<PAGE> 1
As filed with the Securities and Exchange Commission on November 1, 1994
REGISTRATION NO. 33-54043
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 4
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
KMART CORPORATION
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN
(State or other jurisdiction of incorporation or organization)
38-0729500
(I.R.S. Employer Identification No.)
3100 WEST BIG BEAVER ROAD
TROY, MICHIGAN 48084
(810) 643-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------------
A. N. PALIZZI
EXECUTIVE VICE PRESIDENT AND
GENERAL COUNSEL
KMART CORPORATION
3100 WEST BIG BEAVER ROAD
TROY, MICHIGAN 48084
(810) 643-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Copies to:
Verne C. Hampton, II
Dickinson, Wright, Moon,
Van Dusen & Freeman
500 Woodward Avenue, Suite 4000
Detroit, Michigan 48226
Norman C. Storey
Squire, Sanders & Dempsey
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
James L. Purcell
Paul, Weiss, Rifkind,
Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box. /
/
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF AMOUNT BEING OFFERING PRICE OFFERING REGISTRATION
SECURITIES BEING REGISTERED REGISTERED PER UNIT PRICE FEE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage Pass-Through
Certificates................... $250,000,000 100% $250,000,000 $86,206.90*
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</TABLE>
* Previously paid.
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<PAGE> 2
Information contained in this preliminary prospectus supplement is subject
to completion or amendment. This preliminary prospectus supplement and
accompanying prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.
SUBJECT TO COMPLETION, DATED OCTOBER 31, 1994
PRELIMINARY PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER , 1994)
$5,491,000
$1,780,000 MORTGAGE PASS-THROUGH CERTIFICATES SERIES 1994A-1
$3,711,000 MORTGAGE PASS-THROUGH CERTIFICATES SERIES 1994A-2
The Mortgage Pass-Through Certificates Series 1994A-1 and the Mortgage
Pass-Through Certificates Series 1994A-2 (collectively, the "Certificates") will
evidence fractional undivided beneficial ownership interests in the assets of
one of two separate Pass-Through Trusts to be formed pursuant to two separate
Pass-Through Trust Agreements between National Tenant Finance Corporation (the
"Depositor") and United States Trust Company of New York, as Pass-Through
Trustee. The Pass-Through Trust Property of each Pass-Through Trust will consist
of Mortgage Notes evidencing the non-recourse obligations of the Borrowers under
the Loan Agreements, each between a Borrower and the Depositor, pursuant to
which the Depositor will loan each Borrower a portion of the proceeds of the
Certificates offered hereby to (i) finance the acquisition of and/or to provide
permanent financing for, certain real property and improvements thereon
described in this Prospectus Supplement (the "Facilities") to be leased by
OfficeMax, Inc. ("OfficeMax") (the "Subsidiary"), a subsidiary of
KMART CORPORATION
a Michigan corporation ("Kmart") and (ii) pay a pro rata portion of the costs of
issuance of the Certificates. 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 or the Trust Property held in any other Pass-Through
Trust.
Scheduled Payments of interest paid on the Mortgage Notes held in each
Pass-Through Trust will be passed through to the Certificateholders of such
Pass-Through Trust on the first Business Day of November and May of each year
commencing May 1, 1995 (each, a "Remittance Date"), until the final scheduled
Remittance Date for such Pass-Through Trust. Scheduled Payments of principal
paid on the Mortgage Notes held in each Pass-Through Trust will be passed
through to the Certificateholders of such Pass-Through Trust in scheduled
amounts on the first Business Day of November of each year, commencing on the
initial scheduled principal distribution date for such Pass-Through Trust set
forth below, until the final scheduled Remittance Date for such Trust.
(continued on following page)
<TABLE>
<CAPTION>
MORTGAGE
PASS-THROUGH PRINCIPAL INTEREST PRICE TO INITIAL SCHEDULED PRINCIPAL FINAL SCHEDULED
CERTIFICATES AMOUNT RATE PUBLIC DISTRIBUTION DATE REMITTANCE DATE PROCEEDS(1)
- ---------------------- ------------- -------- --------- ---------------------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Series 1994A-1........ $$1,780,000.00 % % 11/1/95 11/1/09 $
Series 1994A-2........ $3,711,000.00 % % 11/1/10 11/1/19 $
</TABLE>
- -------------------------
(1) The underwriting discount and certain other expenses relating to the
offering, of $ in the aggregate and % of the principal amount of
the Certificates, will be paid by the Borrowers out of the loan amounts.
The proceeds of the sale of the Certificates will be used by the
Pass-Through Trusts to purchase the Mortgage Notes from the Depositor.
Kmart has agreed to indemnify Sutro & Co. Incorporated against certain
liabilities under the Securities Act of 1933. See "PLAN OF DISTRIBUTION"
herein.
THESE CERTIFICATES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------
The Certificates are offered by the underwriter named below when, as and if
issued, delivered to, and accepted by it and subject to its right to reject
orders in whole or in part. It is expected that the Certificates will be
delivered in book-entry form on or about November 7, 1994, through the Same Day
Funds Settlement System of The Depository Trust Company.
------------------
SUTRO & CO. INCORPORATED
------------------
The date of this Prospectus Supplement is November , 1994.
<PAGE> 3
The related Collateral Trust Property described in the Prospectus,
including Mortgages on the Facilities and assignments of the Lease Payments
payable by the Subsidiary, will be held for the benefit, pari passu, of the
Pass-Through Trusts in a Collateral Trust pursuant to a Collateral Trust
Agreement between the Depositor and United States Trust Company of New York as
Collateral Trustee. The obligations of the Subsidiary under the Leases are
guaranteed by Kmart pursuant to a Lease Guaranty with respect to each Lease.
Pursuant to the terms of Note Put Agreements, each between Kmart, the Subsidiary
and the Depositor, the Subsidiary, or in the event of the Subsidiary's failure
to do so or under certain other circumstances, Kmart will be obligated to
purchase the related Mortgage Notes upon the occurrence of a Triggering Event.
Kmart has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (File No. 33-54043) (the
"Registration Statement"), which was declared effective by the Commission on
November , 1994, relating to the offering of $250,000,000 aggregate principal
amount of Mortgage Pass-Through Certificates. The Prospectus, dated November ,
1994, included in the Registration Statement is referred to herein as the
"Prospectus." Capitalized terms not otherwise defined herein are defined in the
Glossary in the Prospectus.
ALTHOUGH LEASE PAYMENTS IN AMOUNTS SUFFICIENT TO PERMIT THE TIMELY PAYMENT
OF THE REGULARLY SCHEDULED INSTALLMENTS OF PRINCIPAL OF AND INTEREST ON THE
MORTGAGE NOTES WILL BE A DIRECT OBLIGATION OF THE SUBSIDIARY, WHICH LEASE
PAYMENTS WILL BE GUARANTEED BY KMART, NEITHER THE CERTIFICATES NOR THE MORTGAGE
NOTES WILL REPRESENT AN INTEREST IN OR DIRECT OBLIGATION OF, OR WILL BE
GUARANTEED BY, KMART, THE SUBSIDIARY, ANY PASS-THROUGH TRUSTEE, THE COLLATERAL
TRUSTEE, ANY BORROWER OR THE DEPOSITOR. UNDER CERTAIN CIRCUMSTANCES MORE FULLY
DESCRIBED IN THE PROSPECTUS, THE SUBSIDIARY WILL HAVE THE RIGHT TO TERMINATE THE
LEASE AND CEASE MAKING LEASE PAYMENTS THEREUNDER.
SEE "SPECIAL CONSIDERATIONS" IN THE PROSPECTUS FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BEFORE PURCHASING THE CERTIFICATES, INCLUDING,
WITHOUT LIMITATION, THE ANNOUNCEMENT BY KMART OF ITS INTENTION TO SELL UP TO A
75% INTEREST IN OFFICEMAX THROUGH AN INITIAL PUBLIC OFFERING OF STOCK THEREIN.
SEE "SPECIAL CONSIDERATIONS -- OPTION OF SUBSIDIARY AND KMART TO TERMINATE LEASE
GUARANTY UNDER CERTAIN CIRCUMSTANCES" IN THE PROSPECTUS.
The Certificates offered by this Prospectus Supplement will constitute
separate Series of Certificates being offered pursuant to the Prospectus of
which this Prospectus Supplement is a part and which accompanies this Prospectus
Supplement. The Prospectus contains material information about this offering
that is not contained herein, and prospective investors are urged to read both
this Prospectus Supplement and the Prospectus in full. Sales of the Certificates
may not be consummated unless the purchaser has received both the Prospectus and
this Prospectus Supplement.
There is currently no secondary market for the Certificates and there can
be no assurance that such a market will develop. See "SPECIAL CONSIDERATIONS" in
the Prospectus.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE> 4
SUMMARY INFORMATION
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the Prospectus. Capitalized terms used herein and not defined herein or in the
Prospectus shall have the respective meanings assigned to them in the "Glossary"
contained in the Prospectus.
CERTIFICATES OFFERED.......... $1,780,000 Mortgage Pass-Through Certificates
Series 1994A-1 will be scheduled to bear
interest at % per annum and $3,711,000
Mortgage Pass-Through Certificates Series
1994A-2 will be scheduled to bear interest at
% per annum. Each Certificate represents a
fractional undivided beneficial ownership
interest in the related Pass-Through Trust
Property. See "THE CERTIFICATES" in the
Prospectus and herein.
DEPOSITOR..................... National Tenant Finance Corporation, a limited
purpose financing corporation.
COMPANY....................... Kmart Corporation. See "KMART" in the
Prospectus.
SUBSIDIARY OfficeMax, Inc. ("OfficeMax" or "Subsidiary").
BOOK-ENTRY FORM;
DENOMINATIONS............... The Certificates will be issued in fully
registered form in minimum denominations of
$1,000 and integral multiples thereof, and will
be registered in the name of Cede & Co. as the
nominee of The Depository Trust Company. No
person acquiring an interest in the
Certificates will be entitled to receive a
Definitive Certificate representing such
person's interest in the related Pass-Through
Trust unless Definitive Certificates are
issued, which will only occur under limited
circumstances. See "THE CERTIFICATES -- Book
Entry Registration" in the Prospectus.
CLOSING DATE.................. On or about November 7, 1994.
REMITTANCE DATES.............. (A) The first Business Day of each November and
May commencing May 1, 1995 and continuing until
the earlier of (i) November 1, 2009 with
respect to Series 1994A-1 and November 1, 2019
with respect to Series 1994A-2 or (ii) the
payment in full of such Series, or (B) such
other date when a distribution is made to the
related Certificateholders as a result of a
prepayment, purchase or liquidation of a
related Mortgage Note.
SCHEDULED PAYMENTS OF
INTEREST...................... Scheduled Payments of interest paid on the
Mortgage Notes held in each Pass-Through Trust
will be passed through to the
Certificateholders of such Pass-Through Trust
on each Remittance Date, until the final
scheduled Remittance Date for such Pass-Through
Trust. Distributions on any regularly scheduled
Remittance Date will include interest paid on
the outstanding Mortgage Notes from and
including the first day of the sixth month
immediately preceding such Remittance Date (or
from and including the Closing Date with
respect to the first Remittance Date) through
the end of the calendar month immediately
preceding such Remittance Date. See "THE
CERTIFICATES -- Distributions of Scheduled
Payments" herein.
S-3
<PAGE> 5
SCHEDULED PAYMENTS OF
PRINCIPAL..................... Scheduled Payments of principal paid on the
Mortgage Notes held in each Pass-Through Trust
will be passed through to the
Certificateholders of each such Pass-Through
Trust in scheduled amounts on the first
Business Day of each November commencing
November 1, 1995 and continuing until November
1, 2009 with respect to Series 1994A-1 and
commencing November 1, 2010 and continuing
until November 1, 2019 with respect to Series
1994A-2. See "THE CERTIFICATES -- Distributions
of Scheduled Payments" herein.
PASS-THROUGH TRUST
AGREEMENTS.................... The Pass-Through Trust Agreements, each dated
as of November 7, 1994, between the Depositor
and the Pass-Through Trustee pursuant to each
of which the related Pass-Through Trusts will
be formed, the related Mortgage Notes will be
held and the related Certificates will be
issued. See "THE TRUSTS, PASS-THROUGH TRUSTS
AND COLLATERAL TRUSTS -- The Trust Agreements
and Pass-Through Trust Agreements" in the
Prospectus and "THE PASS-THROUGH TRUSTS AND THE
COLLATERAL TRUST" herein.
PASS-THROUGH TRUSTEE.......... United States Trust Company of New York, a New
York banking corporation. See "THE PASS-THROUGH
TRUSTS AND THE COLLATERAL TRUST -- The
Pass-Through Trustee and Collateral Trustee"
herein.
COLLATERAL TRUST AGREEMENT.... The Collateral Trust Agreement dated as of
November 7, 1994, between the Depositor and the
Collateral Trustee pursuant to which the
Collateral Trustee will hold the Collateral for
the benefit, pari passu, of the Pass-Through
Trusts. See "THE TRUSTS, PASS-THROUGH TRUSTS
AND COLLATERAL TRUSTS -- The Collateral Trust
Agreements" in the Prospectus and "THE
PASS-THROUGH TRUSTS AND THE COLLATERAL TRUST"
herein.
COLLATERAL TRUSTEE............ United States Trust Company of New York, a New
York banking corporation. See "THE PASS-THROUGH
TRUSTS AND THE COLLATERAL TRUST -- The Pass
Through Trustee and Collateral Trustee" herein.
THE MORTGAGE NOTES............ The aggregate principal amount of the Mortgage
Notes held in the Pass-Through Trust Series
1994A-1 is $1,780,000.00 and such Mortgage
Notes bear interest at % per annum. The
aggregate principal amount of the Mortgage
Notes held in the Pass-Through Trust Series
1994A-2 is $3,711,000.00 and such Mortgage
Notes bear interest at % per annum. The
overdue interest rate applicable to any late
payments is % per annum for the Mortgage
Notes held in the Pass-Through Trust Series
1994A-1 and % per annum for the Mortgage
Notes held in the Pass-Through Trust Series
1994A-2. The interest rate on the Mortgage
Notes held in each Pass-Through Trust will
correspond to the interest rate on the
Certificates evidencing interests in such
Pass-Through Trust. The aggregate principal
amount of such Certificates will equal the
aggregate principal amount of such Mortgage
Notes. See "THE MORTGAGE NOTES, THE LOAN
AGREEMENTS AND RELATED DOCUMENTS" in the
Prospectus and "THE MORTGAGE NOTES" herein.
S-4
<PAGE> 6
LEASES........................ Each Borrower will own one of the commercial
properties identified herein and will lease
such property to the Subsidiary for use as a
retail outlet except as otherwise specified
herein. The primary term of each Lease will
expire on or after maturity of the related
Mortgage Loan unless earlier terminated due to
certain bankruptcy, casualty loss or
condemnation events. The Lease Payments under a
Lease will be scheduled to be in amounts
sufficient to pay Scheduled Payments on the
related Mortgage Notes. Payment of the Lease
Payments will be guaranteed by Kmart pursuant
to a related Lease Guaranty. See "THE LEASES,
THE LEASE GUARANTIES AND RELATED DOCUMENTS" in
the Prospectus and "THE FACILITIES AND THE
LEASES" herein.
RATINGS....................... It is a condition to their issuance that the
Certificates be rated BBB-or better by Standard
& Poor's Ratings Group ("S&P"). See "RATINGS"
herein and "SPECIAL CONSIDERATIONS -- Limited
Nature of Credit Ratings" in the Prospectus.
S-5
<PAGE> 7
USE OF PROCEEDS
The proceeds from the sale of the Certificates will be used to make
Mortgage Loans to the Borrowers (i) to finance the acquisition of and/or to
provide permanent financing for the related Facilities and (ii) for the payment
of a pro rata portion of the costs of issuance of the Certificates. All or a
portion of the amount of each Mortgage Loan, less the respective pro rata share
of the issuance costs, will be used to refinance a short-term loan to the
related Borrower, the proceeds of which funded the construction (in whole or in
part) and/or acquisition of the related Facility. The Subsidiary and Kmart
executed note put agreements in connection with each short-term loan which
entitle the holder of the related promissory note to require the Subsidiary or
Kmart, as the case may be, to purchase the note if it is not paid at maturity.
THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of two separate
Pass-Through Trust Agreements, each providing for the issuance of a single class
of Certificates designated either Mortgage Pass-Through Certificates Series
1994A-1 or Mortgage Pass-Through Certificates Series 1994A-2. The original
principal amount of and interest rate applicable to each Series of Certificates
are shown on the front cover page of this Prospectus Supplement. The summary of
the terms of the Certificates contained herein does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the provisions
of the Pass-Through Trust Agreements. Reference is made to the Prospectus for
additional information regarding the terms and conditions of the Certificates.
The Certificates will be issued in fully registered form. All payments of
principal and interest will be made by or on behalf of the Pass-Through Trustee
to DTC for distribution to Beneficial Owners of the Certificates through DTC
Participants or Indirect Participants. See "THE CERTIFICATES -- Book-Entry
Registration" in the Prospectus.
DISTRIBUTIONS OF SCHEDULED PAYMENTS
Scheduled Payments of interest paid on the Mortgage Notes held by each
Pass-Through Trust will be passed through to the Certificateholders of such
Pass-Through Trust semiannually on each Remittance Date commencing May 1, 1995,
and on the first Business Day of each November and May thereafter until November
1, 2009 with respect to Series 1994A-1 and until November 1, 2019 with respect
to Series 1994A-2.
Scheduled Payments of principal paid on such Mortgage Notes will be passed
through to such Certificateholders on the first Business Day of each November,
commencing November 1, 1995, and continuing until November 1, 2009, with respect
to Series 1994A-1, and commencing November 1, 2010, and continuing until
November 1, 2019, with respect to Series 1994A-2.
S-6
<PAGE> 8
The schedule of interest and principal payments on the Certificates is as
follows:
<TABLE>
<CAPTION>
SERIES 1994A-1 SERIES 1994A-1 SERIES 1994A-2 SERIES 1994A-2
SCHEDULED SCHEDULED SCHEDULED SCHEDULED SCHEDULED
PAYMENT DATE PRINCIPAL PAYMENT INTEREST PAYMENT PRINCIPAL PAYMENT INTEREST PAYMENT
- --------------------------------- ----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
May 1, 1995......................
November 1, 1995.................
May 1, 1996......................
November 1, 1996.................
May 1, 1997......................
November 1, 1997.................
May 1, 1998......................
November 1, 1998.................
May 1, 1999......................
November 1, 1999.................
May 1, 2000......................
November 1, 2000.................
May 1, 2001......................
November 1, 2001.................
May 1, 2002......................
November 1, 2002.................
May 1, 2003......................
November 1, 2003.................
May 1, 2004......................
November 1, 2004.................
May 1, 2005......................
November 1, 2005.................
May 1, 2006......................
November 1, 2006.................
May 1, 2007......................
November 1, 2007.................
May 1, 2008......................
November 1, 2008.................
May 1, 2009......................
November 1, 2009................. *
May 1, 2010......................
November 1, 2010.................
May 1, 2011......................
November 1, 2011.................
May 1, 2012......................
November 1, 2012.................
May 1, 2013......................
November 1, 2013.................
May 1, 2014......................
November 1, 2014.................
May 1, 2015......................
November 1, 2015.................
May 1, 2016......................
November 1, 2016.................
May 1, 2017......................
November 1, 2017.................
May 1, 2018......................
November 1, 2018.................
May 1, 2019......................
November 1, 2019................. *
------- ------- ------- -------
Total.......................
============= ============ ============= ============
</TABLE>
- -------------------------
* Final Scheduled Remittance Date
S-7
<PAGE> 9
OTHER DISTRIBUTIONS
The Certificateholders may receive other distributions in the event that a
Mortgage Note is prepaid or purchased. See "THE CERTIFICATES -- Other
Distributions" in the Prospectus.
THE PASS-THROUGH TRUSTS AND THE COLLATERAL TRUST
GENERAL
The Certificates Series 1994A-1 will be issued pursuant to the Pass-Through
Trust Agreement Series 1994A-1, and the Certificates Series 1994A-2 will be
issued pursuant to the Pass-Through Trust Agreement Series 1994A-2
(collectively, the "Pass-Through Trust Agreements"). Each Pass-Through Trustee
will hold the related Mortgage Notes for the benefit of the Certificateholders
of the related Pass-Through Trust. Pursuant to the Collateral Trust Agreement,
the Collateral Trustee will hold the Collateral for the benefit, pari passu, of
the Pass-Through Trusts. See "THE TRUSTS, PASS-THROUGH TRUSTS AND COLLATERAL
TRUSTS" in the Prospectus. The Depositor will provide to any prospective or
actual Certificateholder, upon written request, a copy (without exhibits) of the
related Pass-Through Trust Agreement and the Collateral Trust Agreement.
Requests should be addressed to National Tenant Finance Corporation, 40 North
Central Avenue, Suite 2700, Phoenix, Arizona 85004, Attention: Secretary.
THE PASS-THROUGH TRUSTEE AND COLLATERAL TRUSTEE
United States Trust Company of New York will act as Pass-Through Trustee of
each Pass-Through Trust and will act as Collateral Trustee of the Collateral
Trust. The mailing address of the corporate trust office of the Pass-Through
Trustee and Collateral Trustee is United States Trust Company of New York, c/o
U.S. Trust Company of California, N.A., Suite 2700, 555 South Flower Street, Los
Angeles, California 90071 Attention: Corporate Trust Division.
THE MORTGAGE NOTES
GENERAL
Each Mortgage Note will be issued pursuant to a Loan Agreement between the
Depositor and a Borrower and will be a non-recourse obligation of such Borrower.
Each Borrower will be a special purpose corporation, limited partnership,
limited liability company or other entity that will not be permitted to have any
significant assets or sources of funds other than the related Mortgage Loan and
the related Facility which will be leased to the Subsidiary. No Borrower will
receive the proceeds of more than one Mortgage Loan or own or lease more than
one Facility. A default under one Mortgage Loan will not constitute a default
under any other Mortgage Loan.
The Mortgage Notes Series 1994A-1 will be held by the Pass-Through Trust
Series 1994A-1 and the Mortgage Notes Series 1994A-2 will be held by the
Pass-Through Trust Series 1994A-2. The maturity date of the Mortgage Notes
Series 1994A-1 is October 31, 2009, which is one day prior to the final
scheduled Remittance Date for the Certificates Series 1994A-1, and the maturity
date of the Mortgage Notes Series 1994A-2 is October 31, 2019, which is one day
prior to the final scheduled Remittance Date for the Certificates Series
1994A-2.
Interest on the Mortgage Notes will be calculated on the basis of a 360-day
year consisting of twelve 30-day months. The Mortgage Notes Series 1994A-1 will
bear interest at % per annum and will have an overdue interest rate
applicable to any late payments of % per annum. The Mortgage Notes Series
1994A-2 will bear interest at % per annum and will have an overdue interest
rate applicable to any late payments of % per annum.
S-8
<PAGE> 10
SCHEDULED PAYMENTS
Interest on the Mortgage Notes is payable semiannually on each Due Date
commencing April 30, 1995, and on the last Business Day of each October and
April thereafter until April 30, 2009 with respect to Series 1994A-1 and until
April 30, 2019 with respect to Series 1994A-2.
Payments of principal on the Mortgage Notes will be made on the last
Business Day of each October, commencing October 31, 1995, and continuing until
October 31, 2009 with respect to Series 1994A-1 and commencing October 31, 2010
and continuing until October 31, 2019 with respect to Series 1992A-2.
PREPAYMENTS AND PURCHASES
The Mortgage Notes are subject to being prepaid or purchased under the
circumstances described in the Prospectus. The Purchase Price for any Mortgage
Note in the event of a prepayment or purchase is the sum of (i) the principal
amount of such Mortgage Note that is to be paid or prepaid ("Called Principal"),
(ii) accrued interest thereon, and (iii) the Make-Whole Premium related thereto,
except in the case of a purchase of the Mortgage Notes as a result of a Rating
Decline or a Restructuring Event (each as defined herein), for which no
Make-Whole Premium is payable. See "THE MORTGAGE NOTES, THE LOAN AGREEMENTS AND
RELATED DOCUMENTS -- Prepayments" and "THE NOTE PUT AGREEMENTS" in the
Prospectus.
The "Make-Whole Premium" means with respect to any amount of Called
Principal of a Mortgage Note, an amount equal to the positive excess, if any, as
of the Purchase Date of the Discounted Prepayment Value of the Called Principal
of such Mortgage Note over such Called Principal.
NOTE PUT AGREEMENTS
The following summary describes certain provisions, in addition to the
provisions described in the Prospectus, of the Note Put Agreements to be entered
into by and among Kmart, the Subsidiary and the Depositor. The summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the provisions of each Note Put Agreement, the form of which (in
substantially the form in which it will be used) has been filed as an exhibit to
the Registration Statement of which this Prospectus Supplement and the
Prospectus are a part.
In addition to the Triggering Events discussed in the Prospectus, each Note
Put Agreement will provide that (i) in the event a Rating Decline occurs, the
Collateral Trustee will have the right to require the Subsidiary, and in the
event of the Subsidiary's failure to do so, to require Kmart, to purchase the
related Mortgage Notes in whole (but not in part) at the Purchase Price, and
(ii) in the event a Restructuring Event occurs, the Collateral Trustee will have
the right to require Kmart to purchase the related Mortgage Notes in whole (but
not in part) at the Purchase Price. Upon the occurrence of a Rating Decline or a
Restructuring Event, the Collateral Trustee will be obligated under the
Collateral Trust Agreement to exercise its rights under the applicable Note Put
Agreement unless, upon (i) the earlier of notice from a 66 2/3 Percentage
Interest or (ii) within 30 days after notice to the Certificateholders with
respect to a Rating Decline and 15 days with respect to a Restructuring Event,
holders of Certificates evidencing not less than a 66 2/3 Percentage Interest
(computed by reference to the outstanding principal amount of all Mortgage Notes
issued pursuant to the applicable Loan Agreement) elect not to exercise such
rights. A Rating Decline and a Restructuring Event will each be included in the
term "Triggering Event" for the purposes of this Prospectus Supplement and under
the related Note Put Agreement.
In the event the Collateral Trustee exercises its rights under the related
Note Put Agreement as a result of a Rating Decline or a Restructuring Event, the
date of sale of the related Mortgage Notes will be not more than 35 Business
Days (in the case of a Rating Decline) or 15 Business Days (in the case of a
Restructuring Event) after the Collateral Trustee is obligated under the terms
of the Collateral Trust Agreement to sell such Mortgages Notes.
Notwithstanding the foregoing notice requirements with respect to a
Restructuring Event, if in the reasonable opinion of Kmart, but without any
express or implied duty of Kmart to conduct any inquiry in such
S-9
<PAGE> 11
regard, a proposed Restructuring will result in a Restructuring Event, then
Kmart will be obligated to purchase the related Mortgage Notes prior to the
consummation of the proposed Restructuring, if such date is known to and/or
within the control of Kmart.
The Purchase Price for a Mortgage Note pursuant to the Note Put Agreement
as a result of a Rating Decline, a Restructuring Event, or Kmart's purchase of
the Mortgage Note as a result of its determination that a Restructuring Event
will occur as a consequence of a proposed Restructuring, will be equal to (i)
the outstanding principal balance of such Mortgage Note, and (ii) accrued
interest thereon. The Purchase Price in such circumstances will not include a
Make-Whole Premium.
A "Rating Decline" has occurred if:
(i) the rating assigned to unsubordinated, senior, unsecured
indebtedness of Kmart on such date by either Moody's or S&P: (a) declines
to a rating below the Minimum Investment Grade, or (b) further declines, in
the event then rated below the Minimum Investment Grade; or
(ii) (a) unsubordinated, senior, unsecured indebtedness of Kmart
ceases to be rated by either Moody's or S&P (other than by reason of such
Rating Agency ceasing to rate the indebtedness of corporations generally)
at such time as the rating then assigned by the remaining such Rating
Agency shall be below Minimum Investment Grade or (b) unsubordinated,
senior, unsecured indebtedness of Kmart ceases to be rated by either
Moody's or S&P at such time as the rating then assigned by the remaining
such Rating Agency shall be at least the Minimum Investment Grade and Kmart
is unable to have such debt rated by another Rating Agency within ninety
(90) days thereafter; or
(iii) unsubordinated, senior, unsecured indebtedness of Kmart ceases
to be rated by both Moody's and S&P for any reason (except if, through no
fault of Kmart, both Moody's and S&P are unable to provide a rating due to
a business failure or interruption affecting both Moody's and S&P).
For purposes of determining whether a Rating Decline shall have occurred
pursuant to clause (i) after the occurrence of an event described in clause
(ii), the rating initially assigned by any Rating Agency engaged by Kmart
pursuant to clause (ii) to replace any rating withdrawn or otherwise terminated
by Moody's or S&P shall be compared to the last rating assigned by Moody's or
S&P, as the case may be, to determine if the circumstances described in (i)(a)
or (b) exist.
"Minimum Investment Grade" means a rating of at least Baa3, in the case of
a rating by Moody's, and a rating of at least BBB-, in the case of a rating by
S&P, or the then equivalent of such rating by Moody's or S&P or, to the extent
applicable, by another Rating Agency.
"Rating Agency" and "Rating Agencies" mean Moody's and S&P and, if either
Moody's or S&P (but not both) ceases to rate the indebtedness of corporations
generally, or unsubordinated, senior, unsecured indebtedness of Kmart in
particular, then another comparable rating agency of recognized national
standing in the United States.
"Restructuring" means (i) any consolidation with or merger into another
corporation by Kmart, or the conveyance, transfer, lease or other disposal by
Kmart of all or substantially all of its assets to another entity, or
consolidation with or merger into Kmart by any corporation, or the sale or
exchange of shares of stock of Kmart for cash or shares of stock or other
securities of any other entity pursuant to a transaction in which a majority of
all classes of voting stock of Kmart is changed into or exchanged for cash,
securities, or other property, (ii) a recapitalization, including any special
dividend and any other extraordinary distribution of assets or obligations of
Kmart or any of its subsidiaries to shareholders of Kmart in an amount
aggregating during any twelve-month period, 25% or more of shareholder's equity
or (iii) any repurchase by Kmart or any of its subsidiaries of 25% or more of
Kmart's outstanding common stock during any twelve-month period.
A "Restructuring Event" has occurred if the consummation of a Restructuring
results in a downgrading of Kmart's unsubordinated, senior, unsecured debt to a
credit rating of less than BB- by S&P or Ba3 by Moody's, or the equivalent, or,
if S&P and Moody's are no longer doing business, by a comparable nationally
recognized rating agency approved by the Certificateholders.
S-10
<PAGE> 12
THE FACILITIES RELATED TO THE MORTGAGE NOTES
The following table sets forth each Facility location, the Subsidiary that
will be leasing such Facility and the principal amount of the related Mortgage
Notes.
<TABLE>
<CAPTION>
LOCATION SUBSIDIARY PRINCIPAL AMOUNT OF MORTGAGE NOTE
OF RELATED LEASING RELATED -------------------------------------
FACILITY FACILITY SERIES 1994A-1 SERIES 1994A-2
- ---------------------------------------------- --------------- -------------- --------------
<S> <C> <C> <C>
1. Mesa, AZ................................... OfficeMax $ 764,000.00 $ 1,593,000.00
2. Orlando, FL................................ OfficeMax 1,016,000.00 2,118,000.00
-------------- --------------
Total.................................... $ 1,780,000.00 $ 3,711,000.00
============ ============
</TABLE>
THE FACILITIES AND THE LEASES
Each Borrower will own a Facility and will lease the Facility to the
Subsidiary for use as a retail outlet. The Lease Payments under a Lease will be
scheduled to be in amounts sufficient to pay Scheduled Payments under the
related Mortgage Notes and will be paid by the Subsidiary directly to the
Collateral Trustee. The primary term of the Leases will commence on the Closing
Date and expire on or after October 31, 2019, in each case unless earlier
terminated as provided in the Lease. See "THE LEASES, THE LEASE GUARANTIES AND
RELATED DOCUMENTS" in the Prospectus.
Certain information regarding each of the Facilities is set forth below:
<TABLE>
<CAPTION>
APPROXIMATE DATE PURPOSE
FACILITY LEASE OF
SIZE LOT SIZE PAYMENTS MORTGAGE
LOCATION SUBSIDIARY (SQ. FT.) (ACRES) COMMENCE LOAN(1)
------------------------------------ ----------- ----------- -------- ------------- --------
<C> <S> <C> <C> <C> <C> <C>
1. Mesa, AZ............................ OfficeMax 23,500 2.2 Closing Date P
2. Orlando, FL......................... OfficeMax 23,500 2.9 Closing Date A,P
</TABLE>
- -------------------------
(1) The related Mortgage Loan will be used to acquire the Facility ("A") and/or
provide permanent financing for the Facility ("P").
FACILITIES FOR WHICH CONSTRUCTION IS COMPLETE
The Note Put Agreements related to the Facilities include only four
Triggering Events, (i) a Lease/Lease Guaranty Default, (ii) a Lease Guaranty
Termination, (iii) Rating Decline and (iv) a Restructuring Event. Construction
of these Facilities is complete and, consequently, the Triggering Event
described in the Prospectus as a result of failure to complete construction by
the Completion Date is inapplicable.
SEPARATE TAX PARCELS
The Mesa, Arizona property is presently taxed along with other property not
owned by the related Borrower and not subject to the lien of the related
Mortgage. Failure of the other property owner to pay its share of taxes for the
larger tax parcel will result in a lien on the related Borrower's property which
is superior to the lien of the related Mortgage. The Borrower has applied to the
appropriate taxing authority for designation of the related Facility as a
separate tax parcel, and the entire tax parcel is subject to a reciprocal tax
agreement pursuant to which each party thereto agrees to pay its respective
share of the entire tax bill.
PLAN OF DISTRIBUTION
Sutro & Co. Incorporated (the "Underwriter") has agreed, on the terms and
conditions of the Underwriting Agreement, dated the date hereof, between the
Underwriter, the Depositor and Kmart (the "Underwriting Agreement") to purchase
the entire principal amount of the Certificates offered hereby if any
S-11
<PAGE> 13
Certificates are purchased. In the event of default by the Underwriter, the
Underwriting Agreement provides that, in certain circumstances, the Underwriting
Agreement may be terminated.
The Depositor will provide in each Loan Agreement with a Borrower that such
Borrower will bear its proportionate share of the costs of issuance of the
Certificates, including (i) the underwriter's discount (i.e., % of the
proceeds of sale of the Certificates, or an aggregate of $ ), (ii) a
shelf expense recovery fee (i.e., one-fourth of 1% of the proceeds of sale of
the Certificates or an aggregate of $ ) to reimburse the Underwriter
for a portion of expenses incurred by it in connection with preparing and filing
the Registration Statement, the exhibits thereto and the Prospectus and (iii)
certain expenses of the offering being made by this Prospectus Supplement (not
to exceed $ in the aggregate); and 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 the Underwriter may withhold
from the proceeds of sale of the Certificates, such Borrower's proportionate
share of the costs of issuance of the Certificates.
The distribution of the Certificates by the Underwriter may be effected
from time to time in one or more negotiated transactions, or otherwise, at
varying prices to be determined, in each case, at the time of sale. The
Underwriter may effect such transactions by selling the Certificates to or
through dealers, and such dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Underwriter. In
connection with the sale of the Certificates, the Underwriter may be deemed to
have received compensation in the form of underwriting compensation. The
Underwriter and any dealers that participate with the Underwriter in the
distribution of the Certificates may be deemed to be underwriters and any
commissions received by them and any profit on the resale of the Certificates by
them may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933.
The Underwriting Agreement provides that Kmart will indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, or contribute to payments the Underwriter may be
required to make in respect thereof.
LEGAL MATTERS
The legality of the Certificates and certain other legal matters will be
passed upon for the Depositor by Squire, Sanders & Dempsey. Certain legal
matters will be passed upon for Kmart by its general counsel and Dickinson,
Wright, Moon, Van Dusen & Freeman, Detroit, Michigan, and for the Underwriter by
Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York. The material
federal income tax consequences of the Certificates will be passed upon by
Squire, Sanders & Dempsey.
RATINGS
It is a condition to the issuance of the Certificates that the Certificates
be rated BBB- or better by S&P. A security rating is not a recommendation to
buy, sell or hold securities and may be subject to revision or withdrawal at any
time by the assigning rating organization. The security rating assigned to the
Certificates should be evaluated independently of similar security ratings
assigned to other kinds of securities. See "SPECIAL CONSIDERATIONS" in the
Prospectus.
S-12
<PAGE> 14
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there by any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED NOVEMBER 1, 1994
PROSPECTUS
$250,000,000
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
-------------------------
The Mortgage Pass-Through Certificates (the "Certificates") offered hereby
and by the related Prospectus Supplements will be offered from time to time in
one or more Series in amounts, at prices and on terms to be determined at the
time of the offering. Capitalized terms used herein and not defined herein shall
have the respective meanings assigned to them in the glossary set forth on pages
53 through 59 of this Prospectus (the "Glossary").
Each Certificate of each Series offered hereby will evidence a fractional
undivided beneficial ownership interest in the assets of a single separate Trust
to be created pursuant to the related Trust Agreement between National Tenant
Finance Corporation, a Delaware corporation (the "Depositor"), and the Trustee
identified in the related Prospectus Supplement. If more than one Series of
Certificates is offered by a related Prospectus Supplement, each such Series
will be issued pursuant to a single separate Trust.
The Trust Property of each Trust will include, but not be limited to, one or
more Mortgage Notes (each, a "Mortgage Note," and collectively, the "Mortgage
Notes"). Generally, each such Mortgage Note will evidence the non-recourse
obligation of a Borrower under a Loan Agreement between such Borrower and the
Depositor pursuant to which the Depositor will loan a portion of the proceeds of
the offering of the related Series of Certificates to such Borrower (i) to
finance the acquisition or the acquisition and construction of, or to provide
permanent financing for, a facility described in the Prospectus Supplement (a
"Facility") which will be leased for use as a retail store to a tenant
("Tenant") which will be
KMART CORPORATION
("Kmart") or a subsidiary (a "Subsidiary") of Kmart identified in the Prospectus
Supplement and (ii) to pay a pro rata portion of the costs of issuance of the
Certificates.
The Trust Property will generally also include, with respect to each
Facility, the following Collateral for the related Mortgage Note(s): (i) a
Mortgage on such Facility securing each such Mortgage Note; (ii) all of the
Depositor's rights under the Loan Agreement pursuant to which the related
Mortgage Note(s) were issued; (iii) an assignment of the related Lease, Lease
Payments and (if the Tenant is a Subsidiary) Lease Guaranty; (iv) a pledge of
certain moneys held in certain funds established pursuant to the Trust
Agreement, or Collateral Trust Agreement, if applicable; (v) a Note Put
Agreement requiring the Tenant and Kmart (if the Tenant is a Subsidiary) to
purchase the related Mortgage Note(s) upon the occurrence of a Triggering Event;
(vi) an assignment of the Borrower's right, title and interest in and to any
Construction Fund Disbursement Agreement and Construction Fund Disbursement
Agreement-Common Area related to such Facility; (vii) a pledge of certain
investments of fund balances held in the Trust, or the Collateral Trust if
applicable, and income earned thereon; and (viii) any other Loan Documents.
In some cases a Loan Agreement may provide that a Mortgage Loan will be
evidenced by two or more Mortgage Notes having different maturities. In such
event, (i) each such Mortgage Note (and, if Mortgage Notes of different
maturities are issued pursuant to two or more Loan Agreements, all of such
Mortgage Notes having the same maturity) will be held by a separate Pass-Through
Trust, and, in the case of Mortgage Notes issued under two or more Loan
Agreements, 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 or the 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.
Scheduled Payments on the Mortgage Notes will be passed through to the
Certificateholders of each Trust on the dates and in the amounts set forth in
the related Prospectus Supplement until the final scheduled Remittance Date for
such Trust. The maturity date of the Mortgage Notes acquired by each Trust will
correspond to the final scheduled Remittance Date applicable to the Certificates
evidencing interests in such Trust. Each Trust will acquire Mortgage Notes
having an interest rate corresponding to the interest rate on the Certificates
evidencing interests in such Trust. The aggregate principal amount of the
Certificates evidencing interests in each Trust will be equal to the aggregate
principal amount of the Mortgage Notes held in such Trust.
The Prospectus Supplement relating to a Series of Certificates will set
forth, among other things, the following information if applicable to such
Series: (i) the aggregate principal amount, interest rate and authorized
denominations of such Certificates, (ii) certain information concerning the
Mortgage Notes and the nature of the related Facilities, (iii) the Remittance
Dates on which periodic distributions will be made to Certificateholders, and
(iv) additional information with respect to the plan of distribution of such
Certificates. The Prospectus Supplement will also set forth whether the Mortgage
Note(s) have the same maturity, in which case the Collateral will be held by the
related Trust, or whether the Mortgage Notes have different maturities, in which
case the Collateral will be held by the related Collateral Trust.
ALTHOUGH LEASE PAYMENTS IN AMOUNTS NECESSARY TO PERMIT THE TIMELY PAYMENT OF
THE REGULARLY SCHEDULED INSTALLMENTS OF PRINCIPAL OF AND INTEREST ON THE
MORTGAGE NOTE(S) WILL BE A DIRECT OBLIGATION OF A TENANT, WHICH LEASE PAYMENTS
WILL BE GUARANTEED BY KMART IF IT IS NOT THE TENANT, NEITHER THE CERTIFICATES
NOR THE MORTGAGE NOTES WILL REPRESENT AN INTEREST IN OR A DIRECT OBLIGATION OF,
OR BE GUARANTEED BY, KMART, ANY SUBSIDIARY, ANY TRUSTEE, ANY PASS-THROUGH
TRUSTEE, ANY COLLATERAL TRUSTEE, ANY BORROWER OR THE DEPOSITOR.
THE CERTIFICATES WILL REPRESENT AN INTEREST IN THE RELATED TRUST ONLY, AND
WILL NOT BE GUARANTEED BY ANY GOVERNMENTAL AGENCY OR DEPARTMENT, OR BY THE
DEPOSITOR, KMART, ANY SUBSIDIARY, THE TRUSTEE, THE COLLATERAL TRUSTEE, THE
PASS-THROUGH TRUSTEE, OR BY ANY OF THEIR RESPECTIVE AFFILIATES, OR BY ANY OTHER
PERSON OR ENTITY.
SEE "SPECIAL CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BEFORE PURCHASING THE CERTIFICATES OF ANY SERIES.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
-------------------------
The Certificates are offered when, as and if delivered to and accepted by
Sutro & Co. Incorporated and the other underwriters, if any, subject to prior
sale, withdrawal or modification of the offer without notice, the approval of
counsel and other conditions. Retain this Prospectus for future reference. This
Prospectus may not be used to consummate sales of the Certificates offered
hereby unless accompanied by a Prospectus Supplement.
SUTRO & CO. INCORPORATED
THE DATE OF THIS PROSPECTUS IS NOVEMBER , 1994
<PAGE> 15
AVAILABLE INFORMATION
Kmart Corporation ("Kmart" or the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 7 World Trade Center, 13th Floor, New York, New
York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 upon
payment of prescribed rates. Kmart's common stock is listed on the New York
Stock Exchange, the Chicago Stock Exchange and the Pacific Stock Exchange. Such
reports, proxy statements and other information can also be inspected and copied
at the New York Stock Exchange, 20 Broad Street, 7th Floor, New York, New York
10005.
Kmart has filed with the Commission a registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Certificates. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. The Registration Statement may be inspected without charge at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies thereof may be obtained from
the Commission upon payment of prescribed rates.
-------------------------
REPORTS TO CERTIFICATEHOLDERS
The Trustee will furnish to Certificateholders of each Series periodic
statements containing information with respect to principal and interest
distributions on the Certificates of that Series. Any financial information
contained in such reports will not have been examined or reported upon by an
independent public accountant. See "THE TRUSTS, PASS-THROUGH TRUSTS AND
COLLATERAL TRUSTS -- The Trust Agreements and Pass-Through Trust Agreements --
Reports to Certificateholders." Unless and until Definitive Certificates are
issued, such statements will be sent to Cede & Co., the nominee of The
Depository Trust Company, as registered holder of the Certificates. See "THE
CERTIFICATES -- Book-Entry Registration."
-------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-327) pursuant
to the Exchange Act are incorporated or deemed to be incorporated herein by
reference.
1. The Company's Annual Report on Form 10-K for the fiscal year ended
January 26, 1994, its Quarterly Report on Form 10-Q for the quarter ended
April 27, 1994, its Quarterly Report on Form 10-Q for the quarter ended
July 27, 1994, its Form 8-K filed on June 8, 1994, and its Form 8-K filed
on August 19, 1994; and
2. All other documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the
Certificates.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for all purposes to the extent that a statement contained in any other
subsequently filed document which is also, or is deemed to be, incorporated by
reference, modifies or replaces such statement. Any such statement so modified
or superseded shall not be deemed to constitute a part of this Prospectus,
except as so modified or superseded.
The Company will provide without charge to each person to whom this
Prospectus has been delivered, on written or oral request of such person, a copy
(without exhibits, unless such exhibits are specifically incorporated by
reference into such document(s)) of any or all documents incorporated by
reference in this Prospectus. Requests for such copies should be addressed to
Kmart Corporation, Corporate Reporting Department, 3100 West Big Beaver Road,
Troy, Michigan 48084, telephone number (810) 643-1093.
2
<PAGE> 16
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to detailed
information appearing elsewhere in, or incorporated by reference in, this
Prospectus and by reference to the information with respect to each Series of
Certificates contained in the related Prospectus Supplement and in the Trust
Agreement, the Pass-Through Trust Agreement, the Collateral Trust Agreement, if
applicable, the Mortgage Note(s) and the Loan Documents with respect to such
Series. The forms of the Trust Agreement, the Pass-Through Trust Agreement, the
Collateral Trust Agreement and certain of the Loan Documents, each in
substantially the form in which it will be used, have been filed as exhibits to
the Registration Statement of which this Prospectus is a part.
Capitalized terms used herein and not defined herein shall have the
respective meanings assigned to them in the Glossary.
CERTIFICATES OFFERED. . . . . . Mortgage Pass-Through Certificates (the
"Certificates"), issuable in Series, all as
more fully described in the related Prospectus
Supplement. The Certificates of each Series
will represent fractional undivided beneficial
ownership interests in a single separate Trust
established for the benefit of the
Certificateholders of such Series. If more than
one Series is offered by a related Prospectus
Supplement, such Series will be issued pursuant
to separate Trusts and each Certificate will
represent a fractional undivided beneficial
ownership interest in one of such separate
Trusts. Each Certificate will evidence 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 Trust
Property held in any other Trust. The
Certificates will mature on the date specified,
and will be subject to prepayment
distributions, as described herein, as a
consequence of the prepayment, sale or other
liquidation of the Mortgage Note(s) held by the
related Trust. See "THE CERTIFICATES."
BOOK-ENTRY REGISTRATION . . . . The Certificates will be issued in
fully-registered form only and in denominations
of $1,000 or integral multiples thereof unless
otherwise specified in the related Prospectus
Supplement. Each Series will be represented by
one or more global Certificates registered in
the name of Cede & Co. as the nominee of The
Depository Trust Company. No person acquiring
an interest in the Certificates of such Series
will be entitled to receive a Definitive
Certificate representing such person's interest
in the related Trust, except in the event that
Definitive Certificates are issued under the
limited circumstances described herein. See
"THE CERTIFICATES -- Book-Entry Registration."
DISTRIBUTIONS . . . . . . . . . Distributions from funds held in the
Certificate Account established pursuant to
each Trust Agreement will be made by the
Trustee to the Certificateholders to pay Debt
Service on the Remittance Dates specified in
the related Prospectus Supplement. Interest
will be paid on each Certificate at the rate of
interest specified in the related Prospectus
Supplement and will be calculated on the basis
of a 360-day year consisting of twelve 30-day
months. See "THE CERTIFICATES -- Distribution
of Scheduled Payments."
THE COMPANY . . . . . . . . . . Kmart is one of the world's largest
mass-merchandise retailers. The Subsidiaries
consist of five companies which are
subsidiaries of
3
<PAGE> 17
Kmart: Borders, Inc., which operates large
format book superstores; Walden Book Company
Inc., which operates mall-based bookstores;
Builders Square, Inc., which operates home
improvement superstores; OfficeMax Inc., which
operates office supply superstores; and The
Sports Authority, Inc., which operates large
format sporting goods megastores. See "KMART."
DEPOSITOR The Depositor is a limited purpose finance
corporation formed solely for the purpose of
facilitating the financing and sale of mortgage
loans. See "THE DEPOSITOR."
THE TRUSTS, PASS-THROUGH
TRUSTS AND COLLATERAL TRUSTS Each Series of Certificates will be issued
pursuant to a Trust Agreement between the
Depositor and the Trustee identified in the
related Prospectus Supplement. Each Trust will
hold one or more Mortgage Notes, evidencing one
or more Mortgage Loans.
Each Mortgage Loan will be made to a separate
Borrower, pursuant to a separate Loan
Agreement, and with respect to a separate
Facility. If the Loan Agreement(s) provide for
Mortgage Loan(s) evidenced by Mortgage Note(s)
of one maturity, then, pursuant to a single
Trust Agreement, the Depositor will convey to
the Trustee, without recourse, all of its
right, title and interest in and to such
Mortgage Loan(s) and the related Mortgage
Note(s) and Loan Documents. If the Loan
Agreement(s) provide for Mortgage Notes having
different maturities, then (i) all of such
Mortgage Notes having the same maturity will be
conveyed to a separate Trust ("Pass-Through
Trust") which will be established pursuant to a
form of Trust Agreement sometimes referred to
herein as a "Pass-Through Trust Agreement" and
(ii) the Collateral for all of the Mortgage
Notes issued pursuant to such Loan Agreement(s)
will be conveyed by the Depositor to a single
Collateral Trust pursuant to a Collateral Trust
Agreement for the benefit, pari passu, of all
Pass-Through Trusts holding any of the Mortgage
Notes secured by such Collateral. If the
Mortgage Notes are issued pursuant to more than
one Loan Agreement, the Mortgage Notes relating
to separate Loan Agreements will not be
cross-collateralized or subject to
cross-default provisions. See "THE TRUSTS,
PASS-THROUGH TRUSTS AND COLLATERAL TRUSTS."
The maturity date of the Mortgage Notes
acquired by each Trust will correspond to the
final scheduled Remittance Date applicable to
the Certificates evidencing interests in such
Trust. Each Trust will acquire Mortgage Notes
having an interest rate corresponding to the
interest rate on the Certificates evidencing
interests in such Trust. The aggregate
principal amount of the Certificates evidencing
interests in each Trust will be equal to the
aggregate principal amount of the Mortgage
Notes held in such Trust.
The Trust Property held by either the Trust or
the Collateral Trust will generally also
include, with respect to each Facility, the
following Collateral for the related Mortgage
Note(s): (i) a Mortgage on such Facility; (ii)
all of the Depositor's rights under the Loan
Agreement pursuant to which the related
Mortgage Note(s) were issued; (iii) an
assignment of the related Lease,
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<PAGE> 18
Lease Payments and, if the related Tenant is a
Subsidiary, Lease Guaranty; (iv) a pledge of
certain moneys held in certain funds
established pursuant to the Trust Agreement, or
Collateral Trust Agreement if applicable, (v) a
Note Put Agreement requiring the Tenant and
Kmart (if the Tenant is a Subsidiary) to
purchase the related Mortgage Note(s) upon the
occurrence of a Triggering Event; (vi) an
assignment of the Borrower's right, title and
interest in and to any Construction Fund
Disbursement Agreement and any Construction
Fund Disbursement Agreement-Common Area related
to such Facility; (vii) a pledge of certain
investments of fund balances held in the Trust
or the Collateral Trust, if applicable, and
income earned thereon; and (viii) any other
Loan Documents. See "STRUCTURE OF THE
FINANCINGS" and "THE TRUSTS, PASS-THROUGH
TRUSTS AND COLLATERAL TRUSTS."
MORTGAGE NOTES Each Mortgage Note will evidence the
non-recourse obligation of a Borrower under a
Loan Agreement between such Borrower and the
Depositor pursuant to which the Depositor will
loan a portion of the proceeds of the offering
of the related Series of Certificates to such
Borrower to (i) finance the acquisition or the
acquisition and construction of, or to provide
permanent financing for, a Facility which will
be leased to a Tenant and (ii) pay a pro rata
portion of the costs of issuance of the
Certificates. Scheduled Payments on the
Mortgage Notes will be passed through to the
Certificateholders of each Trust on the dates
set forth in the related Prospectus Supplement
until the final scheduled Remittance Date for
such Trust. The Mortgage Notes will be subject
to prepayment prior to maturity as described
herein. Although the Mortgage Note(s) will not
be a direct obligation of, or guaranteed by,
Kmart or a Subsidiary, Lease Payments payable
by the Tenant of the related Facility (the
payment of which will be guaranteed by Kmart if
a Subsidiary is the Tenant), together with any
payments to be made from funds on deposit in
any related Capitalized Debt Service Account,
will be scheduled to be sufficient to pay the
Scheduled Payments on the Mortgage Notes which,
in turn, will be scheduled to be sufficient to
pay Debt Service on the Certificates. See "THE
MORTGAGE NOTES, THE LOAN AGREEMENTS AND RELATED
DOCUMENTS."
NOTE PUT AGREEMENT Kmart, a Subsidiary (if it is the Tenant) and
the Depositor will enter into a Note Put
Agreement with respect to each Mortgage Loan.
Unless otherwise disclosed in the related
Prospectus Supplement, each Note Put Agreement
will provide that, in the event (a)(i) a Tenant
fails to pay when due any Lease Payment within
10 days (or 30 days if the Tenant is Kmart)
after notice to the Tenant of such default and
(ii) if the Tenant is a Subsidiary, Kmart fails
to pay any such Lease Payment within 30 days
after notice to Kmart of such Subsidiary's
failure to do so (which notice may be given
concurrently with the corresponding notice to
such Subsidiary), (b) completion of
construction of the Facility to be leased to
the Tenant does not occur prior to the
Completion Date, or (c) if the Tenant is a
Subsidiary, a Lease Guaranty Termination occurs
(each, a Triggering Event), the Trustee, or the
Collateral Trustee if applicable, will have the
right to require the Tenant,
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and in the event of the Tenant's failure to do
so when the Tenant is a Subsidiary, to require
Kmart to purchase the related Mortgage Note(s)
in whole (but not in part) at the Purchase
Price (which Purchase Price will include the
Make-Whole Premium, unless otherwise disclosed
in the related Prospectus Supplement). In the
event the Trustee, or the Collateral Trustee if
applicable, exercises such right, the Purchase
Price will be deposited with the Trustee, or
initially with the Collateral Trustee if
applicable, and on the next Business Day with
the Pass-Through Trustee, and such amount, less
any costs and expenses incurred by the Trustee,
the Pass-Through Trustee or the Collateral
Trustee in connection with the exercise of
their rights under the Note Put Agreement, will
be distributed to the related
Certificateholders. If the Trust holds no other
Mortgage Notes, such distribution will be the
final distribution with respect to that Series
of Certificates. If the Trust holds other
Mortgage Notes, subsequent Debt Service on the
Certificates will be adjusted as provided in
the Trust Agreement. All of the Depositor's
right, title and interest in and to the Note
Put Agreement will be assigned to the Trustee,
or to the Collateral Trustee if applicable. See
"THE NOTE PUT AGREEMENTS."
LEASE Each Facility will be leased to a Tenant by the
related Borrower. The term of each Lease,
excluding renewal or extension terms, will
expire on or after maturity of the related
Mortgage Loan unless earlier terminated due to
certain bankruptcy, casualty loss or
condemnation events. Lease Payments will be
scheduled to be in amounts sufficient to pay
the Scheduled Payments on the related Mortgage
Notes, and such Scheduled Payments will be
scheduled to be in amounts sufficient to pay
Debt Service on the related Certificates. The
Lease Payments will be made by the related
Tenant directly to the Trustee or, if Mortgage
Notes of different maturities are issued by the
related Borrower, to the Collateral Trustee.
The obligation of the Tenant to make Lease
Payments will commence on the date the related
Mortgage Loan is made, if no construction of
the Facility is required, or, if construction
of the Facility is required, on the date
specified in the Lease regardless of whether
construction has been completed. All of the
Borrower's right, title and interest in and to
the Lease will be assigned to the Trustee, or
the Collateral Trustee if applicable. See "THE
LEASES, LEASE GUARANTIES AND RELATED DOCUMENTS"
and "THE MORTGAGE NOTES, THE LOAN AGREEMENTS
AND RELATED DOCUMENTS -- The Assignments of
Leases and Rents."
LEASE GUARANTY Kmart will enter into a Lease Guaranty with
respect to each Facility leased by a Borrower
to a Subsidiary. Pursuant to such Lease
Guaranty, Kmart will guarantee to the Borrower
the full and punctual payment, performance and
observance by the related Subsidiary of all of
the terms, conditions, covenants and
obligations to be performed and observed by the
Subsidiary under the related Lease. Except for
Kmart's and the Subsidiary's right to terminate
the Lease Guaranty in certain specific
circumstances stated in the Lease Guaranty, the
liability of Kmart under the Lease Guaranty
will be irrevocable so long as the Lease is not
terminated as
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<PAGE> 20
permitted in the Lease. All of the Borrower's
right, title and interest in and to the Lease
Guaranty will be assigned to the Trustee, or
the Collateral Trustee if applicable. See "THE
LEASES, THE LEASE GUARANTIES AND RELATED
DOCUMENTS -- The Lease Guaranty Agreements" and
"THE MORTGAGE NOTES, THE LOAN AGREEMENTS AND
RELATED DOCUMENTS -- The Assignments of Leases
and Rents."
FEDERAL INCOME TAX
CONSEQUENCES A Trust should be classified as a grantor trust
and not as an association taxable as a
corporation for federal income tax purposes.
Each Beneficial Owner will be treated as the
owner of a fractional undivided interest in the
Trust Property and, as such, will be required
to report a pro rata share of the income of
such Trust on its federal income tax return in
accordance with such Beneficial Owner's method
of accounting. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES."
ERISA CONSIDERATIONS A fiduciary of any employee benefit plan
subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or
the Internal Revenue Code of 1986, as amended
(the "Code"), should review carefully with its
legal counsel whether the purchase or holding
of the Certificates could give rise to a
transaction prohibited or otherwise not
permissible under ERISA or the Code. See "ERISA
CONSIDERATIONS."
LEGAL INVESTMENT Institutions whose investment authority is
subject to review by federal or state
regulatory authorities should consult with
their counsel or the applicable authorities to
determine whether and to what extent the
Certificates constitute legal investments for
them. The Certificates will not constitute
"mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act
of 1984, as amended. See "LEGAL INVESTMENT
CONSIDERATIONS."
USE OF PROCEEDS The proceeds from the sale of each Series of
Certificates will be used by the Depositor to
make Mortgage Loans to Borrowers to (i) finance
the acquisition or acquisition and construction
of, or to provide permanent financing for,
Facilities and (ii) pay a pro rata portion of
the costs of issuance of the Certificates. In
the case of Mortgage Loans made to finance the
construction of Facilities, a portion of the
Mortgage Loan proceeds will be deposited in a
Capitalized Debt Service Account maintained in
a Trust or Collateral Trust, if applicable. See
"USE OF PROCEEDS."
RATING Unless otherwise specified in the related
Prospectus Supplement, each Series of
Certificates offered by means of this
Prospectus and the related Prospectus
Supplement will have an Investment Grade Rating
from the rating agency or rating agencies
identified in such Prospectus Supplement. See
"SPECIAL CONSIDERATIONS -- Limited Nature of
Credit Ratings."
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<PAGE> 21
SPECIAL CONSIDERATIONS
Investors should consider, among other things, the following factors in
connection with the purchase of Certificates.
NON-RECOURSE OBLIGATIONS OF SPECIAL PURPOSE BORROWER; RELIANCE ON LEASE PAYMENTS
Each Borrower will be a special purpose entity without assets other than
the related Facility and its interest as landlord under the related Lease, and
the related Mortgage Note(s) will be non-recourse obligation(s) of such
Borrower. Accordingly, the only source of payments under, or with respect to,
any Mortgage Note will be the related Lease Payments (which will be guaranteed
by Kmart if the Tenant is a Subsidiary), the proceeds of any foreclosure of the
related Facility, the right, under certain circumstances, to sell such Mortgage
Note to the related Tenant or to Kmart (if the Tenant is a Subsidiary) pursuant
to the related Note Put Agreement, and, under certain other circumstances,
Insurance Proceeds or Condemnation Proceeds payable in respect of such Facility.
Although the Lease Payments under each Lease, together with amounts in the
related Capitalized Debt Service Account, if any, will be scheduled to be in
amounts sufficient to pay the Scheduled Payments under the related Mortgage
Note(s), there can be no assurance, in the event of a default under such Lease
and the related Lease Guaranty and Note Put Agreement, or a termination of such
Lease in connection with a casualty, condemnation or Borrower bankruptcy, that
the value of the related Facility, and, if applicable, the amount of Insurance
Proceeds or Condemnation Proceeds, will be sufficient to permit the payment in
full of all amounts due under the Mortgage Note(s), or that Insurance Proceeds
or Condemnation Proceeds will be received in time to make Scheduled Payments on
the dates when due.
OPTION OF TENANT TO TERMINATE LEASE UNDER CERTAIN CIRCUMSTANCES
Each Lease will provide that in the event that all of the related Facility
is permanently expropriated, the Lease will automatically terminate. If (i) the
points of ingress and egress to the public roadways are materially impaired by a
permanent expropriation by a public or quasi-public authority (with no
reasonable replacement points of ingress and egress provided) so as to render
such Facility unsuitable for its intended use, (ii) less than the whole, but
more than 10% or such other higher percentage specified in the Prospectus
Supplement, of the square footage of the building or land constituting the
Facility is permanently expropriated by public or quasi-public authority, or
(iii) damage or destruction to the Facility takes place within two years prior
to the expiration date of the initial term of the Lease and the cost of
restoration exceeds 50% of the fair market value of the Facility immediately
prior to the time such damage or destruction took place, the Tenant will have
the right to terminate the Lease. If the Lease automatically terminates or the
Tenant exercises its right to terminate the Lease, the Tenant will have no
further obligation to make Lease Payments, the related Lease Guaranty (if the
Tenant is a Subsidiary) will be terminated, and the related Mortgage Note(s)
will automatically become due and payable, together with accrued but unpaid
interest and the Make-Whole Premium. Such termination of the Lease and Lease
Guaranty (if the Tenant is a Subsidiary) and the acceleration of the maturity of
the related Mortgage Note(s) will not give the Trustee or Collateral Trustee, if
applicable, the right to sell such Mortgage Note(s) under the related Note Put
Agreement. Accordingly, the only source from which to pay the amounts due under
such Mortgage Note(s) will be any Condemnation Proceeds or Insurance Proceeds
and the proceeds of foreclosure or other sale. There can be no assurance that
such proceeds will be sufficient to pay all amounts then due under the Mortgage
Note(s), although, in the case of a termination resulting from damage or
destruction during the last two years of the term of the Lease, the resulting
Insurance Proceeds may, in light of the fact that each Mortgage Note fully
amortizes during its term, be sufficient to pay all amounts due under such
Mortgage Note, except in the case of extraordinary devaluation of the Facility
during the term of such Mortgage Note.
OPTION OF SUBSIDIARY AND KMART TO TERMINATE LEASE GUARANTY UNDER CERTAIN
CIRCUMSTANCES
Each Lease Guaranty will provide that at the option of the related
Subsidiary and Kmart, the obligations of Kmart under the Lease Guaranty may be
terminated upon the occurrence of any of the following events: (a) the related
Subsidiary achieves Investment Grade Status without regard to Kmart's credit
rating, (b) the related Lease is assigned to a third party and such third party,
or an affiliate of such third party which has
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<PAGE> 22
guaranteed such third party's obligations under the related Lease, has achieved
or subsequently achieves Investment Grade Status, or (c) more than 50% of the
issued and outstanding capital stock of the related Subsidiary is acquired by a
third party and such third party, or affiliate thereof, which has guaranteed the
Subsidiary's obligations under the related Lease, has achieved or subsequently
achieves Investment Grade Status. Termination of the Lease Guaranty as a result
of either (a), (b) or (c) above constitutes a Triggering Event pursuant to the
related Note Put Agreement and unless the holders of Certificates evidencing not
less than a 66 2/3% Percentage Interest in the related Mortgage Note(s) direct
the Trustee not to exercise its rights under the Note Put Agreement, the related
Subsidiary, or upon the failure of the Subsidiary to do so, Kmart must purchase
the related Mortgage Note(s). A Make-Whole Premium is payable in connection with
any such purchase. In the event the Trustee is directed by 66 2/3% Percentage
Interest of holders of Certificates not to exercise its rights under the Note
Put Agreement, and the long-term unsecured debt rating of the (i) Subsidiary or
(ii) third party assignee and the new guarantor is lower than the long-term
unsecured debt rating of Kmart, the Investment Grade Rating of the Certificates
will be downgraded to the greater of the Investment Grade Rating of such
Subsidiary or third party assignee or of the new guarantor.
Although registration statements were filed with the Securities and
Exchange Commission (i) on August 31, 1994 for an initial public offering of a
majority interest in the common shares of OfficeMax and (ii) on September 1,
1994 for an initial public offering of a majority interest in the common shares
of The Sports Authority and Kmart has announced plans to sell a majority
interest in Borders/Walden through an initial public offering of stock, it is
not likely that the proposed offerings, if completed, will have an adverse
effect on the Certificateholders. The related Lease Guaranties may be terminated
as a result of any such sale only if a single investor, or affiliate thereof,
which is investment grade rated purchases 51% of the stock of the Subsidiary and
Kmart and the Subsidiary elect to terminate the related Lease Guaranties. See
"THE LEASES, THE LEASE GUARANTIES AND RELATED DOCUMENTS -- The Lease Guaranty
Agreements" and "THE NOTE PUT AGREEMENTS."
BANKRUPTCY
In the event that a bankruptcy petition should be filed by or against a
Borrower under the Bankruptcy Code, the rights of Certificateholders may be
adversely affected as a result of the Borrower's exercise of certain rights and
remedies available to a debtor-in-possession under the Bankruptcy Code. If a
Borrower is in bankruptcy and rejects the related Lease, the related Consent and
Agreement will require the related Tenant to elect under Section 365(h) of the
Bankruptcy Code to remain in possession of the Facility, and to continue making
Lease Payments, for the remaining term of the Lease. However, if notwithstanding
such election, the Tenant is deprived of possession of the Facility as a result
of the Lease having been rejected by such Borrower in the bankruptcy proceeding,
such Tenant and Kmart (if the Tenant is a Subsidiary) will have no further
obligation to make Lease Payments or any further obligations under such Lease,
the related Lease Guaranty or the related Note Put Agreement.
In the event that a Tenant should become the subject of a bankruptcy
proceeding, such Tenant as a debtor-in-possession, or its bankruptcy trustee,
may reject the related Lease, thereby leaving the Borrower with an unsecured
claim for damages limited to an amount equal to the rent reserved under such
Lease, without acceleration, for the greater of one year or 15 percent (not to
exceed three years) of the remaining term of such Lease (plus rent already due
but unpaid). Alternatively, such Lease may be recharacterized by the bankruptcy
court as a secured loan to such Tenant, thereby subjecting the Borrower (and,
indirectly, the Trustee or Collateral Trustee) to certain risks associated with
being a secured creditor of such Tenant. In the event of bankruptcy proceedings
instituted by or against a Subsidiary which is a Tenant, Kmart would continue to
be obligated under the related Lease Guaranty for the payment of the
Subsidiary's obligations under the Lease, and Kmart would remain obligated under
the Note Put Agreement to purchase the related Mortgage Note(s) upon the
occurrence of a Triggering Event. See "CONSEQUENCES OF BANKRUPTCY OF A TENANT OR
A BORROWER."
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<PAGE> 23
LIMITED LIQUIDITY
There can be no assurance that a secondary market for the Certificates of
any Series will develop or, if it does develop, that it will provide
Certificateholders with liquidity of their investment or will continue for the
life of the Certificates. In addition, the market value of Certificates of each
Series will fluctuate with changes in prevailing interest rates. Consequently,
sale of the Certificates in any secondary market which may develop may be at a
discount from par value or from their purchase price. Certificateholders have no
optional redemption rights.
LIMITED NATURE OF CREDIT RATINGS
Any rating assigned to the Certificates by a rating agency will reflect
only such rating agency's assessment of the likelihood that timely distributions
will be made with respect to such Certificates. Such rating will not constitute
an assessment of the risk that the Leases will be terminated, or of the
likelihood that principal prepayments on the Mortgage Notes comprising part of
the Trust Property will be made by Borrowers, or address the effect of any
Make-Whole Premium on the anticipated yield for any Series. As a result, such
rating will not address the possibility that a prepayment of a Mortgage Loan may
cause such investor to experience a lower than anticipated yield.
