Company may pay an automobile allowance to Officer in an amount
sufficient to meet its obligations in this Section 4(c).

          (e) Club Membership. The Company shall pay or reimburse Officer for one country club
membership, including initiation fees and annual membership fees and dues, at a club selected by
Officer.

          (f) Annuity. The Company will purchase an annuity payable to Officer upon the terms
set forth herein (the “Annuity”). Under the Annuity, upon the terms and conditions set forth
herein, Officer shall receive, commencing when Officer reaches the age of 58 and continuing until
his death, monthly payments (“Monthly Annuity Payments”) in an amount equal to the product of (x)
$2,000, multiplied by (y) the total number of years Officer served as an employee of the Company
and its subsidiaries (it being acknowledged that Officer commenced serving as an employee on
May 8, 2000) as of the time his employment with the Company is

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terminated; provided, however,
that (i) the amount of the Monthly Annuity Payments shall not exceed $20,000 per month regardless
of the number of years of Officer’s service, and (ii) Officer may, at his election, commence
receiving the Monthly Annuity Payments when he reaches the age of 53, but the amount of the Monthly
Annuity Payments shall be reduced by five percent (5%) for each year of age Officer is below the age of 58
when he commences receiving such payments. Officer shall have the right to receive the Monthly
Annuity Payments only if two conditions are satisfied: (i) Officer shall have continued to remain
employed with the Company though the earlier of (A) August 8, 2012, (B) the effective date of a
Change in Control (as defined below) of the Company, or (C) Officer’s employment is terminated by
the Company without Cause (as defined below); and (ii) Officer’s employment with the Company has
terminated before he commences receiving the Monthly Annuity Payments; provided that if either of
events (B) or (C) occurs, the amount of the Monthly Annuity Payments shall be computed as if
Officer had remained employed with the Company through August 8, 2012. The Company will use its
commercially reasonable best efforts to fund the Annuity through a third party provider such as an
insurance company or similar financial institution, provided that the Company and Officer agree to
reasonably cooperate in agreeing to the design, funding, terms and conditions of such plan.

          (g) Employee Benefit Plans. Officer shall be entitled to participate in all pension,
401(k), retirement, life, disability and health insurance, hospitalization, major medical and other
the employee benefit plans and arrangements, if any (as in effect and as amended from time to
time), to the extent that his position, tenure, salary, age, health and other qualifications make
his eligible to participate, generally made available by the Company to comparable level employees,
subject to and on a basis consistent with the terms, rules and regulations, conditions and overall
administration of such plans and arrangements. Notwithstanding the foregoing sentence, the Company
may discontinue at any time any such employee benefit plan or arrangement, to the extent permitted
by the terms of such plans or arrangements, and shall not be required to compensate Officer for the
elimination of any such employee benefit plans or arrangements.

          (h) Expenses. The Company shall, upon presentment by Officer of appropriate receipts
and vouchers therefor, reimburse Officer for all reasonable, ordinary and necessary out-of-pocket
business expenses incurred by Officer in connection with the performance of his duties under this
Agreement, provided that such expenses are incurred and accounted for in accordance with and
subject to the normal policies and procedures of the Company.

          (i) Vacation. Officer shall be entitled to reasonable paid vacation time in accordance
with the policies of the Company applicable to executive officers of the Company.

     Section 5. Termination of Employment. Notwithstanding the provisions of
Section 2, the Employment Term and Officer’s employment hereunder shall terminate as
follows:

          (a) Death. Officer’s employment hereunder shall automatically terminate upon his
death, and the Company shall pay to his designated beneficiaries (or, if none, to his estate) the
pro rata portion of his Base Salary and all other accrued and vested but unpaid compensation
through the date of his death. In addition, the Company shall pay for and provide for the benefit
of Officer and his beneficiaries a term life insurance policy in the amount of $5,000,000 on the
life of Officer, and Officer shall have the unilateral right to name the beneficiaries of such life
insurance policy.

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          (b) Disability. The Company shall have the right, in its sole discretion, to
terminate Officer’s employment hereunder in the event of Officer’s “Disability” upon giving at
least 30 days written notice to Officer of its intention to terminate Officer’s employment. In
such event, the Company shall pay to Officer the pro rata portion of his Base Salary and all other
accrued and vested but unpaid compensation through the date of termination. In addition, the
Company shall pay for and provide for the benefit of Officer a disability insurance policy that
provides for payment benefits to Officer in an amount equal to no less than 60% of his Base Salary.
Upon termination by the Company in the event of Officer’s Disability, Officer shall be entitled to
receive the following: (i) the accrued but unpaid portion of his Base Salary and any bonuses and
other compensation that are earned, accrued or vested but unpaid through the date of termination; (ii) an amount equal to one-third of the full
Severance Amount, computed and payable as provided in Section 5(j), except that the average of the
Cash Flow Bonus shall be computed based only on the three fiscal years preceding the fiscal year in
which Officer’s employment is terminated, and the severance shall be payable in approximately equal
installments in accordance with the Company’s customary payroll practices over the 12 months
following the termination of Officer’s employment; (iii) in the event such termination of
employment occurs after August 8, 2012, then Officer shall be entitled to the Annuity and to
receive the Monthly Annuity Payments as provided in Section 4(f); (iv) for a period of three years
from the date of termination, the Company shall pay for, or otherwise provide for at Company
expense, the continuation of the same (if available, and to the extent not available similar) life,
accidental death, disability, medical, dental and other insurance plans and benefits in which
Officer and his family participated prior to such termination; and (v) any other rights and
benefits of any of the employee benefits earned, accrued or vested (including under any plans in
which he was participating) as of the date of such termination, subject to the terms and conditions
of such plans and benefits, but Officer shall not attain vested status in any plans or benefits in
which he is not vested on the date of termination. For purposes of this Agreement, “Disability”
means the physical or mental inability of Officer, due to illness, accident or other incapacity, to
effectively perform the essential functions of his duties hereunder for any period of 90
consecutive days, or 180 days during any twelve-month period, or which results from an incapacity
determined to be total and permanent as determined by an independent physician selected by the
Company.

          (c) By the Company for Cause. The Company shall have the right, in its sole
discretion, to terminate Officer’s employment hereunder at any time for “Cause” immediately upon
giving written notice of termination to Officer. Upon his termination for Cause, Officer shall be
entitled to receive only the accrued but unpaid portion of his Base Salary through the date of
termination, plus any accrued and vested but unpaid bonuses and other compensation as of such date,
but Officer shall not be entitled to any other bonus or incentive compensation for the fiscal year
in which he was terminated. In addition, any unvested portion of any option to purchase shares of
Common Stock, and any unvested portion of the Restricted Shares, shall expire without vesting.
Officer shall have no right to receive any other or further compensation or benefits. For purposes
of this Agreement, “Cause” means only the following:

               (i) The failure or refusal by Officer to perform any of his material duties hereunder, or
the breach by Officer of any of his obligations, covenants, representations, warranties or
acknowledgments hereunder, which failure, refusal or breach is confirmed by a resolution adopted by
the Board and that remains unremedied or uncured for a period of 30 consecutive days after specific
written notice thereof is given to Officer by on or behalf of the Board;

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               (ii) Any act of dishonesty, fraud, breach of fiduciary duty or bad faith by Officer that is
materially detrimental to the Company or that results in substantial personal enrichment of
Officer; or

               (iii) The conviction of Officer, or the entering of a guilty plea or a plea of no contest by
Officer with respect to (A) a felony, or (B) a misdemeanor that involves theft, fraud or
dishonesty, results in Officer’s imprisonment or materially impairs Officer’s ability to perform
his duties hereunder or materially damages the reputation or business of the Company.

          (d) By the Company Without Cause. The Company shall have the right, in its sole
discretion, to terminate Officer’s employment hereunder at any time, without Cause, which
termination shall be effective upon the giving of written notice of such termination to Officer (or
at such later date as the notice provides). In such event, Officer shall be entitled to receive
the following: (i) all amounts of the Base Salary and any bonuses and other earned but unpaid
compensation that are earned, accrued or vested but unpaid through the date of termination; (ii) an
amount equal to the Severance Amount, computed and payable as provided in Section 5(j); (iii) any
unvested portion of the Restricted Shares shall vest as follows: (A) the Service Restricted Shares,
if then unvested, shall immediately vest, and (B) the unvested Performance Restricted Shares
applicable for the fiscal year in which the termination occurs shall vest in the event the Company attains the applicable Performance Goal for that fiscal year; (iv) for a
period of three years from the date of termination, the Company shall pay for, or otherwise provide
for at Company expense, the continuation of the same (if available, and to the extent not available
similar) life, accidental death, disability, medical, dental and other insurance plans and benefits
in which Officer and his family participated prior to such termination; and (v) any rights and
benefits of any of the employee benefits earned, accrued or vested (including under any plans in
which he was participating) as of the date of such termination, subject to the terms and conditions
of such plans and benefits, but Officer shall not attain vested status in any plans or benefits in
which he is not vested on the date of termination.

          (e) By Officer.

               (i) With Good Reason. Officer shall have the right, in his sole discretion, to
terminate his employment hereunder for “Good Reason” at any time effective upon the giving of at
least 60 days written notice of termination to the Company. Upon such termination for Good Reason
by Officer, Officer shall be entitled to receive the same compensation, payments and benefits as if
the Company had terminated the employment of Officer without Cause, as provided in Section 5(d).
In addition, in the event such termination of employment occurs after August 8, 2012, then Officer
shall be entitled to the Annuity and to receive the Monthly Annuity Payments as provided in Section
4(f). For purposes of this Agreement, “Good Reason” means the occurrence of one of the following
that continues for 30 consecutive days after Officer gives notice thereof to the Company, which
notice is given within 90 days after the first occurrence thereof:

(A) (I) The assignment to Officer of any position, authority, duties or
responsibilities inconsistent in any respect with Officer’s position (including,
without limitation, status, offices, title and reporting requirements), authority,
duties or responsibilities, as provided hereunder, or (II) any other action by the
Company which results in a diminution in such position, authority, duties or
responsibilities, other than an insubstantial and inadvertent action which is

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remedied by the Company promptly after receipt of notice thereof given by Officer;

(B) Any reduction in Officer’s Base Salary or in the extent of Officer’s entitlement
to the employee benefits, expenses, fringe benefits or perquisites referred to in
Section 4;

(C) The Company’s requiring Officer to be based at an office location or to maintain
his personal residence other than North Carolina or Georgia, without Officer’s
consent, which may be withheld for any reason;

(D) The failure of the Board to continue to elect Officer as its President and Chief
Executive Officer, without Officer’s consent, which may be withheld for any reason;

(E) Any purported termination by the Company of Officer’s employment other than as
expressly permitted by this Agreement; or

(F) Any other failure by the Company to comply with any provision of this
Agreement, other than an insubstantial and inadvertent failure which is remedied by
the Company within 30 days after receipt of notice thereof given by Officer.

                           (ii) Without Good Reason. Officer agrees not to voluntarily terminate his employment
hereunder, without Good Reason, except by giving at least 60 days written notice to the Company.
Upon such voluntary termination by Officer, Officer shall be entitled to receive the following: (i)
the accrued but unpaid portion of his Base Salary and any bonuses and other
compensation that are earned, accrued or vested but unpaid through the date of termination; (ii) an
amount equal to one-third of the full Severance Amount, computed and payable as provided in Section
5(j), except that the average of the Cash Flow Bonus shall be computed based only on the three
fiscal years preceding the fiscal year in which Officer’s employment is terminated, and the
severance shall be payable in approximately equal installments in accordance with the Company’s
customary payroll practices over the 12 months following the termination of Officer’s employment;
(iii) in the event such termination of employment occurs after August 8, 2012, then Officer shall
be entitled to the Annuity and to receive the Monthly Annuity Payments as provided in Section 4(f);
and (iv) any rights and benefits of any of the employee benefits earned, accrued or vested
(including under any plans in which he was participating) as of the date of such termination,
subject to the terms and conditions of such plans and benefits, but Officer shall not attain vested
status in any plans or benefits in which he is not vested on the date of termination. In exchange
for the receipt of the foregoing consideration, Officer agrees to be subject to the covenants set
forth in Section 6, including but not limited to the covenant not to compete, during the Employment
Term and for one year thereafter.

               (f) Compensation Upon Termination of Employment Following a Change in Control.

                             (i) Amount of Compensation. If, during the Employment Term, a “Change in Control” (as
defined below) of the Company occurs, and within three years after

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such date the Company shall
terminate Officer’s employment without “Cause” or the employment of Officer shall be terminated by
Officer for any reason, then:

(A) The Company shall pay to Officer in a lump sum in cash within 30 days after the
date of termination the aggregate of the following amounts:

(I) To the extent not theretofore paid, the Base Salary through the date of
termination at the rate in effect on the date the notice of termination was
given along with any earned but unpaid bonuses or other compensation; and

(II) the Severance Amount; and

(III) In the case of compensation previously deferred by Officer, all amounts
of such compensation previously deferred and not yet paid by the Company; and

(B) The Company shall, promptly upon submission by Officer of supporting
documentation, pay or reimburse to Officer all costs and expenses paid or incurred
by Officer prior to the date of termination which would have been payable under this
Agreement if Officer’s employment had not terminated; and

(C) For a period of three years from the date of termination, Officer and his family
shall be permitted to continue to participate in all life, accidental death,
disability, medical, dental and other insurance plans of the Company. If, despite
the provisions of this Section 5(f), benefits shall not be available under any of
such plans because Officer is no longer an employee of the Company, then the Company
itself shall, to the extent necessary, pay or provide for payment of similar
benefits to Officer and/or Officer’s family.

