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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) November 4, 1994
KMART CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Michigan
(State or Other Jurisdiction of Incorporation)
1-327 38-0729500
(Commission File Number) (I.R.S Employer Identification No.)
3100 West Big Beaver Road, Troy, Michigan 48084
(Address of Principal Executive Offices) (Zip Code)
(810) 643-1000
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
On November 4, 1994, a Registration Statement (Registration No.
33-54043) filed by Registrant on Form S-3 (as amended, the "Registration
Statement") with the Securities and Exchange Commission (the "Commission") in
respect of a shelf offering of $250,000,000 of Mortgage Pass-Through
Certificates, Issuable in Series (collectively "Certificates") was declared
effective by the Commission.
On November 8, 1994, $5,491,000 principal amount of such Certificates
(Series 1994A-1 and 1994A-2, respectively) were sold to Sutro & Co.
Incorporated ("Sutro") pursuant to an Underwriting Agreement dated November 4,
1994, a copy of which is filed as an exhibit to this Report. On the same day,
Sutro resold all of the Certificates Series 1994A-1 and 1994A-2 to a single
purchaser.
On November 21, 1994 an additional $63,988,000 principal amount of such
Certificates (Series 1994A-3, 1994A-4 and 1994A-5, respectively) were sold to
Sutro pursuant to an Underwriting Agreement dated November 16, 1994, a copy of
which is filed as an exhibit to this Report. On the same day, Sutro resold all
of the Certificates Series 1994A-3, 1994A-4 and 1994A-5 to a single purchaser
(the "Purchaser"). The disclosure documents used in connection with the
November 21, 1994 sale and resale included a Basic Prospectus dated November 4,
1994 and a Prospectus Supplement dated November 16, 1994, which, together, are
hereinafter referred to as the "Prospectus." Included among the $63,988,000 of
Certificates sold on November 21, 1994 were $39,687,000 Certificates Series
1994A-5, which bear interest at a stated rate of 10.05% per annum and have a
final scheduled remittance date of November 1, 2019. These Certificates were
issued by Pass-Through Trust Series 1994A-5, the property of which consists of
eight mortgage notes in the aggregate principal amount of $39,687,000,
including three mortgage notes in the aggregate principal amount of $21,186,000
secured by mortgages on three projects in the State of California. The mortgage
notes have a stated interest rate of 10.05% but provide that if the stated
interest rate exceeds the maximum rate permitted by law the latter rate shall
apply. By their terms, the mortgage notes are governed by the laws of the State
of New York, where the Pass-Through Trustee (payee of the notes) has its
principal office. The maximum legal rate of interest in California (subject to
exceptions which may or may not be applicable) is 10% per annum. In New York
there is no ceiling on the rate of interest applicable to the mortgage notes
held by Pass-Through Trust 1994A-5; and if the parties' choice of governing law
is respected by the courts, the 10.05% stated rate is clearly lawful. No
assurances can be given, however, that a California Court, if called upon to
consider whether the 10.05% stated rate, or the 10.00% California maximum rate,
should apply to the mortgage notes given with
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respect to the three California properties would respect the parties' choice
of New York as the jurisdiction, whose laws govern the mortgage notes --
including the interest rate provisions.
Neither the fact that the maximum permissible rate of interest in
California is lower than the stated rate of the mortgage notes (and the stated
rate of the Certificates Series 1994A-5), nor the fact that no assurances can
be given that a California court would respect the parties' choice of law, was
disclosed in the Prospectus. These facts were, however, disclosed by Sutro to
the Purchaser, which acknowledged such disclosure in writing and agreed not to
make any resales of the Certificates until such facts had been publicly
disclosed. The purpose of this filing is to make public disclosure of such
facts and thereby remedy any disclosure deficiency that may exist by reason of
the failure to do so in the Prospectus.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KMART CORPORATION
(Registrant)
Date: December 6, 1994 By: /s/ NANCIE W. LADUKE
Vice President and Secretary
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EXHIBIT
UNDERWRITING AGREEMENT
November 4, 1994
Sutro & Co. Incorporated
555 South Flower Street, 46th Floor
Los Angeles, CA 90071
Dear Sirs:
National Tenant Finance Corporation ("Depositor") proposes to
cause United States Trust Company of New York, as trustee ("Trustee") under the
several trust agreements (collectively, "Trust Agreements," and each a "Trust
Agreement") identified in the Schedule of Trust Agreements annexed hereto as
Exhibit A to issue, and Depositor proposes to sell to you, as underwriter,
$5,491,000 aggregate principal amount of Mortgage Pass-Through Certificates, in
series, as more particularly described in the Schedule of Mortgage Pass-Through
Certificates annexed hereto as Exhibit B (the "Certificates") for which you, as
underwriter, shall pay the aggregate amount of $5,381,180, less the amounts to
be distributed pursuant to Sections 6.1 and 6.2 of this Underwriting Agreement.
Capitalized terms used and not otherwise defined herein shall have the meanings
ascribed to them in the registration statement, dated June 8, 1994, filed by or
on behalf of Kmart Corporation ("Kmart") (Registration No. 33-54043) as from
time to time amended and supplemented.
The Certificates of each series will represent fractional
undivided beneficial ownership interests in a single separate trust (a "Trust")
established for the benefit of the Certificateholders of such series. Each
Certificate will represent a fractional undivided beneficial ownership interest
in the assets of one Trust and will have no rights, benefits or interests in
respect of any other Trust or the assets held in any other trust. Each Trust
will hold two (2) Mortgage Notes evidencing two (2) Mortgage Loans. Each
Mortgage Loan will be made by the Depositor to a separate borrower (each a
"Borrower") pursuant to a separate Loan Agreement to finance the acquisition of
a separate Facility or to provide permanent financing for a Facility and to pay
the Borrowers' proportionate shares of the costs of issuance of the
Certificates, including the underwriting discount and the expenses provided for
in Sections 6.1 and 6.2 of this Underwriting Agreement. Each
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Loan Agreement provides that the Mortgage Loan will be evidenced by two
Mortgage Notes having different maturities. Because Mortgage Notes of
different maturities are being issued pursuant to the two Loan Agreements, (i)
all of such Mortgage Notes having the same maturity will be held by a separate
Pass-Through Trust, and all Mortgage Notes held by each separate Pass-Through
Trust will have the same maturity, (ii) each Certificate will evidence a
fractional undivided beneficial ownership interest in the assets of the related
Pass-Through Trust and will have no rights, benefits or interests in respect of
any other Pass-Through Trust Property held in any other Pass-Through Trust, and
(iii) the Collateral securing such Mortgage Notes will be held by a Collateral
Trustee for the benefit, pari passu, of all Pass-Through Trusts holding any of
the Mortgage Notes secured by such Collateral. The assets held by the
Collateral Trust will include with respect to each Facility the following
collateral for the Mortgage Notes relating to such Facility: (i) a Mortgage on
such Facility; (ii) all of the Depositor's rights under the Loan Agreement
pursuant to which the related Mortgage Notes were issued; (iii) an assignment
of the related Lease, Lease Payments and, because the Tenant (OfficeMax, Inc.)
under each lease is a subsidiary of Kmart (the "Subsidiary"), a Lease Guaranty
by Kmart of the lease obligations of such Tenant; (iv) a pledge of certain
moneys held in certain funds established pursuant to the Collateral Trust
Agreement; (v) a Note Put Agreement requiring the Tenant and Kmart to purchase
the related Mortgage Note(s) upon the occurrence of a Triggering Event; (vi) a
pledge of certain investments of fund balances held in the Collateral Trust and
income earned thereon; and (viii) any other Loan Documents. The Trust
Agreement, the Loan Agreement, the Mortgage, the Mortgage Note, the Lease, the
Lease Guaranty, the Note Put Agreement, the Pledge Agreement and any other Loan
Documents are referred to herein as the "Transaction Documents."
Subject to the terms and conditions set forth or incorporated
by reference herein, Kmart agrees to cause the Depositor to sell and the
Depositor agrees to sell, and you agree to purchase, the principal amounts of
Certificates of each series set forth opposite your name in the Schedule of
Underwriters annexed hereto as Exhibit C at the purchase price (expressed as a
percentage of the principal amount of each series of Certificates) set forth in
such schedule.
You will pay for the Certificates in immediately available
funds upon delivery thereof in book entry form, and payment for the
Certificates will be made, at New York, New York no later than 5:00 p.m. (New
York time) on November 7, 1994, through the Same Day Funds Settlement System of
The Depository Trust Company. The time and date
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of such payment and delivery are hereinafter referred to as the "Closing Date."
The Certificates shall have the terms set forth in the
Prospectus dated November 4, 1994, as modified by the Definitive Prospectus
Supplement dated November 4, 1994.
1. Representations and Warranties of Kmart. Kmart
represents and warrants to, and agrees with, you as follows:
(a) Kmart meets the requirements for the use of
Form S-3 under the Securities Act of 1933, as amended (the "Act"), and
has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (Registration No. 33-54043) on
such Form (as amended and supplemented, the "Registration Statement"),
including a basic prospectus (the "Basic Prospectus"), for
registration under the Act of the offering and sale of mortgage pass
through certificates, including the Certificates. Kmart has filed
four (4) amendments and one (1) supplement thereto and has used
Preliminary Prospectuses and Preliminary Prospectus Supplements, each
of which has previously been furnished to you. The Registration
Statement has become effective. No stop order suspending the
effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before, or, to Kmart's
knowledge, are threatened by, the Commission. Although the Basic
Prospectus does not include all the information with respect to the
Certificates and the offering thereof required by the Act and the
rules thereunder, the Basic Prospectus includes all such information
required by the Act and the rules and regulations thereunder to be
included therein as of the Effective Date. Kmart will next file with
the Commission pursuant to Rule 424(b)(2) or (5) a definitive
prospectus supplement (the "Definitive Prospectus Supplement") to the
form of Basic Prospectus included in such registration statement
relating to the Certificates and the offering thereof. As filed, such
Definitive Prospectus Supplement, together with the Basic Prospectus,
shall include all such required information with respect to the
Certificates and the offering thereof and, except to the extent you
shall agree in writing to a modification, shall be in all substantive
respects in the form furnished to you prior to the Execution Time or,
to the extent not completed at the Execution Time, shall contain only
such specific additional information and other changes (beyond those
contained in the Basic Prospectus and any Preliminary Prospectus) as
Kmart has
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advised you, prior to the Execution Time, will be included or made
herein.
(b) The terms which follow, when used in this
Agreement, shall have the meanings indicated. The term "Effective
Date" shall mean each date that the Registration Statement and any
post-effective amendment or amendments thereto became or become
effective. "Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto. "Basic
Prospectus" shall mean the prospectus referred to in paragraph (a)
above contained in the Registration Statement at the Effective Date.
"Preliminary Prospectus" shall mean any preliminary prospectus
supplement to the Basic Prospectus, which describes the Certificates
and the offering thereof and which was or is used prior to filing of
the Definitive Prospectus Supplement. "Prospectus" shall mean the
Definitive Prospectus Supplement relating to the Certificates that is
first filed pursuant to Rule 424(b) after the Execution Time, together
with the Basic Prospectus. "Registration Statement" shall mean the
registration statement referred to in paragraph (a) above, including
incorporated documents, exhibits and financial statements, as amended
at the Execution Time (or, if not effective at the Execution Time, in
the form in which it shall become effective) and, in the event any
post-effective amendment thereto becomes effective prior to the
Closing Date (as defined above), shall also mean such registration
statement as so amended. Such term shall include any Rule 430A
Information deemed to be included therein at the Effective Date as
provided by Rule 430A. "Rule 415," "Rule 424," "Rule 430A" and
"Regulation S-K" refer to such rules or regulations under the Act.
"Rule 430A Information" means information with respect to the
Certificates and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule
430A. Any reference herein to the Registration Statement, the Basic
Prospectus, any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which were filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), on
or before the Effective Date or the issue date of the Basic
Prospectus, any Preliminary Prospectus or the Prospectus, as the case
may be; and any reference herein to the terms "amend," "amendment" or
"supplement" with respect to the Registration Statement, the Basic
Prospectus, any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the filing of any document under the
Exchange
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Act after the Effective Date or the issue date of the Basic
Prospectus, any Preliminary Prospectus or the Prospectus, as the case
may be, deemed to be incorporated therein by reference.
(c) (i) Each document, if any, filed or to be
filed by Kmart pursuant to the Exchange Act prior to the termination
of the offering of the Certificates complied or will comply when so
filed in all material respects with the Exchange Act and the
applicable rules and regulations thereunder; (ii) each part of the
Registration Statement, when such part became effective, did not
contain, and each such part, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this Section 1(c) do
not apply to statements or omissions in the Registration Statement or
the Prospectus based upon information furnished to Kmart in writing by
you or on your behalf expressly for use therein or to that part of the
Registration Statement that shall constitute the statement of
eligibility and qualification under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act") of any Trustee on Form T-1;
(iii) on the Effective Date, and when the Definitive Prospectus
Supplement is first filed (if required) in accordance with Rule
424(b), and on the Closing Date (X) the Registration Statement and the
Prospectus (and each preliminary prospectus or prospectus supplement
filed as part of any amendment to the Registration Statement) did and
will comply in all material respects with the applicable requirements
of the Act and the Exchange Act and the respective rules thereunder
and (Y) at the Closing Date, the Trust Agreement complied in all
material respects with the requirements of the Trust Indenture Act and
the rules thereunder; and (iv) each of the Transaction Documents to
which Kmart is, or is to be, a party conforms in all material respects
to the description thereof in the Prospectus.