Kmart will be either the Tenant under, or (unless the guaranty is
terminated as described above) the guarantor of, all of the Leases, and, as
such, may become the ultimate source of payment on the Mortgage Loans and,
therefore, the ultimate source of payments on the Certificates. Because of this
dependence upon Kmart for the ultimate payment of the Certificates, the ratings
on the Certificates are directly related to the credit of Kmart. It should,
therefore, be expected that a reduction or withdrawal of the debt ratings of
Kmart will adversely affect the ratings on the Certificates. The long-term
unsecured debt obligations of Kmart are currently rated "BBB+" by S&P, "A3" by
Moody's and "A-" by Duff & Phelps Credit Rating Co.
KMART
BACKGROUND
Kmart Corporation ("Kmart" or "Company") is one of the world's largest mass
merchandise retailers. The dominant portion of Kmart's business consists of the
Kmart Group which as of January 26, 1994 operated a chain of 2,323 Kmart
discount stores with locations in each of the 50 United States and Puerto Rico.
The Kmart Group's international operations consisted primarily of 127 Kmart
stores in Canada and 13 department stores located in the Czech Republic and
Slovakia as of January 26, 1994. The Central European stores were acquired in
mid-1992 and represent Kmart's entry into that market. Kmart is developing
advanced distribution methods and merchandising skills to modernize, refurbish
and streamline operations in the two Central European countries. As part of its
international expansion strategy, the Kmart Group has formed joint ventures in
Mexico and Singapore and expects to open stores in those countries in 1994.
Kmart also holds significant equity interest in Coles Myer Ltd., Australia's
largest retailer, and substantially all of the Meldisco subsidiaries of Melville
Corporation, which operate the footwear departments in domestic Kmart stores.
The Kmart Group also includes the operations of PayLess Drug Stores Northwest,
Inc., which was sold in the first quarter of 1994, and PACE Membership
Warehouse, Inc., substantially all of the assets of which were sold in January
1994, each of which has been presented as a discontinued operation in the
Company's consolidated financial statements.
Kmart's Specialty Retail Groups consist of the Borders-Walden Group, the
Builders Square Group, the OfficeMax Group and The Sports Authority Group. The
Borders-Walden Group is a leading book retailer in the United States, and is
comprised of the Company's Borders, Inc. ("Borders") and Walden Book Company,
Inc. ("Walden") subsidiaries. As of January 23, 1994, Borders operated 44 large
format superstores in 22 states and the District of Columbia, each of which is
designed to be the premier book retailer in its market, and Walden, which is the
largest operator of mall-based bookstores in the United States, operated 1,159
book stores in 50 states and the District of Columbia. Although Borders and
Walden will continue to operate independently, Borders and Walden recently have
been combined under common executive leadership in order to realize synergies in
certain areas, including in the development of inventory control systems and in
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<PAGE> 24
merchandise distribution. The Builders Square Group, comprised of the Company's
Builders Square, Inc. subsidiary operated 177 home improvement stores in 26
states and Puerto Rico at January 23, 1994, of which 130 were Builders Square I
Stores and 47 were Builders Square II Stores. The business strategy of Builders
Square is to phase out its self-service warehouse-style home improvement stores
and operate large format superstores that emphasize customer service and provide
an extensive selection of quality products and services to repair, remodel,
redecorate and maintain both home and garden. The OfficeMax Group is one of the
largest operators of high-volume, deep discount office products superstores in
the United States, and is comprised of the Company's OfficeMax, Inc. subsidiary.
It operated 328 superstores in 38 states as of January 22, 1994. The Sports
Authority Group is the largest operator of large format sporting goods stores in
the United States in terms of both sales and number of stores and is also the
largest full-line sporting goods retailer in the United States in terms of
sales. It is comprised of the Company's The Sports Authority, Inc. subsidiary
which operated 80 sporting goods megastores at January 23, 1994.
Kmart was incorporated under the laws of the State of Michigan on March 9,
1916. The principal executive offices of Kmart are located at 3100 West Big
Beaver Road, Troy, Michigan 48084, and its telephone number is (810) 643-1000.
RECENT DEVELOPMENTS
On January 5, 1994, the Board of Directors approved a restructuring plan
involving the Kmart Group (including Kmart Canada), the Builders Square Group
and the Borders-Walden Group. As a result, in the fourth quarter of 1993, Kmart
recorded a charge (1993 Store Restructuring and Other Charges) to earnings of
$1,348 million before taxes. Net of taxes, the charge was $862 million. The
provision included anticipated costs associated with Kmart stores which will be
closed and relocated, enlarged or refurbished in the United States and Canada,
the closing and relocation of certain Builders Square stores and the closing of
underperforming Walden stores. These costs, which represent approximately 85% of
the total, include lease obligations for store closings as well as fixed asset
writedowns, primarily furniture and fixtures, and inventory dispositions for all
affected stores. The remainder of the charge is for costs related to certain
changes to Walden's accounting policies in connection with its combination with
Borders, re-engineering programs (principally severance) and non-routine legal
contingency accrual.
The 1993 Store Restructuring and Other Charges related to the U.S. General
Merchandise Operations were principally for specifically-identified relocations
which will result in replacing smaller, less productive stores with larger
stores in better locations. These new stores are expected to generate improved
sales and gross margin which will be partially offset by increased store
occupancy and depreciation expense. The Kmart Group also expects that there will
be continued sales and profitability improvement at the stores modernized to
date. In 1993, modernized stores (including new stores, relocations, expansions
and refurbishments) outperformed non-modernized stores by 17% in sales, 12% in
customer count, 16% in units sold and 6% in transaction amounts, and the Super
Kmart Center stores open the full year averaged in excess of $55 million in
sales. These larger-format stores are a key part of the Kmart Group's strategy
to compete effectively in the marketplace. The Kmart Group will integrate these
larger-format stores and the Super Kmart Center program into the remaining U.S.
Kmart store modernization program. The Kmart Group anticipates that the store
modernization program will be substantially complete by the end of fiscal 1996.
As part of the restructuring plan, on September 8, 1994, Kmart announced the
closing in January and February of 1995 of 110 Kmart stores which currently do
not meet Kmart's sales, profit and return on investment requirements. During the
next 18 to 24 months, it is anticipated that Kmart's management work force will
be reduced by 10% as a result of the announced store closings.
In January 1994, PACE Membership Warehouse, Inc. ("PACE") sold the assets
and lease obligations of 93 of its warehouses and virtually all of the inventory
and membership files in the 34 warehouses not included in the transaction to
Sam's Club, a division of Wal-Mart, Stores, Inc. for $774 million. The book
value of the assets sold to Wal-Mart was $624 million. Operations of the 34
remaining PACE sites not included in the transaction were discontinued and PACE
is in the process of evaluating and marketing these leased sites as well as
leased premises for unopened warehouses and corporate facilities. Included in
the loss on the disposition of PACE was unamortized goodwill of $395 million,
expected remaining lease obligations in the
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<PAGE> 25
warehouses not sold, other PACE liabilities and a provision for additional costs
anticipated during the wind-down of PACE operations. The Company has accounted
for PACE as a discontinued operation in its financial statements.
In addition, Kmart sold its PayLess Drug Stores Northwest, Inc. ("PayLess")
subsidiary to Thrifty PayLess Holdings, Inc. ("TPH") and its subsidiary Thrifty
PayLess, Inc. for approximately $595 million in cash, $100 million in senior
notes of TPH and approximately 46% of the common equity of TPH. The book value
of PayLess' net assets sold was $1,186 million at January 26, 1994. The
structure of the sale was designed to maximize value received for PayLess. It is
Kmart's intention to divest substantially all of its interest in TPH within one
year. Management expects the disposition to be achieved either through a private
offering or other alternative means. Accordingly, Kmart has reported PayLess as
a discontinued operation in its financial statements and has recorded its
investment in TPH at anticipated net realizable value.
Kmart has called for early redemption $300 million of its 8 3/8% debentures
due January 15, 2017, using the proceeds of the sale of PayLess to redeem the
issue. The resulting redemption premium and associated cost of $18 million, net
of applicable income taxes, was recorded in 1993 as part of the loss on disposal
of the discontinued operations. The $300 million principal amount has been
included in the current portion of long-term debt. Kmart believes the effect of
recognizing the charge in 1993 rather than in the first quarter of 1994 would
not have a material effect on the results of operations for its 1993 or 1994
fiscal years.
On September 19, 1994 the Company announced that Coles Myer shareholders
approved an agreement to purchase Kmart's 21.5 percent equity interest in the
Australian retailer. Under the agreement, the Company will receive the
equivalent of A$4.55 per share for its Coles Myer shares with total proceeds
amounting to A$1.26 billion (equivalent to U.S.$927 million). The transaction is
expected to be completed by November 4, 1994. As part of the transaction, the
Company has extended its long-term license that allows Coles Myer to use the
"Kmart" name in Australia and New Zealand.
Following its meeting on August 16, 1994, the Company's Board of Directors
announced plans for public offerings of shares in three of the Company's
specialty retail businesses, Borders/Walden, OfficeMax and The Sports Authority,
through Initial Public Offerings (IPO's). On August 31, 1994, a registration
statement was filed with the Securities and Exchange Commission for a proposed
IPO of approximately 23.4 million common shares of OfficeMax. On October 27,
1994, an amendment to the registration statement was filed, to increase the size
of the OfficeMax IPO to 33 million common shares. Upon completion, the IPO, as
amended, will reduce the Company's ownership interest in OfficeMax to
approximately 30.4 percent, or to approximately 25% if the underwriters'
over-allotment option on approximately 2.7 million shares is exercised in full.
On September 1, 1994, a registration statement was filed with the Securities and
Exchange Commission for a proposed IPO of approximately 10.2 million common
shares of The Sports Authority ("TSA"). On October 31, 1994, an amendment to the
registration statement was filed to increase the size of the TSA IPO to 12.3
million common shares. Upon completion of TSA IPO, as amended, the Company's
ownership interest in TSA will be reduced to approximately 39 percent, or to
approximately 30 percent if the underwriters' over-allotment option on
approximately 1.845 million common shares is exercised in full. An IPO of shares
in Borders/Walden is expected to follow dependent upon market conditions. The
Board of Directors and management continue to review alternatives with respect
to Builders Square and initiatives related to the Company's core business. See
"SPECIAL CONSIDERATIONS -- Option of Subsidiary or Kmart to Terminate Lease
Guaranty under Certain Circumstances."
FINANCIAL INFORMATION
Net income (loss) from continuing retail operations in 1993 was $(328)
million, as compared to $882 million and $789 million in 1992 and 1991,
respectively. Excluding the net of tax $862 million store restructuring and
other charges, 1993 net income from continuing retail operations was $534
million. The decrease in net income from continuing retail operations in 1993,
exclusive of the store restructuring and other charges, resulted primarily from
the inventory reduction program and gross margin pressure in U.S. Kmart stores.
12
<PAGE> 26
Net income (loss) from discontinued operations in 1993 was $(81) million,
as compared to $59 million and $70 million in 1992 and 1991, respectively.
Discontinued operations include the results of PayLess and PACE, which have been
reclassified to reflect their respective dispositions announced in the fourth
quarter of 1993. The $81 million after-tax loss from the operation of
discontinued businesses in 1993 was the result of a significant net operating
loss at PACE which more than offset net income from PayLess. Additionally, in
1993, an after-tax loss of $521 million was realized from the disposal of
discontinued businesses.
Sales in 1993 were $34.16 billion, an increase of 10.1% from the $31.03
billion in the preceding year, as restated to exclude the PACE and PayLess
businesses.
Net income from continuing retail operations for the 13 weeks ended July
27, 1994 declined to $94 million from $125 million for the 13 weeks ended July
28, 1993 as restated to exclude the discontinued PACE and divested PayLess
businesses. Second-quarter sales reached $8.83 billion, an increase of 4.6% from
$8.44 billion for the same period in 1993.
Net income for the first 26 weeks of 1994 declined to $112 million from
$183 million for the same period of 1993 as restated to exclude the discontinued
and divested businesses and before an extraordinary item and accounting changes.
Sales rose 5.4% to $16.64 billion from $15.79 billion for the same 26-week
period of 1993.
13
<PAGE> 27
KMART CORPORATION
SELECTED FINANCIAL INFORMATION
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
26 WEEKS ENDED
--------------------
JULY 27, JULY 28,
1989(1) 1990 1991 1992 1993(2) 1994 1993
------- ------- ------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
Sales........................ $27,670 $28,133 $29,042 $31,031 $34,156 $ 16,638 $ 15,791
Cost of merchandise sold..... 20,310 20,614 21,243 22,800 25,646 12,477 11,775
Selling, general and
administrative expenses... 6,277 6,435 6,603 6,875 7,636 3,916 3,669
Interest expense -- net...... 353 384 384 414 477 240 247
Income (loss) from continuing
retail operations before
income taxes.............. 444 1,070 1,189 1,327 (550) 171 263
Net income (loss) from
continuing retail
operations before an
extraordinary item and the
effect of accounting
changes................... 282 712 789 882 (328) 112 183
Ratio of earnings from
continuing retail
operations to fixed
charges................... 1.8 2.9 3.0 3.0 (3) (4) (4)
Balance Sheet (at end of
period):
Working capital.............. $ 3,685 $ 3,519 $ 4,682 $ 5,014 $ 4,123 $ 3,743 $ 4,393
Merchandise inventories...... 6,933 6,891 7,546 8,752 7,252 8,328 9,437
Total assets................. 13,145 13,899 15,999 18,931 17,504 18,522 20,189
Long-term debt............... 1,480 1,701 2,287 3,237 2,227 2,042 2,979
Capital leases............... 1,549 1,598 1,638 1,698 1,720 1,791 1,876
Shareholders' equity......... 4,972 5,384 6,891 7,536 6,093 6,011 7,424
</TABLE>
- -------------------------
(1) Results of operations for 1989 include a pre-tax provision of $640 million
($422 million net of tax) for store restructuring and other charges.
(2) Results of operations for 1993 include a pre-tax provision of $1,348 million
($862 million net of tax) for store restructuring and other charges.
(3) Fixed charges represent total interest charges, a portion of operating
rentals representative of the interest factor and amortization of debt
discount and expense. The deficiency of income from continuing retail
operations versus fixed charges was $581 million for the fiscal year ended
January 26, 1994.
(4) Due to the seasonality of Kmart's business, the ratio of earnings from
continuing retail operations to fixed charges for the interim period
computed as described in (3) above using 52 weeks ended July 28, 1993 was
2.5. The deficiency of income from continuing retail operations versus
fixed charges was $681 million for the 52 weeks ended July 27, 1994.
THE DEPOSITOR
National Tenant Finance Corporation will be a Delaware corporation to be
formed prior to the initial issuance of Certificates. The Depositor will be a
limited purpose financing corporation formed solely for the purpose of
facilitating the origination and sale of Mortgage Loans. The Depositor's
certificate of incorporation will limit its business to the foregoing and will
place certain other restrictions on its activities.
The Depositor's principal executive office will be located in Phoenix,
Arizona.
USE OF PROCEEDS
The proceeds from the sale of each Series of Certificates will be used by
the Depositor to make Mortgage Loans to Borrowers (i) for permanent financing
of, or for the acquisition or acquisition and construction of, Facilities and
(ii) for the payment of a pro rata share of the costs of issuance of the
Certificates.
14
<PAGE> 28
DIAGRAM OF TRANSACTION STRUCTURE
INVOLVING A MORTGAGE NOTE WITH ONE MATURITY
CERTIFICATE HOLDERS
/\ |
| |
| |
(13)| (1) |
| |
| |
| |
| \/
TRUST
/\ | /\
| | \ (12)
| | \
(9) | | (2) \
| | \
| \/ (7) \
DEPOSITOR <------------- <---------
/\ | | /\ TENNANT ----- |
| |(4) | (4) \(7) |(10) | |
| | \/ \(8) | | |
| | ESCROW \ \/ | |
(3)| | AGENT / KMART | |
| | | (11) /(6) | |
| | | / | |
| \/ \/ \/ (5) | |
BORROWER <----------------------------| |
-----------------------------------|
(10)
15
<PAGE> 29
FOOTNOTES TO DIAGRAM WITH SINGLE MATURITY:
(1) On the Closing Date, the Certificates will be issued to the
Certificateholders by the Trust in exchange for the proceeds thereof.
(2) On the Closing Date, the Trust will provide funds to the Depositor to make
a Mortgage Loan to a Borrower.
(3) On the Closing Date, the Depositor will enter into a Loan Agreement with a
Borrower pursuant to which such Borrower will deliver to the Depositor a
Mortgage Note equal to the amount of the Mortgage Loan, a Mortgage on the
Facility to be leased to the Tenant, and an assignment of the Lease and
Lease Guaranty, if applicable.
(4) Unless otherwise specified in the related Prospectus Supplement, on the
Closing Date, if construction of the Facility is complete, the net proceeds
of the Mortgage Loan after payment of a pro rata share of the costs of
issuance of the Certificates will be disbursed to the Borrower. If the
Facility will be constructed with such proceeds, then such proceeds (net of
land costs and the amount placed in the Capitalized Debt Service Account)
will be disbursed to the Escrow Agent pursuant to a Construction Fund
Disbursement Agreement among the Borrower, the Depositor, the Tenant, Kmart
(if the Tenant is a Subsidiary), the Escrow Agent, and, if applicable, the
Construction Monitor.
(5) On the Closing Date, the Borrower will enter into a Lease with the Tenant
pursuant to which the Tenant will lease the Facility for use as a retail
store.
(6) On the Closing Date, if the Tenant is a Subsidiary, the Borrower will enter
into a Lease Guaranty with Kmart pursuant to which Kmart will guaranty the
payment and performance of the Subsidiary's obligations under the Lease.
(7) On the Closing Date, the Depositor, the Tenant and Kmart (if the Tenant is
a Subsidiary) will enter into a Note Put Agreement pursuant to which the
Depositor, upon the occurrence of a Triggering Event, will be entitled to
require the Tenant and, if the Tenant is a Subsidiary and fails to perform,
to require Kmart to purchase the related Mortgage Note(s) at the Purchase
Price.
(8) On the Closing Date, if the Tenant is a Subsidiary, the Depositor and Kmart
will enter into an Indemnity Agreement pursuant to which Kmart will
indemnify the Depositor in the event any Lease Payments under the Lease or
Lease Guaranty are asserted to be voidable in any bankruptcy proceeding
filed by or against the Subsidiary.
(9) On the Closing Date, the Depositor will assign to the Trust for the benefit
of the Certificateholders the Depositor's interest in the Mortgage Note and
the related Loan Documents including the Loan Agreement, the Mortgage, the
Lease, the Lease Guaranty, if applicable, the Note Put Agreement, the
Construction Fund Disbursement Agreement, if applicable, and the Indemnity
Agreement, if applicable.
(10) On the Closing Date, if the Facility will be constructed with the proceeds
of a Mortgage Loan, the Borrower will grant the Tenant a second mortgage on
the Facility to secure the Borrower's obligation to construct the Facility
and also will grant the Tenant an option to purchase the Facility in the
event Borrower does not complete such construction on or before the
Completion Date. If the Tenant is a Subsidiary, it will assign its rights
under the second mortgage and the option to purchase to Kmart to secure the
performance by the Subsidiary of its reimbursement obligations to Kmart
with respect to payments made by Kmart under the Lease Guaranty and the
Note Put Agreement.
(11) Unless otherwise stated in the related Prospectus Supplement, as
construction of the Facility continues, the Borrower will receive drawdowns
from the Escrow Agent pursuant to the Construction Fund Disbursement
Agreement. Each drawdown will require the approval of the Tenant.
(12) The Tenant will make Lease Payments directly to the Trust.
(13) On each Due Date, the Trustee will use such Lease Payments to pay Scheduled
Payments on the Mortgage Note and, on each Remittance Date, will use such
Scheduled Payments on the Mortgage Note to pay Debt Service on the
Certificates. As long as no Event of Default exists under any of the
related Loan Documents (other than a non-monetary default by the Tenant
under the Lease), on the second scheduled Remittance Date after the Closing
Date and on each anniversary thereafter of such Remittance Date, Lease
Payments received by the Trustee in excess of amounts needed to pay
Scheduled Payments on the Mortgage Note and certain other expenses will be
remitted to the Borrower.
NOTE: If the proceeds of the sale of Certificates are used to finance more than
one Facility, then each Facility will be owned and, if applicable, constructed
by a different Borrower, each Loan Agreement, the Mortgage Note issued
thereunder, and related Loan Documents will relate to only one Facility, the
Facilities may be leased by the same Tenant or by different Tenants, and the
foregoing structure will apply to each Mortgage Loan except that only a portion
of the proceeds of the sale of Certificates will be used to finance such
Mortgage Loan.
See "STRUCTURE OF THE FINANCINGS" herein for a more detailed description of
the transaction set forth in the foregoing diagram.
16
<PAGE> 30
DIAGRAM OF TRANSACTION STRUCTURE
INVOLVING MORTGAGE NOTES WITH TWO MATURITIES
|--------------------------------------------------|
| (14) |
| |------------------------------ |
(15) \/ \/ (15) | |
CERTIFICATE<-------- PASS THROUGH PASS THROUGH -----> CERTIFICATE | |
HOLDERS (1) TRUST TRUST (1) HOLDERS | |
Series B ----------> Series B Series A <--------- Series A | |
/\| /\ | | |
| | | | | |
(9)| | (9) | | | |
| | | | COLLATERAL---------| |
| |(2) | | (2) / TRUST ----------------
| | | | (10)/ /\
| | | | / | (13)
| \/ | \/ (7) | <-------------
DEPOSITOR <------------ TENNANT ----------- |
/\| | \ | (11) | |
| |(4) \/ (4) \ | | |
| | ESCROW (7) \/ | |
(3) | | AGENT (8) \ KMART | |
| | |(12) / | |
| | | / | |
| \/ \/ / (6) (5) | |
BORROWER <-------------------------------- |
-------------------------------------|
(11)
17
<PAGE> 31
FOOTNOTES TO DIAGRAM WITH TWO MATURITIES:
(1) On the Closing Date, the Certificates Series A will be issued to the
Certificateholders Series A by the Pass-Through Trust Series A in exchange
for the proceeds thereof, and the Certificates Series B will be issued to
the Certificateholders Series B by the Pass-Through Trust Series B in
exchange for the proceeds thereof. The Certificates Series A and the
Certificates Series B will have different maturities.
(2) On the Closing Date, the Pass-Through Trust Series A and the Pass-Through
Trust Series B will provide funds to the Depositor to make a Mortgage Loan
to a Borrower.
(3) On the Closing Date, the Depositor will enter into a Loan Agreement with
the Borrower pursuant to which the Borrower will deliver to the Depositor
the Mortgage Note Series A and the Mortgage Note Series B, the aggregate
principal amount of which will equal the principal amount of the Mortgage
Loan, a Mortgage on the Facility to be leased to the Tenant, and an
assignment of the Lease and Lease Guaranty, if applicable.
(4) Unless otherwise specified in the related Prospectus Supplement, on the
Closing Date, if construction of the Facility is complete, the net proceeds
of the Mortgage Loan after payment of a pro rata share of the costs of
issuance of the Certificates will be disbursed to the Borrower. If the
Facility will be constructed with such proceeds, then such proceeds (net of
land costs and the amount placed in the Capitalized Debt Service Account)
will be disbursed to the Escrow Agent pursuant to a Construction Fund
Disbursement Agreement among the Borrower, the Depositor, the Tenant, Kmart
(if the Tenant is a Subsidiary), the Escrow Agent, and, if applicable, the
Construction Monitor.
(5) On the Closing Date, the Borrower will enter into a Lease with the Tenant
pursuant to which the Tenant will lease the Facility for use as a retail
store.
(6) On the Closing Date, if the Tenant is a Subsidiary, the Borrower will enter
into a Lease Guaranty with Kmart pursuant to which Kmart will guaranty the
payment and performance of the Subsidiary's obligations under the Lease.
(7) On the Closing Date, the Depositor, the Tenant and Kmart (if the Tenant is
a Subsidiary) will enter into a Note Put Agreement pursuant to which the
Depositor, upon the occurrence of a Triggering Event, will be entitled to
require the Tenant and, if the Tenant is a Subsidiary and fails to perform,
to require Kmart to purchase the Mortgage Note Series A and the Mortgage
Note Series B at the Purchase Price for each Mortgage Note.
(8) On the Closing Date, if the Tenant is a Subsidiary, the Depositor and Kmart
will enter into an Indemnity Agreement pursuant to which Kmart will
indemnify the Depositor in the event any Lease Payments under the Lease or
Lease Guaranty are asserted to be voidable in any bankruptcy proceeding
filed by or against the Subsidiary.
(9) On the Closing Date, the Depositor will assign to the Pass-Through Trust
Series A for the benefit of Certificateholders Series A the Mortgage Note
Series A and will assign to the Pass-Through Trust Series B for the benefit
of Certificateholders Series B the Mortgage Note Series B. The Mortgage
Note Series A and the Mortgage Note Series B will have different maturities
that correspond, respectively, to the maturities of the Certificates Series
A and of the Certificates Series B.
(10) On the Closing Date, the Depositor will assign to the Collateral Trustee
for the benefit of the Pass-Through Trust Series A and the Pass-Through
Trust Series B the Depositor's interest in the Loan Documents including the
Loan Agreement, the Mortgage, the Lease, the Lease Guaranty, if applicable,
the Note Put Agreement, the Construction Fund Disbursement Agreement, if
applicable, and the Indemnity Agreement, if applicable.
(11) On the Closing Date, if the Facility will be constructed with the proceeds
of a Mortgage Loan, the Borrower will grant the Tenant a second mortgage on
the Facility to secure the Borrower's obligation to construct the Facility
and also will grant the Tenant an option to purchase the Facility in the
event Borrower does not complete such construction on or before the
Completion Date. If the Tenant is a Subsidiary, it will assign its rights
under the second mortgage and the option to purchase to Kmart to secure the
performance by the Subsidiary of its reimbursement obligations to Kmart
with respect to payments made by Kmart pursuant to the Lease Guaranty and
the Note Put Agreement.
(12) Unless otherwise stated in the related Prospectus Supplement, as
construction of the Facility continues, the Borrower will receive drawdowns
from the Escrow Agent pursuant to the Construction Fund Disbursement
Agreement. Each drawdown will require the approval of the Tenant.
(13) The Tenant will make Lease Payments directly to the Collateral Trust.
(14) On each Due Date, the Collateral Trustee will use such Lease Payments to
pay to the Pass-Through Trust Series A Scheduled Payments due on the
Mortgage Note Series A and to the Pass-Through Trust Series B Scheduled
Payments due on the Mortgage Note Series B. As long as no Event of Default
exists under any of the related Loan Documents (other than a non-monetary
default by the Tenant under the Lease), on the second scheduled Remittance
Date after the Closing Date and on each anniversary thereafter of such
Remittance Date, Lease Payments received by the Collateral Trustee in
excess of amounts needed to pay Scheduled Payments on the Mortgage Note
Series A and on the Mortgage Note Series B and certain other expenses will
be remitted to the Borrower.
(15) On each Remittance Date, the Pass-Through Trustee Series A will use such
Scheduled Payments on the Mortgage Note Series A to pay Debt Service on the
Certificates Series A, and the Pass-Through Trustee Series B will use such
Scheduled Payments on the Mortgage Note Series B to pay Debt Service on the
Certificates Series B.
NOTE: If the proceeds of the sale of Certificates are used to finance more than
one Facility, then each Facility will be owned and, if applicable, constructed
by a different Borrower, each Loan Agreement, the Mortgage Notes issued
thereunder and related Loan Documents will relate to only one Facility, the
Facilities may be leased by the same Tenant or by different Tenants and the
foregoing structure will apply to each Mortgage Loan except that only a portion
of the proceeds of the sale of Certificates will be used to finance such
Mortgage Loan. If a Mortgage Loan is evidenced by Mortgage Notes of more than
two maturities, there will be a different Pass-Through Trust and a different
series of Certificates for each maturity. In all other respects, the foregoing
structure will apply.
See "STRUCTURE OF THE FINANCINGS" herein for a more detailed description of
the transaction set forth in the foregoing diagram.
18
<PAGE> 32
STRUCTURE OF THE FINANCINGS
Concurrently with the issuance of each Series of Certificates, the
Depositor will make a Mortgage Loan to a Borrower or multiple Mortgage Loans,
each to a different Borrower, with the proceeds from the sale of the
Certificates to be used as permanent financing for, or for the financing of the
acquisition or the acquisition and construction of, one or more Facilities and
to pay a pro rata share of the costs of issuance of the Certificates. Each
Facility will be owned or owned and constructed by a different Borrower
(provided that in certain cases the Borrower may have a ground leasehold
interest in, and not fee simple title to, the Demised Premises) and will be a
retail or warehouse facility to be leased to a Tenant pursuant to a Lease
between such Borrower and such Tenant. Lease Payments will be guaranteed by
Kmart pursuant to a Lease Guaranty (if the Tenant is a Subsidiary). Lease
Payments will be made by the Tenant directly to the Trustee or to the Collateral
Trustee, if applicable, and will be scheduled to be sufficient to pay Scheduled
Payments on the related Mortgage Note(s) for the period from and after the
commencement of such Lease Payments. If the Facility is constructed when the
Mortgage Loan is made, Lease Payments will commence immediately. If the Facility
is to be constructed with the proceeds of the Mortgage Loan, Lease Payments will
commence on a date specified in the Lease even if construction of the Facility
is not complete. With respect to each Mortgage Loan when Lease Payments do not
commence immediately, a portion of such Mortgage Loan will be deposited in a
related Capitalized Debt Service Account, and such amount will be sufficient to
pay Scheduled Payments that become due or accrue prior to the commencement of
Lease Payments. In connection with each Mortgage Loan, the related Borrower will
execute and deliver, or cause to be executed and delivered, to the Depositor (i)
a Mortgage Note or Mortgage Notes and Mortgage (ii) an assignment of the Lease,
Lease Payments and, if the Tenant is a Subsidiary, the Lease Guaranty and (iii)
other Loan Documents.
With respect to each Mortgage Loan, the related Tenant and Kmart (if the
Tenant is a Subsidiary) will enter into a Note Put Agreement with the Depositor
which unless otherwise stated in the related Prospectus Supplement, will give
the Depositor the right to require such Tenant and Kmart, if applicable, to
purchase the related Mortgage Note(s) at the Purchase Price upon the occurrence
of (i) a default in the payment of Lease Payments by such Tenant after 10 days
notice (or 30 days notice if the Tenant is Kmart) of such default and, if the
Tenant is a Subsidiary, by Kmart after 30 days notice of such default (which
notice may be given concurrently with the corresponding notice to such
Subsidiary), (ii) a failure to complete construction of the related Facility by
the Completion Date, (iii) if the Tenant is a Subsidiary, the occurrence of a
Lease Guaranty Termination of the related Lease Guaranty, or (iv) the occurrence
of any other event not described in this Prospectus but denominated a
"Triggering Event" in the Prospectus Supplement (each, a Triggering Event).
In consideration for the proceeds of the sale of the Certificates, and if
the related Loan Agreements provide for Mortgage Notes of a single maturity, the
Depositor will convey to the Trustee, without recourse, such Mortgage Notes and
all of the Depositor's right, title and interest in and to the related Loan
Documents, including the related Lease, Lease Guaranty, if applicable, Indemnity
Agreement, if applicable, Loan Agreement, Mortgage and Note Put Agreement. When
the Loan Agreements provide for Mortgage Notes of different maturities, the
Depositor will convey the Mortgage Notes to different Pass-Through Trustees such
that each Pass-Through Trustee will hold only Mortgage Notes having the same
maturity. All of the Depositor's right, title and interest in and to the related
Loan Documents, including the related Lease, Lease Guaranty, if applicable,
Indemnity Agreement, if applicable, Loan Agreement, Mortgage and Note Put
Agreement, will be conveyed by the Depositor to the Collateral Trustee which
will hold such property in trust for the benefit, pari passu, of the
Pass-Through Trustees as holders of the related Mortgage Notes. In no case will
Mortgage Notes issued under different Loan Agreements be cross-collateralized or
subject to cross-default provisions.
If the proceeds of a Mortgage Loan will be used to construct a Facility,
unless otherwise stated in the related Prospectus Supplement, the Depositor, the
related Borrower, the related Tenant, Kmart (if the Tenant is a Subsidiary), an
Escrow Agent and, in some cases, a Construction Monitor engaged at the request
of such Tenant will enter into a Construction Fund Disbursement Agreement, which
will provide that the Borrower will deposit the net proceeds of the Mortgage
Loan (less amounts used to pay a pro rata share of the costs of issuance of the
Certificates, amounts used to acquire land or ground leasehold interest, amounts
used to fund the related Capitalized Debt Service Account and amounts deposited
in the related Escrow
19
<PAGE> 33
Account-Common Area, if any) into the Escrow Account created pursuant to such
Construction Fund Disbursement Agreement. Amounts deposited in each Escrow
Account will be disbursed to a Borrower in connection with the acquisition and
construction of a Facility upon approval by the related Tenant and the
Construction Monitor, if one is appointed, of draw requests submitted by such
Borrower. In certain instances, Borrowers may own or acquire, or may lease,
contiguous but separate parcels of land for the purpose of constructing a
shopping center to be occupied by more than one Tenant. If the Common Area of
such a shopping center is to be built using a portion of the proceeds of the
Mortgage Loans related to such Facilities, then, in addition to the Construction
Fund Disbursement Agreement, there will be a Construction Fund Disbursement
Agreement -- Common Area among the same parties together with each additional
Borrower and each additional Tenant that is leasing a Facility that will be
utilizing such Common Area. The portion of the related Mortgage Loans that will
be used to construct such Common Area will be deposited in an Escrow Account --
Common Area established pursuant to such Construction Fund Disbursement
Agreement -- Common Area, and will be disbursed upon approval of such Tenants
and the Construction Monitor, if one is appointed, of draw requests submitted by
the Borrowers constructing such Common Area. All of each Borrower's right, title
and interest in and to any Construction Fund Disbursement Agreement and any
Construction Fund Disbursement Agreement -- Common Area will be pledged, subject
to the rights of the Tenants and Kmart under such Agreements, to the Trustee, or
to the Collateral Trustee, if applicable.
Each Trust Agreement will provide for the establishment of a Certificate
Account and, if there is no Collateral Trust, a Rental Payment Account. Each
Collateral Trust Agreement will provide for the establishment of a Rental
Payment Account and a Mortgage Note Account. The Lease Payments related to the
Mortgage Notes held by the Trustee, or Pass-Through Trustees, if applicable,
will be paid directly by the related Tenants to such Trustee, or the Collateral
Trustee if applicable, and, unless an Event of Default has occurred under any of
the Loan Documents (other than a non-monetary default by the related Tenant
under the related Lease), deposited in the related Rental Payment Account. Such
Lease Payments will be scheduled to be in amounts sufficient to pay Scheduled
Payments on such Mortgage Notes. On the Business Day immediately preceding each
Remittance Date, amounts on deposit in the Rental Payment Account(s) equal to
Scheduled Payments due under the related Mortgage Note or Mortgage Notes will be
deposited in the Certificate Account(s) in the related Trust or Pass-Through
Trust, as applicable, and will be applied to pay Debt Service on the
Certificates as set forth in the related Prospectus Supplement. The Scheduled
Payments on the Mortgage Note(s) will be scheduled to be sufficient to pay the
interest applicable to the related Series of the Certificates and over the term
of such Mortgage Notes to pay the principal of such Series of Certificates. The
maturity date of each Mortgage Note acquired by a Trust or Pass-Through Trust
will correspond to the final Remittance Date applicable to the related Series of
the Certificates.
THE CERTIFICATES
The Certificates described herein and in the related Prospectus Supplements
will be issued from time to time in Series pursuant to one or more Trust
Agreements or Pass-Through Trust Agreements. Each Pass-Through Trust Agreement
(used when there are Mortgage Notes of different maturities) will contain
substantially the same terms as each other such Pass-Through Trust Agreement,
except that interest rates, scheduled payments of principal, aggregate principal
amount and final distribution dates applicable to each Series of Certificates
may differ. When there are Mortgage Notes of different maturities, the
Collateral for all such Mortgage Notes will be held in a Collateral Trust for
the benefit, pari passu, of all Pass-Through Trusts holding any of the Mortgage
Notes secured by such Collateral. The following summaries describe certain
provisions common to each Series of Certificates. The summaries do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, the Prospectus Supplement and the provisions of the Trust
Agreement or Pass-Through Trust Agreement relating to each such Series of
Certificates, the forms of which have been filed as exhibits to the Registration
Statement of which (in substantially the form in which they will be used) this
Prospectus is a part.
20
<PAGE> 34
GENERAL
The Certificates will be issued in fully registered form only. Each
Certificate will represent a fractional undivided beneficial ownership interest
in the assets conveyed to the Trust or Pass-Through Trust pursuant to which such
Series of Certificates was issued. Each Certificate will correspond to a pro
rata share of the outstanding principal amount of the Mortgage Notes held in the
related Trust or Pass-Through Trust and will be issued in minimum denominations
of $1,000 initial principal amount and integral multiples of $1,000 in excess
thereof unless otherwise specified in the related Prospectus Supplement. The
Certificates will be registered in the name of Cede & Co. ("Cede") as the
nominee of The Depository Trust Company ("DTC"). No person acquiring an interest
in the Certificates (a "Beneficial Owner") will be entitled to receive a
Certificate representing such person's interest in the Certificates, except as
set forth below under "Book-Entry Registration -- Definitive Certificates."
Unless and until Definitive Certificates are issued under the limited
circumstances described herein, all references to actions by Certificateholders
shall refer to actions taken by DTC upon instructions from DTC Participants (as
defined below) and all references herein to distributions, notices, reports and
statements to Certificateholders shall refer, as the case may be, to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of the Certificates, or to DTC Participants for distribution to
Beneficial Owners in accordance with DTC procedures. See "Book-Entry
Registration."
Scheduled Payments made on the Mortgage Notes held in a Trust or a
Pass-Through Trust will be passed through to Certificateholders of such Trust or
Pass-Through Trust on the dates and in the amounts set forth in the related
Prospectus Supplement until the final scheduled Remittance Date for such Trust.
Each Certificate will represent a fractional undivided beneficial ownership
interest in the related Trust or Pass-Through Trust and will not have any
rights, benefits or interest in respect of any other Trust or Pass-Through Trust
or in the property held by any other Trust or Pass-Through Trust. All payments
and distributions on each Series of Certificates will be made only from the
Trust Property in which such Series of Certificates evidences an interest.
Although Lease Payments in amounts necessary to permit the timely payment of
Scheduled Payments on the Mortgage Notes, and consequently Debt Service on the
Certificates, will be direct obligations of one or more Tenants, which Lease
Payments will be guaranteed by Kmart if the related Tenant is a Subsidiary, the
Certificates themselves will not represent an interest in or obligation of
Kmart, any Subsidiary, any Trustee, any Pass-Through Trustee, any Collateral
Trustee, any Borrower or the Depositor. Each purchaser of a Certificate will
look solely to the income and proceeds from the Trust Property to the extent
available for distribution as provided in the Trust Agreement or Pass-Through
Trust Agreement.
No Trust Agreement, Pass-Through Trust Agreement, Collateral Trust
Agreement, Lease, Lease Guaranty, if applicable, Note Put Agreement or other
Loan Document will include financial covenants or other provisions that would
afford Certificateholders protection in the event of highly leveraged or other
transactions involving Kmart. The Certificateholders will have the benefit
solely of the Collateral securing the Mortgage Loan held in the related Trust
Agreement or Collateral Trust, as applicable. See "THE MORTGAGE NOTES, THE LOAN
AGREEMENTS AND RELATED DOCUMENTS."
BOOK-ENTRY REGISTRATION
General
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC
was created to hold securities for its participants ("DTC Participants") and to
facilitate the clearance and settlement of securities transactions between DTC
Participants through electronic book-entries, thereby eliminating the need for
physical movement of certificates. DTC Participants include securities brokers
and dealers, banks, trust companies and clearing corporations. Indirect access
to the DTC system also is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a DTC Participant either directly or indirectly ("Indirect Participants").
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Beneficial Owners that are not DTC Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Certificates may do so only through DTC Participants and Indirect
Participants. In addition, Beneficial Owners will receive all distributions of
principal and interest from the Trustee through DTC Participants or Indirect
Participants, as the case may be. Under a book-entry format, Beneficial Owners
may experience some delay in their receipt of payments, since such payments will
be forwarded by the Trustee to Cede, as nominee for DTC. DTC will forward such
payments to DTC Participants, which thereafter will forward them to Indirect
Participants or Beneficial Owners, as the case may be, in accordance with
customary industry practices. The forwarding of such distributions to the
Beneficial Owners will be the responsibility of such DTC Participants and
Indirect Participants. When book-entry registration is used, the only
"Certificateholder" of a Trust will be Cede, as nominee of DTC. Beneficial
Owners will not be recognized by the Trustee as Certificateholders, as such term
is used in the Trust Agreement or Pass-Through Trust Agreement, and Beneficial
Owners will be permitted to exercise the rights of Certificateholders only
indirectly through DTC and DTC Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Certificates among DTC Participants on whose behalf it acts with respect to the
Certificates and to receive and transmit distributions of principal of, premium,
if any, and interest on, the Certificates to DTC Participants. DTC Participants
and Indirect Participants with which Beneficial Owners have accounts with
respect to the Certificates similarly are required to make book-entry transfers
and receive and transmit such payments on behalf of their respective Beneficial
Owners. Accordingly, although Beneficial Owners will not possess Certificates,
the Rules provide a mechanism by which Beneficial Owners will receive payments
and will be able to transfer their interests.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect Participants, the ability of a Beneficial Owner to pledge
Certificates to persons or entities that do not participate in the DTC system,
or to otherwise act with respect to such Certificates, may be limited due to the
absence of a physical certificate for such Certificates.
DTC has advised the Depositor that it will take any action permitted to be
taken by a Certificateholder under the Trust Agreement only at the direction of
one or more DTC Participants to whose accounts with DTC the Certificates are
credited. Additionally, DTC has advised the Depositor that it will take such
actions with respect to any percentage of Certificateholders of each Trust only
at the direction of and on behalf of DTC Participants whose holdings include
fractional undivided interests that satisfy any such percentage. DTC may take
conflicting actions with respect to other fractional undivided interests to the
extent that such actions are taken on behalf of DTC Participants whose holdings
include such fractional undivided interests. All notices to Certificateholders
under a Trust Agreement or Pass-Through Trust Agreement will be sent to Cede so
long as the Series of Certificates issued pursuant to such Trust Agreement or
Pass-Through Trust Agreement is represented by a single Certificate registered
in the name of Cede.
None of the Company, the Depositor, the Trustee or the Pass-Through Trustee
will have any liability for any aspect of the records relating to or payments
made on account of beneficial ownership interests in the Certificates held by
Cede, as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company and the Depositor believe to be
reliable, but neither the Company nor the Depositor takes any responsibility for
the accuracy thereof.
Definitive Certificates
The Certificates will be issued in fully registered, certificated form
("Definitive Certificates") to Beneficial Owners or their nominees, rather than
to DTC or its nominee, only if (i) the Depositor advises the Trustee or
Pass-Through Trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as depository with respect to the
Certificates and the Depositor is unable to appoint a qualified successor or
(ii) the Depositor, at its option and only with the prior written consent of
Kmart, elects to terminate the book-entry system through DTC.
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Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee or Pass-Through Trustee will be required to notify all
Beneficial Owners through DTC Participants of the availability of Definitive
Certificates. Upon surrender by DTC of the global certificates representing the
Certificates and receipt of instructions for re-registration, the Trustee or
Pass-Through Trustee will reissue the Certificates as Definitive Certificates to
Beneficial Owners.
Definitive Certificates will be freely transferable and exchangeable at the
office of the Trustee or Pass-Through Trustee upon compliance with the
requirements set forth in the Trust Agreement or Pass-Through Trust Agreement.
No service charge will be imposed for any registration of transfer or exchange,
but payment of a sum sufficient to cover any tax or other governmental charge
will be required.
Settlement and Payment
So long as the Certificates are registered in the name of Cede, as nominee
of DTC, all payments of distributions pursuant to the Trust Agreement or
Pass-Through Trust Agreement will be paid to DTC in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the
Certificates will trade in DTC's Same-Day Funds Settlement System until
maturity, and secondary market trading activity in the Certificates will
therefore be required by DTC to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in the Certificates.
DISTRIBUTIONS OF SCHEDULED PAYMENTS
The Prospectus Supplement for a Series will specify the Due Dates on which
payments of interest and principal on each Mortgage Note ("Scheduled Payments")
held by a related Trust or Pass-Through Trust are due and the Remittance Dates
on which the Trustee or Pass-Through Trustee will distribute to each
Certificateholder its pro rata share of the Available Distribution Amount for
the payment of Debt Service. Each such distribution will be made by the Trustee
to holders of record of the Certificates on the close of business of the
fifteenth day preceding the related Remittance Date, except with respect to
Scheduled Payments received after the Due Date (the "Record Date"). Lease
Payments related to any Mortgage Note will be paid directly to the Trustee, or
the Collateral Trustee if applicable. On each Due Date, the Trustee will use
such Lease Payments to pay the Scheduled Payments on the related Mortgage Note
or the Collateral Trustee will transfer to the Pass-Through Trustee amounts
sufficient to pay the Scheduled Payments on the related Mortgage Notes. Such
Scheduled Payments will then be used by the Trustee, or Pass-Through Trustee, if
applicable, to pay Debt Service to the Certificateholders on the related
Remittance Date. See "THE TRUSTS, PASS-THROUGH TRUSTS AND COLLATERAL TRUSTS."
Each Mortgage Note will provide for interest at an overdue rate as
specified in the related Prospectus Supplement on any Scheduled Payments, or
portions thereof, that are not paid when due. The related Lease will provide for
a late payment rate applicable to any Lease Payments, or portions thereof, that
are not paid when due (including any grace period). The late payment rate in the
Lease is scheduled to be sufficient to pay the overdue rate on the related
Mortgage Note(s). Any portion of Scheduled Payments and overdue interest thereon
received by the Trustee or Pass-Through Trustee after the related Due Date will
be distributed to the Certificateholders, based upon their Percentage Interests,
within 10 Business Days of receipt of the corresponding late Lease Payments by
the Trustee or Collateral Trustee. The Record Date with respect to such
distributions will be the close of business on the fifteenth day prior to the
Remittance Date on which the related Scheduled Payment would have been
distributable to Certificateholders had such Scheduled Payment been timely paid
in full. See "THE MORTGAGE NOTES AND THE LOAN AGREEMENTS -- Scheduled Payments."
OTHER DISTRIBUTIONS
Certificateholders may receive other distributions on the Certificates due
to the optional prepayment of a Mortgage Note by the related Borrower, the sale
of a Mortgage Note as a result of the occurrence of a
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Triggering Event under the related Note Put Agreement, the termination of a
Lease due to certain casualty or condemnation events, a condemnation that does
not result in a termination of the related Lease, or the liquidation of a
Mortgage Note. The Trustee or Pass-Through Trustee will send notice of any such
distribution to the Certificateholders at the address shown on the Certificate
Register not less than 10 days prior to the date fixed for such distribution.
The reasonable costs of such notices incurred by the Trustee or Pass-Through
Trustee will be deducted from the amount of any such distribution.
Optional Prepayment Distribution
Unless otherwise specified in the related Prospectus Supplement, any
Mortgage Note may be prepaid at any time, in whole or in part (but if in part,
then in units of $1,000,000 or an integral multiple of $100,000 in excess
thereof), at the option of the related Borrower at a price equal to the Purchase
Price. See "THE MORTGAGE NOTES, THE LOAN AGREEMENTS AND RELATED DOCUMENTS --
Prepayments -- Optional Prepayments." Any such prepayment will be deposited with
the Trustee, or, if applicable, the Collateral Trustee, which will transfer it
to the related Pass-Through Trustees on the next Business Day. Any such
prepayment will be distributed to the Certificateholders, based on their
Percentage Interests, within 30 days of receipt by the Trustee or Collateral
Trustee. Subsequent distributions to Certificateholders of Debt Service will be
proportionately reduced as a consequence of the reduction of the aggregate
outstanding principal balance of the Mortgage Note(s) and the corresponding
reduction of Scheduled Payments.
Distribution from Proceeds of Purchase of Mortgage Note
Unless otherwise stated in the related Prospectus Supplement, a
distribution will be made with respect to the Certificates of any Series in the
event that a Tenant or Kmart (if the Tenant is a Subsidiary) purchases a
Mortgage Note pursuant to the related Note Put Agreement. Each Note Put
Agreement will provide that, in the event (a)(i) a Tenant fails to pay when due
any Lease Payment within 10 days (or 30 days if the Tenant is Kmart) after
notice to the Tenant of such default and (ii) if the Tenant is a Subsidiary,
Kmart fails to pay any such Lease Payment within 30 days after notice to Kmart
of such Subsidiary's failure to do so (which notice may be given concurrently
with the corresponding notice to such Subsidiary), (b) completion of
construction of the Facility to be leased to the Tenant does not occur prior to
the Completion Date, or (c) if the Tenant is a Subsidiary, a Lease Guaranty
Termination occurs or (d) any other event occurs which is described in the
related Prospectus Supplement as a "Triggering Event" (each, a Triggering
Event), the Trustee, or Collateral Trustee, if applicable, will have the right
to require the Tenant, and in the event of the Tenant's failure to do so when
the Tenant is a Subsidiary, to require Kmart to purchase the related Mortgage
Note(s) in whole (but not in part) at the Purchase Price. In the event the
Trustee or Collateral Trustee exercises such right, the Purchase Price will be
deposited with the Trustee, or, if applicable, the Collateral Trustee which will
transfer it to the related Pass-Through Trustees on the next Business Day. Upon
receipt of the Purchase Price with respect to such Mortgage Note(s), the
Trustee, or the Pass-Through Trustee if applicable, will endorse the related
Mortgage Notes(s), and the Trustee, or the Collateral Trustee if applicable,
will assign the related Loan Documents to the purchaser of the Mortgage Note(s),
whereupon the Trust, or the Pass-Through Trust and the Collateral Trust if
applicable, will terminate as to such Mortgage Note(s) and the related
Collateral. Any Purchase Price received by the Trustee or Pass-Through Trustee
as a result of its exercise of its rights under a Note Put Agreement, less any
expense incurred by the Trustee, or the Pass-Through Trustee and Collateral
Trustee, will be distributed to the related Certificateholders within 30 days of
the receipt of such Purchase Price by the Trustee, or Collateral Trustee if
applicable. If the Trust or Pass-Through Trust holds any other Mortgage Note(s),
Debt Service distributable to the Certificateholders will be proportionately
reduced to reflect the reduction in the aggregate Scheduled Payments payable to
the Trust or Pass-Through Trust after the sale of the Mortgage Note(s) pursuant
to the Note Put Agreement. See "THE NOTE PUT AGREEMENTS."
Distribution Due to Casualty or Condemnation
If a Lease is terminated pursuant to the terms thereof by the related
Tenant as a result of casualty loss or condemnation, the Borrower will be
required to prepay the related Mortgage Note(s) at the Purchase Price. Any
related Condemnation Proceeds or Insurance Proceeds will be used to make such
prepayment, but there
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can be no assurance that such amounts will be sufficient for that purpose.
Unless the Borrower prepays the related Mortgage Note(s) at the Purchase Price,
the only additional sources of funds to make such prepayment will be any amounts
recoverable through foreclosure or other disposition of any remaining part of
the Mortgaged Property. Any such Borrower prepayment, Insurance Proceeds or
Condemnation Proceeds will be deposited with the Trustee, or the Collateral
Trustee if applicable which on the next Business Day will transfer a
proportionate amount of such prepayment (based upon the respective Purchase
Prices of the related Mortgage Notes) to the related Pass-Through Trustees. Any
such prepayments will be distributed by the Trustee, or Pass-Through Trustee if
applicable, to the Certificateholders within 30 days of receipt of such amounts
by the Trustee, or Collateral Trustee if applicable. If the Trust or
Pass-Through Trust holds Mortgage Notes relating to other Facilities, subsequent
distributions to the Certificateholders of Debt Service will be proportionately
reduced to reflect the deduction from aggregate Scheduled Payments of principal
and interest payable under the Mortgage Note(s) required to be prepaid. In the
event that Condemnation Proceeds or Insurance Proceeds deposited with the
Trustee exceed the Purchase Price for the related Mortgage Note(s), such excess
amount will be distributed to the related Borrower.
If Lease Payments under a Lease are abated due to a condemnation which does
not result in a termination of the related Lease, Scheduled Payments on the
related Mortgage Note(s) will be reduced in proportion to the reduced Lease
Payments, and Debt Service will be correspondingly reduced. Any Condemnation
Proceeds resulting from such condemnation will be applied first by the related
Tenant toward restoration of the related Facility. In the unlikely event that
such Condemnation Proceeds exceed the amount necessary to restore the Facility,
such excess will be used to prepay a portion of the related Mortgage Note(s)
(including the Make-Whole Premium with respect to such portion). Unless such
excess Condemnation Proceeds are sufficient to prepay the portion of the related
Mortgage Note(s) that is proportionate to the reduction of Scheduled Payments as
a consequence of such Lease Payment abatement, Scheduled Payments following such
condemnation will be less than the amounts necessary to amortize the remaining
principal balance of the related Mortgage Note and to pay the interest thereon.
In that event: (i) subsequent Scheduled Payments will be applied first to pay
accrued interest on the related Mortgage Note(s) and then to reduce the
principal of such Mortgage Note(s); (ii) if any such Scheduled Payments are
insufficient to pay accrued interest on a related Mortgage Note, such unpaid
interest will, to the extent permitted under applicable law, be added to
principal; and (iii) the unpaid principal balance of the related Mortgage
Note(s), together with all accrued and unpaid interest thereon, will, if not
already paid, be due and payable at the maturity date of the Mortgage Note with
the longest term issued pursuant to the related Loan Agreement. At such maturity
date, if such amounts are not paid by the related Borrower, the only source of
payment will be the proceeds recovered from a foreclosure on the related
Facility, which depends upon the fair market value of the Facility, and there
can be no assurance that such proceeds will be sufficient to make such payments.
Such modification of the Lease Payments, the related Scheduled Payments and the
amortization of the related Mortgage Note(s) will not constitute an Event of
Default under such Mortgage Note(s) or any of the related Loan Documents or give
rise to any rights under the related Note Put Agreement. See "THE MORTGAGE
NOTES, THE LOAN AGREEMENTS AND RELATED DOCUMENTS -- Prepayments -- Mandatory
Prepayments and -- Purchase Price" and "THE LEASES, THE LEASE GUARANTIES AND
RELATED DOCUMENTS -- The Leases -- Condemnation and Casualty."
Distribution Due to Liquidation
If any Mortgage Note is liquidated as a result of foreclosure or other
disposition pursuant to the terms of the related Loan Documents, any amounts
received with respect to such liquidation, net of expenses incurred in
connection with such liquidation, will be distributed to the related
Certificateholders within 30 days of receipt by the Trustee, or Collateral
Trustee if applicable. There can be no assurance that the amounts realized from
a foreclosure or other disposition of a Mortgage Note will be sufficient to pay
the principal of, interest on and Make-Whole Premium with respect thereto. If
the Trust or Pass-Through Trust holds other Mortgage Notes, subsequent
distributions to the Certificateholders of Debt Service will be proportionately
reduced to reflect the deduction from aggregate Scheduled Payments of principal
and interest payable under the liquidated Mortgage Note. See "THE MORTGAGE
NOTES, THE LOAN AGREEMENTS AND RELATED DOCUMENTS -- Prepayments -- Liquidation."
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THE TRUSTS, PASS-THROUGH TRUSTS AND COLLATERAL TRUSTS
The following summaries describe certain provisions of the Trust
Agreements, the Pass-Through Trust Agreements and the Collateral Trust
Agreements. The summaries do not purport to be complete and are subject to, and
qualified in their entirety by reference to, the provisions of such documents,
the forms of which (each in substantially the form in which it will be used)
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part. The Pass-Through Trust Agreement and the Collateral Trust
Agreement will be used when there are Mortgage Notes of more than one maturity
issued pursuant to one or more Loan Agreements. A Pass-Through Trust Agreement
will provide for the Pass-Through Trustee to hold one or more Mortgage Notes,
but Collateral securing such Mortgage Note(s), including, with respect to each
such Mortgage Note, the related Loan Agreement, Mortgage, Note Put Agreement,
Lease, Lease Guaranty, if applicable, and all other Loan Documents, will be held
by the related Collateral Trustee. For purposes of the following summaries,
unless otherwise indicated, the Trust Agreements and Pass-Through Trust
Agreements are each referred to as a "Trust Agreement," the Trust and
Pass-Through Trust are each referred to as a "Trust" and the Trustee and
Pass-Through Trustee are each referred to as a "Trustee."
GENERAL
The Depositor will sell, transfer, assign, set over and convey the Mortgage
Note(s) to the Trustee without recourse for the benefit of the
Certificateholders of each Series. If the related Loan Agreements provide for
Mortgage Notes of a single maturity, then the Trust Property of the Trust will
also include, but not be limited to, the following Collateral with respect to
each Mortgage Loan: (i) a Mortgage on the Facility securing the related Mortgage
Note(s), (ii) all of the Depositor's rights under the Loan Agreement pursuant to
which the related Mortgage Note(s) were issued, (iii) an assignment of the
related Lease, Lease Payments and Lease Guaranty, if applicable, (iv) a pledge
of certain moneys held in certain funds established pursuant to the Trust
Agreement, (v) a Note Put Agreement, (vi) an assignment of the Borrower's right,
title and interest in and to any Construction Fund Disbursement Agreement and
any Construction Fund Disbursement Agreement -- Common Area, (vii) a pledge of
certain investments of fund balances held under the Trust Agreement and income
earned thereon, and (viii) any other Loan Documents.
In some cases a Loan Agreement may provide that a Mortgage Loan will be
evidenced by two or more Mortgage Notes having different maturities. In such
case, the Depositor will sell, transfer, assign, set over and convey each such
Mortgage Note to a different Pass-Through Trust. In the event Mortgage Notes are
issued pursuant to more than one Loan Agreement, all Mortgage Notes having the
same maturity will be conveyed to a different Pass-Through Trust such that each
Pass-Through Trust will hold only Mortgage Notes having the same maturity. 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 or the Trust
Property held in any other Pass-Through Trust. When Mortgage Notes having
different maturities are issued, the Collateral with respect to such Mortgage
Notes will be held by the Collateral Trustee in a separate Collateral Trust for
the benefit, pari passu, of the separate Pass-Through Trusts holding the
Mortgage Notes.
ACCOUNTS
Rental Payment Account
Lease Payments (including Lease Payments made after any Due Date), payments
pursuant to any Lease Guaranty and payments pursuant to any Indemnity Agreement
with respect to each Facility will be deposited in a Rental Payment Account
created and maintained pursuant to the Trust Agreement, or, if applicable,
pursuant to the Collateral Trust Agreement, for the related Series of
Certificates to secure the obligations of the Borrower under the related Loan
Documents and Mortgage Note(s). Each Rental Payment Account will be maintained
as a fund separate and distinct from other accounts created under the Trust
Agreement or Collateral Trust Agreement and will remain the property of the
related Borrower subject to the rights of the Trustee, or the Collateral
Trustee, as the case may be, under the related Loan Documents, the related Trust
Agreement or Collateral Trust Agreement and the pledge of the Rental Payment
Account by such Borrower
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to secure the related Mortgage Loan. On each Due Date, amounts on deposit in
such Rental Payment Account equal to Scheduled Payments due under the related
Mortgage Note will be deposited in the Certificate Account maintained pursuant
to the Trust Agreement, or, if such Rental Payment Account is maintained in a
Collateral Trust pursuant to a Collateral Trust Agreement, transferred to the
Certificate Accounts maintained pursuant to the related Pass-Through Trust
Agreements and will be applied on the related Remittance Date to pay Debt
Service on the Certificates. On the second scheduled Remittance Date after the
Closing Date and on each anniversary thereafter of such Remittance Date, amounts
remaining in such Rental Payment Account after such deposit in or transfer to
the Certificate Account will be distributed to the related Borrower. If the
Trustee, or the Collateral Trustee if applicable, becomes aware of an Event of
Default under any of the related Loan Documents (other than a non-monetary
default by the related Tenant under the related Lease), amounts in the Rental
Payment Account will be transferred to the Certificate Account in the Trust or,
if applicable, to the related Mortgage Note Account in the Collateral Trust and
will continue to be held as Collateral by the Trustee or, if applicable, the
Collateral Trustee.
On the next Business Day after receipt, any Lease Payments made after the
applicable Due Date will be deposited in the Certificate Account maintained
pursuant to the Trust Agreement, or if the Rental Payment Account into which
such Lease Payments were initially deposited is maintained in a Collateral Trust
pursuant to a Collateral Trust Agreement, transferred to the Certificate Account
maintained pursuant to the related Pass-Through Trust Agreements and will be
distributed to Certificateholders within ten Business Days of receipt.
Certificate Account
All Scheduled Payments required to be made by a Borrower pursuant to the
terms of the related Mortgage Note(s) and Loan Documents will be paid from the
Lease Payments deposited in the related Rental Payment Account and will be
transferred to a Certificate Account maintained pursuant to the Trust Agreement
or, in the case of Mortgage Notes with different maturities, will be transferred
from the Rental Payment Account or Mortgage Note Account, if applicable,
maintained in the Collateral Trust to the Certificate Accounts maintained
pursuant to the Pass-Through Trust Agreements. On each Remittance Date, the
Trustee or Pass-Through Trustee will distribute to each Certificateholder its
pro rata share of the Available Distribution Amount for the payment of Debt
Service due on such Remittance Date. See "THE CERTIFICATES -- Distribution of
Scheduled Payments." In addition, any prepayments on the related Mortgage
Note(s), Insurance Proceeds or Condemnation Proceeds (to the extent required for
mandatory prepayment of the related Mortgage Note(s) pursuant to the related
Loan Agreement), net proceeds from the liquidation of the related Mortgage and
the Purchase Price under the Note Put Agreement will be deposited in the
Certificate Account, or, if there is a Collateral Trust, deposited in the
Mortgage Note Account and the next Business Day deposited in the Certificate
Accounts of the related Pass-Through Trusts, for distribution in accordance with
the Trust Agreement or Pass-Through Trust Agreements. See "THE CERTIFICATES --
Other Distributions." If an Event of Default occurs and is continuing with
respect to any Mortgage Loan (other than a non-monetary default by the related
Tenant under the related Lease), all amounts in the related Rental Payment
Account will be transferred to the Certificate Account established by such Trust
or to the Mortgage Note Account in the Collateral Trust, if applicable. All
related Lease Payments subsequently received by the Trustee will be deposited in
such Certificate Account, and all related Lease Payments subsequently received
by the Collateral Trustee will be deposited in the Mortgage Note Account. All
such amounts deposited into the Certificate Account or the Mortgage Note Account
after the occurrence of, and during the continuation of, an Event of Default
will continue to be held as Collateral by the Trustee or Collateral Trustee.
Capitalized Debt Service Account
In cases where proceeds of the Certificates are to be used to finance
construction of a Facility, Lease Payments will not commence until a date
specified in the related Prospectus Supplement. In such event, the Depositor
will establish, out of the proceeds of the related Mortgage Loan, a Capitalized
Debt Service Account in an amount sufficient to pay Scheduled Payments on the
related Mortgage Note(s) before Lease
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Payments commence. Each Capitalized Debt Service Account will be maintained as a
fund separate and distinct from other accounts created under the Trust
Agreement, or under the Collateral Trust Agreement, if applicable, and will
remain the property of the Borrower on whose behalf it was established, subject
to the rights of the Trustee, or the Collateral Trustee, as the case may be,
under the Loan Documents, the Trust Agreement or the Collateral Trust Agreement,
and the pledge of the Capitalized Debt Service Account by such Borrower to
secure the related Mortgage Loan. Amounts in the Capitalized Debt Service
Account will be transferred to the related Certificate Account(s) on the Due
Dates and in the amounts specified in the related Trust Agreement, or Collateral
Trust Agreement if applicable, to pay, in whole or in part, the Scheduled
Payments on the Mortgage Note(s). After all amounts required to be transferred
from a Capitalized Debt Service Account to the related Certificate Account have
been so transferred, any amounts remaining in such Capitalized Debt Service
Account will be transferred to the related Tenant. If an Event of Default occurs
under any of the related Loan Documents (other than a non-monetary default by
the related Tenant under the related Lease), all amounts in the related
Capitalized Debt Service Account will be transferred to the Certificate Account
or, if applicable, the related Mortgage Note Account and will continue to be
held as Collateral by the Trustee or, if applicable, the Collateral Trustee.
Mortgage Note Account
With respect to each Mortgage Loan evidenced by Mortgage Notes of different
maturities, the Collateral Trustee will establish a separate Mortgage Note
Account. Each Mortgage Note Account will be maintained as a fund separate and
distinct from other accounts created under the Collateral Trust Agreement. The
Collateral Trustee will deposit in the Mortgage Note Account any prepayments on
the related Mortgage Notes, including any Condemnation Proceeds or Insurance
Proceeds (to the extent required for mandatory prepayments of the related
Mortgage Notes pursuant to the related Loan Agreement), any Purchase Price
received pursuant to any Note Put Agreement, and any net proceeds from the
liquidation of the related Mortgage. All amounts in the Mortgage Note Account
used to pay Scheduled Payments on the Mortgage Notes will be transferred to the
Certificate Accounts of the related Pass-Through Trusts on the Due Dates. All
other amounts in the Mortgage Note Account will be transferred to the related
Pass-Through Trusts the next Business Day after receipt thereof. If an Event of
Default occurs and is continuing with respect to any Mortgage Loan or any
related Loan Document (other than a non-monetary default by the related Tenant
under the related Lease), all amounts in the related Rental Payment Account and
any Capitalized Debt Service Account will be transferred to such Mortgage Note
Account, and all related Lease Payments subsequently received will be deposited
in such Mortgage Note Account. All such amounts transferred or deposited into
the Mortgage Note Account will continue to be held as Collateral by the
Collateral Trustee.
THE TRUST AGREEMENTS AND PASS-THROUGH TRUST AGREEMENTS
The Trustee
The Trustee under each Trust Agreement will be named in the related
Prospectus Supplement. The Trustee must be a corporation or national banking
association organized under the laws of the United States of America or of any
State, must be authorized to exercise corporate trust powers, must have a
combined capital and surplus of at least $50,000,000 in the case of United
States Trust Company of New York and of at least $100,000,000 in the case of any
other trustee and must be subject to regulation and examination by state or
federal regulatory authorities.
The Trustee may resign at any time by giving written notice to the
Depositor and the Certificateholders. If a Trustee (i) fails to comply with
certain requirements of the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act") after written request for such compliance by any
Certificateholder who has been a bona fide Certificateholder for at least six
months, or (ii) ceases to be eligible to continue as Trustee under a Trust
Agreement and fails to resign after written request therefor by the Depositor or
any such bona fide Certificateholder, or (iii) becomes incapable of acting as
Trustee or becomes insolvent, then, in any such case, (i) the Depositor may
remove the Trustee and appoint a successor trustee, or (ii) subject to certain
provisions of the Trust Agreement, any Certificateholder who has been a bona
fide Certificateholder for at least six months may, on behalf of itself and all
others similarly situated, petition any court of competent jurisdiction
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for the removal of the Trustee and the appointment of a successor trustee. A
Trustee may also be removed at any time by the holders of Certificates
evidencing not less than a 66 2/3 Percentage Interest. Any resignation or
removal of a Trustee will not become effective until acceptance of the
appointment by the successor Trustee.
Each Trust Agreement will provide that the Trustee's Fees will be paid by
the Tenants pursuant to the Consent and Agreements. See "THE LEASES, LEASE
GUARANTIES AND RELATED DOCUMENTS -- The Consent and Agreements."
Modification of the Trust Agreements
Each Trust Agreement will contain provisions permitting the Depositor and
the Trustee to enter into a supplement to the Trust Agreement with the consent
of Kmart (except that no consent will be required with respect to (vii) below)
but without the consent of the Certificateholders, (i) to evidence the
succession of another Person to the Depositor and the assumption by such Person
of the Depositor's obligations under such Trust Agreement; (ii) to add to the
covenants of the Depositor for the benefit of the Certificateholders; (iii) to
cure any ambiguity, to correct or supplement any defective or inconsistent
provisions of such Trust Agreement or any supplement, or to make any other
provisions with respect to matters or questions arising under such Trust
Agreement or any supplement, provided such action will not materially adversely
affect the interests of the Certificateholders; (iv) to correct or amplify the
description of any property constituting property of the Trust or to acknowledge
any change relating to title to a Mortgaged Property that does not materially
adversely affect the rights of the Certificateholders; (v) to surrender any
rights or powers conferred upon the Depositor or add to the rights of the
Certificateholders; (vi) to evidence or provide for the appointment of a
successor trustee or to add or change any provision of such Trust Agreement as
may be necessary to provide for or facilitate the administration of the Trust
created thereby by more than one Trustee; or (vii) to add, eliminate or change
any provision under such Trust Agreement to the extent necessary to continue the
qualification of the Trust Agreement under the Trust Indenture Act; provided,
that in each case such supplement does not cause the Trust to fail to be
characterized as a trust for federal income tax purposes or the Collateral
Trust, if applicable, to become taxable as an association within the meaning of
Treasury Regulation Section 301.7701-2.