                   (ii) Definition of Change in Control. For the purpose of this Agreement, a “Change
in Control” of the Company shall be deemed to have occurred only if:

(A) Any person or group (as such terms are used in Sections 13 (d) (3) and 14 (d) (2)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) acquires the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of 50% or more of the aggregate voting power of all
classes of the Company’s then outstanding voting securities entitled to vote
generally in the election of directors of the Company; provided, however, that the
following acquisitions shall not constitute a Change in Control: (I) any acquisition
directly from the as provided in Section 4(f) (excluding an acquisition by virtue of
the exercise of a conversion privilege), (II) any acquisition by the as provided in
Section 4(f) or any subsidiary of the as provided in Section 4(f), or (III) any
acquisition by any employee benefit plan (or related trust) for employees or any
subsidiary of the as provided in Section 4(f); or

(B) Individuals who, as of any given date, constitute the Board of Directors of the
Company (the “Board” generally, and as of the date hereof, the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board within

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12 months
after such date, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company’s stockholders, was
approved by a vote of at least three-fifths of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election contest
relating to the election of the directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for
purposes of this Agreement, considered as though such individual were a member of the
Incumbent Board; or

(C) Consummation by the Company of a reorganization, merger, combination, or
consolidation, in each case, unless, following such reorganization, merger,
combination, or consolidation, (I) more than 50% of, respectively, the then
outstanding shares of common stock of the corporation or other entity resulting from
such reorganization, merger, combination or consolidation and the aggregate voting
power of the then outstanding voting securities of the resulting corporation or other
entity entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the outstanding Common
Stock and outstanding voting securities of the Company immediately prior to such
reorganization, merger, combination, or consolidation, in substantially the same
proportion as their ownership immediately prior to such reorganization, merger,
combination, or consolidation, and (II) at least a majority of the members of the
board of directors of the corporation or other entity resulting from such
reorganization, merger, combination or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement providing for such
reorganization, merger, combination or consolidation; or

(D) Approval by the stockholders of the Company of the sale or other disposition of
all or substantially all of the assets of the Company, other than to a corporation or
other entity with respect to which following such sale or other disposition the
conditions described in clauses (I) and (II) of Section 5(f)(ii)(C) are satisfied.

          (g) Expiration of Employment Term. In the event of the expiration of the Employment
Term (including any renewal or extension period hereunder) without further renewal or extension,
Officer shall be entitled to receive (i) all amounts of the Base Salary and any bonuses and other
compensation earned, accrued or vested but unpaid through the date of expiration; (ii) an amount
equal to one-third of the full Severance Amount, computed and payable as provided in Section 5(j),
except that the average of the Cash Flow Bonus shall be computed based only on the three fiscal
years preceding the fiscal year in which Officer’s employment is terminated, and the severance
shall be payable in approximately equal installments in accordance with the Company’s customary
payroll practices over the 12 months following the termination of Officer’s employment; (iii) the
Annuity and the Monthly Annuity Payments as provided in Section 4(f); and (iv) any rights and
benefits of any of the employee benefits earned, accrued or vested (including under any plans in
which he was participating) as of the date of such termination, subject to the

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terms and conditions
of such plans and benefits, but Officer shall not attain vested status in any plans or benefits in
which he is not vested on the date of termination.

          (h) No Further Obligation to Officer. The payments and benefits (if any) required to
be made or provided to Officer pursuant to this Section 5 shall be in full and complete
satisfaction of, and shall constitute the full settlement and release of the Company by Officer
with regard to, all obligations of the Company owed to Officer pursuant to this Agreement. After
the date of termination of Officer’s employment hereunder, the Company shall have no further
obligations to Officer under this Agreement except as otherwise set forth herein.

          (i) Survival of Officer’s Obligations. Notwithstanding the termination of this
Agreement by either party hereto for any reason, the obligations of Officer under Section 6 and the
other provisions thereof shall survive the termination or expiration of this Agreement or Officer’s
employment hereunder and shall remain in full force and effect for the period provided therein.

          (j) Computation and Payment of Severance Amount. For purposes of this Agreement, the
term “Severance Amount” shall mean an amount equal to three times the sum of the following: (I) the
“Base Salary Component,” which shall be equal to the highest Base Salary of Officer during the
Employment Term, plus (II) the “Cash Flow Component,” which shall be equal to the average of the
Cash Flow Bonus awarded to Officer for the two fiscal years of the Company immediately preceding
the fiscal year in which Officer’s employment is terminated and of the Cash Flow Bonus that would
have been awarded to Officer (if his employment had not terminated) for the fiscal year in which
his employment is terminated based on the formula set forth in Section 4(b), or, if greater, for
the three fiscal years preceding the fiscal year in which his employment is terminated; provided
that in any event, regardless of the formula set forth in Section 4(b), the Cash Flow Component
shall be no less than one time the Base Salary Component and no more than two times the Base Salary
Component. The Severance Amount shall be payable in approximately equal installments in accordance
with the Company’s customary payroll practices over the 36 months following the termination of
Officer’s employment hereunder.

          (k) Release of Claims. Upon termination of Officer’s employment for any reason, other
than by the Company for Cause, Officer agrees to execute a release of all claims against the
Company and its subsidiaries, affiliates, directors, officers, employees, stockholders, agents an
representatives, substantially in the same form as standard releases used by the Company in
employee terminations, and the Company agrees to execute a similar mutual release of all claims
against Officer.

     Section 6. Covenants. In consideration in part for the compensation to be
paid to Officer hereunder by the Company, and in order to induce the Company to enter into
this Agreement, Officer hereby makes the following covenants to the Company:

          (a) Covenant Not to Compete. During the Employment Term and for a period of (x) three
years thereafter, if Officer’s employment is terminated by the Company for any reason other than
for Cause or by Officer for Good Reason or if the Employment Term expires without being renewed, or
(y) one year thereafter, if Officer’s employment is terminated by Officer without Good Reason (the
“Restricted Period”), Officer shall not, directly or indirectly, alone or in association with
others, whether as owner, shareholder, employee, Officer, director, partner, manager, member,
lender, investor, consultant, principal, agent, independent contractor, co-venturer or in any other capacity, invest
in, engage in, have a financial interest in, be in any other way

11

 

connected or affiliated with, or
render advice or services to, any Person that is in competition with the Company in the United
States or in any other country in which the Company does a material amount of business or otherwise
has material operations.

                    (i) Competition with the Company. For purposes of this Agreement, (A) the phrase “in
competition with the Company” shall be deemed to include competition with the Company and its
subsidiaries and Affiliates, or their respective successors or assigns, or the businesses of any of
them, and (B) a business shall be deemed to be in competition with the Company if it is engaged in
any business activity or has products or services that are the same or similar to the business
activities, products or services of the Company during the Employment Term. Notwithstanding the
foregoing, nothing herein contained shall prevent Officer from acquiring and holding for investment
up to five percent (5%) of any class of securities of any corporation, if such securities are
listed or traded on a national securities exchange or the Nasdaq Stock Market or in the
over-the-counter market.

                    (ii) Interpretation of Covenant. The parties hereto acknowledge and agree that the
duration and area for which the covenant not to compete set forth in this Section 6(a) is to be
effective are fair and reasonable and are reasonably necessary for the protection of the Company
and its business and good will, and Officer hereby waives any objections to or defenses in respect
thereof. In the event that any court determines that any portion of the time period or the area,
or both of them, are unreasonable, arbitrary or against public policy, and that such covenant is to
such extent unenforceable, illegal or invalid, the parties hereto agree that this Section 6(a)
shall be deemed amended to delete therefrom such provisions or portions adjudicated to be
unenforceable, illegal or invalid so that the covenant shall remain in full force and effect for
the greatest time period and in the greatest geographical area that would render it enforceable,
legal and valid. The parties intend that the covenant set forth in this Section 6(a) shall be
deemed to be a series of separate covenants, one for each and every county of each and every state
of the United States of America and one for each and every political subdivision of each and every
other country where the covenant is intended to be effective and is not proscribed by law.

          (b) Covenant Regarding Disclosure or Use of Confidential Information.

                    (i) Officer acknowledges that during the Employment Term and as a result of his employment by
the Company, he has and will continue to learn, obtain and have access to confidential and
proprietary information regarding the business and affairs of the Company and its Affiliates.
Officer hereby agrees that at all times during and after the Employment Term he shall keep strictly
confidential and hold in confidence all Confidential Information (as defined below), and shall not,
directly or indirectly, use any Confidential Information for Officer’s own benefit or for the
benefit of any other Person or divulge, disclose, communicate or otherwise reveal any Confidential
Information to any Person in any manner whatsoever, other than to the directors, employees and
agents of the Company, and then only in the course of the Company’s affairs to the extent necessary
for them to perform services to and responsibilities on behalf of the Company.

                    (ii) As used herein, “Confidential Information” means any and all information, however
documented, which is confidential property or otherwise non-public, related to the business and
affairs of the Company and its Affiliates, including, but not limited to, their assets, properties,
operations, finances, practices, procedures, policies, methods, contracts, agreements and
arrangements, lending policies, pricing policies, price lists, financial plans, business plans,
financial information, financial projections, budgets, marketing strategies and techniques; the
identity and location of all past, present and prospective customers, suppliers, affiliates,
debtors, creditors,

12

 

lenders, employees, consultants, advisors, agents, distributors, wholesalers,
clients and others who have dealings with the Company; trade secrets, processes, photographs,
graphics, product specifications, formulas, compositions, samples, inventions, ideas, research and
development; patents, patent applications; copyrights and copyright applications (in any such case,
whether registered or to be registered in the United States or any foreign country) applied for,
issued to or owned by the Company; any and all processes, computer programs and software (including
object code and source codes, database, technologies, engineering or technical data, drawings,
sketches or designs, manufacturing or distribution methods or techniques; and any other
information known to Officer to be confidential, proprietary, secret or otherwise non-public
information.

                    (iii) Officer hereby acknowledges and agrees that, as between the Company and Officer, all of
the Confidential Information, however documented, whether or not developed, created or modified by
Officer, is the exclusive property of the Company.

                    (iv) Upon the termination or expiration of the Employment Term, Officer shall leave with or
return to the Company, without making or retaining any copies, or other records of, all
Confidential Information including all copies, summaries, abstracts thereof and all memoranda,
notes, records, reports, books, letters, customer lists, manuals and other writings or documents
whatsoever pertaining thereto. Notwithstanding the foregoing, as used herein “Confidential
Information” does not mean or include any information that is generally available to the public
other than as a result of a direct or indirect disclosure by Officer.

          (c) Covenants Regarding Business Relationships. Officer agrees that during and
throughout the Employment Term and the Restricted Period, except when acting on behalf of the
Company, he shall not, directly or indirectly, (i) employ, solicit, induce, engage or cause any
director, officer, employee, independent contractor, consultant, salesman or other agent of the
Company (whether now or hereafter engaged by the Company) to (A) terminate his employment or
engagement with the Company, (B) accept employment or engagement or otherwise render services to
any other Person or business (wherever located, and regardless of type of business conducted), or
(C) interfere with the business of the Company; or (ii) solicit any clients or customers of the
Company or interfere in any business relationship between the Company and any other Person,
including any Person who was at any time an employee, consultant, contractor, advisor, supplier,
lender or customer of the Company. Officer shall not, at any time during or after the Employment
Term, disparage the business reputation of the Company or any of its shareholders, directors,
officers, employees or agents or take actions that are harmful to the Company’s good will with
others.

          (d) Intellectual Property. During and throughout the Employment Term and the
Restricted Period, Officer agrees to disclose to the Company any and all ideas, improvements,
techniques, modifications, processes, inventions, developments, discoveries, trade secrets,
trademarks, service marks, copyrights, trade names, business plans and any work of authorship
(“Intellectual Property”) developed, conceived, created, made, devised, discovered, acquired or
acquired knowledge of, by Officer during the Employment Term, either by himself or in conjunction
with any other Person, which relates in any way, directly or indirectly, or may be useful in any
manner in the business of the Company or its Affiliates, and any such item that is based upon or
utilizes Confidential Information, whether or not the Company or its Affiliates obtains a patent,
trademark, service mark or copyright thereon. Officer hereby agrees that the Intellectual Property
shall become and remain the sole and exclusive property of the Company. Officer hereby acknowledges
that all of Officer’s writing, works of authorship and other Intellectual Property are

13

 

works made
for hire and the property of the Company, including patents, trademarks, service marks, copyrights
and other intellectual property rights pertaining thereto. Officer shall, at the request and cost
of the Company or any of its Affiliates, render assistance as the Company deems necessary or
desirable to secure, prosecute and/or defend the rights thereto by patent, trademark, service mark,
copyright to otherwise to the Company or its Affiliates, including without limitation the
assignment, transfer and conveyance to the Company or its Affiliates of all of Officer’s right,
title and interest in and to the Intellectual Property.

          (e) Officer’s Acknowledgment. The Company spends considerable amounts of time,
money and effort in developing and maintaining good will in its industry. Officer agrees the
covenants contained within this Section 6 (i) are reasonable and necessary in all respects to
protect the goodwill, trade secrets, confidential information, and business interests of the
Company; (ii) are not oppressive to Officer; (iii) do not impose any greater restraint on Officer
than is reasonably necessary to protect the goodwill, trade secrets, confidential information and
legitimate business interests of the Company; and (iv) will not, upon the termination, of Officer’s employment with the Company for any
reason whatsoever, cause Officer to be unable to earn a living that is suitable and acceptable to
Officer.

          (f) Equitable Relief. Officer hereby acknowledges and agrees that his services to be
rendered to the Company hereunder and his obligations contained in this Section 6 are of special,
unique and personal character which gives them a peculiar value to the Company, that the Company
cannot be reasonably or adequately compensated in money damages in an action at law in the event
Officer breaches any obligations under this Section 6, and that the provisions of this Section 6
are reasonable and necessary to protect the business of the Company. Officer therefore expressly
agrees that, in addition to any other rights or remedies which the Company may have at law or in
equity or by reason of any other agreement, the Company shall be entitled to injunctive and other
equitable relief in the form of temporary, preliminary and permanent injunctions without posting
bond or other security in the event of any actual or threatened breach of any such obligation by
Officer and without the necessity of proving actual damages, and to discontinue any salary, bonus,
benefits and/or insurance continuation provided hereunder. Nothing in this Agreement shall be
construed to prohibit the Company from pursuing any other remedy, and Officer agrees that all
remedies of the Company are cumulative.

          (g) Nature of Covenants. Officer’s covenants in Section 6 are independent covenants,
and the existence of any claim by Officer against the Company under this Agreement or otherwise
will not excuse Officer’s breach of, or waive Officer’s obligation to perform, any covenant in this
Section 6. If Officer’s employment hereunder terminates for any reason, or the Employment Term
expires, this Section 6, and the other terms and conditions of this Agreement necessary or
appropriate to enforce the covenants of Officer in Section 6, shall survive and remain in full
force and effect.

     Section 7. Representations and Warranties of Officer. Officer represents and
warrants to the Company that (a) Officer is under no contractual or other restriction, arrangement
or obligation which is or will be breached by or in conflict or inconsistent with his execution and
delivery of this Agreement, the performance of his duties hereunder, or the other rights of the
Company hereunder, and (b) Officer is under no physical or mental disability or incapacity that
would hinder the performance of his duties under this Agreement.

14

 

     Section 8. Consolidation, Merger or Sale of Assets. Nothing in this Agreement shall
preclude the Company from consolidating with, merging into, or transferring all or substantially
all of its assets to another entity which assumes all of the Company’s obligations and undertakings
hereunder. Upon such a consolidation, merger or transfer of assets, the term “Company” as used
herein shall mean such other entity, and this Agreement shall continue in full force and effect.