(d) Kmart is a corporation duly incorporated, is
validly existing as a corporation in good standing under the laws of
the State of Michigan, has the full power and authority and legal
right to own and lease the property used by it, to conduct its
business as described in the Prospectus and to execute and deliver
this Agreement and each Transaction Document to which it is a party
and to perform its obligations under this Agreement and each
Transaction Document to
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which it is a party, and is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on Kmart and its subsidiaries, taken as a whole.
(e) This Agreement and each Transaction Document
to which Kmart is a party have been duly authorized, executed and
delivered by Kmart and are legal, valid and binding agreements of
Kmart, enforceable against Kmart in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(f) The execution, delivery and performance by
Kmart of this Agreement and each Transaction Document to which it is a
party and the consummation by Kmart of the transactions contemplated
hereby and thereby (i) do not and will not violate the articles of
incorporation or by-laws of Kmart or any order, injunction, ruling or
decree by which Kmart is bound, (ii) do not and will not constitute a
breach of or a default under any material agreement, indenture,
mortgage, lease, note, instrument or arrangement to which Kmart is a
party or by which Kmart is bound, and (iii) do not and will not
contravene or constitute a material violation of any law, statute,
ordinance, rule or regulation to which Kmart is subject, and (iv) have
been duly authorized by all necessary corporate action on the part of
Kmart, and do not require any stockholder approval.
(g) Neither the authorization, execution or
delivery by Kmart of this Agreement or any Transaction Document to
which it is a party in accordance with the provisions hereof and
thereof, nor the consummation by Kmart of any of the transactions
contemplated hereby or thereby, requires the consent or the approval
of, the giving of notice to, or the registration with, or the taking
of any other action in respect of, any federal or state governmental
authority or agency, other than (i) registration of the issuance and
sale of the Certificates under the Act and under the securities laws
of any state in which the Certificates may be offered for sale if the
laws of such state requires such action, (ii) the qualification of
each of the Trust Agreements
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under the Trust Indenture Act and (iii) the granting of the
application in respect of the Trustee pursuant to Section 305(b)(2) of
the Trust Indenture Act.
(h) Price Waterhouse, who certified the
consolidated financial statements of Kmart and its consolidated
subsidiaries for the year ended January 26, 1994, incorporated by
reference in the Registration Statement and Prospectus, are
independent public accountants as required by the Act and the rules
thereunder.
(i) The financial statements filed as part of the
Registration Statement or included in, or incorporated by reference
into, the Basic Prospectus or the Prospectus or Definitive Prospectus
Supplement present fairly, and will present fairly, the financial
condition and results of operations of the entities purported to be
shown thereby, at the dates and for the periods indicated, and have
been, and, in the case of financial statements subsequently
incorporated by reference, will be, prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved, except as approved by Price
Waterhouse.
(j) There has not occurred any material adverse
change, to Kmart's knowledge, in the condition, financial or
otherwise, or in the earnings, business or operations of Kmart and its
subsidiaries, taken as a whole, from that set forth in either the most
recent annual report on Form 10-K or the most recent quarterly report
on Form 10-Q or Form 8-K filed by Kmart with the Commission or the
Prospectus.
(k) There are no legal or governmental
proceedings pending or, to Kmart's knowledge, threatened to which
Kmart or any of its subsidiaries is or may become a party or to which
any of their respective properties is or may be subject that are
required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit
to the Registration Statement that are not described or filed as
required.
2. Representations and Warranties of the Depositor. The
Depositor represents and warrants to, and agrees with, you as follows:
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(a) The Depositor is a corporation duly
incorporated, is validly existing as a corporation in good standing
under the laws of the State of Delaware, has the full power and
authority and legal right to own and lease the property used by it, to
conduct its business as described in the Prospectus and to execute and
deliver this Agreement and each Transaction Document to which it is a
party and to perform its obligations under this Underwriting Agreement
and each Transaction Document to which it is a party, and is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification.
(b) This Underwriting Agreement and each
Transaction Document to which it is a party, including each of the
Trust Agreements, have been duly authorized, executed and delivered by
the Depositor and are legal, valid and binding agreements of the
Depositor, enforceable against the Depositor in accordance with their
respective terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject to
general principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity).
(c) The Certificates have been duly authorized
and, when executed and authenticated in accordance with the Trust
Agreements and delivered to and duly paid for by you in accordance
with the terms hereof, will be entitled to the benefits of the Trust
Agreements, will be validly issued under the Trust Agreements and will
be legal, valid and binding obligations of the Trusts, enforceable in
accordance with their respective terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally, and subject to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(d) The execution, delivery and performance by
the Depositor of this Underwriting Agreement and each Transaction
Document to which it is a party, including each of the Trust
Agreements, and the consummation by the Depositor of the transactions
contemplated hereby and thereby (A) do not and will not violate the
certificate of incorporation or by- laws (or similar governing
instruments) of the Depositor or any
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order, injunction, ruling or decree by which the Depositor is bound,
(B) do not and will not constitute a breach of or a default under any
agreement, indenture, mortgage, lease, note, instrument or arrangement
to which the Depositor is a party (there being none other than the
Transaction Documents and other similar transaction documents
described in the Basic Prospectus) or by which the Depositor or any of
its property is bound, and (C) do not and will not contravene or
constitute a violation of any law, statute, ordinance, rule or
regulation to which the Depositor or any of its property is subject,
and (D) have been duly authorized by all necessary corporate action on
the part of the Depositor, and do not require any stockholder approval
or approval or consent of any trustee or holder of any indebtedness or
obligations of the Depositor (there being none).
(e) Neither the authorization, execution or
delivery by the Depositor of this Underwriting Agreement or any
Transaction Document to which it is a party in accordance with the
provisions hereof or thereof, nor the consummation by the Depositor of
any of the transactions contemplated hereby or thereby, requires the
consent or the approval of, the giving of notice to, or the
registration with, or the taking of any other action in respect of,
any federal or state governmental authority or agency, other than (i)
registration of the issuance and sale of the Certificates under the
Act and under the securities laws of any state in which the
Certificates may be offered for sale if the laws of such state
requires such action, (ii) the qualification of each of the Trust
Agreements under the Trust Indenture Act and (iii) the granting of the
application in respect of the Trustee pursuant to Section 305(b)(2) of
the Trust Indenture Act.
(f) There are no legal or governmental
proceedings pending or, to the knowledge of Depositor, threatened to
which the Depositor is or may become a party or to which any of its
properties is or may be subject.
3. Public Offering. Kmart and the Depositor are advised
by you that you propose to make a public offering of the Certificates as soon
after this Agreement has been entered into as in your judgment is advisable.
The terms of the public offering of the Certificates are set forth in the
Prospectus.
4. Purchase and Delivery. Except as otherwise provided
in this Section 4, payment for the Certificates
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shall be made by wire transfer or certified or official bank check or checks
payable to the order of the Trustee in immediately available funds at the time
and place set forth above, upon delivery to The Depository Trust Company
("Cede") for your account of the Certificates, registered in the name of Cede,
with any transfer taxes payable in connection with the transfer of the
Certificates to you duly paid.
5. Covenants of Kmart and the Depositor. In further
consideration of your agreements contained herein, Kmart and the Depositor
severally covenant as follows:
(a) To furnish you, without charge, a copy of the
Registration Statement (including exhibits thereto and documents
incorporated by reference therein) as originally filed electronically
in compliance with Regulation S-T of the Act, and, during the period
mentioned in paragraph (c) below, as many copies of the Prospectus,
any documents incorporated by reference therein and any supplements
and amendments thereto or to the Registration Statement as you may
reasonably request.
(b) Before amending or supplementing the
Registration Statement or the Prospectus with respect to the
Certificates, to furnish to you, a reasonable amount of time prior to
filing such amendment or supplement, a copy of each such proposed
amendment or supplement; provided, however, that the foregoing
requirement shall not apply to any of Kmart's periodic filings with
the Commission required to be filed pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act, all of which required filings Kmart
hereby agrees timely to make during the period when the Prospectus
relating to the Certificates is required to be delivered under the
Act, and copies of which filings Kmart will upon request cause to be
delivered to you promptly after being filed with the Commission.
(c) Subject to the provisions of Section 5(b),
if, during such period after the first date of the public offering of
the Certificates that the Prospectus is required by law to be
delivered in connection with sales by you or a dealer, any event shall
occur or condition exist as a result of which it would be necessary to
amend or supplement the Prospectus so that the Prospectus as so
amended or supplemented will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary to amend or supple-
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ment the Prospectus, Kmart shall forthwith prepare, file with the
Commission and furnish, at its own expense, to you, such amendments or
supplements to the Prospectus so that the Prospectus as so amended or
supplemented will not contain an untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they are made,
not misleading or so that the Prospectus, as so amended or
supplemented, will comply with law.
(d) To endeavor to qualify the Certificates for
offer and sale under the securities or Blue Sky laws of such
jurisdictions as you shall reasonably request, to endeavor to maintain
such qualification for so long as the laws of such jurisdictions so
require and to notify you of any termination of such qualifications;
provided, however, that neither Kmart nor the Depositor shall be
obligated so to qualify the Certificates if such qualification requires
it to file any general consent to service of process or to qualify as
a foreign corporation in any jurisdiction in which it is not so
qualified.
(e) Kmart will promptly advise you (i) when,
prior to the termination of the offering of the Certificates, any
amendment to the Registration Statement shall have been filed or
become effective, (ii) of any request by the Commission for any
amendment to the Registration Statement or supplement to the
Prospectus or for additional information, (iii) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any
proceedings for that purpose and (iv) of the receipt by Kmart of any
notification with respect to the suspension of the qualification of
the Certificates for sale in any jurisdiction with the initiation or
threatening of any proceeding for such purpose. Kmart will use its
best efforts to prevent the issuance of any stop order and, if issued,
to obtain as soon as possible the withdrawal thereof.
6. Expenses.
6.1 Sutro & Co. Incorporated ("Sutro") has
advanced or incurred, or shall advance or incur, expenses incident to the shelf
registration by Kmart of $250,000,000 of securities (of which the specific
Certificates covered by this Underwriting Agreement are a part), including (i)
those incurred in connection with preparation and filing of the Registration
Statement and amendments thereto, the Basic Prospectus (and preliminary
versions thereof), and all exhibits thereto (including the basic forms of
underwriting
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agreement and Transaction Documents), (ii) the filing fee paid to the
Commission in respect of such registration, (iii) the related fees,
disbursements and other charges of Kmart's counsel, (iv) the related fees,
disbursements and other charges of special counsel to the Depositor, (v) the
related fees, disbursements and other charges of special counsel to Sutro, and
(vi) the printing and delivery to you in quantities as hereinabove stated of
copies of the Registration Statement, the amendments thereto and the Basic
Prospectus. Sutro shall be reimbursed for the expenses advanced or incurred by
it by the allowance to Sutro of a shelf filing expense recovery fee of 0.25% of
the principal amount of all securities included in the shelf registration.
Such allowance shall be deducted from the purchase price of all such securities
and be retained by, and/or paid to, Sutro. The amount so to be retained in
respect of the specific securities covered by this Underwriting Agreement is
$13,727.50.
6.2 In addition to the expenses to be deducted
pursuant to Section 6.1, the sum of the following expenses incident to the
proposed sale of Certificates contemplated by this Underwriting Agreement,
including (i) expenses in connection with the preparation of any amendments to
the Registration Statement that relate specifically to the sale of such
Certificates, the Definitive Prospectus Supplement (and any preliminary
versions thereof) and any exhibits to any thereof (including, without
limitation, this Underwriting Agreement), (ii) the preparation, issuance and
delivery of such Certificates, (iii) the fees, disbursements and other charges
of Kmart's counsel, (iv) the fees, disbursements and other charges of special
counsel to the Depositor, (v) the fees, disbursements and other charges of
local counsel, (vi) the first year's fees of the Trustee(s), (vii) any fees
charged by rating agencies for the rating of such Certificates, (viii) the
printing and delivery to you in quantities as hereinabove stated of copies of
the relevant amendments to the Registration Statement and of the Definitive
Prospectus Supplement (and any preliminary versions thereof) and any amendments
or supplements thereto, and (ix) the printing and delivery to you of copies of
each of the Trust Agreements and any Blue Sky Memorandum, shall be deducted and
paid from the proceeds of sale of the Certificates; provided, however, that the
maximum amount of expenses so to be deducted and paid pursuant to this Section
6.2 shall be $50,000 multiplied by the number of projects to be financed by the
sale of such Certificates. Notwithstanding the foregoing provisions of this
Section 6.2, you have agreed to deduct only $12,733.50 from the proceeds of the
specific securities that are covered by this Underwriting Agreement and to
accept such sum in full
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satisfaction of your reimbursement rights under this Section 6.2 with respect
to such securities.
6.3 The Depositor shall cause each Borrower to
whom a Mortgage Loan is made to bear its proportionate share of the costs of
issuance of the Certificates (i.e., the underwriting discount, the shelf
expense recovery fee provided for in Section 6.1 and the expenses to be
deducted pursuant to Section 6.2). Each Borrower as a condition to receiving a
Mortgage Loan shall authorize the Depositor to apply a portion of the related
Mortgage Loan amount to payment of the Borrower's proportionate share of such
costs of issuance by agreeing that you may withhold from the proceeds of sale
of the Certificates, such Borrower's proportionate share of the underwriting
discount and the amount provided for in Sections 6.1 and 6.2.