Each Trust Agreement will also contain provisions permitting the Depositor
and the Trustee, with the consent of the Certificateholders evidencing
fractional undivided beneficial ownership interests aggregating not less than a
66 2/3 Percentage Interest of the Trust, to execute supplements adding any
provisions to or changing or eliminating any of the provisions of the Trust
Agreement or modifying the rights of the Certificateholders, except that no such
supplement may, without the consent of each affected Certificateholder and, with
respect to (ii) and (unless there is a monetary default under the related Lease)
(iii), Kmart, (i) modify the provision of the Trust Agreement that concerns
notifying Certificateholders and Kmart of the occurrence of an Event of Default,
modify the provision of the Trust Agreement concerning approval by
Certificateholders of supplements to the Trust Agreement, or modify the
definition of "Certificateholder" in the Trust Agreement; (ii) modify the
definition of "Percentage Interest" in the Trust Agreement or reduce the
Percentage Interests, the consent of the Holders of Certificates of which is
required for any such supplement to the Trust Agreement, or the consent of the
Holders of Certificates of which is required for any waiver provided for in the
Trust Agreement; (iii) reduce the amount or extend the time of payment of any
amount owing or payable under the Mortgage Note(s) or distributions to be made
on any Certificate; (iv) impair the right of any Certificateholder to commence
legal proceedings to enforce a right to receive payment under such Certificate
or under the Trust Agreement; or (v) create or permit the creation of any lien
on the Trust Property or any part thereof, or deprive any Certificateholder of
the benefit of the Trust Agreement, whether by disposition of such Trust
Property or otherwise; provided however, in each case such supplement does not
cause the Trust to fail to be characterized as a trust for federal income tax
purposes or the Collateral Trust, if applicable, to become taxable as an
association within the meaning of Treasury Regulations Section 301.7701-2.
Events of Default
Events of Default under a Trust Agreement in respect of a Series of
Certificates will consist of the occurrence of any event constituting an Event
of Default under any of the Loan Documents or Mortgage
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Note(s) held by the Trustee, or Collateral Trustee if applicable. The Trustee
will be obligated to notify the Certificateholders and Kmart of any Event of
Default within the later of 90 days from the occurrence thereof or 30 days after
obtaining knowledge thereof, unless such Event of Default has been cured or
waived before the giving of such notice. Except in the case of a default in the
payment of principal of, or interest on, the Mortgage Note(s), the Trustee may
withhold such notice so long as its board of directors, the executive committee
or a committee of its directors and/or responsible officers in good faith
determines that the withholding of such notice is in the interests of the
Certificateholders.
Rights Upon Event of Default
So long as an Event of Default has not been remedied, the Trustee, at the
written direction of the holders of Certificates evidencing not less than a
66 2/3 Percentage Interest, will exercise any rights and remedies that it may
have against a Borrower, a Tenant or Kmart (if the Tenant is a Subsidiary)
pursuant to the related Loan Documents, Mortgage Note(s), Lease or Lease
Guaranty, if applicable, or at law or in equity, including injunctive relief and
specific performance, subject to the rights of the related Tenant and Kmart (if
the Tenant is a Subsidiary) under the related Lease, the related Consent and
Agreement, the related Construction Fund Disbursement Agreement, if any, and the
related Construction Fund Disbursement Agreement -- Common Area, if any;
provided that, if as a result of the occurrence of an Event of Default, the
Trustee acquires any property other than cash, whether pursuant to foreclosure
or otherwise, the Trustee will be required to sell such property as promptly as
is reasonably possible. In addition, the Trustee will not be required to take
title to a Facility in a foreclosure or similar proceeding if the Trustee has
actual knowledge or reasonably believes that all or any part of such Facility is
affected by hazardous or toxic wastes or substances. In the case of an Event of
Default which also constitutes a Triggering Event, the Trustee's rights will
include the right to require the related Tenant or Kmart (if the Tenant is a
Subsidiary) to purchase the related Mortgage Note(s) pursuant to the Note Put
Agreement. See "THE NOTE PUT AGREEMENTS."
Where there is both a Collateral Trust and a Pass-Through Trust, the
Pass-Through Trustee will hold a Mortgage Note but not the related Loan
Documents. Consequently, upon an occurrence of an Event of Default under the
Pass-Through Trust Agreement with respect to a Mortgage Note, the Pass-Through
Trustee's principal right and remedy will be to vote the principal balance of
such Mortgage Note, as directed by the Certificateholders of such Pass-Through
Trust, in favor of the exercise by the Collateral Trustee of its rights and
remedies under the related Loan Documents, and accordingly to direct the related
Collateral Trustee to exercise such rights and remedies. The Collateral Trustee
will be required to exercise such rights and remedies if such Collateral Trustee
receives written directions in favor of such exercise from the related
Pass-Through Trustees voting not less than 66 2/3% of the outstanding principal
balance of all Mortgage Note(s) affected by such Event of Default.
The occurrence of an Event of Default pursuant to the Loan Documents
relating to any Mortgage Loan, the related Mortgage Note(s), the related Lease
or the related Lease Guaranty, if applicable, will not give rise to an election
to terminate the Trust. The occurrence of such an Event of Default will not
constitute a cross default with respect to any other Mortgage Loan and will have
no effect on any Loan Documents, Mortgage Note, Lease or Lease Guaranty with
respect to any such other Mortgage Loan. Consequently, remedies may be exercised
only with respect to the related Mortgage Note and Loan Documents. Any amounts
realized upon the exercise of such remedies may be less than the Purchase Price
for such Mortgage Note. No person or entity, including the related Tenant, Kmart
(if the Tenant is a Subsidiary), the related Borrower or the Depositor has any
liability for any deficiency which may result from a sale of a Facility upon
foreclosure of the related Mortgage.
Each Trust Agreement will contain a provision entitling the Trustee,
subject to the duty of the Trustee during the continuance of an Event of Default
to act with the required standard of care, to be indemnified by the
Certificateholders before exercising any right or power under such Trust
Agreement or the related Loan Documents.
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Rights Upon Triggering Event
If a Triggering Event other than a Lease Guaranty Termination occurs, the
Trustee, at the written direction of the holders of Certificates evidencing not
less than a 66 2/3 Percentage Interest (which direction must be given within 90
days after the giving by the Trustee to the Certificateholders of a notice
stating that such Triggering Event has occurred), will exercise its rights under
the Note Put Agreement. If a Triggering Event is a Lease Guaranty Termination,
the Trustee will exercise its rights under the Note Put Agreement unless, within
30 days after notice by the Trustee to the Certificateholders of the occurrence
of such Lease Guaranty Termination, holders of Certificates evidencing not less
than a 66 2/3 Percentage Interest elect not to exercise such rights. In cases
where the Note Put Agreement is held in a Collateral Trust, the 66 2/3
Percentage Interest required for the exercise of such rights (or, in the case of
a Lease Guaranty Termination, the election not to exercise such rights) will be
computed by reference to the outstanding principal amount of all Mortgage Notes
issued pursuant to the applicable Loan Agreement. The Prospectus Supplement will
describe the obligation of the Trustee to exercise its rights under a related
Note Put Agreement with respect to any Triggering Event so denominated therein
and not described in this Prospectus. See "THE NOTE PUT AGREEMENTS."
Termination
Each Trust Agreement and the obligations of the Depositor and the Trustee
created thereby will terminate as to any Mortgage Note and the related Loan
Documents upon the final payment, prepayment in full or other liquidation of
such Mortgage Note, including the disposition of all property acquired upon
foreclosure of such Mortgage Note and the remittance of all funds due thereunder
with respect to such Mortgage Note. In no event, however, will any Trust
continue beyond the expiration of 21 years from the death of the survivor of
certain persons described in such Trust Agreement. Written notice of termination
of the Trust Agreement will be given to each Certificateholder and the final
payment on the Certificates will be made only upon surrender and cancellation of
the Certificates at the corporate trust office of the Trustee.
Reports to Certificateholders
The Trustee will furnish to Certificateholders on each Remittance Date a
statement setting forth the following information (per $1,000 aggregate
principal amount, as to (i) and (ii) below):
(i) that portion of the distribution paid on such Remittance Date
which is allocable to principal on the related Mortgage Note(s);
(ii) that portion of such distribution which is allocable to interest
on the related Mortgage Note(s);
(iii) any amounts expended by the Trustee or the Collateral Trustee,
if applicable, following an Event of Default under any of the Loan
Documents in connection with enforcing the Trustee's or the Collateral
Trustee's rights and remedies thereunder for the benefit of the
Certificateholders; and
(iv) whether any Mortgage Note is delinquent.
So long as the Certificates of any Series are registered in the name of
Cede, as nominee for DTC, on the Record Date prior to each Remittance Date, the
Trustee will request from DTC a securities position listing setting forth the
names of all DTC Participants reflected on DTC's books as holding positions in
such Certificates on such Record Date. On each Remittance Date, the Trustee will
mail to each such DTC Participant the statement described above, and will make
available additional copies as requested by such DTC Participant, to be
available for forwarding to the related Beneficial Owners.
In addition, within 90 days after the end of each calendar year, the
Trustee will prepare for each Certificateholder a report setting forth the
interest paid on the related Mortgage Note(s) during the year with respect to
the Certificates held by such Certificateholder. Such report will be prepared by
the Trustee and will be delivered by the Trustee to such DTC Participants to be
available for forwarding by DTC Participants to Beneficial Owners in the manner
described in the immediately preceding paragraph for so long as the Certificates
of any Series are registered in the name of Cede, as nominee for DTC. If the
Certificates of any Series are issued as Definitive Certificates, the Trustee
will prepare and deliver the information described
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above to each Certificateholder of record as the name of such Certificateholder
appears on the records of the Trustee.
THE COLLATERAL TRUST AGREEMENTS
The Collateral Trustee
The Collateral Trustee under each Collateral Trust Agreement, if any, will
be named in the related Prospectus Supplement. The Collateral Trustee must be a
corporation or national banking association organized under the laws of the
United States of America or of any State, authorized to exercise corporate trust
powers, must have a combined capital and surplus of at least $50,000,000 in the
case of United States Trust Company of New York and of at least $100,000,000 in
the case of any other trustee and must be subject to regulation and examination
by state or federal regulatory authorities. The same entity may serve as
Trustee, Pass-Through Trustee and Collateral Trustee.
The Collateral Trustee may resign at any time by giving written notice to
the related Pass-Through Trustees for distribution to their Certificateholders.
If a Collateral Trustee (i) ceases to be eligible to continue as Collateral
Trustee under the Collateral Trust Agreement, and fails to resign after written
request therefor by the Depositor or a related Pass-Through Trustee at the
direction of a bona fide Certificateholder who has been a bona fide
Certificateholder for at least six months or (ii) becomes incapable of acting as
Collateral Trustee or becomes insolvent, then, in any such case, the Depositor
or the related Pass-Through Trustees may remove the Collateral Trustee and
appoint a successor collateral trustee. A Collateral Trustee may also be removed
at any time by the related Pass-Through Trustees, at the direction of holders of
Certificates evidencing not less than a 66 2/3 Percentage Interest. Any
resignation or removal of a Collateral Trustee will not become effective until
acceptance of the appointment by the successor Collateral Trustee.
Each Collateral Trust Agreement will provide that the Collateral Trustee's
Fees will be paid by the related Tenants pursuant to the Consent and Agreements.
See "THE LEASE, THE LEASE GUARANTIES AND RELATED DOCUMENTS -- The Consent and
Agreements."
Modification of the Collateral Trust Agreements
Each Collateral Trust Agreement will contain provisions permitting the
Depositor and the Collateral Trustee to enter into a supplement to the
Collateral Trust Agreement with the consent of Kmart but without the consent of
the Pass-Through Trustees or the Certificateholders, (i) to evidence the
succession of another Person to the Depositor and the assumption by such Person
of the Depositor's obligations under such Collateral Trust Agreement; (ii) to
add to the covenants of the Depositor for the benefit of the Pass-Through
Trustees and the Certificateholders; (iii) to cure any ambiguity, to correct or
supplement any defective or inconsistent provisions of such Collateral Trust
Agreement or any supplement, or to make any other provisions with respect to
matters or questions arising under such Collateral Trust Agreement or any
supplement, provided such action will not materially adversely affect the
interests of the Pass-Through Trustees or the Certificateholders; (iv) to
correct or amplify the description of any property constituting property of the
Collateral Trust or to acknowledge any change relating to title to the Mortgaged
Property that does not materially adversely affect the rights of the
Certificateholders; (v) to surrender any rights or powers conferred upon the
Depositor or add to the rights of the Pass-Through Trustees for the benefit of
the Certificateholders; or (vi) to evidence or provide for a successor
Collateral Trustee or to add or change any provision of such Collateral Trust
Agreement as may be necessary to provide for or facilitate the administration of
the Collateral Trust created thereby by more than one Collateral Trustee;
provided, that in each case such supplement does not cause the Collateral Trust
to become taxable as an association within the meaning of Treasury Regulation
Section 301.7701-2 or cause any Trust to fail to be characterized as a trust for
federal income tax purposes.
Each Collateral Trust Agreement will also contain provisions permitting the
Depositor and the Collateral Trustee, with the consent of the Pass-Through
Trustees at the direction of holders of Certificates evidencing pass-through
ownership of not less than 66 2/3% of the aggregate outstanding principal
balance of all Mortgage Notes, to execute supplements adding any provisions to
or changing or eliminating any of the provisions of the Collateral Trust
Agreement or modifying the rights of the Pass-Through Trustees or the
Certificateholders,
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except that no such supplement may, without the consent of each affected
Certificateholder and, with respect to (ii) and (unless there is a monetary
default under the related Lease) (iii), Kmart, (i) modify the provision of the
Collateral Trust Agreement that concerns notifying the related Pass-Through
Trustees and Kmart of the occurrence of an Event of Default, modify the
provision of the Collateral Trust Agreement concerning approval by the related
Pass-Through Trustees and Certificateholders of supplements to the Collateral
Trust Agreement, or modify the definitions of "Pass-Through Trust,"
"Pass-Through Trustee" or "Certificateholder" in the Collateral Trust Agreement,
(ii) modify the definition of "Percentage Interest" in the Collateral Trust
Agreement or reduce the Percentage Interest vote that is required for any such
supplement to the Collateral Trust Agreement, or the consent required from the
related Pass-Through Trustees for any waiver provided for in the Collateral
Trust Agreement; (iii) reduce the amount or extend the time of payment of any
amount owing or payable under the Mortgage Note(s); (iv) impair the right of any
related Pass-Through Trustee or Certificateholder to commence legal proceedings
to enforce a right to receive payment on a related Mortgage Note; or (v) create
or permit the creation of any lien on the Collateral Trust Property or any part
thereof, or deprive any Certificateholder of the benefit of the Collateral Trust
Agreement, whether by disposition of such Collateral Trust Property or
otherwise; provided, that in each such case such supplement does not cause the
Collateral Trust to become taxable as an association within the meaning of
Treasury Regulation Section 301.7701-2 or cause any Pass-Through Trust to fail
to be characterized as a trust for federal income tax purposes.
Events of Default
Events of Default under a Collateral Trust Agreement will consist of the
occurrence of any event constituting an Event of Default under any of the Loan
Documents held by the Collateral Trustee or the Mortgage Notes held by the
related Pass-Through Trustees. The Collateral Trustee will be obligated to
notify the Pass-Through Trustees of such Event of Default within five Business
Days after the Collateral Trustee obtains knowledge thereof, unless such Event
of Default has been cured or waived before the giving of such notice.
Rights Upon Event of Default
So long as an Event of Default has not been remedied, the Collateral
Trustee, at the written direction of Pass-Through Trustees voting not less than
66 2/3% of the outstanding principal balance of the Mortgage Notes affected by
such Event of Default, will exercise any rights and remedies that it may have
against a Borrower, a Tenant or, if the Tenant is a Subsidiary, Kmart pursuant
to the related Loan Documents, Mortgage Notes, Lease or Lease Guaranty, if
applicable, or at law or in equity, including injunctive relief and specific
performance, subject to the rights of the Tenant and, if the Tenant is a
Subsidiary, Kmart under the related Lease, the related Consent and Agreement,
the related Construction Fund Disbursement Agreement, if any, and the related
Construction Fund Disbursement Agreement -- Common Area, if any; provided that,
if as a result of the occurrence of an Event of Default, the Collateral Trustee
acquires any property other than cash, whether pursuant to foreclosure or
otherwise, the Collateral Trustee will sell such property as promptly as is
reasonably possible. In addition, the Collateral Trustee will not be required to
take title to a Facility in a foreclosure or similar proceeding if the
Collateral Trustee has actual knowledge or reasonably believes that all or any
part of such Facility is affected by hazardous or toxic wastes or substances. In
the case of an Event of Default which also constitutes a Triggering Event, the
rights of the Collateral Trustee will include the right to require the related
Tenant or Kmart (if the Tenant is a Subsidiary) to purchase the related Mortgage
Note(s) pursuant to the Note Put Agreement. See "THE NOTE PUT AGREEMENTS."
The occurrence of an Event of Default pursuant to any of the Loan Documents
relating to any Mortgage Loan, the related Mortgage Notes, the related Lease or
the related Lease Guaranty, if applicable, will not give rise to an election to
terminate the Collateral Trust as to such Mortgage Loan. The occurrence of such
an Event of Default will not constitute a cross default with respect to any
other Mortgage Loan held by the Collateral Trust and will have no effect on any
Loan Documents, Mortgage Note, Lease or Lease Guaranty, if applicable, with
respect to any such other Mortgage Loan. Consequently, remedies may only be
exercised with
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respect to the related Mortgage Note and Loan Documents. Any amounts realized
upon the exercise of such remedies may be less than the Purchase Price for such
Mortgage Note.
Each Collateral Trust Agreement will contain a provision entitling the
Collateral Trustee, subject to the duty of the Collateral Trustee during the
continuance of an Event of Default to act with the required standard of care, to
be indemnified by the holders of Certificates evidencing pass-through ownership
of not less than 66 2/3% of the aggregate outstanding principal balance of the
Mortgage Notes before exercising any right or power under such Collateral Trust
Agreement.
Termination
Each Collateral Trust Agreement and the obligations of the Depositor and
the Collateral Trustee created thereby will terminate with respect to any
Mortgage Loan and related Loan Documents upon the final payment, prepayment in
full or other liquidation of the Mortgage Notes held by the related Pass-Through
Trusts, including the disposition of all property acquired upon foreclosure of
such Mortgage Notes, and the remittance to the Pass-Through Trustee of all funds
due with respect thereto under the Collateral Trust Agreement. In no event,
however, will any Collateral Trust continue beyond the expiration of 21 years
from the death of the survivor of certain persons described in such Collateral
Trust Agreement.
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THE MORTGAGE NOTES, THE LOAN AGREEMENTS AND RELATED DOCUMENTS
The following summaries describe certain provisions of the Mortgage Notes,
the Loan Agreements, the Mortgages and the Assignments of Leases and Rents. The
summaries do not purport to be complete and are subject to, and qualified in
their entirety by reference to, the provisions of such documents, the forms of
which (each in substantially the form in which it will be used) have been filed
as exhibits to the Registration Statement of which this Prospectus is a part.
GENERAL
Concurrently with the issuance of each Series of Certificates, the
Depositor will make one or more Mortgage Loans from the proceeds of such
issuance to one or more Borrowers. Each Mortgage Loan will be made to a
different Borrower, which will enter into a Loan Agreement with the Depositor.
The Loan Agreements will require the Borrowers to execute and deliver to the
Depositor Mortgage Notes evidencing the Mortgage Loans together with the other
Loan Documents securing the Mortgage Loans. The Depositor in turn will assign
all of its right, title and interest in, under and to the Loan Documents and the
Mortgage Notes to the Trustee under the related Trust Agreement for such Series
if all Mortgage Notes have the same maturity. If the Mortgage Notes have
different maturities, the Depositor will assign all of its right, title and
interest in, under and to the Mortgage Notes to different Pass-Through Trusts
such that all the Mortgage Notes in any Pass-Through Trust will have the same
maturity, and the Depositor will assign all of its right, title and interest in,
under and to the other Loan Documents to the Collateral Trustee under the
related Collateral Trust Agreement.
SCHEDULED PAYMENTS
Each Mortgage Note will be a promissory note obligating a Borrower to make
Scheduled Payments which will be passed through to the Trust or Pass-Through
Trust to pay Debt Service on the related Series of Certificates. The Lease
Payments due pursuant to a Lease will be scheduled to be sufficient to pay
Scheduled Payments on the related Mortgage Notes(s). The maturity date of the
Mortgage Notes acquired by each Trust will correspond to the final scheduled
Remittance Date applicable to the Certificates evidencing interests in such
Trust. Each Mortgage Note will provide for an increased interest rate applicable
to any overdue principal or interest payments with respect to such Mortgage
Note. The related Lease will provide for a late payment rate on any Lease
Payments or portions thereof that are not paid when due (including any grace
period). The late payment rate in a Lease is scheduled to be sufficient to pay
the overdue rate on the related Mortgage Note(s). See "THE CERTIFICATES --
Distributions of Scheduled Payments."
Each Trust will acquire Mortgage Notes having an interest rate
corresponding to the interest rate on the Certificates evidencing interests in
such Trust. The aggregate principal amount of the Certificates evidencing
interests in each Trust will be equal to the aggregate principal amount of the
Mortgage Notes held in such Trust.
PREPAYMENTS
Optional Prepayment
Unless otherwise specified in the related Prospectus Supplement, each
Borrower will have the option at any time and from time to time to prepay a
Mortgage Note in whole or in part (but if in part, then in units of $1,000,000
or an integral multiple of $100,000 in excess thereof) by payment of the
Purchase Price. Any optional prepayment of a Mortgage Note will be distributed
by the Trustee or Pass-Through Trustee to the related Certificateholders based
upon their Percentage Interests. See "THE CERTIFICATES -- Other Distributions --
Optional Prepayment Distribution."
Mandatory Prepayments
A Borrower will be required to prepay a Mortgage Note at the Purchase Price
in the event the related Lease is terminated in connection with a taking by
condemnation of all or any part of, or a casualty affecting,
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the related Facility. See "THE LEASES, LEASE GUARANTIES AND RELATED DOCUMENTS --
The Leases -- Condemnation and Casualty." In the event of any such required
prepayment, any Insurance Proceeds or Condemnation Proceeds will be used to pay
the Purchase Price of the related Mortgage Loan. There can be no assurance that
such Insurance Proceeds or Condemnation Proceeds will be sufficient to pay such
Purchase Price in full, although, in the case of a termination resulting from
damage or destruction during the last two years of the term of the Leases, the
resulting Insurance Proceeds may, in light of the fact that the Mortgage Note
fully amortizes during its term, be sufficient to pay all amounts due under the
Mortgage Note, except in the case of extraordinary devaluation of the Facility
during the term of the Mortgage Note. If the Insurance Proceeds or Condemnation
Proceeds are insufficient to pay the Purchase Price in full, the Borrower will
in all likelihood not have sufficient funds to pay the deficiency, and there can
be no assurance that such deficiency will be satisfied out of the proceeds of
any subsequent foreclosure of the related Facility.
In the event of any condemnation of a Facility which does not result in the
termination of the related Lease, the Lease Payments under such Lease may be
abated (see "THE LEASES, LEASE GUARANTIES AND RELATED DOCUMENTS -- The Leases --
Condemnation and Casualty") and, in such event, Scheduled Payments under the
related Mortgage Note(s) will be reduced in the same proportion as Lease
Payments have been abated under such Lease. Any Condemnation Proceeds resulting
from such condemnation will be applied by the related Tenant to restore the
related Facility. In the unlikely event that such Condemnation Proceeds exceed
the amount necessary to restore the Facility, such excess will be used to prepay
a portion of the related Mortgage Note(s) (including the Make-Whole Premium with
respect to such portion). Subsequent Scheduled Payments will be applied first to
pay accrued interest on the related Mortgage Note(s) and then to reduce the
principal of such Mortgage Note(s), and any unpaid interest will, to the extent
permitted under applicable law, be capitalized. The unpaid principal amount of
such Mortgage Note(s), together with all accrued and unpaid interest, will be
due and payable at the maturity date of Mortgage Note with the longest term
issued pursuant to the related Loan Agreement. See "THE CERTIFICATES -- Other
Distributions -- Distribution Due to Casualty or Condemnation."
Any prepayment of any Mortgage Loan in connection with a casualty or
condemnation will be distributed by the Trustee or Pass-Through Trustee to the
related Certificateholders based upon their Percentage Interests.
Liquidation
If an Event of Default under a Loan Document occurs (other than a
non-monetary default by a Tenant under a Lease) and if the Trustee, or
Collateral Trustee if applicable, accelerates the related Mortgage Note, the
related Borrower will be required to pay the Purchase Price to the Trustee or
Collateral Trustee. All proceeds of any foreclosure or any other liquidation of
the related Mortgage Note under the related Loan Documents, net of expenses
incurred in connection therewith, from such liquidation will be applied toward
payment of such Purchase Price. All of such net proceeds will be distributed by
the Trustee, or the Pass-Through Trustee if applicable, to the
Certificateholders based upon their Percentage Interests. There can be no
assurance that the proceeds of any such liquidation will be sufficient to pay
the Purchase Price of the related Mortgage Note(s). See "THE CERTIFICATES --
Other Distributions -- Distribution Due to Liquidation."
Purchase Price
The Purchase Price for a Mortgage Note in case of an optional prepayment,
mandatory prepayment or liquidation will be equal to the outstanding principal
balance of such Mortgage Note, accrued interest thereon and the Make-Whole
Premium related thereto. Under the laws of certain states the enforceability of
the obligation to pay amounts similar to the Make-Whole Premium is unclear, and
there can be no assurance that the obligation to pay the Make-Whole Premium will
be enforceable in the event of a prepayment or acceleration of a Mortgage Note.
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EVENTS OF DEFAULT
Unless otherwise provided in the Prospectus Supplement for a Series, Events
of Default under each Loan Agreement and Mortgage Note will include the
following (after the expiration of any applicable cure periods):
(i) a default in the payment or prepayment of the principal of,
Make-Whole Premium, if any, or interest on, a Mortgage Note when due;
(ii) if applicable, the construction of a Facility ceases for a period
longer than that specified in the Loan Agreement or is abandoned or is not
completed in compliance with the Loan Agreement on or before the date
specified in the Loan Agreement;
(iii) the occurrence of a default under a Lease, a Lease Guaranty, if
applicable, or an Indemnity Agreement, if applicable; and
(iv) the occurrence of any default by Kmart in the performance of its
obligations under a Note Put Agreement.
Each Loan Agreement also will provide for other Events of Default that are
customary in mortgage loan transactions. An event or condition giving rise to an
Event of Default under a Loan Agreement will not necessarily give rise to an
Event of Default under the related Lease or permit the Trustee, or the
Collateral Trustee if applicable, to exercise any remedy against the Tenant or,
if the Tenant is a Subsidiary, Kmart under the related Lease, Lease Guaranty, if
applicable, or Note Put Agreement. An Event of Default with respect to one
Mortgage Loan will not constitute an Event of Default under any other Mortgage
Loan or the Loan Documents related thereto or permit the Trustee, or Collateral
Trustee if applicable, to exercise any remedies with respect to any other
Mortgage Loan or the Loan Documents related thereto.
REMEDIES UPON EVENT OF DEFAULT
If any Event of Default occurs and is continuing following any applicable
cure period, the Trustee, or the Collateral Trustee if applicable, as assignee
of the Depositor will upon the direction of 66 2/3 Percentage Interests of the
Certificateholders, declare the entire unpaid principal amount of such Mortgage
Note, interest accrued thereon and the Make-Whole Premium, if applicable,
immediately due and payable and the Trustee, or the Collateral Trustee if
applicable, will be entitled to commence proceedings for immediate foreclosure
of the Mortgage and may avail itself of any other relief to which the Trustee,
or the Collateral Trustee if applicable, may be legally or equitably entitled
under the other Loan Documents, the Mortgage Notes, or otherwise. The Trustee,
or the Collateral Trustee if applicable, will, upon becoming the owner of the
Facility pursuant to any such foreclosure, take title subject to the related
Lease, provided that, if a monetary Event of Default exists under such Lease
and, if the Tenant is a Subsidiary, any Lease Guaranty, the Trustee, or the
Collateral Trustee if applicable, will have the right, after completion of such
foreclosure (possibly including the expiration of any redemption period) or
prior to such completion if permitted under the laws of the state in which the
Facility is located, to exercise the right of the Borrower as lessor to
terminate such Lease. In the case of an Event of Default which also constitutes
a Triggering Event, the rights of the Trustee, or Collateral Trustee if
applicable, will include the right to require the related Tenant or Kmart (if
the Tenant is a Subsidiary) to purchase the related Mortgage Note(s) pursuant to
the Note Put Agreement. See "THE NOTE PUT AGREEMENTS."
LIMITATION OF A BORROWER'S LIABILITY
Each Loan Agreement will provide that the recourse of the Trustee, or the
Collateral Trustee if applicable, will be limited to foreclosure and other
remedies set forth in the Loan Documents. Generally, neither a Borrower nor any
of its affiliates will be personally liable for payment of principal, interest
or other amounts which may become due and payable under any of the Loan
Documents, the holder of a Mortgage Note will be entitled to look solely to the
security provided for in the Loan Documents, and no deficiency judgment for
amounts unsatisfied after the application of such security and the proceeds
thereof may be obtained against a Borrower or its affiliates. The general
limitation on the personal liability of the Borrower and its affiliates will not
prejudice the rights of the Trustee, or the Collateral Trustee if applicable, to
recover
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(i) for fraud, intentional misrepresentation or breach of any representation or
warranty or willful misconduct by or on behalf of a Borrower, (ii) certain
funds, deposits, advances and other amounts which may be held by or for a
Borrower at the time of an Event of Default under a Mortgage Note or any other
Loan Documents, and (iii) amounts recoverable for certain environmental hazards.
However, because each Borrower is expected to be an entity without any assets
(other than the related Facility) the recourse of the Trustee or the Collateral
Trustee will be limited even in those instances where personal liability may be
established against a Borrower.
THE MORTGAGES
General
The Mortgage Note(s) issued under a Loan Agreement, and the payment and
performance of all of the obligations of the Borrower under such Loan Agreement,
will be secured by a first mortgage and security interest in (i) a Facility and
all improvements thereon; (ii) all leases, rents, profits, royalties and income
and other benefits derived from the Facility; (iii) all right, title and
interest of a Borrower in and to all tangible personal property, whenever
acquired by the Borrower, which is located on or at the Facility and used solely
in connection therewith; (iv) all of the Borrower's interest in intangible
property related to the acquisition, ownership, leasing, construction,
operation, servicing or management of the Facility; and (v) all of the
Borrower's interest in claims or demands including those with respect to
Insurance Proceeds and Condemnation Proceeds of the whole or any part of the
Facility. Each Mortgage will be subordinate to the related Lease.
Each Mortgage will provide that the Borrower may transfer its interest in
the Facility prior to the completion of construction only with the consent of
the Trustee, or Collateral Trustee if applicable, as assignee of the Depositor.
Thereafter, if no default under the Mortgage has occurred and is continuing, and
subject to satisfying certain conditions set forth in the Mortgage, the Borrower
may transfer its interest in the Facility without the consent of the Trustee or
the Collateral Trustee.
Events of Default
An Event of Default under a Loan Agreement will also be an Event of Default
under the related Mortgage. In addition, any failure on the part of a Borrower
to perform any covenants or agreements contained in the related Mortgage which
are not cured within 30 days after notice thereof will constitute an Event of
Default under such Mortgage.
Remedies Upon Event of Default
Upon the occurrence of an Event of Default, the Trustee, or the Collateral
Trustee if applicable, may declare all obligations secured by a Mortgage to be
due and payable and thereafter, subject to the provisions of applicable state
law, the Trustee, or Collateral Trustee if applicable, may (i) enter upon and
take possession of the related Facility; (ii) commence an action to foreclose
the Mortgage; (iii) exercise any and all of the remedies available to a secured
party under applicable law; and (iv) apply to any court having jurisdiction to
appoint a receiver of the Facility or to specifically enforce any of the
covenants set forth in the Mortgage.
If the Trustee, or the Collateral Trustee if applicable, forecloses by
reason of the occurrence of an Event of Default prior to the completion of
construction of a Facility, the Tenant will, prior to the occurrence of a
Triggering Event, retain its right under the related Construction Fund
Disbursement Agreement and any Construction Fund Disbursement Agreement --
Common Area to complete construction of the Facility and Common Area. See "THE
LEASES, THE LEASE GUARANTIES AND RELATED DOCUMENTS -- Construction Fund
Disbursement Agreements."
If the Trustee, or Collateral Trustee if applicable, forecloses on a
Facility, it may not be able subsequently to exercise its rights under the
related Note Put Agreement if the Mortgage Note is deemed to have been
extinguished in or satisfied by the foreclosure proceeding. However, a
foreclosure will not affect the continuing rights and obligations of the Tenant
under the Lease or of Kmart (if the Tenant is a Subsidiary) under the Lease
Guaranty.
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THE ASSIGNMENTS OF LEASES AND RENTS
Pursuant to an Assignment of Leases and Rents, all Lease Payments due under
a related Lease will be assigned to the Trustee or Collateral Trustee, if
applicable. The Assignment of Leases and Rents will also give the Trustee or
Collateral Trustee the right, upon the occurrence of an Event of Default under
the related Loan Agreement, to exercise the rights and remedies of the related
Borrower as lessor under the Lease. Although each Assignment of Leases and Rents
will, by its terms, be a present assignment of the related Lease and Lease
Payments, it may, under the laws of certain states in which Facilities are
located, be deemed a collateral assignment. In such event, the rights of the
Trustee or Collateral Trustees thereunder may be exercisable only upon
completion of a foreclosure of the related Mortgage (possibly including the
expiration of any redemption period) or otherwise as permitted or required under
the laws of the applicable state.
THE NOTE PUT AGREEMENTS
The following summary describes certain provisions of the Note Put
Agreements to be entered into by and among Kmart, a Subsidiary (if it is a
Tenant) and the Depositor. The summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the provisions of
each Note Put Agreement, the form of which (in substantially the form in which
it will be used) has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part.
Unless otherwise stated in the related Prospectus Supplement, each Note Put
Agreement will provide that, in the event (a) (i) a Tenant fails to pay when due
any Lease Payment within 10 days (or 30 days if the Tenant is Kmart) after
notice to the Tenant of such default and (ii) if the Tenant is a Subsidiary,
Kmart fails to pay any such Lease Payment within 30 days after notice to Kmart
of such Subsidiary's failure to do so (which notice may be given concurrently
with the corresponding notice to such Subsidiary), (b) completion of
construction of the Facility to be leased to the Tenant does not occur prior to
the Completion Date, or (c) if the Tenant is a Subsidiary, a Lease Guaranty
Termination occurs (each, a Triggering Event), the Trustee, or Collateral
Trustee if applicable, will have the right to require the Tenant, and in the
event of the Tenant's failure to do so when the Tenant is a Subsidiary, to
require Kmart to purchase the related Mortgage Note(s) in whole (but not in
part) at the Purchase Price. The Trustee, at the written direction of the
holders of Certificates evidencing not less than a 66 2/3 Percentage Interest
(which direction must be given within 90 days after the giving by the Trustee to
the Certificateholders of a notice stating that such Triggering Event has
occurred), will exercise its rights under the Note Put Agreement. If the
Triggering Event is a Lease Guaranty Termination, the Trustee will exercise its
rights under the Note Put Agreement unless, within 30 days after notice by the
Trustee to the Certificateholders of the occurrence of such Lease Guaranty
Termination, holders of Certificates evidencing not less than a 66 2/3
Percentage Interest elect not to exercise such rights. In cases where the Note
Put Agreement is held in a Collateral Trust, the 66 2/3 Percentage Interest
required for the exercise (or the election not to exercise such rights) of such
rights will be computed by reference to the outstanding principal amount of all
Mortgage Notes issued pursuant to the applicable Loan Agreement. If the
Prospectus Supplement describes any Triggering Events not described in this
Prospectus, the Prospectus Supplement will describe those circumstances in which
the Trustee will be required to exercise its rights under the related Note Put
Agreement.
The Purchase Price for a Mortgage Note pursuant to the Note Put Agreement
will be equal to (i) the outstanding principal balance of such Mortgage Note,
(ii) accrued interest thereon and (iii), unless otherwise stated the related
Prospectus Supplement, the Make-Whole Premium related thereto. Under the laws of
certain states the enforceability of the obligation to pay amounts similar to
the Make-Whole Premium is unclear, and there can be no assurance that the
obligation to pay the Make-Whole Premium will be enforceable upon the occurrence
of a Triggering Event.
In the event the Trustee, or the Collateral Trustee, if applicable,
exercises its rights under the related Note Put Agreement, the date of sale of
the Mortgage Note(s) will be not more than 35 Business Days, or such lesser
period of time as may be stated in the related Prospectus Supplement, after the
Trustee, or Collateral Trustee, receives direction to sell such Mortgage
Note(s). The Purchase Price will be deposited with the Trustee, or, if
applicable, with the Collateral Trustee which will transfer it to the related
Pass-Through Trustees on the next Business Day. Any Purchase Price received by a
Trustee, or Collateral Trustee,
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pursuant to the exercise of rights under a Note Put Agreement, less any expense
incurred by the Trustee, or Pass-Through Trustees and Collateral Trustee, if
applicable, will be distributed to Certificateholders within 30 days of receipt.
See "THE CERTIFICATES -- Other Distributions -- Distribution from Proceeds of
Purchase of Mortgage Note."
The Note Put Agreement will terminate if the related Mortgage Note(s) are
not required to be purchased in accordance with such Note Put Agreement as a
consequence of a Lease Guaranty Termination. See "THE LEASES, THE LEASE
GUARANTIES AND RELATED DOCUMENTS -- The Lease Guaranty Agreements --
Termination."
THE LEASES, THE LEASE GUARANTIES AND RELATED DOCUMENTS
The following summaries describe certain provisions of the Leases, the
Lease Guaranties, the Consent and Agreements, the Indemnity Agreements and the
Construction Fund Disbursement Agreements. The summaries do not purport to be
complete and are subject to, and qualified in their entirety by reference to the
provisions of, such documents, the forms of which (each in substantially the
form in which it will be used) have been filed as exhibits to the Registration
Statement of which this Prospectus is a part.
THE LEASES
General
Each Facility will be leased to a Tenant which will be either Kmart or a
Subsidiary. The obligations of a Subsidiary under a Lease will be guaranteed by
Kmart pursuant to a Lease Guaranty. The Leases will be assigned by the Borrower
to the Depositor pursuant to an Assignment of Leases and Rents and the Mortgage,
and the Depositor's rights under those documents will then be assigned to the
Trustee, or to the Collateral Trustee if applicable.
Term and Rental
Each Lease will have a primary term that, excluding renewal or extension
terms, will expire on or after the scheduled maturity of the related Mortgage
Note(s) unless terminated due to certain casualty, condemnation or bankruptcy
events. Lease Payments will be payable monthly and will be scheduled to be in
amounts sufficient to pay Scheduled Payments on the related Mortgage Note(s).
The term of each Lease and the obligation of the Tenant to make Lease Payments
will commence on the date specified in each Lease whether or not construction of
the Facility has been completed, the Tenant takes occupancy or accepts the
Facility as constructed.
Net Lease
The obligation of the Tenant under each Lease will, except with respect to
the cost of construction and certain environmental costs and liabilities, be
that of a lessee under a "net lease." The Tenant's obligation to pay rent under
each Lease will be absolute and unconditional and amounts payable by the Tenant
under each Lease will be paid as absolute net sums, without diminution for any
reason except for a permitted termination by the Tenant by reason of certain
casualty or condemnation events as described below (see "Condemnation and
Casualty"), a rejection of the Lease by a Borrower as lessor in a bankruptcy
proceeding if the Tenant is deprived of possession of the Facility by reason of
such rejection, certain Tenant bankruptcy events (see "CONSEQUENCES OF
BANKRUPTCY OF A TENANT OR A BORROWER") or an abatement of Lease Payments
following a condemnation which does not result in a Lease termination. The
Tenant will be obligated to pay all costs, including without limitation real
estate taxes and utilities, associated with the Facility, except for the costs
of construction and acquisition and certain environmental costs and liabilities.
Maintenance and Alterations
Each Lease will require the Tenant to make and pay for all maintenance,
replacement and repair necessary to keep the related Facility in a good state of
repair and tenantable condition. The Tenant may, at its
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own expense, from time to time, make such additions or changes, structural or
otherwise in and to the Facility as it may deem necessary or suitable, which
additions or changes (other than a Tenant's trade fixtures) will become the
property of the related Borrower. The Tenant may also, at its own expense, at
any time, erect or construct additional buildings, structures or improvements,
which will become a part of the Facility and subject to all obligations under
the Lease. Any alterations, additions or improvements will be required to be
made in a good and workmanlike manner and in compliance with applicable law.
Use, Assignment and Subletting
Except as otherwise specified in the related Prospectus Supplement, each
Lease will generally provide that the related Facility may be used for any
lawful purpose. Each Lease will permit the Tenant to assign the Lease or sublet
the whole or any part of the related Facility without the consent of the
Borrower or the related Trustee, or Collateral Trustee if applicable, but in any
such case, the Tenant will remain primarily liable under the Lease, and Kmart,
if the Tenant is a Subsidiary, will remain liable under the Lease Guaranty. The
Tenant will not be required continuously to operate or occupy the Facility.
Insurance
Provided that the net worth of the Tenant or Kmart (if the Tenant is a
Subsidiary) exceeds $100,000,000, as determined in accordance with generally
accepted accounting principles consistently applied, the Tenant will be
permitted under each Lease to self-insure. If the Tenant elects not to, or is
not entitled to, self-insure, the Tenant will be required, at its own cost and
expense, to obtain and maintain insurance in the amounts and upon the terms and
conditions set forth in the Lease. All property insurance maintained by the
Tenant must be for 100% of the replacement value of the Facility, exclusive of
excavation costs.
Condemnation and Casualty
In the event that at any time during the term of a Lease the related
Facility is damaged or destroyed (partially or totally) by fire or other
casualty, the Lease will require that the Tenant, at its own expense, promptly
repair, rebuild and restore the Facility to the condition existing just prior to
such damage or destruction, or for the same use and purpose but in accordance
with such plans and specifications as are then generally in use by the Tenant
for the construction of the Tenant's stores and related structures; provided,
however, the repaired, rebuilt or replaced building has a value not less than
its fair market value immediately prior to such loss. Notwithstanding the
foregoing, each Lease will provide that if such damage or destruction takes
place within two years prior to the expiration date of the current term of the
Lease and if the cost of restoration exceeds 50% of the fair market value of the
Facility at the time such damage or destruction took place, the Tenant will have
the option to terminate the Lease as of the date such damage or destruction took
place by giving written notice to the Borrower within 30 days thereafter. After
such termination, the Tenant will have an additional 60 days, rent free, within
which to remove its property from the Facility. If the Tenant so terminates the
Lease and is carrying property insurance, all Insurance Proceeds will be paid to
the Trustee, or the Collateral Trustee if applicable. If the Facility is
self-insured and the Tenant terminates the Lease, the Tenant will pay the
Trustee, or the Collateral Trustee if applicable, an amount sufficient to
rebuild the Facility whether or not rebuilt.
In the event that all of a Facility is permanently expropriated, the
related Lease will automatically terminate. If (i) the points of ingress and
egress to public roadways are materially impaired by a permanent expropriation
by a public or quasi-public authority (with no reasonable replacement points of
ingress and egress) so as to render the Facility unsuitable for its intended
use, or (ii) less than the whole, but more than 10%, or such other greater
percentage as may be specified in the Prospectus Supplement, of the square
footage of the building or land constituting the Facility is permanently
expropriated by public or quasi-public authority, the Tenant will have the
option to terminate the related Lease as of the date of such permanent
expropriation.
In the event a Lease is terminated because of casualty loss or
condemnation, the only source of funds to prepay the related Mortgage Note(s) is
likely to be the Insurance Proceeds or Condemnation Proceeds,
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respectively, and any amounts that could be realized from the liquidation of the
related Mortgaged Property. There can be no assurance that such amounts would be
sufficient to pay the Purchase Price of the related Mortgage Note(s).
In the event of an expropriation of a portion of a Facility under
circumstances where the Lease is not terminated, the Lease will continue as to
the portion of the Facility which has not been expropriated or taken. If the
floor area of the Facility is reduced as a result of such expropriation, Lease
Payments will be proportionately reduced to reflect such reduction. The Tenant
will be required, at its sole cost and expense, promptly to restore the Facility
as nearly as practicable to the condition existing prior to such expropriation,
or for the same use and purpose but in accordance with such plans and
specifications as are then generally in use by the Tenant for the construction
of the Tenant's stores and related structures. All Condemnation Proceeds will be
paid over to the Tenant for restoration, and restoration costs in excess of the
Condemnation Proceeds will be paid by the Tenant. Any Condemnation Proceeds in
excess of restoration costs will be paid to the Trustee, or the Collateral
Trustee if applicable, as assignee of the Depositor and will be applied against
amounts outstanding under the related Mortgage Note(s). See "THE CERTIFICATES --
Other Distributions -- Distribution Due to Casualty or Condemnation" and "THE
MORTGAGE NOTES AND THE LOAN AGREEMENTS -- Prepayments -- Mandatory Prepayments."
Borrower Bankruptcy
If a Borrower is in bankruptcy and rejects the related Lease, the related
Consent and Agreement will require the related Tenant to elect under Section
365(h) of the Bankruptcy Code to remain in possession of the Facility for the
remaining term of such Lease. However, if, notwithstanding such election, the
Tenant is deprived of possession of the Facility as a result of such Borrower's
rejection of the Lease in the bankruptcy proceeding, the Lease will terminate
and such Tenant and Kmart (if the Tenant is a Subsidiary) will have no further
obligations under such Lease, the related Lease Guaranty or the related Note Put
Agreement.
Remedies Upon Event of Default
Each Lease will provide that in the case of nonpayment of rent, if the
Tenant is in default for a period of 10 days after notice to the Tenant, and (if
the Tenant is a Subsidiary) Kmart is in default under the related Lease Guaranty
for 30 days after written notice to Kmart, then the Borrower, as lessor under
the Lease, with the consent of the Trustee, or Collateral Trustee if applicable,
may by giving notice to the Tenant at any time thereafter during the continuance
of such default either terminate the Lease, or reenter the related Facility by
summary proceedings or otherwise, and, in either case, expel the Tenant and
remove all property therefrom, relet the Facility at the best possible rent
readily attainable and receive the rent from the Facility; provided, however
that the Tenant and, if the Tenant is a Subsidiary, Kmart, as guarantor under
the Lease Guaranty, will remain liable for any and all deficiencies in Lease
Payments. The Lease by its terms gives neither the Borrower, as lessor under the
Lease, nor the Trustee (or Collateral Trustee, if applicable) as assignee of the
Borrower's rights under the Lease, any right to collect such deficiencies on an
accelerated basis. The Borrower (or the Trustee or Collateral Trustee) must
instead proceed against the Tenant for such deficiencies as and when they become
due. However, in the event of a payment default under the Lease and a default
under the related Lease Guaranty, the Trustee or Collateral Trustee, if
applicable, will be entitled, if such defaults are not cured within the period
specified in the Note Put Agreement, to exercise its rights under the Note Put
Agreement. See "THE NOTE PUT AGREEMENTS." Neither the Borrower nor the Trustee
(or Collateral Trustee, if applicable) have the right to terminate the Lease by
reason of non-monetary defaults by the Tenant; however, the Borrower will, in
the event of any such default, be entitled to bring an action against the Tenant
for damages or injunctive relief.
Indemnification
Each Lease will contain provisions obligating the Tenant to indemnify the
related Borrower and the Trustee, or the Collateral Trustee if applicable, as
assignee of the Depositor against any liability for damage to property or
injuries sustained by any person within the Facility prior to or during the term
of the Lease, except for liabilities arising from the Borrower's negligence.
Each Lease and the related Consent and Agreement will
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further contain provisions obligating the Tenant to indemnify the Borrower, the
Depositor and the Trustee, or the Collateral Trustee if applicable, and to
provide insurance, against liabilities caused by the Tenant, its employees or
agents during the Tenant's occupancy of the Facility (although not during any
construction at the Facility by the Tenant prior to its taking occupancy) and
arising out of the release, use, storage, treatment, transportation, transfer,
manufacture, refinement, handling, production, disposal or threatened release of
hazardous materials or related violations of environmental laws.
The Borrower will be required under the Lease to indemnify the Tenant
against environmental liabilities which are not caused by the Tenant, its
employees or agents. If the Borrower incurs any liability under its indemnity in
favor of the Tenant, or any liability to a third party by reason of any
environmental condition as to which the Tenant has not given its indemnity, the
Borrower will in all likelihood not have any assets (other than the Facility) in
order to satisfy such liability (although, under the Lease, the Tenant will have
no recourse against the Borrower until the earlier of the expiration of the
initial term of the Lease or the payment in full of the related Mortgage
Note(s)). In addition, if the Trustee or Collateral Trustee, if applicable,
becomes the owner of a Borrower's interest in a Facility as the result of a
foreclosure, it may become subject to liability for environmental costs and
liabilities as to which it has not been indemnified by the Tenant or, if the
Tenant is a Subsidiary, by Kmart pursuant to the related Lease Guaranty. It will
be a condition to the making of each Mortgage Loan that the Depositor obtain or
cause to be obtained a phase I environmental audit of the related Facility
satisfactory to the Depositor and such further information or studies as the
Depositor deems necessary. In addition, the Loan Documents will require the
maintenance of insurance against environmental liabilities, although there can
be no assurance that such insurance will cover all environmental risks or that
such insurance will remain available at all times. The Tenant will pay premiums
for such environmental liability insurance pursuant to the Consent and
Agreement.
THE LEASE GUARANTY AGREEMENTS
General
If the Tenant is a Subsidiary, Kmart will enter into a Lease Guaranty
Agreement ("Lease Guaranty") with a Borrower with respect to the related
Facility. The Lease Guaranty will be assigned by the Borrower to the Depositor
pursuant to an Assignment of Leases and Rents and the Mortgage, and the
Depositor's rights under those documents then will be assigned to the Trustee,
or to the Collateral Trustee if applicable.
The Lease Guaranty
Pursuant to the terms of each Lease Guaranty, Kmart will absolutely and
unconditionally guarantee to a Borrower the full and punctual payment,
performance and observance by the related Subsidiary of all of the terms,
conditions, covenants and obligations to be performed and observed by the
Subsidiary under the related Lease. Except for the right of Kmart and the
Subsidiary to terminate the Lease Guaranty in certain circumstances described
below, the liability of Kmart under the Lease Guaranty will be irrevocable,
continuing, absolute, independent and unconditional except that Kmart will be
relieved of any liability under the Lease Guaranty if the Lease is rejected and
terminated by a trustee or debtor-in-possession in the Borrower's bankruptcy
proceeding and, as a result, the Subsidiary has been deprived of its possessory
rights pursuant to the Lease. Kmart will also be relieved of liability under the
Lease Guaranty if the Lease is terminated by the Subsidiary in the event of a
condemnation or casualty.
Termination
Kmart and a Subsidiary by a mutual notice to the Trustee may terminate
Kmart's obligations under a Lease Guaranty if (i) the related Subsidiary
achieves Investment Grade Status without regard to Kmart's credit rating, (ii)
the related Lease is assigned to a third party (a) which has achieved or
achieves Investment Grade Status or (b) an affiliate of which has achieved or
achieves Investment Grade Status and such affiliate delivers to the Trustee, or
the Collateral Trustee if applicable, a new lease guaranty agreement with
substantially the same terms as the Lease Guaranty and an indemnity agreement
with substantially the same terms as the Indemnity Agreement, or (iii) more than
50% of the issued and outstanding stock of the
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Subsidiary is acquired by a third party and such third party or an affiliate of
such third party has achieved or achieves Investment Grade Status and delivers
to the Trustee, or the Collateral Trustee if applicable, a new lease guaranty
agreement with substantially the same terms as the Lease Guaranty and an
indemnity agreement with substantially the same terms as the Indemnity
Agreement. The Lease Guaranty provides that any new lease guaranty agreement
will not contain a Lease Guaranty Termination provision. In the case of a
termination of a Lease Guaranty in connection with an assignment of the Lease or
the delivery of a new lease guaranty and indemnity agreement, the third party
assignee or the new guarantor will also be required to deliver to the Trustee,
or the Collateral Trustee if applicable, a new note put agreement with
substantially the same terms as the Note Put Agreement and such Note Put
Agreement will terminate if the related Mortgage Note(s) is not required to be
purchased in accordance with such Note Put Agreement as a consequence of such
Lease Guaranty Termination. For purposes of the Lease Guaranty, an entity will
have achieved "Investment Grade Status" if the senior debt of such entity will
have been rated at least Standard & Poor's rating of BBB- or Moody's rating of
Baa3 for the immediately preceding twelve month period. The exercise by Kmart
and a Subsidiary of the right to terminate a Lease Guaranty is a Triggering
Event under the related Note Put Agreement. See "THE NOTE PUT AGREEMENTS."
THE CONSENT AND AGREEMENTS
Each Consent and Agreement will provide that Kmart, the related Tenant if
it is a Subsidiary and the related Borrower consent to the Depositor's sale,
conveyance, transfer and absolute assignment of all of its right, title and
interest in the related Loan Documents and Lease to the Trustee, or the
Collateral Trustee if applicable. Each Consent and Agreement will further
provide that all Lease Payments will be paid directly to the Trustee, or the
Collateral Trustee if applicable, for the benefit of the Borrower and that such
payment will constitute payment to the Borrower in accordance with the Lease.
Each Consent and Agreement will also provide that the Tenant will pay the annual
Trustee's Fee and the Collateral Trustee's Fee, if applicable, and premiums for
environmental liability insurance. Kmart, the Tenant (if it is a Subsidiary),
the Borrower and the Depositor will acknowledge and agree that the Trustee, or
the Collateral Trustee if applicable, will have the sole right to pursue any
claim for Lease Payments and, subject to the rights of the Tenant and Kmart (if
the Tenant is a Subsidiary) under the related Construction Fund Disbursement
Agreement and any Construction Fund Disbursement Agreement -- Common Area, to
perform all other necessary and appropriate acts to protect and preserve any
right, title and interest of the Trustee, or the Collateral Trustee if
applicable, Borrower and Depositor in and to the Loan Documents. Each Consent
and Agreement will provide that without the prior consent of the Trustee or
Collateral Trustee, if applicable, the Borrower will not modify the Lease,
except with respect to modifications that do not reduce Lease Payments, alter
the initial term of the Lease, add to the Borrower's covenants under the Lease
or limit the obligations of the Tenant under the Lease. Each Consent and
Agreement will also provide that no amendment to the Loan Agreement, the
Mortgage Notes or the Loan Documents may be made without the prior consent of
the Tenant and, if the Tenant is a Subsidiary, Kmart, unless a monetary default
exists under the related Lease.
THE INDEMNITY AGREEMENTS
If the Tenant is a Subsidiary, Kmart will enter into an Indemnity Agreement
pursuant to which Kmart will indemnify the Trustee, or the Collateral Trustee if
applicable, in the event any Lease Payments made to such Trustee or Collateral
Trustee by such Subsidiary pursuant to the related Lease or by Kmart pursuant to
the related Lease Guaranty are asserted to be voidable under the Bankruptcy
Code, whether by preference or otherwise, in a proceeding in a bankruptcy case
filed by or against such Subsidiary.
The Indemnity Agreement will terminate if the related Mortgage Note(s) are
not required to be purchased in accordance with the related Note Put Agreement
as a consequence of a Lease Guaranty Termination. See "The Lease Guaranty
Agreements -- Termination" and "THE NOTE PUT AGREEMENTS."
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THE CONSTRUCTION FUND DISBURSEMENT AGREEMENTS
General
In those cases where Mortgage Loan proceeds are being used in whole or in
part to construct a Facility, the related Borrower will be obligated under its
Lease with the related Tenant to construct the Facility in accordance with the
provisions of the Lease. The obligation of such Tenant to make Lease Payments
will commence on the date specified in the Lease whether or not the Facility is
completed, the Tenant takes occupancy, or the Tenant accepts the improvements as
constructed. In addition, the Tenant and, if the Tenant is a Subsidiary, Kmart
will be obligated under the related Note Put Agreement to purchase the related
Mortgage Note(s) in the event construction of the Facility is not completed on
or before the Completion Date. In an effort to provide assurance to the Tenant
that each such Facility will be developed and constructed in a timely manner in
accordance with the plans and specifications referred to in the related Loan
Agreement, unless otherwise specified in the Prospectus Supplement, the
Depositor, the related Tenant, the related Borrower, Kmart (if the Tenant is a
Subsidiary), an Escrow Agent and, in some cases, a Construction Monitor engaged
at the request of the Tenant will enter into a Construction Fund Disbursement
Agreement which will provide that the proceeds of the Mortgage Loan being used
for the construction of the Facility will be deposited in an Escrow Account and
disbursed to the Borrower upon approval by the Tenant. It will also provide for
certain remedies in favor of the Tenant and Kmart, including the right to
foreclose on a second mortgage on the Facility given by the Borrower to the
Tenant and the right to acquire the Facility pursuant to an option granted by
the Borrower to the Tenant, in the event of a default by the Borrower in the
performance of its obligations under the related Lease to construct the Facility
in accordance with such Lease and the Construction Fund Disbursement Agreement.
If a portion of the proceeds from more than one Mortgage Loan will be used
to construct a Common Area to be used by the Tenants leasing the Facilities to
be constructed with the balance of such Mortgage Loans, then, in addition to the
previously described Construction Fund Disbursement Agreement, there will be a
Construction Fund Disbursement Agreement -- Common Area among the Depositor, the
related Borrowers, an Escrow Agent, such Tenants, Kmart (if any of the Tenants
are Subsidiaries) and a Construction Monitor, if applicable. Such Construction
Fund Disbursement Agreement -- Common Area will provide that the proceeds from
such Mortgage Loans which will be used for the construction of such Common Area
will be deposited in an Escrow Account -- Common Area and disbursed upon
approval by the applicable Tenants. It will also provide for certain remedies in
favor of such Tenants and Kmart (if any of the Tenants are Subsidiaries) in the
event of the default by the related Borrowers in the performance of their
obligations to construct such Common Area.
Prior to a Triggering Event under the related Note Put Agreement, neither
the Depositor, the Trustee, nor the Collateral Trustee, if applicable, will have
any rights with respect to the disbursement of Mortgage Loan proceeds used in
the construction of the related Facility and, if applicable, the related Common
Area. In addition, in the event the Trustee or Collateral Trustee forecloses on
a related Facility, it will do so subject to the right of the related Tenant or
Tenants to control disbursements from the Escrow Account and, if applicable, the
Escrow Account -- Common Area and to complete construction of the Facility and
the Common Area, if any.
Remedies Upon Default Under Lease
Upon the occurrence of a default by a Borrower in the performance of its
obligation in favor of the related Tenant under the Lease and prior to the
occurrence of a Triggering Event, such Tenant may, in addition to any remedies
it may have at law or in equity, (i) within the first three (3) years of the
term of the Mortgage Loan, foreclose on the second mortgage on the Facility
given by the Borrower to the Tenant or, at any time prior to completion of
construction acquire the Facility pursuant to the option granted by the Borrower
to the Tenant, and (ii) if Borrower's default is related to construction of the
Facility, (x) cease approving disbursements to a Borrower from the Escrow
Account, (y) exercise its rights under the license granted to the Tenant under
the Construction Fund Disbursement Agreement to complete the construction of the
Facility if the Borrower fails to do so, or (z) specifically enforce the
Borrower's obligations to complete the work. However, the Tenant will
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not have the right, prior to the earlier of the payment in full of the related
Mortgage Note(s) or the expiration of the initial term of the Lease, to withhold
Lease Payments, terminate the Lease, or recover monetary damages by reason of
the Borrower's default under the Lease, including Borrower's failure to complete
the Facility.
THE BORROWERS
Each Borrower will be a special purpose corporation, limited partnership,
limited liability company or other entity that will not be permitted to have any
significant assets or sources of funds other than the Mortgage Loan made to such
Borrower and the Facility owned or leased by such Borrower and leased or
subleased to a Tenant. No Borrower will receive the proceeds of or be a party to
more than one Loan Agreement, and no Borrower will own or lease more than one
Facility. No Borrower will be an affiliate of Kmart, any Subsidiary, the
Depositor, the Trustee or the Collateral Trustee.
CONSEQUENCES OF BANKRUPTCY OF A TENANT
OR A BORROWER
In the event a bankruptcy case is commenced by or against a Tenant, such
Tenant, as a debtor-in-possession, or its trustee in bankruptcy would have the
right, subject to bankruptcy court approval, to assume or reject any Lease. If
such Tenant were to reject a Lease its payments thereunder would terminate,
thereby leaving the related Borrower without cash flow to make payments on the
related Mortgage Note(s). In addition, under Section 502(b)(6) of the Bankruptcy
Code, any unsecured claim of the Trustee or the Collateral Trustee, as the case
may be, for termination damages would be limited to an amount equal to the rent
reserved under such Lease, without acceleration, for the greater of one year or
15 percent (not to exceed three years) of the remaining term of such Lease (plus
rent already due but unpaid as of the commencement date of the bankruptcy
proceeding). Therefore, if such Tenant were to reject the Lease, the damages
that could be claimed for rejection, even assuming full recovery on such claims
(which may not occur), would, in all likelihood, not be sufficient to repay the
related Mortgage Note(s). Subject to bankruptcy court approval, such Tenant, as
a debtor-in-possession, or its trustee, would also have the right, in lieu of
rejecting the Lease, to assume and to assign all of its rights and obligations
under the Lease provided, among other requirements, adequate assurance of future
performance by the assignee were provided.
It is possible that a bankruptcy court could characterize the transactions
described herein not as a lease that may be rejected, but instead as a secured
loan to the bankrupt Tenant. In such event, the Borrower, as a secured creditor,
would be prohibited by operation of the automatic stay contained in Section
362(a) of the Bankruptcy Code from taking any action against the Tenant or its
property without bankruptcy court approval. In addition, the Tenant may be
permitted to use or, under certain circumstances, sell the related Facility,
together with any other property securing the Tenant's obligations to the
Borrower, over the objection of the Trustee or the Collateral Trustee. Finally,
as a secured creditor of the Tenant, the Borrower may be required to accept
restructured payments under a Chapter 11 plan filed by the Tenant provided that
it satisfies certain plan confirmation requirements set forth in the Bankruptcy
Code. The occurrence of any of these events would have a material adverse effect
on the Certificateholders.
In the event of bankruptcy proceedings instituted by or against a
Subsidiary that is a Tenant, Kmart would continue to be obligated under the
Lease Guaranty for the payment of the Subsidiary's obligations under the Lease,
even if the Lease were rejected in bankruptcy, and would continue to be
obligated under the Note Put Agreement to purchase the related Mortgage Note(s)
if a Triggering Event occurred. See "THE LEASES, THE LEASE GUARANTIES AND
RELATED DOCUMENTS" and "THE NOTE PUT AGREEMENTS."
Although Lease Payments under each Lease will be scheduled to be sufficient
to pay Scheduled Payments under the related Mortgage Notes, and although the
Tenant under each Lease will be required to pay substantially all of the
expenses relating to the Facility, each Borrower will incur certain obligations
which will not be passed on to the Tenant under the Lease. The most significant
of these obligations will consist of
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agreements to compensate contractors, architects and other third parties in
connection with the construction of the Facility, to pay certain environmental
liabilities for which the Tenant is not responsible under the Lease, and to pay
any Make-Whole Premium in connection with the prepayment of the related Mortgage
Note(s). It is also possible that the Borrower will, in violation of the Loan
Documents, incur obligations which are unrelated to the Facility. If the cost of
completing the Facility exceeds the amount of Mortgage Loan proceeds available
to the Borrower, or if the Borrower otherwise lacks the funds to pay obligations
which are not required to be paid by the Tenant under the Lease, it is possible
that a bankruptcy petition may be filed by or against the Borrower even in the
absence of a default by the Tenant in its obligations under the Lease. In such
event, the Borrower may benefit from various powers and remedies available to
debtors-in-possession under the Bankruptcy Code. Although the outcome of a
bankruptcy case involving the Borrower is difficult to predict, events may
transpire in the case that may adversely affect the interests of the
Certificateholders. For example, upon the filing of its bankruptcy petition, the
Borrower would enjoy the protection of the automatic stay that would prohibit
the Trustee or the Collateral Trustee, as the case may be, from taking any
action against the Borrower or its property, including foreclosing upon the
related Facility and collecting the Lease Payments directly. In order to take
such action, the Trustee or the Collateral Trustee, as the case may be, would be
required to obtain permission from the bankruptcy court by satisfying certain
requirements set forth in Section 362(d) of the Bankruptcy Code for obtaining
relief from the stay. In addition, the Borrower may be able to use the
Collateral, including the funds in the Capitalized Debt Service Account, the
Rental Payment Account, the Certificate Account and the Mortgage Note Account,
without the consent of the Trustee or the Collateral Trustee, if the Borrower
obtains bankruptcy court approval and provides such parties with adequate
protection (which adequate protection may take the form of a replacement lien,
substitute collateral or periodic cash payments). The Borrower may also have
access to the funds in the Escrow Account established under the Construction
Fund Disbursement Agreement or in the Escrow Account -- Common Area established
under the Construction Fund Disbursement Agreement -- Common Area. So long as
Lease Payments are made in accordance with the terms of the Lease or, if
applicable, the related Lease Guaranty or as otherwise ordered by the bankruptcy
court, the Trustee, or Collateral Trustee if applicable, would in no event have
any right to proceed against the Tenant or (if the Tenant is a Subsidiary) Kmart
under such Lease, such Lease Guaranty or the related Note Put Agreement.
It is also possible that the secured claims of the Trustee or the
Collateral Trustee, as the case may be, may receive economically unfavorable
treatment under the Borrower's Chapter 11 plan. For example, in the event that
it is determined that the value of the Collateral is less than the indebtedness
evidenced by the Mortgage Note(s), there may be no entitlement to receive
interest that accrued on the Mortgage Note(s) after the filing of the Borrower's
petition. In addition, if the Borrower were unable to satisfy all of the
requirements of Section 1129(a) of the Bankruptcy Code to confirm a consensual
Chapter 11 plan, the Borrower might attempt to restructure the secured claims of
the Trustee or the Collateral Trustee over its objections by invoking the
"cramdown" provisions of Section 1129(b). In such event Certificateholders may
be required, for example, to accept deferred payments in respect to the
Certificates over a longer period of time than the original term of the Mortgage
Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of the anticipated federal income tax
consequences of the purchase, ownership and disposition of Certificates. The
summary is based upon laws, regulations, rulings and decisions now in effect,
all of which are subject to change or possibly differing interpretations. The
discussion below does not purport to deal with federal income tax consequences
applicable to all categories of investors, such as foreign persons or tax exempt
entities, some of which may be subject to special rules. Investors should
consult their own tax advisors in determining the federal, state, local and any
other tax consequences to them of the purchase, ownership and disposition of the
Certificates.
Unless otherwise specified in the Prospectus Supplement for a Series of
Certificates, it is intended that each Trust will be classified for federal
income tax purposes as a grantor trust and that each Trust and any
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Collateral Trust will not be classified as an association taxable as a
corporation. For each Series, Squire, Sanders & Dempsey, counsel to the
Depositor, will deliver a separate opinion to that general effect.
In rendering its opinion for each Series that each Trust will be classified
as a grantor trust, counsel will have considered whether two or more Trusts
holding separate Mortgage Notes from (i) the same obligor with respect to the
same Facility or (ii) different obligors with respect to different Facilities,
to the extent those facts are present, could be recharacterized as a "taxable
mortgage pool" or as a single grantor trust with impermissible multiple classes
of ownership, each of which is treated as a corporation for federal income tax
purposes. Generally, an entity is classified as a "taxable mortgage pool" only
if, among other requirements, the entity is the obligor on debt obligations (or
equity interests treated as debt obligations) with two or more maturities.
Similarly, if certificates in a single grantor trust have different maturities,
it would have multiple classes of ownership. However, under Treasury
Regulations, such multiple classes are permissible if the trust was formed to
facilitate direct investment in the assets of the trust, and the existence of
multiple classes of ownership interests is incidental to that purpose. Because
each Trust will generally issue only one class of beneficial ownership interest
having only one maturity date, such Trust could be treated as a "taxable
mortgage pool" or as a single grantor trust with potentially impermissible
multiple classes of ownership only if such Trust is integrated with one or more
other Trusts, or if the Trusts serve to recast the manner in which principal and
interest on the debt obligations held therein are paid to Certificateholders.