     Section 9. Officer Acknowledgment; Counsel. Officer acknowledges by executing this
Agreement and delivering it to the Company that (i) he has read all of the terms and conditions
hereof, including his obligations, covenants, representations and warranties to the Company; (ii)
the covenants of Officer in Section 6 are essential elements of this Agreement, and the Company
would not have entered into this Agreement without Officer’s agreement to comply with such
covenants; (iii) each and every term, covenant and restriction in this Agreement is reasonable and
necessary for the proper protection of the Company’s business; and (iv) he has been advised by the
Company that he should consult with independent counsel of his choice and have such counsel review
this Agreement and render advice thereon to Officer, and Officer has either done so or voluntarily
elected not to do so.

     Section 10. Taxes. All payments required to be made by the Company hereunder to
Officer shall be subject to withholding of such amounts relating to taxes as the Company may
reasonably determine it should withhold pursuant to any applicable federal, state or local law or
regulation. In lieu of withholding such amounts, in whole or in part, the Company may, in its sole
discretion, accept other provision for payment of taxes, provided it is satisfied that all
requirements of law affecting its responsibilities to withhold such taxes have been satisfied.

     Section 11. No Attachment. Except as required by law, no right to receive payment
under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge or hypothecation or to execution, attachment, levy, or similar process
of assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such
action shall be null, void and of no effect.

     Section 12. General Provisions.

          (a) Governing Law. This Agreement shall in all respects be governed by, and construed
in accordance with, the internal substantive laws of the State of Delaware, without giving effect
to any conflict or choice of law principles or rules.

          (b) Amendment. This Agreement may not be amended or modified in whole or in part in
any manner except in a writing which makes reference to this Agreement executed by both parties
hereto.

          (c) Assignment. Neither the Agreement, nor any rights, obligations or duties
hereunder, may be assigned or delegated by any party hereto without the prior written consent of
the other party hereto; provided, however, that this Agreement shall inure to the benefit of and be
binding upon the successors and assigns of the Company upon any sale of all or substantially all of
the Company’s stock or assets, or upon any merger, consolidation or reorganization of the Company
with or into any other Person, so long as such successors or assigns assume all of the Company’s
obligations hereunder. As used in this Agreement, the term “Company” shall be

15

 

deemed to refer to
any such successor or assign of the Company referred to in the preceding sentence.

          (d) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted assigns.

          (e) Entire Agreement.

                    (i) This Agreement (along with the Restricted Stock Agreement) sets forth the entire agreement
and understanding of the parties hereto with respect to the subject matter hereof and supersedes in
their entirety all prior and contemporaneous written and oral agreements, arrangements,
understandings, negotiations, communications, covenants, representations and warranties among the
parties hereto relating to the subject matter hereof, including but not limited to the PowerSecure
Employment Agreement.

                    (ii) Officer acknowledges that from time to time, the Company may establish, maintain or
distribute the employee manuals or handbooks or personnel policy manuals, and officers or other
representatives of the Company may make written or oral statements relating to personal policies
and procedures. Such manuals, handbooks and statements are intended only for general guidance. No
policies, procedures or statements of any nature by or on behalf of the Company (whether written or
oral, and whether or not contained in any the employee manual or handbook or personnel policy
manual), and no acts or practices of any nature, shall be construed to modify this Agreement.

          (f) Notices. Any and all notices, demands, requests, elections and other
communications required or permitted to be given hereunder shall be in writing and shall be deemed
to have been duly given (i) upon personal delivery; (ii) upon confirmation of receipt when sent by
facsimile transmission; (iii) one business day after deposit during normal business hours with a
nationally recognized overnight courier, specifying next day delivery, with written verification of
receipt; (iv) five business days after being sent by first class (certified or registered) mail,
postage prepaid, return receipt requested, in each case to the following addresses:

If to the Company:

Metretek Technologies, Inc.

1609 Heritage Commerce Boulevard

Wake Forest, NC 27587

Attn: Chairman of the Board

Telephone: (919) 556-3056

Facsimile: (919) 556-3596

With copies to:

Metretek Technologies, Inc.

1609 Heritage Commerce Boulevard

Wake Forest, NC 27587

Attn: Chief Financial Officer

16

 

Telephone: (919) 556-3056

Facsimile: (919) 556-3596

and:

Paul R. Hess, Esq.

Kegler, Brown, Hill & Ritter Co., L.P.A.

65 E. State Street, Suite 1800

Columbus, Ohio 43215

Telephone: (614) 462-5400

Facsimile: (614) 464-2634

If to Officer to:

Sidney Hinton

                                        

Wake Forest, NC 27587

Telephone: (919) 818-5338

Any party hereto may send any notice, demand, request, election or other communication to the
intended recipient at its address set forth above using any other means (such as expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, demand,
request or other communication shall be deemed to have been given until it is actually received by
the recipient. Any party hereto may change its designated address by giving written notice to all
other parties.

          (g) Waiver. The obligations of any party hereunder may be waived only with the written
consent of the party or parties entitled to the benefits the obligations so involved. Any waiver
of a breach or violation of or default under any provision of this Agreement shall not be
construed or operate as, or constitute, a waiver of any other or subsequent breach or violation of
or default under that provision or any other provision of this Agreement. The failure of any party
to insist upon strict compliance with any provision of this Agreement on any one or more occasions
shall not be construed or operate as, or constitute, a continuing waiver of, or an estoppel of that
party’s right to insist upon strict compliance with, that provision or any other provision of this
Agreement.

          (h) Severability. The provisions of this Agreement shall be deemed severable. If any
provision of this Agreement is determined to be illegal, invalid or unenforceable in any situation:
(i) the parties hereto shall agree to a suitable and equitable provision to be substituted
therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of
such invalid or unenforceable provision; and (ii) the remainder of this Agreement shall remain in
full force and effect, and the application of such provision in any other situation shall not be
affected.

          (i) Counterparts. This Agreement may be executed in any number of counterparts
(including counterparts executed by less than all parties hereto), each of which shall be deemed to
be an original, but all of which together shall constitute one and the same instrument.

17

 

          (j) Headings. The headings used herein are solely for convenience of reference and
shall not be given any effect in the construction or interpretation of this Agreement.

          (k) No Third Party Beneficiaries. Nothing in this Agreement, express or implied,
in intended to create or confer and shall not be construed or operate as creating or conferring,
any rights or remedies under or by reason of this Agreement, upon any Person other than the parties
hereto and their respective successors and permitted assigns.

          (l) Further Assurances. The parties hereto agree to take or cause to be taken all
actions, which are necessary, convenient or desirable in order to effect the transactions
contemplated by this Agreement.

          (m) Best Efforts. Each of the parties hereto shall act in good faith and use its best
efforts to bring about the transactions contemplated by this Agreement.

          (n) Expenses. Except as otherwise expressly provided herein, each of the parties to
this Agreement shall pay his or its own costs and expenses incurred in connection with this
Agreement and the consummation of the transactions contemplated hereby.

          (o) Construction. In the event an ambiguity or question or intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party hereto by virtue of
the authorship of any of the provisions of this Agreement.

          (p) Specific Performance. Each of the parties hereto acknowledges and agrees that
the other parties hereto would suffer irreparable damage for which an adequate remedy at law would
not be available in the event any of the provisions of this Agreement is not performed in
accordance with its specific terms or otherwise is breached. Accordingly, each of the parties
hereto agrees that the non-breaching parties shall be entitled to an injunction, restraining order
or other form of equitable relief from any court of competent jurisdiction to prevent breaches of,
and to specifically enforce, the provisions of this Agreement.

          (q) Section 409A. This Agreement is intended to comply with Section 409A of the
Internal Revenue Code of 1986, as amended (“Section 409A”). Notwithstanding any other provision of
this Agreement to the contrary, in the event that either the Company or Officer reasonable believes
that any provision of this Agreement would subject Officer to any excise or additional tax,
interest, charges or penalties under Section 409A (“409A Charges”), then the Company shall have the
right to take any actions and to modify any provision hereunder required to comply with Section
409A or to minimize any such 409A Charges with respect to any payment or benefit due to Officer
under this Agreement, including delaying making or providing payments or benefits due to Officer
hereunder until six months after the date of termination of Officer’s employment hereunder,
provided that all such payments and benefits due to Officer hereunder that are so delayed or
deferred shall be made or provided at the earliest time practicable without Officer incurring such
409A Charges, and further provided that any such modification or deferral does not adversely
affect, in any material respect, the economic benefit to Officer of such payments or benefits.

18

 

          (r) Interpretation of Certain Provisions. Except as otherwise expressly provided
herein, as used in this Agreement:

                    (i) Any reference to any federal, state, local or foreign statute or law shall be deemed also
to include a reference to all rules and regulations promulgated thereunder.

                    (ii) The term “including” means “including, without limitation”.

                    (iii) The term “Entity” means and includes a corporation, partnership, limited liability
company, joint venture, trust, association, unincorporated organization, governmental or regulating
body or authority, or any other form of business or entity.

                    (iv) The term “Person” means and includes an individual and an Entity.

                    (v) The number and gender of each noun and pronoun and the terms “Person” and “Persons” and
the like shall be construed to mean such number and gender as the context, the circumstances or its
antecedent may require.

                    (vi) The terms “hereof”, “herein”, “hereunder” and words of similar import refer to this
Agreement as a whole, and not to any Section, subsection or clause of this Agreement.

                    (vii) Each reference to a Section means such Section of this Agreement.

                    (viii) The term “fiscal year” in reference to the Company or PowerSecure shall mean the year
ending December 31, or such other date as the Company or PowerSecure designates as its fiscal year
in its financial statements.

* * * * * * * * *

19

 

     IN WITNESS WHEREOF, this Employment and Non-Competition Agreement has been executed and
delivered by or on behalf the parties hereto, effective as of the date first above written.

	 	 	 	 	 
	 	THE COMPANY:

PowerSecure, Inc. 

 	 
	 	By:  	/s/
Basil M. Briggs	 
	 	 	Basil M. Briggs, Chairman of the Board 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	Attest:

 	 
	 	By:  	/s/
Gary J. Zuiderveen	 
	 	 	Gary J. Zuiderveen, Vice President, 	 
	 	 	     Chief Financial Officer, Secretary 	 
	 

	 	 	 	 	 
	 	EMPLOYEE:

 	 
	 		/s/
Sidney Hinton	 
	 	 	Sidney Hinton 	 
	 	 	 	 
	 

20EX-4.3.1

 

Exhibit 4.3.1

          SEVENTEENTH SUPPLEMENTAL INDENTURE, dated as of August 15, 2007, between The Kroger Co.,
a corporation duly organized and existing under the laws of the State of Ohio (herein called the
“Company”), having its principal office at 1014 Vine Street, Cincinnati, Ohio 45202, the Guarantors
listed on the signature pages and Schedule I hereto (each, a “Guarantor”) and U.S. Bank National
Association (formerly known as Firstar Bank, N.A.), a banking corporation duly organized and
existing under the laws of the State of Ohio, as Trustee (herein called the “Trustee”).

RECITALS OF THE COMPANY

          The Company has heretofore executed and delivered to the Trustee an Indenture dated as of June
25, 1999 (the “Indenture”), providing for the issuance from time to time of the Company’s unsecured
debentures, notes or other evidences of indebtedness (herein and therein called the “Securities”),
to be issued in one or more series as in the Indenture provided.

          Section 201 of the Indenture permits the form of the Securities of any series to be
established pursuant to an indenture supplemental to the Indenture.

          Section 301 of the Indenture permits the terms of the Securities of any series to be
established in an indenture supplemental to the Indenture.

          Section 901(7) of the Indenture provides that, without the consent of any Holders, the
Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time,
may enter into one or more indentures supplemental to the Indenture for the purpose of establishing
the form or terms of Securities of any series as permitted by Sections 201 and 301 of the
Indenture.

          Each of the Guarantors has duly authorized the issuance of a guarantee of the Securities, as
set forth herein, and to provide therefor, each of the Guarantors has duly authorized the execution
and delivery of this Seventeenth Supplemental Indenture.

          The Company and the Guarantors, pursuant to the foregoing authority, propose in and by this
Seventeenth Supplemental Indenture to establish the terms and form of the Securities of a new
series and to amend and supplement the Indenture in certain respects with respect to the Securities
of such series.

 

 

          All things necessary to make this Seventeenth Supplemental Indenture a valid agreement of the
Company and the Guarantors, and a valid amendment of and supplement to the Indenture, have been
done.

          NOW, THEREFORE, THIS SEVENTEENTH SUPPLEMENTAL INDENTURE WITNESSETH:

          For and in consideration of the premises and the purchase of the Securities by the Holders
thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the
Securities of the series to be created hereby, as follows:

ARTICLE ONE

DEFINITIONS

Section 101. Definitions.

          (a) For all purposes of this Seventeenth Supplemental Indenture:

     (1) Capitalized terms used herein without definition shall have
the meanings specified in the Indenture;

     (2) All references herein to Articles and Sections, unless
otherwise specified, refer to the corresponding Articles and Sections
of this Seventeenth Supplemental Indenture and, where so specified, to
the Articles and Sections of the Indenture as supplemented by this
Seventeenth Supplemental Indenture; and

     (3) The terms “hereof”, “herein”, “hereby”, “hereto”, “hereunder”
and “herewith” refer to this Seventeenth Supplemental Indenture.

          (b) For all purposes of the Indenture and this Seventeenth Supplemental Indenture, with
respect to the Securities of the series created hereby, except as otherwise expressly provided or
unless the context otherwise requires:

     “Adjusted Treasury Rate” means, with respect to any Redemption
Date, the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price for such Redemption
Date.

     “Attributable Debt” means, in connection with a Sale and
Lease-Back Transaction, as of any particular time, the aggregate of
present values (discounted at a rate per annum equal to the interest

- 2 -

 

rate borne by the Securities of the series created by this Seventeenth
Supplemental Indenture) of the obligations of the Company or any
Restricted Subsidiary for net rental payments during the remaining
primary term of the applicable lease, calculated in accordance with
generally accepted accounting principles. The term “net rental
payments” under any lease for any period shall mean the sum of the
rental and other payments required to be paid in such period by the
lessee thereunder, not including, however, any amounts required to be
paid by such lessee (whether or not designated as rental or
additional rental) on account of maintenance and repairs,
reconstruction, insurance, taxes, assessments, water rates, operating
and labor costs or similar charges required to be paid by such lessee
thereunder or any amounts required to be paid by such lessee
thereunder contingent upon the amount of sales, maintenance and
repairs, reconstruction, insurance, taxes, assessments, water rates or
similar charges.