7. Conditions to Closing. Your several obligations will
be subject to the accuracy of the representations and warranties on the part of
Kmart and the Depositor herein on the date hereof and on the Closing Date, to
the accuracy of the statements of officers of Kmart and the Depositor made in
each certificate furnished pursuant to the provisions hereof, to the
performance and observance by Kmart, the Subsidiary, the Trustee and the
Depositor of all covenants and agreements contained in the Transaction
Documents on their part to be performed and observed and to the following
additional conditions precedent:
(a) Subsequent to the execution and delivery of
this Agreement and the most recent quarterly report on Form 10-Q filed
by Kmart with the Commission and prior to the Closing Date,
(i) no stop order suspending the
effectiveness of the Registration Statement shall be in effect
and no proceedings for that purpose shall have been instituted
or threatened;
(ii) there shall not have occurred any
change, or any event reasonably likely to result in any
change, in (x) the letter or letters referred to in Section
7(e) or (y) the condition, financial or otherwise, or in the
earnings, business or operations, of Kmart and its
subsidiaries, taken as a whole, from that set forth in such
Form 10-K, Form 10-Q, Form 8-K or the Prospectus, as amended
or supplemented through the date hereof that, in your
reasonable judgment, is material and adverse and that makes
it, in your reasonable judgment, impracticable to market the
Certificates on the terms and in the manner contemplated in
the Prospectus, as so amended or supplemented;
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(iii) there shall not have occurred any
(A) suspension or material limitation of trading, either
generally or of any securities of Kmart, on or by, as the case
may be, the New York Stock Exchange or the Chicago Stock
Exchange, (B) suspension of trading of any securities of Kmart
on any exchange or in any over-the-counter market, (C)
declaration of a general moratorium on commercial banking
activities in New York by either Federal or New York State
authorities or (D) any outbreak or escalation of hostilities
or any change in financial markets or any calamity or crisis
that, in your reasonable judgment, is material and adverse
and, in the case of any of the events described in clauses
(iii)(A) through (D), such event, singly or together with any
other event, makes it, in your reasonable judgment,
impracticable to market the Certificates on the terms and in
the manner contemplated by the Prospectus, as amended or
supplemented; and
(iv) other than as disclosed in the
Prospectus, there shall not have been any downgrading, or any
notice given of any intended or potential downgrading, or
review or possible change that does not indicate the direction
of the possible change, in the rating accorded any of Kmart's
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule
436(g)(2) under the Act.
(b) You shall have received on the Closing Date:
(i) An opinion of A.N. Palizzi, Esq.,
Executive Vice President and General Counsel of Kmart, dated
as of such date, addressed to you in form and substance
satisfactory to you to the effect that:
(1) Kmart is a corporation duly
organized and validly existing as a corporation in
good standing under the laws of the State of
Michigan.
(2) Kmart is duly authorized by its
Articles of Incorporation, as amended, to conduct the
business which it is described in the Prospectus (or
in any document incorporated therein by reference) as
conducting.
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(3) The Transaction Documents to
which Kmart is a party and this Agreement have each
been duly authorized, executed and delivered by
Kmart.
(4) To such counsel's knowledge, no
further approval, authorization, consent or other
order of any governmental body (other than in
connection or compliance with the provisions of the
securities or blue sky laws of any jurisdiction) is
legally required to permit the execution, delivery
and performance by Kmart of the Transaction Documents
to which it is a party and this Agreement.
(5) The execution, delivery and
performance by Kmart of each of the Transaction
Documents to which it is a party and this Agreement
(A) will not violate any provision of Kmart's
Articles of Incorporation or By-laws, each as
amended, (B) will not, to such counsel's knowledge,
violate any provisions of, or constitute a default
under, or (except as contemplated by the Transaction
Documents) result in the creation or imposition of
any lien, charge or encumbrance on, or security
interest in, any of the assets of Kmart pursuant to
the provision of, any mortgage, indenture, contract,
agreement or other undertaking to which Kmart is a
party or which purports to be binding upon Kmart and
which is, or is required to be, filed by Kmart with
the Commission pursuant to the Act or the Exchange
Act and (C) to such counsel's knowledge will not
violate any provision of any state law or regulation
applicable to Kmart (other than state securities or
blue sky laws, upon which such counsel need not pass)
or, to such counsel's knowledge, any provision of any
order, writ, judgment or decree of any governmental
instrumentality applicable to Kmart.
(ii) An opinion of Dickinson, Wright,
Moon, Van Dusen & Freeman, counsel for Kmart, dated as of such
date, addressed to you in form and substance satisfactory to
you to the effect that:
(1) Each of the Transaction
Documents to which Kmart or a Subsidiary is a party
conforms in all material respects to
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<PAGE> 20
the descriptions thereof contained in the Prospectus.
(2) Except as to the financial
statements and other financial or statistical data
contained or incorporated by reference therein and in
the Statement[s] of Eligibility and Qualification
under the Trust Indenture Act (each a "Form T-1") of
the Trustee(s), and the sections contained in the
Registration Statement and Prospectus under the
headings "CERTAIN FEDERAL INCOME TAX CONSEQUENCES,"
"PROSPECTUS SUMMARY - Federal Income Tax
Consequences" and "ERISA CONSIDERATIONS," upon which
such counsel is not required to state a belief, the
Registration Statement, at the time it became
effective, and the Prospectus complied as to form in
all material respects with the applicable
requirements of the Securities Act and (except with
respect to the parts of the Registration Statement
that constitute the statements of eligibility and
qualification of the Trustees under the Trust
Agreements, upon which such counsel need not opine)
the Trust Indenture Act, and the applicable
instructions, rules and regulations promulgated by
the Commission thereunder or pursuant to said
instructions, rules and regulations are deemed to
comply therewith; and, with respect to the documents
or portions thereof filed with the Commission
pursuant to the Exchange Act, and incorporated by
reference in the Prospectus pursuant to Item 12 of
Form S-3, such documents or portions thereof, on the
date first filed with the Commission, complied as to
form in all material respects with the applicable
provisions of the Exchange Act, and the applicable
instructions, rules and regulations promulgated by
the Commission thereunder or pursuant to said
instructions, rules and regulations are deemed to
comply therewith; the Registration Statement has
become and is effective under the Securities Act;
and, to the best knowledge of such counsel, no stop
order suspending the effectiveness of the
Registration Statement has been issued and no
proceedings for a stop order with respect thereto are
pending or threatened under Section 8(d) of the Act.
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<PAGE> 21
Such opinion may state that in passing upon
the forms of the Registration Statement and the Prospectus,
such counsel assumes the correctness, completeness and
fairness of the statements made by Kmart and the Depositor and
information included or incorporated by reference in the
Registration Statement and the Prospectus and any
representations of Kmart or the Depositor contained in this
Agreement and that they take no responsibility therefor. The
opinion should also state that, in connection with the
preparation of the Registration Statement and the Prospectus,
such counsel has had discussions with certain of Kmart's
officers and representatives, with other counsel for Kmart,
with counsel for the Depositor, with Price Waterhouse, the
independent certified public accountants who audited certain
of the financial statements incorporated by reference in the
Registration Statement, and with the Underwriters'
representatives, and that such counsel's examination of the
Registration Statement and the Prospectus and its discussions
did not disclose to them any information which gives them
reason to believe that, at the Effective Date, the
Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required
to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading or that the Prospectus, as of the
date thereof and the date hereof, included or includes any
untrue statement of a material fact or omitted or omits to
state any material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading. Such counsel need not
express any belief or opinion as to the financial statements
or other financial or statistical data contained or
incorporated by reference in the Registration Statement or the
Prospectus, applicable antitrust laws, the Form(s) T-1, or the
sections of the Prospectus under the heading "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES," and "PROSPECTUS SUMMARY -- Federal
Income Tax Consequences."
(iii) An opinion of in-house counsel
satisfactory to you the Subsidiary, dated as of such date,
addressed to you, in form and substance satisfactory to you to
the effect that:
(1) The Subsidiary is a corporation
duly organized and validly existing as a corporation
in good standing
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under the laws of the State of its incorporation.
(2) The Subsidiary is duly
authorized by its Articles of Incorporation, as
amended and restated, to conduct the business which
it is described in the Prospectus (or in any document
incorporated therein by reference) as conducting.
(3) The Transaction Documents to
which such Subsidiary is a party have each been duly
authorized, executed and delivered by such
Subsidiary.
(4) To such counsel's knowledge, no
further approval, authorization, consent or other
order of any governmental body is legally required to
permit the execution, delivery and performance by
such Subsidiary of the Transaction Documents to which
it is a party.
(5) The execution, delivery and
performance by such Subsidiary of each of the
Transaction Documents to which it is a party will not
violate any provision of such Subsidiary's Articles
of Incorporation or By-laws, each as amended.
(iv) An opinion of Squire, Sanders &
Dempsey, special counsel for the Depositor, dated as of such
date, addressed to you, in form and substance satisfactory to
you to the effect that:
(1) The Depositor is a corporation
duly incorporated and validly existing in good
standing under the laws of the State of Delaware.
(2) The Depositor is duly
authorized by its Certificate of Incorporation, as
amended, to conduct the business which it is
described in the Prospectus (or in any document
incorporated therein by reference) as conducting.
(3) The Transaction Documents to
which the Depositor is a party have been duly
authorized, executed and delivered by the Depositor.
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<PAGE> 23
(4) This Agreement, and also each
of the Transaction Documents governed by New York law
to which any one or more of Kmart, any Subsidiary or
the Depositor is a party, constitutes the valid and
binding agreement of Kmart, such Subsidiary and/or
the Depositor, as the case may be, enforceable
against Kmart, such Subsidiary and/or the Depositor,
as the case may be, in accordance with the respective
terms thereof, except, in each case, as enforcement
thereof may be limited by bankruptcy, insolvency or
other laws affecting enforcement of creditors' rights
generally, and subject to general principles of
equity (regardless of whether enforcement is sought
in a proceeding at law or in equity). In giving the
opinion specified in the preceding sentence, Squire,
Sanders & Dempsey may state that they have read and
relied upon the opinion of A.N. Palizzi, Esq.
referred to in Section 7(b)(i), and the opinion of
counsel to the Subsidiary referred to in Section
7(b)(iii), to the extent that such opinions are
relevant in forming the opinions required by the next
preceding sentence.
(5) The Certificates and the
Transaction Documents to which the Depositor is a
party conform in all material respects to the
descriptions thereof contained in the Prospectus.
(6) The statements and legal
conclusions contained in the Prospectus under the
caption "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" are
correct, and the discussion thereunder does not omit
any considerations that are material to purchasers or
holders of the Certificates with respect to the
matters covered.
(7) Except as to the financial
statements and other financial or statistical data
contained or incorporated by reference therein and in
the Statements of Eligibility and Qualification under
the Trust Indenture Act (each a "Form T-1") of the
Trustee, and the sections contained in the
Registration Statement and Prospectus under the
headings "AVAILABLE INFORMATION," "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE," "PROSPECTUS SUMMARY
-- The Company," "PROSPECTUS SUMMARY
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<PAGE> 24
-- Erisa Considerations," "KMART," "KMART CORPORATION
SELECTED FINANCIAL INFORMATION" "ERISA
CONSIDERATIONS," "PLAN OF DISTRIBUTION" and
"EXPERTS," upon which such counsel is not required to
state a belief, the Registration Statement, at the
time it became effective, and the Prospectus complied
as to form in all material respects with the
applicable requirements of the Act and (except with
respect to the parts of the Registration Statement
that constitute the Statements of Eligibility and
Qualification of the Trustee under the Trust
Agreement, upon which such counsel need not opine)
the Trust Indenture Act, and the applicable
instructions, rules and regulations promulgated
by the Commission thereunder or pursuant to said
instructions, rules and regulations are deemed to
comply therewith; the Registration Statement has
become and is effective under the Act; and, to the
best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration
Statement has been issued and no proceedings for a
stop order with respect thereto are pending or
threatened under Section 8(d) of the Act.
Such opinion may state that in passing upon the forms
of the Registration Statement and the Prospectus, such counsel assumes
the correctness, completeness and fairness of the statements made by
Kmart and information included or incorporated by reference in the
Registration Statement and the Prospectus and any representations of
Kmart contained in this Agreement and that they take no responsibility
therefor. The opinion should also state that, in connection with the
preparation of the Registration Statement and the Prospectus, such
counsel has had discussions with outside counsel for Kmart, with
certain of the Depositor's officers and with the Underwriter's
representatives, and that such counsel's examination of the
Registration Statement and the Prospectus and its discussion did not
disclose to them any information that gives them reason to believe
that, at the effective date of the Registration Statement, the
Registration Statement contained any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading or that
the Prospectus, as of the date thereof and the date hereof, included
or includes any
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<PAGE> 25
untrue statement of a material fact or omitted or omits to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. Such counsel need not express any belief or opinion as to
the financial statements or other financial or statistical data
contained or incorporated by reference in the Registration Statement
or the Prospectus, applicable antitrust laws, the Form(s) T-1 or the
sections of the Prospectus under the headings "AVAILABLE INFORMATION,"
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "PROSPECTUS SUMMARY
-- The Company," "PROSPECTUS SUMMARY -- Erisa Considerations,"
"KMART," "KMART CORPORATION SELECTED FINANCIAL INFORMATION" "ERISA
CONSIDERATIONS," "PLAN OF DISTRIBUTION" and "EXPERTS."