While there is no authority directly on point, each Trust should be respected as
a separate entity because (i) each Trust will own separate assets in the form of
100 percent interests in separate Mortgage Notes issued directly by the obligors
thereof to such Trusts, which Mortgage Notes will not be secured by other debt
obligations, (ii) each Trust will issue a separate Series of Certificates to a
substantially separate set of Beneficial Owners, and (iii) each Trust will have
independent economic substance, in that the Trusts serve primarily to facilitate
the offering of fractional undivided participation interests in one or more
separate Mortgage Notes without recasting the interest and principal payments
thereon. Moreover, even if two or more Trusts were integrated (e.g., Trusts
holding Mortgage Notes with different maturities issued by the same obligor with
respect to the same Facility were treated as a single Trust), the integrated
single Trust will not alter the payment terms of the Mortgage Notes held;
rather, Beneficial Owners will have a fractional undivided interest in all of
the principal and interest payments received by the Trusts with respect to only
one or the other Mortgage Note (or groups of Mortgage Notes having the same
maturity). Accordingly, because the integrated single Trust would serve merely
to facilitate investment in assets that might have been separately invested in,
it should not be treated as having impermissible multiple classes of ownership.
Finally, pursuant to proposed regulations under the taxable mortgage pool
provisions, an ownership interest in an entity that is classified as an
investment trust will not be treated as a debt obligation of the trust.
Accordingly, if such proposed regulations are ultimately adopted, assuming that
the Trusts qualify as trusts under the analysis set forth above, they should not
be subject to taxable mortgage pool treatment.
Each Beneficial Owner will be treated as the owner of a pro rata fractional
undivided interest in the related Trust Property. Each Beneficial Owner, in
accordance with its method of accounting, will be required to report on its
federal income tax return its pro rata share of the interest and other income
from any Mortgage Note or other property held in the related Trust and may
deduct its pro rata share of the deductible expenses of the related Trust, at
the same time and to the same extent as if it held directly a pro rata interest
in the Trust Property and received and paid directly the amounts received by the
Trust. A Beneficial Owner who is an individual, trust or estate will be allowed
a deduction for certain itemized deductions subject to certain limitations in
the Code.
Collateral Trusts will be viewed as mere security arrangements and not as
separate entities for federal income tax purposes.
Market Discount
A purchaser of a Certificate of any Series will be treated as purchasing an
interest in any Mortgage Note and other Trust Property in the related Trust at a
price determined by allocating the purchase price paid for the Certificate among
such Mortgage Note and other Trust Property in proportion to their respective
fair market values at the time of purchase of the Certificate. To the extent
that the portion of the purchase price of
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a Certificate allocated to a Mortgage Note is less than the portion of the
principal balance of the Mortgage Note allocable to the Certificate by more than
a prescribed de minimis amount, that interest in the Mortgage Note will be
deemed to have been acquired with original issue discount. It is not anticipated
that the Mortgage Notes will have "original issue discount" because the purchase
price of a Certificate of any Series, as well as the portion of such purchase
price allocable to the related Mortgage Note, are not expected to be less than
the principal amount of such related Mortgage Note by more than the prescribed
de minimis amount. A Beneficial Owner may have market discount if it purchases a
Certificate subsequent to the origination of the respective Trust and the
remaining principal amount of the Mortgage Note allocable to the Certificate
exceeds the Beneficial Owner's tax basis allocable to such Mortgage Note, unless
the excess does not exceed a prescribed de minimis amount. In the event such
excess exceeds the de minimis amount, the Beneficial Owner will be subject to
the market discount rules of sections 1276 to 1278 of the Code with regard to
its interest in the Mortgage Note, with the result that actual or deemed
receipts of principal on a Mortgage Note may be treated as the receipt of
taxable interest income to the extent of accrued market discount. In particular,
in the case of a sale or certain other dispositions of a Mortgage Note subject
to the market discount rules, any gain from such sale or disposition will be
treated as ordinary income to the extent such payment does not exceed the market
discount that has accrued on such Mortgage Note during the period in which it
was held. A partial principal payment on a Mortgage Note subject to the market
discount rules will be included in gross income as ordinary income to the extent
such payment does not exceed the market discount that has accrued on such
Mortgage Note during the period in which it was held, with adjustments to
prevent double inclusion.
Generally, market discount accrues under a straight line method, unless the
taxpayer elects a constant interest method. However, in the case of installment
obligations, such as the Mortgage Notes, Congress has indicated its intent that,
until Treasury regulations are issued, holders of installment obligations with
market discount may elect to accrue market discount either on the basis of a
constant interest rate or, assuming the installment obligation was issued
without original issue discount, on the basis of that portion of remaining
market discount which corresponds to the ratio of the amount of stated interest
paid in the accrual period to the total amount of stated interest remaining to
be paid on the installment obligation as of the beginning of such period. Rules
are also provided that defer the deduction of part or all of the interest paid
or accrued on indebtedness incurred or continued to purchase or carry market
discount indebtedness to the extent it exceeds the interest currently includable
in income with respect to such market discount indebtedness. As an alternative
to the rules stated in this section, taxpayers can elect to include market
discount in gross income currently, without regard to the actual or deemed
receipt of principal payments, as discussed above.
A Beneficial Owner purchasing Certificates subsequent to the creation of
the respective Trust at a price which is less than the allocable principal
amount of a Mortgage Note should consult its tax advisor with respect to the
manner of reporting accrued market discount on its annual tax return and on sale
or other disposition of its Certificates.
Premium
A Beneficial Owner will generally be considered to have acquired an
interest in a Mortgage Note at a premium to the extent that its tax basis
allocable to such interest, determined as described above, exceeds the principal
amount of the Mortgage Note allocable to such interest (or the remaining
principal amount of the Mortgage Note allocable to such interest in the case of
Certificates purchased subsequent to the creation of the respective Trust). It
is not anticipated that Certificates will be issued at a premium above the
principal amount of the Mortgage Notes because the aggregate principal amount of
the Certificates evidencing interests in each Trust will be equal to the
aggregate principal amount of the Mortgage Notes held in such Trust (see "THE
MORTGAGE NOTES, THE LOAN AGREEMENTS AND RELATED DOCUMENTS -- Scheduled
Payments"). The existence of a premium with respect to Certificates acquired
subsequent to original issuance is, of course, a function of market conditions.
A Beneficial Owner owning a Certificate as a capital asset may elect to amortize
any such premium as an offset to interest income under section 171 of the Code,
with corresponding reductions in the Beneficial Owner's tax basis in that
Mortgage Note. Generally, such amortization is on a constant yield basis, based
on the Beneficial Owner's yield to maturity. However, Congress has indicated its
intent that, until regulations are issued by the Treasury Department, an
alternate
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method of amortization may be used where, as here, installment obligations are
involved. Such alternate method is based on the ratio of stated interest paid
during a particular period to stated interest remaining to be paid on the
Mortgage Note at the beginning of such period, multiplied by the amount of
unamortized premium. Beneficial Owners are urged to consult their own tax
advisors as to the amount of any such amortizable premium.
Sale of Certificates
If a Certificate is sold, gain or loss will be recognized equal to the
difference between the amount realized on the sale and the Beneficial Owner's
adjusted tax basis in the Certificate. Such tax basis will equal the Beneficial
Owner's cost for the Certificate, increased by any discount previously included
in income, and decreased by any deduction previously allowed for amortization of
premium and by the amount of principal payments previously received on the
Certificate. Any such gain or loss will be capital gain or loss if the
Certificate was held as a capital asset for more than one year, except that gain
may be treated in whole or in part as ordinary interest income under the market
discount rules of the Code.
Backup Withholding
Payments made on the Certificates, and proceeds from the sale of the
Certificates to or through certain brokers, may be subject to a "backup"
withholding tax of 31% unless the Beneficial Owner complies with certain
reporting procedures or is an exempt recipient under section 6049(b)(4) of the
Code. Any such withheld amounts will be allowed as a credit against the
Beneficial Owner's federal income tax.
STATE AND LOCAL TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences," potential investors should consider the state
and local income tax consequences of the acquisition, ownership and disposition
of the Certificates. State and local income tax law may differ substantially
from the corresponding federal law, and this discussion does not purport to
describe any aspect of the income tax law of any state or other political
subdivision. Therefore, potential investors should consult their own tax
advisors with respect to the various state and local consequences of an
investment in the Certificates.
ERISA CONSIDERATIONS
In considering an investment of the assets of an employee benefit plan in a
Certificate, a fiduciary should consider, among other things (i) the purposes,
requirements and liquidity needs of such plan; (ii) the plan asset rules under
ERISA and the U.S. Department of Labor regulations; (iii) whether the investment
satisfies the diversification standards of Section 404(a)(1)(C) of ERISA, (iv)
whether the investment is prudent, considering the nature of an investment in
the Certificate; and (v) whether the investment can be valued annually. The
prudence of a particular investment must be determined by the responsible
fiduciary (usually the trustee or investment manager) with respect to each
employee benefit plan taking into account all of the facts and circumstances of
the investment.
Section 406 of ERISA and Section 4975 of the Code prohibit certain pension,
profit sharing or other employee benefit plans, individual retirement accounts
("IRAs") or annuity and employee annuity plans from engaging in certain
transactions involving "plan assets" with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to the plan. A
violation of these "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and the Code for such persons.
The U.S. Department of Labor has issued a regulation (the "Plan Asset
Regulation") concerning "plan assets" of certain employee benefit plans
(including annuities and individual retirement accounts) that are subject to
ERISA or to the prohibited transaction provisions of the Code (collectively
referred to as "Benefit Plans"). Under the Plan Asset Regulation the assets and
properties of corporations, partnerships and certain
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other entities in which a Benefit Plan makes an equity investment could be
deemed to be assets of the Benefit Plan in certain circumstances.
In general, the Plan Asset Regulation applies to the purchase by a Benefit
Plan of an "equity interest" in an entity. An equity interest is defined as any
interest in an entity other than an instrument that is treated as debt under
applicable local law and which has no substantial equity features. Although no
assurance can be given that the Certificates will be treated as debt under
applicable law, if the Certificates are deemed to be debt rather than equity
interests, the Trust's assets would not be treated as plan assets solely as a
result of the purchase of a Certificate by a Benefit Plan.
If the Certificates represent equity interests, however, and investments
are made in a Trust by Benefit Plans, the Trust could be deemed to hold plan
assets unless an exception is applicable to the Trust. The Plan Asset Regulation
states that an entity's assets will not be deemed to be plan assets if equity
participation in the entity by "benefit plan investors" is not significant.
Benefit plan investors include employee welfare benefit plans and employee
pension benefit plans that are employee benefit plans as defined pursuant to
Section 3(3) of ERISA, trusts described in Section 401(a) of the Code or plans
described in Section 403(a) of the Code, which are exempt from tax under Section
501(a) of the Code, IRAs under Section 408 of the Code and any entity whose
underlying assets include plan assets by reason of a plan's investment in the
entity. Equity participation in an entity by benefit plan investors is not
significant on any date if, immediately after the most recent acquisition of any
equity interest in the entity, less than 25% of the value of any class of equity
interests in the entity is held by benefit plan investors.
If an exception is not applicable, then (i) the prudence standards and
other provisions of Part 4 of Title I of ERISA applicable to investments by
Benefit Plans (other than IRAs) and their fiduciaries would extend to
investments of the Trust; (ii) fiduciaries of Benefit Plans that are subject to
ERISA could be liable for investments of the Trust that do not conform to such
ERISA standards; (iii) certain transactions that may be entered into between or
among the Depositor, the Trustee, the Collateral Trustee, Kmart, or a Subsidiary
might be "prohibited transactions" under ERISA and/or the Code; and (iv) the
assets of the Trust would be subject to certain reporting and disclosure
requirements under ERISA.
Finally, fiduciaries of certain types of Benefit Plans are required to
determine the fair market value of the assets of the Benefit Plan as of the
close of the Benefit Plan's fiscal year. To the extent there is a public market
in the Certificates, fiduciaries should be able to value the Benefit Plan's
investment; however, no assurances can be given that a public market will
develop or that the fiduciary will be able to determine precisely the fair
market value of the Certificates. Although the Trustee will provide periodic
statements to investors with respect to principal and interest distributions on
the Certificates, these statements will not state the fair market value of the
Certificates, and neither Kmart, the Depositor nor the Trustee can assume any
responsibility for providing such a valuation.
In light of the foregoing, fiduciaries of a Benefit Plan considering the
purchase of Certificates should consult their own counsel regarding the impact
of ERISA and the Code upon such an investment.
No transfer of a Certificate or of a beneficial ownership interest in a
Certificate will be made unless the Trustee or Pass-Through Trustee (i) has
received a representation from the transferee of the Certificate or from the
proposed Beneficial Owner of a beneficial interest in a Certificate that such
transferee or Beneficial Owner is not a Benefit Plan, or a person acting on
behalf of or purchasing for the benefit of any such Benefit Plan; (ii) has
received an opinion of counsel reasonably satisfactory to the Trustee or
Pass-Through Trustee to the effect that the purchase or holding of such
Certificate or beneficial interest in a Certificate will not result in the
assets of the Trust or Pass-Through Trust being deemed to be "plan assets"
subject to the prohibited transaction provisions of ERISA or the Code, or that
the purchase or holding of such Certificates or such beneficial interest
qualifies as an exempt prohibited transaction under the provisions of ERISA or
the Code, and will not subject the Trustee or Pass-Through Trustee or the
Depositor to any obligation in addition to those undertaken in the Trust
Agreement or Pass-Through Trust Agreement, or (iii) otherwise authorizes such
transfer. In the absence of an opinion of counsel or the Trustee's or
Pass-Through Trustee's authorization as provided in (ii) or (iii) above, the
representation as described in (i) above shall be deemed to have been made to
the Trustee or Pass-Through Trustee by the transferee's or Beneficial Owner's
acceptance of a
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Certificate or beneficial interest therein. In the event that such
representation is violated, or any attempt is made to transfer a Certificate or
a beneficial interest therein to a Benefit Plan, or a person acting on behalf of
or purchasing for the benefit of any such Benefit Plan, without an opinion of
counsel or the Trustee's or Pass-Through Trustee's authorization as provided in
(i) or (ii) above, such attempted transfer shall be void and of no effect.
LEGAL INVESTMENT CONSIDERATIONS
The Certificates will not constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984. There may be
restrictions on the ability of certain investors, including depository
institutions, either to purchase the Certificates or to purchase Certificates
representing more than a specified percentage of the investor's assets.
Investors should consult their own legal advisors in determining whether and to
what extent the Certificates constitute legal investments for such investors.
PLAN OF DISTRIBUTION
The Certificate offered hereby will be sold through Sutro & Co.
Incorporated ("Sutro") or through Sutro and one or more other underwriters or
underwriting syndicates. The Prospectus Supplement for each Series will set
forth the terms of the offering of such Series, including the name or names of
the underwriters, the use of proceeds thereof, and either the initial offering
price, the discounts and commissions to the underwriters and any discounts or
concessions allowed or reallowed to certain dealers, or the method by which the
price at which the underwriters will sell the Certificates will be determined.
The Certificates of a Series may be acquired by the underwriters for their
own account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The obligations of any
underwriter will be subject to certain conditions precedent and such
underwriters will be severally obligated to purchase all the Certificates of a
Series described in the related Prospectus Supplement, if any are purchased.
The place and time of delivery for the Certificates of a Series in respect
of which this Prospectus is delivered will be set forth in the Prospectus
Supplement.
LEGAL MATTERS
The legality of the Certificates and certain other legal matters will be
passed upon for the Depositor by Squire, Sanders & Dempsey. Certain legal
matters will be passed upon for Kmart by its general counsel and Dickinson,
Wright, Moon, Van Dusen & Freeman, Detroit, Michigan, and for the underwriter by
Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York. The material
federal income tax consequences of the Certificates will be passed upon by
Squire, Sanders & Dempsey.
EXPERTS
The consolidated financial statements and schedules of Kmart appearing in
or incorporated by reference to the Annual Report on Form 10-K of Kmart for the
year ended January 26, 1994, have been so incorporated in reliance on the report
of Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
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GLOSSARY
There follows an abbreviated definition of certain capitalized terms used
in this Prospectus and in the Prospectus Supplement. The Trust Agreement, the
Pass-Through Trust Agreement, the Collateral Trust Agreement if applicable, and
the Loan Agreement may contain a more complete definition of certain of the
terms defined herein and reference should be made to such documents for a more
complete definition of such terms. If there is a conflict between the definition
of any term contained in any agreement referred to in this Prospectus and the
definition included herein, the definition contained in such agreement controls.
"Assignment of Leases and Rents": Each Assignment of Leases and Rents by
and between a Borrower and the Depositor pursuant to which a Borrower will
assign to the Depositor all its rights under a Lease and Lease Guaranty, if
applicable, including, where permitted by law, a present assignment of its
rights to Lease Payments.
"Available Distribution Amount": As to any Remittance Date, an amount equal
to the amount on deposit in the Certificate Account as of the close of business
on the Business Day immediately preceding such Remittance Date.
"Bankruptcy Code": Title 11 of the United States Code.
"Beneficial Owner": A Person having a beneficial ownership interest in any
Certificate which is registered in the name of Cede.
"Borrower": A special purpose corporation, limited partnership, limited
liability company or other entity which is the obligor under the related Loan
Agreement and Mortgage Note and the lessor under the related Lease.
"Business Day": Any day other than (i) a Saturday or Sunday, or (ii) a day
on which banks in New York or California are required by law to be closed or are
customarily closed.
"Called Principal": With respect to a Mortgage Note, the principal of such
Mortgage Note that is to be paid or prepaid or is declared to be immediately due
and payable or, in the case of the purchase of a Mortgage Note under the related
Note Put Agreement, the outstanding principal balance of such Mortgage Note.
"Capitalized Debt Service Account": Each Capitalized Debt Service Account
created and maintained pursuant to a Trust Agreement, or a Collateral Trust
Agreement if applicable, from which Scheduled Payments on the related Mortgage
Note(s) will be made prior to the date Lease Payments are scheduled to commence
under the related Lease.
"Capitalized Debt Service Reserve": With respect to each Mortgage Loan, an
amount equal to all Scheduled Payments due (on a prorated basis) under the
related Mortgage Note(s) through the date when Lease Payments under the related
Lease will commence as specified in the Prospectus Supplement.
"Cede": Cede & Co. as nominee of DTC.
"Certificate Account": Each Certificate Account created and maintained
pursuant to a Trust Agreement or Pass-Through Trust Agreement.
"Certificateholder" or "Holder": The person in whose name a Certificate is
registered in the Certificate Register.
"Certificate Register": The register maintained pursuant to a Trust
Agreement or Pass-Through Trust Agreement.
"Certificates": The mortgage pass-through certificates, issuable in Series.
"Closing Date": The date on which the sale of a Series is closed and the
Certificates issued.
"Code": The Internal Revenue Code of 1986, as amended.
"Collateral": The Collateral for the Mortgage Note(s) issued pursuant to a
Loan Agreement will consist of the following: (i) a Mortgage on the related
Facility securing such Mortgage Note(s); (ii) all of the
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Depositor's rights under the Loan Agreement pursuant to which the related
Mortgage Note(s) were issued; (iii) an assignment of the related Lease, Lease
Payments and Lease Guaranty, if applicable; (iv) a pledge of certain moneys held
in certain funds established pursuant to the Trust Agreement or Collateral Trust
Agreement, if applicable; (v) a Note Put Agreement requiring the related Tenant
and Kmart (if the Tenant is a Subsidiary) to purchase the related Mortgage
Note(s) upon the occurrence of a Triggering Event; (vi) an assignment of the
Borrower's right, title and interest in and to any Construction Fund
Disbursement Agreement and Construction Fund Disbursement Agreement-Common Area
related to such Facility; (vii) a pledge of certain investments of fund balances
held under the Trust Agreement, or Collateral Trust Agreement if applicable, and
income earned thereon; and (viii) any other Loan Documents.
"Collateral Trust": A collateral trust created pursuant to a Collateral
Trust Agreement.
"Collateral Trustee": The bank, trust company or other fiduciary named in
the Prospectus Supplement for each Series of Certificates for which a Collateral
Trust has been established as the collateral trustee under the Collateral Trust
Agreement related to such Series.
"Collateral Trustee's Fee": The amount of the annual fee paid to a
Collateral Trustee for its ordinary fees and expenses arising under a Collateral
Trust Agreement.
"Collateral Trust Agreement": An agreement between the Depositor and a
Collateral Trustee pursuant to which the Depositor will transfer, convey and
assign to such Collateral Trustee all of the Collateral related to Mortgage
Notes having different maturities to be held for the benefit, pari passu, of the
Pass-Through Trusts holding such Mortgage Notes.
"Collateral Trust Property": The corpus of the Collateral Trust created by
a Collateral Trust Agreement related to certain Mortgage Notes, consisting of
(i) the Collateral related to such Mortgage Notes; (ii) property which secured
any related Mortgage Loan and which has been acquired by foreclosure or deed in
lieu of foreclosure; and (iii) Insurance Proceeds, Condemnation Proceeds and any
other amounts receivable under any related Loan Document.
"Commission": The Securities and Exchange Commission.
"Common Area": Area used in common by more than one Facility in a shopping
center.
"Completion Date": With respect to any Note Put Agreement, the second
anniversary of the related Mortgage Note(s).
"Condemnation Proceeds": Awards in respect of, or settlements in lieu of,
condemnation proceedings affecting the Mortgaged Property, net of any amounts to
which Tenant is entitled under the Lease in respect of unamortized leasehold
improvements by Tenant, Tenant's relocation expenses and Tenant's loss of
goodwill.
"Consent and Agreement": A Consent and Agreement among a Tenant, Kmart (if
the Tenant is a Subsidiary), a Borrower, the Depositor and the Trustee, or
Collateral Trustee if applicable, (i) providing for the direct payment of Lease
Payments to the Trustee, or Collateral Trustee if applicable, (ii) requiring
such Tenant to pay the Trustee's Fee, or Collateral Trustee's Fee if applicable,
(iii) requiring such Tenant to pay the premium on certain required environmental
insurance, and (iv) concerning certain other matters.
"Construction Fund Disbursement Agreement": Each Construction Fund
Disbursement Agreement among a Borrower, Tenant, Kmart (if the Tenant is a
Subsidiary), the Depositor, a Construction Monitor, if applicable, and an Escrow
Agent pursuant to which an Escrow Account will be created and certain procedures
regarding the disbursement of the proceeds from a Mortgage Loan for construction
of a Facility will be established.
"Construction Fund Disbursement Agreement -- Common Area": Each
Construction Fund Disbursement Agreement -- Common Area among two or more
Borrowers, Kmart, two or more Tenants, the Depositor, a Construction Monitor, if
applicable, and an Escrow Agent pursuant to which an Escrow Account -- Common
Area will be created and certain procedures for the disbursement of the portion
of the proceeds from two or more Mortgage Loans to be used for construction of a
Common Area will be established.
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"Construction Monitor": A party, in some cases, to a Construction Fund
Disbursement Agreement or a Construction Fund Disbursement Agreement -- Common
Area who is responsible for monitoring the progress of the construction of the
related Facility or Common Area.
"Debt Service": The principal and interest which is scheduled to be paid
with respect to a Series of Certificates in the amounts specified in the
Prospectus Supplement on each scheduled Remittance Date.
"Definitive Certificates": Certificates issued in fully registered,
certificated form to Certificateholders other than DTC or its nominee.
"Demised Premises": The interest of a Borrower (which may be fee title
ownership or a ground leasehold) in the land on which the Facility is or will be
located and which will be leased to a Tenant pursuant to a Lease, including the
Borrower's interest in any rights, licenses, privileges and easements
appurtenant thereto.
"Depositor": National Tenant Finance Corporation, a Delaware corporation
and its successors and assigns.
"Discounted Prepayment Value": With respect to the Called Principal, the
amount obtained by discounting all Remaining Scheduled Payments with respect to
such Called Principal from their respective scheduled Due Dates to the Purchase
Date with respect to such Called Principal, in accordance with generally
accepted financial practice and at a discount factor (applied generally on a
semiannual basis) equal to the Reinvestment Yield.
"DTC": The Depository Trust Company.
"DTC Participants": Those participants for whom DTC holds securities on
deposit.
"Due Date": With respect to a Mortgage Note, the last Business Day of the
month on which each Scheduled Payment is due, exclusive of any days of grace.
"ERISA": The Employee Retirement Income Security Act of 1974, as amended.
"Escrow Account": An escrow account created pursuant to a Construction Fund
Disbursement Agreement.
"Escrow Account -- Common Area": An escrow account created pursuant to a
Construction Fund Disbursement Agreement -- Common Area.
"Escrow Agent": The bank, trust company or other fiduciary named in the
Prospectus Supplement for each Series of Certificates as the escrow agent under
a Construction Fund Disbursement Agreement or Construction Fund Disbursement
Agreement -- Common Area related to such Series.
"Event of Default": For any Trust Agreement, Pass-Through Trust Agreement,
Collateral Trust Agreement, Mortgage Note or Loan Document, an event of default
described in such Trust Agreement, Pass-Through Trust Agreement, Collateral
Trust Agreement, Mortgage Note or Loan Document, as the context requires.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"Facility": Each Demised Premises and the improvements constructed or to be
constructed thereon, as described in the Prospectus Supplement for each Series.
"Indemnity Agreement": Each Indemnity Agreement between Kmart and the
Depositor when the Tenant is a Subsidiary pursuant to which Kmart will indemnify
the Depositor and its successors and assigns in the event that any Lease Payment
under the related Lease or Lease Guaranty is asserted to be voidable in any
bankruptcy case filed by or against such Subsidiary.
"Indirect Participants": Those Persons who clear through, or maintain a
custodial relationship with, a DTC Participant, either directly or indirectly.
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"Insurance Proceeds": Proceeds paid by any insurer pursuant to any
insurance policy (other than liability insurance) and self-insurance proceeds
paid by any of the Tenants or, pursuant to a Lease Guaranty, Kmart with respect
to any Mortgaged Property.
"Investment Grade Rating": A rating by Standard & Poor's of BBB- or better
or a rating by Moody's of Baa3 or better.
"Investment Grade Status": The long-term senior unsecured debt of the
entity issuing such debt has continuously had an Investment Grade Rating for a
period of not less than 12 full calendar months immediately prior to the related
Lease Guaranty Termination.
"Kmart" or "Kmart Corporation": Kmart Corporation, a Michigan corporation.
"Lease": Each Lease by and between a Tenant and a Borrower pursuant to
which such Borrower will lease a Facility to the Tenant described in the
Prospectus Supplement for each Series.
"Lease Guaranty": Each Lease Guaranty Agreement by and between Kmart and a
Borrower pursuant to which Kmart will guarantee to such Borrower the obligations
of a Tenant which is a Subsidiary under the related Lease.
"Lease Guaranty Termination": The giving of notice by Kmart or a Subsidiary
to the Borrower and the Trustee, or the Collateral Trustee if applicable, that
Kmart or the Subsidiary has elected to terminate the related Lease Guaranty
because such Subsidiary which is a Tenant under the related Lease, the new
tenant pursuant to an assignment of the related Lease, or a new guarantor of the
performance of such Lease, as the case may be, has achieved Investment Grade
Status and provided that certain other conditions are satisfied.
"Lease Payments": The annual rental and additional rent payable by a Tenant
under a Lease, other than real estate taxes and amounts payable directly to a
third party, which will be payable in accordance with such Lease.
"Loan Agreement": Each Loan Agreement between a Borrower and the Depositor
pursuant to which the Depositor will loan funds to a Borrower to provide
permanent financing for, or to finance the acquisition or acquisition and
construction of, a Facility described in the Prospectus Supplement for each
Series of Certificates.
"Loan Documents": Collectively, each Loan Agreement, Mortgage, Assignment
of Leases and Rents, Lease, Lease Guaranty, if applicable, Construction Fund
Disbursement Agreement, Construction Fund Disbursement Agreement - Common Area,
and Note Put Agreement related to a Mortgage Loan, and any other document
identified in any Loan Agreement as a Loan Document.
"Make-Whole Premium": With respect to any amount of Called Principal of a
Mortgage Note, an amount equal to the positive excess, if any, as of the
Purchase Date of the Discounted Prepayment Value of the Called Principal of such
Mortgage Note over such Called Principal.
"Moody's": Moody's Investors Service, Inc., a corporation organized and
existing under the laws of the State of Delaware, its successors and assigns.
"Mortgage": Each Mortgage, Security Agreement, Assignment of Leases and
Rents and Fixture Filing by and between the Depositor and a Borrower which will
create a first lien priority interest in the Facility securing each Mortgage
Note.
"Mortgage Loan": Each loan from the Depositor to a Borrower evidenced by
one or more Mortgage Notes and secured by a Mortgage and other Collateral.
"Mortgage Note": Each promissory note executed and delivered by a Borrower
to the Depositor which evidences all or a portion of a Mortgage Loan, which is
sold and assigned by the Depositor to the Trustee or Pass-Through Trustee and
which is the subject of a Trust Agreement or Pass-Through Trust Agreement
pursuant to which a Series of Certificates is issued.
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"Mortgage Note Account": Each Mortgage Note Account created and maintained
pursuant to a Collateral Trust Agreement.
"Mortgaged Property": The real and personal property securing a Mortgage
Note.
"Note Put Agreement": Each Note Put Agreement by and among a Tenant, Kmart
(if the Tenant is a Subsidiary) and a Depositor pursuant to which the Tenant and
Kmart agree to purchase the related Mortgage Note at the Purchase Price upon the
occurrence of a Triggering Event.
"Pass-Through Trust": A grantor trust created pursuant to a Pass-Through
Trust Agreement.
"Pass-Through Trustee": The bank, trust company or other fiduciary named in
a Prospectus Supplement for a Series of Certificates as the trustee under a
Pass-Through Trust Agreement pursuant to which such Series is issued.
"Pass-Through Trust Agreement": A Trust Agreement when Mortgage Notes of
different maturities are issued pursuant to one or more Loan Agreements.
"Pass-Through Trust Property": The corpus of a Pass-Through Trust created
by a Pass-Through Trust Agreement for a Series of Certificates, consisting of
(i) one or more Mortgage Notes; and (ii) all assets deposited in the Certificate
Account, including investments of funds in such account.
"Percentage Interest": (i) In the case of property held in a Trust (other
than a Collateral Trust) the percentage of the whole undivided beneficial
interest in such property held by a holder of one or more Certificates of such
Trust and evidenced by such Certificates, and (ii) in the case of property held
in a Collateral Trust, the percentage of the whole undivided beneficial interest
in such property held indirectly by a holder of one or more Certificates in a
Pass-Through Trust having an interest in such Collateral Trust. When used in
connection with the exercise of any right which by its terms can be exercised
only by holders of Certificates of a single Pass-Through Trust, such term shall
mean the percentage of the whole undivided interest in the Mortgage Note(s)
owned by such Trust held by a holder of one or more Certificates in such
Pass-Through Trust and evidenced by such Certificates.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
"Purchase Date": With respect to the Called Principal of a Mortgage Note or
with respect to the purchase of a Mortgage Note pursuant to a Note Put
Agreement, the date on which such Called Principal is to be paid or prepaid or
is declared to be immediately due and payable under any of the related Loan
Documents or the date on which such Mortgage Note is to be purchased.
"Purchase Price": The sum of the Called Principal plus, except in the case
of a Lease Guaranty Termination or as otherwise described in the Prospectus
Supplement, the Make-Whole Premium, and accrued interest with respect to the
Called Principal to the Purchase Date.
"Record Date": The close of business on the fifteenth day preceding the
related Remittance Date, except that the Record Date with respect to Scheduled
Payments received after the Due Date shall mean the close of business on the
fifteenth day preceding the Remittance Date such Scheduled Payments would have
been distributable to the Certificateholders if they had been paid on such Due
Date.
"Reinvestment Yield": With respect to the Called Principal of a Mortgage
Note, the sum of (x) the yield to maturity implied by the following: (i) the
yields reported, as of 10:00 a.m. (New York City time) on the third Business Day
preceding the Purchase Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Service (or such other display
as may replace Page 678 on the Telerate Service) for actively traded U.S.
Treasury securities having a maturity equal (as nearly as practicable) to the
Remaining Average Life of the Called Principal being paid or prepaid as of such
Purchase Date, or (ii) if such yields have been reported as of such time or the
yields reported as of such time are not ascertainable, the Treasury Constant
Maturity Series yields reported, for the latest day for which such yields have
not been so reported as of the third Business Day preceding the Purchase Date
with respect to such
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Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury securities
having a constant maturity equal (as nearly as practicable) to the Remaining
Average Life of the Called Principal being paid or prepaid as of such Purchase
Date; and (y) 50 basis points. Such implied yield will be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b) interpolating
linearly between reported yields.
"Remaining Average Life": With respect to any amount of Called Principal of
a Mortgage Note, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum of the
products obtained by multiplying (a) each Remaining Scheduled Payment of such
Called Principal (excluding interest thereon) by (b) the number of years
(calculated to the nearest one-twelfth year) which will elapse between the
Purchase Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.
"Remaining Scheduled Payments": With respect to the Called Principal, all
payments of such Called Principal and interest thereon that would be due on or
after the Purchase Date with respect to such Called Principal if no payment of
such Called Principal were made prior to its maturity date.
"Remittance Date": Each date specified in the Prospectus Supplement for
each Series of Certificates on which principal of, and/or interest on, the
Mortgage Notes is distributable to the Certificateholder or such other date on
which a distribution is made to Certificateholders as a result of the prepayment
or other liquidation of a Mortgage Note or as a result of the sale of a Mortgage
Note pursuant to the related Note Put Agreement.
"Rental Payment Account": Each Rental Payment Account created and
maintained pursuant to a Trust Agreement or a Collateral Trust Agreement if
applicable.
"Scheduled Payments": Payments of principal of, if any, and interest on, a
Mortgage Note held in a Trust or a Pass-Through Trust which will be scheduled to
be received by the Trustee or Collateral Trustee on each Due Date.
"Securities Act": The Securities Act of 1933, as amended.
"Series": A group of Certificates issued by a separate Trust or
Pass-Through Trust.
"Standard & Poor's" or "S&P": Standard & Poor's Ratings Group or its
successor in interest.
"Subsidiary": One or more of the following subsidiaries of Kmart identified
in the related Prospectus Supplement as the Tenant under a related Lease:
Borders, Inc.; Walden Book Company Inc.; Builders Square, Inc.; OfficeMax Inc.;
or The Sports Authority, Inc.
"Tenant": The lessee under each Lease named in the Prospectus Supplement
for each Series of Certificates, which lessee will be either Kmart or a
Subsidiary.
"Triggering Event": With respect to a Note Put Agreement, (a) (i) the
failure by a Tenant to pay when due any related Lease Payment within 10 days (or
30 days if the Tenant is Kmart) after notice to such Tenant of such default and
(ii) if the Tenant is a Subsidiary, the failure by Kmart to pay such Lease
Payment within 30 days after notice to Kmart of such Subsidiary's failure to do
so (which notice may be given concurrently with the corresponding notice to such
Subsidiary), (b) completion of construction of the Facility to be leased to the
Tenant does not occur prior to the related Completion Date, (c) if the Tenant is
a Subsidiary, a Lease Guaranty Termination occurs, or (d) the occurrence of any
other event which is denominated a "Triggering Event" in a Prospectus
Supplement.
"Trust": A grantor trust created pursuant to a Trust Agreement.
"Trust Agreement": An agreement between the Depositor and the Trustee
pursuant to which a Series of Certificates will be issued and, if Mortgage Notes
having the same maturity are issued pursuant to a Loan Agreement, pursuant to
which the Collateral with respect to the related Mortgage Notes will be held.
"Trust Indenture Act": The Trust Indenture Act of 1939, as amended.
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"Trust Property": The corpus of the Trust created by a Trust Agreement for
each Series of the Certificates, consisting of (i) one or more Mortgage Notes;
and (ii) all assets deposited in the Certificate Account, including the
investment of funds in such account. If Mortgage Notes of the same maturity are
issued pursuant to the related Loan Documents, then any Trust Property will also
include: (i) all rights which secure the obligations of the Borrowers of the
proceeds of such Mortgage Notes, (ii) all related Loan Documents and any rights
thereunder of holders of the Mortgage Notes; (iii) property which secured the
related Mortgage and which has been acquired by foreclosure or deed in lieu of
foreclosure; and (iv) Insurance Proceeds, Condemnation Proceeds and any other
amounts receivable under any related Loan Document.
"Trustee": The bank, trust company or other fiduciary named in a Prospectus
Supplement for a Series of Certificates as the trustee under a Trust Agreement
pursuant to which such Series is issued.
"Trustee's Fee": The amount of the annual fee(s) paid to the Pass-Through
Trustees, if applicable, or the Trustee for its ordinary fees and expenses
arising under the Pass-Through Trust Agreements, if applicable, or the Trust
Agreement.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE CERTIFICATES OFFERED HEREBY, NOR AN OFFER OF THE CERTIFICATES IN ANY STATE
OR JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR ANY PROSPECTUS AT ANY
TIME DOES NOT IMPLY THAT INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE; HOWEVER, IF ANY MATERIAL CHANGE OCCURS WHILE THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS REQUIRED BY LAW TO BE DELIVERED, THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED
ACCORDINGLY.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Summary Information............................ S-3
Use of Proceeds................................ S-6
The Certificates............................... S-6
The Pass-Through Trusts and The Collateral
Trust........................................ S-8
The Mortgage Notes............................. S-8
The Facilities and The Leases.................. S-10
Plan of Distribution........................... S-12
Legal Matters.................................. S-13
Ratings........................................ S-13
PROSPECTUS
Available Information.......................... 2
Reports to Certificateholders.................. 2
Incorporation of Certain Documents by
Reference.................................... 2
Prospectus Summary............................. 3
Special Considerations......................... 8
Kmart.......................................... 10
The Depositor.................................. 14
Use of Proceeds................................ 14
Diagrams of Transaction Structure.............. 15
Structure of the Financings.................... 19
The Certificates............................... 20
The Trusts, Pass-Through Trusts and Collateral
Trusts....................................... 26
The Mortgage Notes, the Loan Agreements and
Related Documents............................ 35
The Note Put Agreements........................ 39
The Leases, the Lease Guaranties and Related
Documents.................................... 40
The Borrowers.................................. 46
Consequences of Bankruptcy of a Tenant or a
Borrower..................................... 46
Certain Federal Income Tax
Consequences................................. 47
State and Local Tax Considerations............. 50
ERISA Considerations........................... 50
Legal Investment Considerations................ 52
Plan of Distribution........................... 52
Legal Matters.................................. 52
Experts........................................ 52
Glossary....................................... 53
</TABLE>
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT ALL DEALERS
EFFECTING TRANSACTIONS IN THE CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ---------------------------------------------------------------
- ---------------------------------------------------------------
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$5,491,000
KMART
CORPORATION
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1994A-1
SERIES 1994A-2
------------------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------------------
SUTRO & CO. INCORPORATED
NOVEMBER , 1994
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<PAGE> 74
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Filing Fee................................................................ $ 86,206.90
Printing and Engraving........................................................ 130,000.00*
Legal Fees and Expenses....................................................... 2,500,000.00*
Trustee Fees and Expenses..................................................... 60,000.00**
Blue Sky Fees and Expenses (including fees and expenses of counsel)........... 30,000.00*
Rating Agency Fees............................................................ 250,000.00*
Miscellaneous Expenses........................................................ 100,000.00*
-------------
Total.................................................................... $3,156,206.90
============
</TABLE>
- -------------------------
* Estimated.
** Estimated; does not include annual Trustee expense.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Registrant's By-Laws and the Michigan Business Corporation Act permit
the Registrant's officers and directors to be indemnified under certain
circumstances for expenses, and in some instances, for judgments, fines or
amounts paid in settlement of civil, criminal, administrative and investigative
suits or proceedings, including those involving alleged violations of the
Securities Act of 1933. In addition, the Registrant maintains directors' and
officers' liability insurance which, under certain circumstances, would cover
alleged violations of the Securities Act of 1933.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation of National Tenant Finance Corporation
3.2 By-Laws of National Tenant Finance Corporation
4.1 Form of Trust Agreement between the Depositor and the Trustee*
4.2 Form of Pass-Through Trust Agreement between the Depositor and the Pass-Through
Trustee*
4.3 Form of Collateral Trust Agreement between the Depositor and the Collateral
Trustee*
4.4 Form of Certificate used with Trust Agreement (included in 4.1)
4.5 Form of Certificate used with Pass-Through Trust Agreement (included in 4.2)
4.6 Form of Loan Agreement
4.7 Form of Mortgage Note
4.8 Form of Leases
4.9 Form of Lease Guaranty*
4.10 Form of Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture
Filing
4.11 Form of Assignment of Leases and Rents
4.12 Form of Construction Fund Disbursement Agreement
4.13 Form of Construction and Disbursement Agreement -- Common Area
4.14 Form of Note Put Agreement*
4.15 Form of Consent and Agreement
</TABLE>
II-1
<PAGE> 75
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<S> <C>
4.16 Form of Indemnity Agreement
5.1 Opinion of Squire, Sanders & Dempsey regarding validity of Certificates,
including consent
8.1 Opinion of Squire, Sanders & Dempsey as to certain tax matters, including consent
12 Computation of Ratio of Earnings to Fixed Charges*
23.1 Consent of Price Waterhouse*
23.2 Consent of Squire, Sanders & Dempsey (included in Exhibit 5.1)
23.3 Consent of Squire, Sanders & Dempsey (included in Exhibit 8.1)
24.1 Power of Attorney (included as part of signature page of this Registration
Statement)
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of
Trustee
</TABLE>
- -------------------------
* Filed with this Amendment No. 4
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 unless the information required to be included in
such post-effective amendment is contained in a periodic report filed by
the Registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 and incorporated herein by reference;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement unless the information required to be
included in such post-effective amendment is contained in a periodic
report filed by the Registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 and incorporated herein by
reference;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
If the Trustee is not identified until after the Registration Statement is
declared effective, the undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee to
II-2
<PAGE> 76
act under subsection (a) of section 310 of the Trust Indenture Act of 1939, as
amended (the "TIA"), in accordance with the rules and regulations prescribed by
the Commission under section 305(b)(2) of the TIA.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted against the Registrant by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at the
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 77
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 4 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Troy and State of Michigan on October
31, 1994.
KMART CORPORATION
By: /s/ JOSEPH E. ANTONINI*
------------------------------------
Joseph E. Antonini
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the Registration Statement has been signed below by the following
persons in the capacities indicated on October 31, 1994.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ---------------------------------------
<C> <S>
/s/ JOSEPH E. ANTONINI* Chairman of the Board, President
- --------------------------------------------- (Principal Executive Officer) and
Joseph E. Antonini Director
/s/ THOMAS F. MURASKY* Executive Vice President
- --------------------------------------------- (Principal Financial and Accounting
Thomas F. Murasky Officer)
/s/ LILYAN H. AFFINITO* Director
- ---------------------------------------------
Lilyan H. Affinito
/s/ JOSEPH A. CALIFANO, JR.* Director
- ---------------------------------------------
Joseph A. Califano, Jr.
/s/ WILLIE D. DAVIS* Director
- ---------------------------------------------
Willie D. Davis
/s/ ENRIQUE C. FALLA* Director
- ---------------------------------------------
Enrique C. Falla
/s/ JOSEPH P. FLANNERY* Director
- ---------------------------------------------
Joseph P. Flannery
/s/ DAVID B. HARPER* Director
- ---------------------------------------------
David B. Harper
/s/ F. JAMES MCDONALD* Director
- ---------------------------------------------
F. James McDonald
</TABLE>
II-4
<PAGE> 78
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ RICHARD S. MILLER* Director
- ---------------------------------------------
Richard S. Miller
/s/ J. RICHARD MUNRO* Director
- ---------------------------------------------
J. Richard Munro
Director
- ---------------------------------------------
Donald S. Perkins
/s/ GLORIA M. SHATTO* Director
- ---------------------------------------------
Gloria M. Shatto
/s/ JOSEPH R. THOMAS* Director
- ---------------------------------------------
Joseph R. Thomas
*By: /s/ NANCIE W. LaDUKE
- ---------------------------------------------
Nancie W. LaDuke
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 79
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGES
- ----------- ---------------------------------------------------------------------- ------------
<S> <C> <C>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation of National Tenant Finance Corporation
3.2 By-Laws of National Tenant Finance Corporation
4.1 Form of Trust Agreement between the Depositor and the Trustee*
4.2 Form of Pass-Through Trust Agreement between the Depositor and the
Pass-Through Trustee*
4.3 Form of Collateral Trust Agreement between the Depositor and the
Collateral Trustee*
4.4 Form of Certificate used with Trust Agreement (included in 4.1)
4.5 Form of Certificate used with Pass-Through Trust Agreement (included
in 4.2)
4.6 Form of Loan Agreement
4.7 Form of Mortgage Note
4.8 Form of Leases
4.9 Form of Lease Guaranty*
4.10 Form of Mortgage, Security Agreement, Assignment of Leases and Rents
and Fixture Filing
4.11 Form of Assignment of Leases and Rents
4.12 Form of Construction Fund Disbursement Agreement
4.13 Form of Construction and Disbursement Agreement -- Common Area
4.14 Form of Note Put Agreement*
4.15 Form of Consent and Agreement
4.16 Form of Indemnity Agreement
5.1 Opinion of Squire, Sanders & Dempsey regarding validity of
Certificates, including consent
8.1 Opinion of Squire, Sanders & Dempsey as to certain tax matters,
including consent
12 Computation of Ratio of Earnings to Fixed Charges*
23.1 Consent of Price Waterhouse*
23.2 Consent of Squire, Sanders & Dempsey (included in Exhibit 5.1)
23.3 Consent of Squire, Sanders & Dempsey (included in Exhibit 8.1)
24.1 Power of Attorney (included as part of signature page of this
Registration Statement)
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939 of Trustee
</TABLE>
- -------------------------
* Filed with this Amendment No. 4
<PAGE> 1
EXHIBIT 4.1
_______________
TRUST AGREEMENT
_______________
between
NATIONAL TENANT FINANCE CORPORATION
as Depositor
and
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
_____________________________
Dated as of_______ __, 199_
_____________________________
$_________
Mortgage Pass-Through Certificates
(___________________)
Series 199_-__
_________________________________________________________________
<PAGE> 2
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
TIA Section Trust Agreement Section
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 8.07
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 8.07
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . 8.06
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . *
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . 8.07
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 8.07; 8.08; 11.08
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . *
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . *
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . *
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . *
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 8.15
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . *
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . *
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 8.15; 11.08
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 8.15
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . *
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . *
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 11.13
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 11.13
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . *
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . *
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 11.14
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . *
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . *
316(a) last sentence . . . . . . . . . . . . . . . . . . . Definition of "Certificateholder"
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . 7.04
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . 7.02
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . *
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . *
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . *
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.05
</TABLE>
1
<PAGE> 3
<TABLE>
<CAPTION>
TIA Section Trust Agreement Section
<S> <C>
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 11.12
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . *
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 11.12
- ----------------------
</TABLE>
* Intentionally deleted.
2
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Incorporation by Reference of Trust Indenture Act. . . . . . . 11
Section 1.03. Acts of Holders. . . . . . . . . . . . . . . . . . . . . . . . 11
<CAPTION>
ARTICLE II
CONVEYANCE OF MORTGAGE LOAN[S]; TRUST PROPERTY
<S> <C> <C>
Section 2.01. Conveyance of Mortgage Loan[s] . . . . . . . . . . . . . . . . 12
Section 2.02. Acceptance by Trustee. . . . . . . . . . . . . . . . . . . . . 13
Section 2.03. Trust Property. . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.04. Limitation of Powers. . . . . . . . . . . . . . . . . . . . . 14
<CAPTION>
ARTICLE III
THE CERTIFICATES
<S> <C> <C>
Section 3.01. The Certificates. . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.02. Registration of Transfer and Exchange of Certificates . . . . 17
Section 3.03. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . 19
Section 3.04. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . 19
Section 3.05. Appointment of Paying Agent . . . . . . . . . . . . . . . . . 19
Section 3.06. Certificates Issuable in the Form of a
Registered Global Certificate. . . . . . . . . . . . . . . . 19
Section 3.07. Temporary Securities. . . . . . . . . . . . . . . . . . . . . 21
<CAPTION>
ARTICLE IV
RECEIPT AND DISTRIBUTION OF INCOME
AND PROCEEDS FROM THE TRUST PROPERTY
<S> <C> <C>
Section 4.01. Calculation of Distributions. . . . . . . . . . . . . . . . . 22
Section 4.02. Receipt of Lease Payments; Collection of
Lease and Lease Guaranty Payments;
Collection of Indemnity Agreement
Payments; Collection of Mortgage
Loan Payments; Investment
Direction. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section. 4.03. Establishment of Rental Payment
Account[s]; Deposits in Rental Payment Account[s] . . . . . 24
Section. 4.04. Permitted Withdrawals From the Rental Payment Account[s]. . . 24
Section. 4.05. Establishment of Certificate Account;
Deposits in Certificate Account. . . . . . . . . . . . . . . 25
Section. 4.06. Permitted Withdrawals From the Certificate Account. . . . . . . 26
Section. 4.07. Capitalized Debt Service Account[s]. . . . . . . . . . . . . . 27
Section. 4.08. Realization Upon Defaulted Mortgage Loan. . . . . . . . . . . 28
Section. 4.09. Trustee Compensation . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 4.10. Rights of the Certificateholders . . . . . . . . . . . . . . . 29
<CAPTION>
ARTICLE V
PAYMENTS TO THE CERTIFICATEHOLDERS
<S> <C> <C>
Section 5.01. Distributions. . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.02. Statements to Certificateholders. . . . . . . . . . . . . . . 30
Section 5.03. Advances by Trustee. . . . . . . . . . . . . . . . . . . . . . 31
<CAPTION>
ARTICLE VI
THE DEPOSITOR
<S> <C> <C>
Section 6.01. Maintaining Corporate Existence of the
Depositor. . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.02. Limitation on Liability of the Depositor. . . . . . . . . . . 32
<CAPTION>
ARTICLE VII
DEFAULT
<S> <C> <C>
Section 7.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.02. Waiver of Defaults. . . . . . . . . . . . . . . . . . . . . . 33
Section 7.03. Notification to Certificateholders. . . . . . . . . . . . . . 33
Section 7.04. Rights of Certificateholders to Direct
Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.05. Rights of Certificateholders to Receive
Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.06. Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . 34
Section 7.07. Trustee Default. . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.08. Notice to Tenant[s] and [Kmart] . . . . . . . . . . . . . . . 34
<CAPTION>
ARTICLE VIII
CONCERNING THE TRUSTEE
<S> <C> <C>
Section 8.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.02. Certain Matters Affecting Trustee. . . . . . . . . . . . . . . 36
Section 8.03. Trustee Not Liable for Certificates
or Mortgage Loan[s]. . . . . . . . . . . . . . . . . . . . . 37
Section 8.04. Trustee May Own Certificates. . . . . . . . . . . . . . . . . 37
Section 8.05. Trustee's Fee and Expenses. . . . . . . . . . . . . . . . . . 37
Section 8.06. Action by Co-Trustee. . . . . . . . . . . . . . . . . . . . . 38
Section 8.07. Eligibility Requirements for Trustee. . . . . . . . . . . . . 38
Section 8.08. Resignation and Removal of Trustee. . . . . . . . . . . . . . 39
Section 8.09. Successor Trustee. . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.10. Merger or Consolidation of Trustee. . . . . . . . . . . . . . 40
Section 8.11. Resignation of Co-Trustee. . . . . . . . . . . . . . . . . . . 41
Section 8.12. Removal of Co-Trustee. . . . . . . . . . . . . . . . . . . . . 41
Section 8.13. Appointment of Successor to Co-Trustee. . . . . . . . . . . . 41
Section 8.14. Succession of Successor to Co-Trustee. . . . . . . . . . . . . 41
Section 8.15. Reports by the Trustee to Certificateholders. . . . . . . . . 42
<CAPTION>
ARTICLE IX
TERMINATION
<S> <C> <C>
Section 9.01. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.02. Notice; Final Distribution. . . . . . . . . . . . . . . . . . 42
</TABLE>
ii
<PAGE> 6
ARTICLE X
SUPPLEMENTS AND AMENDMENTS TO THIS
TRUST AGREEMENT AND OTHER DOCUMENTS;
ADDITIONAL AGREEMENTS OF TRUSTEE
<TABLE>
<S> <C> <C>
Section 10.01. Supplemental Trust Agreements Without Consent of Holders. . . 43
Section 10.02. Supplemental Agreements With Consent of Certificateholders. . . 44
Section 10.03. Effect of Supplemental Agreement. . . . . . . . . . . . . . . . 45
Section 10.04. Documents to Be Given to Trustee. . . . . . . . . . . . . . . . 46
Section 10.05. Notation on Certificates in Respect of Supplemental
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 10.06. Granting of Easements . . . . . . . . . . . . . . . . . . . . . 46
<CAPTION>
ARTICLE XI
MISCELLANEOUS PROVISIONS
<S> <C> <C>
Section 11.01. Severability of Provisions. . . . . . . . . . . . . . . . . . 46
Section 11.02. Limitation on Rights of Certificateholders. . . . . . . . . . 47
Section 11.03. Solicitation of Certificateholders. . . . . . . . . . . . . . 47
Section 11.04. Recordation of Agreement. . . . . . . . . . . . . . . . . . . 48
Section 11.05. Duration of Agreement. . . . . . . . . . . . . . . . . . . . . 48
Section 11.06. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.07. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.08. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.09. Submission to Jurisdiction. . . . . . . . . . . . . . . . . . 49
Section 11.10. Gender; Number. . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.11. TIA Controls. . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.12. Certificate and Opinion as to Conditions Precedent . . . . . . 50
Section 11.13. Statements Required in Certificate or Opinion . . . . . . . 50
Section 11.14. Benefits of Trust Agreement. . . . . . . . . . . . . . . . . . 50
EXHIBIT A-1 MORTGAGE LOAN SCHEDULE
EXHIBIT A-2 CERTIFICATE SCHEDULE
EXHIBIT A-3 CONTENTS OF MORTGAGE FILE
EXHIBIT A-4 CAPITALIZED DEBT SERVICE ACCOUNT SCHEDULE
EXHIBIT B [FORM OF CERTIFICATE]
EXHIBIT C FORM OF TRUSTEE CERTIFICATION
EXHIBIT D LETTER OF REPRESENTATIONS
</TABLE>
iii
<PAGE> 7
TRUST AGREEMENT
THIS TRUST AGREEMENT, dated as of _______ __, 19__, is executed by and
among NATIONAL TENANT FINANCE CORPORATION, a Delaware corporation, as depositor
(together with its permitted successors, in such capacity, "Depositor"), and
UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking corporation,
as trustee (together with its permitted successors and assigns, "Trustee").
In consideration of the premises and the mutual agreements hereinafter
set forth, the Depositor and the Trustee agree as follows:
PREFACE
Each Certificate evidences a beneficial ownership interest in the Trust
Property, the assets of which include, among other things, the Mortgage
Loan[s]. The Certificates are equally and ratably secured by and payable from
the proceeds of the Mortgage[s] and the Mortgage Note[s], respectively (as each
such term is defined herein).
Each Certificate is paid interest or principal and interest, as set
forth on the Debt Service schedule on such Certificate, on a semiannual basis
referred to herein as the Remittance Dates. Payments under the Mortgage
Note[s] are payable semiannually on the Due Dates.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions. Whenever used herein, the following words
and phrases, unless the context otherwise requires, shall have the following
meanings:
"Additional Rent": [With respect to each Lease] has the meaning
assigned in Article 5 of [the] [such] Lease.
"Administrative Expenses": The ordinary and necessary expenses
incurred by the Trustee in the course of administering the affairs of the
Trust, excluding any Liquidation Expenses.
"Annual Rental": [With respect to each Lease] has the meaning assigned
in Article 4 of [the] [such] Lease.
"Assignment of Mortgage[s]": The Assignment of the Mortgage[s] dated
as of ____________________, 19__ between Depositor and Trustee, the Assignment
of Lease Assignment[s] dated as of ____________________, 19__, between
Depositor and Trustee, and any other notice of transfer or equivalent
instrument, in recordable form, sufficient under the laws of the
jurisdiction[s]
<PAGE> 8
where the Mortgaged Estate securing [each] [the] Mortgage Loan is located to
reflect of record the sale, conveyance, transfer and absolute assignment of the
Mortgage[s] to the Trustee.
"Available Distribution Amount": As to any Remittance Date, an amount
equal to the amount on deposit in the Certificate Account as of the close of
business on the Business Day immediately preceding the Remittance Date.
"Benefit Plan": An employee benefit plan as defined in Section 3(3) of
ERISA, including an employee welfare benefit plan or an employee pension
benefit plan, a plan described in Section 401(a) or Section 403(a) of the Code,
the trust under which is exempt from tax under Section 501(a) of the Code, an
individual retirement account under Section 408(a) of the Code or an individual
retirement annuity under Section 408(b) of the Code, and any entity whose
underlying assets include Benefit Plan assets by reason of a Benefit Plan's
investment in such entity.
"Borrower": [The] [A] Borrower identified in [the] [a] Loan Agreement.
"Business Day": Any day other than (i) a Saturday or Sunday, or (ii) a
day on which banking or savings and loan institutions in New York or
California, or the city in which the principal corporate trust offices of any
successor Trustee are located, are authorized or obligated by law or executive
order to be closed.
["Capitalized Debt Service Account": [The] [Each] trust account
described in Section 4.07.]
["Capitalized Debt Service Reserve": Has the meaning assigned thereto
in Section 2 of [the] [each] Loan Agreement.]
"Certificate" or "Certificates": The Certificate or Certificates
evidencing a beneficial ownership interest in the Trust Property executed and
authenticated by the Trustee substantially in the form set forth in Exhibit B
hereto.
"Certificate Account": The trust account described in Section 4.05.
"Certificate Balance": With respect to all the Certificates, the
original principal amount of the Certificates less all payments and prepayments
of principal thereof, including without limitation any payments of principal
comprising Debt Service; and with respect to any Certificate, the original
principal amount of such Certificate less all payments and prepayments of
principal thereof, including without limitation any payments of principal
comprising Debt Service on such Certificate.
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<PAGE> 9
"Certificateholder", "Certificateholders", "Holder" or "Holders": The
person or persons in whose name a Certificate is registered in the Certificate
Register, except that, solely for the purposes of any consent, waiver, request
or demand pursuant to this Trust Agreement, any Certificate registered in the
name of the Depositor, Kmart, a Tenant, a Borrower, any successor owner or
ground lessee of a Project, any successor tenant or subtenant of a Project, any
successor guarantor of the performance of a Tenant, or successor tenant or
subtenant, or any affiliate of any of the foregoing, shall be deemed not to be
outstanding and the Percentage Interest evidenced thereby shall not be taken
into account in determining whether the requisite amount of Percentage
Interests necessary to effect any such consent, waiver, request or demand has
been obtained.
"Certificate Owner": Any Person acquiring a beneficial interest in a
Registered Global Certificate, which ownership shall be reflected on the books
of the Depository or on those of a participant in such Depository. Solely for
the purposes of any consent, waiver, request or demand pursuant to this Trust
Agreement, any portion of a Registered Global Certificate that is beneficially
owned by the Depositor, Kmart, a Tenant, a Borrower, any successor owner or
ground lessee of a Project, any successor tenant or subtenant of a Project, any
successor guarantor of the performance of a Tenant or successor tenant or
subtenant, or any affiliate of any of the foregoing, shall be deemed not to be
outstanding and the Percentage Interest evidenced by such portion shall not be
taken into account in determining whether the requisite amount of Percentage
Interests necessary to effect any such consent, waiver, request or demand has
been obtained.
"Certificate Register": The register maintained pursuant to Section
3.02.
"Certificate Schedule": The Certificate Schedule attached hereto as
Exhibit A-2 setting forth the following information for each Certificate issued
as of the Closing Date: (i) the Certificate Number; (ii) the Certificate
Balance as of the Closing Date; and (iii) the Debt Service on such Certificate.
"Closing Costs": An amount equal to $_____________ which shall be
disbursed to the Underwriters on the Closing Date.
"Closing Date": _______ __, 199_.
"Code": The Internal Revenue Code of 1986, as amended.
"Condemnation Proceeds": Any awards in respect of, or settlements in
lieu of, condemnation proceedings affecting [the] [a] Mortgaged Estate.
"Consent and Agreement": [A] [The] Consent and Agreement among Kmart,
Depositor, [a] Borrower, [a] Tenant and Trustee relating to [a] [the] Lease,
[a] [the] Lease Guaranty, [a] [the] Note Put Agreement and certain other
related matters.
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<PAGE> 10
"Corporate Trust Office": The office of the Trustee in the State of
New York at which at any particular time its corporate trust business shall
be administered, or the office of its designated agent, U.S. Trust Company of
California, N.A., which office at the date of execution of this instrument is
located at Suite 2700, 555 South Flower Street, Los Angeles, California 90071.
"Debt Service": The interest or interest and principal payable
semiannually on the Remittance Date as stated on a specific Certificate, as
adjusted from time to time as provided in Section 3.01(g) hereof.
"Depositor": National Tenant Finance Corporation, a Delaware
corporation, and its successors in interest.
"Depository": The depository of the Registered Global Certificate[s],
if any, representing the Certificates and any successor to such depository
appointed by the Depositor. Such depository initially shall be The Depository
Trust Company, a New York corporation.
"Determination Date": The Business Day immediately preceding a
Remittance Date.
"Due Date": [With respect to each Mortgage Note,] a Note Payment Date
as defined in the [related] Loan Agreement.
"Eligible Investments": One or more of the following:
(i) direct obligations of the United States of America;
(ii) obligations fully guaranteed, both as to principal
and interest, by the United States of America;
(iii) certificates of deposit issued by, or bankers'
acceptances of, or time deposits with, a bank or trust company organized under
the laws of the United States or any state thereof, having capital, surplus and
undivided profits aggregating at least $100,000,000 and whose long-term
certificates of deposit are, at the time of acquisition thereof, rated in the
highest rating category for such securities by S&P and Moody's; and
(iv) taxable government money-market portfolios restricted
to obligations with maturities of one year or less, issued or guaranteed by the
full faith and credit of the United States which, at the time of such
investment, are then rated in the highest rating category of S&P and Moody's
(the "highest rating category" as used in this definition shall mean (A) a
rating which would be assigned by S&P, as of the date first above written,
equivalent to or higher than "AAAm" or "AAAmG" with respect to money-market
securities and (B) a rating which would be assigned by Moody's as of the date
first above written, equivalent to or higher than "Am" with respect to
money-market securities);
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<PAGE> 11
provided that any such obligations of the types described in clauses (i)
through (iv) above shall not have a maturity later than the earlier of 90 days
and the Due Date immediately following the acquisition thereof or, in the case
of the Certificate Account, the date when any funds being invested are to be
distributed to the Certificateholders; provided further, that any such
obligations of the types described in clauses (i) and (ii) above may be made
through a repurchase agreement in commercially reasonable form with a bank or
other financial institution (which may be the Trustee) the senior unsecured
debt of which is then assigned an A rating or better by S&P or Moody's, so long
as title to the underlying obligations shall pass to the Trustee and that such
underlying obligations shall be segregated in a custodial or trust account of
or for the benefit of the Trustee.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default": Any event of default described in Section 7.01.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"Extraordinary Expense Advances": All reasonable and necessary
"out-of-pocket" costs and expenses of the Trustee in enforcing the Mortgage
Note[s] and the Loan Documents following an Event of Default under Section 7.01
hereof (except for a Non-Monetary Tenant Default), and in compliance with the
obligations of the Trustee under Section 4.08.
"FDIC": Federal Deposit Insurance Corporation or any successor
organization.
"Indemnity Agreement": [With respect to each Mortgage Note,] has the
meaning assigned thereto in Section 1.1 of the [related] Loan Agreement.
"Insurance Proceeds": Proceeds paid by any insurer pursuant to any
insurance policy, including but not limited to title insurance, environmental
insurance and self-insurance proceeds paid by Kmart or any Tenant, covering all
or a portion of the Mortgaged Estate.
"Kmart": Kmart Corporation, a Michigan corporation, and its successors
and assigns.
"Lease": [With respect to each Mortgage Note,] has the meaning
assigned thereto in Section 1.1 of the [related] Loan Agreement.
"Lease Guaranty": [With respect to each Mortgage Note,] has the
meaning assigned thereto in Section 1.1 of the [related] Loan Agreement.
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"Lease Guaranty Termination": [With respect to any Mortgage Loan] a
Lease Guaranty Termination as defined in the [related] Note Put Agreement.
"Letter of Representations": A letter (in the form attached hereto as
Exhibit D) from the Depositor and the Trustee to, and accepted by, the
Depository, as such letter may be modified or supplemented, or any successor
letter thereto.
"Liquidated Mortgage Loan": [A] [The] Mortgage Loan after an Event of
Default under the [related] Loan Agreement when the Trustee has reasonably
determined that all amounts which it expects to recover from or on account of
such Mortgage Loan have been recovered.
"Liquidation Expenses": Expenses which are incurred by the Trustee in
connection with the liquidation of a defaulted Mortgage Loan, such expenses
including, without limitation, legal fees and expenses, any unreimbursed amount
expended by the Trustee pursuant to Section 4.08 (to the extent such amount is
reimbursable under the terms of Section 4.08) respecting such Mortgage Loan and
any related and unreimbursed expenditures for real estate property taxes or for
property restoration or preservation.
"Liquidation Proceeds": Cash (including Insurance Proceeds and
Condemnation Proceeds) received by the Trustee in connection with the
liquidation of [a] [the] defaulted Mortgage Loan, whether through the sale of
such defaulted Mortgage Loan, the sale of the Mortgaged Estate securing such
defaulted Mortgage Loan pursuant to foreclosure sale or otherwise, or revenues
from or the sale of the related Mortgaged Estate if such Mortgaged Estate is
acquired in satisfaction of such defaulted Mortgage Loan, other than amounts
required to be paid to the Borrower pursuant to law or the terms of the related
Mortgage Note.
"Loan Agreement": [With respect to each Mortgage Note,] the [related]
Loan Agreement between Depositor and [a] Borrower, pursuant to the terms and
conditions of which the [related] Mortgage Loan was made.
"Loan Documents": [With respect to each Mortgage Loan,] the [related]
Note Put Agreement, the related Loan Agreement, the related Mortgage and each
document in the Mortgage File [pertaining to such Mortgage Loan], and each
other document which constitutes a Loan Document pursuant to the terms and
provisions of [such] [the] Loan Agreement.
"Make-Whole Premium": [With respect to each Mortgage Note,] has the
meaning assigned to it in Section 2 of the [related] Loan Agreement. The
Trustee shall be provided with a certificate evidencing the calculation of such
amount by the Depositor.
"Moody's": Moody's Investors Service, Inc., a Delaware corporation,
its successors and assigns.
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"Mortgage": [With respect to each Mortgage Note,] has the meaning
assigned thereto in Section 1.2 of the [related] Loan Agreement.
"Mortgage File": The items referred to in Exhibit A-3 annexed hereto
pertaining to the Mortgage Loan[s].
"Mortgage Loan": The loan pursuant to [a] [the] Loan Agreement
together with all right, title and interest of Depositor relating thereto,
evidenced by the [related] Mortgage Note and secured by the [related] Mortgage,
which Mortgage Loan was sold, conveyed, transferred and absolutely assigned by
the Depositor to the Trustee and which is the subject of this Trust Agreement
and included in the Trust Property. [Each] [The] Mortgage Loan is identified
on the Mortgage Loan Schedule annexed hereto as Exhibit A-1.
"Mortgage Loan Schedule": The schedule attached hereto as Exhibit A-1
setting forth the following information for the Mortgage Loan[s]: (i) [each]
[the] Borrower's name; (ii) the Mortgaged Estate[s]; (iii) the maturity
date[s]; (iv) [each] [the] Mortgage Note rate; (v) the first Due Date; (vi) a
schedule setting forth the Mortgage Payments; and (vii) the original Principal
Balance of [each] [the] Mortgage Loan.
"Mortgage Note": [A] [The] promissory note, executed by [a] [the]
Borrower as obligor and having [a] [the] maturity date and interest rate
specified in the Mortgage Loan Schedule, secured by [a] [the] Mortgage.
"Mortgage Payments": The scheduled payments set forth in Exhibit A-1
of interest or principal and interest on the Mortgage Loan[s], as adjusted
pursuant to the prepayment or other liquidation of such Mortgage Loan[s].
"Mortgaged Estate": [With respect to each Mortgage Note,] the real and
personal property securing [such] [the] Mortgage Note.
"Net Liquidation Proceeds": Liquidation Proceeds net of Liquidation
Expenses.
"Non-Monetary Tenant Default": [With respect to a Lease,] any default
under [such] [the] Lease by the [related] Tenant other than a default in the
payment of Annual Rental or Additional Rent.
"Note Put Agreement": [With respect to each Loan Agreement,] the Note
Put Agreement by and between Depositor, [and] the [related] Tenant, [and Kmart]
pursuant to the terms and conditions of which a Put of [such] [the] Mortgage
Note may be made on the occurrence of certain events specified therein.
"Officer's Certificate": A certificate signed by the Chairman of the
Board, the Chief Executive Officer, the President or a Vice President, the
Treasurer or the Secretary or one of the Assistant
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<PAGE> 14
Treasurers or Assistant Secretaries or any other duly authorized officer of the
Depositor and delivered to the Trustee containing the information required by
Sections 11.12 and 11.13.