     “Business Day” means any day other than a Saturday or Sunday or a
day on which banking institutions in New York City or Cincinnati, Ohio
are authorized or obligated by law or executive order to close.

     “Capital Lease” means any lease of property which, in accordance
with generally accepted accounting principles, should be capitalized
on the lessee’s balance sheet or for which the amount of the asset and
liability thereunder as if so capitalized should be disclosed in a
note to such balance sheet; and “Capitalized Lease Obligation” means
the amount of the liability which should be so capitalized or
disclosed.

     “Comparable Treasury Issue” means the United States Treasury
security selected by a Quotation Agent as having a maturity comparable
to the remaining term of the Securities to be redeemed that would be
utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of such Securities.

     “Comparable Treasury Price” means, with respect to any Redemption
Date, (i) the average of the Reference Treasury Dealer Quotations,
after excluding the highest and lowest such Reference Treasury Dealer
Quotations for such Redemption Date, or (ii) if the Trustee obtains
fewer than three such Reference Treasury Dealer Quotations, the
average of all such Quotations.

- 3 -

 

     “Consolidated Net Tangible Assets” means, for the Company and its
Subsidiaries on a consolidated basis determined in accordance with
generally accepted accounting principles, the aggregate amounts of
assets (less depreciation and valuation reserves and other reserves
and items deductible from gross book value of specific asset accounts
under generally accepted accounting principles) which under generally
accepted accounting principles would be included on a balance sheet
after deducting therefrom (a) all liability items except deferred
income taxes, commercial paper, short-term bank Indebtedness, Funded
Indebtedness, other long-term liabilities and shareholders’ equity and
(b) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles, which in each case
would be so included on such balance sheet.

     “Credit Facility” means any credit agreement, loan agreement or
credit facility, whether syndicated or not, involving the extension of
credit by banks or other credit institutions, entered into by the
Company or Fred Meyer, Inc. and outstanding on the date of this
Seventeenth Supplemental Indenture, and any refinancing or other
restructuring of such agreement or facility.

     “Funded Indebtedness” means any Indebtedness maturing by its
terms more than one year from the date of the determination thereof,
including (i) any Indebtedness having a maturity of 12 months or less
but by its terms renewable or extendible at the option of the obligor
to a date later than 12 months from the date of the determination
thereof and (ii) rental obligations payable more than 12 months from
the date of determination thereof under Capital Leases (such rental
obligations to be included as Funded Indebtedness at the amount so
capitalized at the date of such computation and to be included for the
purposes of the definition of Consolidated Net Tangible Assets both as
an asset and as Funded Indebtedness at the amount so capitalized).

     “Non-Restricted Subsidiary” means any Subsidiary that the
Company’s Board of Directors has in good faith declared pursuant to a
written resolution not to be of material importance, either singly or
together with all other Non-Restricted Subsidiaries, to the business
of the Company and its consolidated Subsidiaries taken as a whole.

     “Operating Assets” means all merchandise inventories, furniture,
fixtures and equipment (including all transportation and

- 4 -

 

warehousing equipment but excluding office equipment and data processing
equipment) owned or leased pursuant to Capital Leases by the Company
or a Restricted Subsidiary.

     “Operating Property” means all real property and improvements
thereon owned or leased pursuant to Capital Leases by the Company or a
Restricted Subsidiary and constituting, without limitation, any store,
warehouse, service center or distribution center wherever located,
provided that such term shall not include any store, warehouse,
service center or distribution center which the Company’s Board of
Directors declares by written resolution not to be of material
importance to the business of the Company and its Restricted
Subsidiaries.

     “Quotation Agent” means the Reference Treasury Dealer appointed
by the Company.

     “Reference Treasury Dealer” means (i) J.P. Morgan Securities Inc.
and its successors; provided, however, that if the foregoing shall
cease to be a primary U.S. Government securities dealer in New York
City (a “Primary Treasury Dealer”), the Company shall substitute
therefor another Primary Treasury Dealer, and (ii) any other Primary
Treasury Dealer selected by the Company.

     “Reference Treasury Dealer Quotations” means, with respect to
each Reference Treasury Dealer and any Redemption Date, the average,
as determined by the Company, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of
its principal amount) quoted in writing to the Trustee by such
Reference Treasury Dealer at 5:00 p.m. on the third Business Day
preceding such Redemption Date.

     “Restricted Subsidiaries” means all Subsidiaries other than
Non-Restricted Subsidiaries.

     “Sale and Lease-Back Transaction” has the meaning specified in
Section 1010.

     “Subsidiary” means (i) any corporation or other entity of which
securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly
owned by the Company and/or one or more Subsidiaries

- 5 -

 

or (ii) any partnership of which more than 50% of the partnership interest is
owned by the Company or any Subsidiary.

ARTICLE TWO

SECURITY FORMS

Section 201. Form of Securities of this Series.

          The Securities of this series shall be in the form set forth in this Article.

Section 202. Form of Face of Security.

          This Security is a Global Security within the meaning of the Indenture hereinafter referred to
and is registered in the name of a Depositary or a nominee of a Depositary. This Security is not
exchangeable for Securities registered in the name of a Person other than the Depositary or its
nominee except in the limited circumstances described in the Indenture, and no transfer of this
Security (other than a transfer of this Security as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary) may be registered except in the limited circumstances described in the Indenture.

          Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation (“DTC”), to The Kroger Co. or its agent for registration of
transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co.
or in such other name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC),
ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof, Cede & Co., has an interest herein.

THE KROGER CO.

6.400% Senior Notes due 2017

	 	 	 	 	 
	CUSIP No. 501044CG4
	 	 	 	 
	ISIN No. US501044CG47
	 	$	                    	 

          The Kroger Co., a corporation duly organized and existing under the laws of the State of Ohio
(herein called the “Company”, which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to            , or registered
assigns, the principal sum of $           on August 15, 2017 and to pay interest thereon from August
15, 2007, or from the most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on February 15 and August 15 in each year, commencing February 15, 2008
at the rate of interest of 6.400% per annum until the principal

- 6 -

 

hereof is paid or made available
for payment. Interest on the Security will be computed on the basis of a 360-day year of twelve
30-day months. The interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the February 1 or August 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to
Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any
time in any other lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in said Indenture.

          Payment of the principal of (and premium, if any) and interest on this Security will be made
at the office or agency of the Company maintained for that purpose in Cincinnati, Ohio, in such
coin or currency of the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option of the
Company payment of interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.

          In the case where any Interest Payment Date or the maturity date of this Security does not
fall on a Business Day, payment of interest or principal otherwise payable on such day need not be
made on such day, but may be made on the next succeeding Business Day with the same force and
effect as if made on such Interest Payment Date or the maturity date of this Security.

          Reference is hereby made to the further provisions of this Security set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as if set forth at
this place.

- 7 -

 

          Unless the certificate of authentication hereon has been executed by the Trustee referred to
on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose.

          IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its
corporate seal.

Dated: August 15, 2007

	 	 	 	 	 	 	 	 	 
	 	 	 	 	THE KROGER CO.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By	 	 	 	 
	 

	 	 	 	 	 	 

Name:
	 	 
	 

	 	 	 	 	 	Title:	 	 
	Attest:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

Name:
	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 

          This is one of the Securities of the series designated therein referred to in the within
mentioned Indenture.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	U.S. BANK NATIONAL ASSOCIATION,	 	 
	 	 	 	 	as Trustee	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By	 	 	 	 
	 

	 	 	 	 	 	 

Authorized Officer
	 	 
	Attest:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
 
	 	 	 	 	 	 	 	 

Section 203. Form of Reverse of Security.

          This Security is one of a duly authorized issue of Securities of the Company (including the
related Guarantees, the “Securities”) issued and to be issued under an Indenture dated as of June
25, 1999, as supplemented by the First Supplemental Indenture dated as of
June 25, 1999, the Second Supplemental Indenture dated as of June 25, 1999, the Third
Supplemental Indenture dated as of June 25, 1999, the Fourth Supplemental Indenture dated as of
September 22, 1999, the Fifth Supplemental Indenture dated as of September 22, 1999, the Sixth
Supplemental Indenture dated as of September 22, 1999, the Seventh Supplemental Indenture dated as
of February 11, 2000, the Eighth Supplemental Indenture dated as of

- 8 -

 

February 11, 2000, the Ninth Supplemental Indenture dated as of August 21, 2000, the Tenth Supplemental Indenture dated as of
May 11, 2001, the Eleventh Supplemental Indenture dated as of May 11, 2001, the Twelfth
Supplemental Indenture dated as of August 16, 2001, the Thirteenth Supplemental Indenture dated as
of April 3, 2002, the Fourteenth Supplemental Indenture dated as of June 17, 2002, the Fifteenth
Supplemental Indenture dated as of January 28, 2003, the Sixteenth Supplemental Indenture dated as
of December 20, 2004 and the Seventeenth Supplemental Indenture dated as of August 15, 2007 (as so
supplemented, herein called the “Indenture”), each between the Company and the Guarantors named
therein, and Firstar Bank, N.A. (now known as U.S. Bank National Association), as Trustee (herein
called the “Trustee”, which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of the Company, the
Guarantors named therein, the Trustee and the Holders of the Securities and of the terms upon which
the Securities are, and are to be, authenticated and delivered. This Security is one of the series
designated on the face hereof, initially limited in aggregate principal amount to $300,000,000.

          The Company may from time to time, without notice to or consent of the registered holders of
the Securities issue further Securities (“Additional Securities”). The Additional Securities will
rank equal with the Securities in all respects (or in all respects other than the payment of
interest accruing prior to the issue date of the Additional Securities, or except for the first
payment of interest following the issue date of the Additional Securities). The Additional
Securities may be consolidated and form a single series with the Securities and may have the same
terms as to status, redemption, or otherwise, as the Securities.

          The Securities of this series will be redeemable, in whole or in part, at the option of the
Company at any time at a redemption price equal to the greater of (i) 100% of the principal amount
of such Securities or (ii) as determined by a Quotation Agent, the sum of the present values of the
remaining scheduled payments of principal and interest thereon (not including any portion of such
payments of interest accrued as of the date of redemption) discounted to the date of redemption on
a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate plus 25 basis points, plus, in each case, accrued interest thereon to the date of
redemption.

          Notice of any redemption will be mailed at least 30 days but not more than 60 days before the
Redemption Date to each holder of the Securities to be redeemed. Unless the
Company defaults in payment of the redemption price, on and after the Redemption Date,
interest will cease to accrue on the Securities or portions thereof called for redemption.

          If a Change of Control Triggering Event occurs, unless the Company has exercised its right to
redeem the Securities, Holders of Securities will have the right to require the Company to
repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of
their Securities pursuant to the offer described below (the “Change of Control Offer”). In the
Change of Control Offer, the Company shall offer payment in cash

- 9 -

 

equal to 101% of the aggregate principal amount of Securities repurchased plus accrued and unpaid interest, if any, on the
Securities repurchased, to the date of purchase (the “Change of Control Payment”). Within 30 days
following any Change of Control Triggering Event, or, at the Company’s option, prior to any Change
of Control, but after the public announcement of the Change of Control, the Company shall mail a
notice to Holders of Securities describing the transaction or transactions that constitute or may
constitute the Change of Control Triggering Event and offering to repurchase the Securities on the
date specified in the notice, which date will be no earlier than 30 days and no later than 60 days
from the date such notice is mailed (the “Change of Control Payment Date”), pursuant to the
procedures described herein and in such notice. The notice shall, if mailed prior to the date of
consummation of the Change of Control, state that the offer to purchase is conditioned on the
Change of Control Triggering Event occurring on or prior to the payment date specified in the
notice. The Company shall comply with the requirements of Rule 14e-1 under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and any other securities laws and regulations
thereunder to the extent those laws and regulations are applicable in connection with the
repurchase of the Securities as a result of a Change of Control Triggering Event. To the extent
that the provisions of any securities laws or regulations conflict with the Change of Control
provisions herein, the Company shall be required to comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the Change of Control
provisions herein by virtue of such conflicts.

          On the Change of Control Payment Date, the Company shall, to the extent lawful, (i) accept for
payment all Securities or portions of Securities properly tendered pursuant to the Change of
Control Offer; (ii) deposit with the paying agent an amount equal to the Change of Control Payment
in respect of all Securities or portions of Securities properly tendered; and (iii) deliver or
cause to be delivered to the Trustee the Securities properly accepted, together with an officers’
certificate stating the aggregate principal amount of Securities or portions of Securities being
purchased.

          “Below Investment Grade Rating Event” means the Securities are rated below an Investment Grade
Rating by any two of the three Rating Agencies (as defined below) on any date from the date of the
public notice of an arrangement that could result in a Change of Control until the end of the
60-day period following public notice of the occurrence of the Change of Control (which 60-day
period shall be extended so long as the rating of the Securities is under publicly announced
consideration for possible downgrade below investment
grade by any of the Rating Agencies); provided that a Below Investment Grade Rating Event
otherwise arising by virtue of a particular reduction in rating shall not be deemed to have
occurred in respect of a particular Change of Control (and thus shall not be deemed a Below
Investment Grade Rating Event for purposes of the definition of Change of
Control Triggering Event) if the Rating Agencies making the reduction in rating to which this definition would otherwise
apply do not announce or publicly confirm or inform the Trustee in writing at the Company’s request
that the reduction was the result, in whole or in part, of any event or circumstance comprised of
or arising as a result of, or in respect of, the applicable Change of

- 10 -

 

Control (whether or not the applicable Change of Control shall have occurred at the time of the Below Investment Grade Rating
Event).

          “Change of Control” means the occurrence of any of the following: (1) the direct or indirect
sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in
one or a series of related transactions, of all or substantially all of the properties or assets of
the Company and its subsidiaries taken as a whole to any “person” (as that term is used in Section
13(d)(3) of the Exchange Act) other than the Company or one of its subsidiaries; (2) the
consummation of any transaction (including, without limitation, any merger or consolidation) the
result of which is that any “person” (as that term is used in Section 13(d)(3) of the Exchange Act)
becomes the beneficial owner, directly or indirectly, of more than 50% of the then outstanding
number of shares of the Company’s voting stock; or (3) the first day on which a majority of the
members of the Company’s Board of Directors are not Continuing Directors. Notwithstanding the
foregoing, a transaction will not be deemed to involve a Change of Control if (1) the Company
becomes a wholly owned subsidiary of a holding company that has agreed to be bound by the terms of
the Securities and (2) the Holders of the voting stock of such holding company immediately
following that transaction are substantially the same as the Holders of the Company’s voting stock
immediately prior to that transaction.