(v) An opinion of counsel licensed to
practice law in Arizona and an opinion of counsel authorized
to practice law in Florida, that is not governed by New York
law (specifically, Arizona and Florida) each of whom shall be
satisfactory to you, dated as of such date, each of which
opinions shall be addressed to you and satisfactory in form
and substance to you, which, among other things, shall be to
the effect that each of the Transaction Documents governed by
the laws of such jurisdiction to which any one or more of
Kmart, any Subsidiary or the Depositor is a party, constitutes
the valid and binding agreement of Kmart, such Subsidiary
and/or the Depositor, as the case may be, enforceable against
Kmart, such Subsidiary and/or the Depositor, as the case may
be, in accordance with the respective terms thereof, except,
in each case, as enforcement thereof may be limited by
bankruptcy, insolvency or other laws affecting enforcement of
creditors' rights generally, and subject to general principles
of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). In giving the opinion
specified in the preceding sentence, such counsel may state
that they have read and relied upon the opinion of A.N.
Palizzi, Esq. referred to in Section 7(b)(i), the opinions of
counsel to the Subsidiar[y] [ies] referred to in Section
7(b)(iii), and the opinion of Squire, Sanders & Dempsey
referred to in Section 7(b)(iv), to the extent that such
opinions are relevant in forming the opinions required by the
next preceding sentence.
(vi) The favorable opinion of Brown &
Wood, counsel for the Trustee, dated as of such
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date, addressed to you and to Kmart, in form and substance
satisfactory to you and Kmart to the effect that:
(1) The Trustee has been duly
incorporated and is validly existing as a banking
corporation in good standing under the laws of the
State of New York.
(2) The Trustee has full corporate
trust power and authority to enter into and perform
its obligations under the Trust Agreements and, on
behalf of the Trusts, the obligations under the
Transaction Documents to which such Trusts are
parties.
(3) The execution and delivery of
the Trust Agreements and, on behalf of the Trusts,
each of the Transaction Documents to which a Trust is
a party and the performance by the Trustee of the
Trustee's obligations under the Trust Agreements, and
the Transaction Documents, have been duly authorized
by all necessary corporate action of the Trustee, and
each has been duly executed and delivered by the
Trustee.
(4) The Trust Agreements and each
of the Transaction Documents to which a Trust is a
party constitute valid and binding agreements of the
Trustee, enforceable against the Trustee in
accordance with their terms, subject, as to
enforcement of remedies, to applicable bankruptcy,
insolvency, reorganization, and other similar laws
affecting the rights of creditors generally and to
general principles of equity (regardless of whether
such enforceability is considered in a proceeding in
equity or at law).
(5) The execution and delivery by
the Trustee of the Trust Agreements and, on behalf of
the Trusts, each of the Transaction Documents to
which a Trust is a party, and the performance by the
Trustee of its obligations thereunder do not conflict
with, result in a breach or violation of or
constitute a default under, the Certificate of
Incorporation or By-laws of the Trustee.
(6) The Certificates have been duly
and validly authorized, executed,
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<PAGE> 27
authenticated and issued by the Trusts and, when
delivered, the Certificates have been validly issued
and are entitled to the benefits of the Trust
Agreements.
(vii) An opinion of counsel to each
Borrower, dated as of such date, addressed to you, Kmart and
the Depositor in form and substance satisfactory to you, Kmart
and the Depositor.
(viii) An opinion of Paul, Weiss,
Rifkind, Wharton & Garrison, your counsel, dated as of such
date, in a form acceptable to you. Such opinion may state
that in passing upon the forms of the Registration Statement
and the Prospectus, such counsel assumes the correctness,
completeness and fairness of the statements made by Kmart and
the Depositor and information included or incorporated by
reference in the Registration Statement and the Prospectus and
any representations of Kmart or the Depositor contained in
this Agreement and that they take no responsibility therefor.
The opinion should also state that, in connection with the
preparation of the Registration Statement and the Prospectus,
such counsel has had discussions with certain of Kmart's
officers and representatives, with counsel for Kmart and the
Depositor, with Price Waterhouse, the independent certified
public accountants who audited certain of the financial
statements incorporated by reference in the Registration
Statement, and with the Underwriters' representatives, and
that such counsel's examination of the Registration Statement
and the Prospectus and its discussions did not disclose to
them any information which gives them reason to believe that,
at the Effective Date, the Registration Statement contained
any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary
to make the statements therein, in the light of the
circumstances under which they were made, not misleading or
that the Prospectus, as of the date thereof and the date
hereof, included or includes any untrue statement of a
material fact or omitted or omits to state any material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. Such counsel need not express any belief or
opinion as to the financial statements or other financial or
statistical data contained or incorporated by reference in the
Registration Statement or the Prospectus, applicable antitrust
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<PAGE> 28
laws, the Trust Indenture Act, the Form(s) T-1, or the sections
of the Prospectus under the headings "CERTAIN FEDERAL INCOME
TAX CONSEQUENCES," "PROSPECTUS SUMMARY - Federal Income Tax
Consequences," or "ERISA CONSIDERATIONS."
(c) You shall have received, on the Closing Date,
certificates of Kmart and the Depositor, respectively, signed as to
each by its respective Chairman of the Board, Treasurer or other Chief
Financial Officer, or in the case of the Depositor, any Vice
President, dated as of the Closing Date, and in the case of the
certificate of the Depositor, addressed to both you and Kmart, to the
effect that the signers of such certificate have examined the
Registration Statement, the Basic Prospectus, the Prospectus, the
Definitive Prospectus Supplement and this Agreement and that:
(i) the representations and warranties
of Kmart or the Depositor, as the case may be, in this
Agreement and each of the other Transaction Documents to which
it is a party are true and correct in all material respects
(except for those representations and warranties that are
already subject to a materiality or similar qualification,
which shall be true and correct in all respects as so
qualified) on and as of the date of such certificate, and
Kmart or the Depositor, as the case may be, has complied with
all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to the date of
such certificate;
(ii) no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or,
to the knowledge of Kmart or the Depositor, as the case may
be, threatened;
(iii) there has been no change or any
event reasonably likely to result in any change, in the
condition, financial or otherwise, or in the earnings,
business or operations, of Kmart or the Depositor, as the case
may be, and its subsidiaries, if any, taken as a whole, from
that set forth in the Prospectus, as amended or supplemented
through the date hereof, or the most recent quarterly report
of Kmart on Form 10-Q filed with the Commission, that is
material and adverse; and
(iv) no event has occurred that
constitutes or is reasonably likely to result in a
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<PAGE> 29
default under a Lease or a Lease Guaranty or any other
Transaction Document to which Kmart or the Depositor, as
the case may be, is a party.
(d) You shall have received from the Subsidiary a
Closing Date certificate signed by its Chairman of the Board,
President or any Vice President, and by its Treasurer or other Chief
Financial Officer, in the form annexed hereto as Exhibit D.
(e) You shall have received on the Closing Date,
from Price Waterhouse, Kmart's independent certified public
accountants, a letter or letters, dated as of the Closing Date,
addressed to both you and Kmart, in form and substance satisfactory to
you confirming that they are independent accountants within the
meaning of the Act and the Exchange Act and the respective applicable
published rules and regulations thereunder, and containing statements
and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial
statements and certain financial information contained in or
incorporated by reference into the Registration Statement and the
Prospectus, including, without limitation, those set forth on Exhibit
[D] [E].
(f) The Depositor shall have received a letter
from Standard & Poor's rating the Certificates "BBB-" or better and
true copies thereof shall have been provided to you.
(g) All conditions specified in each of the
Transaction Documents to be performed or satisfied on or prior to the
Closing Date shall have been so performed or satisfied on the Closing
Date and you shall have received executed copies of all documents
delivered in connection therewith.
(h) You shall have received on the Closing Date,
such appropriate further information, certificates and documents as
you may reasonably request.
(i) Each of the transactions contemplated herein
or in the Prospectus as occurring on or before the Closing Date shall
have occurred as anticipated.
If any of the conditions specified in this Section 7 shall not
have been fulfilled in all material respects when and as provided in this
Underwriting Agreement, or if any of the opinions and certificates mentioned
above or elsewhere in this Underwriting Agreement shall not be in all material
respects reasonably
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<PAGE> 30
satisfactory in form and substance to you and to your counsel, this Agreement
and all of your obligations hereunder may be canceled at, or at any time prior
to, the Closing Date by you. Notice of such cancellation shall be given to
Kmart and the Depositor in writing or by telephone or telegraph confirmed in
writing.
8. Indemnification and Contribution.
(a) Kmart agrees to indemnify and hold harmless
you and each person, if any, who controls you within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act from and against any
and all losses, claims, damages or liabilities (including, without limitation,
the reasonable fees and expenses of counsel in connection with any
investigation or proceeding), whether or not arising from third party claims,
arising out of or based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement as
originally filed or in any amendment or supplement thereto, or the Prospectus
as originally filed or in any amendment or supplement thereto, or arising out
of or based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) any breach of a representation or warranty or covenant
or agreement herein of Kmart; provided, however, that Kmart will not be liable
in any such case to the extent that such losses, claims, damages or liabilities
are caused by any such untrue statement or alleged untrue statement or omission
or alleged omission made therein based upon and in conformity with information
furnished in writing to Kmart by or on behalf of you expressly for use therein;
and provided, further, that the indemnity agreement described in this
subsection shall not inure to the benefit of you or of any person controlling
you on account of any such losses, claims, damages, liabilities, expenses or
actions arising from the sale of Certificates to any person in respect of the
Prospectus, as supplemented or amended (excluding, however, any document then
incorporated or deemed incorporated by reference therein pursuant to Item 12 of
Form S-3) furnished by you to a person to whom any of the Certificates were
sold, insofar as such indemnity relates to any untrue or misleading statement
or omission made in a Preliminary Prospectus or the Prospectus but eliminated
or remedied prior to the consummation of such sale in the Prospectus, or any
amendment or supplement thereto furnished pursuant to Section 5 hereof,
respectively, unless a copy of such amendment or supplement is furnished by you
to such person (i) with or prior to the written confirmation of the sale
involved or (ii) as soon as available after such written confirmation.
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<PAGE> 31
(b) You agree, to indemnify and hold harmless
Kmart, its directors, its officers who signed the Registration Statement and
each person, if any, who controls Kmart within the meaning of either Section 15
of the Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from Kmart to you, but only with reference to the
respective information relating to you, as the case may be, furnished in
writing by or on behalf of you expressly for use in the Registration Statement,
the Prospectus or any amendments or supplements thereto.
(c) If any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either paragraph (a) or (b) above, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing of the
institution of such proceeding and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
parties to any such proceeding (including any impleaded parties) include both
the indemnifying party (or any other person represented by such counsel) and
the indemnified party, and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. Except as provided in the preceding sentence, it is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm (in addition to any local counsel) for
all such indemnified parties and that all such fees and expenses as are
reimbursable hereunder shall be reimbursed as they are incurred. In the case
of parties indemnified pursuant to paragraph (a) above, such separate firm
shall be designated in writing by you, and by Kmart in the case of parties
indemnified pursuant to paragraph (b) above. The indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent
27
<PAGE> 32
of the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) If the indemnification provided for in
paragraph (a) or (b) of this Section 8 is unavailable to an indemnified party
or insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraph, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by Kmart and/or the Subsidiary (and/or
the Trusts) on the one hand and you on the other from the offering of the
Certificates or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of Kmart on the one hand and of you on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative benefits received by Kmart (and/or the Subsidiary and the Trusts) on
the one hand and you on the other in connection with the offering of the
Certificates shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Certificates (before deducting expenses)
received by Kmart (and/or the Subsidiary and the Trusts) bears to the total
commissions received by you in respect thereof. The relative fault of Kmart on
the one hand and of you on the other, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by or on behalf of Kmart or by or on behalf of
you and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. For purposes of
this Section 8, each person who controls you within the meaning of the Act
shall have the same rights to contribution as you, and each person who controls
Kmart within the meaning of either the Act or the Exchange Act, each officer of
Kmart who shall have signed the Registration Statement and each director of
Kmart shall have the same rights to contribution as Kmart, subject in each case
to the provisions of this paragraph (d) and paragraph (e). Any party entitled
to contribution will, promptly after receipt of notice of commencement of any
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<PAGE> 33
action, suit or proceeding (including any governmental investigation) against
such party in respect of which a claim for contribution may be made against
another party or parties under this paragraph (d), notify such party or parties
from whom contribution may be sought, but the omission to so notify such party
or parties shall not relieve the party or parties from whom contribution may be
sought from any other obligation it or they may have hereunder or otherwise
than under this paragraph (d), except and only to the extent that the party or
parties is materially prejudiced thereby.
(e) Kmart and you agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, you shall not be required to contribute any
amount in excess of the amount by which the total price at which the
Certificates underwritten by you and distributed to the public were offered to
the public exceeds the amount of any damages that you have otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this
Section 8 and the representations and warranties and covenants and agreements
of Kmart and the Depositor contained herein shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on your behalf, or on behalf of any person controlling
you or by or on behalf of Kmart, its directors or officers or any person
controlling Kmart and (iii) acceptance and payment for any of the Certificates.