"Opinion of Counsel": An opinion in writing signed by legal counsel
who may be an employee of or counsel to the Depositor in form and substance
acceptable to the Trustee containing the information required by Sections 11.12
and 11.13.
["Option Agreement": An option granted by [a][the] Borrower to
[a][the] Tenant permitting such Tenant to acquire the [related] Project in the
event Borrower does not perform its obligations under the [related] Lease and
the [related] Construction Fund Disbursement Agreement.]
"Paying Agent": The Person designated as the Paying Agent pursuant to
Section 3.05.
"Percentage Interest": The percentage of the whole undivided
beneficial interest in the Trust Property held by a Holder, to be evidenced by
a Certificate which shall state the percentage interest therein.
"Permitted Encumbrances": The Permitted Encumbrances as defined in
[each] [the] Mortgage.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political
subdivision thereof.
"Pledge Agreement": [With respect to each Mortgage Note,] has the
meaning assigned thereto in Section 1.2 of the [related] Loan Agreement.
"Principal Balance": The outstanding principal balance of [the] [a]
Mortgage Note as of any specified date.
"Principal Prepayment": Any payment or other recovery of principal on
[a] [the] Mortgage Note (other than monthly receipts of amounts referred to in
Section 4.02(a)), including any prepayment of principal pursuant to Section 3
of the [related] Loan Agreement, Insurance Proceeds and Condemnation Proceeds
to the extent required to be deposited in the Certificate Account, and
Liquidation Proceeds, which is received in advance of its scheduled Due Date.
"Project": [A] [The] facility comprised of a retail store [constructed
by [a] Borrower [and [a] Tenant]] for lease by [a] [such] Tenant on real
property [which will be [acquired by] [owned by] [a] [such] Borrower and] [upon
which such facility will be constructed on behalf of [such] Borrower] using the
proceeds of [a] [the] Mortgage Loan.
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<PAGE> 15
"Purchase Price": [With respect to each Mortgage Note,] has the
meaning assigned thereto in Section 2.1 of the [related] Note Put Agreement.
"Put": The right to require purchase of [a] [the] Mortgage Note by [a]
[the] Tenant and Kmart pursuant to the [related] Note Put Agreement.
"Rating Agency": Any nationally recognized statistical rating agency,
or its successor, that rated the Certificates at the request of the Depositor
at the time of the initial issuance of the Certificates. If such agency or a
successor is no longer in existence, "Rating Agency" shall be such nationally
recognized statistical rating agency, or other comparable Person, designated by
the Depositor, notice of which designation shall be given to the Trustee.
References herein to the highest rating category of a Rating Agency shall mean
AAA or better in the case of S&P and Aaa or better in the case of Moody's and
in the case of any other Rating Agency shall mean a rating equivalent to such
ratings.
["Rating Decline": [with respect to each Mortgage Note,] a Rating
Decline as defined in the [related] Note Put Agreement.]
"Record Date": (i) With respect to any distribution, the close of
business on the fifteenth day preceding the related Remittance Date, except
with respect to a distribution pursuant to Section 3.01(f), in which case the
Record Date is the close of business on the fifteenth day prior to the
Remittance Date on which the related Mortgage Payment would, pursuant to the
terms hereof, have been distributable to the Certificateholders had such
Mortgage Payment been paid in full in a timely manner. (ii) With respect to
any direction, consent, waiver, or other action to be given or taken by
Certificateholders, the date established by the Trustee pursuant to Section
1.03(e) hereof.
"Registered Global Certificate": The Certificate, if any, issued to
the Depository in accordance with Article III and bearing the legend prescribed
in Section 3.06(a).
"Remittance Date": With respect to the Certificates, an interest or
principal and interest payment date of ________ 1, 19__, and the first Business
Day of each ________ and ____ thereafter until _____ 1, ____, or the payment of
the unpaid principal balance in full, or such other date when a distribution is
made pursuant to Section 3.01(c), 3.01(d), 3.01(e) or 3.01(f) hereof.
"Rental Payment Account": [The] [Each] trust account described in
Section 4.03.
"Responsible Officer": When used with respect to the Trustee, the
Chairman or Vice Chairman of the Board of Directors of the Trustee, the
Chairman or Vice Chairman of the Executive or Standing Committee of the Board
of Directors of the Trustee, the President, the Chairman of the Committee on
Trust Matters, any Vice President, any Assistant Vice President, the Secretary,
any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier,
any Assistant Cashier, any Trust Officer or Assistant Trust Officer, the
Controller and any Assistant Controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also, with
["Restructuring Event": [with respect to each Mortgage Note,] a
Restructuring Event as defined in the [related] Note Put Agreement.]
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<PAGE> 16
respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"[Second Mortgage": A Mortgage, Security Agreement and Assignment of
Rents from [a] [the] Borrower to [a] [the] Tenant which grants a lien
subordinate to the [related] Mortgage on [a] [the] Project to secure such
Borrower's performance under the [related] Lease and under the [related]
Construction Fund Disbursement Agreement.]
"S & P": Standard & Poor's Ratings Group, a _______________
corporation, its successors and assigns.
"Tenant" [or "Tenants"]: [Kmart and] ___________, _____________ [or
____________,] [each of] which is a subsidiary of Kmart and which has entered
into [the] [a] Lease with [a] [the] Borrower to occupy a Project.
"TIA": The Trust Indenture Act of 1939 as in effect on the date as of
which this Trust Agreement was first qualified under such Act; provided,
however, that in the event the Trust Indenture Act is amended after such date,
"TIA" means, to the extent required by such amendment, the Trust Indenture Act
of 1939 as so amended.
"Transfer Assurance": A Transfer Assurance required pursuant to
Section 3.02(c).
"Trust": The grantor trust created pursuant to this Trust Agreement.
"Trust Agreement": This Trust Agreement and all amendments hereof and
supplements hereto.
"Trustee": United States Trust Company of New York, and its permitted
successors hereunder.
"Trustee's Fee": The amount of the annual fee paid to the Trustee for
its Administrative Expenses, including the reasonable expenses of preparing any
tax returns as provided in Section 5.02, arising under this Trust Agreement,
equal to $_____, payable by the Tenant[s] pursuant to the Consent and
Agreement[s].
"Trust Property": The corpus of the Trust, to the extent described
herein, consisting of the Mortgage Loan[s], including all rights which secure
the obligation of the Borrower[s] thereunder, the Mortgage Note[s], all Loan
Documents, such assets as shall from time to time be identified as deposited
in the Certificate Account (including the investment income thereon), property
which secures the Mortgage Loan[s] and which has been acquired by
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<PAGE> 17
foreclosure or deed in lieu of foreclosure (prior to its disposition) and
Insurance Proceeds, Condemnation Proceeds and any other amounts receivable
under the Mortgage Note[s] or the Loan Documents, and any funds advanced by the
Certificateholders to Trustee or otherwise held by Trustee in accordance with
the provisions hereof.
"Underwriters": The several underwriters named in the Underwriting
Agreement.
"Underwriting Agreement": The Underwriting Agreement dated ________
__, 19__, between Kmart, the Depositor and Sutro & Co. Incorporated [on behalf
of itself and the several underwriters named therein].
Section 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Trust Agreement refers to a provision of the TIA, such provision
is incorporated by reference in and made a part of this Trust Agreement. The
following TIA terms used in this Trust Agreement have the following meanings:
"Commission" means the SEC.
"Indenture securities" means the Certificates.
"Indenture security holder" means a Certificateholder.
"Indenture to be qualified" means this Trust Agreement.
"Indenture trustee" or "institutional trustee" means the Trustee.
"Obligor" on the Indenture securities means Kmart.
All other TIA terms used in this Trust Agreement that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule
have the meanings assigned to them by such definitions.
Section 1.03. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Trust Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or
by an agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Depositor and to Kmart. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of Certificateholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any
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<PAGE> 18
such agent shall be sufficient for any purpose of this Trust Agreement and
conclusive in favor of the Trustee and the Depositor, if made in the manner
provided in this Section 1.03.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Trustee deems
sufficient.
(c) The ownership of Certificates shall be proved by the Certificate
Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Certificate shall bind every future
Holder of the same Certificate and the Holder of every Certificate issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Depositor in reliance thereon, whether or not notation of such action is
made upon such Certificate.
(e) If the Trustee shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Trustee
shall fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act. Such request, demand, authorization,
direction, notice, consent, waiver or other Act may be given before or
after such record date, but only the Holders of record at the close of business
on such record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion of outstanding
Certificates have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for that
purpose the outstanding Certificates shall be computed as of such record date;
provided that no such authorization, agreement or consent by the Holders on
such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Trust Agreement not later than six months
after the record date.
ARTICLE II
CONVEYANCE OF MORTGAGE LOAN[S]; TRUST PROPERTY
Section 2.01. Conveyance of Mortgage Loan[s]. As grantor of the
Trust, the Depositor, concurrently with the execution and delivery hereof, does
hereby sell, transfer, set over, convey and absolutely assign to the Trustee
without recourse (except as provided herein) in trust intending to establish
the Trust, all right, title and interest of the Depositor in and to the
Mortgage Loan[s], including all interest, Make-Whole Premium and principal due
or to become due from [each] [the] Borrower on or with respect to [each] [the]
Mortgage Loan.
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In connection with such sale, conveyance, transfer and absolute
assignment, the Depositor does hereby sell, transfer, convey and absolutely
assign and deliver to, and deposit with, the Trustee the Mortgage Note[s] and
all Loan Documents.
The ownership of the Trust Property is vested in the Trustee without
reservation of any right, title or interest whatsoever in the Depositor. The
Depositor intends that the sale, conveyance, transfer and absolute assignment
of the Depositor's right, title and interest in and to the Trust Property
pursuant to this Trust Agreement shall constitute a purchase and sale and not a
pledge of security for a loan. However, if for any reason such conveyance is
deemed not to be a sale, the Depositor intends that the rights and obligations
of the parties shall nevertheless be established pursuant to the terms of this
Trust Agreement and that the Depositor shall be deemed to have granted to the
Trustee a first priority security interest in all of the Depositor's right,
title and interest in, to and under the Mortgage Loan[s], all payments of
principal of or interest on the Mortgage Loan[s], all other payments made in
respect of the Mortgage Loan[s] (including, without limitation, any Make-Whole
Premium), and all proceeds of any thereof, and any other
assets of the Trust, and that this Trust Agreement shall constitute a security
agreement under applicable law.
Section 2.02. Acceptance by Trustee. The Trustee acknowledges receipt
of the documents referred to in Section 2.01, subject to any exceptions noted
in a certificate of the Trustee delivered within 30 days after the Closing
Date, and declares that it holds and will hold such documents delivered to it
in trust for the use and benefit of all present and future Certificateholders.
The Trustee agrees, for the benefit of Certificateholders, to review within 30
days after the Closing Date each of the documents described in Section 2.01
delivered to it to ascertain that all required documents have been executed and
received, and that such documents relate to the Mortgage Loan[s] identified in
the Mortgage Loan Schedule, as supplemented, that have been sold, conveyed,
transferred and absolutely assigned to it. If the Trustee finds any document
or documents constituting a part of the documents described in Section 2.01 to
be missing, mutilated, damaged, defaced, incomplete, improperly dated, clearly
forged or otherwise physically altered in any material respect, the Trustee
shall promptly (and in any event within no more than five Business Days after
such discovery) so notify the Depositor. At the conclusion of such review, the
Trustee shall also notify the Depositor if, in examining such documents, or
through any other means, the Trustee had notice or knowledge (a) of any adverse
claim, lien or encumbrance against [any] [the] Mortgage Loan or [any] [the]
[related] Mortgaged Estate, (b) that [any] [the] Mortgage Note was overdue or
had been dishonored, (c) of evidence on the face of [any] [the] Mortgage Note
or Mortgage of any security interest or other right or interest therein, or (d)
of any defense against or claim to [any] [the] Mortgage Note by any party. The
Depositor shall correct such omission or other irregularity referred to above
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within 90 days from receipt of such notice from the Trustee. The Trustee shall
review the documents referred to in Section 2.01 only for the purpose set forth
above in this Section 2.02 and the Trustee shall be under no duty or obligation
to inspect, review or examine any such documents, instruments, certificates or
other papers to determine that they are genuine, enforceable or appropriate for
the represented purpose or that they have actually been recorded or that they
are other than what they purport to be on their face.
Within thirty (30) days of the Closing Date, the Trustee shall deliver
to the Depositor, Kmart and the Certificateholders the Trustee's Certification
substantially in the form attached hereto as Exhibit C.
Section 2.03. Trust Property. The Trustee acknowledges that it
holds the Trust Property conveyed pursuant to this Trust Agreement in trust for
the use and benefit of all present and future Certificateholders.
Section 2.04. Limitation of Powers. The Trust is constituted solely
for the purpose of making the investment in the Trust Property, and, except as
set forth herein, the Trustee is not authorized or empowered to acquire any
other investments or engage in any other activities.
ARTICLE III
THE CERTIFICATES
Section 3.01. The Certificates.
(a) Form and Terms. The Certificates and the Trustee's certificate
of authentication shall be substantially in the form attached hereto as Exhibit
B. Subject to the provisions of Section 3.06 hereof, the Certificates shall be
issuable as registered securities without coupons and shall be numbered,
lettered or otherwise distinguished from one another. The Certificates shall
be issued in denominations of $1,000 principal amount and any integral multiple
thereof and shall be dated the date of their authentication. Each Certificate
shall bear interest and have the other terms as are set forth in the
Certificate Schedule and in such Certificate. Each Certificate shall evidence
a beneficial ownership interest in the Trust Property and shall have no rights,
benefits or interest in respect of any other separate pass-through trust, if
any, or the trust property held in such other pass-through trust. All
Certificates shall be in all respects equally and ratably entitled to the
benefits of the Trust without preference, priority, or distinction on account
of actual time or times of authentication and delivery, all in accordance with
the terms and provisions of this Trust Agreement.
Certificates shall not be subject to optional prepayment except as
provided herein.
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On the Closing Date, Trustee shall issue the Certificates indicated on
the Certificate Schedule. The aggregate principal amount of the Certificates
to be issued hereunder shall not exceed $___________.
(b) Execution and Authentication. The Certificates shall be
executed on behalf of the Trustee by its Chairman of the Board, one of its Vice
Chairmen, its President or one of its Vice Presidents, under its corporate seal
reproduced thereon. The signature of any such officer on the Certificates may
be manual or facsimile.
Certificates bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Trustee shall bind the Trustee,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Certificates or did
not hold such offices at the date of such Certificates.
No Certificate shall be entitled to any benefit under this Trust
Agreement or be valid or obligatory for any purpose unless there appears on
such Certificate a certificate of authentication substantially in the form
provided for in Exhibit "B" annexed thereto duly executed by the Trustee by
manual signature of an authorized officer, and such certificate of
authentication upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and made available
for delivery hereunder.
(c) Prepayment Distribution. In the event of a prepayment of [a]
[the] Mortgage Note pursuant to Section 3 of the [related] Loan Agreement (not
including a Put pursuant to the [related] Note Put Agreement), the Trustee
shall within 30 days following receipt of any amounts in connection with such
prepayment distribute the portion of such amounts that have been deposited into
the Certificate Account to the Certificateholders pro rata based upon their
respective Percentage Interests.
(d) Note Put Distribution. The Trustee shall, in the manner and to
the extent required by Section 313(c) of the TIA, notify the Certificateholders
of the occurrence of any Triggering Event (as defined in [a] [the] Note Put
Agreement) known to the Trustee within five (5) Business Days after obtaining
knowledge thereof.
(i) Upon the occurrence of a Triggering Event (other than a Lease
Guaranty Termination [, a Rating Decline or a Restructuring Event]), the
Trustee, as provided in (ii) below or upon receipt, within 90 days of delivery
of the notice pursuant to Section 3.01(d), of the written direction to exercise
the Put by the Holders of Certificates evidencing Percentage Interests in the
aggregate of not less than 66-2/3%, shall (A) exercise the Put in accordance
with the terms and provisions of [such] [the] Note Put Agreement, including but
not limited to delivering the [related] Mortgage Note, endorsed as provided in
such Note Put Agreement, to the [related] Tenant [or Kmart, as the case may
be,] upon receipt of the Purchase Price from the [related] Tenant [or Kmart],
(B) designate
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the Purchase Date under [such] [the] Note Put Agreement, which Purchase Date
shall be not more than 35 Business Days after receipt of such direction, and
(C) within 30 days following the receipt of the Purchase Price distribute
such amount, less any unreimbursed reasonable costs and expenses incurred by
the Trustee in connection with the exercise of the Put, to the
Certificateholders pro rata based upon their respective Percentage Interests,
whereupon this Trust shall terminate with respect to such Mortgage Note and the
[related] Loan Documents. Upon execution and delivery of all documents
reasonably necessary to assign the related Loan Documents to the purchaser of
such Mortgage Note, the Trustee shall have no further obligations with respect
to such Loan Documents or such Mortgage Note. The payment of the Purchase
Price to Trustee as set forth herein and in the [related] Note Put Agreement
and any other amounts due under the terms of the Note Put Agreement shall
satisfy in full [the related] Tenant's and Kmart's obligations under the
[related] Note Put Agreement.
(ii) If the Triggering Event is a Lease Guaranty Termination [, a
Rating Decline or Restructuring Event] the Trustee shall exercise the
[related] Put and take the other steps specified in (i) above unless, within 30
days after sending the notice of the occurrence of the Triggering Event as
provided in this Section 3.01(d), the Trustee receives written direction from
the Holders of Certificates evidencing Percentage Interests in the aggregate of
not less than 66-2/3% instructing the Trustee not to exercise such Put. If the
Trustee is required hereunder to exercise the [related] Put, the Purchase Date
shall be not more than 35 Business Days [or 15 Business Days in the case of a
Restructuring Event] after such requirement arises.
[(iii) Notwithstanding anything herein to the contrary, if Kmart is
obligated to purchase a Mortgage Note pursuant to the first sentence of Section
2.3 of the [related] Note Put Agreement, then the Trustee shall deliver such
Mortgage Note in accordance with the terms and provisions of such Note Put
Agreement, including, but not limited to, endorsed as provided in such Note Put
Agreement, to Kmart upon receipt of the Purchase Price from Kmart, and within 30
days following the receipt of the Purchase Price distribute such amount, less
any unreimbursed reasonable costs and expenses incurred by the Trustee in
connection with such purchase, to the Certificateholders pro rata based upon
their respective Percentage Interests, whereupon this Trust shall terminate with
respect to such Mortgage Note and the [related] Loan Documents. Upon execution
and delivery of all documents reasonably necessary to assign the related Loan
Documents to Kmart, the Trustee shall have no further obligations with respect
to such Loan Documents or such Mortgage Note. The payment of the Purchase
Price to Trustee as set forth herein and in the [related] Note Put Agreement
and any other amounts due under the terms of the Note Put Agreement shall
satisfy in full [the related] Tenant's and Kmart's obligations under the
[related] Note Put Agreement.]
(e) Liquidation Distribution. In the event of a liquidation of [a]
[the] Mortgage Note by foreclosure or otherwise as a consequence of an Event of
Default (not including a Put pursuant to the [related] Note Put Agreement), the
Trustee shall within 30 days following receipt of any Net Liquidation Proceeds
in connection with such liquidation distribute such amounts to the
Certificateholders pro rata based upon their respective Percentage Interests.
Once a Mortgage Loan has become a Liquidated Mortgage Loan and all Net
Liquidation Proceeds with respect to such Liquidated Mortgage Loan have been
distributed to the Certificateholders, this Trust shall terminate with respect
to such Liquidated Mortgage Loan and the [related] Loan Documents.
(f) Late Payment Distribution. In the event that, due to unpaid
Annual Rental, there are insufficient funds available on any Due Date to pay
the Mortgage Payments on a Mortgage Note and subsequent to such Due Date such
Annual Rental or any Additional Rent with respect thereto is paid, the Trustee
shall, within 10 Business Days of receipt of such late Annual Rental or
Additional Rent, distribute to the Certificateholders such unpaid portion of
such Mortgage Payments together with interest on such overdue amount at the
Overdue Rate (as defined in such Mortgage Note) to the extent received.
(g) Adjustment of Debt Service. In the event of (i) an optional
prepayment of all or any part of a Mortgage Note, (ii) an acceleration of the
maturity date of a Mortgage Note by reason of
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an Event of Default, (iii) a Borrower becoming obligated to prepay a Mortgage
Note pursuant to Section 3.3 of the [related] Loan Agreement, (iv) a reduction
of Mortgage Payments due to the condemnation of a part of the [related] Project
resulting in a reduction in Annual Rental, or (v) the sale of a Mortgage Note
pursuant to a Note Put Agreement, the Debt Service shall be reduced to equal
the aggregate Mortgage Payments on the remaining outstanding Mortgage Notes,
after giving effect to any reduction in such Mortgage Payments by reason of an
optional partial prepayment or a condemnation described in clause (iv) and
excluding from "remaining outstanding Mortgage Notes," for this purpose, any
Mortgage Note which is sold pursuant to the Note Put Agreement, which is
prepaid in full, the maturity date of which has been accelerated, or which the
Borrower is obligated to prepay in full pursuant to Section 3.3 of the related
Loan Agreement.
(h) Notice of Distribution. Notice of a distribution pursuant to
Section 3.01(c), (d) or (e) shall be given by sending such notice, by
first-class mail, postage prepaid, not less than 10 days prior to the date
fixed for such distribution. Notice of such distribution pursuant to any other
provision hereof shall be given as soon as reasonably practicable following
notice of the facts giving rise to such distribution by the Trustee. All
notices of any such distribution shall be mailed to the Certificateholder at
the address shown on the Certificate Register. The reasonable costs of such
notices incurred by the Trustee shall be deducted from the amount of any such
distribution.
(i) Rights of Holders to Payments. The rights of the
Certificateholders to receive payments with respect to the Trust Property in
respect of the Certificates, and all ownership interests of the
Certificateholders in such payments, shall be as set forth in this Trust
Agreement.
Section 3.02. Registration of Transfer and Exchange of Certificates.
(a) The Trustee shall cause to be kept at its Corporate Trust
Office or at the office of its designated agent, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Trustee shall be the
Certificate Registrar. If the Trustee is not the Certificate Registrar, the
Depositor shall furnish to the Trustee on or before each Remittance Date and at
such other times as the Trustee may request in writing a list in such form and
as of such date as the Trustee may reasonably require of the names and
addresses of Certificateholders, which list may be conclusively relied upon by
the Trustee.
(b) Upon surrender for registration of transfer of any Certificate
at the Corporate Trust Office or at the office of any designated agent of the
Trustee maintained for such purpose, the Trustee shall execute, authenticate
and deliver, in the name of the
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designated transferee or transferees, a new Certificate of a like tenor and
dated the date of such execution and authentication by the Trustee.
(c) No transfer of a Certificate or of a beneficial interest in a
Registered Global Certificate shall be made unless the Trustee;
(i) shall have received a Transfer Assurance consisting of
either (A) a representation from the transferee of such Certificate or
of such beneficial interest in a Registered Global Certificate to the
effect that such transferee is not a Benefit Plan, nor a person
acting on behalf of or purchasing for the benefit of any such Benefit
Plan, which representation letter shall not be an expense of the
Trustee, the Depository or the Depositor, or (B) in the case of any
such Certificate presented for registration, or of any such beneficial
interest in a Registered Global Certificate proposed to be registered
on the books of the Depository or on those of a participant in such
Depository, in the name of a Benefit Plan, or a trustee of any such
Benefit Plan, an opinion of counsel reasonably satisfactory to the
Trustee and Depositor to the effect that the purchase or holding of
such Certificate or such beneficial interest will not result in the
assets of the Trust being deemed to be "plan assets" subject to the
prohibited transaction provisions of ERISA or the Code, or that the
purchase or holding of such Certificate or such beneficial interest
qualifies as an exempt prohibited transaction under the provisions of
ERISA or the Code, and will not subject the Trustee or the Depositor
to any obligation in addition to those undertaken in this Trust
Agreement, which opinion of counsel shall not be an expense of the
Trustee, the Depository or the Depositor; or
(ii) shall authorize such transfer after receiving a request
therefor from the proposed transferee; provided that the Trustee shall
not give such authorization if the Percentage Interest to be owned by
such proposed transferee when added to the Percentage Interests owned
by any Certificateholders or Beneficial Owners who had previously
provided an opinion of counsel pursuant to Section 3.02(c)(i)(B) or
received an authorization pursuant to this Section 3.02(c)(ii) would
exceed 15%, and provided further that any such authorization by the
Trustee shall not be considered a representation that an investment by
any such transferee is an appropriate or permitted investment by any
such transferee, and provided further that the Trustee shall have no
obligation to inquire with respect to, or to determine, whether a
Benefit Plan has attempted to become a Beneficial Owner without
providing an opinion of counsel pursuant to Section 3.02(c)(i)(B) or
obtaining an authorization from the Trustee pursuant to this Section
3.02(c)(ii).
(d) In the absence of an opinion of counsel as provided in Section
3.02(c)(i)(B) or an authorization by the Trustee as provided in Section
3.02(c)(ii), the representation as described in Section 3.02(c)(i)(A) shall be
deemed to have been made to the Trustee by a transferee's or Beneficial Owner's
acceptance of a Certificate or beneficial interest therein. In the event that
such representation is violated, or any attempt is made to transfer a
Certificate or a beneficial interest therein to a Benefit Plan, or a person
acting on behalf of or purchasing for the benefit of any such Benefit Plan,
without an opinion of counsel as provided in Section 3.02(c)(i)(B) or an
authorization of the Trustee as provided in Section 3.02(c)(ii), such attempted
transfer shall be void and of no effect.
(e) At the option of the Certificateholder, a Certificate may be
exchanged for another Certificate or Certificates of a like tenor, upon
surrender of the Certificate to be exchanged at the Corporate Trust Office or
at the office of any designated agent of the Trustee maintained for such
purpose. Whenever a Certificate is so surrendered for exchange, the Trustee
shall execute, authenticate and deliver a new Certificate which the
Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for transfer or exchange shall (if so
required by the Trustee) be duly endorsed by, or be accompanied by a written
instrument of transfer in a form reasonably satisfactory to the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to the Holder for any transfer
or exchange of the Certificate, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of the Certificate.
(g) All Certificates surrendered for transfer and exchange shall be
destroyed by the Trustee.
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Section 3.03. Mutilated, Destroyed, Lost or Stolen Certificates. If
(i) any mutilated Certificate is surrendered to the Trustee or the Trustee
receives evidence to its reasonable satisfaction of the destruction, loss or
theft of any Certificate, and (ii) there is delivered to the Trustee such
reasonable security or indemnity as may be required by it to save it harmless,
then, in the absence of notice to the Trustee that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute, authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor. Upon the issuance of any
new Certificate under this Section, the Trustee may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses connected therewith. Any
replacement Certificate issued pursuant to this Section shall constitute
complete and indefeasible evidence of ownership of the undivided interest of
the Certificateholder in the Trust Property, as if originally issued, whether
or not the mutilated, destroyed, lost or stolen Certificate shall be found at
any time.
Section 3.04. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Trustee may treat the Person in
whose name any Certificate is registered in the Certificate Register as the
owner of such Certificate and the undivided interest in the Trust Property
evidenced thereby for the purpose of receiving remittances pursuant to Section
5.01 and for all other purposes whatsoever, and the Trustee shall not be
affected by notice to the contrary.
Section 3.05. Appointment of Paying Agent. The Trustee shall
initially serve as Paying Agent for the purposes of making distributions to
Certificateholders pursuant to Section 5.01. The Trustee shall require each
Paying Agent, other than the Trustee, to agree in writing that such Paying
Agent shall hold in trust for the benefit of the Certificateholders or the
Trustee all assets held by the Paying Agent for the payment of principal of, or
interest on, the Certificates, and shall notify the Trustee of any default in
making such payments.
Section 3.06. Certificates Issuable in the Form of a Registered
Global Certificate.
(a) The Trustee shall, in accordance with this Article, execute,
authenticate and deliver, Registered Global Certificates which, in the
aggregate, (i) shall represent, and shall be denominated in an initial
principal amount equal to, the original aggregate principal amount of the
Certificates issued hereunder, (ii) shall be registered in the name of the
Depository or its nominee, and (iii) shall bear a legend substantially to the
following effect: "Unless this Registered Global Certificate is presented by
an authorized representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Trustee or its agent for registration of transfer,
exchange or payment, and any Registered Global Certificate issued is registered
in the name of
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Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein."
(b) Notwithstanding any other provision of this Section or of
Section 3.02, the Registered Global Certificates may be transferred, in whole
but not in part and in the manner provided in Section 3.02, by the Depository
to a nominee of such Depository or by a nominee of such Depository to such
Depository or another nominee of such Depository or by such Depository or any
such nominee to a successor Depository selected or approved by the Depositor
upon notice to the Trustee or to a nominee of such successor Depository.
(c) The Depository shall be a clearing agency registered under the
Exchange Act and any other applicable statute or regulation.
(d) If (i) (A) the Depositor at any time advises the Trustee in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities, or (B) the Depository at any time shall no longer be
eligible under subsection (c) above, and the Depositor is unable to appoint a
qualified successor within 90 days after the Depositor receives such notice or
becomes aware of such condition, as the case may be, or (ii) the Depositor at
any time, but only with the consent of Kmart, determines that the Certificates
shall no longer be represented by Registered Global Certificates and that the
provisions of this Section shall no longer apply to such Certificates, then
this Section shall no longer be applicable to the Certificates. In such event,
(x) the Trustee shall notify all Certificate Owners, through the Depository, of
the occurrence of any such event and of the availability of Certificates in
definitive registered form and (y) upon surrender of the Registered Global
Certificates to the Trustee, accompanied by reregistration instructions from
the Depository, the Trustee shall execute, authenticate and deliver
Certificates in definitive registered form without coupons, in authorized
denominations, and in an aggregate Percentage Interest equal to the Percentage
Interest evidenced by the Registered Global Certificates then outstanding in
exchange for such Registered Global Certificates. Upon the exchange of the
Registered Global Certificates for such Certificates in definitive registered
form without coupons in authorized denominations, such Registered Global
Certificates shall be canceled by the Trustee. If such exchange occurs as a
result of the events described in (i) above, all costs of the preparation,
execution, authentication and delivery of such Certificates shall be paid [pro
rata] from the Rental Payment Account[s]. If such exchange occurs at the
request of the Depositor pursuant to (ii) above, the Depositor shall pay all
such costs. Such Certificates in definitive registered form issued in
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exchange for the Registered Global Certificate pursuant to this subsection (d)
shall be registered in the names and in authorized denominations set forth in
the registration instructions. The Trustee shall deliver such Certificates to
the Persons in whose names such Certificates are so registered.
(e) As long as the Certificates are represented by the Registered
Global Certificates, all distributions in respect of such Certificates shall be
made by wire transfer of immediately available funds on the date such
distributions are due in accordance with the Letter of Representations, and the
Depositor shall or shall cause the Trustee to provide to the Depository any
notices referred to in the Letter of Representations in accordance with the
Letter of Representations.
(f) Unless and until Certificates in definitive registered form are
issued pursuant to paragraph (d) above, on the Record Date prior to each
Remittance Date, the Trustee will request from the Depository a securities
position listing setting forth the names of all participants in such Depository
reflected on the Depository's books as holding interests in the Registered
Global Certificates on such Record Date. The Trustee shall mail to each such
Depository participant the statements described in Section 5.02.
Section 3.07. Temporary Securities. Pending the preparation of
definitive Certificates, the Trustee may execute and authenticate and make
available for delivery, temporary Certificates which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Certificates in lieu
of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such temporary
Certificates may determine, as conclusively evidenced by their execution of
such temporary Certificates. The Depositor shall bear the cost of preparation
of any temporary Certificates.
If temporary Certificates are issued, the Depositor will cause
definitive Certificates to be prepared without unreasonable delay. After the
preparation of definitive Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon surrender of the temporary
Certificates at the office or agency of the Trustee designated for such purpose
pursuant to Section 3.02 hereof, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Certificates, the Trustee shall
execute and authenticate and make available for delivery in exchange therefor a
like principal amount of definitive Certificates of authorized denominations.
Until so exchanged, the temporary Certificates shall in all respects be
entitled to the same benefits under this Trust Agreement as definitive
Certificates. Once so exchanged, the temporary Certificates shall be cancelled
by the Trustee.
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ARTICLE IV
RECEIPT AND DISTRIBUTION OF INCOME
AND PROCEEDS FROM THE TRUST PROPERTY
Section 4.01. Calculation of Distributions. The Trustee shall
calculate the Available Distribution Amount, make distributions on each
Remittance Date as set forth in Section 5.01 and have full power and authority
to do any and all things which it may deem necessary or desirable in connection
with such duties.
Section 4.02. Receipt of Lease Payments; Collection of Lease and Lease
Guaranty Payments; Collection of Indemnity Agreement Payments; Collection of
Mortgage Loan Payments; Investment Direction.
(a) Pursuant to the Consent and Agreement[s], [each] Tenant under
[the] [each] Lease will pay all Annual Rental and Additional Rent (except for
Real Estate Taxes (as defined in the related Lease) and amounts payable
directly to a third party pursuant to such Lease, which shall be payable in
accordance with such Lease) payable by [each] Tenant under [the] [each] Lease
directly to the Trustee. All such Annual Rental and Additional Rent received
by Trustee shall be deposited by the Trustee in the Rental Payment Account as
described in Section 4.03 hereof, invested in Eligible Investments in
accordance with Section 4.02(d) of this Trust Agreement, and applied in
accordance with Section 4.04 hereof; provided that, subsequent to the Trustee
becoming aware of the occurrence of an Event of Default pursuant to Section
7.01 hereof (except for a Non-Monetary Tenant Default), and during the time
such Event of Default continues without being cured, or waived, all Annual
Rental and Additional Rent from the [related] Lease received by Trustee shall
be deemed received pursuant to the [related] Assignment of Leases and Rents and
shall be deposited by the Trustee in the Certificate Account as described in
Section 4.05 hereof, shall be invested in accordance with Section 4.02(d)
hereof, and shall be applied in accordance with Section 4.06 hereof.
(b) In the event the Trustee does not receive any monthly
installment of Annual Rental on the date set forth in [the] [each] Lease,
taking into account any grace period provided for therein, the Trustee is
hereby directed to and the Trustee shall notify promptly, but in no event later
than two (2) Business Days after such installment was due, taking into account
any applicable grace period, the [related] Borrower (as landlord), the
[related] Tenant [and Kmart] in writing regarding [the] [such] Tenant's failure
to make such timely payment. In the event the Trustee does not receive the
monthly installment of Annual Rental within the greater of [five] Business Days
of giving such written notice or any applicable grace period under [the] [such]
Lease and [the [related] Lease Guaranty], the Trustee, at the written direction
of the Holders of Certificates of Percentage Interests aggregating not less
than 66-2/3%, shall use its best efforts to enforce the provisions of [the]
[such] Lease [and [the] [such] Lease Guaranty] by exercising all of the
remedies available to it at law and in equity, including, but not limited to,
the remedies available under [the] [such] Lease [and [the] [such] Lease
Guaranty], provided that
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the Trustee shall give notice of intent to terminate or take action to
terminate [the] [such] Lease only at the written direction of Holders of
Certificates of Percentage Interests aggregating not less than 66-2/3% to take
such action.
(c) Continuously from the date hereof until the principal and
interest on, the Mortgage Loan[s] are paid in full, the Trustee will use
reasonable best efforts to collect all payments due under the Mortgage Loan[s]
when the same shall become due and payable. The Trustee shall also review any
official receipts from any taxing authority provided to it pursuant to Section
1.08(c) of the Mortgage[s] to monitor payment of Impositions (as defined in the
Mortgage[s]). [The Trustee also shall use its best efforts to collect any
amount that becomes due pursuant to [the] [an] Indemnity Agreement. Any
amounts collected by the Trustee pursuant to [the] [an] Indemnity Agreement
shall be deposited in the [related] Rental Payment Account, provided that
during any period when the proviso of Section 4.02(a) applies to the [related]
Annual Rental and Additional Rent, any amounts received under the [related]
Indemnity Agreement shall be deposited in the Certificate Account and applied
in accordance with Section 4.06 hereof.]
(d)(i) Funds in [the] [each] Rental Payment Account and [the] [each]
Capitalized Debt Service Account shall be invested in Eligible Investments [at
the written direction of the Borrower [on whose behalf such accounts have been
established]]. Funds in the Certificate Account shall be invested by the
Trustee in Eligible Investments described in subparagraph (i), (ii) or (iv) of
the definition thereof (or in the further proviso at the end of such
definition). All such investments shall mature on or prior to the next
succeeding Determination Date and in no event shall be invested in obligations
maturing later than 90 days from the investment date. The risk of investment
loss with respect to funds in [the] [each] Rental Payment Account and [the]
[each] Capitalized Debt Service Account shall be borne by the Borrower [on
whose behalf such accounts have been established]. The risk of investment loss
with respect to funds in the Certificate Account shall be borne by the
Certificateholders. On or after the Due Date and prior to the next succeeding
Determination Date, the Trustee shall be prohibited from selling or
transferring Eligible Investments prior to maturity unless and until a default
shall have occurred under [a] [the] Mortgage Note. In the event the Trustee
shall not have received at least twenty-four hours' written notice as to any
investment direction from [the] [a] Borrower, upon the maturity of an existing
investment, the Trustee shall be authorized to invest maturing amounts in
Eligible Investments described in subparagraph (iv) of the definition thereof
(or in the further proviso at the end of such definition) until further
directed in writing as to investments of such amounts. Investment earnings and
losses on any Eligible Investment shall be deposited to or charged to the
account in which the funds used for any such Eligible Investment were
deposited. The Trustee shall have no responsibility for any loss on any
Eligible Investments.
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(ii) If an Event of Default occurs under [a] [the] Mortgage Note or
Loan Documents [with respect to a Mortgage Loan], the Borrower [of such
Mortgage Loan] shall be prohibited from directing investments as contemplated
above and the Trustee shall invest in Eligible Investments described in
subparagraph (i), (ii) or (iv) of the definition thereof (or in the further
proviso at the end of such definition).
Section 4.03. Establishment of Rental Payment Account[s]; Deposits in
Rental Payment Account[s]. The Depositor (on behalf of [the] [each] Borrower)
hereby establishes [the] [a separate] Rental Payment Account with the Trustee.
[Such] [Each such] account shall be maintained as a fund separate and distinct
from other accounts [(including other Rental Payment Accounts)] created under
this Trust Agreement. Prior to an Event of Default with respect to such
Borrower's Mortgage Loan pursuant to Section 7.01 hereof (except for a
Non-Monetary Tenant Default), [the] [such] Rental Payment Account shall remain
the property of the Borrower [on whose behalf such Rental Payment Account was
established], subject to the rights of the Trustee under Section 4.04 of this
Trust Agreement and under [the] [such Borrower's] Pledge Agreement.
The Trustee shall cause to be deposited in [the] [such] Rental Payment
Account and retained therein:
(a) All payments (including Annual Rental and Additional Rent)
received pursuant to the terms of the [related] Lease [and Lease Guaranty]
other than Condemnation Proceeds and Insurance Proceeds and pursuant to the
terms of the [related] Indemnity Agreement, subject to the proviso of Section
4.02(a) hereof;
(b) Subject to the provisions of the [related] Lease, all Insurance
Proceeds or Condemnation Proceeds received pursuant to Section 17 or Section 18
of [the] [such] Lease in excess of the amounts required to make the mandatory
prepayment of the [related] Mortgage Notes pursuant to Section 3.3 of the
[related] Loan Agreement; and
(c) All earnings (or losses) on funds held in [the] [such] Rental
Payment Account derived from Eligible Investments.
The foregoing requirements for deposit in the Rental Payment Account[s] shall
be exclusive.
Section 4.04. Permitted Withdrawals From the Rental Payment
Account[s]. The Trustee shall cause the withdrawal of funds from [the] [a]
Rental Payment Account for the following purposes and in the following order
of priority:
(a) Upon the occurrence of an Event of Default [with respect to the
[related] Borrower's Mortgage Loan] pursuant to Section 7.01 hereof (except for
a Non-Monetary Tenant Default), to transfer to the Certificate Account all
amounts in the Rental Payment Account
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[related to such Mortgage Loan] and to apply such amounts pursuant to the
provisions of Section 4.06 hereof;
(b) to transfer to the Certificate Account (i) on each Due Date an
amount equal to the Mortgage Payments due and unpaid on the [related
Borrower's] Mortgage Loan as of such Due Date and (ii) on the next Business Day
after receipt any amounts distributable to the Certificateholders under Section
3.01(f);
(c) to pay the Trustee for any amounts due pursuant to Section
3.06(d), for any unreimbursed Extraordinary Expense Advances required by [the
related] Borrower's default pursuant to the [related] Mortgage Note or the
[related] Loan Documents and for [such Borrower's ratable portion of] due and
unpaid Trustee's Fees, and to reimburse Trustee for any expenses, costs and
liabilities for which it is entitled to reimbursement hereunder or under the
[related] Mortgage Note or the Loan Documents [related to such Borrower's
Mortgage Loan]; prior to an Event of Default [with respect to such Borrower's
Mortgage Loan] the Trustee's right to reimburse itself pursuant to this clause
(c) with respect to [the] [such Borrower's] Mortgage Loan is limited to
reimbursement for amounts due pursuant to Section 3.06(d); subsequent to an
Event of Default [with respect to such Borrower's Mortgage Loan] pursuant to
Section 7.01 (except for a Non-Monetary Tenant Default), the Trustee shall have
a prior lien on all moneys in [the] [such Borrower's] Rental Payment Account
for payment or reimbursement of Extraordinary Expense Advances [related to such
Mortgage Loan], [such Borrower's ratable portion of] due and unpaid Trustee's
Fees, and other amounts owed it and payable by [such] Borrower under any
provision of the [related] Mortgage Note or the [related] Loan Documents,
provided, however, that so long as [(i) no default exists under the [related]
Lease Guaranty, taking into account any grace period provided for therein, or
(ii)] no direction has been given by Certificateholders owning Percentage
Interests of at least 66-2/3% to exercise rights or remedies under such
Mortgage Notes or Loan Documents, the payments pursuant to Section 4.04(a) and
(b) above shall be made by Trustee free and clear of such lien; and
(d) to disburse to [the related] Borrower any amounts remaining in
the Rental Payment Account promptly following the second scheduled Remittance
Date after the Closing Date, and on each anniversary thereafter to such
Remittance Date, after paying or providing for the payment or withdrawal of
amounts described in clauses (a), (b) and (c) above.
Section 4.05. Establishment of Certificate Account; Deposits in
Certificate Account. With respect to the Mortgage Loan[s], the Trustee shall
cause to be segregated and held all funds collected and received pursuant to
the Mortgage Loan[s] separate and apart from any of its own funds and general
assets and shall cause to be established and maintained a Certificate Account
in the form of a trust account titled "Mortgage Pass-Through Certificates
(_____________________________) Series 199_, Certificate Account" in trust for
the benefit of the Certificateholders.
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8
The Trustee shall cause to be deposited in the Certificate Account upon
receipt, and retained therein:
(a) All scheduled payments due on account of principal and interest
on the Mortgage Loan[s], and all Principal Prepayments and interest related
thereto collected;
(b) All payments on account of Make-Whole Premium on the Mortgage
Loan[s];
(c) Net Liquidation Proceeds;
(d) Subject to the provisions of the [related] Lease, (i) all
Insurance Proceeds received pursuant to Section 17 of [the] [such] Lease not
to exceed the amounts required to make the mandatory prepayment of the
[related] Mortgage Note pursuant to Section 3.3 of the [related] Loan
Agreement, and [(ii) any other Insurance Proceeds;]
(e) Subject to the provisions of the [related] Lease, all
Condemnation Proceeds pursuant to Sections 18(d) and 18(g) of [the] [such]
Lease not to exceed the amounts required to make the mandatory prepayment of
the [related] Mortgage Note pursuant to Section 3.3 of the [related] Loan
Agreement;
(f) All proceeds paid to Trustee by a Tenant [or Kmart] following an
exercise of [the] [a] Put pursuant to [the][a] Note Put Agreement;
(g) All earnings (or losses) on funds held in the Certificate Account
derived from Eligible Investments; and
(h) All amounts required to be deposited therein under Sections
4.02(a), [4.02(c),] 4.04(a), [and] 4.04(b) [and 4.07].
The foregoing requirements for deposit in the Certificate Account shall be
exclusive.
Section 4.06. Permitted Withdrawals From the Certificate Account. The
Trustee shall, from time to time, cause the withdrawal of funds from the
Certificate Account for the following purposes and in the following priority:
(a) to make payments to the Certificateholders in the amounts and in
the manner provided for in Section 5.01;
(b) subsequent to an Event of Default [with respect to such
Borrower's Mortgage Loan] pursuant to Section 7.01 hereof (except for a
Non-Monetary Tenant Default), to pay the Trustee for any unreimbursed
Extraordinary Expense Advances required by [the related] Borrower's default
pursuant to the [related] Mortgage Note or the [related] Loan Documents and
for [such Borrower's ratable portion of] due and unpaid Trustee's Fees, and to
reimburse Trustee for any expenses, costs and liabilities for which it is
entitled to
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reimbursement hereunder or under the Loan Documents [related to such Borrower's
Mortgage Loan]; and, in such event, the Trustee shall have a prior lien for
itself on all moneys in the Certificate Account for payment or reimbursement of
Extraordinary Expense Advances [related to such Mortgage Loan], [such
Borrower's ratable portion of] due and unpaid Trustee's Fees, and other amounts
owed it and payable by [such] Borrower under any provision of the [related]
Mortgage Note or the [related] Loan Documents, provided, however, that so long
as [(i) no default exists under the [related] Lease Guaranty, taking into
account any grace period provided for therein, or (ii)] no direction has been
given by Certificateholders owning Percentage Interests of at least 66-2/3% to
exercise rights or remedies under such Mortgage Note or Loan Documents, the
payments pursuant to Section 4.06(a) above shall be made by Trustee free and
clear of such lien; and
(c) to make any payments to clear and terminate the Certificate
Account upon the termination of this Trust Agreement.
[Section 4.07. Capitalized Debt Service Account[s]. The Depositor (on
behalf of each Borrower listed on Exhibit A-4 hereto) hereby establishes from
the proceeds of the [related] Mortgage Loan [the] [a separate] Capitalized Debt
Service Account with the Trustee. [This] [Each such] account shall be
maintained as a fund separate and distinct from other accounts [(including
other Capitalized Debt Service Accounts)] created under this Trust Agreement.
[The] [Such] Capitalized Debt Service Account shall remain the property of the
Borrower [on whose behalf such Capitalized Debt Service Account was
established,] subject to the rights of the Trustee under the terms of this
Trust Agreement and the pledge thereof by [such] Borrower pursuant to the
Pledge Agreement to secure [the] [such Borrower's] Mortgage Loan; provided
that, subsequent to the Trustee becoming aware of the occurrence of an Event of
Default [with respect to such Borrower's Mortgage Loan] pursuant to Section
7.01 hereof (except for a Non-Monetary Tenant Default), all amounts in the
[related] Capitalized Debt Service Account shall be transferred to the
Certificate Account and shall be applied in accordance with Section 4.06
hereof. The Trustee shall cause to be deposited into [the] [such] Capitalized
Debt Service Account (i) the amount of the Capitalized Debt Service Reserve
received on the Closing Date [with respect to such Mortgage Loan] and (ii) all
amounts received on earnings on or income from (or losses due to) any
investments or reinvestments of [the] [such] Capitalized Debt Service Reserve
in Eligible Investments.
The Trustee shall cause the transfer of funds from [the] [each]
Capitalized Debt Service Account to the Certificate Account on the dates and in
the amounts set forth in the attached Exhibit A-4. Upon the payment of all of
the amounts set forth in Exhibit A-4 [with respect to the Capitalized Debt
Service Account established on behalf of a Borrower], and provided that no
default or Event of Default shall have occurred and be continuing (except for a
Non-Monetary Tenant Default) under any [related] Mortgage Note or Loan
Documents, Trustee shall disburse to the [related]
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Tenant without requisition any amounts remaining in [the] [such] Capitalized
Debt Service Account.]
Section 4.08. Realization Upon Defaulted Mortgage Loan.
(a) If an Event of Default with respect to a Mortgage Loan has
occurred and is continuing and if Certificateholders holding Percentage
Interests aggregating not less than 66-2/3% direct, the Trustee, after
receiving indemnity for its reasonable costs, expenses and liabilities with
respect thereto to its reasonable satisfaction from the Certificateholders in
accordance with Section 8.02 (iii), shall use its best efforts to foreclose
upon or otherwise comparably convert the ownership of the Mortgaged Estate
securing such Mortgage Loan; shall manage, conserve and protect such Mortgaged
Estate for the purposes of its disposition and sale; and shall dispose of such
Mortgaged Estate as promptly as is reasonably possible. Upon sale or other
conveyance of all or any part of such Mortgaged Estate by the Trustee, the
Trust shall have no further right, title or interest in the Mortgaged Estate,
or portion thereof, so sold or conveyed. [Notwithstanding anything herein to
the contrary, a default under one Loan Agreement or related Loan Documents
shall not constitute a default under any other Loan Agreement or Loan
Documents.]
(b) Notwithstanding the foregoing, if the Trustee has actual
knowledge or reasonably believes that all or any part of a Mortgaged Estate is
affected by hazardous or toxic wastes or substances, the Trustee need not
cause the Trust to acquire title to such Mortgaged Estate in a foreclosure or
similar proceeding. In connection with such activities, the Trustee shall
follow such practices and procedures as it shall deem necessary or advisable,
as shall be normal and usual in trustee activities by leading national banking
associations, and, in particular, the Trustee may request such certificates of
appropriate public officials and agencies, if any, a history of such Mortgaged
Estate and its uses, other evidence reasonably satisfactory to the Trustee
showing that such Mortgaged Estate conforms to existing environmental laws,
regulations and rules, and that no conditions exist in, on or beneath the
surface of such Mortgaged Estate that are or might become hazardous materials,
and including but not limited to an environmental report or reports from a
company reasonably satisfactory to Trustee, showing the current state of
storage, disposal or release of any oil, fuels, gases, chemicals, trash,
garbage or other solid wastes or hazardous materials which report or reports
shall be based upon complete and thorough on-site inspections of such Mortgaged
Estate, including but not limited to investigations of the soil, surface water
and groundwater, to confirm the presence or absence of any hazardous materials
on or beneath the surface of such Mortgaged Estate or adjacent lands. Any
expenses incurred by Trustee in connection with obtaining any such certificates
or reports, if not paid by the Borrower, shall be Extraordinary Expense
Advances.
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(c) The activities set forth in Section 4.08(a) are also subject to
the proviso that the Trustee may, but shall not be required to, expend its own
funds in connection with any foreclosure or towards the restoration of a
Mortgaged Estate if it shall determine that (i) such restoration or foreclosure
will increase the Net Liquidation Proceeds of the related Mortgage Loan to
Certificateholders after reimbursement for such expenses and (ii) such expenses
will be recoverable either through Liquidation Proceeds or revenues from such
Mortgaged Estate.
Section 4.09. Trustee Compensation. The Trustee's Fee shall be paid
pursuant to the terms of the Consent and Agreement[s]. The Trustee, as
compensation for its activities hereunder (other than those covered by the
Trustee's Fee), shall be entitled to receive amounts representing reimbursement
for Extraordinary Expense Advances and reimbursement for certain expenses, as
specified by Sections 3.01(d), 3.01(h), 3.06(d), 4.04(c) and 4.06(b).
Section 4.10. Rights of the Certificateholders. The Trustee shall
afford the Certificateholders, upon reasonable notice and during normal
business hours, access to all records maintained by the Trustee in respect of
its rights and obligations hereunder and access to officers of the Trustee
responsible for such obligations. Upon request, the Trustee shall furnish the
Certificateholders with its most recent publicly available financial
statements.
ARTICLE V
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 5.01. Distributions.
(a) The Trustee shall cause to be distributed, from funds in the
Certificate Account, the following amounts:
(i) on each Remittance Date, to each Certificateholder an
amount equal to the Debt Service due on the Certificate or Certificates held
by such Certificateholder; provided, however, that the foregoing shall not
apply to amounts deposited in the Certificate Account under Section 4.02(a),
4.02(c), 4.04(a) or 4.07 if the maturity of the related Mortgage Loan has been
accelerated pursuant to the terms of the related Loan Documents. Any amounts
referred to in the proviso contained in the preceding sentence, together with
the interest earned thereon, shall, after such acceleration, be held in the
Certificate Account until such time as they constitute Liquidation Proceeds,
at which time the Net Liquidation Proceeds attributable thereto shall be
disposed of as provided in sections 3.01(e) and 5.01(a)(ii); and
(ii) on the date provided for distributions pursuant to Section
3.01(c), (d), (e) or (f), to each Certificateholder an amount equal to the
amount payable on the Certificate or Certificates held by such
Certificateholder pursuant to Section 3.01(c), (d), (e) or (f), as the case
may be; and
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(iii) concurrently with the termination of the Trust pursuant
to Section 9.01 hereunder, to each Certificateholder an amount equal to the
product of (a) all amounts remaining in the Certificate Account after giving
effect to the distributions provided for in clauses (i) and (ii) hereof, and
(b) the Percentage Interest of such Certificateholder.
(b) All distributions made to Certificateholders on each Remittance
Date shall be made to the Certificateholders of record on the Record Date
(other than as provided in this Trust Agreement or in the form of Certificate
respecting the final distribution), (i) by wire transfer in immediately
available funds to the account of such Holder at a bank or other financial or
depository institution having appropriate facilities therefor, if such Holder
has so notified the Trustee in writing at least 10 Business Days prior to such
Remittance Date and such Holders hold Certificates in the aggregate principal
amount of $1,000,000 or more or (ii) for all other Holders of Certificates, by
check mailed to the address of the Person entitled thereto as it appears on the
Certificate Register. Notwithstanding any of the provisions of this subsection
(b) to the contrary, so long as all of the outstanding Certificates are held by
the Depository, all distributions in respect of such Certificates shall be made
by wire transfer in immediately available funds in accordance with the Letter
of Representations. All distributions in respect of the Certificates shall be
made without presentation or surrender, except that the final distribution in
accordance with Section 9.02 will be made only upon presentation and surrender
of the Certificates at the Corporate Trust Office or such other agency of the
Trustee specified in the final distribution notice to Certificateholders. If
on any Determination Date, the Trustee reasonably determines that [the] [no]
Mortgage Loan is [not] outstanding and there are no other funds or assets in
the Trust Property other than the funds in the Certificate Account, the Trustee
shall send the final distribution notice to each Certificateholder and make
provision for the final distribution in accordance with Section 9.02.
Section 5.02. Statements to Certificateholders. Not later than each
Remittance Date, Trustee will cause to be sent to each Certificateholder a
statement setting forth the following information with respect to each
Certificate (which information may be aggregated for all Certificates held by
the same Holder), after giving effect to the distributions to be made pursuant
to Section 5.01 on or as of such Remittance Date:
(i) the portion of such distribution allocable to principal
on the Mortgage Note[s];
(ii) the portion of such distribution allocable to interest on
the Mortgage Note[s];
(iii) the amount of any Extraordinary Expense Advance by the
Trustee pursuant to Section 5.03; and
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(iv) whether [the] [a] Mortgage Loan is delinquent.
In addition, not more than 90 days after the end of each calendar year
or by such earlier time as may be required under the Code, the Trustee will
furnish a report to each holder of a Certificate at any time during such
calendar year, an annual statement of interest paid on the Mortgage Note[s] in
accordance with the requirements of applicable federal income tax law.
The Trustee shall cause to be prepared and shall file any and all tax
returns, information statements or other filings required to be delivered to
(a) any governmental taxing authorities or (b) the Certificateholders pursuant
to any applicable law with respect to the Trust Property and the transactions
contemplated hereby. The costs of any such filings, including the costs of any
accounting firm or other organization retained to assist in the preparation of
any such filings, shall be considered an ordinary cost and expense of the
Trustee included within the Trustee's Fee and not subject to reimbursement by
the Depositor, any Borrower or otherwise.
Section 5.03. Advances by Trustee. The Trustee may from time to time
following an Event of Default make such Extraordinary Expense Advances as
Trustee in its sole discretion deems advisable, provided, however, that it
shall not be obligated to make any such advances unless it is satisfied as to
the availability of reimbursement, pursuant to the terms hereof or from the
Certificateholders.
ARTICLE VI
THE DEPOSITOR
Section 6.01. Maintaining Corporate Existence of the Depositor. The
Depositor will keep in full effect its existence, rights and franchises as a
corporation, and will obtain and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of this Trust
Agreement, the Certificates or the Mortgage Loan[s] and to perform its duties
under this Trust Agreement.
The Depositor will not, on or after the date of execution of this Trust
Agreement (i) engage in any business or activities other than those set forth
in Article III of the Certificate of Incorporation of the Depositor, (ii) incur
any indebtedness, other than trade payables incurred in the ordinary course of
business, or (iii) amend, or propose to its shareholders for their consent any
amendment of, its Certificate of Incorporation or Bylaws without giving notice
thereof in writing not less than 30 days nor more than 90 days prior to the
date on which such amendment is to become effective to Trustee and without
first obtaining the written consent of Trustee.
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Section 6.02. Limitation on Liability of the Depositor. Neither the
Depositor nor any of the directors, officers, employees or agents of the
Depositor shall be under any liability to the Trustee or the Certificateholders
for any action taken or for refraining from the taking of any action in good
faith pursuant to this Trust Agreement, or for errors in judgment; provided,
however, that this provision shall not protect the Depositor or any such person
against any liability which would otherwise be imposed by reason of any willful
misfeasance, bad faith or negligence in the performance of its duties or by
reason of negligent disregard of obligations and duties hereunder. The
Depositor and any director, officer, employee or agent of the Depositor may
rely in good faith on any document of any kind prima facie properly executed
and submitted by any Person respecting any matters arising hereunder.
The Depositor shall not be under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its duties pursuant to
this Trust Agreement and which in its opinion may involve it in any expense or
liability; provided, however, that the Depositor may in its discretion
undertake any such action which it may deem necessary or desirable with respect
to this Trust Agreement and the rights and duties of the parties hereto and the
interests of the Certificateholders hereunder.
ARTICLE VII
DEFAULT
Section 7.01. Events of Default. The occurrence of any event
constituting an event of default as defined in [any] [the] Mortgage Note or any
Loan Document shall constitute an Event of Default under this Trust Agreement.
If an Event of Default shall occur and be continuing, then, and in each and
every such case, so long as the Event of Default shall not have been remedied
or waived, the Trustee, at the written direction of the Holders of Certificates
of Percentage Interests aggregating not less than 66-2/3%, shall exercise any
rights and remedies that it may have pursuant to [such] Mortgage Note or any
[related] Loan Document, as modified by the provisions of this Trust Agreement,
or at law or equity, including injunctive relief and specific performance,
provided that, if, as a result of the occurrence of an Event of Default, the
Trustee acquires any property other than cash, whether pursuant to foreclosure
or otherwise, the Trustee shall sell such property as promptly as is reasonably
possible. [A failure to pay with respect to any Mortgage Note or a default
under any Loan Document will not constitute a default under any unrelated
Mortgage Note or under any unrelated Loan Documents and will not give rise to
any right of the Trustee to exercise any remedies with respect to such
unrelated Mortgage Note or unrelated Loan Documents.] The Trustee will have no
obligation to take any action or institute, conduct or defend any litigation
under this Trust Agreement at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered to the Trustee
reasonable indemnity pursuant to Section 8.02(iii) against the
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costs, expenses and liabilities which the Trustee may incur. The Trustee shall
apply the proceeds recovered in the enforcement of the rights and remedies
under this Trust Agreement in accordance with the terms of this Trust
Agreement.
Section 7.02. Waiver of Defaults. The Trustee, at the written
direction of Holders of Certificates of Percentage Interests aggregating not
less than 66-2/3%, shall waive any default hereunder or under any Mortgage Note
or Loan Document and the consequences of any such default, except that a
default in the making of any required distribution on the Certificates may
only be waived by the affected Certificateholders. The Trustee shall have no
authority to exercise the right of waiver if, as a result thereof, this Trust
would fail to be characterized as a trust for federal income tax purposes. The
Trustee may rely upon an Opinion of Counsel as set forth in Section 8.02 if it
reasonably believes that such an act may cause the Trust to fail to be
characterized as a trust for federal income tax purposes. Upon any such waiver
of a past default, such default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Trust Agreement. No such waiver shall extend to any subsequent Event of
Default or impair any right consequent thereon except to the extent expressly
so waived.
Section 7.03. Notification to Certificateholders. The Trustee shall,
in the manner and to the extent required by Section 313(c) of the TIA, notify
the Certificateholders, the [related] Tenant and Kmart of any Event of Default
known to the Trustee within the later of 90 days from the occurrence thereof or
30 days after obtaining knowledge thereof, unless such Event of Default has
been cured or waived before the giving of such notice. Except in the case of a
default in the payment of principal of, or interest on, the Mortgage Note[s],
the Trustee may withhold such notice if and so long as its board of directors,
the executive committee of the board of directors or a committee of its
directors and/or responsible officers in good faith determine that the
withholding of such notice is in the interests of the Certificateholders.
Section 7.04. Rights of Certificateholders to Direct Proceedings.
Anything in this Trust Agreement to the contrary notwithstanding, the Holders
of Certificates of Percentage Interests aggregating not less than 66-2/3% shall
have the right, at any time during the continuance of an Event of Default, by
an instrument or instruments in writing executed and delivered to the Trustee,
to direct the time, place and method of conducting all proceedings to be taken
in connection with the enforcement of the terms and conditions of the Loan
Documents; provided, however that such direction shall not be otherwise than in
accordance with the provisions of law and this Trust Agreement and provided
that such Holders shall have provided to the Trustee the reasonable indemnity
pursuant to Section 8.02 (iii) against the costs, expenses and liabilities
which the Trustee may incur in connection with such proceedings.
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Section 7.05. Rights of Certificateholders to Receive Payment.
Notwithstanding any other provision in this Trust Agreement, the right of any
Certificateholder to receive distributions pursuant to Section 5.01, on or
after the respective Remittance Dates set forth herein or in the Certificates,
or to bring suit for the enforcement of any such distribution on or after such
respective dates shall not be impaired or affected without the consent of such
Certificateholder.
Section 7.06. Remedies Cumulative. No remedy given hereunder to the
Trustee or to any of the Certificateholders shall be exclusive of any other
remedy or remedies, and each such remedy shall be cumulative and in addition to
every other remedy given hereunder or now or hereafter given by statute, law,
equity or otherwise.
Section 7.07. Trustee Default. In the event of any breach by the
Trustee of its obligations pursuant to this Trust Agreement, the
Certificateholders and the Depositor shall be entitled to exercise all rights
and remedies to which they may be entitled at law or in equity.
Section 7.08. Notice to Tenant[s] [and Kmart]. The Trustee shall
promptly notify the [related] Tenant [and Kmart] of the exercise of any
remedies under this Trust Agreement, under [any] [the] Mortgage Note or under
any Loan Document. Failure to give such notice or notice under Section 7.03
hereof shall not impair or limit the Trustee's right to pursue any such
remedies or any other right or remedy to which it may be entitled.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.01. Duties of Trustee. [With respect to each Mortgage Note]
the Trustee, prior to the occurrence of an Event of Default [related to such
Mortgage Note] and after the curing or waiver of all Events of Default [related
to such Mortgage Note] which may have occurred, undertakes to perform such
duties and only such duties as are specifically set forth in this Trust
Agreement. In case an Event of Default has occurred [related to such Mortgage
Note] (which has not been cured or waived), the Trustee shall exercise such of
the rights and powers vested in it by this Trust Agreement, and use the same
degree of care and skill in their exercise as a prudent man would exercise or
use under the circumstances in the conduct of such man's own affairs. No
permissive rights of the Trustee shall be construed as a mandatory duty of the
Trustee. If the Trustee becomes aware of the occurrence of any event which,
with the giving of notice and, if applicable, the passage of time without cure,
would constitute an event of default as defined in any Loan Document, the
Trustee, if it is an appropriate party (or an assignee of an appropriate party)
to give such notice, is authorized and directed to give such notice in
accordance with such Loan Document.
The Trustee, upon receipt of any resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Trust Agreement, shall examine them to determine whether they
conform to
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the requirements of this Trust Agreement and if they are deemed to be
deficient, Trustee shall request cure of any such deficiency within a
reasonable period of time for such cure. If such deficiency is not cured to
the satisfaction of Trustee, the Trustee may treat the requirement pursuant to
which such instrument is furnished as not having been satisfied.
No provision of this Trust Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own misconduct; provided, however, that:
(i) Prior to the occurrence of an Event of Default, and after
the curing or waiver of all such Events of Default which may have occurred, the
duties and obligations of the Trustee shall be determined solely by the express
provisions of this Trust Agreement, the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set forth
in this Trust Agreement and, in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any certificates
or opinions furnished to the Trustee and conforming to the requirements of this
Trust Agreement;
(ii) The Trustee shall not be personally liable for an error
of judgment made in good faith by a Responsible Officer or Responsible Officers
of the Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable with respect
to any action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of holders of Certificates evidencing Percentage
Interests aggregating not less than 66-2/3% as to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Trust
Agreement; and
(iv) The Trustee shall have no authority to perform any act
which, if consummated, would cause the entity created hereunder to fail to be
characterized as a trust for federal income tax purposes. The Trustee may rely
upon an Opinion of Counsel, as set forth in Section 8.02, if it reasonably
believes that such an act may cause the Trust to fail to be characterized as a
trust for federal income tax purposes. Nothing in this Section 8.01(iv) is
intended to prevent the Trustee from exercising any right or remedy to which it
is entitled hereunder or under any Loan Document.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any rights or powers, if there is reasonable
grounds for believing that the
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repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Section 8.02. Certain Matters Affecting Trustee. Except as otherwise
provided in Section 8.01:
(i) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate, certificate
of auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other paper or document
reasonably believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(ii) The Trustee may consult with counsel, and any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it hereunder in good faith and in
accordance with such Opinion of Counsel, provided that any cost incurred by the
Trustee shall be reimbursable only to the extent provided in Sections 3.01(d),
3.06(d), 4.04(c), 4.06(b) and 4.09 hereof;
(iii) The Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Trust Agreement following an Event
of Default or to institute, conduct or defend any litigation hereunder or in
relation hereto at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Trust Agreement,
unless such Certificateholders shall have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby; the right of the Trustee to perform any discretionary
act enumerated in this Trust Agreement shall not be construed as a duty; and
the Trustee shall not be answerable for other than negligence or willful
misconduct in performance of such act. Nothing contained herein shall,
however, relieve the Trustee of the obligation, upon the occurrence of an
Event of Default (which has not been cured or waived), to exercise such of
the rights and powers vested in it by this Trust Agreement, and to use the
same degree of care and skill in their exercise as a prudent man would
exercise or use under the circumstances in the conduct of such man's own
affairs;
(iv) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and reasonably believed by it to
be authorized or within the discretion or rights or powers conferred upon it by
this Trust Agreement;
(v) Except with respect to notice of deficient or missing
documents described in Section 2.02, prior to the occurrence of an Event of
Default hereunder and after the curing or waiver of all Events of Default
which may have occurred, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
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approval, bond or other paper or document, unless requested in writing so to do
by Holders of Certificates evidencing Percentage Interests aggregating not less
than 66-2/3%; provided, however, that if the payment within a reasonable time
to the Trustee of the costs, expenses or liabilities likely to be incurred by
it in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms
of this Trust Agreement, the Trustee may require reasonable indemnity against
such expense or liability as a condition to such proceeding. The reasonable
expense of every such investigation shall be paid by the Certificateholder
requesting the investigation; and
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys.
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loan[s].
The recitals contained herein and in the Certificates shall be taken as the
statements of the Depositor and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations or warranties as to the
validity or sufficiency of this Trust Agreement or of the Certificates (except
that the Certificates shall be duly and validly executed and authenticated by
the Trustee and this Trust Agreement shall be duly and validly executed by the
Trustee) or of the Mortgage Loan[s] or related documents (other than the
representations made in Section 2.02 hereof). The Trustee shall not be
accountable for the use or application by the Depositor of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to or at the direction of the Depositor with
respect to the Mortgage Loan[s].
Section 8.04. Trustee May Own Certificates. The Trustee in its
corporate or any other capacity may become the owner or pledgee of Certificates
with the same rights it would have if it were not Trustee.
Section 8.05. Trustee's Fee and Expenses. The Trustee shall be
entitled to reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust) for all services rendered by it in the execution of the trust hereby
created and in the exercise and performance of any of the powers and duties
hereunder of the Trustee, and the Trustee shall be reimbursed for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Trust Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel and
of all persons not regularly in its employ), but solely from the Trustee's Fee
and amounts available as provided in Section 3.01(d) and Section 3.01(h) and in
the Rental Payment Account[s] and Certificate Account for reimbursement of
expenses as set forth in Section 3.06(d) and of Extraordinary Expense Advances
as provided in Sections 4.04(c),
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4.06(b) and 4.09. Notwithstanding the above, no such expense, disbursement or
advance shall be reimbursable as may arise from Trustee's negligence or bad
faith.