          “Change of Control Triggering Event” means the occurrence of both a Change of Control and a
Below Investment Grade Rating Event.

          “Continuing Directors” means, as of any date of determination, members of the Board of
Directors of the Company who (1) were members of such Board of Directors on the date of original
issuance of the Securities; or (2) were nominated for election or elected to such Board of
Directors with the approval of a majority of the continuing directors under clause (1) or (2) of
this definition who were members of such Board of Directors at the time of such nomination or
election (either by a specific vote or by approval of the Company’s proxy statement in which such
member was named as a nominee for election as a director, without objection to such nomination).

          “Fitch” means Fitch, Inc.

          “Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by
Moody’s and BBB- (or the equivalent) by S&P and Fitch, and the equivalent
investment grade credit rating from any replacement rating agency or rating agencies selected
by the Company.

          “Moody’s” means Moody’s Investors Service, Inc.

          “Person” means any individual, partnership, corporation, limited liability company, joint
stock company, business trust, trust, unincorporated association, joint venture or other entity, or
a government or political subdivision or agency thereof.

          “Rating Agencies” means (1) each of Fitch, Moody’s and S&P; and (2) if Fitch, Moody’s or S&P
ceases to rate the Securities or fails to make a rating of the Securities publicly available for
reasons outside of the Company’s control, a “nationally recognized statistical

- 11 -

 

rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, selected by the Company (as
certified by a Board Resolution) as a replacement agency for Fitch, Moody’s or S&P, or any of them,
as the case may be.

          “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.

          The Indenture contains provisions for defeasance at any time of (i) the entire indebtedness of
this Security or (ii) certain restrictive covenants and Events of Default with respect to this
Security, in each case upon compliance with certain conditions set forth therein.

          If an Event of Default shall occur and be continuing, the principal of all Securities of this
series may be declared due and payable in the manner and with the effect provided in the Indenture.

          The Indenture permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of the Holders of the
Securities of each series to be affected under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of 50% in aggregate principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains provisions
permitting the Holders of specified percentages in principal amount of the Securities of each
series at the time Outstanding, on behalf of the Holders of all the Securities of such series, to
waive compliance by the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the Holder of this
Security shall be conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or in exchange
therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this
Security.

          As set forth in, and subject to, the provisions of the Indenture, no Holder of any Security
will have any right to institute any proceeding with respect to the Indenture or for any remedy
thereunder, unless such Holder shall have previously given to the Trustee written notice of a
continuing Event of Default, the Holders of not less than 25% in principal amount
of the Outstanding Securities shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as trustee, and the Trustee shall not have
received from the Holders of a majority in principal amount of the Outstanding Securities a
direction inconsistent with such request and shall have failed to institute such proceeding within
60 days; provided, however, that such limitations do not apply to a suit instituted
by the Holder hereof for the enforcement of payment of the principal of (and premium, if any) or
any interest on this Security on or after the respective due dates expressed herein.

          No reference herein to the Indenture and no provision of this Security or of the Indenture
shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay
the principal of and any premium and interest on this Security at the times, place and rate, and in
the coin or currency, herein prescribed.

- 12 -

 

          As provided in the Indenture and subject to certain limitations therein set forth, the
transfer of this Security is registerable in the Security Register, upon surrender of this Security
for registration of transfer at the office or agency of the Company in any place where the
principal of and any premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Securities of like tenor, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or transferees.

          The Securities are issuable only in registered form without coupons in denominations of $2,000
and integral multiples of $1,000. As provided in the Indenture and subject to certain limitations
therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities
of like tenor, of a different authorized denomination, as requested by the Holder surrendering the
same.

          Except where otherwise specifically provided in the Indenture, no service charge shall be made
for any such registration of transfer or exchange, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection therewith.

          Prior to due presentment of this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

          All terms used in this Security which are defined in the Indenture shall have the meanings
assigned to them in the Indenture.

Section 204. Form of Guarantee.

          The form of Guarantee shall be set forth on the Securities substantially as follows:

GUARANTEE

     For value received, each of the undersigned hereby absolutely, fully and unconditionally and
irrevocably guarantees, jointly and severally with each other Guarantor, to the holder of the
Security on which this Guarantee is endorsed the payment of principal of, premium, if any, and
interest on such Security in the amounts and at the time when due and payable whether by
declaration thereof, or otherwise, and interest on the overdue principal and interest, if any, of
such Security, if lawful, and the payment or performance of all other obligations of the Company
under the Indenture or such Security, to the holder of such Security and the Trustee, all in
accordance with and subject to the terms and limitations of such

- 13 -

 

Security and Article Five of the
Seventeenth Supplemental Indenture to the Indenture. This Guarantee will not become effective
until the Trustee duly executes the certificate of authentication on this Guarantee. This
Guarantee shall be governed by and construed in accordance with the laws of the State of New York,
without regard to conflict of law principles thereof.

Dated: August 15, 2007

	 	 	 	 	 
	 	Each of the Guarantors Listed on Schedule I

hereto, as Guarantor of the Securities

 	 
	 	By:  	 	 
	 	 	Name:  	Paul W. Heldman 	 
	 	 	Title:  	President/Vice President 	 

- 14 -

 

	 	 	 	 	 

	 	 	 	 	 
	 	QUEEN CITY ASSURANCE, INC.,

as Guarantor of the Securities

RJD ASSURANCE, INC.,

as Guarantor of the Securities

VINE COURT ASSURANCE INCORPORATED,

as Guarantor of the Securities

 	 
	 	By:  	 	 
	 	 	Name:  	Bruce M. Gack 	 
	 	 	Title:  	Senior Vice President/Vice President 	 
	 
	 	ROCKET NEWCO, INC.,

as Guarantor of the Securities

HENPIL, INC.,

as Guarantor of the Securities

 	 
	 	By:  	 	 
	 	 	Name:  	Kim Storch 	 
	 	 	Title:  	Vice President 	 

- 15 -

 

	 	 	 	 	 

This is one of the Guarantees referred to in the within mentioned Indenture.

	 	 	 	 	 	 	 	 	 
	Attest:	 	 	 	U.S. BANK NATIONAL ASSOCIATION	 	 
	 	 	 	 	as Trustee	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 
 

	 	 	 	 	 	 

Name:
	 	 
	 

	 	 	 	 	 	Title:	 	 

- 16 -

 

SCHEDULE I

Guarantors

	 	 	 
	Name of Guarantor	 	State of Organization
	Alpha Beta Company
	 	California
	Bay Area Warehouse Stores, Inc.
	 	California
	Bell Markets, Inc.
	 	California
	Cala Co.
	 	Delaware
	Cala Foods, Inc.
	 	California
	CB&S Advertising Agency, Inc.
	 	Oregon
	Crawford Stores, Inc.
	 	California
	Dillon Companies, Inc.
	 	Kansas
	Dillon Real Estate Co., Inc.
	 	Kansas
	Distribution Trucking Company
	 	Oregon
	F4L L.P.
	 	Ohio
	FM, Inc.
	 	Utah
	FMJ, Inc.
	 	Delaware
	Food 4 Less GM, Inc.
	 	California
	Food 4 Less Holdings, Inc.
	 	Delaware
	Food 4 Less Merchandising, Inc.
	 	California
	Food 4 Less of California, Inc.
	 	California
	Food 4 Less of Southern California, Inc.
	 	Delaware
	Fred Meyer, Inc.
	 	Delaware
	Fred Meyer Jewelers, Inc.
	 	California
	Fred Meyer Stores, Inc.
	 	Ohio
	Hughes Markets, Inc.
	 	California
	Hughes Realty, Inc.
	 	California
	Inter-American Foods, Inc.
	 	Ohio
	Junior Food Stores of West Florida, Inc.
	 	Florida
	J.V. Distributing, Inc.
	 	Michigan
	KRGP Inc.
	 	Ohio
	KRLP Inc.
	 	Ohio
	The Kroger Co. of Michigan
	 	Michigan
	Kroger Dedicated Logistics Co.
	 	Ohio
	Kroger Group Cooperative, Inc.
	 	Ohio
	Kroger Limited Partnership I
	 	Ohio
	Kroger Limited Partnership II
	 	Ohio
	Kroger Texas L.P.
	 	Ohio
	Kwik Shop, Inc.
	 	Kansas
	Mini Mart, Inc.
	 	Wyoming
	Peyton’s-Southeastern, Inc.
	 	Tennessee
	Quik Stop Markets, Inc.
	 	California

- 17 -

 

	 	 	 
	Name of Guarantor	 	State of Organization
	Ralphs Grocery Company
	 	Ohio
	Second Story, Inc.
	 	Washington
	Smith’s Beverage of Wyoming, Inc.
	 	Wyoming
	Smith’s Food & Drug Centers, Inc.
	 	Ohio
	THGP Co., Inc.
	 	Pennsylvania
	THLP Co., Inc.
	 	Pennsylvania
	Topvalco, Inc.
	 	Ohio
	Turkey Hill, L.P.
	 	Pennsylvania

- 18 -

 

ARTICLE THREE

THE SERIES OF SECURITIES

     Section 301. Title and Terms.

          There shall be a series of Securities designated as the “6.400% Senior Notes due 2017” of the
Company. Their Stated Maturity shall be August 15, 2017, and they shall bear interest at the rate
of 6.400% per annum.

          Interest on the Securities of this series will be payable semi-annually on February 15 and
August 15 of each year, commencing February 15, 2008, until the principal thereof is made available
for payment. Interest on the Securities of this series will be computed on the basis of a 360-day
year of twelve 30-day months. The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will be paid to the Person in whose name the Securities of this series
(or one or more Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the February 1 or August 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date.

          In the case where any Interest Payment Date or the maturity date of the Securities of this
series does not fall on a Business Day, payment of interest or principal otherwise payable on such
date need not be made on such day, but may be made on the next succeeding Business Day with the
same force and effect as if made on such Interest Payment Date or the maturity date of the
Securities of this series.

          The aggregate principal amount of Securities of this series which may be authenticated and
delivered under this Seventeenth Supplemental Indenture is initially limited to $300,000,000,
except for Securities authenticated and delivered upon registration or transfer of, or in exchange
for, or in lieu of, other Securities of this series pursuant to Section 304, 305 and 306 of the
Indenture and except for any Securities of this series which, pursuant to Section 303 of the
Indenture, are deemed never to have been authenticated and delivered under the Indenture.
Notwithstanding the foregoing, the Company may from time to time, without notice to or consent of
the registered holders of the Securities issue further Securities (“Additional Securities”). The
Additional Securities will rank equal with the Securities in all respects (or in all respects other
than the payment of interest accruing prior to the issue date of the Additional Securities, or
except for the first payment of interest following the issue date of the Additional Securities).
The Additional Securities may be consolidated and form a single series with the Securities and may
have the same terms as to status, redemption, or otherwise, as the Securities.

          The Securities of this series will be represented by one or more Global Securities
representing the entire $300,000,000 aggregate principal amount of the Securities of this series

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(as such amount may be increased by the Additional Securities), and the Depositary with respect to
such Global Security or Global Securities will be The Depository Trust Company.

          The Place of Payment for the principal of (and premium, if any) and interest on the Securities
of this series shall be the office or agency of the Company in the City of Cincinnati, State of
Ohio, maintained for such purpose, which shall be the Corporate Trust Office of the Trustee and at
any other office or agency maintained by the Company for such purpose; provided,
however, that at the option of the Company payment of interest may be made by check mailed
to the address of the Person entitled thereto as such address shall appear in the Security
Register.

          The Securities of this series are redeemable prior to maturity at the option of the Company as
provided in this Seventeenth Supplemental Indenture.

          The Securities of this series are not subject to a sinking fund and the provisions of Section
501(3) and Article Twelve of the Indenture shall not be applicable to the Securities of this
series.

          The Securities of this series are subject to defeasance at the option of the Company as
provided in this Seventeenth Supplemental Indenture.

ARTICLE FOUR

MODIFICATIONS AND ADDITIONS TO THE INDENTURE

			
	Section 401.	 	Modifications to the Consolidation, Merger,
Conveyance, Transfer or Lease Provisions.

          With respect to the Securities of this series, Section 801 of the Indenture shall be deleted
in its entirety and the following shall be substituted therefor:

          “Section 801. Covenant Not to Merge, Consolidate, Sell or Convey Property Except
Under Certain Conditions.

          The Company covenants that it will not merge with or into or consolidate with
any corporation, partnership, or other entity or sell, lease or convey all or
substantially all of its assets to any other Person, unless (i) either the Company
shall be the continuing corporation, or the successor entity or the Person which
acquires by sale, lease or conveyance all or substantially all the assets of the
Company (if other than the Company) shall be a corporation or partnership organized
under the laws of the United States of America or any State thereof or
the District of Columbia and shall expressly assume all obligations of the
Company under this Indenture and the Securities of the series created by the

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Seventeenth Supplemental Indenture, including the due and punctual payment of the
principal of and interest on all the Securities of the series created by the
Seventeenth Supplemental Indenture according to their tenor, and the due and
punctual performance and observance of all of the covenants and conditions of the
Indenture to be performed or observed by the Company, by supplemental indenture in
form satisfactory to the Trustee, executed and delivered to the Trustee by such
entity, and (ii) the Company, such person or such successor entity, as the case may
be, shall not, immediately after such merger or consolidation, or such sale, lease
or conveyance, be in default in the performance of any such covenant or condition
and, immediately after giving effect to such transaction, no Event of Default, and
no event which, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing.

     Section 802. Successor Substituted

     Upon any consolidation of the Company with, or merger of the Company into, any other
Person or any sale, lease or conveyance of all or substantially all of the assets of the
Company in accordance with Section 801, the successor Person formed by such consolidation or
into which the Company is merged or to which such sale, lease or conveyance is made shall
succeed to, and be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had been named as the
Company herein, and thereafter, except in the case of a lease, the predecessor Person shall
be relieved of all obligations and covenants under this Indenture and the Securities.”

Section 402. Other Modifications.

          With respect to the Securities of this series, the Indenture shall be modified as follows:

          (a) The eighth paragraph of Section 305 of the Indenture shall be modified by inserting “,
and a successor Depositary is not appointed by the Company within 90 days” at the end of clause (i)
in such paragraph; and

          (b) Section 401 of the Indenture shall be modified by adding to the end of such Section the
following paragraph:

     “For the purpose of this Section 401, trust funds may consist of (A) money in an
amount, or (B) U.S. Government Obligations (as defined in Section 1304) which through the
scheduled payment of principal and interest in respect thereof in accordance
with their terms will provide, not later than one day before the due date of any
payment, money in an amount, or (C) a combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge, the principal of,
premium, if any, and each installment of interest on the Securities of this series on the
Stated Maturity of such principal or installment of interest on the day on which such

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payments are due and payable in accordance with the terms of this Indenture and of such
Securities of this series.”