9. Termination. This Agreement shall be subject to
termination, by notice given by you to Kmart, if after the execution and
delivery of this Agreement and prior to
29
<PAGE> 34
the Closing Date (i) there has been any material adverse change in the
condition, financial or otherwise, or in the earnings, business or operations
of Kmart and its subsidiaries, taken as a whole, or (ii) there has occurred any
outbreak or escalation of hostilities or other calamity or crisis the effect of
which on the financial markets of the United States is such as to make it, in
your judgment, impracticable to market the Certificates, or (iii) trading in
securities, either generally or of Kmart, on the New York Stock Exchange has
been suspended or materially limited or if a general moratorium on commercial
banking activities has been declared by either Federal or New York State
authorities, or (iv) except as disclosed in the Prospectus, there has been any
downgrading, or any notice given of any intended or potential downgrading, in
the rating accorded any of Kmart's securities by any "nationally recognized
statistical rating organization," as such term is defined for purposes of Rule
436(g)(2) under the Act, or (v) all of the conditions of Section 7 shall not
have been fulfilled.
10. Miscellaneous. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
11. Notices. All communications hereunder will be in
writing and effective only on receipt, and, if sent to you at the address set
forth above (telecopy no.: 213-624-5263); if sent to Kmart, will be mailed,
delivered or telecopied to it at 3100 West Big Beaver Road, Troy, Michigan
48084 (telecopy no. 810-643-5398), attention of Executive Vice President and
Chief Financial Officer (with a copy to the General Counsel); and if sent to
the Depositor, will be mailed, delivered or telecopied to it at 40 North
Central Avenue, Suite 2700, Phoenix, Arizona 85004 (telecopy no. 602-253-8129),
attention of Secretary, with a copy to Squire Sanders & Dempsey, 40 North
Central Avenue, Suite 2700, Phoenix, Arizona 85004, attention of Norman C.
Storey, Esq.
12. Successors. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective successors and
the officers and directors and controlling persons referred to in Section 8
hereof, and no other person will have any right or obligation hereunder.
13. Headings. The headings of the sections of this
Agreement have been inserted for convenience of
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<PAGE> 35
reference only and shall not be deemed a part of this Agreement.
Please confirm your agreement by having an authorized officer
sign a copy of this Agreement in the space set forth below.
Very truly yours,
KMART CORPORATION
By:
------------------------------------------
Name:
Title:
NATIONAL TENANT FINANCE CORPORATION
By:
------------------------------------------
Name:
Title:
Accepted:
SUTRO & CO. INCORPORATED
By:
------------------------------------
Name: John F. Stiepel
Title: Senior Vice President
31
<PAGE> 36
EXHIBIT
UNDERWRITING AGREEMENT
November 16, 1994
Sutro & Co. Incorporated
555 South Flower Street, 46th Floor
Los Angeles, CA 90071
Dear Sirs:
National Tenant Finance Corporation ("Depositor") proposes to
cause United States Trust Company of New York, as trustee ("Trustee") under the
several trust agreements (collectively, "Trust Agreements," and each a "Trust
Agreement") identified in the Schedule of Trust Agreements annexed hereto as
Exhibit A to issue, and Depositor proposes to sell to you, as underwriter,
$63,988,000 aggregate principal amount of Mortgage Pass-Through Certificates,
in series, as more particularly described in the Schedule of Mortgage
Pass-Through Certificates annexed hereto as Exhibit B (the "Certificates") for
which you, as underwriter, shall pay the aggregate amount of $63,028,180, less
the amounts to be distributed pursuant to Sections 6.1 and 6.2 of this
Underwriting Agreement. Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed to them in the registration statement,
dated June 8, 1994, filed by or on behalf of Kmart Corporation ("Kmart")
(Registration No. 33-54043) as from time to time amended and supplemented.
The Certificates of each series will represent fractional
undivided beneficial ownership interests in a single separate trust (a "Trust")
established for the benefit of the Certificateholders of such series. Each
Certificate will represent a fractional undivided beneficial ownership interest
in the assets of one Trust and will have no rights, benefits or interests in
respect of any other Trust or the assets held in any other trust. Each Trust
(other than the Trust created by Pass-Through Trust Agreement dated November
10, 1994 in respect of Mortgage Pass-Through Certificates Series 1994 A-4) will
hold two or more Mortgage Notes evidencing two or more Mortgage Loans. Each
Mortgage Loan will be made by the Depositor to a separate borrower (each a
"Borrower") pursuant to a separate Loan Agreement to finance the acquisition of
a separate Facility or to provide permanent financing for a Facility and to pay
the Borrowers' proportionate shares of the costs of issuance of the
Certificates, including the underwriting discount
<PAGE> 37
and the expenses provided for in Sections 6.1 and
2
<PAGE> 38
6.2 of this Underwriting Agreement. Each Loan Agreement provides that the
Mortgage Loan will be evidenced by two Mortgage Notes having different
maturities. Because Mortgage Notes of different maturities are being issued
pursuant to the two Loan Agreements, (i) all of such Mortgage Notes having the
same maturity will be held by a separate Pass-Through Trust, and all Mortgage
Notes held by each separate Pass-Through Trust will have the same maturity,
(ii) each Certificate will evidence a fractional undivided beneficial ownership
interest in the assets of the related Pass-Through Trust and will have no
rights, benefits or interests in respect of any other Pass-Through Trust
Property held in any other Pass-Through Trust, and (iii) the Collateral
securing such Mortgage Notes will be held by a Collateral Trustee for the
benefit, pari passu, of all Pass-Through Trusts holding any of the Mortgage
Notes secured by such Collateral. The assets held by the Collateral Trust will
include with respect to each Facility the following collateral for the Mortgage
Notes relating to such Facility: (i) a Mortgage on such Facility; (ii) all of
the Depositor's rights under the Loan Agreement pursuant to which the related
Mortgage Notes were issued; (iii) an assignment of the related Lease, Lease
Payments and, because the Tenant under each lease is a subsidiary of Kmart (a
"Subsidiary"), a Lease Guaranty by Kmart of the lease obligations of such
Tenant; (iv) a pledge of certain moneys held in certain funds established
pursuant to the Collateral Trust Agreement; (v) a Note Put Agreement requiring
the Tenant and Kmart to purchase the related Mortgage Note(s) upon the
occurrence of a Triggering Event; (vi) a pledge of certain investments of fund
balances held in the Collateral Trust and income earned thereon; and (viii) any
other Loan Documents. The Trust Agreement, the Loan Agreement, the Mortgage,
the Mortgage Note, the Lease, the Lease Guaranty, the Note Put Agreement, the
Pledge Agreement and any other Loan Documents are referred to herein as the
"Transaction Documents."
Subject to the terms and conditions set forth or incorporated
by reference herein, Kmart agrees to cause the Depositor to sell and the
Depositor agrees to sell, and you agree to purchase, the principal amounts of
Certificates of each series set forth opposite your name in the Schedule of
Underwriters annexed hereto as Exhibit C at the purchase price (expressed as a
percentage of the principal amount of each series of Certificates) set forth in
such schedule.
You will pay for the Certificates in immediately available
funds upon delivery thereof in book entry form, and payment for the
Certificates will be made, at New York, New York no later than 5:00 p.m. (New
York time) on November 21, 1994, through the Same Day Funds Settlement System
of The Depository Trust Company. The time and date
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<PAGE> 39
of such payment and delivery are hereinafter referred to as the "Closing Date."
The Certificates shall have the terms set forth in the
Prospectus dated November 4, 1994, as modified by the Definitive Prospectus
Supplement dated November , 1994.
1. Representations and Warranties of Kmart. Kmart
represents and warrants to, and agrees with, you as follows:
(a) Kmart meets the requirements for the use of
Form S-3 under the Securities Act of 1933, as amended (the "Act"), and has
filed with the Securities and Exchange Commission (the "Commission") a
registration statement (Registration No. 33-54043) on such Form (as amended
and supplemented, the "Registration Statement"), including a basic prospectus
(the "Basic Prospectus"), for registration under the Act of the offering and
sale of mortgage pass through certificates, including the Certificates. Kmart
has filed four (4) amendments and one (1) supplement thereto and has used
Preliminary Prospectuses and Preliminary Prospectus Supplements, each of which
has previously been furnished to you. The Registration Statement has become
effective. No stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose are pending before,
or, to Kmart's knowledge, are threatened by, the Commission. Although the
Basic Prospectus does not include all the information with respect to the
Certificates and the offering thereof required by the Act and the rules
thereunder, the Basic Prospectus includes all such information required by the
Act and the rules and regulations thereunder to be included therein as of the
Effective Date. Kmart will next file with the Commission pursuant to Rule
424(b)(2) or (5) a definitive prospectus supplement (the "Definitive Prospectus
Supplement") to the form of Basic Prospectus included in such registration
statement relating to the Certificates and the offering thereof. As filed,
such Definitive Prospectus Supplement, together with the Basic Prospectus,
shall include all such required information with respect to the Certificates
and the offering thereof and, except to the extent you shall agree in writing
to a modification, shall be in all substantive respects in the form furnished
to you prior to the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional information and
other changes (beyond those contained in the Basic Prospectus and any
Preliminary Prospectus) as Kmart has advised you, prior to the Execution Time,
will be included or made herein.
(b) The terms which follow, when used in this
Agreement, shall have the meanings indicated. The term "Effective Date" shall
mean each date that the Registration
4
<PAGE> 40
Statement and any post-effective amendment or amendments thereto became or
become effective. "Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto. "Basic Prospectus"
shall mean the prospectus referred to in paragraph (a) above contained in the
Registration Statement at the Effective Date. "Preliminary Prospectus" shall
mean any preliminary prospectus supplement to the Basic Prospectus, which
describes the Certificates and the offering thereof and which was or is used
prior to filing of the Definitive Prospectus Supplement. "Prospectus" shall
mean the Definitive Prospectus Supplement relating to the Certificates that is
first filed pursuant to Rule 424(b) after the Execution Time, together with the
Basic Prospectus. "Registration Statement" shall mean the registration
statement referred to in paragraph (a) above, including incorporated documents,
exhibits and financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Date (as defined above), shall also mean such
registration statement as so amended. Such term shall include any Rule 430A
Information deemed to be included therein at the Effective Date as provided by
Rule 430A. "Rule 415," "Rule 424," "Rule 430A" and "Regulation S-K" refer to
such rules or regulations under the Act. "Rule 430A Information" means
information with respect to the Certificates and the offering thereof permitted
to be omitted from the Registration Statement when it becomes effective
pursuant to Rule 430A. Any reference herein to the Registration Statement, the
Basic Prospectus, any Preliminary Prospectus or the Prospectus shall be deemed
to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), on or before the Effective Date
or the issue date of the Basic Prospectus, any Preliminary Prospectus or the
Prospectus, as the case may be; and any reference herein to the terms "amend,"
"amendment" or "supplement" with respect to the Registration Statement, the
Basic Prospectus, any Preliminary Prospectus or the Prospectus shall be deemed
to refer to and include the filing of any document under the Exchange Act after
the Effective Date or the issue date of the Basic Prospectus, any Preliminary
Prospectus or the Prospectus, as the case may be, deemed to be incorporated
therein by reference.
(c) (i) Each document, if any, filed or to be
filed by Kmart pursuant to the Exchange Act prior to the termination of the
offering of the Certificates complied or will comply when so filed in all
material respects with the Exchange Act and the applicable rules and
regulations
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<PAGE> 41
thereunder; (ii) each part of the Registration Statement, when such part became
effective, did not contain, and each such part, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that the representations and warranties set forth in
this Section 1(c) do not apply to statements or omissions in the Registration
Statement or the Prospectus based upon information furnished to Kmart in
writing by you or on your behalf expressly for use therein or to that part of
the Registration Statement that shall constitute the statement of eligibility
and qualification under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act") of any Trustee on Form T-1; (iii) on the Effective Date, and
when the Definitive Prospectus Supplement is first filed (if required) in
accordance with Rule 424(b), and on the Closing Date (X) the Registration
Statement and the Prospectus (and each preliminary prospectus or prospectus
supplement filed as part of any amendment to the Registration Statement) did
and will comply in all material respects with the applicable requirements of
the Act and the Exchange Act and the respective rules thereunder and (Y) at the
Closing Date, the Trust Agreements complied in all material respects with the
requirements of the Trust Indenture Act and the rules thereunder; and (iv) each
of the Transaction Documents to which Kmart is, or is to be, a party conforms
in all material respects to the description thereof in the Prospectus.
(d) Kmart is a corporation duly incorporated, is
validly existing as a corporation in good standing under the laws of the State
of Michigan, has the full power and authority and legal right to own and lease
the property used by it, to conduct its business as described in the Prospectus
and to execute and deliver this Agreement and each Transaction Document to
which it is a party and to perform its obligations under this Agreement and
each Transaction Document to which it is a party, and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be
in good standing would not have a material adverse effect on Kmart and its
subsidiaries, taken as a whole.
(e) This Agreement and each Transaction Document
to which Kmart is a party have been duly authorized, executed and delivered by
Kmart and are legal, valid and binding agreements of Kmart, enforceable against
Kmart in accordance with their respective terms, subject to
6
<PAGE> 42
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject to general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity).
(f) The execution, delivery and performance by
Kmart of this Agreement and each Transaction Document to which it is a party
and the consummation by Kmart of the transactions contemplated hereby and
thereby (i) do not and will not violate the articles of incorporation or
by-laws of Kmart or any order, injunction, ruling or decree by which Kmart is
bound, (ii) do not and will not constitute a breach of or a default under any
material agreement, indenture, mortgage, lease, note, instrument or arrangement
to which Kmart is a party or by which Kmart is bound, and (iii) do not and will
not contravene or constitute a material violation of any law, statute,
ordinance, rule or regulation to which Kmart is subject, and (iv) have been
duly authorized by all necessary corporate action on the part of Kmart and do
not require any stockholder approval.