Section 8.06. Action by Co-Trustee. At any time or times, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Property may at the time be located or in which any action of the
Trustee may be required to be performed or taken, the Trustee, by an instrument
in writing signed by it, may appoint one or more Persons ("Co-Trustee") to act
as a separate trustee or co-trustee, acting jointly with the Trustee, of all or
any part of such Trust Property, to the full extent that local law makes it
necessary for such separate trustee or separate trustees or co-trustee acting
jointly with the Trustee to act. The Co-Trustee shall act as and be such upon
the following terms and conditions:
(a) Subject to the provisions of Section 8.14, all rights, powers,
duties and obligations conferred or imposed upon the Trustee shall be conferred
or imposed solely upon and solely exercised and performed by the Trustee except
as expressly provided otherwise in this Trust Agreement and except to the
extent that under any law or any jurisdiction in which any particular act or
acts are to be performed, the Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations shall be exercised and performed by the Co-Trustee;
(b) No power granted by this Trust Agreement to, or which this Trust
Agreement provides may be exercised by, the Co-Trustee shall be exercised by
the Co-Trustee except jointly with, or with the consent in writing of, the
Trustee, anything contained to the contrary notwithstanding; and
(c) The Co-Trustee may at any time by an instrument in writing,
constitute the Trustee or its successor in trust hereunder its agent or
attorney-in-fact, with full power and authority, to the extent which may be
permitted by law, to do any and all acts and things and exercise any and all
discretion which it is authorized or permitted to do or exercise, for and in
its behalf and in its name.
Section 8.07. Eligibility Requirements for Trustee. The Trust shall
at all times have a Trustee which shall be a corporation eligible to act as
trustee under Section 310(a) of the TIA and shall be a corporation organized
and doing business under the laws of a state or the United States of America,
authorized under such laws to exercise corporate trust powers, having (or, in
the case of a corporation included in a bank holding company system, the
related bank holding company shall have) a combined capital and surplus of at
least $50,000,000 in the case of United States Trust Company of New York, and of
at least $100,000,000 in the case of any successor trustee and subject to
supervision or examination by federal or state authority. If such corporation
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publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. In case at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 8.08.
Section 8.08. Resignation and Removal of Trustee. The Trustee may at
any time resign and be discharged from the trusts hereby created by giving
written notice thereof to the Depositor and the Certificateholders. Upon
receiving such notice of resignation, the Depositor or the Certificateholders
evidencing Percentage Interests aggregating not less than 66-2/3% shall
promptly appoint a successor trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If no successor trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
If at any time any of the following events occur:
(a) the Trustee fails to comply with the requirements of Section 310
of the Trust Indenture Act after written request for such compliance by any
Certificateholder who has been a bona fide Certificateholder for at least six
months; or
(b) the Trustee ceases to be eligible in accordance with the
provisions of Section 8.07 and fails to resign after written request therefor
by the Depositor or by any such bona fide Certificateholder; or
(c) the Trustee becomes incapable of acting, or shall be adjudged a
bankrupt or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation;
then, in any such case, (i) the Depositor may remove the Trustee and appoint a
successor trustee by written instrument, in triplicate, one copy of which
instrument shall be delivered to the Trustee so removed, one copy to Depositor
and one copy to the successor trustee, or (ii) subject to the provisions of
Section 7.04, any Certificateholder who has been a bona fide Certificateholder
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor trustee. Such court may thereupon,
after such notice, if any, as it may deem proper and prescribe, remove the
Trustee and appoint a successor trustee.
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The Certificateholders evidencing Percentage Interests aggregating not
less than 66-2/3% may at any time remove the Trustee and appoint a successor
trustee by written instrument or instruments, in triplicate, signed by such
Holders or their attorneys-in-fact duly authorized, one complete set of which
instruments shall be delivered to the Trustee so removed, one complete set to
Depositor and one complete set to the successor so appointed.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall
become effective only upon acceptance of appointment by the successor trustee
as provided in Section 8.09.
Section 8.09. Successor Trustee. Any successor trustee appointed as
provided in Section 8.07 or 8.08 shall execute, acknowledge and deliver to the
Certificateholders and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee shall
become effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the same effect as if originally
named as trustee herein. The predecessor trustee shall deliver to the
successor trustee the Mortgage Note[s], the Loan Documents, the Mortgage File
and any other documents and statements held by it hereunder, and the Depositor
and the predecessor trustee shall execute and deliver such instruments and do
such other things as may reasonably be required for more fully and certainly
vesting and confirming in the successor trustee all such rights, powers, duties
and obligations.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.07.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Depositor shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register. If the Depositor fails to mail such notice within 10
days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of the Depositor.
Section 8.10. Merger or Consolidation of Trustee. Any corporation
into which the Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be eligible under the
provisions of Section 8.07, without the execution or filing of any paper or any
further
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act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 8.11. Resignation of Co-Trustee. The Co-Trustee or any of its
successors may resign, and may be discharged of the trusts created by this
Trust Agreement by giving written notice thereof to the Certificateholders and
to the Trustee.
Such resignation shall take effect immediately upon the acceptance of
appointment by a Person succeeding to the office of the Co- Trustee appointed
by the Trustee.
Section 8.12. Removal of Co-Trustee. The Co-Trustee or any of its
successors may be removed at any time by the Trustee or the Holders of
Certificates evidencing Percentage Interests aggregating not less than 66-2/3%,
by delivery of a notice of such removal to the Co- Trustee, to the Depositor,
and to the Trustee, signed by such holders, and such removal shall be effective
upon the date specified in such notice, and the Co-Trustee's duties and
obligations hereunder shall thereupon cease, except as specified in Section
8.14.
Section 8.13. Appointment of Successor to Co-Trustee. If at any time
the Co-Trustee or any of its successors shall die, resign or be removed or
otherwise become incapable of acting, or if for any reason the office of
Co-Trustee shall become vacant, a successor to the Co-Trustee shall forthwith
be appointed by the Trustee.
Section 8.14. Succession of Successor to Co-Trustee. Any Person
appointed as a successor to the Co-Trustee shall execute, acknowledge and
deliver to the Certificateholders, its predecessor, to the Trustee and to the
Depositor, an instrument accepting such appointment hereunder, and thereupon
such Person without any further act, deed or conveyance shall become vested
with all estates, properties, rights, powers, duties and trusts of its
predecessor in the trusts hereunder with like effect as if originally named as
Co-Trustee herein; but nevertheless, on the written request of the Depositor or
Holders of Certificates evidencing Percentage Interests aggregating not less
than 66- 2/3% or of the Trustee or of the new Co-Trustee, the predecessor shall
execute and deliver an instrument transferring to the new Co-Trustee, upon the
trusts expressed in this Trust Agreement, all the estates, properties, rights,
powers and trusts granted to it by this Trust Agreement and shall duly assign,
transfer, deliver and pay over to the new Co-Trustee any property and money
subject to the lien of this Trust Agreement held by such predecessor. Should
any instrument in writing from the Depositor or from Holders of Certificates
evidencing Percentage Interests aggregating not less than 66-2/3% or from the
Trustee be required by any person who becomes the Co-Trustee for more fully and
certainly vesting in and confirming to such Co-Trustee such estates,
properties, rights, powers and trusts, then, on request, any and all such
instruments
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in writing shall be made, executed, acknowledged and delivered by the Depositor
and/or the Trustee.
Any Co-Trustee which has resigned or been removed shall nevertheless
retain all rights of indemnity granted hereunder.
Section 8.15. Reports by the Trustee to Certificate-holders.
(a) On or before each March 31 of each calendar year commencing 199_,
the Trustee shall transmit to Certificateholders such reports concerning the
Trustee and its actions under this Trust Agreement as may be required pursuant
to the TIA and at the times and in the manner provided pursuant thereto.
(b) A copy of each report shall, at the time of such transmission to
Certificateholders, be filed by the Trustee with any stock exchange upon which
the Certificates are listed, with the Securities and Exchange Commission, with
Kmart and with the Depositor. The Depositor shall notify the Trustee when the
Certificates are listed on any stock exchange, in accordance with Section
313(c) of the TIA.
ARTICLE IX
TERMINATION
Section 9.01. Termination. The respective obligations and
responsibilities of the Depositor and the Trustee under this Trust Agreement
shall, so long as such termination does not result in the imposition of a tax
on the Trust Property, terminate upon the final payment, prepayment in full or
other liquidation of the Mortgage Note[s] including the disposition of all
property acquired upon foreclosure or deed in lieu of foreclosure of [the]
[any] Mortgage Loan and the remittance of all funds due hereunder; provided,
however, that in no event shall the Trust continue beyond the expiration of 21
years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St. James,
living on the date hereof.
Section 9.02. Notice; Final Distribution.
(a) Notice of any termination pursuant to Section 9.01, specifying the
Remittance Date after which all Certificateholders shall surrender their
Certificates to the Trustee for payment and cancellation, shall be given
promptly by the Trustee by letter to Certificateholders mailed no later than 15
days prior to such final distribution specifying (i) the Remittance Date upon
which final payment on the Certificates will be made and following which the
Certificateholders shall present and surrender their Certificates at the
Corporate Trust Office or the office of any designated agent of the Trustee
therein designated, (ii) the amount of any such final payment, and (iii) that
payments will be made only upon presentation and surrender of the Certificates
at the office or
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agency of the Trustee therein specified. After giving such notice, the Trustee
shall not register the transfer or exchange of any Certificates. On the
Remittance Date upon presentation and surrender of the Certificates, the
Trustee shall cause to be distributed to Certificateholders an amount equal to
the amount distributable on such Remittance Date.
(b) If all of the Certificateholders shall not surrender their
Certificates for cancellation within three months after the time specified in
the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If
within three months after the second notice all the Certificates shall not have
been surrendered for cancellation, the Trustee may take appropriate steps, or
may appoint an agent to take appropriate and reasonable steps, to contact the
remaining Certificateholders concerning surrender of their Certificates, and
the cost thereof shall be paid out of the funds and other assets which remain
in the Trust.
ARTICLE X
SUPPLEMENTS AND AMENDMENTS TO THIS
TRUST AGREEMENT AND OTHER DOCUMENTS;
ADDITIONAL AGREEMENTS OF TRUSTEE
Section 10.01. Supplemental Trust Agreements Without Consent of
Holders. The Depositor and the Trustee, at any time and from time to time,
with the consent of Kmart (which shall not be unreasonably withheld or delayed
and which shall not be required with respect to (g) below) but without the
consent of Certificateholders, may enter into one or more trust agreements
supplemental hereto for one or more of the following purposes:
(a) to evidence the succession of another Person to the Depositor, or
successive successions, and the assumption by the successor of the covenants,
agreements and obligations of the Depositor herein;
(b) to add any covenants, restrictions, conditions or provisions with
respect to the Depositor as the Trustee shall consider to be for the protection
of the Certificateholders;
(c) to surrender any rights or power conferred herein upon the
Depositor herein or to add to the rights of the Certificateholders;
(d) to correct or amplify the description of any property at any time
that constitutes Trust Property or better to assure, convey and confirm unto
the Trustee any such property to be included in any such Trust Property, or to
acknowledge any change relating to title to the
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Mortgaged Estate which does not materially adversely affect the rights of the
Certificateholders;
(e) to evidence and provide for the acceptance and appointment
hereunder of a successor trustee and to add to or change any of the provisions
hereof as may be necessary to provide for or facilitate the administration of
the Trust by more than one trustee pursuant to Section 8.14;
(f) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to make
any other provisions with respect to matters or questions arising under this
Trust Agreement, provided that such action pursuant to this Section 10.01(f)
shall not materially adversely affect the Certificateholders; or
(g) to modify, eliminate or add to the provisions of this Trust
Agreement to the extent necessary to continue the qualification of this Trust
Agreement under the TIA;
provided that no such supplemental agreement shall cause the Trust to fail to
be characterized as a trust for federal income tax purposes.
The Trustee is hereby authorized to join in the execution of any such
supplemental agreement, to make any further appropriate agreements and
stipulations which may be contained therein and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Trustee shall not be obligated to enter into any such supplemental agreement
which adversely affects the Trustee's own rights, duties or immunities under
this Trust Agreement or otherwise, whether in its official or individual
capacity.
Section 10.02. Supplemental Agreements With Consent of
Certificateholders. With the consent of the Holders of Certificates evidencing
Percentage Interests of not less than 66-2/3%, the Depositor and the Trustee
may, from time to time and at any time, enter into an agreement or agreements
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Trust Agreement or of
any agreements supplemental hereto or of modifying in any manner the rights of
the Certificateholders; provided, however, that no such supplemental agreement
shall cause the Trust to fail to be characterized as a trust for federal income
tax purposes; and provided further that except as expressly permitted under the
terms of this Trust Agreement, without the consent of each Certificateholder
affected thereby and, with respect to (b) and (unless there is a monetary
default under the [related] Lease) (c) below, Kmart, no such amendment of or
supplement to this Trust Agreement or modification of the terms of, or consent
under, any provision hereof, shall
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(a) modify any of the provisions of Section 7.03 or this Section
10.02, or the definition of "Certificateholder" as set forth in Article I
hereof;
(b) modify the definition of "Percentage Interest" as set forth in
Article I hereof or reduce the Percentage Interests, the consent of the Holders
of Certificates of which is required for any such supplement to this Trust
Agreement, or the consent of the Holders of Certificates of which is required
for any waiver provided for in this Trust Agreement;
(c) reduce the amount or extend the time of payment of any amount
owing or payable under the Mortgage Note[s] or distributions to be made on any
Certificate pursuant to Article V;
(d) impair the right of any Certificateholder to commence legal
proceedings to enforce a right to receive payment hereunder; or
(e) create or permit the creation of any lien on the Trust Property or
any part thereof [(other than the Second Mortgage and the Option Agreement)],
or deprive any Certificateholder of the benefit of this Trust Agreement,
whether by disposition of such Trust Property or otherwise.
Upon the request of the Depositor and upon the filing with the Trustee
of evidence of the consent of the Certificateholders and Kmart, if applicable,
required under this Section, the Trustee shall join with the Depositor in the
execution of such supplemental agreement unless such supplemental agreement
affects the Trustee's own rights, duties or immunities under this Trust
Agreement or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such supplemental agreement.
It shall not be necessary for the consent of the Certificateholders
under this Section to approve the particular form of any proposed supplemental
agreement, and it shall be sufficient if such consent shall approve the
substance thereof. Kmart shall be entitled to receive a copy of the form of
proposed supplemental agreement.
Promptly after the execution by the Depositor and the Trustee of any
supplemental agreement pursuant to the provisions of this Section, the Trustee
shall mail a notice thereof by first-class mail to the Certificateholders at
their addresses as they shall appear in the Certificate Register, setting forth
in general terms the substance of such supplemental agreement. Any failure of
the Trustee to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental agreement.
Section 10.03. Effect of Supplemental Agreement. Upon the execution
of any supplemental agreement pursuant to the provisions hereof, this Trust
Agreement shall be and be deemed to be modified
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and amended in accordance therewith and the respective rights, limitations of
rights, obligations, duties and immunities under this Trust Agreement of the
Trustee, the Depositor and the Certificateholders shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental agreement shall be and be deemed to be part of the terms and
conditions of this Trust Agreement for any and all purposes. The Trustee shall
deliver to Kmart a true and correct copy of the final form of supplemental
agreement as executed by the Depositor and the Trustee.
Section 10.04. Documents to Be Given to Trustee. The Trustee, subject
to the provisions of Sections 8.02, may receive an Officer's Certificate and an
Opinion of Counsel as conclusive evidence that any such supplemental agreement
complies with the applicable provisions of this Trust Agreement.
Section 10.05. Notation on Certificates in Respect of Supplemental
Agreements. Certificates authenticated and delivered after the execution of
any supplemental agreement pursuant to the provisions of this Article may bear
a notation in form approved by the Trustee as to any matter provided for by
such supplemental agreement. If the Depositor or the Trustee shall so
determine, new Certificates so modified as to conform, in the opinion of the
Depositor and the Trustee, to any modification of this Trust Agreement
contained in any such supplemental agreement may be prepared, executed and
authenticated by the Trustee and delivered in exchange for the outstanding
Certificates.
Section 10.06. Granting of Easements. The Trustee, at the direction
of [a] [the] Tenant and the [related] Borrower, may grant, release, modify or
amend easements, licenses, rights-of-way, dedications and other rights or
privileges in the nature of easements with respect to the [related] Mortgaged
Estate, which the Trustee determines do not materially adversely affect the
security of the Trust Property. The Trustee shall, upon request of [such]
Tenant, certify that the rights or privileges so granted or released are no
longer part of the Trust Property for purposes of this Trust Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Trust Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Trust Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Trust Agreement.
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Section 11.02. Limitation on Rights of Certificateholders. The death
or incapacity of any Certificateholder shall not operate to terminate this
Trust Agreement or the Trust Property, nor entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust Property,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
No Certificateholder shall have any right to vote (except as expressly
provided herein) or in any manner otherwise control the operation and
management of the Trust Property, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of the Certificates,
be construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken by the parties
to this Trust Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any provision of
this Trust Agreement to institute any suit, action or proceeding in equity or
at law upon or under or with respect to this Trust Agreement, unless such
Holder previously shall have given to the Trustee a written notice of the
occurrence of an Event of Default and of the continuance thereof, as
hereinbefore provided, and unless also the Holders of Certificates evidencing
in the aggregate Percentage Interests of not less than 66-2/3% shall have made
written request upon the Trustee to institute such action, suit or proceeding
in its own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificates shall have any right in any manner whatever
by virtue of any provision of this Trust Agreement to affect, disturb or
prejudice the rights of the Holders of any other of such Certificates, or to
obtain or seek to obtain priority over or preference to any other such Holder,
or to enforce any right under this Trust Agreement, except in the manner herein
provided and for the common benefit of Certificateholders. For the protection
and enforcement of the provisions of this Section, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 11.03. Solicitation of Certificateholders. The Trustee will
not solicit, request or negotiate for or with respect to any direction or
proposed waiver or amendment of any of the provisions of this Trust Agreement
or the Certificates, unless each Holder of the Certificates (irrespective of
the amount of
47
<PAGE> 54
Certificates then owned by it) shall be informed thereof by the Trustee and
shall be afforded the opportunity of considering the same and shall be supplied
by the Trustee with sufficient information to enable it to make an informed
decision with respect thereto. Executed or true and correct copies of any
waiver effected pursuant to the provisions of this Section shall be delivered
by the Trustee to Kmart and each Holder of outstanding Certificates forthwith
following the date on which the same shall have been executed and delivered by
the Holder or Holders of the requisite percentage of outstanding Certificates.
Neither the Depositor nor the Trustee nor any Affiliate thereof will, directly
or indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any
Certificateholders as consideration for or as an inducement to the entering
into by any Certificateholders of any waiver or amendment of any of the terms
and provisions of this Trust Agreement unless such remuneration is
concurrently paid, on the same terms, ratably to all Certificateholders.
Under any provisions of this Trust Agreement that relate to consent,
waiver, direction, request or demand of or by Certificateholders, each and
every Certificateholder shall be entitled to give or make any such consent,
waiver, direction, request or demand without request or demand for such action
by the Trustee.
In the event any such direction or similar action is so received by the
Trustee under any provision hereof from the Certificateholders of requisite
Percentage Interests, the Trustee shall follow the direction of such
Certificateholders.
Section 11.04. Recordation of Agreement. To the extent required by
applicable law, this Trust Agreement is subject to recordation in appropriate
public offices for real property records in the county or other comparable
jurisdiction in which [the] [each] Mortgaged Estate is situated, and in any
other appropriate public recording office or elsewhere, such recordation to be
effected by the Trustee accompanied by an Opinion of Counsel to the effect that
such recordation materially and beneficially affects the interests of the
Certificateholders or is necessary in connection with the [related] Mortgage
Loan.
Section 11.05. Duration of Agreement. This Trust Agreement shall
continue in existence and effect until terminated as herein provided.
SECTION 11.06. GOVERNING LAW. THIS TRUST AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
THE CHOICE OF LAW PRINCIPLES THEREOF AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.07. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to
48
<PAGE> 55
have been duly given if personally delivered at or mailed by first class or
registered mail, postage prepaid, to (i) in the case of the Depositor, National
Tenant Finance Corporation, 40 North Central Avenue, Suite 2700, Phoenix,
Arizona 85004-4441, Attention: Norman C. Storey, and (ii) in the case of the
Trustee, United States Trust Company of New York c/o U.S. Trust Company of
California, N.A., Suite 2700, 555 South Flower Street, Los Angeles California
90071 Attention: Corporate Trust Division, or such other addresses as such
Persons may hereafter designate. Any notice required or permitted to be mailed
to a Certificateholder shall be given by registered mail, postage prepaid, or
by express delivery service, at the address of such Certificateholder as shown
in the Certificate Register. A copy of each notice of an Event of Default and
all other notices or communications hereunder, including the text of any
proposed or final amendment or supplement to this Trust Agreement, given by or
to the Certificateholders, the Trustee or the Depositor shall be
contemporaneously transmitted to Kmart, 3100 West Big Beaver Road, Troy,
Michigan 48084, Attention: Vice President-Real Estate, or to such other
address as Kmart may have designated by written notice to the Trustee. The
provisions of the foregoing sentence are for the express benefit of Kmart,
shall be enforceable by it, and may not be modified or eliminated without its
consent.
Section 11.08. Counterparts. For the purpose of facilitating the
recordation of this Trust Agreement as herein provided and for other purposes,
this Trust Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
Section 11.09. Submission to Jurisdiction. Each party hereto hereby
consents to the jurisdiction of any state or federal court located within the
County of New York, State of New York and irrevocably agrees that all actions
or proceedings relating to this Trust Agreement may be litigated in such courts
and each such party waives any objection which it may have based on improper
venue or forum non conveniens to the conduct of any proceeding in any such
court, waives personal service of any and all process upon it and consents that
all such service or process be made by registered or certified mail (return
receipt requested) or messengered to it at its address set forth in Section
11.08 or to its Agent referred to below at such Agent's address set forth below
and that service so made shall be deemed to be completed in accordance with
Section 11.08. Each party hereto hereby appoints the Prentice Hall Corporation
System, Inc., with an office on the date hereof at 15 Columbus Circle, New
York, New York 11023 as its Agent for the purpose of accepting service of any
process within the State of New York and shall execute any confirmation thereof
requested by the other party hereto. Nothing in this Section shall affect the
right of any party hereto to serve legal process in any other manner permitted
by law to bring any action or proceeding in the courts of any jurisdiction
against the other party or to enforce a judgment obtained in the courts of any
other jurisdiction.
49
<PAGE> 56
Section 11.10. Gender; Number. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular
or plural, as the context shall require.
Section 11.11. TIA Controls. If any provision of this Trust Agreement
limits, qualifies or conflicts with the duties imposed by operation of Section
318(c) of the TIA, the imposed duties shall control.
Section 11.12. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Depositor to the Trustee to take any
action under this Trust Agreement, the Depositor shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Trust Agreement
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel all such conditions precedent have been complied with.
Section 11.13. Statements Required in Certificate or Opinion. Each
Officers' Certificate and Opinion of Counsel with respect to compliance with a
covenant or condition provided for in this Trust Agreement shall include:
(a) a statement that each Person making such Officers' Certificate or
Opinion of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
Officers' Certificate or Opinion of Counsel are based;
(c) a statement that, in the opinion of each such Person, he has made
such examination or investigation as is necessary to enable such Person to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement that, in the opinion of such Person, such covenant or
condition has been complied with; provided, however, that with respect to
matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or
certificates of public officials.
Section 11.14. Benefits of Trust Agreement. Nothing in this Trust
Agreement or in the Certificates, express or implied, shall give to any Person,
other than the parties hereto and their successors hereunder, and the
Certificateholders, any benefit or
50
<PAGE> 57
any legal or equitable right, remedy or claim under this Trust Agreement.
IN WITNESS WHEREOF, the Depositor and the Trustee have caused their
names to be signed hereto by their respective officers thereunto duly
authorized as of the day and year first above written.
NATIONAL TENANT FINANCE CORPORATION,
a Delaware corporation
By_____________________________
Name___________________________
Title__________________________
UNITED STATES TRUST COMPANY OF
NEW YORK, a New York banking
corporation
By_____________________________
Name___________________________
Title__________________________
<PAGE> 58
STATE OF_____________________ ]
] ss.
CITY OF______________________ ]
On the___ day of _________, 199_ before me, a Notary Public in and for
said State, personally appeared ______________, known to me (or proved to me on
the basis of satisfactory evidence) to be the person who executed the within
instrument as ___________ on behalf of NATIONAL TENANT FINANCE CORPORATION, a
Delaware corporation, and acknowledged to me that such Corporation executed the
within instrument pursuant to its Bylaws or a resolution of its Board of
Directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
[NOTARIAL SEAL]
_________________________________
Notary Public
My Commission Expires:
______________________
STATE OF_____________________ ]
] ss.
CITY OF______________________ ]
On the of _________, 199_ before me, a Notary Public in and for said
State, personally appeared ______________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person who executed the
within instrument as to be a ______________ on behalf of UNITED STATES TRUST
COMPANY OF NEW YORK, a New York banking corporation, and acknowledged to me
that such association executed the within instrument pursuant to its Bylaws or
a resolution of its Board of Directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
[NOTARIAL SEAL]
_________________________________
Notary Public
My Commission Expires:
______________________
52
<PAGE> 59
EXHIBIT A-1
MORTGAGE LOAN SCHEDULE
(i) Borrower Name -
(ii) Mortgaged Estate - See Exhibit A
attached hereto
(iii) Maturity Date - _____ __, 20__
(iv) Rate - ____%
(v) First Due Date - ________ __, 199_
(vi) Mortgage Payments - See Exhibit B
attached hereto
(vii) Original Principal
Balance of Mortgage
Loan - $_______________
<PAGE> 60
EXHIBIT A-2
CERTIFICATE SCHEDULE
<PAGE> 61
EXHIBIT A-3
CONTENTS OF MORTGAGE FILE
With respect to the Mortgage Loan, the Mortgage File shall include each
of the following items:
<PAGE> 62
EXHIBIT A-4
CAPITALIZED DEBT SERVICE ACCOUNT SCHEDULE
(i) Borrower Name -
(ii) Tenant Name -
(iii) Payments:
Date Amount
$
<PAGE> 63
EXHIBIT B
[FORM OF CERTIFICATE]
[Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Trustee or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]
_____% MORTGAGE PASS-THROUGH CERTIFICATE
(____________________________)
SERIES 199_
Trust Agreement Dated as of Original Principal Amount:
_______ __, 199_ $_________
Cusip No. ____________ Original Issuance Date:
_______________, 199_
Number R-_ Maturity Date:
______________, ____
This Certificate does not represent an obligation of or interest in
National Tenant Finance Corporation, a Delaware corporation, Kmart Corporation,
any subsidiary of Kmart Corporation, or the Trustee referred to below or any of
their respective affiliates. Neither this Certificate nor the underlying
Mortgage Loan[s] referred to below are guaranteed or insured. To the extent
not defined herein, the capitalized terms used herein have the meanings set
forth in the Trust Agreement referred to below.
This certifies that _______________________ (the "Holder") is the
registered owner of an undivided ___% beneficial interest in the Trust
Property, subject to the terms and conditions of the Trust Agreement. The
Trust Property includes [the] mortgage loan[s] ("Mortgage Loan[s]") made to the
Borrower[s] identified in the Loan Agreement[s] ([individually a] "Borrower" [,
collectively "Borrowers"]). The Mortgage Loan[s], the Mortgage Note[s]
relating thereto, the Loan Documents relating thereto and certain other
property (collectively, "Trust Property") have been transferred as of the date
hereof from National Tenant Finance Corporation ("Depositor," which term
includes any successor entity under the Trust Agreement referred to below) to
the Trustee (as defined below) in trust for the benefit of Certificateholders.
The Trust
<PAGE> 64
Property was conveyed to the Trustee pursuant to a Trust Agreement ("Trust
Agreement"), dated as of the date hereof, by and among Depositor, as Depositor,
and United States Trust Company of New York ("Trustee"), as Trustee, a summary
of certain of the pertinent provisions of which is set forth herein.
This Certificate is one of a duly authorized issue of Certificates
("Certificates"), designated as "Mortgage Pass-Through Certificates
(______________________) Series 199_", and is issued under and is subject to
the terms, provisions and conditions of the Trust Agreement. The Holder of
this Certificate by acceptance hereof assents to the Trust Agreement and agrees
to be bound thereby.
This Certificate evidences a ___% Percentage Interest for purposes of
the Trust Agreement. For purposes of calculations under the Trust Agreement,
this Certificate represents an original principal amount as set forth at the
head of this Certificate, and is scheduled to bear interest from the date of
issuance on the unpaid principal balance hereof at the rate of _____% per annum
(computed on the basis of a 360-day year comprised of 12 consecutive 30-day
months) payable on each Remittance Date, and is scheduled to bear interest at
the rate of _____% per annum (computed on the same basis) on any overdue
principal or (to the extent permitted by applicable law) interest under the
Mortgage Note[s]. Distributions on any regularly scheduled Remittance Date
will include interest on the outstanding Mortgage Note[s] from and including
the first day of the sixth month immediately preceding such Remittance Date (or
from and including the Closing Date with respect to the first Remittance Date)
through the end of the calendar month immediately preceding such Remittance
Date. Additional distributions may be made with respect to this Certificate as
a result of the prepayment, purchase or acceleration of the Mortgage Note[s] as
set forth in the Trust Agreement.
THIS CERTIFICATE AND ANY OTHER CERTIFICATES ISSUED PURSUANT TO THE
TRUST AGREEMENT ARE EQUALLY AND RATABLY SECURED BY THE TRUST PROPERTY.
Distributions on this Certificate will be made by the Trustee to the
Person entitled thereto, without the presentation or surrender of this
Certificate or the making of any notation hereon. Except as otherwise provided
in the Trust Agreement and notwithstanding the preceding sentence, the final
distribution on this Certificate will be made after notice mailed by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency of the Trustee specified
in such notice.
On each Remittance Date, the Trustee will cause to be distributed to
the Holder from funds in the Certificate Account an amount equal to the
aggregate scheduled Debt Service, to the extent available, on this Certificate
for such Remittance Date. The Debt Service on this Certificate is set forth on
the Debt Service Schedule attached hereto and made a part hereof by this
reference. The Debt Service is subject to adjustment as a consequence of
prepayment, purchase or acceleration of the Mortgage Note[s] and as a
consequence of adjustment to the Annual Rental due under the
B-2
<PAGE> 65
Leases [each of] which secures [the] [a] Mortgage Note and constitutes part of
the Trust Property.
The Trustee will cause to be kept at its Corporate Trust Office, or at
the office of its designated agent, a Certificate Register in which, subject to
such reasonable regulations as it may prescribe in compliance with the Trust
Agreement, the Trustee will provide for the registration of Certificates and of
transfers and exchanges of Certificates. Upon surrender for registration of
transfer of any Certificate at any office or agency of the Trustee maintained
for such purpose, the Trustee will, subject to the limitations set forth in the
Trust Agreement, execute, authenticate and deliver, in the name of the
designated transferee or transferees, a Certificate or Certificates of a like
tenor and aggregate Percentage Interest and dated the date of such execution
and authentication by the Trustee.
No service charge will be made to the Holder for any transfer or
exchange of any Certificate, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of any Certificate. Prior to due
presentation of a Certificate for registration of transfer, the Trustee may
treat the person in whose name any Certificate is registered as the owner of
such Certificate and the undivided interest in the Trust Property evidenced
thereby for the purpose of receiving distributions pursuant to the Trust
Agreement and for all other purposes whatsoever, and the Trustee will not be
affected by any notice to the contrary.
The Trust Agreement may be amended from time to time by the Depositor
and the Trustee with the consent of Kmart but without the consent of the
Certificateholders in certain circumstances specified in the Trust Agreement.
The Trust Agreement may, under certain other circumstances specified in the
Trust Agreement, be supplemented from time to time by the Depositor and the
Trustee with the consent of the Holders of Certificates evidencing in the
aggregate not less than 66-2/3% of the Percentage Interest of the Certificates
issued and outstanding for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of the Trust Agreement or of
modifying in any manner the rights of the Certificateholders; provided that no
such amendment may (i) modify the provision of the Trust Agreement that
concerns notifying Certificateholders of the occurrence of an Event of Default,
modify the provision of the Trust Agreement concerning approving supplements to
the Trust Agreement that require the approval of Certificateholders, or modify
the definition of "Certificateholder" in the Trust Agreement, (ii) modify the
definition of "Percentage Interest" in the Trust Agreement or reduce the
Percentage Interests, the consent of the Holders of Certificates of which is
required for any such supplement to the Trust Agreement, or the consent of the
Holders of Certificates of which is required for any waiver provided for in the
Trust Agreement; (iii) reduce the amount or extend the time of payment of
B-3
<PAGE> 66
any amount owing or payable under the Mortgage Note[s] or distributions to be
made on any Certificate; (iv) impair the right of any Certificateholder to
commence legal proceedings to enforce a right to receive payment hereunder or
under the Trust Agreement; or (v) create or permit the creation of any lien on
the Trust Property or any part thereof, or deprive any Certificateholder of the
benefit of the Trust Agreement, whether by disposition of such Trust Property
or otherwise, without the consent of each affected Certificateholder and, with
respect to (ii) and (unless there is a monetary default under the related
Lease) (iii), Kmart.
The respective obligations and responsibilities of the Depositor and
the Trustee under the Trust Agreement will terminate upon the final payment,
prepayment in full or other liquidation of the Mortgage Loan[s] and the
distribution of all funds in the Trust, including the disposition of all
property acquired upon foreclosure or deed in lieu of foreclosure of [the]
[any] Mortgage Loan and the remittance of all funds due thereunder; provided,
however, that in no event shall the Trust continue beyond the expiration of 21
years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St. James,
living on the date hereof.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed by one of its authorized officers.
Dated: _______ __, 199_ UNITED STATES TRUST COMPANY OF
NEW YORK, solely as Trustee under the
Trust Agreement dated as of
_______ __, 199_ with National
Tenant Finance Corporation and
not in its individual capacity
By_____________________________
Authorized Officer
[FORM OF CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates defined in the Trust Agreement dated as
of ______ __, 199_ with National Tenant Finance Corporation.
Dated: _______ __, 199_ UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By________________________________
Authorized Officer
B-4
<PAGE> 67
EXHIBIT C
FORM OF TRUSTEE CERTIFICATION
_______ __, 199_
National Tenant Finance Corporation
40 North Central Avenue
Suite 2700
Phoenix, Arizona 85004-4441
Re: Trust Agreement ("Trust Agreement") dated as of _______ __, 199_
by and between National Tenant Finance Corporation, as Depositor,
and United States Trust Company of New York, as Trustee, Mortgage
Pass-Through Certificates (____________________) Series 199_
Gentlemen:
In accordance with Section 2.02 of the Trust Agreement, the
undersigned, as Trustee, hereby certifies that, as to the Mortgage Loan[s]
listed in the Mortgage Loan[s] Schedule it has reviewed [the] [each] Mortgage
File and [the] [each] Mortgage Loan Schedule and has determined that:
(i) All documents in each Mortgage File required to be delivered to
the Trustee pursuant to Section 2.01 of the Trust Agreement are in its
possession; and
(ii) Such documents have been reviewed by it and such documents do not
contain any omissions, defects or irregularities within the meaning of Sections
2.01 or 2.02 of the Trust Agreement.
The Trustee further certifies that, as to the Mortgage Loan[s], the
Trustee holds the Mortgage Note[s] without notice or knowledge (a) of any
adverse claims, liens or encumbrances, (b) that the Mortgage Note[s] [was]
[were] overdue or [has] [have] been dishonored, (c) of evidence on the face of
the Mortgage Note[s] or the Mortgage of any security interest or other right or
interest therein, or (d) of any defense against or claim to the Mortgage
Note[s] by any other party.
The Trustee has made no independent examination of any documents
contained in the Mortgage File[s] beyond the review specifically required in
the Trust Agreement. The Trustee makes no representations or warranties as to
the validity, legality, sufficiency, enforceability or genuineness of any of
the documents contained in the Mortgage File[s] (other than the statements made
herein) or the collectibility, insurability, effectiveness or suitability of
the Mortgage Loan[s].
<PAGE> 68
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the Trust Agreement.
UNITED STATES TRUST COMPANY OF
NEW YORK
By_______________________________
Name_____________________________
Title____________________________
<PAGE> 1
EXHIBIT 4.2
_______________
PASS-THROUGH TRUST AGREEMENT
_______________
between
NATIONAL TENANT FINANCE CORPORATION
as Depositor
and
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
_____________________________
Dated as of ________ __, 199_
_____________________________
$_________
Mortgage Pass-Through Certificates
(___________________)
Series 199_-__
_________________________________________________________________
<PAGE> 2
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
TIA Section Trust Agreement Section
- ----------- -----------------------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 8.07
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 8.07
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . 8.06
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . *
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . 8.07
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 8.07; 8.08; 11.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . *
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . *
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . *
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . *
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 8.15
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . *
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . *
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 8.15; 11.07
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 8.15
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . *
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . *
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 11.12
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 11.12
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . *
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . *
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 11.13
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . *
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . *
316(a) last sentence . . . . . . . . . . . . . . . . . . . Definition of "Certificateholder"
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . 7.04
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . 7.02
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . *
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . *
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . *
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.05
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
TIA Section Trust Agreement Section
- ----------- -----------------------
<S> <C>
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 11.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . *
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 11.11
- ----------------------
</TABLE>
* Intentionally deleted.
<PAGE> 4
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
<TABLE>
<S> <C> <C> <C>
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . 1
Section 1.02. Incorporation by Reference of
Trust Indenture Act. . . . . . . . . . . . . 11
Section 1.03. Acts of Holders. . . . . . . . . . . . . . . . 12
<CAPTION>
ARTICLE II
CONVEYANCE OF MORTGAGE LOAN[S]; TRUST PROPERTY
<S> <C> <C> <C>
Section 2.01. Conveyance of Mortgage Note[s]. . . . . . . . . 13
Section 2.02. Acceptance by Pass-Through Trustee. . . . . . . 13
Section 2.03. Trust Property. . . . . . . . . . . . . . . . . 14
Section 2.04. Limitation of Powers. . . . . . . . . . . . . . 14
<CAPTION>
ARTICLE III
THE CERTIFICATES
<S> <C> <C> <C>
Section 3.01. The Certificates. . . . . . . . . . . . . . . . 14
Section 3.02. Registration of Transfer and Exchange
of Certificates. . . . . . . . . . . . . . . 17
Section 3.03. Mutilated, Destroyed, Lost or Stolen
Certificates. . . . . . . . . . . . . . . . . 19
Section 3.04. Persons Deemed Owners. . . . . . . . . . . . . 19
Section 3.05. Appointment of Paying Agent. . . . . . . . . . 19
Section 3.06. Certificates Issuable in the Form
of a Registered Global Certificate. . . . . 19
Section 3.07. Temporary Securities. . . . . . . . . . . . . . 21
<CAPTION>
ARTICLE IV
RECEIPT AND DISTRIBUTION OF INCOME
AND PROCEEDS FROM THE TRUST PROPERTY
<S> <C> <C> <C>
Section 4.01. Calculation of Distributions. . . . . . . . . . 22
Section 4.02. Collection of Mortgage Note Payments;
Investment. . . . . . . . . . . . . . . . . . 22
Section 4.03. Establishment of Certificate Account;
Deposits in Certificate Account. . . . . . . . 22
Section 4.04. Permitted Withdrawals From the Certificate
Account. . . . . . . . . . . . . . . . . . . 23
Section 4.05. Action Concerning Defaulted Mortgage Loan. . . 24
Section 4.06. Trustee Compensation . . . . . . . . . . . . . 24
Section 4.07. Rights of the Certificateholders . . . . . . . 24
<CAPTION>
ARTICLE V
PAYMENTS TO THE CERTIFICATEHOLDERS
<S> <C> <C> <C>
Section 5.01. Distributions. . . . . . . . . . . . . . . . . 25
Section 5.02. Statements to Certificateholders . . . . . . . . 26
Section 5.03. Advances by Pass-Through Trustee . . . . . . . 26
</TABLE>
i
<PAGE> 5
ARTICLE VI
THE DEPOSITOR
<TABLE>
<S> <C> <C> <C>
Section 6.01. Maintaining Corporate Existence of the
Depositor. . . . . . . . . . . . . . . . . . 27
Section 6.02. Limitation on Liability of the Depositor. . . . 27
<CAPTION>
ARTICLE VII
DEFAULT
<S> <C> <C> <C>
Section 7.01. Events of Default. . . . . . . . . . . . . . . 28
Section 7.02. Waiver of Defaults. . . . . . . . . . . . . . . 29
Section 7.03. Notification to Certificateholders. . . . . . . 29
Section 7.04. Rights of Certificateholders to Direct
Proceedings . . . . . . . . . . . . . . . . . 29
Section 7.05. Rights of Certificateholders to
Receive Payment . . . . . . . . . . . . . . . 30
Section 7.06. Remedies Cumulative . . . . . . . . . . . . . . 30
Section 7.07. Pass-Through Trustee Default. . . . . . . . . . 30
Section 7.08. Notice to Tenant[s] and Kmart. . . . . . . . . 31
<CAPTION>
ARTICLE VIII
CONCERNING THE PASS-THROUGH TRUSTEE
AND THE COLLATERAL TRUSTEE
<S> <C> <C> <C>
Section 8.01. Duties of Pass-Through Trustee. . . . . . . . . 31
Section 8.02. Certain Matters Affecting Pass-Through
Trustee. . . . . . . . . . . . . . . . . . . 32
Section 8.03. Pass-Through Trustee Not Liable for
Certificates or Mortgage Note[s]. . . . . . . 34
Section 8.04. Pass-Through Trustee May Own Certificates. . . 34
Section 8.05. Pass-Through Trustee's Fee and Expenses. . . . 34
Section 8.06. Action by Co-Trustee. . . . . . . . . . . . . . 35
Section 8.07. Eligibility Requirements for Pass-Through
Trustee. . . . . . . . . . . . . . . . . . . 36
Section 8.08. Resignation and Removal of Pass-Through
Trustee and Collateral Trustee. . . . . . . . 36
Section 8.09. Successor Pass-Through Trustee. . . . . . . . . 38
Section 8.10. Merger or Consolidation of Pass-Through
Trustee. . . . . . . . . . . . . . . . . . . 38
Section 8.11. Resignation of Co-Trustee. . . . . . . . . . . 38
Section 8.12. Removal of Co-Trustee. . . . . . . . . . . . . 39
Section 8.13. Appointment of Successor to Co-Trustee. . . . . 39
Section 8.14. Succession of Successor to Co-Trustee. . . . . 39
Section 8.15. Reports by the Pass-Through Trustee to
Certificateholders. . . . . . . . . . . . . . 39
Section 8.16 Co-Trustee of the Collateral Trust . . . . . . 40
<CAPTION>
ARTICLE IX
TERMINATION
<S> <C> <C> <C>
Section 9.01. Termination. . . . . . . . . . . . . . . . . . 40
Section 9.02. Notice; Final Distribution . . . . . . . . . . . 40
</TABLE>
ii
<PAGE> 6
ARTICLE X
SUPPLEMENTS AND AMENDMENTS TO THIS
PASS-THROUGH TRUST AGREEMENT AND OTHER DOCUMENTS;
ADDITIONAL AGREEMENTS OF TRUSTEE
<TABLE>
<S> <C> <C> <C>
Section 10.01. Supplemental Pass-Through Trust Agreements
Without Consent of Holders. . . . . . . . . . 41
Section 10.02. Supplemental Agreements With Consent of
Certificateholders. . . . . . . . . . . . . . 42
Section 10.03. Effect of Supplemental Agreement. . . . . . . . 44
Section 10.04. Documents to Be Given to Trustee. . . . . . . . 44
Section 10.05. Notation on Certificates in Respect of
Supplemental Agreements. . . . . . . . . . . 44
Section 10.06. Supplements to Collateral Trust Agreement . . . 45
<CAPTION>
ARTICLE XI
MISCELLANEOUS PROVISIONS
<S> <C> <C> <C>
Section 11.01. Severability of Provisions. . . . . . . . . . . 45
Section 11.02. Limitation on Rights of Certificateholders. . . 45
Section 11.03. Solicitation of Certificateholders. . . . . . . 46
Section 11.04. Recordation of Agreement. . . . . . . . . . . . 47
Section 11.05. Duration of Agreement. . . . . . . . . . . . . 47
Section 11.06. Governing Law. . . . . . . . . . . . . . . . . 47
Section 11.07. Notices. . . . . . . . . . . . . . . . . . . . 47
Section 11.08. Counterparts. . . . . . . . . . . . . . . . . . 48
Section 11.09. Submission to Jurisdiction. . . . . . . . . . . 48
Section 11.10. Gender; Number. . . . . . . . . . . . . . . . . 48
Section 11.11. TIA Controls. . . . . . . . . . . . . . . . . . 48
Section 11.12. Certificate and Opinion as to Conditions
Precedent . . . . . . . . . . . . . . . . . . 48
Section 11.13. Statements Required in Certificate
or Opinion . . . . . . . . . . . . . . . . . 49
Section 11.14. Benefits of Pass-Through Trust Agreement. . . . 49
</TABLE>
EXHIBIT A-1 MORTGAGE NOTE SCHEDULE
EXHIBIT A-2 CERTIFICATE SCHEDULE
EXHIBIT A-3 CONTENTS OF MORTGAGE FILE
EXHIBIT B [FORM OF CERTIFICATE]
iii
<PAGE> 7
__________________
PASS-THROUGH TRUST AGREEMENT
SERIES _____
__________________
THIS PASS-THROUGH TRUST AGREEMENT, SERIES ____, dated as of __________,
19__, is executed by and among NATIONAL TENANT FINANCE CORPORATION, a Delaware
corporation, as depositor (together with its permitted successors, in such
capacity, "Depositor"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York
banking corporation organized under the laws of the United States of America,
as trustee (together with its permitted successors and assigns, "Pass-Through
Trustee").
In consideration of the premises and the mutual agreements hereinafter set
forth, the Depositor and the Pass-Through Trustee agree as follows:
PREFACE
Each Certificate evidences a beneficial ownership interest in the
Pass-Through Trust Property, the assets of which include, among other things,
the Mortgage Note[s]. The Certificates are equally and ratably secured by and
payable from the proceeds of the Mortgage Note[s], and [the] [each] Mortgage
Note is ratably secured by the related Mortgage (as each such term is defined
herein).
Each Certificate is paid interest or principal and interest, as set forth
on the Debt Service schedule on such Certificate, on a semiannual basis
referred to herein as the Remittance Dates. Payments under the Mortgage Note[s]
are payable semiannually on the Due Dates.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions. Whenever used herein, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
"Additional Rent": [With respect to each Lease] has the meaning assigned
in Article 5 of [the] [such] Lease.
"Administrative Expenses": The ordinary and necessary expenses incurred by
the Trustee in the course of administering the affairs of the Pass-Through
Trust.
"Annual Rental": [With respect to each Lease] has the meaning assigned in
Article 4 of [the] [such] Lease.
"Available Distribution Amount": As to any Remittance Date, an amount
equal to the amount on deposit in the Certificate Account
<PAGE> 8
as of the close of business on the Business Day immediately preceding the
Remittance Date.
"Benefit Plan": An employee benefit plan as defined in Section 3(3) of
ERISA, including an employee welfare benefit plan or an employee pension
benefit plan, a plan described in Section 401(a) or Section 403(a) of the Code,
the trust under which is exempt from tax under Section 501(a) of the Code, an
individual retirement account under Section 408(a) of the Code or an individual
retirement annuity under Section 408(b) of the Code, and any entity whose
underlying assets include Benefit Plan assets by reason of a Benefit Plan's
investment in such entity.
"Borrower": [The] [A] Borrower identified in [the] [a] Loan Agreement.
"Business Day": Any day other than (i) a Saturday or Sunday, or (ii) a
day on which banking or savings and loan institutions in New York or
California, or the city in which the principal corporate trust offices of any
successor Pass-Through Trustee are located, are authorized or obligated by law
or executive order to be closed.
"Certificate" or "Certificates": The Certificate or Certificates
evidencing a beneficial ownership interest in the Pass-Through Trust Property
executed and authenticated by the Pass-Through Trustee substantially in the
form set forth in Exhibit B hereto.
"Certificate Account": The trust account described in Section 4.03.
"Certificate Balance": With respect to all the Certificates, the original
principal amount of the Certificates less all payments and prepayments of
principal thereof, including without limitation any payments of principal
comprising Debt Service; and with respect to any Certificate, the original
principal amount of such Certificate less all payments and prepayments of
principal thereof, including without limitation any payments of principal
comprising Debt Service on such Certificate.
"Certificateholder", "Certificateholders", "Holder" or "Holders": The
person or persons in whose name a Certificate is registered in the Certificate
Register, except that, solely for the purposes of any consent, waiver, request
or demand pursuant to this Pass-Through Trust Agreement, any Certificate
registered in the name of the Depositor, [Kmart], a Tenant, a Borrower, any
successor owner or ground lessee of a Project, any successor tenant or
subtenant of a Project, any successor guarantor of the performance of a Tenant
or successor tenant or subtenant, or any affiliate of any of the
2
<PAGE> 9
foregoing, shall be deemed not to be outstanding and the Percentage Interest
evidenced thereby shall not be taken into account in determining the amount of
Percentage Interests voted with respect to any such consent, waiver, request or
demand.
"Certificate Owner": Any Person acquiring a beneficial interest in a
Registered Global Certificate, which ownership shall be reflected on the books
of the Depository or on those of a participant in such Depository. Solely for
the purposes of any consent, waiver, request or demand pursuant to this
Pass-Through Trust Agreement, any portion of a Registered Global Certificate
that is beneficially owned by the Depositor, [Kmart], a Tenant, a Borrower, any
successor owner or ground lessee of a Project, any successor tenant or
subtenant of a Project, any successor guarantor of the performance of a Tenant
or successor tenant or subtenant, or any affiliate of any of the foregoing,
shall be deemed not to be outstanding and the Percentage Interest evidenced by
such portion shall not be taken into account in determining whether the
requisite amount of Percentage Interests necessary to effect any such consent,
waiver, request or demand has been obtained.
"Certificate Register": The register maintained pursuant to Section 3.02.
"Certificate Schedule": The Certificate Schedule attached hereto as
Exhibit A-2 setting forth the following information for each Certificate issued
as of the Closing Date: (i) the Certificate Number; (ii) the Certificate
Balance as of the Closing Date; and (iii) the Debt Service on such Certificate.
"Closing Costs": An amount equal to $_____________ which shall be
disbursed to the Underwriters on the Closing Date.
"Closing Date": _______ __, 199_.
"Code": The Internal Revenue Code of 1986, as amended.
"Collateral Trust": The Trust created pursuant to the Collateral Trust
Agreement.
"Collateral Trust Agreement": The Collateral Trust Agreement dated the
date hereof between the Collateral Trustee and the Depositor, together with all
amendments thereof and supplements thereto.
"Collateral Trust Property": The corpus of the Collateral Trust, to the
extent described in the Collateral Trust Agreement, consisting of all Loan
Documents, property which secures the Mortgage Loan[s] and which has been
acquired by foreclosure or deed in lieu of foreclosure (prior to its
disposition) and Insurance Proceeds, Condemnation Proceeds and any other
amounts receivable under the Loan Documents, and any funds advanced by the
Certificateholders to the Collateral Trustee or otherwise held by
3
<PAGE> 10
the Collateral Trustee in accordance with the provisions of the Collateral
Trust Agreement.
"Collateral Trustee": United States Trust Company of New York, and
its permitted successors under the Collateral Trust Agreement.
"Condemnation Proceeds": Any awards in respect of, or settlements in lieu
of, condemnation proceedings affecting [the] [a] Mortgaged Estate.
"Consent and Agreement": [A] [The] Consent and Agreement among Kmart,
Depositor, [a] Borrower, [a] Tenant and the Collateral Trustee relating to [a]
[the] Lease, [[a] [the] Lease Guaranty,] [a] [the] Note Put Agreement and
certain other related matters.
"Corporate Trust Office": The office of the Pass-Through Trustee in
the State of New York at which at any particular time its corporate trust
business shall be administered, or the office of its designated agent, U.S.
Trust Company of California, N.A., which office at the date of execution of
this instrument is located at Suite 2700, 555 South Flower Street, Los Angeles,
California 90071.
"Debt Service": The interest or interest and principal payable
semiannually on the Remittance Date as stated on a specific Certificate, as
adjusted from time to time as provided in Sections 3.01(g) hereof.
"Depositor": National Tenant Finance Corporation, a Delaware corporation,
and its successors in interest.
"Depository": The depository of the Registered Global Certificate[s], if
any, representing the Certificates and any successor to such depository
appointed by the Depositor. Such depository initially shall be The Depository
Trust Company, a New York corporation.
"Determination Date": The Business Day immediately preceding a Remittance
Date.
"Due Date": [With respect to each Mortgage Note,] a Note Payment Date as
defined in the [related] Loan Agreement.
"Eligible Investments": One or more of the following:
(i) direct obligations of the United States of America;
(ii) obligations fully guaranteed, both as to principal and
interest, by the United States of America;
(iii) certificates of deposit issued by, or bankers' acceptances
of, or time deposits with, a bank or trust company organized under the laws of
the United States or any state thereof, having capital, surplus and undivided
profits aggregating at least $100,000,000 and whose long-term certificates of
deposit are, at
4
<PAGE> 11
the time of acquisition thereof, rated in the highest rating category for such
securities by S&P and Moody's; and
(iv) taxable government money-market portfolios restricted to
obligations with maturities of one year or less, issued or guaranteed by the
full faith and credit of the United States which, at the time of such
investment, are then rated in the highest rating category of S&P and Moody's
(the "highest rating category" as used in this definition shall mean (A) a
rating which would be assigned by S&P, as of the date first above written,
equivalent to or higher than "AAAm" or "AAAmG" with respect to money-market
securities and (B) a rating which would be assigned by Moody's as of the date
first above written, equivalent to or higher than "Am" with respect to
money-market securities);
provided that any such obligations of the types described in clauses (i)
through (iv) above shall not have a maturity later than the earlier of 90 days
and the date the funds being invested are to be distributed to the
Certificateholders; provided further, that any such obligations of the types
described in clauses (i) and (ii) above may be made through a repurchase
agreement in commercially reasonable form with a bank or other financial
institution (which may be the Pass-Through Trustee or the Collateral Trustee)
the senior unsecured debt of which is then assigned an A rating or better by
S&P or Moody's, so long as title to the underlying obligations shall pass to
the Pass-Through Trustee and that such underlying obligations shall be
segregated in a custodial or trust account of or for the benefit of the
Pass-Through Trustee.
"ERISA": The Employee Retirement Income Security Act of 1974, as amended.
"Event of Default": Any event of default described in Section 7.01.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"Extraordinary Expense Advances": All reasonable and necessary
"out-of-pocket" costs and expenses of the Pass-Through Trustee or the
Collateral Trustee in enforcing the Mortgage Note[s] and the Loan Documents
following an Event of Default under Section 7.01 hereof (except for a
Non-Monetary Tenant Default), and in compliance with the obligations of the
Collateral Trustee under Section 4.07 of the Collateral Trust Agreement.
"FDIC": Federal Deposit Insurance Corporation or any successor
organization.
"Insurance Proceeds": Proceeds paid by any insurer pursuant to any
insurance policy, including but not limited to title insurance, environmental
insurance and self-insurance proceeds paid by Kmart or any Tenant, covering
all or a portion of the Mortgaged Estate.
5
<PAGE> 12
"Kmart": Kmart Corporation, a Michigan corporation, and its successors and
assigns.
"Lease": [With respect to each Mortgage Note,] has the meaning assigned
thereto in Section 1.1 of the [related] Loan Agreement.
["Lease Guaranty": [With respect to each Mortgage Note,] has the meaning
assigned thereto in Section 1.1 of the [related] Loan Agreement.]
["Lease Guaranty Termination": [With respect to any Mortgage Loan] a Lease
Guaranty Termination as defined in the [related] Note Put Agreement.]
"Letter of Representations": A letter (in the form attached hereto as
Exhibit C) from the Depositor and the Pass-Through Trustee to, and accepted by,
the Depository, as such letter may be modified or supplemented, or any
successor letter thereto.
"Liquidated Mortgage Loan": [A] [The] Mortgage Loan after an Event of
Default under the [related] Loan Agreement when the Collateral Trustee has
reasonably determined that all amounts which it expects to recover from or on
account of such Mortgage Loan have been recovered.
"Liquidation Expenses": Expenses which are incurred by the Collateral
Trustee in connection with the liquidation of a defaulted Mortgage Loan, such
expenses including, without limitation, legal fees and expenses, any
unreimbursed amount expended by the Collateral Trustee pursuant to Section 4.07
of the Collateral Trust Agreement (to the extent such amount is reimbursable
under the terms of such Section 4.07) respecting such Mortgage Loan and any
related and unreimbursed expenditures for real estate property taxes or for
property restoration or preservation.
"Liquidation Proceeds": Cash (including Insurance Proceeds and Condemnation
Proceeds) received by the Collateral Trustee in connection with the liquidation
of [a] [the] defaulted Mortgage Loan, whether through the sale of such
defaulted Mortgage Loan, the sale of the Mortgaged Estate securing such
defaulted Mortgage Loan pursuant to foreclosure sale or otherwise, or revenues
from or the sale of the related Mortgaged Estate if such Mortgaged Estate is
acquired in satisfaction of such defaulted Mortgage Loan, other than amounts
required to be paid to the Borrower pursuant to law or the terms of the related
Mortgage Note.
"Loan Agreement": [With respect to each Mortgage Note,] the [related] Loan
Agreement between Depositor and [a] Borrower, pursuant to the terms and
conditions of which the [related] Mortgage Loan was made.
6
<PAGE> 13
"Loan Documents": [With respect to each Mortgage Loan,] the [related] Note
Put Agreement, the [related] Loan Agreement, the [related] Mortgage and each
document in the Mortgage File [pertaining to such Mortgage Loan], and each
other document which constitutes a Loan Document pursuant to the terms and
provisions of [such] [the] Loan Agreement.
"Make-Whole Premium": [With respect to each Mortgage Note,] has the meaning
assigned to it in Section 2 of the [related] Loan Agreement. The Pass-Through
Trustee shall be provided with a certificate evidencing the calculation of such
amount by the Depositor.
"Moody's": Moody's Investors Service, Inc., a Delaware corporation, its
successors and assigns.
"Mortgage": [With respect to each Mortgage Note,] has the meaning assigned
thereto in Section 1.2 of the [related] Loan Agreement.
"Mortgage File": The items referred to in Exhibit A-3 annexed hereto
pertaining to the Mortgage Loan[s].
"Mortgage Loan": The loan pursuant to [a] [the] Loan Agreement together
with all right, title and interest of Depositor relating thereto, secured by the
[related] Mortgage, and evidenced by the [related] Mortgage Note and [another]
[other] mortgage note[s] issued in connection with such Loan Agreement with [a]
different maturit[y][ies], which [is][are] held by [another] [other]
pass-through trustee[s] pursuant to [another] [other] pass-through trust
agreement[s] dated the date hereof.
"Mortgage Note": [A] [The] promissory note, executed by [a] [the] Borrower
as obligor and having [a] [the] maturity date and interest rate specified
in the Mortgage Note Schedule, secured by [a] [the] Mortgage, which Mortgage
Note was sold, conveyed, transferred and absolutely assigned by the Depositor
to the Pass-Through Trustee and which is the subject of this Pass-Through Trust
Agreement and included in the Pass-Through Trust Property.
"Mortgage Note Payments": The scheduled payments set forth in Exhibit A-1
of interest or principal and interest on the Mortgage Note[s].
"Mortgage Note Schedule": The schedule attached hereto as Exhibit A-1
setting forth the following information for the Mortgage Note[s]: (i) [each]
[the] Borrower's name; (ii) the Mortgaged Estate[s]; (iii) the maturity
date[s]; (iv) [each] [the] Mortgage Note rate; (v) the first Due Date; (vi) a
schedule setting forth the Mortgage Note Payments; and (vii) the original
Principal Balance of [each] [such] Mortgage Note.
"Mortgaged Estate": [With respect to each Mortgage Note,] the real and
personal property securing [such] [the] Mortgage Note.
7
<PAGE> 14
"Net Liquidation Proceeds": Liquidation Proceeds net of Liquidation
Expenses.
"Non-Monetary Tenant Default": [With respect to a Lease,] any default under
[such] [the] Lease by the [related] Tenant other than a default in the payment
of Annual Rental or Additional Rent.
"Note Put Agreement": [With respect to each Loan Agreement,] the Note Put
Agreement by and between Depositor, [and] the [related] Tenant, [and Kmart]
pursuant to the terms and conditions of which a Put of [such] [the] Mortgage
Note may be made on the occurrence of certain events specified therein.
"Officer's Certificate": A certificate signed by the Chairman of the Board,
the Chief Executive Officer, the President or a Vice President, the Treasurer
or the Secretary or one of the Assistant Treasurers or Assistant Secretaries or
any other duly authorized officer of the Depositor and delivered to the
Pass-Through Trustee containing the information required by Sections 11.12 and
11.13.
"Opinion of Counsel": An opinion in writing signed by legal counsel who may
be an employee of or counsel to the Depositor in form and substance acceptable
to the Pass-Through Trustee containing the information required by Sections
11.12 and 11.13.
["Option Agreement": An option granted by [a][the] Borrower to [a][the]
Tenant permitting such Tenant to acquire the [related] Project in the event
Borrower does not perform its obligations under the [related] Lease and the
[related] Construction Fund Disbursement Agreement.]
"Pass-Through Trust": The grantor trust created pursuant to this
Pass-Through Trust Agreement.
"Pass-Through Trust Agreement": This Trust Agreement and all amendments
hereof and supplements hereto.
"Pass-Through Trustee": United States Trust Company of New York, and its
permitted successors and assigns hereunder.
"Pass-Through Trustee's Fee": The amount of the annual fee paid to the
Pass-Through Trustee for its Administrative Expenses, including the reasonable
expenses of preparing any tax returns as provided in Section 5.02, arising
under this Pass-Through Trust Agreement, equal to $_____, payable by the
Tenant[s] pursuant to the Consent and Agreement[s].
"Pass-Through Trust Property": The corpus of the Pass-Through Trust, to the
extent described herein, consisting of the Mortgage Note[s], all rights of the
holder of such Mortgage Note[s] under the Collateral Trust Agreement or
otherwise, such assets as shall from time to time be identified as deposited in
the Certificate Account (including the investment income thereon), and any
funds
8
<PAGE> 15
advanced by the Certificateholders to the Pass-Through Trustee in accordance
with the provisions hereof.
"Paying Agent": The Person designated as the Paying Agent pursuant to
Section 3.05.
"Percentage Interest": The percentage of the whole undivided beneficial
interest in the Pass-Through Trust Property held by a Holder, to be evidenced
by a Certificate which shall state the percentage interest therein.
"Permitted Encumbrances": The Permitted Encumbrances as defined in [each]
[the] Mortgage.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political
subdivision thereof.
"Pledge Agreement": [With respect to each Mortgage Note,] has the meaning
assigned thereto in Section 1.2 of the [related] Loan Agreement.
"Principal Balance": The outstanding principal balance of [the] [a]
Mortgage Note as of any specified date.
"Principal Prepayment": Any payment or other recovery of principal on [a]
[the] Mortgage Note, including any prepayment of principal pursuant to Section
3 of the [related] Loan Agreement, Insurance Proceeds and Condemnation Proceeds
to the extent required to be deposited in the Certificate Account and
Liquidation Proceeds, which is received in advance of its scheduled Due Date.
"Project": [A] [The] facility comprised of a retail store [constructed by
[a] Borrower [and [a] Tenant]] for lease by [a] [such] Tenant on real property
[which will be [acquired by] [owned by] [a] [such] Borrower and] [upon which
such facility will be constructed on behalf of [such] Borrower] using the
proceeds of [a] [the] Mortgage Loan.
"Purchase Price": [With respect to each Mortgage Note,] has the meaning
assigned thereto in Section 2.1 of the [related] Note Put Agreement.
"Put": The right to require purchase of [a] [the] Mortgage Note by [a]
[the] Tenant [and Kmart] pursuant to the [related] Note Put Agreement.
"Rating Agency": Any nationally recognized statistical rating agency, or
its successor, that rated the Certificates at the request of the Depositor at
the time of the initial issuance of the Certificates. If such agency or a
successor is no longer in existence, "Rating Agency" shall be such nationally
recognized statistical rating agency, or other comparable Person, designated
["Rating Decline": [with respect to a Mortage Loan,] has the meaning
assigned thereto in the related Note Put Agreement.]
9
<PAGE> 16
by the Depositor, notice of which designation shall be given to the Pass-Through
Trustee. References herein to the highest rating category of a Rating Agency
shall mean AAA or better in the case of S&P and Aaa or better in the case of
Moody's and in the case of any other Rating Agency shall mean a rating
equivalent to such ratings.
"Record Date": (i) With respect to any distribution the close of business
on the fifteenth day preceding the related Remittance Date, except with respect
to a distribution pursuant to Section 3.01(f), in which case the Record Date is
the close of business on the fifteenth day prior to the Remittance Date on
which the related Mortgage Note Payment would, pursuant to the terms hereof,
have been distributable to the Certificateholders had such Mortgage Note
Payment been paid in full in a timely manner. (ii) With respect to any
direction, consent, waiver or other action to be given or taken by
Certificateholders, the date established by the Pass-Through Trustee pursuant
to Section 1.03(e) hereof.
"Registered Global Certificate": The Certificate, if any, issued to
the Depository in accordance with Article III and bearing the legend prescribed
in Section 3.06(a).
"Remittance Date": With respect to the Certificates, an interest or
principal and interest payment date of ________ 1, 19__, and the first Business
Day of each ________ and ____ thereafter until _____ 1, ____, or the payment of
the unpaid principal balance in full, or such other date when a distribution is
made pursuant to Section 3.01(c), 3.01(d), 3.01(e), or 3.01(f) hereof.
"Responsible Officer": When used with respect to the Pass-Through
Trustee, the Chairman or Vice Chairman of the Board of Directors of the
Pass-Through Trustee, the Chairman or Vice Chairman of the Executive or
Standing Committee of the Board of Directors of the Pass-Through Trustee, the
President, the Chairman of the Committee on Trust Matters, any Vice President,
any Assistant Vice President, the Secretary, any Assistant Secretary, the
Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any
Trust Officer or Assistant Trust Officer, the Controller and any Assistant
Controller or any other officer of the Pass-Through Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
["Restructuring Event": [with respect to a Mortgage Loan] has the meaning
assigned thereto in the related Note Put Agreement.]
["Second Mortgage": A Mortgage, Security Agreement and Assignment of
Rents from [a] [the] Borrower to [a] [the] Tenant which grants a lien
subordinate to the [related] Mortgage on [a] [the] Project to secure such
Borrower's performance under the [related] Lease and under the [related]
Construction Fund Disbursement Agreement.]
"S & P": Standard & Poor's Ratings Group, a __________ corporation,
its successors and assigns.
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"Tenant" [or "Tenants"]: [Kmart and] ___________, _____________ [or
____________,] [each of] which is a subsidiary of Kmart and which has entered
into [the] [a] Lease with [a] [the] Borrower to occupy a Project.
"TIA": The Trust Indenture Act of 1939 as in effect on the date as of
which this Pass-Through Trust Agreement was first qualified under such Act;
provided, however, that in the event the Trust Indenture Act is amended after
such date, "TIA" means, to the extent required by such amendment, the Trust
Indenture Act of 1939 as so amended.
"Transfer Assurance": A Transfer Assurance required pursuant to
Section 3.02(c).
"Treasury Regulations": The Treasury Regulations, including proposed,
temporary and final regulations promulgated under the provisions of the Code.
"Underwriters": The several underwriters named in the Underwriting
Agreement.
"Underwriting Agreement": The Underwriting Agreement dated ________
__, 19__, between Kmart, the Depositor and Sutro & Co. Incorporated [on behalf
of itself and the several underwriters named therein].
Section 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Pass-Through Trust Agreement refers to a provision of the TIA,
such provision is incorporated by reference in and made a part of this Trust
Agreement. The following TIA terms used in this Pass-Through Trust Agreement
have the following meanings:
"Commission" means the SEC.
"Indenture securities" means the Certificates.
"Indenture security holder" means a Certificateholder.
"Indenture to be qualified" means this Pass-Through Trust Agreement.
"Indenture trustee" or "institutional trustee" means the Pass-Through
Trustee.
"Obligor" on the Indenture securities means Kmart.
All other TIA terms used in this Pass-Through Trust Agreement that are
defined by the TIA, defined by TIA reference to another
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statute or defined by SEC rule have the meanings assigned to them by
such definitions.