Section 403. Additional Covenants; Defeasance and Covenant Defeasance.

          (a) With respect to the Securities of this series, the following provisions shall be added as
Sections 1009, 1010 and 1011 and as Article Thirteen (Section references contained in these
additional provisions are to the Indenture as supplemented by this Seventeenth Supplemental
Indenture):

     “Section 1009. Limitations on Liens.

     After the date hereof and so long as any Securities of the series created by the
Seventeenth Supplemental Indenture are Outstanding, the Company will not issue, assume or
guarantee, and will not permit any Restricted Subsidiary to issue, assume or guarantee, any
Indebtedness which is secured by a mortgage, pledge, security interest, lien or encumbrance
of any kind (including any conditional sale or other title retention agreement, any lease in
the nature thereof, and any agreement to give any of the foregoing) (each being hereinafter
referred to as a “lien” or “liens”) of or upon any Operating Property or Operating Asset,
whether now owned or hereafter acquired, of the Company or any Restricted Subsidiary without
effectively providing that the Securities of the series created by the Seventeenth
Supplemental Indenture (together with, if the Company shall so determine, any other
Indebtedness of the Company ranking equally with the Securities) shall be equally and
ratably secured by a lien on such assets ranking ratably with and equal to (or at the
Company’s option prior to) such secured Indebtedness; provided that the foregoing
restriction shall not apply to:

          (a) liens on any property or assets of any corporation existing at the time such
corporation becomes a Restricted Subsidiary provided that such lien does not extend to any
other property of the Company or any of its Restricted Subsidiaries;

          (b) liens on any property or assets (including stock) existing at the time of
acquisition of such property or assets by the Company or a Restricted Subsidiary, or liens
to secure the payment of all or any part of the purchase price of such property or assets
(including stock) upon the acquisition of such property or assets by the Company or a
Restricted Subsidiary or to secure any indebtedness incurred, assumed or guaranteed by the
Company or a Restricted Subsidiary for the purpose of financing all
or any part of the purchase price of such property or, in the case of real property,
construction or improvements thereon or attaching to property substituted by the Company to
obtain the release of a lien on other property of the Company on which a lien then exists,
which indebtedness is incurred, assumed or guaranteed prior to, at the time of, or within 18
months after such acquisition (or in the case of real property, the completion of
construction (including any improvements on an existing asset) or commencement of full
operation at such property, whichever is later (which in the case of a retail store is the
opening of the store for business to the public)); provided that in

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the case of any such acquisition, construction or improvement, the lien shall not apply
to any other property or assets theretofore owned by the Company or a Restricted Subsidiary;

          (c) liens on any property or assets to secure Indebtedness of a Restricted Subsidiary
to the Company or to another Restricted Subsidiary;

          (d) liens on any property or assets of a corporation existing at the time such
corporation is merged into or consolidated with the Company or a Restricted Subsidiary or at
the time of a purchase, lease or other acquisition of the assets of a corporation or firm as
an entirety or substantially as an entirety by the Company or a Restricted Subsidiary
provided that such lien does not extend to any other property of the Company or any of its
Restricted Subsidiaries;

          (e) liens on any property or assets of the Company or a Restricted Subsidiary in favor
of the United States of America or any State thereof, or any department, agency or
instrumentality or political subdivision of the United States of America or any State
thereof, or in favor of any other country, or any political subdivision thereof, to secure
partial, progress, advance or other payments pursuant to any contract or statute or to
secure any Indebtedness incurred or guaranteed for the purpose of financing all or any part
of the purchase price (or, in the case of real property, the cost of construction) of the
property or assets subject to such liens (including, but not limited to, liens incurred in
connection with pollution control, industrial revenue or similar financings);

          (f) liens existing on properties or assets of the Company or any Restricted Subsidiary
existing on the date hereof; provided that such liens secure only those obligations which
they secure on the date hereof or any extension, renewal or replacement thereof;

          (g) any extension, renewal or replacement (or successive extensions, renewals or
replacements) in whole or in part, of any lien referred to in the foregoing clauses (a)
through (f), inclusive; provided that such extension, renewal or replacement shall be
limited to all or a part of the property or assets which secured the lien so extended,
renewed or replaced (plus improvements and construction on real property);

          (h) liens imposed by law, such as mechanics’, workmen’s, repairmen’s, materialmen’s,
carriers’, warehouseman’s, vendors’, or other similar liens arising in the ordinary course
of business of the Company or a Restricted Subsidiary, or governmental (federal, state or
municipal) liens arising out of contracts for the sale of products or services by the
Company or any Restricted Subsidiary, or deposits or pledges to obtain the release of any of
the foregoing liens;

          (i) pledges, liens or deposits under worker’s compensation laws or similar legislation
and liens or judgments thereunder which are not currently dischargeable, or

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in connection with bids, tenders, contracts (other than for the payment of money) or
leases to which the Company or any Restricted Subsidiary is a party, or to secure the public
or statutory obligations of the Company or any Restricted Subsidiary, or in connection with
obtaining or maintaining self-insurance or to obtain the benefits of any law, regulation or
arrangement pertaining to unemployment insurance, old age pensions, social security or
similar matters, or to secure surety, appeal or customs bonds to which the Company or any
Restricted Subsidiary is a party, or in litigation or other proceedings such as, but not
limited to, interpleader proceedings, and other similar pledges, liens or deposits made or
incurred in the ordinary course of business;

          (j) liens created by or resulting from any litigation or other proceeding which is
being contested in good faith by appropriate proceedings, including liens arising out of
judgments or awards against the Company or any Restricted Subsidiary with respect to which
the Company or such Restricted Subsidiary is in good faith prosecuting an appeal or
proceedings for review or for which the time to make an appeal has not yet expired; or final
unappealable judgment liens which are satisfied within 30 days of the date of judgment; or
liens incurred by the Company or any Restricted Subsidiary for the purpose of obtaining a
stay or discharge in the course of any litigation or other proceeding to which the Company
or such Restricted Subsidiary is a party;

          (k) liens for taxes or assessments or governmental charges or levies not yet due or
delinquent, or which can thereafter be paid without penalty, or which are being contested in
good faith by appropriate proceedings; landlord’s liens on property held under lease; and
any other liens or charges incidental to the conduct of the business of the Company or any
Restricted Subsidiary or the ownership of the property or assets of any of them which were
not incurred in connection with the borrowing of money or the obtaining of advances or
credit and which do not, in the opinion of the Company, materially impair the use of such
property or assets in the operation of the business of the Company or such Restricted
Subsidiary or the value of such property or assets for the purposes of such business; or

          (l) liens not permitted by clauses (a) through (k) above if at the time of, and after
giving effect to, the creation or assumption of any such lien, the aggregate amount of all
Indebtedness of the Company and its Restricted Subsidiaries secured by all such liens not so
permitted by clauses (a) through (k) above together with the Attributable Debt in respect of
Sale and Lease-Back Transactions permitted by paragraph (a) of Section 1010 does not exceed
10% of Consolidated Net Tangible Assets.

     Section 1010. Limitations on Sale and Lease-Back Transactions.

     After the date hereof and so long as any Securities of the series created by the
Seventeenth Supplemental Indenture are Outstanding, the Company agrees that it will not, and
will not permit any Restricted Subsidiary to, enter into any arrangement with any Person
providing for the leasing by the Company or a Restricted Subsidiary of any

 - 24 - 

 

Operating
Property or Operating Asset (other than any such arrangement involving a
lease for a term, including renewal rights, for not more than 3 years and leases
between the Company and a Restricted Subsidiary or between Restricted Subsidiaries), whereby
such Operating Property or Operating Asset has been or is to be sold or transferred by the
Company or any Restricted Subsidiary to such Person (herein referred to as a “Sale and
Lease-Back Transaction”), unless:

          (a) the Company or such Restricted Subsidiary would, at the time of entering into a
Sale and Lease-Back transaction, be entitled to incur Indebtedness secured by a lien on the
Operating Property or Operating Asset to be leased in an amount at least equal to the
Attributable Debt in respect of such Sale and Lease-Back Transaction without equally and
ratably securing the Securities of the series created by the Seventeenth Supplemental
Indenture pursuant to Section 1009; or

          (b) the proceeds of the sale of the Operating Property or Operating Asset to be leased
are at least equal to the fair market value of such Operating Property or Operating Asset
(as determined by the chief financial officer or chief accounting officer of the Company)
and an amount in cash equal to the net proceeds from the sale of the Operating Property or
Operating Asset so leased is applied, within 180 days of the effective date of any such Sale
and Lease-Back Transaction, to the purchase or acquisition (or, in the case of Operating
Property, the construction) of Operating Property or Operating Assets or to the retirement,
repurchase, redemption or repayment (other than at maturity or pursuant to a mandatory
sinking fund or redemption provision and other than Indebtedness owned by the Company or any
Restricted Subsidiary) of Securities of the series created by the Seventeenth Supplemental
Indenture or of Funded Indebtedness of the Company ranking on a parity with or senior to the
Securities of the series created by the Seventeenth Supplemental Indenture, or in the case
of a Sale and Lease-Back Transaction by a Restricted Subsidiary, of Funded Indebtedness of
such Restricted Subsidiary; provided that in connection with any such retirement, any
related loan commitment or the like shall be reduced in an amount equal to the principal
amount so retired.

     The foregoing restriction shall not apply to, in the case of any Operating Property or
Operating Asset acquired or constructed subsequent to the date eighteen months prior to the
date of this Indenture, any Sale and Lease-Back Transaction with respect to such Operating
Asset or Operating Property (including presently owned real property upon which such
Operating Property is to be constructed) if a binding commitment is entered into with
respect to such Sale and Lease-Back Transaction within 18 months after the later of the
acquisition of the Operating Property or Operating Asset or the completion of improvements
or construction thereon or commencement of full operations at such Operating Property (which
in the case of a retail store is the opening of the store for business to the public).

     Section 1011. Change of Control.

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     If a Change of Control Triggering Event occurs, unless the Company has exercised its
right to redeem the Securities, Holders of Securities will have the right to require the
Company to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in
excess thereof) of their Securities pursuant to the offer described below (the “Change of
Control Offer”). In the Change of Control Offer, the Company shall offer payment in cash
equal to 101% of the aggregate principal amount of Securities repurchased plus accrued and
unpaid interest, if any, on the Securities repurchased, to the date of purchase (the “Change
of Control Payment”). Within 30 days following any Change of Control Triggering Event, or,
at the Company’s option, prior to any Change of Control, but after the public announcement
of the Change of Control, the Company shall mail a notice to Holders of Securities
describing the transaction or transactions that constitute or may constitute the Change of
Control Triggering Event and offering to repurchase the Securities on the date specified in
the notice, which date will be no earlier than 30 days and no later than 60 days from the
date such notice is mailed (the “Change of Control Payment Date”), pursuant to the
procedures described herein and in such notice. The notice shall, if mailed prior to the
date of consummation of the Change of Control, state that the offer to purchase is
conditioned on the Change of Control Triggering Event occurring on or prior to the payment
date specified in the notice. The Company shall comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and any other
securities laws and regulations thereunder to the extent those laws and regulations are
applicable in connection with the repurchase of the Securities as a result of a Change of
Control Triggering Event. To the extent that the provisions of any securities laws or
regulations conflict with the Change of Control provisions herein, the Company shall be
required to comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under the Change of Control provisions herein by
virtue of such conflicts.

     On the Change of Control Payment Date, the Company shall, to the extent lawful, (i)
accept for payment all Securities or portions of Securities properly tendered pursuant to
the Change of Control Offer; (ii) deposit with the paying agent an amount equal to the
Change of Control Payment in respect of all Securities or portions of Securities properly
tendered; and (iii) deliver or cause to be delivered to the Trustee the Securities properly
accepted, together with an officers’ certificate stating the aggregate principal amount of
Securities or portions of Securities being purchased.

     “Below Investment Grade Rating Event” means the Securities are rated below an
Investment Grade Rating by any two of the three Rating Agencies (as defined below) on any
date from the date of the public notice of an arrangement that could result in a Change of
Control until the end of the 60-day period following public notice of the occurrence of the
Change of Control (which 60-day period shall be extended so long as the rating of the
Securities is under publicly announced consideration for possible downgrade below investment
grade by any of the Rating Agencies); provided that a Below Investment Grade Rating Event
otherwise arising by virtue of a particular

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reduction in rating shall not be deemed to have occurred in respect of a particular
Change of Control (and thus shall not be deemed a Below Investment Grade Rating Event for
purposes of the definition of Change of Control Triggering Event) if the Rating Agencies
making the reduction in rating to which this definition would otherwise apply do not
announce or publicly confirm or inform the Trustee in writing at the Company’s request that
the reduction was the result, in whole or in part, of any event or circumstance comprised of
or arising as a result of, or in respect of, the applicable Change of Control (whether or
not the applicable Change of Control shall have occurred at the time of the Below Investment
Grade Rating Event).

     “Change of Control” means the occurrence of any of the following: (1) the direct or
indirect sale, transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or substantially all of
the properties or assets of the Company and its subsidiaries taken as a whole to any
“person” (as that term is used in Section 13(d)(3) of the Exchange Act) other than the
Company or one of its subsidiaries; (2) the consummation of any transaction (including,
without limitation, any merger or consolidation) the result of which is that any “person”
(as that term is used in Section 13(d)(3) of the Exchange Act) becomes the beneficial owner,
directly or indirectly, of more than 50% of the then outstanding number of shares of the
Company’s voting stock; or (3) the first day on which a majority of the members of the
Company’s Board of Directors are not Continuing Directors. Notwithstanding the foregoing, a
transaction will not be deemed to involve a Change of Control if (1) the Company becomes a
wholly owned subsidiary of a holding company that has agreed to be bound by the terms of the
Securities and (2) the Holders of the voting stock of such holding company immediately
following that transaction are substantially the same as the Holders of the Company’s voting
stock immediately prior to that transaction.

     “Change of Control Triggering Event” means the occurrence of both a Change of Control
and a Below Investment Grade Rating Event.

     “Continuing Directors” means, as of any date of determination, members of the Board of
Directors of the Company who (1) were members of such Board of Directors on the date of
original issuance of the Securities; or (2) were nominated for election or elected to such
Board of Directors with the approval of a majority of the continuing directors under clause
(1) or (2) of this definition who were members of such Board of Directors at the time of
such nomination or election (either by a specific vote or by approval of the Company’s proxy
statement in which such member was named as a nominee for election as a director, without
objection to such nomination).