(g) Neither the authorization, execution or
delivery by Kmart of this Agreement or any Transaction Document to which it is
a party in accordance with the provisions hereof and thereof, nor the
consummation by Kmart of any of the transactions contemplated hereby or
thereby, requires the consent or the approval of, the giving of notice to, or
the registration with, or the taking of any other action in respect of, any
federal or state governmental authority or agency, other than (i) registration
of the issuance and sale of the Certificates under the Act and under the
securities laws of any state in which the Certificates may be offered for sale
if the laws of such state requires such action, (ii) the qualification of each
of the Trust Agreements under the Trust Indenture Act and (iii) the granting of
the application in respect of the Trustee pursuant to Section 305(b)(2) of the
Trust Indenture Act.
(h) Price Waterhouse, who certified the
consolidated financial statements of Kmart and its consolidated subsidiaries
for the year ended January 26, 1994, incorporated by reference in the
Registration Statement and Prospectus, are independent public accountants as
required by the Act and the rules thereunder.
(i) The financial statements filed as part of the
Registration Statement or included in, or incorporated by reference into, the
Basic Prospectus or the Prospectus or Definitive Prospectus Supplement present
fairly, and will present fairly, the financial condition and results of
operations of the entities purported to be shown thereby, at the dates and for
the periods indicated, and have been,
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<PAGE> 43
and, in the case of financial statements subsequently incorporated by
reference, will be, prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved,
except as approved by Price Waterhouse.
(j) There has not occurred any material adverse
change, to Kmart's knowledge, in the condition, financial or otherwise, or in
the earnings, business or operations of Kmart and its subsidiaries, taken as a
whole, from that set forth in either the most recent annual report on Form 10-K
or the most recent quarterly report on Form 10-Q or Form 8-K filed by Kmart
with the Commission or the Prospectus.
(k) There are no legal or governmental
proceedings pending or, to Kmart's knowledge, threatened to which Kmart or any
of its subsidiaries is or may become a party or to which any of their
respective properties is or may be subject that are required to be described in
the Registration Statement or the Prospectus and are not so described or any
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement that are not described or filed as
required.
2. Representations and Warranties of the Depositor. The
Depositor represents and warrants to, and agrees with, you as follows:
(a) The Depositor is a corporation duly
incorporated, is validly existing as a corporation in good standing under the
laws of the State of Delaware, has the full power and authority and legal right
to own and lease the property used by it, to conduct its business as described
in the Prospectus and to execute and deliver this Agreement and each
Transaction Document to which it is a party and to perform its obligations
under this Underwriting Agreement and each Transaction Document to which it is
a party, and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification.
(b) This Underwriting Agreement and each
Transaction Document to which it is a party, including each of the Trust
Agreements, have been duly authorized, executed and delivered by the Depositor
and are legal, valid and binding agreements of the Depositor, enforceable
against the Depositor in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting
8
<PAGE> 44
creditors' rights and remedies generally, and subject to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or
in equity).
(c) The Certificates have been duly authorized
and, when executed and authenticated in accordance with the Trust Agreements
and delivered to and duly paid for by you in accordance with the terms hereof,
will be entitled to the benefits of the Trust Agreements, will be validly
issued under the Trust Agreements and will be legal, valid and binding
obligations of the Trusts, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(d) The execution, delivery and performance by
the Depositor of this Underwriting Agreement and each Transaction Document to
which it is a party, including each of the Trust Agreements, and the
consummation by the Depositor of the transactions contemplated hereby and
thereby (A) do not and will not violate the certificate of incorporation or
by-laws (or similar governing instruments) of the Depositor or any order,
injunction, ruling or decree by which the Depositor is bound, (B) do not and
will not constitute a breach of or a default under any agreement, indenture,
mortgage, lease, note, instrument or arrangement to which the Depositor is a
party (there being none other than the Transaction Documents and other similar
transaction documents described in the Basic Prospectus) or by which the
Depositor or any of its property is bound, and (C) do not and will not
contravene or constitute a violation of any law, statute, ordinance, rule or
regulation to which the Depositor or any of its property is subject, and (D)
have been duly authorized by all necessary corporate action on the part of the
Depositor, and do not require any stockholder approval or approval or consent
of any trustee or holder of any indebtedness or obligations of the Depositor
(there being none).
(e) Neither the authorization, execution or
delivery by the Depositor of this Underwriting Agreement or any Transaction
Document to which it is a party in accordance with the provisions hereof or
thereof, nor the consummation by the Depositor of any of the transactions
contemplated hereby or thereby, requires the consent or the approval of, the
giving of notice to, or the registration with, or the taking of any other
action in respect of, any federal or state governmental authority or agency,
other than (i) registration of the issuance and sale of the Certificates under
the Act and under the securities laws of any
9
<PAGE> 45
state in which the Certificates may be offered for sale if the laws of such
state requires such action, (ii) the qualification of each of the Trust
Agreements under the Trust Indenture Act and (iii) the granting of the
application in respect of the Trustee pursuant to Section 305(b)(2) of the
Trust Indenture Act.
(f) There are no legal or governmental
proceedings pending or, to the knowledge of Depositor, threatened to which the
Depositor is or may become a party or to which any of its properties is or may
be subject.
3. Public Offering. Kmart and the Depositor are advised
by you that you propose to make a public offering of the Certificates as soon
after this Agreement has been entered into as in your judgment is advisable.
The terms of the public offering of the Certificates are set forth in the
Prospectus.
4. Purchase and Delivery. Except as otherwise provided
in this Section 4 or as agreed to by you and the undersigned, payment for the
Certificates shall be made in immediately available funds upon delivery thereof
in book entry form, and payment for the Certificates will be made, at New York,
New York no later than 5:00 p.m. (New York time) on November 21, 1994, through
the Same Day Funds Settlement System of the Depository Trust Company.
5. Covenants of Kmart and the Depositor. In further
consideration of your agreements contained herein, Kmart and the Depositor
severally covenant as follows:
(a) To furnish you, without charge, a copy of the
Registration Statement (including exhibits thereto and documents incorporated
by reference therein) as originally filed electronically in compliance with
Regulation S-T of the Act, and, during the period mentioned in paragraph (c)
below, as many copies of the Prospectus, any documents incorporated by
reference therein and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
(b) Before amending or supplementing the
Registration Statement or the Prospectus with respect to the Certificates, to
furnish to you, a reasonable amount of time prior to filing such amendment or
supplement, a copy of each such proposed amendment or supplement; provided,
however, that the foregoing requirement shall not apply to any of Kmart's
periodic filings with the Commission required to be filed pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act, all of which required filings
Kmart hereby agrees timely to make during the period when the Prospectus
relating to the Certificates is required to be delivered
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under the Act, and copies of which filings Kmart will upon request cause to be
delivered to you promptly after being filed with the Commission.
(c) Subject to the provisions of Section 5(b),
if, during such period after the first date of the public offering of the
Certificates that the Prospectus is required by law to be delivered in
connection with sales by you or a dealer, any event shall occur or condition
exist as a result of which it would be necessary to amend or supplement the
Prospectus so that the Prospectus as so amended or supplemented will not
contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
to amend or supplement the Prospectus, Kmart shall forthwith prepare, file with
the Commission and furnish, at its own expense, to you, such amendments or
supplements to the Prospectus so that the Prospectus as so amended or
supplemented will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they are made, not misleading or so that the
Prospectus, as so amended or supplemented, will comply with law.
(d) To endeavor to qualify the Certificates for
offer and sale under the securities or Blue Sky laws of such jurisdictions as
you shall reasonably request, to endeavor to maintain such qualification for so
long as the laws of such jurisdictions so require and to notify you of any
termination of such qualifications; provided, however, that neither Kmart nor
the Depositor shall be obligated so to qualify the Certificates if such
qualification requires it to file any general consent to service of process or
to qualify as a foreign corporation in any jurisdiction in which it is not so
qualified.
(e) Kmart will promptly advise you (i) when,
prior to the termination of the offering of the Certificates, any amendment to
the Registration Statement shall have been filed or become effective, (ii) of
any request by the Commission for any amendment to the Registration Statement
or supplement to the Prospectus or for additional information, (iii) the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the institution or threatening of any proceedings
for that purpose and (iv) of the receipt by Kmart of any notification with
respect to the suspension of the qualification of the Certificates for sale in
any jurisdiction with the initiation or threatening of any proceeding for such
purpose. Kmart will use its best efforts to pre-
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vent the issuance of any stop order and, if issued, to obtain as soon as
possible the withdrawal thereof.
6. Expenses.
6.1 Sutro & Co. Incorporated ("Sutro") has
advanced or incurred, or shall advance or incur, expenses incident to the shelf
registration by Kmart of $250,000,000 of securities (of which the specific
Certificates covered by this Underwriting Agreement are a part), including (i)
those incurred in connection with preparation and filing of the Registration
Statement and amendments thereto, the Basic Prospectus (and preliminary
versions thereof), and all exhibits thereto (including the basic forms of
underwriting agreement and Transaction Documents), (ii) the filing fee paid to
the Commission in respect of such registration, (iii) the related fees,
disbursements and other charges of Kmart's counsel, (iv) the related fees,
disbursements and other charges of special counsel to the Depositor, (v) the
related fees, disbursements and other charges of special counsel to Sutro, and
(vi) the printing and delivery to you in quantities as hereinabove stated of
copies of the Registration Statement, the amendments thereto and the Basic
Prospectus. Sutro shall be reimbursed for the expenses advanced or incurred by
it by the allowance to Sutro of a shelf filing expense recovery fee of 0.25% of
the principal amount of all securities included in the shelf registration.
Such allowance shall be deducted from the purchase price of all such securities
and be retained by, and/or paid to, Sutro. The amount so to be retained in
respect of the specific securities covered by this Underwriting Agreement is
$159,970.
6.2 In addition to the expenses to be deducted
pursuant to Section 6.1, the sum of the following expenses incident to the
proposed sale of Certificates contemplated by this Underwriting Agreement,
including (i) expenses in connection with the preparation of any amendments to
the Registration Statement that relate specifically to the sale of such
Certificates, the Definitive Prospectus Supplement (and any preliminary
versions thereof) and any exhibits to any thereof (including, without
limitation, this Underwriting Agreement), (ii) the preparation, issuance and
delivery of such Certificates, (iii) the fees, disbursements and other charges
of Kmart's counsel, (iv) the fees, disbursements and other charges of special
counsel to the Depositor, (v) the fees, disbursements and other charges of
local counsel, (vi) the first year's fees of the Trustee, (vii) any fees
charged by rating agencies for the rating of such Certificates, (viii) the
printing and delivery to you in quantities as hereinabove stated of copies of
the relevant amendments to the Registration Statement and of the
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Definitive Prospectus Supplement (and any preliminary versions thereof) and any
amendments or supplements thereto, and (ix) the printing and delivery to you of
copies of each of the Trust Agreements and any Blue Sky Memorandum, shall be
deducted and paid from the proceeds of sale of the Certificates; provided,
however, that the maximum amount of expenses so to be deducted and paid
pursuant to this Section 6.2 shall be $50,000 multiplied by the number of
projects to be financed by the sale of such Certificates. Notwithstanding the
foregoing provisions of this Section 6.2, you have agreed to deduct only
$159,697 from the proceeds of the specific securities that are covered by this
Underwriting Agreement and to accept such sum in full satisfaction of your
reimbursement rights under this Section 6.2 with respect to such securities.
6.3 The Depositor shall cause each Borrower to
whom a Mortgage Loan is made to bear its proportionate share of the costs of
issuance of the Certificates (i.e., the underwriting discount, the shelf
expense recovery fee provided for in Section 6.1 and the expenses to be
deducted pursuant to Section 6.2). Each Borrower as a condition to receiving a
Mortgage Loan shall authorize the Depositor to apply a portion of the related
Mortgage Loan amount to payment of the Borrower's proportionate share of such
costs of issuance by agreeing that you may withhold from the proceeds of sale
of the Certificates, such Borrower's proportionate share of the underwriting
discount and the amount provided for in Sections 6.1 and 6.2.
7. Conditions to Closing. Your several obligations will
be subject to the accuracy of the representations and warranties on the part of
Kmart and the Depositor herein on the date hereof and on the Closing Date, to
the accuracy of the statements of officers of Kmart and the Depositor made in
each certificate furnished pursuant to the provisions hereof, to the
performance and observance by Kmart, the Subsidiary, the Trustee and the
Depositor of all covenants and agreements contained in the Transaction
Documents on their part to be performed and observed and to the following
additional conditions precedent:
(a) Subsequent to the execution and delivery of
this Agreement and the most recent quarterly report on Form 10-Q filed by Kmart
with the Commission and prior to the Closing Date,
(i) no stop order suspending the
effectiveness of the Registration Statement shall be in effect and no
proceedings for that purpose shall have been instituted or threatened;
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(ii) there shall not have occurred any
change, or any event reasonably likely to result in any change, in (x) the
letter or letters referred to in Section 7(e) or (y) the condition, financial
or otherwise, or in the earnings, business or operations, of Kmart and its
subsidiaries, taken as a whole, from that set forth in such Form 10-K, Form
10-Q, Form 8-K or the Prospectus, as amended or supplemented through the date
hereof that, in your reasonable judgment, is material and adverse and that
makes it, in your reasonable judgment, impracticable to market the Certificates
on the terms and in the manner contemplated in the Prospectus, as so amended or
supplemented;
(iii) there shall not have occurred any
(A) suspension or material limitation of trading, either generally or of any
securities of Kmart, on or by, as the case may be, the New York Stock Exchange
or the Chicago Stock Exchange, (B) suspension of trading of any securities of
Kmart on any exchange or in any over-the-counter market, (C) declaration of a
general moratorium on commercial banking activities in New York by either
Federal or New York State authorities or (D) any outbreak or escalation of
hostilities or any change in financial markets or any calamity or crisis that,
in your reasonable judgment, is material and adverse and, in the case of any of
the events described in clauses (iii)(A) through (D), such event, singly or
together with any other event, makes it, in your reasonable judgment,
impracticable to market the Certificates on the terms and in the manner
contemplated by the Prospectus, as amended or supplemented; and
(iv) other than as disclosed in the
Prospectus, there shall not have been any downgrading, or any notice given of
any intended or potential downgrading, or review or possible change that does
not indicate the direction of the possible change, in the rating accorded any
of Kmart's securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2) under the
Act.