Section 1.03. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Pass-Through Trust Agreement to be
given or taken by Certificateholders may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such
Certificateholders in person or by an agent duly appointed in writing; and,
except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Pass-Through
Trustee and, where it is hereby expressly required, to the Depositor and to
Kmart. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of
Certificateholders signing such instrument or instruments. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Pass-Through Trust Agreement and conclusive
in favor of the Pass-Through Trustee and the Depositor, if made in the manner
provided in this Section 1.03.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Pass-Through
Trustee deems sufficient.
(c) The ownership of Certificates shall be proved by the Certificate
Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Certificate shall bind every future
Holder of the same Certificate and the Holder of every Certificate issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Pass-Through
Trustee or the Depositor in reliance thereon, whether or not notation of such
action is made upon such Certificate.
(e) If the Pass-Through Trustee shall solicit from the Holders any
request, demand, authorization, direction, notice, consent, waiver or
other Act, the Pass-Through Trustee shall fix in advance a record date for the
determination of Holders entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other Act. Such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close
of business on such record date shall be deemed to be Holders for the purposes
of determining whether Holders of the requisite proportion of outstanding
Certificates have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent,
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waiver or other Act, and for that purpose the outstanding Certificates
shall be computed as of such record date; provided that no such authorization,
agreement or consent by the Holders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Pass-Through Trust Agreement not later than six months after the record date.
ARTICLE II
CONVEYANCE OF MORTGAGE LOAN[S]; TRUST PROPERTY
Section 2.01. Conveyance of Mortgage Note[s]. As grantor of the
Pass-Through Trust, the Depositor, concurrently with the execution and delivery
hereof, does hereby sell, transfer, set over, convey and absolutely assign to
the Pass-Through Trustee without recourse (except as provided herein) in trust
intending to establish the Pass-Through Trust, all right, title and interest of
the Depositor in and to the Mortgage Note[s], including all interest,
Make-Whole Premium and principal due or to become due from [each] [the]
Borrower on or with respect to [each] [the] Mortgage Note.
The ownership of the Pass-Through Trust Property is vested in the
Pass-Through Trustee without reservation of any right, title or interest
whatsoever in the Depositor. The Depositor intends that the sale, conveyance,
transfer and absolute assignment of the Depositor's right, title and interest
in and to the Mortgage Note[s] pursuant to this Pass-Through Trust Agreement
shall constitute a purchase and sale and not a pledge of security for a loan.
However, if for any reason such conveyance is deemed not to be a sale, the
Depositor intends that the rights and obligations of the parties shall
nevertheless be established pursuant to the terms of this Pass-Through Trust
Agreement and that the Depositor shall be deemed to have granted to the
Pass-Through Trustee a first priority security interest in all of the
Depositor's right, title and interest in, to and under the Mortgage Note[s],
all payments of principal of or interest on the Mortgage Note[s], all other
payments made in respect of the Mortgage Note[s] (including, without
limitation, any Make-Whole Premium), and all proceeds of any thereof, and
any other assets of the Pass-Through Trust, and that this Pass-Through Trust
Agreement shall constitute a security agreement under applicable law.
Section 2.02. Acceptance by Pass-Through Trustee. The Pass-Through
Trustee acknowledges receipt of the Mortgage Notes[s] and declares that it
holds and will hold such Mortgage Note[s] and any other documents constituting
a part of the Pass-Through Trust Property delivered to it in trust for the use
and benefit of all present and future Certificateholders.
The Pass-Through Trustee hereby represents that it holds [each][the]
Mortgage Note without notice or knowledge (a) of any adverse claims, liens or
encumbrances with respect to [such][the] Mortgage Note, (b) that [such][the]
Mortgage Note is overdue or has
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been dishonored, (c) of evidence on the face of [such][the] Mortgage
Note of any security interest or other right or interest therein by any other
party, or (d) of any defense against or claim to [such][the] Mortgage Note by
any other party.
Upon receipt thereof, the Pass-Through Trustee shall deliver to the
Certificateholders the Collateral Trustee's Certification delivered pursuant
Section 2.02 of the Collateral Trust Agreement.
Section 2.03. Trust Property. The Pass-Through Trustee acknowledges
that it holds the Pass-Through Trust Property conveyed pursuant to this
Pass-Through Trust Agreement in trust for the use and benefit of all present
and future Certificateholders.
Section 2.04. Limitation of Powers. The Pass-Through Trust is
constituted solely for the purpose of making the investment in the Pass-Through
Trust Property, and, except as set forth herein, the Pass-Through Trustee is
not authorized or empowered to acquire any other investments or engage in any
other activities.
ARTICLE III
THE CERTIFICATES
Section 3.01. The Certificates.
(a) Form and Terms. The Certificates and the Pass-Through Trustee's
certificate of authentication shall be substantially in the form attached
hereto as Exhibit B. Subject to the provisions of Section 3.06 hereof, the
Certificates shall be issuable as registered securities without coupons and
shall be numbered, lettered or otherwise distinguished from one another. The
Certificates shall be issued in denominations of $1,000 principal amount and
any integral multiple thereof and shall be dated the date of their
authentication. Each Certificate shall bear interest and have the other terms
as are set forth in the Certificate Schedule and in such Certificate. Each
Certificate shall evidence a beneficial ownership interest in the Pass-Through
Trust Property and shall have no rights, benefits or interest in respect of any
other separate pass-through trust, if any, or the trust property held in such
other pass-through trust. All Certificates shall be in all respects equally and
ratably entitled to the benefits of the Pass-Through Trust without preference,
priority, or distinction on account of actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this
Pass-Through Trust Agreement.
Certificates shall not be subject to optional prepayment except as
provided herein.
On the Closing Date, the Pass-Through Trustee shall issue the
Certificates indicated on the Certificate Schedule. The aggregate principal
amount of the Certificates to be issued hereunder shall not exceed
$___________.
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(b) Execution and Authentication. The Certificates shall be executed
on behalf of the Pass-Through Trustee by its Chairman of the Board, one of its
Vice Chairmen, its President or one of its Vice Presidents, under its corporate
seal reproduced thereon. The signature of any such officer on the Certificates
may be manual or facsimile.
Certificates bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Pass-Through Trustee shall bind
the Pass-Through Trustee, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the authentication and delivery of
such Certificates or did not hold such offices at the date of such
Certificates.
No Certificate shall be entitled to any benefit under this Pass-Through
Trust Agreement or be valid or obligatory for any purpose unless there appears
on such Certificate a certificate of authentication substantially in the form
provided for in Exhibit "B" annexed thereto duly executed by the Pass-Through
Trustee by manual signature of an authorized officer, and such certificate of
authentication upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and made available
for delivery hereunder.
(c) Prepayment Distribution. In the event of a prepayment of [a]
[the] Mortgage Note pursuant to Section 3 of the [related] Loan Agreement (not
including a Put pursuant to the [related] Note Put Agreement), the Pass-Through
Trustee shall within 30 days following receipt of any amounts in connection
with such prepayment distribute such amounts to the Certificateholders pro rata
based upon their respective Percentage Interests.
(d) Note Put Distribution. The Pass-Through Trustee shall, in the
manner and to the extent required by Section 313(c) of the TIA, notify the
Certificateholders of the occurrence of any Triggering Event (as defined in [a]
[the] Note Put Agreement) known to the Pass-Through Trustee within five (5)
Business Days after obtaining knowledge thereof.
(i) Upon the occurrence of a Triggering Event (other than a Lease
Guaranty Termination [or a Rating Decline or Restructuring Event]), the
Pass-Through Trustee, at the written direction of any Certificateholders
received by the Pass-Through Trustee within 90 days of delivery of the notice
pursuant to Section 3.01(d), shall vote a percentage of the Principal Balance
of the [related] Mortgage Note corresponding to the Percentage Interests owned
by such Certificateholders in favor of directing the Collateral Trustee to (A)
exercise the Put in accordance with the terms and provisions of [such] [the]
Note Put Agreement, and (B) designate the Purchase Date under and as defined in
[such] [the] Note Put Agreement, which Purchase Date shall be not more than 35
Business Days after receipt of such direction.
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(ii) If the Triggering Event is a Lease Guaranty Termination [, Rating
Decline or Restructuring Event], the Pass-Through Trustee shall vote in favor
of directing the Collateral Trustee not to exercise such Put a percentage of
the Principal Balance of the [related] Mortgage Note corresponding to the
Percentage Interests owned by Certificateholders that have given the
Pass-Through Trustee written direction, within 30 days [, with respect to a
Failure of Completion, a Lease/Lease Guaranty Default, a Rating Decline or
Lease Guaranty Termination, or 15 days, with respect to a Restructuring Event,]
after the date the Pass-Through Trustee sent the notice of the occurrence of
the Triggering Event as provided in this Section 3.01(d), to vote to direct the
Collateral Trustee not to exercise such Put. With respect to a Restructuring
Event, if such direction not to exercise the Put is not received by the
Pass-Through Trustee from the Certificateholders during the 15 day period,
then the Pass-Through Trustee shall vote immediately upon the expiration of
such period to exercise the Put.
(iii) In the event the Collateral Trustee puts [the] [a] Mortgage
Note, [or in the event Kmart is obligated to purchase [the] [a] Mortgage Note
pursuant to the first sentence of Section 2.3 of the [related] Note Put
Agreement,] the Pass-Through Trustee will, upon request by the Collateral
Trustee, deliver such Mortgage Note, endorsed as provided in the [related] Note
Put Agreement, to the Collateral Trustee for the purpose of delivering such
Mortgage Note to the [related] Tenant or Kmart, as the case may be, in
connection with such Put [or purchase]. Within 29 days following receipt of the
Purchase Price, the Pass-Through Trustee shall distribute such amount, less any
unreimbursed reasonable costs and expenses incurred by the Pass-Through Trustee
in connection with the exercise of the Put [or in connection with such
purchase], to the Certificateholders pro rata based upon their respective
Percentage Interests, whereupon this Pass-Through Trust shall terminate with
respect to such Mortgage Note.
(e) Liquidation Distribution. In the event of a liquidation of [a]
[the] Mortgage Note by foreclosure or otherwise as a consequence of an Event of
Default (not including a Put pursuant to the [related] Note Put Agreement), the
Pass-Through Trustee shall within 29 days following receipt of any Net
Liquidation Proceeds in connection with such liquidation distribute such
amounts to the Certificateholders pro rata based upon their respective
Percentage Interests. Once a Mortgage Loan has become a Liquidated Mortgage
Loan and all Net Liquidation Proceeds with respect to the related Mortgage Note
have been distributed to the Certificateholders, this Pass-Through Trust shall
terminate with respect to such Mortgage Note.
(f) Late Payment Distribution. In the event that, due to unpaid
Annual Rental, there are insufficient funds available on any Due Date to pay
the Mortgage Note Payments on a Mortgage Note and subsequent to such Due Date
such Annual Rental or any Additional Rent with respect thereto is paid to the
Collateral Trustee, then, within 9 Business Days of receipt by the Pass-Through
Trustee from the Collateral Trustee of such overdue Mortgage Note Payments and,
to the extent available, interest at the Overdue Rate (as defined in such
Mortgage Note) or such overdue amount, the Pass-Through Trustee shall
distribute such amounts to the Certificateholders.
(g) Adjustment of Debt Service. In the event of (i) an optional
prepayment of all or any part of a Mortgage Note, (ii) an acceleration of the
maturity date of a Mortgage Note by reason of an Event of Default, (iii) a
Borrower becoming obligated to prepay a Mortgage Note pursuant to Section 3.3
of the [related] Loan
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Agreement, (iv) a reduction of Mortgage Payments due to the condemnation of a
part of the [related] Project resulting in a reduction in Annual Rental or (v)
the sale of a Mortgage Note pursuant to a Note Put Agreement, the Debt Service
shall be reduced to equal the aggregate Mortgage Note Payments on the remaining
outstanding Mortgage Notes, after giving effect to any reduction in such
Mortgage Note Payments by reason of an optional partial prepayment or a
condemnation described in clause (iv) and excluding from "remaining outstanding
Mortgage Notes," for this purpose, any Mortgage Note which is sold pursuant to
the Note Put Agreement, which is prepaid in full, the maturity date of which
has been accelerated, or which the Borrower is obligated to prepay in full
pursuant to Section 3.3 of the related Loan Agreement.
(h) Notice of Distribution. Notice of a distribution pursuant to
Section 3.01(c), (d) and (e) shall be given by sending such notice, by
first-class mail, postage prepaid, not less than 10 days prior to the date
fixed for such distribution. Notice of such distribution pursuant to any other
provision hereof shall be given as soon as reasonably practicable following
notice of the facts giving rise to such distribution by the Pass-Through
Trustee. All notices of such distribution shall be mailed to the
Certificateholder of each Certificate to be prepaid in whole or in part at the
address shown on the Certificate Register. Neither the failure of any
Certificateholder to receive a notice mailed nor any defect in any notice so
mailed shall affect the validity of the proceedings for such distribution. The
reasonable costs of such notices incurred by the Pass-Through Trustee shall be
deducted from the amount of any such distribution.
(i) Rights of Holders to Payments. The rights of the
Certificateholders to receive payments with respect to the Pass-Through Trust
Property in respect of the Certificates, and all ownership interests of the
Certificateholders in such payments, shall be as set forth in this
Pass-Through Trust Agreement.
Section 3.02. Registration of Transfer and Exchange of Certificates.
(a) The Pass-Through Trustee shall cause to be kept at its Corporate
Trust Office or at the office of its designated agent, a Certificate Register
in which, subject to such reasonable regulations as it may prescribe, the
Pass-Through Trustee shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided. The Pass-Through
Trustee shall be the Certificate Registrar. If the Pass-Through Trustee is not
the Certificate Registrar, the Depositor shall furnish to the Pass-Through
Trustee on or before each Remittance Date and at such other times as the
Pass-Through Trustee may request in writing a list in such form and as of such
date as the Pass-Through Trustee may reasonably require of the names and
addresses of Certificateholders, which list may be conclusively relied upon by
the Pass-Through Trustee.
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(b) Upon surrender for registration of transfer of any Certificate at
the Corporate Trust Office or at the office of any designated agent of the
Pass-Through Trustee maintained for such purpose, the Pass-Through Trustee
shall execute, authenticate and deliver, in the name of the designated
transferee or transferees, a new Certificate of a like tenor and dated the date
of such execution and authentication by the Pass-Through Trustee.
(c) No transfer of a Certificate or of a beneficial interest in a
Registered Global Certificate shall be made unless the Pass-Through Trustee:
(i) shall have received a Transfer Assurance consisting of
either (A) a representation from the transferee of such Certificate or
of such beneficial interest in a Registered Global Certificate to the
effect that such transferee is not a Benefit Plan, nor a person
acting on behalf of or purchasing for the benefit of any such Benefit
Plan, which representation letter shall not be an expense of the
Pass-Through Trustee, the Depository or the Depositor, or (B) in the
case of any such Certificate presented for registration, or of any
such beneficial interest in a Registered Global Certificate proposed
to be registered on the books of the Depository, or on those of a
participant in such Depository, in the name of a Benefit Plan, or a
trustee of any such Benefit Plan, an opinion of counsel reasonably
satisfactory to the Pass-Through Trustee and Depositor to the effect
that the purchase or holding of such Certificate or such beneficial
interest will not result in the assets of the Pass-Through Trust being
deemed to be "plan assets" subject to the prohibited transaction
provisions of ERISA or the Code, or that the purchase or holding of
such Certificate or such beneficial interest qualifies as an exempt
prohibited transaction under the provisions of ERISA or the Code, and
will not subject the Pass-Through Trustee or the Depositor to any
obligation in addition to those undertaken in this Pass-Through Trust
Agreement, which opinion of counsel shall not be an expense of the
Pass-Through Trustee, the Depository or the Depositor; or
(ii) shall authorize such transfer after receiving a request
therefor from the proposed transferee; provided that the Pass-Through
Trustee shall not give such authorization if the Percentage Interest
to be owned by such proposed transferee when added to the Percentage
Interests owned by any Certificateholders or Beneficial Owners who had
previously provided an opinion of counsel pursuant to Section
3.02(c)(i)(B) or received an authorization pursuant to this Section
3.02(c)(ii) would exceed 15%, and provided further that any such
authorization by the Pass-Through Trustee shall not be considered a
representation that an investment by any such transferee is an
appropriate or permitted investment by any such transferee, and
provided further that the Pass-Through Trustee shall have no
obligation to inquire with respect to, or to determine, whether a
Benefit Plan has attempted to become a Beneficial Owner without
providing an opinion of counsel pursuant to Section 3.02(c)(i)(B) or
obtaining an authorization from the Pass-Through Trustee pursuant to
this Section 3.02(c)(ii).
(d) In the absence of an opinion of counsel as provided in Section
3.02 (c)(i)(B) or an authorization by the Pass-Through Trustee as provided in
Section 3.02(c)(ii), the representation as described in Section 3.02(c)(i)(A)
shall be deemed to have been made to the Pass-Through Trustee by a transferee's
or Beneficial Owner's acceptance of a Certificate or beneficial interest
therein. In the event that such representation is violated, or any attempt is
made to transfer a Certificate or a beneficial interest therein to a Benefit
Plan, or a person acting on behalf of or purchasing for the benefit of any such
Benefit Plan, without an opinion of counsel as provided in Section
3.02(c)(i)(B) or an authorization of the Pass-Through Trustee as provided in
Section 3.02(c)(ii), such attempted transfer shall be void and of no effect.
(e) At the option of the Certificateholder, a Certificate may be
exchanged for another Certificate or Certificates of a like tenor, upon
surrender of the Certificate to be exchanged at the Corporate Trust Office or
at the office of any designated agent of the Pass-Through Trustee maintained
for such purpose. Whenever a Certificate is so surrendered for exchange, the
Pass-Through Trustee shall execute, authenticate and deliver a new Certificate
which the Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for transfer or exchange shall (if so
required by the Pass-Through Trustee) be duly endorsed by, or be accompanied by
a written instrument of transfer in a form reasonably satisfactory to the
Pass-Through Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing.
(f) No service charge shall be made to the Holder for any transfer or
exchange of the Certificate, but the Pass-Through
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Trustee may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of the Certificate.
(f) All Certificates surrendered for transfer and exchange shall be
destroyed by the Pass-Through Trustee.
Section 3.03. Mutilated, Destroyed, Lost or Stolen Certificates. If
(i) any mutilated Certificate is surrendered to the Pass-Through Trustee or the
Pass-Through Trustee receives evidence to its reasonable satisfaction of the
destruction, loss or theft of any Certificate, and (ii) there is delivered to
the Pass-Through Trustee such reasonable security or indemnity as may be
required by it to save it harmless, then, in the absence of notice to the
Pass-Through Trustee that such Certificate has been acquired by a bona fide
purchaser, the Pass-Through Trustee shall execute, and authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor. Upon the issuance of any
new Certificate under this Section, the Pass-Through Trustee may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses connected therewith.
Any replacement Certificate issued pursuant to this Section shall constitute
complete and indefeasible evidence of ownership of the undivided interest of
the Certificateholder in the Pass-Through Trust Property, as if originally
issued, whether or not the mutilated, destroyed, lost or stolen Certificate
shall be found at any time.
Section 3.04. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Pass-Through Trustee may treat
the Person in whose name any Certificate is registered in the Certificate
Register as the owner of such Certificate and the undivided interest in the
Pass-Through Trust Property evidenced thereby for the purpose of receiving
remittances pursuant to Section 5.01 and for all other purposes whatsoever, and
the Pass-Through Trustee shall not be affected by notice to the contrary.
Section 3.05. Appointment of Paying Agent. The Pass-Through Trustee
shall initially serve as Paying Agent for the purposes of making distributions
to Certificateholders pursuant to Section 5.01. The Pass-Through Trustee shall
require each Paying Agent, other than the Pass- Through Trustee, to agree in
writing that such Paying Agent shall hold in trust for the benefit of the
Certificateholders or the Pass-Through Trustee all assets held by the Paying
Agent for the payment of principal of, or interest on, the Certificates, and
shall notify the Pass-Through Trustee of any default in making such payments.
Section 3.06. Certificates Issuable in the Form of a Registered Global
Certificate. (a) The Pass-Through Trustee shall, in accordance with this
Article, execute, authenticate and deliver, Registered Global Certificates
which, in the aggregate,
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(i) shall represent, and shall be denominated in an initial principal
amount equal to, the original aggregate principal amount of the Certificates
issued hereunder, (ii) shall be registered in the name of the Depository or its
nominee, and (iii) shall bear a legend substantially to the following effect:
"Unless this Registered Global Certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Pass-Through Trustee or its agent for registration of transfer, exchange
or payment, and any Registered Global Certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein."
(b) Notwithstanding any other provision of this Section or of
Section 3.02, the Registered Global Certificates may be transferred, in whole
but not in part and in the manner provided in Section 3.02, by the Depository
to a nominee of such Depository or by a nominee of such Depository to such
Depository or another nominee of such Depository or by such Depository or any
such nominee to a successor Depository selected or approved by the Depositor
upon notice to the Pass-Through Trustee or to a nominee of such successor
Depository.
(c) The Depository shall be a clearing agency registered under the
Exchange Act and any other applicable statute or regulation.
(d) If (i) (A) the Depositor at any time advises the Pass-Through
Trustee in writing that the Depository is no longer willing or able to properly
discharge its responsibilities, or (B) the Depository at any time shall no
longer be eligible under subsection (c) above, and the Depositor is unable to
appoint a qualified successor within 90 days after the Depositor receives such
notice or becomes aware of such condition, as the case may be, or (ii) the
Depositor at any time, but only with the consent of Kmart, determines that the
Certificates shall no longer be represented by Registered Global Certificates
and that the provisions of this Section shall no longer apply to such
Certificates, then this Section shall no longer be applicable to the
Certificates. In such event, (x) the Pass-Through Trustee shall notify all
Certificate Owners, through the Depository, of the occurrence of any such event
and of the availability of Certificates in definitive registered form and (y)
upon surrender of the Registered Global Certificates to the Pass-Through
Trustee, accompanied by reregistration instructions from the Depository, the
Pass-Through Trustee shall execute, authenticate and deliver Certificates in
definitive registered form without coupons, in authorized denominations, and in
an aggregate Percentage Interest equal to the Percentage Interest evidenced by
the Registered Global Certificates then outstanding in exchange for such
Registered
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Global Certificates. Upon the exchange of the Registered Global
Certificates for such Certificates in definitive registered form without
coupons in authorized denominations, such Registered Global Certificates shall
be canceled by the Pass-Through Trustee. If such exchange occurs as a result
of the events described in (i) above, all costs of the preparation, execution,
authentication and delivery of such Certificates shall be paid [pro rata] from
the Rental Payment Accounts as defined in and pursuant to the Collateral Trust
Agreement. If such exchange occurs at the request of the Depositor pursuant to
(ii) above, the Depositor shall pay all such costs. Such Certificates in
definitive registered form issued in exchange for the Registered Global
Certificate pursuant to this subsection (d) shall be registered in the names
and in authorized denominations set forth in the registration instructions.
The Pass-Through Trustee shall deliver such Certificates to the Persons in
whose names such Certificates are so registered.
(e) As long as the Certificates are represented by the Registered
Global Certificates, all distributions in respect of such Certificates shall be
made by wire transfer in immediately available funds on the date such
distributions are due in accordance with the Letter of Representations, and the
Depositor shall or shall cause the Pass-Through Trustee to provide to the
Depository any notices referred to in the Letter of Representations in
accordance with the Letter of Representations.
(f) Unless and until Certificates in definitive registered form are
issued pursuant to paragraph (d) above, on the Record Date prior to each
Remittance Date, the Pass-Through Trustee will request from the Depository a
securities position listing setting forth the names of all participants in
such Depository reflected on the Depository's books as holding interests in the
Registered Global Certificates on such Record Date. The Pass-Through Trustee
shall mail to each such Depository participant the statements described in
Section 5.02.
Section 3.07. Temporary Securities. Pending the preparation of
definitive Certificates, the Pass-Through Trustee may execute and authenticate
and make available for delivery, temporary Certificates which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive
Certificates in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such temporary Certificates may determine, as conclusively evidenced
by their execution of such temporary Certificates. The Depositor shall bear
the cost of preparation of any temporary Certificates as prepared.
If temporary Certificates are issued, the Depositor will cause
definitive Certificates to be prepared without unreasonable delay. After the
preparation of definitive Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon
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surrender of the temporary Certificates at the office or agency of the
Pass-Through Trustee designated for such purpose pursuant to Section 3.02
hereof, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Certificates, the Pass-Through Trustee shall execute and
authenticate and make available for delivery in exchange therefor a like
principal amount of definitive Certificates of authorized denominations. Until
so exchanged, the temporary Certificates shall in all respects be entitled to
the same benefits under this Trust Agreement as definitive Certificates. Once
so exchanged, the Temporary Certificates shall be cancelled by the Pass-Through
Trustee.
ARTICLE IV
RECEIPT AND DISTRIBUTION OF INCOME
AND PROCEEDS FROM THE TRUST PROPERTY
Section 4.01. Calculation of Distributions. The Pass-Through Trustee
shall calculate the Available Distribution Amount, make distributions on each
Remittance Date as set forth in Section 5.01 and have full power and authority
to do any and all things which it may deem necessary or desirable in connection
with such duties.
Section 4.02. Collection of Mortgage Note Payments; Investment.
(a) Continuously from the date hereof until the principal and
interest on the Mortgage Note[s] are paid in full or the Mortgage Note[s] are
otherwise liquidated or disposed of, the Pass-Through Trustee shall, in
accordance with the provisions of this Pass- Through Trust Agreement, use
reasonable best efforts to collect all payments due under the Mortgage Note[s]
when the same shall become due and payable and shall, in connection therewith,
cooperate with the Collateral Trustee.
(b) Funds in the Certificate Account shall be invested by the
Pass-Through Trustee in Eligible Investments described in subparagraph (i),
(ii) or (iv) of the definition thereof (or in the further proviso at the end of
such definition). All such investments shall mature on or prior to the next
succeeding Determination Date and in no event shall be invested in obligations
maturing later than ninety days from the investment date. The risk of
investment loss with respect to funds in the Certificate Account shall be borne
by the Certificateholders. On or after the Due Date and prior to the next
succeeding Determination Date, the Pass-Through Trustee shall be prohibited
from selling or transferring Eligible Investments prior to maturity unless and
until a default shall have occurred under [a] [the] Mortgage Note. The
Pass-Through Trustee shall have no responsibility for any loss on any Eligible
Investments.
Section 4.03. Establishment of Certificate Account; Deposits in
Certificate Account. With respect to the Mortgage Note[s], the Pass-Through
Trustee shall cause to be segregated and held all
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funds collected and received pursuant to the Mortgage Note[s] separate
and apart from any of its own funds and general assets and shall cause to be
established and maintained a Certificate Account in the form of a trust account
titled "Mortgage Pass-Through Certificates (_____________________________)
Series ___ 199_, Certificate Account" in trust for the benefit of the
Certificateholders.
The Pass-Through Trustee shall cause to be deposited in the Certificate
Account upon receipt from the Collateral Trustee, and retained therein:
(a) All scheduled payments due on account of principal and interest
on the Mortgage Loan[s], and all Principal Prepayments and interest related
thereto collected;
(b) All payments on account of Make-Whole Premium on the Mortgage
Note[s];
(c) All other amounts received from the Collateral Trustee pursuant
to Section 4.05 of the Collateral Trust Agreement; and
(d) All earnings (or losses) on funds held in the Certificate Account
derived from Eligible Investments.
The foregoing requirements for deposit in the Certificate Account shall be
exclusive.
Section 4.04. Permitted Withdrawals From the Certificate Account. The
Pass-Through Trustee shall, from time to time, cause the withdrawal of funds
from the Certificate Account for the following purposes and in the following
priority:
(a) to make payments to the Certificateholders in the amounts and in
the manner provided for in Section 5.01;
(b) subsequent to an Event of Default [with respect to such
Borrower's Mortgage Loan] pursuant to Section 7.01 hereof (except for a Non-
Monetary Tenant Default), to pay the Pass-Through Trustee for any unreimbursed
Extraordinary Expense Advances required by [the related] Borrower's default
pursuant to the [related] Mortgage Note or the [related] Loan Documents and for
[such Borrower's ratable portion of] due and unpaid Pass-Through Trustee's
Fees, and to reimburse Pass-Through Trustee for any expenses, costs and
liabilities for which it is entitled to reimbursement hereunder or under the
Loan Documents [related to such Borrower's Mortgage Loan]; and, in such event,
the Pass-Through Trustee shall have a prior lien for itself on all moneys in
the Certificate Account for payment or reimbursement of Extraordinary Expense
Advances [related to such Mortgage Loan], [such Borrower's ratable portion of]
due and unpaid Pass-Through Trustee's Fees and other amounts owed it and
payable by [such] Borrower under any provision of the [related] Mortgage Note
or the
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[related] Loan Documents, provided, however, that so long as (i) no
default exists under the [related] Lease Guaranty, taking into account any
grace period provided for therein, or (ii) no direction has been given by
Certificateholders owning Percentage Interests of at least 66-2/3% to exercise
rights or remedies under such Mortgage Note or Loan Documents, the payments
pursuant to Section 4.04(a) above shall be made by Pass-Through Trustee free
and clear of such lien; and
(c) to make any payments to clear and terminate the Certificate
Account upon the termination of this Pass-Through Trust Agreement.
Section 4.05. Action Concerning Defaulted Mortgage Loan. If an Event
of Default with respect to a Mortgage Loan has occurred and is continuing, and
if any Certificateholders direct, and if the Pass-Through Trustee and the
Collateral Trustee have received indemnity for their respective reasonable
costs, expenses and liabilities with respect thereto to the reasonable
satisfaction of both of them from the Certificateholders in accordance with
Section 8.02 (iii) hereof and in accordance with the Collateral Trust
Agreement, the Pass-Through Trustee shall vote a percentage of the outstanding
principal balance of the [related] Mortgage Note corresponding to the
Percentage Interests owned by such Certificateholders in favor of directing the
Collateral Trustee to use its best efforts to foreclose upon or otherwise
comparably convert the ownership of the Mortgaged Estate securing such Mortgage
Loan; to manage, conserve and protect such Mortgaged Estate for the purposes of
its disposition and sale; and to dispose of such Mortgaged Estate as promptly
as is reasonably possible. Upon sale or other conveyance of all or any part of
a Mortgage Note by the Pass-Through Trustee, the Pass-Through Trust shall have
no further right, title or interest, in the Mortgage Note, or portion thereof,
so sold or conveyed. Upon sale or other conveyance of all or any part of the
Mortgaged Estate by the Collateral Trustee, the Pass-Through Trust shall have
no right, title or interest in the Mortgaged Estate, or portion thereof, so
sold or conveyed. [Notwithstanding anything herein to the contrary, a default
under one Loan Agreement or related Loan Documents shall not constitute a
default under any other Loan Agreement or other Loan Document.]
Section 4.06. Trustee Compensation. The Pass-Through Trustee's Fee
shall be paid pursuant to the terms of the Consent and Agreement[s]. The
Pass-Through Trustee, as compensation for its activities hereunder (other than
those covered by the Pass-Through Trustee's Fee), shall be entitled to receive
amounts representing reimbursement for Extraordinary Expense Advances and
reimbursement for certain expenses, as specified by Sections 3.01(d), 3.01(h),
3.06(d) and 4.04(b) hereof and Sections 4.03(c) and 4.05(d) of the Collateral
Trust Agreement.
Section 4.07. Rights of the Certificateholders. The Pass-Through
Trustee shall afford the Certificateholders, upon reasonable notice and during
normal business hours, access to all
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records maintained by the Pass-Through Trustee in respect of its rights
and obligations hereunder and access to officers of the Pass-Through Trustee
responsible for such obligations. Upon request, the Pass-Through Trustee shall
furnish the Certificateholders with its most recent publicly available
financial statements.
ARTICLE V
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 5.01. Distributions.
(a) The Pass-Through Trustee shall cause to be distributed, from
funds in the Certificate Account, the following amounts:
(i) on each Remittance Date, to each Certificateholder an
amount equal to the Debt Service due on the Certificate or Certificates held
by such Certificateholder; and
(ii) on the date provided for distribution of Certificates
pursuant to Section 3.01(c), (d), (e) or (f), to each Certificateholder an
amount equal to the amount payable on the Certificate or Certificates held by
such Certificateholder pursuant to Section 3.01(c), (d), (e) or (f), as the
case may be; and
(iii) concurrently with the termination of the Pass-Through
Trust pursuant to Section 9.01 hereunder, to each Certificateholder an
amount equal to the product of (a) all amounts remaining in the Certificate
Account after giving effect to the distributions provided for in clauses (i)
and (ii) hereof, and (b) the Percentage Interest of such Certificateholder.
(b) All distributions made to Certificateholders on each Remittance
Date shall be made to the Certificateholders of record on the Record Date
(other than as provided in this Pass-Through Trust Agreement or in the form of
Certificate respecting the final distribution), (i) by wire transfer in
immediately available funds to the account of such Holder at a bank or other
financial or depository institution having appropriate facilities therefor, if
such Holder has so notified the Pass-Through Trustee in writing at least 10
Business Days prior to such Remittance Date and such Holders hold Certificates
in the aggregate principal amount of $1,000,000 or more or (ii) for all other
Holders of Certificates, by check mailed to the address of the Person entitled
thereto as it appears on the Certificate Register. Notwithstanding any of the
provisions of this subsection (b) to the contrary, so long as all of the
outstanding Certificates are held by the Depository, all distributions in
respect of such Certificates shall be made by wire transfer in immediately
available funds in accordance with the Letter of Representations. All
distributions in respect of the Certificates shall be made without presentation
or surrender, except that the final distribution in accordance with Section
9.02
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will be made only upon presentation and surrender of the Certificates at
the Corporate Trust Office or such other agency of the Pass-Through Trustee
specified in the final distribution notice to Certificateholders. If on any
Determination Date, the Pass-Through Trustee reasonably determines that [the]
[no] Mortgage Loan is [not] outstanding and there are no other funds or assets
in the Trust Property other than the funds in the Certificate Account, the
Pass-Through Trustee shall send the final distribution notice to each
Certificateholder and make provision for the final distribution in accordance
with Section 9.02.
Section 5.02. Statements to Certificateholders. Not later than each
Remittance Date, Pass-Through Trustee will cause to be sent to each
Certificateholder a statement setting forth the following information with
respect to each Certificate (which information may be aggregated for all
Certificates held by the same Holder), after giving effect to the distributions
to be made pursuant to Section 5.01 on or as of such Remittance Date:
(i) the portion of such distribution allocable to principal of the
Mortgage Note[s];
(ii) the portion of such distribution allocable to interest on the
Mortgage Note[s];
(iii) the amount of any Extraordinary Expense Advance by the
Pass-Through Trustee or the Collateral Trustee pursuant to Section 5.03 hereof
or Section 5.01 of the Collateral Trust Agreement, respectively; and
(iv) whether [the] [a] Mortgage Note is delinquent.
In addition, not more than 90 days after the end of each calendar year or by
such earlier time as may be required under the Code, the Pass- Through Trustee
will furnish a report to each holder of a Certificate at any time during such
calendar year, an annual statement of interest paid on the Mortgage Note[s] in
accordance with the requirements of applicable federal income tax law.
The Pass-Through Trustee shall cause to be prepared and shall file any and
all tax returns, information statements or other filings required to be
delivered to (a) any governmental taxing authorities or (b) the
Certificateholders pursuant to any applicable law with respect to the
Pass-Through Trust Property and the transactions contemplated hereby. The
costs of any such filings, including the costs of any accounting firm or other
organization retained to assist in the preparation of any such filings, shall
be considered an ordinary cost and expense of the Pass-Through Trustee included
within the Pass-Through Trustee's Fee and not subject to reimbursement by the
Depositor, any Borrower or otherwise.
Section 5.03. Advances by Pass-Through Trustee. The Pass-Through Trustee
may from time to time following an Event of Default
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make such Extraordinary Expense Advances as Pass-Through Trustee in its
sole discretion deems advisable, provided, however, that it shall not be
obligated to make any such advances unless it is satisfied as to the
availability of reimbursement pursuant to the terms hereof or of the Collateral
Trust Agreement or from the Certificateholders.
ARTICLE VI
THE DEPOSITOR
Section 6.01. Maintaining Corporate Existence of the Depositor. The
Depositor will keep in full effect its existence, rights and franchises as a
corporation, and will obtain and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of this
Pass-Through Trust Agreement, the Certificates or the Mortgage Note[s] and to
perform its duties under this Pass-Through Trust Agreement.
The Depositor will not, on or after the date of execution of this
Pass-Through Trust Agreement (i) engage in any business or activities other
than those set forth in Article III of the Certificate of Incorporation of the
Depositor (ii) incur any indebtedness other than trade payables incurred in the
ordinary course of business, or (iii) amend, or propose to its shareholders for
their consent any amendment of, its Certificate of Incorporation or Bylaws
without giving notice thereof in writing not less than 30 days nor more than 90
days prior to the date on which such amendment is to become effective to
Pass-Through Trustee and without first obtaining the written consent of
Pass-Through Trustee.
Section 6.02. Limitation on Liability of the Depositor. Neither the
Depositor nor any of the directors, officers, employees or agents of the
Depositor shall be under any liability to the Pass-Through Trustee or the
Certificateholders for any action taken or for refraining from the taking of
any action in good faith pursuant to this Pass-Through Trust Agreement, or for
errors in judgment; provided, however, that this provision shall not protect
the Depositor or any such person against any liability which would otherwise be
imposed by reason of any willful misfeasance, bad faith or negligence in the
performance of its duties or by reason of negligent disregard of obligations
and duties hereunder. The Depositor and any director, officer, employee or
agent of the Depositor may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder.
The Depositor shall not be under any obligation to appear in, prosecute or
defend any legal action which is not incidental to its duties pursuant to this
Pass-Through Trust Agreement and which in its opinion may involve it in any
expense or liability; provided, however, that the Depositor may in its
discretion undertake any such action which it may deem necessary or desirable
with respect
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to this Pass-Through Trust Agreement and the rights and duties of
the parties hereto and the interests of the Certificateholders hereunder.
ARTICLE VII
DEFAULT
Section 7.01. Events of Default. The occurrence of any event
constituting an event of default as defined in the Collateral Trust Agreement,
any Loan Document or [the] [any] Mortgage Note shall constitute an Event of
Default under this Pass-Through Trust Agreement. If an Event of Default shall
occur and be continuing, then, and in each and every such case, so long as the
Event of Default shall not have been remedied or waived, the Pass-Through
Trustee, at the written direction of any Holders of Certificates, shall vote a
percentage of the Principal Balance of such Mortgage Note[s] corresponding to
the Percentage Interests owned by such Holders in favor of directing the
Collateral Trustee to exercise any rights and remedies that it may have pursuant
to such Mortgage Note[s] or any [related] Loan Document, as modified by the
provisions of the Collateral Trust Agreement, or at law or equity, including
injunctive relief and specific performance, provided that if as a result of the
occurrence of an Event of Default, the Pass-Through Trustee acquires any
property other than cash, whether pursuant to foreclosure or otherwise, the
Pass-Through Trustee shall sell such property as promptly as reasonably
possible. [Failure to pay with respect to any Mortgage Note or a default under
any Loan Document will not constitute a default under any unrelated Mortgage
Notes or under any unrelated Loan Documents and will not give rise to any right
of the Collateral Trustee or the Pass-Through Trustee (i) to exercise any
remedies with respect to such unrelated Mortgage Notes, or such unrelated Loan
Documents or (ii) to vote any such unrelated Mortgage Notes in favor of
exercising any such remedies.] If an Event of Default with respect to a
Mortgage Loan shall give rise to a right to terminate the [related] Lease, at
the written direction of any Holders of Certificates, the Pass-Through Trustee
shall vote a percentage of the Principal Balance of such Mortgage Note
corresponding to the Percentage Interests owned by such Holders in favor of
directing the Collateral Trustee to give notice of intent to terminate or take
action to terminate such Lease. The Pass-Through Trustee will have no
obligation to take any action or institute, conduct or defend any litigation
under this Pass-Through Trust Agreement at the request, order or direction of
any of the Certificateholders, unless such Certificateholders have offered to
the Pass-Through Trustee reasonable indemnity pursuant to Section 8.02(iii)
against the costs, expenses and liabilities which the Pass-Through Trustee may
incur. The Pass-Through Trustee shall apply the proceeds recovered in the
enforcement of the rights and remedies under this Pass-Through Trust Agreement
in accordance with the terms of this Pass-Through Trust Agreement.
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Section 7.02. Waiver of Defaults. The Pass-Through Trustee, at the
written direction of any Holders of Certificates, shall vote a percentage of
the Principal Balance of such Mortgage Note[s] corresponding to the Percentage
Interests owned by such Holders in favor of directing the Collateral Trustee to
waive any default under any Mortgage Note or any Loan Document and the
consequences of any such default (any such waiver by the Collateral Trustee
shall constitute a waiver of the default under Section 7.01 hereof), except
that the Pass-Through Trustee shall waive a default in the making of any
required distribution on such Mortgage Note[s] only if directed to do so by all
Certificateholders affected by such default. A default in the making of any
required distribution on the Certificates may only be waived by the affected
Certificateholders. The Pass-Through Trustee shall have no authority to
exercise the right of waiver if, as a result thereof, the Pass-Through Trust
would fail to be characterized as a trust for federal income tax purposes or
the Collateral Trust would become taxable as an association within the meaning
of Treasury Regulation Section 301.7701-2. The Pass-Through Trustee may rely
upon an Opinion of Counsel as set forth in Section 8.02 if it reasonably
believes that such an act may cause the Pass-Through Trust to fail to be
characterized as a trust for federal income tax purposes or may cause the
Collateral Trust to become taxable as an association within the meaning of
Treasury Regulation Section 301.7701-2. Upon any such waiver of a past
default, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been remedied for every purpose of this
Pass-Through Trust Agreement. No such waiver shall extend to any subsequent
Event of Default or impair any right consequent thereon except to the extent
expressly so waived.
Section 7.03. Notification to Certificateholders. The Pass-Through Trustee
shall, in the manner and to the extent required by Section 313(c) of the TIA,
notify the Certificateholders, the [related] Tenant and Kmart of any Event of
Default known to the Pass-Through Trustee within the later of 90 days from the
occurrence thereof or 30 days after obtaining knowledge thereof, unless such
Event of Default has been cured or waived before the giving of such notice.
Except in the case of a default in the payment of principal of, or interest on,
the Mortgage Note[s], the Pass-Through Trustee may withhold such notice if and
so long as its board of directors, the executive committee of the board of
directors or a committee of its directors and/or responsible officers in good
faith determine that the withholding of such notice is in the interests of the
Certificateholders.
Section 7.04. Rights of Certificateholders to Direct Proceedings.
(a) Anything in this Pass-Through Trust Agreement to the contrary
notwithstanding, the Holders of Certificates of Percentage Interests
aggregating not less than 66-2/3% shall have the right, at any time during the
continuance of an Event of Default, by an instrument or instruments in writing
executed and
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delivered to the Pass-Through Trustee, to direct the time, place
and method of conducting all proceedings to be taken in connection with the
enforcement of the terms and conditions of this Pass-Through Trust Agreement;
provided, however that such direction shall not be otherwise than in accordance
with the provisions of law and this Pass-Through Trust Agreement and provided
that such Holders shall have provided to the Pass-Through Trustee the
reasonable indemnity pursuant to Section 8.02 (iii) against the costs, expenses
and liabilities which the Pass-Through Trustee may incur in connection with
such proceedings.
(b) Anything in this Pass-Through Trust Agreement to the contrary
notwithstanding, any Holders of Certificates shall have the right, at any time
during the continuance of an event of default under the Collateral Trust
Agreement, by an instrument or instruments in writing executed and delivered to
the Pass-Through Trustee, to cause the Pass-Through Trustee to vote a percentage
of the Principal Balance of the affected Mortgage Note[s] corresponding to the
Percentage Interests owned by such Holders to direct the time, place and method
of conducting all proceedings to be taken in connection with the enforcement of
the terms and conditions of the Loan Documents; provided, however that such
direction shall not be otherwise than in accordance with the provisions of law
and such Loan Documents; and provided that such Holders shall have provided to
the Collateral Trustee and to the Pass-Through Trustee the reasonable indemnity
pursuant to Section 8.02 (iii) hereof and Section 8.02 (iii) of the Collateral
Trust Agreement against the costs, expenses and liabilities which the Collateral
Trustee or the Pass-Through Trustee may incur in connection with such
proceedings.
Section 7.05. Rights of Certificateholders to Receive Payment.
Notwithstanding any other provision in this Pass-Through Trust Agreement, the
right of any Certificateholder to receive distributions pursuant to Section
5.01, on or after the respective Remittance Dates set forth herein or in the
Certificates, or to bring suit for the enforcement of any such distribution on
or after such respective dates shall not be impaired or affected without the
consent of such Certificateholder.
Section 7.06. Remedies Cumulative. No remedy given hereunder to the
Pass-Through Trustee or to any of the Certificateholders shall be exclusive of
any other remedy or remedies, and each such remedy shall be cumulative and in
addition to every other remedy given hereunder or now or hereafter given by
statute, law, equity or otherwise.
Section 7.07. Pass-Through Trustee Default. In the event of any breach by
the Pass-Through Trustee of its obligations pursuant to this Pass-Through Trust
Agreement, the Certificateholders and the Depositor shall be entitled to
exercise all rights and remedies to which they may be entitled at law or in
equity.
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Section 7.08. Notice to Tenant[s] [and Kmart]. The Pass-Through Trustee
shall promptly notify the [related] Tenant [and Kmart] of the exercise of any
remedies under this Pass-Through Trust Agreement, under [any] [the] Mortgage
Note or under any Loan Document or of any vote directing the Collateral Trustee
to exercise any remedies pursuant to the Collateral Trust Agreement. Failure
to give such notice or notice under Section 7.03 hereof shall not impair or
limit the Pass-Through Trustee's or the Collateral Trustee's right to pursue
any such remedies or any other right or remedy to which it may be entitled.
ARTICLE VIII
CONCERNING THE PASS-THROUGH TRUSTEE
AND THE COLLATERAL TRUSTEE
Section 8.01. Duties of Pass-Through Trustee. [With respect to each
Mortgage Note] the Pass-Through Trustee, prior to the occurrence of an Event of
Default [related to such Mortgage Note] and after the curing or waiver of all
Events of Default [related to such Mortgage Note] which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Pass-Through Trust Agreement. In case an Event of Default has
occurred [related to such Mortgage Note] (which has not been cured or waived),
the Pass-Through Trustee shall exercise such of the rights and powers vested in
it by this Pass-Through Trust Agreement, and use the same degree of care and
skill in their exercise as a prudent man would exercise or use under the
circumstances in the conduct of such man's own affairs. No permissive rights
of the Pass-Through Trustee shall be construed as a mandatory duty of the
Pass-Through Trustee.
The Pass-Through Trustee, upon receipt of any resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Pass-Through Trustee which are specifically
required to be furnished pursuant to any provision of this Pass- Through Trust
Agreement, shall examine them to determine whether they conform to the
requirements of this Pass-Through Trust Agreement and if they are deemed to be
deficient, Pass-Through Trustee shall request cure of any such deficiency
within a reasonable period of time for such cure. If such deficiency is not
cured to the satisfaction of Pass-Through Trustee, the Pass-Through Trustee may
treat the requirement pursuant to which such instrument is furnished as not
having been satisfied.
No provision of this Pass-Through Trust Agreement shall be construed to
relieve the Pass-Through Trustee from liability for its own negligent action,
its own negligent failure to act or its own misconduct; provided, however,
that:
(i) Prior to the occurrence of an Event of Default, and after
the curing or waiver of all such Events of Default which may have occurred, the
duties and obligations of the Pass-Through Trustee shall be determined solely
by the express provisions of
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this Pass-Through Trust Agreement, the Pass-Through Trustee shall not be
liable except for the performance of such duties and obligations as are
specifically set forth in this Pass-Through Trust Agreement and, in the absence
of bad faith on the part of the Pass-Through Trustee, the Pass-Through Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to
the Pass-Through Trustee and conforming to the requirements of this Pass-Through
Trust Agreement;
(ii) The Pass-Through Trustee shall not be personally liable
for an error of judgment made in good faith by a Responsible Officer or
Responsible Officers of the Pass-Through Trustee, unless it shall be proved
that the Pass-Through Trustee was negligent in ascertaining the pertinent facts;
(iii) The Pass-Through Trustee shall not be personally liable
with respect to any action taken, suffered or omitted to be taken by it in good
faith in accordance with the direction of holders of Certificates evidencing
Percentage Interests aggregating not less than 66-2/3% or such lesser
percentage as is specifically set forth herein with respect to the exercise of
specific powers hereunder as to the time, method and place of conducting any
proceeding for any remedy available to the Pass-Through Trustee, or exercising
any trust or power conferred upon the Pass-Through Trustee, under this
Pass-Through Trust Agreement; and
(iv) The Pass-Through Trustee shall have no authority to
perform any act which, if consummated, would cause the entity created
hereunder to fail to be characterized as a trust for federal income tax
purposes or the Collateral Trust to become taxable as an association within
the meaning of Treasury Regulation Section 301.7701-2. The Pass-Through
Trustee may rely upon an Opinion of Counsel, as set forth in Section 8.02, if
it reasonably believes that such an act may cause the Pass-Through Trust to
fail to be characterized as a trust for federal income tax purposes or the
Collateral Trust to become taxable as an association within the meaning of
Treasury Regulation Section 301.7701-2. Nothing in this Section 8.01(iv) is
intended to prevent the Pass-Through Trustee from exercising any right or
remedy to which it is entitled hereunder or under any Loan Documents.
The Pass-Through Trustee shall not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties hereunder, or in the exercise of any rights or powers, if there are
reasonable grounds for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Section 8.02. Certain Matters Affecting Pass-Through Trustee. Except as
otherwise provided in Section 8.01:
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(i) The Pass-Through Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution, Officers' Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other
paper or document reasonably believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(ii) The Pass-Through Trustee may consult with counsel, and any
Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in good
faith and in accordance with such Opinion of Counsel, provided that any cost
incurred by the Pass-Through Trustee shall be reimbursable only to the extent
provided in Sections 3.01(d), 3.01(h), 3.06(d), 4.04(b) and 4.06 hereof and in
Sections 4.03(c) and 4.05(d) of the Collateral Trust Agreement;
(iii) The Pass-Through Trustee shall be under no obligation to
exercise any of the trusts or powers vested in it by this Pass-Through Trust
Agreement following an Event of Default or to institute, conduct or defend any
litigation hereunder or in relation hereto at the request, order or direction
of any of the Certificateholders, pursuant to the provisions of this
Pass-Through Trust Agreement, unless such Certificateholders shall have offered
to the Pass-Through Trustee reasonable indemnity against the costs, expenses
and liabilities which may be incurred therein or thereby; the right of the
Pass-Through Trustee to perform any discretionary act enumerated in this
Pass-Through Trust Agreement shall not be construed as a duty; and the
Pass-Through Trustee shall not be answerable for other than negligence or
willful misconduct in performance of such act. Nothing contained herein shall,
however, relieve the Pass-Through Trustee of the obligation, upon the
occurrence of an Event of Default (which has not been cured or waived), to
exercise such of the rights and powers vested in it by this Pass-Through Trust
Agreement, and to use the same degree of care and skill in their exercise as
a prudent man would exercise or use under the circumstances in the conduct of
such man's own affairs;
(iv) The Pass-Through Trustee shall not be personally liable
for any action taken, suffered or omitted by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or powers
conferred upon it by this Pass-Through Trust Agreement;
(v) (a) Prior to the occurrence of an Event of Default
hereunder and after the curing or waiver of all Events of Default which may
have occurred, the Pass-Through Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless requested in writing so to
do by Holders of Certificates evidencing Percentage Interests aggregating not
less than 66-2/3%; provided, however, that if the payment within a
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reasonable time to the Pass-Through Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Pass-Through Trustee, not reasonably assured to the
Pass-Through Trustee by the security afforded to it by the terms of this
Pass-Through Trust Agreement, the Pass-Through Trustee may require reasonable
indemnity against such expense or liability as a condition to such proceeding;
(b) If requested in writing by any Holders of Certificates, the
Pass-Through Trustee shall vote a percentage of the outstanding principal
balance of the Mortgage Note[s] corresponding to the Percentage Interests owned
by such Holders to make an investigation as set forth in Section 8.02(v) of the
Collateral Trust Agreement;
(c) The reasonable expense of every such investigation shall be paid by
the Certificateholder[s] requesting the investigation; and
(vi) The Pass-Through Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys.
Section 8.03. Pass-Through Trustee Not Liable for Certificates or Mortgage
Note[s]. The recitals contained herein and in the Certificates shall be taken
as the statements of the Depositor, and the Pass-Through Trustee assumes no
responsibility for their correctness. The Pass-Through Trustee makes no
representations or warranties as to the validity or sufficiency of this
Pass-Through Trust Agreement, of the Collateral Trust Agreement or of the
Certificates (except that the Certificates shall be duly and validly executed
and authenticated by the Pass-Through Trustee and this Pass-Through Trust
Agreement shall be duly and validly executed by the Pass-Through Trustee) or of
the Mortgage Note[s] (other than the representations made in Section 2.02
hereof) or related documents. The Pass-Through Trustee shall not be
accountable for the use or application by the Depositor of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to or at the direction of the Depositor with
respect to the Mortgage Note[s].
Section 8.04. Pass-Through Trustee May Own Certificates. The Pass-Through
Trustee in its corporate or any other capacity may become the owner or pledgee
of Certificates with the same rights it would have if it were not the
Pass-Through Trustee.
Section 8.05. Pass-Through Trustee's Fee and Expenses. The Pass-Through
Trustee shall be entitled to reasonable compensation (which shall not be
limited by any provision of law in regard to the compensation of a trustee of
an express trust) for all services rendered by it in the execution of the trust
hereby created and in the exercise and performance of any of the powers and
duties hereunder of the Pass-Through Trustee, and the Pass-Through Trustee
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shall be reimbursed for all reasonable expenses, disbursements and
advances incurred or made by the Pass-Through Trustee in accordance with any
of the provisions of this Pass-Through Trust Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel and
of all persons not regularly in its employ), but solely from the Pass-Through
Trustee's Fee and amounts available as provided in Section 3.01(d) and Section
3.01(h) and in the Rental Payment Account[s], as provided in the Collateral
Trust Agreement, and in the Certificate Account as provided herein for
reimbursement of expenses as set forth in Section 3.06(d) and Extraordinary
Expense Advances as provided in Sections 4.04(b) and 4.05 hereof and Sections
4.03(c) and 4.05(d) of the Collateral Trust Agreement. Notwithstanding the
above, no such expense, disbursement or advance shall be reimbursable as may
arise from Pass-Through Trustee's negligence or bad faith.
Section 8.06. Action by Co-Trustee. At any time or times, for the purpose
of meeting any legal requirements of any jurisdiction in which any part of the
Pass-Through Trust Property may at the time be located or in which any action
of the Pass-Through Trustee may be required to be performed or taken, the
Pass-Through Trustee, by an instrument in writing signed by it, may appoint one
or more Persons ("Co-Trustee") to act as a separate trustee or co-trustee,
acting jointly with the Pass-Through Trustee, of all or any part of such
Pass-Through Trust Property, to the full extent that local law makes it
necessary for such separate trustee or separate trustees or co-trustee acting
jointly with the Pass- Through Trustee to act. The Co-Trustee shall act as and
be such upon the following terms and conditions:
(a) Subject to the provisions of Section 8.14, all rights, powers,
duties and obligations conferred or imposed upon the Pass-Through Trustee
shall be conferred or imposed solely upon and solely exercised and performed
by the Pass-Through Trustee except as expressly provided otherwise in this
Pass-Through Trust Agreement and except to the extent that under any law or any
jurisdiction in which any particular act or acts are to be performed, the
Pass-Through Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations shall be
exercised and performed by the Co-Trustee;
(b) No power granted by this Pass-Through Trust Agreement to, or
which this Pass-Through Trust Agreement provides may be exercised by, the
Co-Trustee shall be exercised by the Co-Trustee except jointly with, or with
the consent in writing of, the Pass-Through Trustee, anything contained to the
contrary notwithstanding; and
(c) The Co-Trustee may at any time by an instrument in writing,
constitute the Pass-Through Trustee or its successor in trust hereunder its
agent or attorney-in-fact, with full power and authority, to the extent which
may be permitted by law, to do any and all acts and things and exercise any
and all discretion which
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it is authorized or permitted to do or exercise, for and in its behalf and in
its name.
Section 8.07. Eligibility Requirements for Pass-Through Trustee. The
Pass-Through Trust shall at all times have a Pass-Through Trustee which shall
be a corporation eligible to act as trustee under Section 310(a) of the TIA and
shall be a corporation organized and doing business under the laws of a state
or the United States of America, authorized under such laws to exercise
corporate trust powers, having (or, in the case of a corporation included in a
bank holding company system, the related bank holding company shall have) a
combined capital and surplus of at least $50,000,000 in the case of United
States Trust Company of New York, and of at least $100,000,000 in the case
of any successor trustee and subject to supervision or examination by federal
or state authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising
or examining authority, then for the purposes of this Section the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. In case at any time the Pass-Through Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Pass-Through
Trustee shall resign immediately in the manner and with the effect specified in
Section 8.08.
Section 8.08. Resignation and Removal of Pass-Through Trustee and
Collateral Trustee.
(a) The Pass-Through Trustee may at any time resign and be
discharged from the trusts hereby created by giving written notice thereof to
the Depositor and the Certificateholders. Upon receiving such notice of
resignation, the Depositor or the Certificateholders evidencing Percentage
Interests aggregating not less than 66-2/3% shall promptly appoint a successor
trustee by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Pass-Through Trustee and one copy to the
successor trustee. If no successor trustee shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Pass- Through Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
If at any time any of the following events occur:
(i) the Pass-Through Trustee fails to comply with the
requirements of Section 310 of the Trust Indenture Act after written request
for such compliance by any Certificateholder who has been a bona fide
Certificateholder for at least six months; or
(ii) the Pass-Through Trustee ceases to be eligible in
accordance with the provisions of Section 8.07 and fails to resign after
written request therefor by the Depositor or by any such bona fide
Certificateholder; or
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(iii) the Pass-Through Trustee becomes incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a receiver of the Pass-Through
Trustee or of its property shall be appointed, or any public officer shall
take charge or control of the Pass-Through Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation;
then, in any such case, (x) the Depositor may remove the Pass-Through Trustee
and appoint a successor trustee by written instrument, in duplicate, one copy
of which instrument shall be delivered to the Pass-Through Trustee so removed
and one copy to the successor trustee, or (y) subject to the provisions of
Section 7.04, any Certificateholder who has been a bona fide Certificateholder
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Pass-Through Trustee and the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Pass-Through Trustee and appoint a successor trustee.
The Certificateholders evidencing Percentage Interests aggregating not less
than 66-2/3% may at any time remove the Pass-Through Trustee and appoint a
successor trustee by written instrument or instruments, in triplicate, signed
by such Holders or their attorneys-in-fact duly authorized, one complete set of
which instruments shall be delivered to the Pass-Through Trustee so removed,
one complete set to the Depositor and one complete set to the successor so
appointed.
Any resignation or removal of the Pass-Through Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall
become effective only upon acceptance of appointment by the successor trustee
as provided in Section 8.09.
(b) In the event the Collateral Trustee resigns pursuant to Section
8.08 of the Collateral Trust Agreement, the Pass-Through Trustee, upon receiving
instructions from any Certificateholders, concerning the appointment of a
successor collateral trustee, shall vote a percentage of the Principal Balance
of the Mortgage Note[s] corresponding to the Percentage Interests owned by
such Certificateholders to appoint such designated successor collateral trustee
and take such other actions as are appropriate under such Section 8.08 to
appoint such successor collateral trustee.
Upon receiving instructions from any Certificateholders to do so, the
Pass-Through Trustee shall seek to remove the Collateral Trustee and appoint a
successor collateral trustee, by voting a percentage of the Principal Balance
of the Mortgage Note[s] corresponding to the Percentage Interests owned by such
Certificateholders in favor of removing the Collateral Trustee and appointing
the successor designated by such Certificateholders and by taking such other
actions as are consistent with Section 8.08 of the Collateral Trust Agreement.
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Section 8.09. Successor Pass-Through Trustee. Any successor trustee
appointed as provided in Section 8.07 or 8.08 shall execute, acknowledge and
deliver to the Certificateholders and to its predecessor trustee an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the predecessor trustee shall become effective and such successor trustee
shall become effective and such successor trustee, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor hereunder, with the same effect as if
originally named as trustee herein. The predecessor trustee shall deliver to
the successor trustee the Mortgage Note[s] and any other documents and
statements held by it hereunder, and the Depositor and the predecessor trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for more fully and certainly vesting and confirming in
the successor trustee all such rights, powers, duties and obligations.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.07.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Depositor shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register. If the Depositor fails to mail such notice within 10
days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of the Depositor.
Section 8.10. Merger or Consolidation of Pass-Through Trustee. Any
corporation into which the Pass-Through Trustee may be merged or converted or
with which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Pass-Through Trustee shall be a
party, or any corporation succeeding to the business of the Pass-Through
Trustee, shall be the successor of the Pass-Through Trustee hereunder, provided
such corporation shall be eligible under the provisions of Section 8.07,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding.
Section 8.11. Resignation of Co-Trustee. The Co-Trustee or any of its
successors may resign, and may be discharged of the trusts created by this
Pass-Through Trust Agreement by giving written notice thereof to the
Certificateholders and to the Pass-Through Trustee.
Such resignation shall take effect immediately upon the acceptance of
appointment by a Person succeeding to the office of the Co-Trustee appointed by
the Pass-Through Trustee.
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Section 8.12. Removal of Co-Trustee. The Co-Trustee or any of its
successors may be removed at any time by the Pass-Through Trustee or the
Holders of Certificates evidencing Percentage Interests aggregating not less
than 66-2/3%, by delivery of a notice of such removal to the Co-Trustee, to the
Depositor, and to the Pass-Through Trustee, signed by such Holders, and such
removal shall be effective upon the date specified in such notice, and the
Co-Trustee's duties and obligations hereunder shall thereupon cease, except as
specified in Section 8.14.
Section 8.13. Appointment of Successor to Co-Trustee. If at any time
the Co-Trustee or any of its successors shall die, resign or be removed or
otherwise become incapable of acting, or if for any reason the office of
Co-Trustee shall become vacant, a successor to the Co-Trustee shall forthwith
be appointed by the Pass-Through Trustee.
Section 8.14. Succession of Successor to Co-Trustee. Any Person
appointed as a successor to the Co-Trustee shall execute, acknowledge and
deliver to the Certificateholders, its predecessor, to the Pass-Through Trustee
and to the Depositor, an instrument accepting such appointment hereunder, and
thereupon such Person without any further act, deed or conveyance shall become
vested with all estates, properties, rights, powers, duties and trusts of its
predecessor in the trusts hereunder with like effect as if originally named as
Co-Trustee herein; but nevertheless, on the written request of the Depositor or
Holders of Certificates evidencing Percentage Interests aggregating not less
than 66-2/3% or of the Pass-Through Trustee or of the new Co-Trustee, the
predecessor shall execute and deliver an instrument transferring to the new
Co-Trustee, upon the trusts expressed in this Pass-Through Trust Agreement, all
the estates, properties, rights, powers and trusts granted to it by this
Pass-Through Trust Agreement and shall duly assign, transfer, deliver and pay
over to the new Co-Trustee any property and money subject to the lien of this
Pass-Through Trust Agreement held by such predecessor. Should any instrument
in writing from the Depositor or from Holders of Certificates evidencing
Percentage Interests aggregating not less than 66-2/3% or from the Pass-Through
Trustee be required by any person who becomes the Co-Trustee for more fully and
certainly vesting in and confirming to such Co-Trustee such estates,
properties, rights, powers and trusts, then, on request, any and all such
instruments in writing shall be made, executed, acknowledged and delivered by
the Depositor and/or the Pass-Through Trustee.
Any Co-Trustee which has resigned or been removed shall nevertheless
retain all rights of indemnity granted hereunder.
Section 8.15. Reports by the Pass-Through Trustee to Certificateholders.
(a) On or before each March 31 of each calendar year commencing 199_,
the Pass-Through Trustee shall transmit to Certificateholders such reports
concerning the Pass-Through Trustee
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and its actions under this Pass-Through Trust Agreement as may be
required pursuant to the TIA and at the times and in the manner provided
pursuant thereto.
(b) A copy of each report shall, at the time of such transmission to
Certificateholders, be filed by the Pass-Through Trustee with any stock
exchange upon which the Certificates are listed, with the Securities and
Exchange Commission, with Kmart and with the Depositor. The Depositor shall
notify the Pass-Through Trustee when the Certificates are listed on any stock
exchange, in accordance with Section 313(c) of the TIA.
Section 8.16. Co-Trustee of the Collateral Trust
(a) Upon receiving instructions from any Certificateholders to do so,
the Pass-Through Trustee shall seek to remove the co-trustee of the Collateral
Trust by voting a percentage of the Principal Balance of the Mortgage Note[s]
corresponding to the Percentage Interests owned by such Certificateholders in
favor of removing such co-trustee and by taking such other actions as are
consistent with Section 8.12 of the Collateral Trust Agreement.
(b) Upon written request to do so from any Certificateholders, the
Pass-Through Trustee shall vote a percentage of the Principal Balance of the
Mortgage Note[s] corresponding to the Percentage Interests owned by such
Certificateholders to make the request specified in Section 8.14 of the
Collateral Trust Agreement and take such other actions to implement such
request as are consistent with such Section 8.14.
ARTICLE IX
TERMINATION
Section 9.01. Termination. The respective obligations and
responsibilities of the Depositor and the Pass-Through Trustee under this
Pass-Through Trust Agreement shall, so long as such termination does not result
in the imposition of a tax on the Pass-Through Trust Property, terminate upon
the final payment, prepayment in full or other liquidation of the Mortgage
Note[s] and the remittance of all funds due hereunder; provided, however, that
in no event shall the Trust continue beyond the expiration of 21 years from the
death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James, living on the date
hereof.
Section 9.02. Notice; Final Distribution.
(a) Notice of any termination pursuant to Section 9.01, specifying
the Remittance Date after which all Certificateholders shall surrender their
Certificates to the Pass-Through Trustee for payment and cancellation, shall be
given promptly by the Pass-Through Trustee by letter to Certificateholders
mailed no later than 15 days prior to such final distribution specifying (i)
the
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Remittance Date upon which final payment on the Certificates will be made
and following which the Certificateholders shall present and surrender their
Certificates at the Corporate Trust Office or the office of any designated
agent of the Pass-Through Trustee therein designated, (ii) the amount of any
such final payment, and (iii) that payments will be made only upon presentation
and surrender of the Certificates at the office or agency of the Pass-Through
Trustee therein specified. After giving such notice, the Pass-Through Trustee
shall not register the transfer or exchange of any Certificates. On the
Remittance Date upon presentation and surrender of the Certificates, the
Pass-Through Trustee shall cause to be distributed to Certificateholders an
amount equal to the amount distributable on such Remittance Date.
(b) If all of the Certificateholders shall not surrender their
Certificates for cancellation within three months after the time specified in
the above-mentioned written notice, the Pass-Through Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within three months after the second notice all the Certificates
shall not have been surrendered for cancellation, the Pass-Through Trustee may
take appropriate steps, or may appoint an agent to take appropriate and
reasonable steps, to contact the remaining Certificateholders concerning
surrender of their Certificates, and the cost thereof shall be paid out of the
funds and other assets which remain in the Pass-Through Trust.
ARTICLE X
SUPPLEMENTS AND AMENDMENTS TO THIS
PASS-THROUGH TRUST AGREEMENT AND OTHER DOCUMENTS;
ADDITIONAL AGREEMENTS OF TRUSTEE
Section 10.01. Supplemental Pass-Through Trust Agreements Without
Consent of Holders. The Depositor and the Pass-Through Trustee, at any time
and from time to time, with the consent of Kmart (which shall not be
unreasonably withheld or delayed and which shall not be required with respect
to (g) below) but without the consent of Certificateholders, may enter into one
or more trust agreements supplemental hereto for one or more of the following
purposes:
(a) to evidence the succession of another Person to the Depositor, or
successive successions, and the assumption by the successor of the covenants,
agreements and obligations of the Depositor herein;
(b) to add any covenants, restrictions, conditions or provisions with
respect to the Depositor as the Pass-Through Trustee shall consider to be for
the protection of the Certificateholders;
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(c) to surrender any rights or power conferred herein upon the
Depositor herein or to add to the rights of the Certificateholders;
(d) to correct or amplify the description of any property at any time
that constitutes Pass-Through Trust Property or better to assure, convey and
confirm unto the Pass-Through Trustee any such property to be included in any
such Pass-Through Trust Property, or to acknowledge any change relating to
title to the Mortgaged Estate which does not materially adversely affect the
rights of the Certificateholders;
(e) to evidence and provide for the acceptance and appointment
hereunder of a successor trustee and to add to or change any of the provisions
hereof as may be necessary to provide for or facilitate the administration of
the Pass-Through Trust by more than one trustee pursuant to Section 8.14;
(f) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to make
any other provisions with respect to matters or questions arising under this
Pass-Through Trust Agreement, provided that such action pursuant to this
Section 10.01(f) shall not materially adversely affect the Certificateholders;
or
(g) to modify, eliminate or add to the provisions of this Pass-Through
Trust Agreement to the extent necessary to continue the qualification of this
Pass-Through Trust Agreement under the TIA;
provided that no such supplemental agreement shall cause the Pass-Through Trust
to fail to be characterized as a trust for federal income tax purposes or the
Collateral Trust to become taxable as an association within the meaning of
Treasury Regulation Section 301.7701-2.