     “Fitch” means Fitch, Inc.

     “Investment Grade Rating” means a rating equal to or higher than Baa3 (or the
equivalent) by Moody’s and BBB- (or the equivalent) by S&P and Fitch, and the equivalent
investment grade credit rating from any replacement rating agency or rating agencies
selected by the Company.

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     “Moody’s” means Moody’s Investors Service, Inc.

     “Person” means any individual, partnership, corporation, limited liability company,
joint stock company, business trust, trust, unincorporated association, joint venture or
other entity, or a government or political subdivision or agency thereof.

     “Rating Agencies” means (1) each of Fitch, Moody’s and S&P; and (2) if Fitch, Moody’s
or S&P ceases to rate the Securities or fails to make a rating of the Securities publicly
available for reasons outside of the Company’s control, a “nationally recognized statistical
rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act,
selected by the Company (as certified by a Board Resolution) as a replacement agency for
Fitch, Moody’s or S&P, or any of them, as the case may be.

     “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc.

ARTICLE THIRTEEN

DEFEASANCE AND COVENANT DEFEASANCE

     Section 1301. Company’s Option to Effect Defeasance or Covenant Defeasance.

     The Company may at its option by Board Resolution, at any time, elect to have either
Section 1302 or Section 1303 applied to the Outstanding Securities of this series upon
compliance with the conditions set forth below in this Article Thirteen.

     Section 1302. Defeasance and Discharge.

     Upon the Company’s exercise of the option provided in Section 1301 applicable to this
Section, the Company shall be deemed to have been discharged from its obligations with
respect to the Outstanding Securities of the series created by the Seventeenth Supplemental
Indenture on the date the conditions set forth below are satisfied (hereinafter,
“Defeasance”). For this purpose, such Defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented by the Outstanding Securities
of this series and to have satisfied all its other obligations under such Securities of this
series and this Indenture insofar as such Securities of this series are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of Outstanding Securities of this series to receive,
solely from the trust fund described in Section 1304 and as more fully set forth in such
Section, payments in respect of the principal of (and premium, if any) and interest on such
securities when such payments are due, (B) the Company’s obligations with respect to such
Securities of this series under Sections 304, 305, 306, 1002 and 1003, (C) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and (D) this Article
Thirteen. Subject to

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compliance with this Article Thirteen, the Company may exercise its option under this
Section 1302 notwithstanding the prior exercise of its option under Section 1303.

     Section 1303. Covenant Defeasance.

     Upon the Company’s exercise of the option provided in Section 1301 applicable to this
Section, the Company shall be released from its obligations under Section 501(4) (in respect
of the covenants in Sections 1008 through 1010), Section 801 and Sections 1008 through 1010,
the Securities of this series and the Holders of Securities of this series, on and after the
date the conditions set forth below are satisfied (hereinafter, “covenant Defeasance”). For
this purpose, such covenant Defeasance means that the Company may omit to comply with and
shall have no liability in respect of any term, condition or limitation set forth in any
such Section, whether directly or indirectly, by reason of any reference elsewhere herein to
any such Section or by reason of any reference in any such Section to any other provision
herein or in any other document, but the remainder of this Indenture and such Securities of
this series shall be unaffected thereby.

     Section 1304. Conditions to Defeasance or Covenant Defeasance.

     The following shall be the conditions to application of either Section 1302 or Section
1303 to the Outstanding Securities of this series:

     (1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 609 who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds
in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Securities of this series, (A) money in
an amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day
before the due date of any payment, money in an amount, or (C) a
combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge, the principal of, premium,
if any, and each installment of interest on the Securities of this
series on the Stated Maturity of such principal or installment of
interest on the day on which such payments are due and payable in
accordance with the terms of this Indenture and of such Securities of
this series. For this purpose, “U.S. Government Obligations” means
securities that are (x) direct obligations of the

 - 29 - 

 

United States of America for the payment of which its full faith
and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United
States of America the payment of which is unconditionally guaranteed
as a full faith and credit obligation by the United States of America,
which, in either case, are not callable or redeemable at the option of
the Company thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act
of 1933, as amended) as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian
for the account of the holder of such depository receipt,
provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the
holder of such depositary receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation
evidenced by such depositary receipt.

     (2) No Event of Default or event which with notice or lapse of
time or both would become an Event of Default shall have occurred and
be continuing on the date of such deposit or, insofar as subsections
501(6) and (7) are concerned, at any time during the period ending on
the 121st day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until the expiration of
such period).

     (3) Such Defeasance or covenant Defeasance shall not cause the
Trustee to have a conflicting interest as defined in Section 608 and
for purposes of the Trust Indenture Act with respect to any securities
of the Company.

     (4) Such Defeasance or covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture
or any other agreement or instrument to which the Company is a party
or by which it is bound.

     (5) The Company shall have delivered to the Trustee an Officers’
Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the Defeasance
under Section 1302 or the covenant Defeasance under Section 1303 (as
the case may be) have been complied with.

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     (6) In the case of an election under Section 1302, the Company
shall have delivered to the Trustee an Opinion of
Counsel stating that (x) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling, or (y)
since the date of this Seventeenth Supplemental Indenture there has
been a change in the applicable Federal income tax law, in either case
to the effect that and based thereon such opinion shall confirm that,
the Holders of the Outstanding Securities of this series will not
recognize income, gain or loss for Federal income tax purposes as a
result of such Defeasance or covenant Defeasance and will be subject
to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Defeasance or
covenant Defeasance had not occurred.

     Section 1305. Deposited Money and U.S. Government Obligations to Be Held in Trust;
Other Miscellaneous Provisions.

     Subject to the provisions of the last paragraph of Section 1003, all money and U.S.
Government Obligations (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee—collectively, for purposes of this Section 1305, the “Trustee”) pursuant
to Section 1304 in respect of the Securities of this series shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Securities of this series
and this Indenture, to the payment, either directly or through any Paying Agent (including
the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities of this series, of all sums due and to become due thereon in respect of
principal (and premium, if any) and interest, but such money need not be segregated from
other funds except to the extent required by law.

     The Company shall pay and indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section
1304 or the principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the Outstanding Securities
of this series.

     Anything in this Article Thirteen to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon Company Request any money or U.S.
Government Obligations held by it as provided in Section 1304 which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent Defeasance or covenant
Defeasance.

     Section 1306. Reinstatement.

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                 If the Trustee or the Paying Agent is unable to apply any money in accordance with
Section 1302 or 1303 by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application,
then the Company’s obligations under this Indenture and the Securities of this series
shall be revived and reinstated as though no deposit had occurred pursuant to this Article
Thirteen until such time as the Trustee or Paying Agent is permitted to apply all such money
in accordance with Section 1302 or 1303; provided, however, that if the
Company makes any payment of principal of (and premium, if any) or interest on any Security
of this series following the reinstatement of its obligations, the Company shall be
subjugated to the rights of the Holders of such Securities of this series to receive such
payment from the money held by the Trustee or the Paying Agent.”

Section 404. Redemption of Securities.

                    With respect to Securities of this series, Section 1101 of the Indenture shall be deleted in
its entirety and the following shall be substituted therefor:

                    “Section 1101. Optional Redemption.

                    The Securities will be redeemable, in whole or in part, at the option of the Company at
any time at a redemption price equal to the greater of (i) 100% of the principal amount of
such Securities or (ii) as determined by a Quotation Agent, the sum of the present values of
the remaining scheduled payments of principal and interest thereon (not including any
portion of such payments of interest accrued as of the date of redemption) discounted to the
date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the Adjusted Treasury Rate plus 25 basis points plus, in each case,
accrued interest thereon to the date of redemption.”

ARTICLE FIVE

GUARANTEE

Section 501. Guarantee.

                    Each Guarantor hereby jointly and severally fully and unconditionally guarantees (each a
“Guarantee”) to each Holder of a Security authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity and enforceability of the
Indenture or the Securities or the obligations of the Company or any other Guarantor to the Holders
or the Trustee hereunder or thereunder, that (a) the principal of, premium, if any, and interest on
the Securities will be duly and punctually paid in full when due, whether at maturity, upon
redemption, by acceleration or otherwise, and interest on the overdue principal and (to the extent
permitted by law) interest, if any, on the Securities and all other obligations of the Company or
the Guarantor to the Holders of or the Trustee under the Indenture or the Securities hereunder
(including fees, expenses or others) (collectively, the “Obligations”) will be promptly paid in
full or performed, all in accordance with the terms of the Indenture and the

 - 32 - 

 

Securities; and (b) in
case of any extension of time of payment or renewal of any Obligations, the same will be promptly
paid in full when due or performed in accordance with the terms of the extension or renewal,
whether at Stated Maturity, by acceleration or otherwise. If the
Company shall fail to pay when due, or to perform, any Obligations, for whatever reason, each
Guarantor shall be obligated to pay, or to perform or cause the performance of, the same
immediately. An Event of Default under the Indenture or the Securities shall constitute an event
of default under this Guarantee, and shall entitle the Holders of Securities to accelerate the
Obligations of the Guarantor hereunder in the same manner and to the same extent as the Obligations
of the Company.

                    Each Guarantor hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Securities or the Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder of the Securities
with respect to any provisions of the Indenture or the Securities, any release of any other
Guarantor, the recovery of any judgment against the Company, any action to enforce the same,
whether or not a Guarantee is affixed to any particular Security, or any other circumstance which
might otherwise constitute a legal or equitable discharge or defense of a Guarantor.

                    Each Guarantor further agrees that, as between it, on the one hand, and the Holders of
Securities and the Trustee, on the other hand, (a) the maturity of the Obligations may be
accelerated as provided in Article Five of the Indenture for the purposes of the Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect
of the Obligations, and (b) in the event of any acceleration of such Obligations as provided in
Article Five of the Indenture, such Obligations (whether or not due and payable) shall forthwith
become due and payable by the Guarantor for the purposes of its Guarantee.

Section 502. Waiver of Demand.

                    To the fullest extent permitted by applicable law, each of the Guarantors waives presentment
to, demand of payment from and protest of any of the Obligations, and also waives notice of
acceptance of its Guarantee and notice of protest for nonpayment.

Section 503. Guarantee of Payment.

                    Each of the Guarantors further agrees that its Guarantee constitutes a guarantee of payment
when due and not of collection, and waives any right to require that any resort be had by the
Trustee or any Holder of the Securities to the security, if any, held for payment of the
Obligations.

Section 504. No Discharge or Diminishment of Guarantee.

                    Subject to Section 510 of this Seventeenth Supplemental Indenture, the obligations of each of
the Guarantors hereunder shall not be subject to any reduction,

 - 33 - 

 

limitation, impairment or for any
reason (other than the indefeasible payment in full in cash of the Obligations), including any
claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall
not be subject to any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the generality of the
foregoing, the obligations of each of the Guarantors hereunder shall not be discharged or impaired
or otherwise affected by the failure of the Trustee or any Holder of the Securities to assert any
claim or demand or to enforce any remedy under the Indenture or the Securities, any other guarantee
or any other agreement, by any waiver or modification of any provision of any thereof, by any
default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any
other act or omission that may or might in any manner or to any extent vary the risk of any
Guarantor or that would otherwise operate as a discharge of any Guarantor as a matter of law or
equity (other than the indefeasible payment in full in cash of all the Obligations).

Section 505. Defenses of Company Waived.

                    To the extent permitted by applicable law, each of the Guarantors waives any defense based on
or arising out of any defense of the Company or any other Guarantor or the unenforceability of the
Obligations or any part thereof from any cause, or the cessation from any cause of the liability of
the Company, other than final and indefeasible payment in full in cash of the Obligations. Each of
the Guarantors waives any defense arising out of any such election even though such election
operates to impair or to extinguish any right of reimbursement or subrogation or other right or
remedy of each of the Guarantors against the Company or any security.

Section 506. Continued Effectiveness.

                    Subject to Section 510 of this Seventeenth Supplemental Indenture, each of the Guarantors
further agrees that its Guarantee hereunder shall continue to be effective or be reinstated, as the
case may be, if at any time payment, or any part thereof, of principal of or interest on any
Obligation is rescinded or must otherwise be restored by the Trustee or any Holder of the
Securities upon the bankruptcy or reorganization of the Company.

Section 507. Subrogation.

                    In furtherance of the foregoing and not in limitation of any other right of each of the
Guarantors by virtue hereof, upon the failure of the Company to pay any Obligation when and as the
same shall become due, whether at maturity, by acceleration, after notice of prepayment or
otherwise, each of the Guarantors hereby promises to and will, upon receipt of written demand by
the Trustee or any Holder of the Securities, forthwith pay, or cause to be paid, to the Holders in
cash the amount of such unpaid Obligations, and thereupon the Holders shall, assign (except to the
extent that such assignment would render a Guarantor a “creditor” of the Company within the meaning
of Section 547 of Title 11 of the United States Code as now in effect or hereafter amended or any
comparable provision of any successor statute) the

 - 34 - 

 

amount of the Obligations owed to it and paid by
such Guarantor pursuant to this Guarantee to such Guarantor, such assignment to be pro rata
to the extent the Obligations in question were discharged by such Guarantor, or make such other
disposition thereof as such Guarantor shall
direct (all without recourse to the Holders, and without any representation or warranty by the
Holders). If (a) a Guarantor shall make payment to the Holders of all or any part of the
Obligations and (b) all the Obligations and all other amounts payable under this Seventeenth
Supplemental Indenture shall be indefeasibly paid in full, the Trustee will, at such Guarantor’s
request, execute and deliver to such Guarantor appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of
an interest in the Obligations resulting from such payment by such Guarantor.

Section 508. Information.

                    Each of the Guarantors assumes all responsibility for being and keeping itself informed of the
Company’s financial condition and assets, and of all other circumstances bearing upon the risk of
nonpayment of the Obligations and the nature, scope and extent of the risks that each of the
Guarantors assumes and incurs hereunder, and agrees that the Trustee and the Holders of the
Securities will have no duty to advise the Guarantors of information known to it or any of them
regarding such circumstances or risks.

Section 509. Subordination.

                    Upon payment by any Guarantor of any sums to the Holders, as provided above, all rights of
such Guarantor against the Company, arising as a result thereof by way of right of subrogation or
otherwise, shall in all respects be subordinated and junior in right of payment to the prior
indefeasible payment in full in cash of all the Obligations to the Trustee; provided,
however, that any right of subrogation that such Guarantor may have pursuant to this
Seventeenth Supplemental Indenture is subject to Section 507 hereof.

Section 510. Termination.