(b) You shall have received on the Closing Date:
(i) An opinion of A.N. Palizzi, Esq.,
Executive Vice President and General Counsel of Kmart, dated as of such date,
addressed to you in form and substance satisfactory to you to the effect that:
(1) Kmart is a corporation duly
organized and validly existing as a corporation in good standing under
the laws of the State of Michigan.
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(2) Kmart is duly authorized by
its Articles of Incorporation, as amended, to conduct the business
which it is described in the Prospectus (or in any document
incorporated therein by reference) as conducting.
(3) The Transaction Documents to
which Kmart is a party and this Agreement have each been duly
authorized, executed and delivered by Kmart.
(4) To such counsel's knowledge,
no further approval, authorization, consent or other order of any
governmental body (other than in connection or compliance with the
provisions of the securities or blue sky laws of any jurisdiction) is
legally required to permit the execution, delivery and performance by
Kmart of the Transaction Documents to which it is a party and this
Agreement.
(5) The execution, delivery and
performance by Kmart of each of the Transaction Documents to which it
is a party and this Agreement (A) will not violate any provision of
Kmart's Articles of Incorporation or By-laws, each as amended, (B)
will not, to such counsel's knowledge, violate any provisions of, or
constitute a default under, or (except as contemplated by the
Transaction Documents) result in the creation or imposition of any
lien, charge or encumbrance on, or security interest in, any of the
assets of Kmart pursuant to the provision of, any mortgage, indenture,
contract, agreement or other undertaking to which Kmart is a party or
which purports to be binding upon Kmart and which is, or is required
to be, filed by Kmart with the Commission pursuant to the Act or the
Exchange Act and (C) to such counsel's knowledge will not violate any
provision of any state law or regulation applicable to Kmart (other
than state securities or blue sky laws, upon which such counsel need
not pass) or, to such counsel's knowledge, any provision of any order,
writ, judgment or decree of any governmental instrumentality
applicable to Kmart.
(ii) An opinion of Dickinson, Wright,
Moon, Van Dusen & Freeman, counsel for Kmart, dated as of such date, addressed
to you in form and substance satisfactory to you to the effect that:
(1) Each of the Transaction
Documents to which Kmart or a Subsidiary is a party conforms in all
material respects to the descriptions thereof contained in the
Prospectus.
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(2) Except as to the financial
statements and other financial or statistical data contained or
incorporated by reference therein and in the Statement[s] of
Eligibility and Qualification under the Trust Indenture Act (each a
"Form T-1") of the Trustee(s), and the sections contained in the
Registration Statement and Prospectus under the headings "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES," "PROSPECTUS SUMMARY - Federal Income
Tax Consequences" and "ERISA CONSIDERATIONS," upon which such counsel
is not required to state a belief, the Registration Statement, at the
time it became effective, and the Prospectus complied as to form in
all material respects with the applicable requirements of the
Securities Act and (except with respect to the parts of the
Registration Statement that constitute the statements of eligibility
and qualification of the Trustees under the Trust Agreements, upon
which such counsel need not opine) the Trust Indenture Act, and the
applicable instructions, rules and regulations promulgated by the
Commission thereunder or pursuant to said instructions, rules and
regulations are deemed to comply therewith; and, with respect to the
documents or portions thereof filed with the Commission pursuant to
the Exchange Act, and incorporated by reference in the Prospectus
pursuant to Item 12 of Form S-3, such documents or portions thereof,
on the date first filed with the Commission, complied as to form in
all material respects with the applicable provisions of the Exchange
Act, and the applicable instructions, rules and regulations
promulgated by the Commission thereunder or pursuant to said
instructions, rules and regulations are deemed to comply therewith;
the Registration Statement has become and is effective under the
Securities Act; and, to the best knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for a stop order with respect thereto
are pending or threatened under Section 8(d) of the Act.
Such opinion may state that in passing upon the forms of the
Registration Statement and the Prospectus, such counsel assumes the
correctness, completeness and fairness of the statements made by Kmart and the
Depositor and information included or incorporated by reference in the
Registration Statement and the Prospectus and any representations of Kmart or
the Depositor contained in this Agreement and that they take no responsibility
therefor. The opinion should also state that, in connection with the
preparation of the Registration Statement and the Prospectus, such counsel has
had discussions with certain of Kmart's officers and representatives, with
other counsel for Kmart, with counsel for the Depositor, with Price Waterhouse,
the inde-
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pendent certified public accountants who audited certain of the financial
statements incorporated by reference in the Registration Statement, and with
the Underwriters' representatives, and that such counsel's examination of the
Registration Statement and the Prospectus and its discussions did not disclose
to them any information which gives them reason to believe that, at the
Effective Date, the Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that the
Prospectus, as of the date thereof and the date hereof, included or includes
any untrue statement of a material fact or omitted or omits to state any
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. Such counsel
need not express any belief or opinion as to the financial statements or other
financial or statistical data contained or incorporated by reference in the
Registration Statement or the Prospectus, applicable antitrust laws, the
Form(s) T-1, or the sections of the Prospectus under the heading "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES," and "PROSPECTUS SUMMARY -- Federal Income Tax
Consequences."
(iii) An opinion of in-house counsel
satisfactory to you of each Subsidiary, dated as of such date, addressed to
you, in form and substance satisfactory to you to the effect that:
(1) Such Subsidiary is a
corporation duly organized and validly existing as a corporation in
good standing under the laws of the State of its incorporation.
(2) Such Subsidiary is duly
authorized by its Articles of Incorporation, as amended and restated,
to conduct the business which it is described in the Prospectus (or in
any document incorporated therein by reference) as conducting.
(3) The Transaction Documents to
which such Subsidiary is a party have each been duly authorized,
executed and delivered by such Subsidiary.
(4) To such counsel's knowledge,
no further approval, authorization, consent or other order of any
governmental body is legally required to permit the execution,
delivery and performance by such Subsidiary of the Transaction
Documents to which it is a party.
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(5) The execution, delivery and
performance by such Subsidiary of each of the Transaction Documents to
which it is a party will not violate any provision of such
Subsidiary's Articles of Incorporation or By-laws, each as amended.
(iv) An opinion of Squire, Sanders &
Dempsey, special counsel for the Depositor, dated as of such date, addressed to
you, in form and substance satisfactory to you to the effect that:
(1) The Depositor is a
corporation duly incorporated and validly existing in good standing
under the laws of the State of Delaware.
(2) The Depositor is duly
authorized by its Certificate of Incorporation, as amended, to conduct
the business which it is described in the Prospectus (or in any
document incorporated therein by reference) as conducting.
(3) The Transaction Documents to
which the Depositor is a party have been duly authorized, executed and
delivered by the Depositor.
(4) This Agreement, and also each
of the Transaction Documents governed by New York law to which any one
or more of Kmart, any Subsidiary, [any Borrower] or the Depositor is a
party, constitutes the valid and binding agreement of Kmart, such
Subsidiary, [such Borrower] and/or the Depositor, as the case may be,
enforceable against Kmart, such Subsidiary, [such Borrower] and/or the
Depositor, as the case may be, in accordance with the respective terms
thereof, except, in each case, as enforcement thereof may be limited
by bankruptcy, insolvency or other laws affecting enforcement of
creditors' rights generally, and subject to general principles of
equity (regardless of whether enforcement is sought in a proceeding at
law or in equity). In giving the opinion specified in the preceding
sentence, Squire, Sanders & Dempsey may state that they have read and
relied upon the opinion of A.N. Palizzi, Esq. referred to in Section
7(b)(i), the opinion of counsel to each such Subsidiary referred to in
Section 7(b)(iii), [and the opinion of local counsel to each such
Borrower referred to in Section 7(b)] to the extent that such opinions
are relevant in forming the opinions required by the next preceding
sentence.
(5) The Certificates and the
Transaction Documents to which the Depositor is a party conform in all
material respects to the descriptions thereof contained in the
Prospectus.
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(6) The statements and legal
conclusions contained in the Prospectus under the caption "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES" are correct, and the discussion
thereunder does not omit any considerations that are material to
purchasers or holders of the Certificates with respect to the matters
covered.
(7) Except as to the financial
statements and other financial or statistical data contained or
incorporated by reference therein and in the Statements of Eligibility
and Qualification under the Trust Indenture Act (each a "Form T-1") of
the Trustee, and the sections contained in the Registration Statement
and Prospectus under the headings "AVAILABLE INFORMATION,"
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "PROSPECTUS SUMMARY
-- The Company," "PROSPECTUS SUMMARY -- Erisa Considerations,"
"KMART," "KMART CORPORATION SELECTED FINANCIAL INFORMATION" "ERISA
CONSIDERATIONS," "PLAN OF DISTRIBUTION" and "EXPERTS," upon which such
counsel is not required to state a belief, the Registration Statement,
at the time it became effective, and the Prospectus complied as to
form in all material respects with the applicable requirements of the
Act and (except with respect to the parts of the Registration
Statement that constitute the Statements of Eligibility and
Qualification of the Trustee under the Trust Agreement, upon which
such counsel need not opine) the Trust Indenture Act, and the
applicable instructions, rules and regulations promulgated by the
Commission thereunder or pursuant to said instructions, rules and
regulations are deemed to comply therewith; the Registration Statement
has become and is effective under the Act; and, to the best knowledge
of such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for a stop
order with respect thereto are pending or threatened under Section
8(d) of the Act.
Such opinion may state that in passing upon the forms of the
Registration Statement and the Prospectus, such counsel assumes the
correctness, completeness and fairness of the statements made by Kmart and
information included or incorporated by reference in the Registration Statement
and the Prospectus and any representations of Kmart contained in this Agreement
and that they take no responsibility therefor. The opinion should also state
that, in connection with the preparation of the Registration Statement and the
Prospectus, such counsel has had discussions with outside counsel for Kmart,
with certain of the Depositor's officers and with the Underwriter's
representatives, and that such counsel's examination of the Registration
Statement and the
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Prospectus and its discussion did not disclose to them any information that
gives them reason to believe that, at the effective date of the Registration
Statement, the Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that the
Prospectus, as of the date thereof and the date hereof, included or includes
any untrue statement of a material fact or omitted or omits to state any
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. Such counsel
need not express any belief or opinion as to the financial statements or other
financial or statistical data contained or incorporated by reference in the
Registration Statement or the Prospectus, applicable antitrust laws, the
Form(s) T-1 or the sections of the Prospectus under the headings "AVAILABLE
INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "PROSPECTUS
SUMMARY -- The Company," "PROSPECTUS SUMMARY -- Erisa Considerations," "KMART,"
"KMART CORPORATION SELECTED FINANCIAL INFORMATION" "ERISA CONSIDERATIONS,"
"PLAN OF DISTRIBUTION" and "EXPERTS."
(v) Opinions of counsel satisfactory
to you licensed to practice law in each jurisdiction the law of which governs
any Transaction Document, that is not governed by New York law, each of which
opinions shall be dated as of such date, shall be addressed to you, shall be
satisfactory to you in form and substance, and which, among other things, shall
be to the effect that each of the Transaction Documents governed by the laws of
such jurisdiction to which any one or more of Kmart, any Subsidiary or the
Depositor is a party, constitutes the valid and binding agreement of Kmart,
such Subsidiary and/or the Depositor, as the case may be, enforceable against
Kmart, such Subsidiary and/or the Depositor, as the case may be, in accordance
with the respective terms thereof, except, in each case, as enforcement thereof
may be limited by bankruptcy, insolvency or other laws affecting enforcement of
creditors' rights generally, and subject to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity). In giving the opinion specified in the preceding sentence, such
counsel may state that they have read and relied upon the opinion of A.N.
Palizzi, Esq. referred to in Section 7(b)(i), the opinions of counsel to the
Subsidiaries referred to in Section 7(b)(iii), and the opinion of Squire,
Sanders & Dempsey referred to in Section 7(b)(iv), to the extent that such
opinions are relevant in forming the opinions required by the next preceding
sentence.
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(vi) The favorable opinion of Brown &
Wood, counsel for the Trustee, dated as of such date, addressed to you and to
Kmart, in form and substance satisfactory to you and Kmart to the effect that:
(1) The Trustee has been duly
incorporated and is validly existing as a banking corporation in good
standing under the laws of the State of New York.
(2) The Trustee has full
corporate trust power and authority to enter into and perform its
obligations under the Trust Agreements and, on behalf of the Trusts,
the obligations under the Transaction Documents to which such Trusts
are parties.
(3) The execution and delivery of
the Trust Agreements and, on behalf of the Trusts, each of the
Transaction Documents to which a Trust is a party and the performance
by the Trustee of the Trustee's obligations under the Trust
Agreements, and the Transaction Documents, have been duly authorized
by all necessary corporate action of the Trustee, and each has been
duly executed and delivered by the Trustee.