                    A Guarantor shall, upon the occurrence of either of the following events, be automatically
and unconditionally released and discharged from all obligations under this Seventeenth
Supplemental Indenture and its Guarantee without any action required on the part of the Trustee or
any Holder if such release and discharge will not result in any downgrade in the rating given to
the Securities by Moody’s Investors Service and Standard and Poor’s Rating Services:

                    (a) upon any sale, exchange, transfer or other disposition (by merger or otherwise) of all of
the Capital Stock of a Guarantor or all, or substantially all, of the assets of such Guarantor,
which sale or other disposition is otherwise in compliance with the terms of the Indenture;
provided, however, that such Guarantor shall not be released and discharged from its obligations
under this Seventeenth Supplemental Indenture and its Guarantee if, upon consummation of such sale,
exchange, transfer or other disposition (by merger or otherwise), such Guarantor remains or becomes
a Guarantor under any Credit Facility; or

 - 35 - 

 

                    (b) at the request of the Company, at any time that none of the Credit Facilities are
guaranteed by any Subsidiary of the Company.

The Trustee shall deliver an appropriate instrument evidencing such release upon receipt of a
request of the Company accompanied by an Officers’ Certificate certifying as to the compliance with
this Section. Any Guarantor not so released will remain liable for the full amount of the
principal of, premium, if any, and interest on the Notes provided in this Seventeenth Supplemental
Indenture and its Guarantee.

Section 511. Guarantees of other Indebtedness.

                    As long as the Securities are guaranteed by the Guarantors, the Company will cause each of its
Subsidiaries that becomes a Guarantor in respect of (i) any Indebtedness of the Company which is
outstanding on the date hereof and (ii) any Indebtedness incurred by the Company after the date
hereof (other than in respect of asset-backed securities), to include in any guarantee given by any
such Guarantor, provisions similar to those set forth in Section 510 hereof.

Section 512. Additional Guarantors.

                    The Company will cause each of its Subsidiaries that becomes a Guarantor in respect of any
Indebtedness of the Company following the date hereof to execute and deliver a supplemental
indenture pursuant to which it will become a Guarantor under this Seventeenth Supplemental
Indenture, if it has not already done so or unless the Guarantor is prohibited from doing so by
applicable law or a provision of a contract to which it is a party or by which it is bound.

Section 513. Limitation of Guarantor’s Liability.

                    Each Guarantor, and by its acceptance hereof each Holder, hereby confirms that it is the
intention of all such parties that the Guarantee by such Guarantor not constitute a fraudulent
transfer or conveyance for purposes of Title 11 of the United States Code, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal of state law. To
effectuate the foregoing intention, the Holders and such Guarantor hereby irrevocably agree that
the obligations of such Guarantor under this Seventeenth Supplemental Indenture and its Guarantee
shall be limited to the maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Guarantor, and after giving effect to any collections from or payments made by
or on behalf of, any other Guarantor in respect of the obligations of such Guarantor under its
Guarantee or pursuant to its contribution obligations under this Seventeenth Supplemental
Indenture, will result in the obligations of such Guarantor under its Guarantee not constituting
such fraudulent transfer or conveyance.

 - 36 - 

 

Section 514. Contribution from Other Guarantors.

                    Each Guarantor that makes a payment or distribution under its Guarantee shall be entitled to a
contribution from each other Guarantor in a pro rata amount based on the net
assets of each Guarantor, determined in accordance with generally accepted accounting
principles in effect in the United States of America as of the date hereof.

Section 515. No Obligation to Take Action Against the Company.

                    Neither the Trustee, any Holder nor any other Person shall have any obligation to enforce or
exhaust any rights or remedies or take any other steps under any security for the Obligations or
against the Company or any other Person or any property of the Company or any other Person before
the Trustee, such Holder or such other Person is entitled to demand payment and performance by any
or all Guarantors of their liabilities and obligations under their Guarantee.

Section 516. Dealing with the Company and Others.

                    The Holders, without releasing, discharging, limiting or otherwise affecting in whole or in
part the obligations and liabilities of any Guarantor hereunder and without the consent of or
notice to any Guarantor, may:

                    (a) grant time, renewals, extensions, compromises, concessions, waivers, releases, discharges
and other indulgences to the Company or any other Person;

                    (b) take or abstain from taking security or collateral from the Company or from perfecting
security or collateral from the Company;

                    (c) release, discharge, compromise, realize, enforce or otherwise deal with or do any act or
thing in respect of (with or without consideration) any and all collateral, mortgages or other
security given by the Company or any third party with respect to the Obligations;

                    (d) accept compromises or arrangements from the Company;

                    (e) apply all monies at any time received from the Company or from any security to such part
of the Obligations as the Holders may see fit or change any such application in whole or in part
from time to time as the Holders may see fit; and

                    (f) otherwise deal with, or waive or modify their right to deal with, the Company and all
other Persons and any security as the Holders or the Trustee may see fit.

 - 37 - 

 

Section 517. Execution and Delivery of the Guarantee.

                    (a) To further evidence the Guarantee set forth in this Article Five, each Guarantor hereby
agrees that a notation of such Guarantee shall be endorsed on each Security authenticated and
delivered by the Trustee and executed by either manual or facsimile signature of an officer of each
Guarantor. The corporate seal of a Guarantor may be reproduced on the executed Guarantee and the
execution thereof may be attested to by any
appropriate officer of the Guarantor, but neither such reproduction nor such attestation is or
shall be required.

                    (b) Each of the Guarantors hereby agrees that its Guarantee set forth in this Article Five
shall remain in full force and effect notwithstanding any failure to endorse on each Security a
notation of such Guarantee.

                    (c) If an officer of a Guarantor whose signature is on this Seventeenth Supplemental Indenture
or a Guarantee no longer holds that office at the time the Trustee authenticates such Guarantee or
at any time thereafter, such Guarantor’s Guarantee of such Security shall be valid nevertheless.

                    (d) The delivery of any Security by the Trustee, after the authentication thereof hereunder,
shall constitute due delivery of any Guarantee set forth in this Seventeenth Supplemental Indenture
on behalf of each Guarantor.

ARTICLE SIX

MISCELLANEOUS

Section 601. Miscellaneous.

                    (a) The Trustee accepts the trusts created by the Indenture, as supplemented by this
Seventeenth Supplemental Indenture, and agrees to perform the same upon the terms and conditions of
the Indenture, as supplemented by this Seventeenth Supplemental Indenture.

                    (b) The recitals contained herein shall be taken as statements of the Company, and the Trustee
assumes no responsibility for their correctness. The Trustee makes no representations as to the
validity or sufficiency of this Seventeenth Supplemental Indenture.

                    (c) All capitalized terms used and not defined herein shall have the respective meanings
assigned to them in the Indenture.

                    (d) Each of the Company and the Trustee makes and reaffirms as of the date of execution of
this Seventeenth Supplemental Indenture all of its respective representations, covenants and
agreements set forth in the Indenture.

 - 38 - 

 

                    (e) All covenants and agreements in this Seventeenth Supplemental Indenture by the Company or
the Trustee and each Guarantor shall bind its respective successors and assigns, whether so
expressed or not.

                    (f) In case any provisions in this Seventeenth Supplemental Indenture shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.

                    (g) Nothing in this Seventeenth Supplemental Indenture, express or implied, shall give to any
Person, other than the parties hereto and their successors under the Indenture and the Holders of
the series of Securities created hereby, any benefit or any legal or equitable right, remedy or
claim under the Indenture.

                    (h) If any provision hereof limits, qualifies or conflicts with a provision of the Trust
Indenture Act of 1939, as may be amended from time to time, that is required under such Act to be a
part of and govern this Seventeenth Supplemental Indenture, the latter provision shall control. If
any provision hereof modifies or excludes any provision of such Act that may be so modified or
excluded, the latter provision shall be deemed to apply to this Seventeenth Supplemental Indenture
as so modified or excluded, as the case may be.

                    (i) This Seventeenth Supplemental Indenture shall be governed by and construed in accordance
with the laws of the State of New York.

                    (j) All amendments to the Indenture made hereby shall have effect only with respect to the
series of Securities created hereby.

                    (k) All provisions of this Seventeenth Supplemental Indenture shall be deemed to be
incorporated in, and made a part of, the Indenture; and the Indenture, as supplemented by this
Seventeenth Supplemental Indenture, shall be read, taken and construed as one and the same
instrument.

                    This instrument may be executed in any number of counterparts, each of which so executed shall
be deemed to be an original, but all such counterparts shall together constitute but one and the
same instrument.

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     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of
the day and year first above written.

	 	 	 	 	 
	 	 	THE KROGER CO.

Each of the Guarantors Listed on Schedule I

hereto, as Guarantor of the Securities
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Paul W. Heldman

Name: Paul W. Heldman

Title: President/Vice President
	 
	 	 	 	 
	 	 	QUEEN CITY ASSURANCE, INC.,

as Guarantor of the Securities

RJD ASSURANCE, INC.,

as Guarantor of the Securities

VINE COURT ASSURANCE INCORPORATED,

as Guarantor of the Securities
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Bruce M. Gack

Name: Bruce M. Gack

Title: Senior Vice President/Vice President
	 
	 	 	 	 
	 	 	ROCKET NEWCO, INC.,

as Guarantor of the Securities

HENPIL, INC.,

as Guarantor of the Securities
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Kim Storch

Name: Kim Storch

Title: Vice President
	 
	 	 	 	 
	 	 	U.S. BANK NATIONAL ASSOCIATION,

as Trustee
	 
	 	 	 	 
	 

	 	By:
	 	/s/ William E. Sicking

Name: William E. Sicking

Title: Vice President

Attest:

/s/ Keith A. Maurmeier

 - 40 - 

 

SCHEDULE I

Guarantors

	 	 	 
	Name of Guarantor	 	State of Organization
	Alpha Beta Company
	 	California
	Bay Area Warehouse Stores, Inc.
	 	California
	Bell Markets, Inc.
	 	California
	Cala Co.
	 	Delaware
	Cala Foods, Inc.
	 	California
	CB&S Advertising Agency, Inc.
	 	Oregon
	Crawford Stores, Inc.
	 	California
	Dillon Companies, Inc.
	 	Kansas
	Dillon Real Estate Co., Inc.
	 	Kansas
	Distribution Trucking Company
	 	Oregon
	F4L L.P.
	 	Ohio
	FM, Inc.
	 	Utah
	FMJ, Inc.
	 	Delaware
	Food 4 Less GM, Inc.
	 	California
	Food 4 Less Holdings, Inc.
	 	Delaware
	Food 4 Less Merchandising, Inc.
	 	California
	Food 4 Less of California, Inc.
	 	California
	Food 4 Less of Southern California, Inc.
	 	Delaware
	Fred Meyer, Inc.
	 	Delaware
	Fred Meyer Jewelers, Inc.
	 	California
	Fred Meyer Stores, Inc.
	 	Ohio
	Hughes Markets, Inc.
	 	California
	Hughes Realty, Inc.
	 	California
	Inter-American Foods, Inc.
	 	Ohio
	Junior Food Stores of West Florida, Inc.
	 	Florida
	J.V. Distributing, Inc.
	 	Michigan
	KRGP Inc.
	 	Ohio
	KRLP Inc.
	 	Ohio
	The Kroger Co. of Michigan
	 	Michigan
	Kroger Dedicated Logistics Co.
	 	Ohio
	Kroger Group Cooperative, Inc.
	 	Ohio
	Kroger Limited Partnership I
	 	Ohio
	Kroger Limited Partnership II
	 	Ohio
	Kroger Texas L.P.
	 	Ohio
	Kwik Shop, Inc.
	 	Kansas
	Mini Mart, Inc.
	 	Wyoming
	Peyton’s-Southeastern, Inc.
	 	Tennessee
	Quik Stop Markets, Inc.
	 	California

 - 41 - 

 

	 	 	 
	Name of Guarantor	 	State of Organization
	Ralphs Grocery Company
	 	Ohio
	Second Story, Inc.
	 	Washington
	Smith’s Beverage of Wyoming, Inc.
	 	Wyoming
	Smith’s Food & Drug Centers, Inc.
	 	Ohio
	THGP Co., Inc.
	 	Pennsylvania
	THLP Co., Inc.
	 	Pennsylvania
	Topvalco, Inc.
	 	Ohio
	Turkey Hill, L.P.
	 	Pennsylvania

 - 42 - 

 

	 	 	 	 	 	 	 
	STATE OF OHIO

	 	 	)

)	 	 	ss.:
	COUNTY OF HAMILTON

	 	 	)	 	 	 

                    On the 15th day of August, 2007, before me personally came Paul W. Heldman, to me
known, who, being by me duly sworn, did depose and say that he is Executive Vice President of The
Kroger Co., and President/Vice President of each of the Guarantors Listed on Schedule I hereto,
corporations described in and which executed the foregoing instrument; that he knows the seals of
said corporations; that the seals affixed to said instrument are such corporate seals; that they
were so affixed by authority of the Board of Directors of such corporations, and that he signed his
name thereto by like authority.

/s/ Dorothy D. Roberts

	 	 	 	 	 	 	 
	STATE OF OHIO

	 	 	)

)	 	 	ss.:
	COUNTY OF HAMILTON

	 	 	)	 	 	 

                    On the 15th day of August, 2007, before me personally came Bruce M. Gack, to me
known, who, being by me duly sworn, did depose and say that he is Senior Vice President/Vice
President of Queen City Assurance, Inc., RJD Assurance, Inc. and Vine Court Assurance Incorporated,
corporations described in and which executed the foregoing instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is such corporate seal; that it was so
affixed by authority of the Boards of Directors of said corporation, and that he signed his name
thereto by like authority.

/s/ Dorothy D. Roberts

 - 1 - 

 

	 	 	 	 	 	 	 
	STATE OF TEXAS

	 	 	)

)	 	 	ss.:
	COUNTY OF MONTGOMERY

	 	 	)	 	 	 

                    On the 15th day of August, 2007, before me personally came Kim Storch, to me known,
who, being by me duly sworn, did depose and say that she is Vice President of Rocket Newco, Inc.
and Henpil, Inc., corporations described in and which executed the foregoing instrument; that she
knows the seal of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Boards of Directors of said corporation, and that
she signed her name thereto by like authority.

/s/ Barbara Edwards

 - 2 - 

 

	 	 	 	 	 	 	 	 	 
	STATE OF OHIO

	 	 	)

)	 ss.:	 	 	 	 
	COUNTY OF HAMILTON

	 	 	)	 	 	 	 	 

                    On the 15th day of August, 2007, before me personally came William E. Sicking, to
me known, who, being by me duly sworn, did depose and say that he is a Vice President of U.S. Bank
National Association, one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.

/s/ Dorothy D. Roberts

 - 3 -

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