(4) The Trust Agreements and each
of the Transaction Documents to which a Trust is a party constitute
valid and binding agreements of the Trustee, enforceable against the
Trustee in accordance with their terms, subject, as to enforcement of
remedies, to applicable bankruptcy, insolvency, reorganization, and
other similar laws affecting the rights of creditors generally and to
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(5) The execution and delivery by
the Trustee of the Trust Agreements and, on behalf of the Trusts, each
of the Transaction Documents to which a Trust is a party, and the
performance by the Trustee of its obligations thereunder do not
conflict with, result in a breach or violation of or constitute a
default under, the Certificate of Incorporation or By-laws of the
Trustee.
(6) The Certificates have been
duly and validly authorized, executed, authenticated and issued by the
Trusts and, when delivered, the Certificates have been validly issued
and are entitled to the benefits of the Trust Agreements.
(vii) An opinion of counsel to each
Borrower, dated as of such date, addressed to you, Kmart and
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the Depositor in form and substance satisfactory to you, Kmart and the
Depositor.
(viii) An opinion of Paul, Weiss,
Rifkind, Wharton & Garrison, your counsel, dated as of such date, in a form
acceptable to you. Such opinion may state that in passing upon the forms of
the Registration Statement and the Prospectus, such counsel assumes the
correctness, completeness and fairness of the statements made by Kmart and the
Depositor and information included or incorporated by reference in the
Registration Statement and the Prospectus and any representations of Kmart or
the Depositor contained in this Agreement and that they take no responsibility
therefor. The opinion should also state that, in connection with the
preparation of the Registration Statement and the Prospectus, such counsel has
had discussions with certain of Kmart's officers and representatives, with
counsel for Kmart and the Depositor, with Price Waterhouse, the independent
certified public accountants who audited certain of the financial statements
incorporated by reference in the Registration Statement, and with the
Underwriters' representatives, and that such counsel's examination of the
Registration Statement and the Prospectus and its discussions did not disclose
to them any information which gives them reason to believe that, at the
Effective Date, the Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that the
Prospectus, as of the date thereof and the date hereof, included or includes
any untrue statement of a material fact or omitted or omits to state any
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. Such counsel
need not express any belief or opinion as to the financial statements or other
financial or statistical data contained or incorporated by reference in the
Registration Statement or the Prospectus, applicable antitrust laws, the Trust
Indenture Act, the Form(s) T-1, or the sections of the Prospectus under the
headings "CERTAIN FEDERAL INCOME TAX CONSEQUENCES," "PROSPECTUS SUMMARY -
Federal Income Tax Consequences," or "ERISA CONSIDERATIONS."
(c) You shall have received, on the Closing Date,
certificates of Kmart and the Depositor, respectively, signed as to each by its
respective Chairman of the Board, Treasurer or other Chief Financial Officer,
or in the case of the Depositor, any Vice President, dated as of the Closing
Date, and in the case of the certificate of the Depositor, addressed to both
you and Kmart, to the effect that the signers of such certificate have examined
the Registration
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Statement, the Basic Prospectus, the Prospectus, the Definitive Prospectus
Supplement and this Agreement and that:
(i) the representations and warranties
of Kmart or the Depositor, as the case may be, in this Agreement and each of
the other Transaction Documents to which it is a party are true and correct in
all material respects (except for those representations and warranties that are
already subject to a materiality or similar qualification, which shall be true
and correct in all respects as so qualified) on and as of the date of such
certificate, and Kmart or the Depositor, as the case may be, has complied with
all the agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to the date of such certificate;
(ii) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or, to the knowledge of Kmart or the
Depositor, as the case may be, threatened;
(iii) there has been no change or any
event reasonably likely to result in any change, in the condition, financial or
otherwise, or in the earnings, business or operations, of Kmart or the
Depositor, as the case may be, and its subsidiaries, if any, taken as a whole,
from that set forth in the Prospectus, as amended or supplemented through the
date hereof, or the most recent quarterly report of Kmart on Form 10-Q filed
with the Commission, that is material and adverse; and
(iv) no event has occurred that
constitutes or is reasonably likely to result in a default under a Lease or a
Lease Guaranty or any other Transaction Document to which Kmart or the
Depositor, as the case may be, is a party.
(d) You shall have received from each Subsidiary
a Closing Date certificate signed by its Chairman of the Board, President or
any Vice President, and by its Treasurer or other Chief Financial Officer, in
the form annexed hereto as Exhibit D.
(e) You shall have received on the Closing Date,
from Price Waterhouse, Kmart's independent certified public accountants, a
letter or letters, dated as of the Closing Date, addressed to both you and
Kmart, in form and substance satisfactory to you confirming that they are
independent accountants within the meaning of the Act and the Exchange Act and
the respective applicable published rules and regulations thereunder, and
containing statements and information of the type ordinarily included in
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accountants' "comfort letters" to underwriters with respect to the financial
statements and certain financial information contained in or incorporated by
reference into the Registration Statement and the Prospectus.
(f) The Depositor shall have received a letter
from Standard & Poor's rating the Certificates "BBB-" or better and true copies
thereof shall have been provided to you.
(g) All conditions specified in each of the
Transaction Documents to be performed or satisfied on or prior to the Closing
Date shall have been so performed or satisfied on the Closing Date and you
shall have received executed copies of all documents delivered in connection
therewith.
(h) You shall have received on the Closing Date,
such appropriate further information, certificates and documents as you may
reasonably request.
(i) Each of the transactions contemplated herein
or in the Prospectus as occurring on or before the Closing Date shall have
occurred as anticipated.
If any of the conditions specified in this Section 7 shall not
have been fulfilled in all material respects when and as provided in this
Underwriting Agreement, or if any of the opinions and certificates mentioned
above or elsewhere in this Underwriting Agreement shall not be in all material
respects reasonably satisfactory in form and substance to you and to your
counsel, this Agreement and all of your obligations hereunder may be canceled
at, or at any time prior to, the Closing Date by you. Notice of such
cancellation shall be given to Kmart and the Depositor in writing or by
telephone or telegraph confirmed in writing.
8. Indemnification and Contribution.
(a) Kmart agrees to indemnify and hold harmless
you and each person, if any, who controls you within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act from and against any
and all losses, claims, damages or liabilities (including, without limitation,
the reasonable fees and expenses of counsel in connection with any
investigation or proceeding), whether or not arising from third party claims,
arising out of or based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement as
originally filed or in any amendment or supplement thereto, or the Prospectus
as originally filed or in any amendment or supplement thereto, or arising out
of or based upon any omission or alleged omission to state therein a material
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fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) any breach of a representation or warranty or covenant
or agreement herein of Kmart; provided, however, that Kmart will not be liable
in any such case to the extent that such losses, claims, damages or liabilities
are caused by any such untrue statement or alleged untrue statement or omission
or alleged omission made therein based upon and in conformity with information
furnished in writing to Kmart by or on behalf of you expressly for use therein;
and provided, further, that the indemnity agreement described in this
subsection shall not inure to the benefit of you or of any person controlling
you on account of any such losses, claims, damages, liabilities, expenses or
actions arising from the sale of Certificates to any person in respect of the
Prospectus, as supplemented or amended (excluding, however, any document then
incorporated or deemed incorporated by reference therein pursuant to Item 12 of
Form S-3) furnished by you to a person to whom any of the Certificates were
sold, insofar as such indemnity relates to any untrue or misleading statement
or omission made in a Preliminary Prospectus or the Prospectus but eliminated
or remedied prior to the consummation of such sale in the Prospectus, or any
amendment or supplement thereto furnished pursuant to Section 5 hereof,
respectively, unless a copy of such amendment or supplement is furnished by you
to such person (i) with or prior to the written confirmation of the sale
involved or (ii) as soon as available after such written confirmation.
(b) You agree, to indemnify and hold harmless
Kmart, its directors, its officers who signed the Registration Statement and
each person, if any, who controls Kmart within the meaning of either Section 15
of the Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from Kmart to you, but only with reference to the
respective information relating to you, furnished in writing by you or on your
behalf expressly for use in the Registration Statement, the Prospectus or any
amendments or supplements thereto.
(c) If any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either paragraph (a) or (b) above, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing of the
institution of such proceeding and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel
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related to such proceeding. In any such proceeding any indemnified party shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the parties to any such proceeding (including
any impleaded parties) include both the indemnifying party (or any other person
represented by such counsel) and the indemnified party, and representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. Except as provided in the
preceding sentence, it is understood that the indemnifying party shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees and expenses of more than one separate firm
(in addition to any local counsel) for all such indemnified parties and that
all such fees and expenses as are reimbursable hereunder shall be reimbursed as
they are incurred. In the case of parties indemnified pursuant to paragraph
(a) above, such separate firm shall be designated in writing by you, and by
Kmart in the case of parties indemnified pursuant to paragraph (b) above. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement of
any pending or threatened proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such proceeding.
(d) If the indemnification provided for in
paragraph (a) or (b) of this Section 8 is unavailable to an indemnified party
or insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraph, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by Kmart and/or any Subsidiary (and/or
the Trusts) on the one hand and you on the other from the offering of the
Certificates or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in
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clause (i) above but also the relative fault of Kmart on the one hand and of
you or any Subsidiary on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by Kmart (and/or any Subsidiary and the Trusts) on the one hand and
you on the other in connection with the offering of the Certificates shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Certificates (before deducting expenses) received by Kmart (and/or the
Subsidiary and the Trusts) bears to the total commissions received by you in
respect thereof. The relative fault of Kmart and any Subsidiary on the one
hand and of you on the other, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by or on behalf of Kmart or a Subsidiary or by or on
behalf of you and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
For purposes of this Section 8, each person who controls you within the meaning
of the Act shall have the same rights to contribution as you, and each person
who controls Kmart within the meaning of either the Act or the Exchange Act,
each officer of Kmart who shall have signed the Registration Statement and each
director of Kmart shall have the same rights to contribution as Kmart, subject
in each case to the provisions of this paragraph (d) and paragraph (e). Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding (including any governmental
investigation) against such party in respect of which a claim for contribution
may be made against another party or parties under this para-graph (d), notify
such party or parties from whom contribution may be sought, but the omission to
so notify such party or parties shall not relieve the party or parties from
whom contribution may be sought from any other obligation it or they may have
hereunder or otherwise than under this paragraph (d), except and only to the
extent that the party or parties is materially prejudiced thereby.
(e) Kmart and you agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation or by any other method of allocation that does not take account
the considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending
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any such action or claim. Notwithstanding the provisions of this Section 8,
you shall not be required to contribute any amount in excess of the amount by
which the total price at which the Certificates underwritten by you and
distributed to the public were offered to the public exceeds the amount of any
damages that you have otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The remedies provided for in this Section 8
are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this
Section 8 and the representations and warranties and covenants and agreements
of Kmart and the Depositor contained herein shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on your behalf, or on behalf of any person controlling
you or by or on behalf of Kmart, its directors or officers or any person
controlling Kmart and (iii) acceptance and payment for any of the Certificates.
9. Termination. This Agreement shall be subject to
termination, by notice given by you to Kmart, if after the execution and
delivery of this Agreement and prior to the Closing Date (i) there has been any
material adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of Kmart and its subsidiaries, taken as a
whole, or (ii) there has occurred any outbreak or escalation of hostilities or
other calamity or crisis the effect of which on the financial markets of the
United States is such as to make it, in your judgment, impracticable to market
the Certificates, or (iii) trading in securities, either generally or of Kmart,
on the New York Stock Exchange has been suspended or materially limited or if a
general moratorium on commercial banking activities has been declared by either
Federal or New York State authorities, or (iv) except as disclosed in the
Prospectus, there has been any downgrading, or any notice given of any intended
or potential downgrading, in the rating accorded any of Kmart's securities by
any "nationally recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g)(2) under the Act, or (v) all of the
conditions of Section 7 shall not have been fulfilled.
10. Miscellaneous. This Agreement may be signed in any
number of counterparts, each of which shall be an
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original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.
This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
11. Notices. All communications hereunder will be in
writing and effective only on receipt, and, if sent to you at the address set
forth above (telecopy no.: 213-624-5263); if sent to Kmart, will be mailed,
delivered or telecopied to it at 3100 West Big Beaver Road, Troy, Michigan
48084 (telecopy no. 810-643-5398), attention of Executive Vice President and
Chief Financial Officer (with a copy to the General Counsel); and if sent to
the Depositor, will be mailed, delivered or telecopied to it at 40 North
Central Avenue, Suite 2700, Phoenix, Arizona 85004 (telecopy no. 602-253-8129),
attention of Secretary, with a copy to Squire Sanders & Dempsey, 40 North
Central Avenue, Suite 2700, Phoenix, Arizona 85004, attention of Norman C.
Storey, Esq.
12. Successors. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective successors and
the officers and directors and controlling persons referred to in Section 8
hereof, and no other person will have any right or obligation hereunder.
13. Headings. The headings of the sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed a part of this Agreement.
Please confirm your agreement by having an authorized officer
sign a copy of this Agreement in the space set forth below.
Very truly yours,
KMART CORPORATION
By:
-------------------------------------------
Name:
Title:
NATIONAL TENANT FINANCE CORPORATION
By:
-------------------------------------------
Name:
Title:
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Accepted:
SUTRO & CO. INCORPORATED
By:
-----------------------------------
Name: John F. Stiepel
Title: Senior Vice President
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