The Pass-Through Trustee is hereby authorized to join in the execution
of any such supplemental agreement, to make any further appropriate agreements
and stipulations which may be contained therein and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Pass-Through Trustee shall not be obligated to enter into any such supplemental
agreement which adversely affects the Pass-Through Trustee's own rights, duties
or immunities under this Pass-Through Trust Agreement or otherwise, whether in
its official or individual capacity.
Section 10.02. Supplemental Agreements With Consent of
Certificateholders. With the consent of the Holders of Certificates evidencing
Percentage Interests of not less than 66-2/3%, the Depositor and the
Pass-Through Trustee may, from time to
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time and at any time, enter into an agreement or agreements supplemental
hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Pass-Through Trust Agreement or of any
agreements supplemental hereto or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such supplemental agreement shall
cause the Pass-Through Trust to fail to be characterized as a trust for federal
income tax purposes or the Collateral Trust to become taxable as an association
within the meaning of Treasury Regulation Section 301.7701-2; and provided
further that, except as expressly permitted under the terms of this Pass-Through
Trust Agreement, without the consent of each Certificateholder affected thereby
and, with respect to (b) and (unless there is a monetary default under the
[related] Lease) (c) below, Kmart, no such amendment of or supplement to
this Pass-Through Trust Agreement or modification of the terms of, or consent
under, any provision hereof, shall
(a) modify any of the provisions of Section 7.03 or this Section
10.02, or the definition of "Certificateholder" as set forth in Article I
hereof;
(b) modify the definition of "Percentage Interest" as set forth in
Article I hereof or reduce the Percentage Interests, the consent of the Holders
of Certificates of which is required for any such supplement to this
Pass-Through Trust Agreement, or the consent of the Holders of Certificates of
which is required for any waiver provided for in this Pass-Through Trust
Agreement;
(c) reduce the amount or extend the time of payment of any amount
owing or payable under the Mortgage Note[s] or distributions to be made on any
Certificate pursuant to Article V;
(d) impair the right of any Certificateholder to commence legal
proceedings to enforce a right to receive payment hereunder; or
(e) create or permit the creation of any lien on the Pass-Through
Trust Property or any part thereof, or deprive any Certificateholder of the
benefit of this Pass-Through Trust Agreement, whether by disposition of such
Pass-Through Trust Property or otherwise.
Upon the request of the Depositor and upon the filing with the
Pass-Through Trustee of evidence of the consent of the Certificateholders and
Kmart, if applicable, required under this Section, the Pass-Through Trustee
shall join with the Depositor in the execution of such supplemental agreement
unless such supplemental agreement affects the Pass-Through Trustee's own
rights, duties or immunities under this Pass-Through Trust Agreement or
otherwise, in which case the Pass-Through Trustee may in its discretion, but
shall not be obligated to, enter into such supplemental agreement.
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It shall not be necessary for the consent of the Certificateholders
under this Section to approve the particular form of any proposed supplemental
agreement, and it shall be sufficient if such consent shall approve the
substance thereof. Kmart shall be entitled to receive a copy of the form of
proposed supplemental agreement.
Promptly after the execution by the Depositor and the Pass-Through
Trustee of any supplemental agreement pursuant to the provisions of this
Section, the Pass-Through Trustee shall mail a notice thereof by first-class
mail to the Certificateholders at their addresses as they shall appear in the
Certificate Register, setting forth in general terms the substance of such
supplemental agreement. Any failure of the Pass-Through Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental agreement.
Section 10.03. Effect of Supplemental Agreement. Upon the execution
of any supplemental agreement pursuant to the provisions hereof, this
Pass-Through Trust Agreement shall be and be deemed to be modified and amended
in accordance therewith and the respective rights, limitations of rights,
obligations, duties and immunities under this Pass-Through Trust Agreement of
the Pass-Through Trustee, the Depositor and the Certificateholders shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental agreement shall be and be deemed to be part of the
terms and conditions of this Pass-Through Trust Agreement for any and all
purposes. The Pass-Through Trustee shall deliver to Kmart a true and correct
copy of the final form of supplemental agreement as executed by the Depositor
and the Pass-Through Trustee.
Section 10.04. Documents to Be Given to Trustee. The Pass-Through
Trustee, subject to the provisions of Sections 8.02, may receive an Officer's
Certificate and an Opinion of Counsel as conclusive evidence that any such
supplemental agreement complies with the applicable provisions of this
Pass-Through Trust Agreement.
Section 10.05. Notation on Certificates in Respect of Supplemental
Agreements. Certificates authenticated and delivered after the execution of
any supplemental agreement pursuant to the provisions of this Article may bear
a notation in form approved by the Pass-Through Trustee as to any matter
provided for by such supplemental agreement. If the Depositor or the
Pass-Through Trustee shall so determine, new Certificates so modified as to
conform, in the opinion of the Depositor and the Pass-Through Trustee, to any
modification of this Pass-Through Trust Agreement contained in any such
supplemental agreement may be prepared, executed and authenticated by the
Pass-Through Trustee and delivered in exchange for the outstanding
Certificates.
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Section 10.06. Supplements to Collateral Trust Agreement. If the
Pass-Through Trustee, as holder of the Mortgage Note[s], receives a request for
a consent to any supplement to the Collateral Trust Agreement pursuant to
Article 10 thereof, the Pass-Through Trustee shall forthwith notify the
Certificateholders of such request and shall ask for instructions from the
Certificateholders with respect to such request. The Pass-Through Trustee
shall vote in favor of such supplement the percentage of the outstanding
principal balance of the Mortgage Note[s] corresponding to the Percentage
Interests owned by the Certificateholders who instruct the Pass-Through Trustee
that they are in favor of such supplement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Pass-Through Trust Agreement
shall be for any reason whatsoever held invalid, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Pass-Through Trust Agreement
and shall in no way affect the validity or enforceability of the other
provisions of this Pass-Through Trust Agreement.
Section 11.02. Limitation on Rights of Certificateholders. The death
or incapacity of any Certificateholder shall not operate to terminate this
Pass-Through Trust Agreement or the Pass-Through Trust Property, nor entitle
such Certificateholder's legal representatives or heirs to claim an accounting
or to take any action or proceeding in any court for a partition or winding up
of the Pass-Through Trust Property, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
No Certificateholder shall have any right to vote (except as expressly
provided herein) or in any manner otherwise control the operation and
management of the Pass-Through Trust Property, or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Certificates, be construed so as to constitute the Certificateholders
from time to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Pass-Through Trust Agreement pursuant to
any provision hereof.
No Certificateholder shall have any right by virtue of any provision of
this Pass-Through Trust Agreement to institute any suit, action or proceeding
in equity or at law upon or under or with respect to this Pass-Through Trust
Agreement, unless such Holder previously shall have given to the Pass-Through
Trustee a written notice of the occurrence of an Event of Default and of the
continuance thereof, as hereinbefore provided, and unless also the Holders of
Certificates evidencing in the aggregate Percentage
45
<PAGE> 52
Interests of not less than 66-2/3% shall have made written request upon
the Pass-Through Trustee to institute such action, suit or proceeding in its own
name as Pass-Through Trustee hereunder and shall have offered to the
Pass-Through Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Pass-Through Trustee, for 60 days after its receipt of such notice, request and
offer of indemnity, shall have neglected or refused to institute any such
action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Pass-Through Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatever by virtue of any
provision of this Pass-Through Trust Agreement to affect, disturb or prejudice
the rights of the Holders of any other of such Certificates, or to obtain or
seek to obtain priority over or preference to any other such Holder, or to
enforce any right under this Pass-Through Trust Agreement, except in the manner
herein provided and for the common benefit of Certificateholders. For the
protection and enforcement of the provisions of this Section, each and every
Certificateholder and the Pass-Through Trustee shall be entitled to such relief
as can be given either at law or in equity.
Section 11.03. Solicitation of Certificateholders. The Pass-Through
Trustee will not solicit, request or negotiate for or with respect to any
direction or proposed waiver or amendment of any of the provisions of this
Pass-Through Trust Agreement or the Certificates, unless each Holder of the
Certificates (irrespective of the amount of Certificates then owned by it)
shall be informed thereof by the Pass-Through Trustee and shall be afforded the
opportunity of considering the same and shall be supplied by the Pass-Through
Trustee with sufficient information to enable it to make an informed decision
with respect thereto. Executed or true and correct copies of any waiver
effected pursuant to the provisions of this Section shall be delivered by the
Pass-Through Trustee to Kmart and each Holder of outstanding Certificates
forthwith following the date on which the same shall have been executed and
delivered by the Holder or Holders of the requisite percentage of outstanding
Certificates. Neither the Depositor nor the Pass-Through Trustee nor any
Affiliate thereof will, directly or indirectly, pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest, fee or
otherwise, to any Certificateholders as consideration for or as an inducement
to the entering into by any Certificateholders of any waiver or amendment of
any of the terms and provisions of this Pass-Through Trust Agreement unless
such remuneration is concurrently paid, on the same terms, ratably to all
Certificateholders.
Under any provisions of this Pass-Through Trust Agreement that relate
to consent, waiver, direction, request or demand of or by Certificateholders,
each and every Certificateholder shall be entitled to give or make any such
consent, waiver, direction, request or demand without request or demand for
such action by the Pass-Through Trustee.
46
<PAGE> 53
In the event any such direction or similar action is so received by the
Pass-Through Trustee under any provision hereof from the Certificateholders of
requisite Percentage Interests, the Pass-Through Trustee shall follow the
direction of such Certificateholders.
Section 11.04. Recordation of Agreement. To the extent required by
applicable law, this Pass-Through Trust Agreement is subject to recordation in
appropriate public offices for real property records in the county or other
comparable jurisdiction in which [the] [each] Mortgaged Estate is situated, and
in any other appropriate public recording office or elsewhere, such recordation
to be effected by the Pass-Through Trustee accompanied by an Opinion of Counsel
to the effect that such recordation materially and beneficially affects the
interests of the Certificateholders or is necessary in connection with the
[related] Mortgage Loan.
Section 11.05. Duration of Agreement. This Pass-Through Trust
Agreement shall continue in existence and effect until terminated as herein
provided.
SECTION 11.06. GOVERNING LAW. THIS PASS-THROUGH TRUST AGREEMENT SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
Section 11.07. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by first class or registered mail, postage
prepaid, to (i) in the case of the Depositor, National Tenant Finance
Corporation, 40 North Central Avenue, Suite 2700, Phoenix, Arizona 85004-4441,
Attention: Norman C. Storey, and (ii) in the case of the Pass-Through Trustee,
United States Trust Company of New York, c/o U.S. Trust Company of California,
N.A., Suite 2700, 555 South Flower Street, Los Angeles California 90071
Attention: Corporate Trust Division, or such other addresses as such Persons
may hereafter designate. Any notice required or permitted to be mailed to a
Certificateholder shall be given by registered mail, postage prepaid, or by
express delivery service, at the address of such Certificateholder as shown in
the Certificate Register. A copy of each notice of an Event of Default and
all other notices or communications hereunder, including the text of any
proposed or final amendment or supplement to this Pass-Through Trust Agreement,
given by or to the Certificateholders, the Pass-Through Trustee or the
Depositor shall be contemporaneously transmitted to Kmart, 3100 West Big Beaver
Road, Troy, Michigan 48084, Attention: Vice President-Real Estate, or to such
other address as Kmart may have designated by written notice to the Pass-
Through Trustee. The provisions of the foregoing sentence are for the express
benefit of Kmart, shall be enforceable by it, and may not be modified or
eliminated without its consent.
47
<PAGE> 54
Section 11.08. Counterparts. For the purpose of facilitating the
recordation of this Pass-Through Trust Agreement as herein provided and for
other purposes, this Pass-Through Trust Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, but all of which together shall constitute one and
the same instrument.
Section 11.09. Submission to Jurisdiction. Each party hereto hereby
consents to the jurisdiction of any state or federal court located within the
County of New York, State of New York and irrevocably agrees that all actions
or proceedings relating to this Pass-Through Trust Agreement may be litigated
in such courts and each such party waives any objection which it may have based
on improper venue or forum non conveniens to the conduct of any proceeding in
any such court, waives personal service of any and all process upon it and
consents that all such service or process be made by registered or certified
mail (return receipt requested) or messengered to it at its address set forth
in Section 11.07 or to its Agent referred to below at such Agent's address set
forth below and that service so made shall be deemed to be completed in
accordance with Section 11.07. Each party hereto hereby appoints the Prentice
Hall Corporation System, Inc., with an office on the date hereof at 15 Columbus
Circle, New York, New York 11023 as its Agent for the purpose of accepting
service of any process within the State of New York and shall execute any
confirmation thereof requested by the other party hereto. Nothing in this
Section shall affect the right of any party hereto to serve legal process in
any other manner permitted by law to bring any action or proceeding in the
courts of any jurisdiction against the other party or to enforce a judgment
obtained in the courts of any other jurisdiction.
Section 11.10. Gender; Number. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or
plural, as the context shall require.
Section 11.11. TIA Controls. If any provision of this Pass-Through Trust
Agreement limits, qualifies or conflicts with the duties imposed by operation
of Section 318(c) of the TIA, the imposed duties shall control.
Section 11.12. Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Depositor to the Pass-Through Trustee to take
any action under this Pass-Through Trust Agreement, the Depositor shall furnish
to the Pass-Through Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Pass-Through
Trust Agreement relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel all such conditions precedent have been complied with.
48
<PAGE> 55
Section 11.13. Statements Required in Certificate or Opinion. Each
Officers' Certificate and Opinion of Counsel with respect to compliance with a
covenant or condition provided for in this Pass-Through Trust Agreement shall
include:
(a) a statement that each Person making such Officers' Certificate or
Opinion of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such Officers'
Certificate or Opinion of Counsel are based;
(c) a statement that, in the opinion of each such Person, he has
made such examination or investigation as is necessary to enable such Person
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement that, in the opinion of such Person, such covenant or
condition has been complied with; provided, however, that with respect to
matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or
certificates of public officials.
Section 11.14. Benefits of Pass-Through Trust Agreement. Nothing in this
Pass-Through Trust Agreement or in the Certificates, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, and the Certificateholders, any benefit or any legal or equitable
right, remedy or claim under this Pass-Through Trust Agreement.
IN WITNESS WHEREOF, the Depositor and the Pass-Through Trustee have caused
their names to be signed hereto by their respective officers thereunto duly
authorized as of the day and year first above written.
NATIONAL TENANT FINANCE CORPORATION,
a Delaware corporation
By_____________________________
Name___________________________
Title__________________________
UNITED STATES TRUST COMPANY OF NEW YORK,
a New York banking corporation
By_____________________________
Name___________________________
Title__________________________
49
<PAGE> 56
STATE OF _______________ ]
] ss.
CITY OF ________________ ]
On the ____ day of _________, 199_ before me, a Notary Public in
and for said State, personally appeared ______________, known to me (or proved
to me on the basis of satisfactory evidence) to be the person who executed the
within instrument as ___________ on behalf of NATIONAL TENANT FINANCE
CORPORATION, a Delaware corporation, and acknowledged to me that such
Corporation executed the within instrument pursuant to its Bylaws or a
resolution of its Board of Directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
[NOTARIAL SEAL] _______________________________
Notary Public
My Commission Expires:
______________________
STATE OF _______________ ]
] ss.
CITY OF ________________ ]
On the ____ day of _________, 199_ before me, a Notary Public in
and for said State, personally appeared ______________, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person who
executed the within instrument as to be a ______________ on behalf of UNITED
STATES TRUST COMPANY OF NEW YORK a New York banking corporation, and
acknowledged to me that such association executed the within instrument
pursuant to its Bylaws or a resolution of its Board of Directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
[NOTARIAL SEAL] _______________________________
Notary Public
My Commission Expires:
______________________
<PAGE> 57
EXHIBIT A-1
MORTGAGE NOTE SCHEDULE
(i) Borrower Name -
(ii) Mortgaged Estate - See Exhibit A
attached hereto
(iii) Maturity Date - _____ __, 20__
(iv) Rate - ____%
(v) First Due Date - ________ __, 199_
(vi) Mortgage Payments - See Exhibit B
attached hereto
(vii) Original Principal
Balance of Mortgage
Note - $_______________
1
<PAGE> 58
EXHIBIT A-2
CERTIFICATE SCHEDULE
<PAGE> 59
EXHIBIT A-3
CONTENTS OF MORTGAGE FILE
With respect to the Mortgage Loan, the Mortgage File shall
include each of the following items:
<PAGE> 60
EXHIBIT B
[FORM OF CERTIFICATE]
[Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Pass-Through
Trustee or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]
_____% MORTGAGE PASS-THROUGH CERTIFICATE
(____________________________)
SERIES 199_
Pass-Through Trust Agreement Original Principal Amount:
Series ____ $_________
Dated as of Original Issuance Date:
_______ __, 199_ _______________, 199_
Cusip No. ___________ Maturity Date:
Number R-_ ___________, ____
This Certificate does not represent an obligation of or interest
in National Tenant Finance Corporation, a Delaware corporation, Kmart
Corporation, any subsidiary of Kmart Corporation, the Collateral Trustee or the
Pass-Through Trustee referred to below or any of their respective affiliates.
Neither this Certificate nor the underlying Mortgage Note[s] referred to below
are guaranteed or insured. To the extent not defined herein, the capitalized
terms used herein have the meanings set forth in the Pass-Through Trust
Agreement referred to below.
This certifies that _______________________ (the "Holder") is the
registered owner of an undivided ___% beneficial interest in the Pass-Through
Trust Property, subject to the terms and conditions of the Pass-Through Trust
Agreement. The Pass-Through Trust Property includes [the] mortgage note[s]
("Mortgage Note[s]") issued by the Borrower[s] identified in the Loan
Agreement[s] ([individually a] "Borrower" [, collectively "Borrowers"]). The
Mortgage Note[s], and certain other property (collectively, "Pass-Through Trust
Property") have been transferred as of the date hereof from National Tenant
Finance Corporation ("Depositor," which term includes any successor
entity under the Pass-Through Trust Agreement referred to below) to the
Pass-Through Trustee (as
<PAGE> 61
defined below) in trust for the benefit of Certificateholders. The
Pass-Through Trust Property was conveyed to the Pass-Through Trustee pursuant to
a Pass-Through Trust Agreement ("Pass-Through Trust Agreement"), dated as of the
date hereof, by and among Depositor, as Depositor, and United States Trust
Company of New York ("Pass-Through Trustee"), as Pass-Through Trustee, a summary
of certain of the pertinent provisions of which is set forth herein.
Simultaneously with the transfer of the Pass-Through Trust Property by Depositor
to the Pass-Through Trustee, the Depositor has transferred to United States
Trust Company of New York, as collateral trustee under that Collateral Trust
Agreement dated as of the date hereof, by and among Depositor and such
collateral trustee, in trust for the benefit of the Pass-Through Trustee, as
holder of the Mortgage Note[s], all right, title and interest of the Depositor
in and to the Loan Agreement[s] pursuant to which the Mortgage Note[s] [were]
[was] issued, the related Mortgage[s], all other related Loan Documents and
certain other property.
This Certificate is one of a duly authorized issue of Certificates
("Certificates"), designated as "Mortgage Pass-Through Certificates
(______________________) Series 199_", and is issued under and is subject to
the terms, provisions and conditions of the Pass-Through Trust Agreement. The
Holder of this Certificate by acceptance hereof assents to the Pass-Through
Trust Agreement and agrees to be bound thereby.
This Certificate evidences a ___% Percentage Interest for purposes of
the Pass-Through Trust Agreement. For purposes of calculations under the
Pass-Through Trust Agreement, this Certificate represents an original principal
amount as set forth at the head of this Certificate, and is scheduled to bear
interest from the date of issuance on the unpaid principal balance hereof at
the rate of _____% per annum (computed on the basis of a 360-day year comprised
of 12 consecutive 30-day months) payable on each Remittance Date, and is
scheduled to bear interest at the rate of _____% per annum (computed on the
same basis) on any overdue principal or (to the extent permitted by applicable
law) interest under the Mortgage Note[s]. Distributions on any regularly
scheduled Remittance Date will include interest on the outstanding Mortgage
Note[s] from and including the first day of the sixth month immediately
preceding such Remittance Date (or from and including the Closing Date with
respect to the first Remittance Date) through the end of the calendar month
immediately preceding such Remittance Date. Additional distributions may be
made with respect to this Certificate as a result of the prepayment, purchase
or acceleration of the Mortgage Note[s] as set forth in the Pass-Through Trust
Agreement.
THIS CERTIFICATE AND ANY OTHER CERTIFICATES ISSUED PURSUANT TO
THE PASS-THROUGH TRUST AGREEMENT ARE EQUALLY AND RATABLY SECURED BY THE
PASS-THROUGH TRUST PROPERTY.
Distributions on this Certificate will be made by the Pass-Through
Trustee to the Person entitled thereto, without the presentation or surrender
of this Certificate or the making of any notation hereon. Except as otherwise
provided in the Pass-Through Trust Agreement and notwithstanding the preceding
sentence, the
B-2
<PAGE> 62
final distribution on this Certificate will be made after notice
mailed by the Pass-Through Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or
agency of the Pass-Through Trustee specified in such notice.
On each Remittance Date, the Pass-Through Trustee will cause to be
distributed to the Holder from funds in the Certificate Account an amount equal
to the aggregate scheduled Debt Service, to the extent available, on this
Certificate for such Remittance Date. The Debt Service on this Certificate is
set forth on the Debt Service Schedule attached hereto and made a part hereof
by this reference. The Debt Service is subject to adjustment as a consequence
of prepayment, purchase or acceleration of the Mortgage Note[s] and as a
consequence of adjustment to the Annual Rental due under the Lease[s] [each of]
which secures [the] [a] Mortgage Note.
The Pass-Through Trustee will cause to be kept at its Corporate Trust
Office, or at the office of its designated agent, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe in compliance
with the Pass-Through Trust Agreement, the Pass-Through Trustee will provide
for the registration of Certificates and of transfers and exchanges of
Certificates. Upon surrender for registration of transfer of any Certificate
at any office or agency of the Pass-Through Trustee maintained for such
purpose, the Pass-Through Trustee will, subject to the limitations set forth in
the Pass-Through Trust Agreement, execute, authenticate and deliver, in the
name of the designated transferee or transferees, a Certificate or Certificates
of a like tenor and aggregate Percentage Interest and dated the date of such
execution and authentication by the Pass-Through Trustee.
No service charge will be made to the Holder for any transfer or
exchange of any Certificate, but the Pass-Through Trustee may require payment
of a sum sufficient to cover any tax or governmental charge that may be imposed
in connection with any transfer or exchange of any Certificate. Prior to due
presentation of a Certificate for registration of transfer, the Pass-Through
Trustee may treat the person in whose name any Certificate is registered as the
owner of such Certificate and the undivided interest in the Pass-Through Trust
Property evidenced thereby for the purpose of receiving distributions pursuant
to the Pass-Through Trust Agreement and for all other purposes whatsoever, and
the Pass-Through Trustee will not be affected by any notice to the contrary.
The Pass-Through Trust Agreement may be amended from time to time by
the Depositor and the Pass-Through Trustee with the consent of Kmart but
without the consent of the Certificateholders in certain circumstances
specified in the Pass-Through Trust Agreement. The Pass-Through Trust
Agreement may, under certain other circumstances specified in the Trust
Agreement, be amended from time to time by the Depositor and the Pass-Through
Trustee with the consent of the Holders of Certificates evidencing in the
B-3
<PAGE> 63
aggregate not less than 66-2/3% of the Percentage Interest of the Certificates
issued and outstanding for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of the Pass-Through Trust
Agreement or of modifying in any manner the rights of the Certificateholders;
provided that no such amendment may (i) modify the provision of the
Pass-Through Trust Agreement that concerns notifying Certificateholders of the
occurrence of an Event of Default, modify the provision of the Pass-Through
Trust Agreement concerning approving supplements to the Pass-Through Trust
Agreement that require the approval of Certificateholders, or modify the
definition of "Certificateholder" in the Pass-Through Trust Agreement, (ii)
modify the definition of "Percentage Interest" in the Trust Agreement or reduce
the Percentage Interests, the consent of the Holders of Certificates of which
is required for any such supplement to the Pass-Through Trust Agreement, or the
consent of the Holders of Certificates of which is required for any waiver
provided for in the Pass-Through Trust Agreement; (iii) reduce the amount or
extend the time of payment of any amount owing or payable under the Mortgage
Note[s] or distributions to be made on any Certificate, or impair the right of
any Certificateholder to commence legal proceedings to enforce a right to
receive payment hereunder or under the Pass-Through Trust Agreement; or (iv)
create or permit the creation of any lien on the Trust Property or any part
thereof, or deprive any Certificateholder of the benefit of the Pass-Through
Trust Agreement, whether by disposition of such Trust Property or otherwise,
without the consent of each affected Certificateholder and, with respect to
(ii) and (unless there is a monetary default under the related Lease)
(iii), Kmart.
The respective obligations and responsibilities of the Depositor and
the Pass-Through Trustee under the Pass-Through Trust Agreement will terminate
upon the final payment, prepayment in full or other liquidation of the Mortgage
Note[s] and the remittance of all funds due under the Pass-Through Trust
Agreement; provided, however, that in no event shall the Pass-Through Trust
continue beyond the expiration of 21 years from the death of the last survivor
of the descendants of Joseph P. Kennedy, the late ambassador of the United
States to the Court of St. James, living on the date hereof.
B-4
<PAGE> 64
IN WITNESS WHEREOF, the Pass-Through Trustee has caused this Certificate
to be duly executed by one of its authorized officers.
Dated: _______ __, 199_ UNITED STATES TRUST COMPANY OF
NEW YORK, solely as
Pass-Through Trustee under
the Pass-Through Trust
Agreement Series _____ dated
as of _______ __, 1994 with
National Tenant Finance
Corporation and not in its
individual capacity.
By_____________________________
Authorized Officer
B-5
<PAGE> 65
[FORM OF CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates defined in the Pass-Through Trust
Agreement Series _____ dated as of _________ __, 199_ with National Tenant
Finance Corporation.
Dated: __________ __, 199_ UNITED STATES TRUST COMPANY OF
NEW YORK, as Pass-Through Trustee
By_____________________________
Authorized Officer
B-6
<PAGE> 1
EXHIBIT 4.3
_______________
COLLATERAL TRUST AGREEMENT
_______________
between
NATIONAL TENANT FINANCE CORPORATION
as Depositor
and
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
_____________________________
Dated as of , 199_
_____________________________
$_________
Mortgage Pass-Through Certificates
(___________________)
Series 199_-__
and
Series 199_-__
_________________________________________________________________
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
Section 1.01. Definitions . . . . . . . . . . . . . . . . . 1
<CAPTION>
ARTICLE II
CONVEYANCE OF TRUST PROPERTY
<S> <C> <C>
Section 2.01. Conveyance of Trust Property. . . . . . . . . 10
Section 2.02. Acceptance by Trustee. . . . . . . . . . . . . 11
Section 2.03. Trust Property. . . . . . . . . . . . . . . . 12
Section 2.04. Limitation of Powers. . . . . . . . . . . . . 12
<CAPTION>
ARTICLE III
THE MORTGAGE NOTES
<S> <C> <C>
Section 3.01. Prepayment . . . . . . . . . . . . . . . . . . 12
Section 3.02. Note Put . . . . . . . . . . . . . . . . . . . 12
Section 3.03. Liquidation . . . . . . . . . . . . . . . . . 13
Section 3.04. Late Payment Distribution . . . . . . . . . .
<CAPTION>
ARTICLE IV
RECEIPT AND DISTRIBUTION OF INCOME
AND PROCEEDS FROM THE TRUST PROPERTY
<S> <C> <C>
Section 4.01. Receipt of Lease Payments; Collection
of Lease and Lease Guaranty Payments;
Collection of Mortgage Loan Payments;
Collection of Indemnity Agreement
Payments; Investment Direction . . . . . . . . 14
Section 4.02. Establishment of Rental Payment Account[s];
Deposits in Rental Payment Account[s]. . . . . 16
Section 4.03. Permitted Withdrawals From the Rental Payment
Account[s] . . . . . . . . . . . . . . . . . . 16
Section 4.04. Establishment of Mortgage Note Account[s];
Deposits in Mortgage Note Account[s]. . . . . 18
Section 4.05. Permitted Withdrawals From the Mortgage Note
Account[s] . . . . . . . . . . . . . . . . . . 18
Section 4.06. Capitalized Debt Service Account[s]. . . . . . 20
Section 4.07. Realization Upon Defaulted Mortgage Loan . . . 20
Section 4.08. Trustee Compensation . . . . . . . . . . . . . 22
Section 4.09. Rights of the Pass-Through Trustees. . . . . . 22
<CAPTION>
ARTICLE V
ADVANCES BY TRUSTEE
<S> <C> <C>
Section 5.01. Advances by Trustee. . . . . . . . . . . . . . 22
<CAPTION>
ARTICLE VI
THE DEPOSITOR
<S> <C> <C>
Section 6.01. Maintaining Corporate Existence of the
Depositor. . . . . . . . . . . . . . . . . . . 22
Section 6.02. Limitation on Liability of the Depositor . . . 23
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE VII
DEFAULT
<S> <C> <C>
Section 7.01. Events of Default. . . . . . . . . . . . . . . 23
Section 7.02. Waiver of Defaults. . . . . . . . . . . . . . 24
Section 7.03. Notification to Pass-Through Trustees. . . . . 24
Section 7.04. Rights of Pass-Through Trustees to Direct
Proceedings. . . . . . . . . . . . . . . . . . 24
Section 7.05. Remedies Cumulative. . . . . . . . . . . . . . 25
Section 7.06. Trustee Default. . . . . . . . . . . . . . . . 25
Section 7.07. Notice to Tenant[s] [and Kmart]. . . . . . . . 25
<CAPTION>
ARTICLE VIII
CONCERNING THE TRUSTEE
<S> <C> <C>
Section 8.01. Duties of Trustee. . . . . . . . . . . . . . . 25
Section 8.02. Certain Matters Affecting Trustee. . . . . . . 27
Section 8.03. Trustee Not Liable for Certificates or Mortgage
Loan[s]. . . . . . . . . . . . . . . . . . . 28
Section 8.04. Trustee May Own Certificates. . . . . . . . . 28
Section 8.05. Trustee's Fee and Expenses. . . . . . . . . . 28
Section 8.06. Action by Co-Trustee. . . . . . . . . . . . . 29
Section 8.07. Eligibility Requirements for Trustee. . . . . 29
Section 8.08. Resignation and Removal of Trustee. . . . . . 30
Section 8.09. Successor Trustee. . . . . . . . . . . . . . . 31
Section 8.10. Merger or Consolidation of Trustee. . . . . . 31
Section 8.11. Resignation of Co-Trustee. . . . . . . . . . . 31
Section 8.12. Removal of Co-Trustee. . . . . . . . . . . . . 31
Section 8.13. Appointment of Successor to Co-Trustee. . . . 32
Section 8.14. Succession of Successor to Co-Trustee. . . . . 32
<CAPTION>
ARTICLE IX
TERMINATION
<S> <C> <C>
Section 9.01. Termination. . . . . . . . . . . . . . . . . . 32
<CAPTION>
ARTICLE X
SUPPLEMENTS AND AMENDMENTS TO THIS
TRUST AGREEMENT AND OTHER DOCUMENTS;
ADDITIONAL AGREEMENTS OF TRUSTEE
<S> <C> <C>
Section 10.01. Supplemental Trust Agreement Without Consent
of Pass-Through Trustees. . . . . . . . . . . 33
Section 10.02. Supplemental Agreements With Consent of Pass-
Through Trustees. . . . . . . . . . . . . . . 34
Section 10.03. Effect of Supplemental Agreement. . . . . . . 35
Section 10.04. Documents to Be Given to Trustee. . . . . . . 36
Section 10.05. Granting of Easements . . . . . . . . . . . . 36
<CAPTION>
ARTICLE XI
MISCELLANEOUS PROVISIONS
<S> <C> <C>
Section 11.01. Severability of Provisions. . . . . . . . . . 36
Section 11.02. Recordation of Agreement. . . . . . . . . . . 36
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
Section 11.03. Duration of Agreement . . . . . . . . . . . . 36
Section 11.04. Governing Law . . . . . . . . . . . . . . . . 36
Section 11.05. Notices. . . . . . . . . . . . . . . . . . . 36
Section 11.06. Counterparts. . . . . . . . . . . . . . . . . 37
Section 11.07. Submission to Jurisdiction. . . . . . . . . . 37
Section 11.08. Gender; Number. . . . . . . . . . . . . . . . 38
Section 11.09. Certificate and Opinion as to Conditions
Precedent . . . . . . . . . . . . . . . . . . 38
Section 11.10. Statements Required in Certificate or Opinion 38
Section 11.11. Benefits of Trust Agreement. . . . . . . . . 38
EXHIBIT A-1 MORTGAGE NOTE SCHEDULE
EXHIBIT A-3 CONTENTS OF MORTGAGE FILE
EXHIBIT A-4 CAPITALIZED DEBT SERVICE ACCOUNT SCHEDULE
EXHIBIT C FORM OF TRUSTEE CERTIFICATION
</TABLE>
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<PAGE> 5
___________________
COLLATERAL TRUST AGREEMENT
___________________
THIS COLLATERAL TRUST AGREEMENT, dated as of _______ __, 19__, is
executed by and among NATIONAL TENANT FINANCE CORPORATION, a Delaware
corporation, as depositor (together with its permitted successors, in such
capacity, "Depositor"), and UNITED STATES TRUST COMPANY OF NEW YORK a New York,
banking corporation as trustee (together with its permitted successors and
assigns, "Trustee").
In consideration of the premises and the mutual agreements hereinafter
set forth, the Depositor and the Trustee agree as follows:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions. Whenever used herein, the following words
and phrases, unless the context otherwise requires, shall have the following
meanings:
"Additional Rent": [With respect to each Lease] has the meaning
assigned in Article 5 of [the] [such] Lease.
"Administrative Expenses": The ordinary and necessary expenses
incurred by the Trustee in the course of administering the affairs of the
Trust, excluding any Liquidation Expenses.
"Annual Rental": [With respect to each Lease,] has the meaning
assigned in Article 4 of [the][such] Lease.
"Assignment of Mortgage[s]": The Assignment of the Mortgage[s] dated
as of _______ __, 19__ between Depositor and Trustee, the Assignment of Lease
Assignment[s] dated as of ______ __, 19__, between Depositor and Trustee, and
any other notice of transfer or equivalent instrument, in recordable form,
sufficient under the laws of the jurisdiction[s] where the Mortgaged Estate
securing [each] [the] Mortgage Loan is located to reflect of record the sale,
conveyance, transfer and absolute assignment of the Mortgage[s] to the Trustee.
"Borrower" [The][A] Borrower identified in [the][a] Loan Agreement.
"Business Day": Any day other than (i) a Saturday or Sunday, or (ii)
a day on which banking or savings and loan institutions in New York or
California, or the city in which the principal corporate trust offices of any
successor Trustee are located, are authorized or obligated by law or executive
order to be closed.
<PAGE> 6
[Capitalized Debt Service Account": [The] [Each] trust account
described in Section 4.06.]
["Capitalized Debt Service Reserve": Has the meaning assigned thereto
in Section 2 of [the] [each] Loan Agreement.]
"Certificate" or "Certificates": The Certificate or Certificates
evidencing a beneficial ownership interest in a Pass-Through Trust Property
executed and authenticated by a Pass-Through Trustee.
"Certificate Account": The trust account described in Section 4.03 of
each Pass-Through Trust Agreement.
"Certificate Balance": With respect to all the Certificates, the
original principal amount of the Certificates less all payments and prepayments
of principal thereof, including without limitation any payments of principal
comprising Debt Service; and with respect to any Certificate, the original
principal amount of such Certificate less all payments and prepayments of
principal thereof, including without limitation any payments of principal
comprising Debt Service on such Certificate.
"Certificateholder," "Certificateholders," "Holder" or "Holders": The
person or persons in whose name a Certificate is registered in a Certificate
Register, except that, solely for the purposes of voting Certificates to direct
a Pass-Through Trustee with respect to any consent, waiver, request or demand
pursuant to this Trust Agreement or pursuant to any Pass-Through Trust
Agreement, any Certificate registered in the name of the Depositor, [Kmart,] a
Tenant, a Borrower, any successor owner or ground lessee of a Project, any
successor tenant or subtenant of a Project, any successor guarantor of the
performance of a Tenant or successor tenant, or any affiliate of any of the
foregoing, shall be deemed not to be outstanding.
"Certificate Register": A register maintained pursuant to Section
3.02 of each Pass-Through Trust Agreement.
"Closing Costs": An amount equal to $_____________ which shall be
disbursed to the Underwriters on the Closing Date.
"Closing Date": _______ __, 199_.
"Code": The Internal Revenue Code of 1986, as amended.
"Condemnation Proceeds": Any awards in respect of, or settlements in
lieu of, condemnation proceedings affecting [the] [a] Mortgaged Estate.
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<PAGE> 7
"Consent and Agreement": [A] [The] Consent and Agreement among
[Kmart,] Depositor, [a] Borrower, [a] Tenant and Trustee relating to [a] [the]
Lease, [[a] [the] Lease Guaranty,] [a] [the] Note Put Agreement and certain
other related matters.
"Debt Service": The interest or interest and principal payable
semiannually on the Remittance Date as stated on a specific Certificate, as
adjusted from time to time as provided in Section 3.01(g) of the related
Pass-Through Trust Agreement.
"Depositor": National Tenant Finance Corporation, a Delaware
corporation and its successors in interest.
"Determination Date": The last Business Day immediately preceding a
Remittance Date.
"Due Date": [With respect to each Mortgage Note,] a Note Payment Date
as defined in the [related] Loan Agreement.
"Eligible Investments": One or more of the following:
(i) direct obligations of the United States of America;
(ii) obligations fully guaranteed, both as to principal
and interest, by the United States of America;
(iii) certificates of deposit issued by, or bankers'
acceptances of, or time deposits with, a bank or trust company organized under
the laws of the United States or any state thereof, having capital, surplus and
undivided profits aggregating at least $100,000,000 and whose long-term
certificates of deposit are, at the time of acquisition thereof, rated in the
highest rating category for such securities by S&P and Moody's; and
(iv) taxable government money-market portfolios restricted
to obligations with maturities of one year or less, issued or guaranteed by the
full faith and credit of the United States which, at the time of such
investment, are then rated in the highest rating category of S&P and Moody's
(the "highest rating category" as used in this definition shall mean (A) a
rating which would be assigned by S&P, as of the date first above written,
equivalent to or higher than "AAAm" or "AAAmG" with respect to money-market
securities and (B) a rating which would be assigned by Moody's as of the date
first above written, equivalent to or higher than "Am" with respect to
money-market securities);
provided that any such obligations of the types described in clauses (i)
through (iv) above shall not have a maturity later than
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<PAGE> 8
the earlier of 90 days and the Due Date immediately following the acquisition
thereof; provided further, that any such obligations of the types described in
clauses (i) and (ii) above may be made through a repurchase agreement in
commercially reasonable form with a bank or other financial institution (which
may be the Trustee or any Pass-Through Trustee) the senior unsecured debt of
which is then assigned an A rating or better by S&P or Moody's, so long as
title to the underlying obligations shall pass to the Trustee and that such
underlying obligations shall be segregated in a custodial or trust account of
or for the benefit of the Trustee.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default": Any event of default described in Section 7.01.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"Extraordinary Expense Advances": All reasonable and necessary
"out-of-pocket" costs and expenses of the Trustee or any Pass-Through Trustee
in enforcing the Mortgage Notes and the Loan Documents following an Event of
Default under Section 7.01(c) hereof (except for a Non-Monetary Tenant
Default), and in compliance with the obligations of the Trustee under Section
4.07.
"FDIC": Federal Deposit Insurance Corporation or any successor
organization.
["Indemnity Agreement": [With respect to each Mortgage Note,] has the
meaning assigned thereto in Section 1.1 of the [related] Loan Agreement.]
"Insurance Proceeds": Proceeds paid by any insurer pursuant to any
insurance policy, including but not limited to title insurance, environmental
insurance and self-insurance proceeds paid by Kmart or any Tenant, covering all
or a portion of [the] [a] Mortgaged Estate.
"Kmart": Kmart Corporation, a Michigan corporation, and its
successors and assigns.
"Lease": [With respect to each Mortgage Note,] has the meaning
assigned thereto in Section 1.1 of the [related] Loan Agreement.
["Lease Guaranty": [With respect to each Mortgage Note,] has the
meaning assigned thereto in Section 1.1 of the [related] Loan Agreement.]
["Lease Guaranty Termination": [With respect to each Mortgage Note,]
has the meaning assigned thereto in the related Note Put Agreement.]
"Liquidated Mortgage Loan": [A] [The] Mortgage Loan after an Event of
Default under the [related] Loan Agreement when the Trustee has reasonably
determined that all amounts which it expects
4
<PAGE> 9
to recover from or on account of such Mortgage Loan have been recovered.
"Liquidation Expenses": Expenses which are incurred by the Trustee in
connection with the liquidation of a defaulted Mortgage Loan, such expenses
including, without limitation, legal fees and expenses, any unreimbursed amount
expended by the Trustee pursuant to Section 4.07 (to the extent such amount is
reimbursable under the terms of Section 4.07) respecting such Mortgage Loan and
any related and unreimbursed expenditures for real estate property taxes or for
property restoration or preservation.
"Liquidation Proceeds": Cash (including Insurance Proceeds and
Condemnation Proceeds) received by the Trustee in connection with the
liquidation of [a] [the] defaulted Mortgage Loan, whether through the sale of
such defaulted Mortgage Loan, the sale of the Mortgaged Estate securing such
defaulted Mortgage Loan pursuant to foreclosure sale or otherwise, or revenues
from or the sale of the related Mortgaged Estate if such Mortgaged Estate is
acquired in satisfaction of such defaulted Mortgage Loan, other than amounts
required to be paid to the Borrower pursuant to law or the terms of the related
Mortgage Note.
"Loan Agreement": [With respect to each Mortgage Note,] the [related]
Loan Agreement between Depositor and [a] Borrower, pursuant to the terms and
conditions of which the [related] Mortgage Loan was made.
"Loan Documents": [With respect to each Mortgage Loan,] the [related]
Note Put Agreement, the [related] Loan Agreement, the [related] Mortgage and
each document in the Mortgage File [pertaining to such Mortgage Loan], and each
other document which constitutes a Loan Document pursuant to the terms and
provisions of [such] [the] Loan Agreement.
"Make-Whole Premium": [With respect to each Mortgage Note,] has the
meaning assigned to it in Section 2 of the [related] Loan Agreement. The
Trustee shall be provided with a certificate evidencing the calculation of such
amount by the Depositor.
"Moody's": Moody's Investors Service, Inc., a Delaware corporation,
its successors and assigns.
"Mortgage": [With respect to each Mortgage Note,] has the meaning
assigned thereto in Section 1.2 of the [related] Loan Agreement.
"Mortgage File": The items referred to in Exhibit A-3 annexed hereto
pertaining to the Mortgage Loan[s].
"Mortgage Loan": The loan pursuant to [a] [the] Loan Agreement
together with all right, title and interest of Depositor relating thereto,
evidenced by the [related] Mortgage Notes and secured by the [related]
Mortgage.
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<PAGE> 10
"Mortgage Note": A promissory note, executed by [a] [the] Borrower as
obligor and having [a] [the] maturity date and interest rate specified in
the Mortgage Note Schedule, secured by [a] [the] Mortgage, which Mortgage Note
was sold, conveyed, transferred and absolutely assigned by the Depositor to a
Pass-Through Trustee and which is the subject of the related Pass-Through Trust
Agreement and included in the related Pass-Through Trust Property.
"Mortgage Note Account": [The] [Each] trust account described in
Section 4.04.
"Mortgage Note Payments": The scheduled payments set forth in Exhibit
A-1 of interest or principal and interest on the Mortgage Notes.
"Mortgage Note Schedule": The schedule attached hereto as Exhibit A-1
setting forth the following information for the Mortgage Notes: (i) [each]
[the] Borrower's name; (ii) the Mortgaged Estate[s]; (iii) the maturity dates;
(iv) each Mortgage Note rate; (v) the first Due Date; (vi) a schedule setting
forth the Mortgage Note Payments; and (vii) the original Principal Balance of
each Mortgage Note.
"Mortgaged Estate": [With respect to each Mortgage Note,] the real
and personal property securing [such] [the] Mortgage Note[s].
"Net Liquidation Proceeds": Liquidation Proceeds net of Liquidation
Expenses.
"Non-Monetary Tenant Default": [With respect to a Lease,] any default
under [such] [the] Lease by the [related] Tenant other than a default in the
payment of Annual Rental or Additional Rent.
"Note Put Agreement": [With respect to each Loan Agreement,] the Note
Put Agreement by and between Depositor, [and] the [related] Tenant, [and Kmart]
pursuant to the terms and conditions of which a put of [such] [the] Mortgage
Notes may be made on the occurrence of certain events specified therein.
"Officer's Certificate": A certificate signed by the Chairman of the
Board, the Chief Executive Officer, the President or a Vice President, the
Treasurer or the Secretary or one of the Assistant Treasurers or Assistant
Secretaries or any other duly authorized officer of the Depositor and delivered
to the Trustee containing the information required by Sections 11.09 and 11.10.
[Option Agreement": An option granted by [a][the] Borrower to
[a][the] Tenant permitting such Tenant to acquire the [related] Project in the
event Borrower does not perform its obligations under the [related] Lease and
the [related] Construction Fund Disbursement Agreement.]
"Opinion of Counsel": An opinion in writing signed by legal counsel
who may be an employee of or counsel to the Depositor in
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<PAGE> 11
form and substance acceptable to the Trustee containing the information
required by Sections 11.09 and 11.10.
"Pass-Through Trust": A grantor trust created pursuant to a
Pass-Through Trust Agreement.
"Pass-Through Trust Administrative Expenses": The ordinary and
necessary expenses incurred in the course of administering the affairs of a
Pass-Through Trust.
"Pass-Through Trust Agreement": A Pass-Through Trust Agreement dated
the date hereof between the Pass-Through Trustee and the Depositor, together
with all amendments thereof and supplements thereto.
"Pass-Through Trust Property": With respect to each Pass-Through
Trust, the corpus of such Pass-Through Trust, to the extent described therein,
consisting of the Mortgage Note[s] held by such Pass-Through Trust, such assets
as shall from time to time be identified as deposited in the Certificate
Account (including the investment income thereon) of such Pass-Through Trust,
and any funds advanced by the Certificateholders of a Pass-Through Trust to the
related Pass-Through Trustee or otherwise held by such Pass-Through Trustee in
accordance with the provisions of the related Pass-Through Trust Agreement.
"Pass-Through Trustee": With respect to each Pass-Through Trust
Agreement, the U.S. Trust Company of New York, and its permitted successors and
assigns thereunder.
"Pass-Through Trustee's Fees": The amount of annual fee paid to each
Pass-Through Trustee for its ordinary fees and expenses arising under a
Pass-Through Trust Agreement, equal to $________.
"Percentage Interest": [With respect to the Mortgage Notes issued
under a Loan Agreement] the sum of the percentages of the aggregate outstanding
principal balance of [such] [the] Mortgage Notes which is voted by the
Pass-Through Trustees with respect to any matter. The percentage of such
Mortgage Notes voted by a Pass-Through Trustee shall be determined by dividing
(i) the product of (a) the outstanding principal balance of such Mortgage Notes
held by such Pass-Through Trustee, times (b) the Percentage Interests (as
defined in such Pass-Through Trust Agreement) represented by the
Certificateholders of such Pass-Through Trust which have directed such
Pass-Through Trustee to vote on any particular matter or 100% if the
Pass-Through Trustee is voting in its own discretion, by (ii) the aggregate
outstanding principal balance of such Mortgage Notes.
"Permitted Encumbrances": The Permitted Encumbrances as defined in
[each] [the] Mortgage.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability
7
<PAGE> 12
company, unincorporated organization or government or any agency or political
subdivision thereof.
"Pledge Agreement": [With respect to each Mortgage Note,] has the
meaning assigned thereto in Section 1.2 of the [related] Loan Agreement.
"Principal Balance": The outstanding principal balance of a Mortgage
Note as of any specified date.
"Principal Prepayment": Any payment or other recovery of principal on
a Mortgage Note (other than monthly receipt of amounts referred to in Section
4.01(a)), including any prepayment of principal pursuant to Section 3 of the
[related] Loan Agreement, Insurance Proceeds and Condemnation Proceeds to the
extent required to be deposited in the Certificate Accounts, and Liquidation
Proceeds, which is received in advance of its scheduled Due Date.
"Project": [A] [The] facility comprised of a retail store
[constructed by [a] Borrower [and [a] Tenant]] for lease by [a] [such] Tenant
on real property [which will be [acquired by] [owned by] [a] [such] Borrower
and] [upon which such facility will be constructed on behalf of [such]
Borrower] using the proceeds of [a] [the] Mortgage Loan.
"Purchase Price": [With respect to each Mortgage Note,] has the
meaning assigned thereto in Section 2.1 of the [related] Note Put Agreement.
"Put": The right to require purchase of a Mortgage Note by [a] [the]
Tenant and Kmart pursuant to the [related] Note Put Agreement.
"Rating Agency": Any nationally recognized statistical rating agency,
or its successor, that rated the Certificates at the request of the Depositor
at the time of the initial issuance of the Certificates. If such agency or a
successor is no longer in existence, "Rating Agency" shall be such nationally
recognized statistical rating agency, or other comparable Person, designated by
the Depositor, notice of which designation shall be given to the Trustee.
References herein to the highest rating category of a Rating Agency shall mean
AAA or better in the case of S&P and Aaa or better in the case of Moody's and
in the case of any other Rating Agency shall mean a rating equivalent to such
ratings.
["Rating Decline": [with respect to each Mortgage Note,] has the
meaning assigned thereto in the related Note Put Agreement.]
"Record Date": The close of business on the fifteenth day preceding
the related Remittance Date, except with respect to a distribution pursuant to
Section 3.01(f) of a Pass-Through Trust Agreement, in which case the Record
Date is the close of business on the fifteenth day prior to the Remittance Date
on which the related Mortgage Note Payment would, pursuant to the terms of the
related Pass-Through Trust Agreement, have been distributable to the related
Certificateholders had such Mortgage Note Payment been paid in full in a timely
manner.
8
<PAGE> 13
"Redemption Price": [With respect to each Mortgage Note,] has the
meaning assigned thereto in Section 1.2 of the [related] Loan Agreement.
"Remittance Date": With respect to the Certificates, an interest or a
principal and interest payment date of ________ 1, 19__, and the first Business
Day of each ________ and ____ thereafter until _____ 1, ____, or the payment of
the unpaid principal balance in full, or such other date when a distribution is
made pursuant to Section 3.01(c), 3.01(d), 3.01(e) or 3.01(f) of a Pass-Through
Trust Agreement.
"Rental Payment Account": [The] [Each] trust account described in
Section 4.02.
"Responsible Officer": When used with respect to the Trustee, the
Chairman or Vice Chairman of the Board of Directors of the Trustee, the
Chairman or Vice Chairman of the Executive or Standing Committee of the Board
of Directors of the Trustee, the President, the Chairman of the Committee on
Trust Matters, any Vice President, any Assistant Vice President, the Secretary,
any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier,
any Assistant Cashier, any Trust Officer or Assistant Trust Officer, the
Controller and any Assistant Controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
["Restructuring Event": [with respect to each Mortgage Note,] has the
meaning assigned thereto in the related Note Put Agreement.]
["Second Mortgage": A Mortgage, Security Agreement and Assignment of
Rents from [a] [the] Borrower to [a] [the] Tenant which grants a lien
subordinate to the [related] Mortgage on [a] [the] Project to secure such
Borrower's performance under the [related] Lease and under the [related]
Construction Fund Disbursement Agreement.]
"S & P": Standard & Poor's Ratings Group, a _________________________
corporation, its successor and assigns.
"Tenant" or "Tenants": [Kmart and] ___________, _____________ or
[____________,] [each of] which is a subsidiary of Kmart and which has entered
into [the] [a] Lease with [a] [the] Borrower to occupy a Project.
"Treasury Regulations": The Treasury Regulations, including proposed,
temporary and final regulations promulgated under the provisions of the Code.
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<PAGE> 14
"Trust": The trust created pursuant to this Trust Agreement.
"Trust Agreement": This Trust Agreement and all amendments hereof and
supplements hereto.
"Trustee": United States Trust Company of New York, and its permitted
successors hereunder.
"Trustee's Fee": The amount of the annual fee paid to the Trustee for
its Administrative Expenses, equal to $_____, payable by the Tenant[s] pursuant
to the Consent and Agreement[s].
"Trust Property": The corpus of the Trust, to the extent described
herein, consisting of all Loan Documents, property which secures the Mortgage
Loan[s] and which has been acquired by foreclosure or deed in lieu of
foreclosure (prior to its disposition) and Insurance Proceeds, Condemnation
Proceeds and any other amounts receivable under the Loan Documents, and any
funds advanced by the Certificateholders to Trustee or otherwise held by
Trustee in accordance with the provisions hereof.
"Underwriters": The several underwriters named in the Underwriting
Agreement.
"Underwriting Agreement": The Underwriting Agreement dated ________
__, 19__, between Kmart, the Depositor and Sutro & Co. Incorporated [on behalf
of itself and the several underwriters named therein].
ARTICLE II
CONVEYANCE OF TRUST PROPERTY
Section 2.01. Conveyance of Trust Property. As grantor of the Trust
and the Pass-Through Trusts, the Depositor, concurrently with the execution and
delivery hereof, does hereby sell, transfer, set over, convey and absolutely
assign to the Trustee for the benefit of the Pass-Through Trustees as holders
of the Mortgage Notes without recourse (except as provided herein) in trust
intending to establish the Trust, all right, title and interest of the
Depositor in and to all Loan Documents.
The ownership of the Trust Property is vested in the Trustee without
reservation of any right, title or interest whatsoever in the Depositor. The
Depositor intends that the sale, conveyance, transfer and absolute assignment
of the Depositor's right, title and interest in and to the Trust Property
pursuant to this Trust Agreement shall constitute a purchase and sale and not a
pledge of security for a loan. However, if for any reason such conveyance is
deemed not to be a sale, the Depositor intends that the rights and obligations
of the parties shall nevertheless be established pursuant to the terms of this
Trust Agreement and that the Depositor shall be deemed to have granted to the
Trustee a first priority security interest in all of the Depositor's right,
title
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<PAGE> 15
and interest in, to and under the Trust Property, and that this Trust Agreement
shall constitute a security agreement under applicable law. The Trustee is
holding the Trust Property on behalf of and for the benefit of the Pass-Through
Trustees as holders of the Mortgage Notes. Any funds the Trustee collects
hereunder, except such amounts as are to be paid to the Trustee as provided
herein, are collected and held on behalf of and for the benefit of the
Pass-Through Trustees as holders of the Mortgage Notes.
Section 2.02. Acceptance by Trustee. The Trustee acknowledges
receipt of the documents referred to in Section 2.01, subject to any exceptions
noted in a certificate of the Trustee delivered within 30 days after the
Closing Date, and declares that it holds and will hold such documents delivered
to it in trust for the use and benefit of all present and future holders of the
Mortgage Notes. The Trustee agrees, for the benefit of the Pass-Through
Trustees as holders of the Mortgage Notes, to review within 30 days after the
Closing Date each of the documents described in Section 2.01 delivered to it to
ascertain that all required documents have been executed and received, and that
such documents relate to the Mortgage Notes identified in the Mortgage Note
Schedule, as supplemented, that have been sold, conveyed, transferred and
absolutely assigned to the Pass-Through Trustees. If the Trustee finds any
document or documents constituting a part of the documents described in Section
2.01 to be missing, mutilated, damaged, defaced, incomplete, improperly dated,
clearly forged or otherwise physically altered in any material respect, the
Trustee shall promptly (and in any event within no more than five Business Days
after such discovery) so notify the Depositor. At the conclusion of such
review, the Trustee shall also notify the Depositor if, in examining such
documents, or through any other means, the Trustee had notice or knowledge (a)
of any adverse claim, lien or encumbrance against [any] [the] Mortgage Loan or
[any] [the] related Mortgaged Estate, (b) that any Mortgage Note was overdue or
had been dishonored, (c) of evidence on the face of any Mortgage Note or
Mortgage of any security interest or other right or interest therein, or (d) of
any defense against or claim to any Mortgage Note by any party. The Depositor
shall correct such omission or other irregularity referred to above within 90
days from receipt of such notice from the Trustee. The Trustee shall review
the documents referred to in Section 2.01 only for the purpose set forth above
in this Section 2.02 and the Trustee shall be under no duty or obligation to
inspect, review or examine any such documents, instruments, certificates or
other papers to determine that they are genuine, enforceable or appropriate for
the represented purpose or that they have actually been recorded or that they
are other than what they purport to be on their face.
Within thirty (30) days of the Closing Date, the Trustee shall deliver
to the Depositor, Kmart and the Pass-Through Trustees the Trustee's
Certification substantially in the form attached hereto as Exhibit C.
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<PAGE> 16
Section 2.03. Trust Property. The Trustee acknowledges that it holds
the Trust Property conveyed pursuant to this Trust Agreement in trust for the
use and benefit of all present and future holders of the Mortgage Notes.
Section 2.04. Limitation of Powers. The Trust is constituted solely
for the purpose of holding the Trust Property for the benefit of the
Pass-Through Trustees as holders of the Mortgage Notes, and, except as set
forth herein, the Trustee is not authorized or empowered to acquire any other
investments or engage in any other activities.
ARTICLE III
THE MORTGAGE NOTES
Section 3.01. Prepayment. In the event of a prepayment of a Mortgage
Note pursuant to Section 3 of the Loan Agreement, upon receipt by Trustee of
the amount of such prepayment, Trustee shall deposit such amount in the
[related] Mortgage Note Account and shall on the next Business Day following
such receipt pay such sum to the Pass-Through Trustee holding such Mortgage
Note for deposit into the Certificate Account of the related Pass-Through
Trust. Any Condemnation Proceeds or Insurance Proceeds received by the Trustee
pursuant to Section 3.3 of the Loan Agreement shall be allocated to each
[related] Mortgage Note based upon a fraction, calculated as of immediately
prior to the Prepayment Date, the numerator of which shall be the outstanding
principal balance of such Mortgage Note plus accrued interest thereon plus the
Make-Whole Premium related thereto and the denominator of which shall be the
aggregate outstanding principal balance of all [related] Mortgage Notes, plus
the aggregate accrued interest thereon plus the aggregate Make-Whole Premiums
related thereto. For purposes of this Section, the term "Prepayment Date"
shall mean the effective date of the termination of the [related] Lease or of
the abatement of the Annual Rental of such Lease, as applicable.
Section 3.02. Note Put. The Trustee shall notify the Pass-Through
Trustees of the occurrence of any Triggering Event (as defined in [a] [the]
Note Put Agreement) known to the Trustee within two (2) Business Days after
obtaining knowledge thereof.
(a) Upon the occurrence of a Triggering Event, (other
than a Lease Guaranty Termination) [, Rating Decline or Restructuring Event)]the
Trustee, as provided in (b) below or upon the written direction of the
Pass-Through Trustees voting Percentage Interests in the aggregate of not less
than 66-2/3% of the related Mortgage Notes, shall (i) obtain the Mortgage Notes
from the Pass-Through Trustees, (ii) exercise the Put in accordance with the
terms and provisions of [such] [the] Note Put Agreement, (iii) designate the
Purchase Date under and as defined in [such] [the] Note Put Agreement (which
Purchase Date shall be not more than 35 Business Days after receipt of such
direction) and, upon receipt of the Purchase Price from [the related] Tenant or
Kmart, deposit such amount into the [related] Mortgage Note Account, and (iv)
on the next Business Day following
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such receipt, pay into the Certificate Account of each Pass-Through Trustee the
Purchase Price received by the Trustee for the [related] Mortgage Note held by
such Pass-Through Trust, less any reasonable costs and expenses incurred by the
Trustee or the Pass-Through Trustees in connection with the exercise of the Put
that have not otherwise been reimbursed. The payment of the Purchase Price to
the Trustee as set forth herein and in the [related] Note Put Agreement shall
satisfy in full [the related] Tenant's and Kmart's obligations under the
[related] Note Put Agreement. Upon payment of the Purchase Price, the Trustee
shall transfer all Loan Documents [related to the purchased Mortgage Notes] to
the purchaser of such Mortgage Notes, and this Trust shall thereby terminate
as to such Loan Documents. Upon execution and delivery of all documents
reasonably necessary to assign the related Loan Documents to the purchaser of
the Mortgage Notes, the Trustee shall have no further obligations with respect
to such Loan Documents or such Mortgage Notes.
(b) If the Triggering Event is a Lease Guaranty
Termination, [, a Rating Decline or a Restructuring Event,] the Trustee shall
exercise the [related] Put and take the other steps specified in (a) above
unless the Trustee receives written direction from the Pass-Through Trustees
voting Percentage Interests in the aggregate of not less than 66-2/3% of the
related Mortgage Notes instructing the Trustee not to exercise such Put.
(c) Notwithstanding anything herein to the contrary, if
Kmart is obligated to purchase Mortgage Notes pursuant to the first sentence of
Section 2.3 of the [related] Note Put Agreement, then the Trustee shall (i)
obtain such Mortgage Notes from the Pass-Through Trustees, (ii) deliver such
Mortgage Notes in accordance with the terms and provisions of such Note Put
Agreement, including but not limited to endorsed as provided in such Note Put
Agreement, to Kmart upon receipt of the Purchase Price from Kmart, (iii) upon
receipt of the Purchase Price from Kmart, deposit such amount into the
[related] Mortgage Note Account, and (iv) on the next Business Day following
such receipt, pay into the Certificate Account of each Pass-Through Trust the
Purchase Price received by the Trustee for the [related] Mortgage Note held by
such Pass-Through Trust, less any reasonable costs and expenses incurred by the
Trustee or the Pass-Through Trustees in connection with such purchase that have
not otherwise been reimbursed. The payment of the Purchase Price to the
Trustee as set forth herein and in the [related] Note Put Agreement shall
satisfy in full [the related] Tenant's and Kmart's obligations under the
[related] Note Put Agreement. Upon payment of the Purchase Price, the Trustee
shall transfer all Loan Documents [related to the purchased Mortgage Notes] to
the purchaser of such Mortgage Notes, and this Trust shall thereby terminate
as to such Loan Documents. Upon execution and delivery of all documents
reasonably necessary to assign the related Loan Documents to the purchaser of
the Mortgage Notes, the Trustee shall have no further obligations with respect
to such Loan Documents or such Mortgage Notes.
Section 3.03. Liquidation. In the event of a liquidation of a
Mortgage Loan by foreclosure or otherwise as a consequence of an Event of
Default (not including a Put pursuant to the [related] Note Put Agreement), the
Trustee shall, following receipt of any Net Liquidation Proceeds, deposit such
amounts in the [related] Mortgage Note Account and shall on the next Business
Day following such receipt distribute a portion of such amount to each
Pass-Through Trustee holding a [related] Mortgage Note or rights with respect
thereto. Any amounts received in connection with such a liquidation shall be
allocated to each [related] Mortgage Note based upon a fraction, calculated as
of immediately prior to the receipt by the Trustee of such amounts, the
numerator of which shall be the Purchase Price of such Mortgage Note and the
denominator of which shall be the aggregate Purchase Prices of such Mortgage
Note and all [related] Mortgage Notes. Once a Mortgage Loan has become a
Liquidated Mortgage Loan and all Net Liquidation Proceeds with respect to such
Liquidated Mortgage Loan have been distributed to the Pass-Through Trustees,
this Trust shall terminate with respect to such Liquidated Mortgage Loan and
the [related] Loan Documents.
Section 3.04 Late Payment Distribution. In the event that, due to
unpaid Annual Rental, there are insufficient funds on any Due Date to pay the
Mortgage Note Payments on a Mortgage Note and subsequent to such Due Date such
Annual Rental or any Additional Rent with respect thereto is paid, the Trustee
shall on the next Business Day following such receipt transfer to the
Certificate Account of the Pass-Through Trustee holding such Mortgage Note
such unpaid portion of such Mortgage Note Payments together with
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interest on such overdue amount at the Overdue Rate (as defined in such
Mortgage Note) to the extent received.
ARTICLE IV
RECEIPT AND DISTRIBUTION OF INCOME
AND PROCEEDS FROM THE TRUST PROPERTY
Section 4.01. Receipt of Lease Payments; Collection of Lease and
Lease Guaranty Payments; Collection of Mortgage Loan Payments; Collection of
Indemnity Agreement Payments; Investment Direction.
(a) Pursuant to the Consent and Agreement[s], [each]
Tenant under [the] [each] Lease will pay all Annual Rental and Additional Rent
(except for Real Estate Taxes (as defined in the related Lease) and amounts
payable directly to a third party pursuant to such Lease, which shall be
payable in accordance with such Lease) payable by [each] Tenant under [the]
[each] Lease directly to the Trustee. All such Annual Rental and Additional
Rent received by Trustee shall be deposited by the Trustee in the Rental
Payment Account as described in Section 4.02 hereof, invested in Eligible
Investments in accordance with Section 4.01(d) of this Trust Agreement, and
applied in accordance with Section 4.03 hereof; provided that, subsequent to
the Trustee becoming aware of the occurrence of an Event of Default pursuant to
Section 7.01 hereof (except for a Non-Monetary Tenant Default), and during the
time such Event of Default continues without being cured or waived, all Annual
Rental and Additional Rent [from the related Lease] received by Trustee shall
be deemed received pursuant to the [related] Assignment of Leases and Rents
and shall be deposited by the Trustee in the Mortgage Note Account as described
in Section 4.04 hereof, shall be invested in accordance with Section 4.01(d)
hereof, and shall be applied in accordance with Section 4.05 hereof.
(b) In the event the Trustee does not receive any monthly
installment of Annual Rental on the date set forth in [the] [each] Lease,
taking into account any grace period provided for therein, the Trustee is
hereby directed to and the Trustee, shall notify promptly, but in no event
later than 2 Business Days after such installment was due, taking into account
any applicable grace period, the [related] Borrower (as landlord), the
[related] Tenant [and Kmart] in writing regarding [the] [such] Tenant's failure
to make such timely payment. In the event the Trustee does not receive the
monthly installment of Annual Rental within [five] Business Days of giving such
written notice, the Trustee, at the written direction of the Pass-Through
Trustees voting Percentage Interests aggregating not less than 66-2/3% of the
related Mortgage Notes, shall use its best efforts to enforce the provisions of
[the] [such] Lease [and [the related] Lease Guaranty] by exercising all of the
remedies available to it at law and in equity, including, but not limited to,
the remedies available under [the] [such] Lease [and [the] [such] Lease
Guaranty,] provided that the Trustee shall give notice of intent to terminate
or take action to terminate [the] [such] Lease only at the written direction of
the Pass-Through Trustees voting Percentage Interests aggregating not
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less than 66-2/3% of the related Mortgage Notes to take such action. No later
than two Business Days prior to any Due Date, the Trustee shall advise each
Pass-Through Trustee if there are insufficient funds in the Rental Payment
Account[s] and Mortgage Note Account[s] to pay the Mortgage Note Payments due
on such Due Date.
(c) Continuously from the date hereof until the principal
of, and interest on, the Mortgage Loan[s] are paid in full, the Trustee will
use reasonable best efforts to collect all payments due under the Mortgage
Loan[s] when the same shall become due and payable. The Trustee shall also
review any official receipts from any taxing authority provided to it pursuant
to Section 1.08(c) of the Mortgage[s] to monitor payment of Impositions (as
defined in the Mortgage[s]). [The Trustee also shall use its best efforts to
collect any amount that becomes due pursuant to [the] [an] Indemnity Agreement.
Any amounts collected by the Trustee pursuant to [the] [an] Indemnity Agreement
shall be deposited in the [related] Rental Payment Account, provided that
during any period when the proviso of Section 4.01 applies to the [related]
Annual Rental and Additional Rent, any amounts received under the [related]
Indemnity Agreement shall be deposited in the Mortgage Note Account and applied
in accordance with Section 4.05 hereof.]
(d)(i) Funds in [the] [each] Rental Payment Account and [the]
[each] Capitalized Debt Service Account shall be invested in Eligible
Investments at the written direction of the Borrower [on whose behalf such
accounts have been established]. Funds in the Mortgage Note Account shall be
invested by the Trustee in Eligible Investments described in subparagraph (i),
(ii) or (iv) of the definition thereof (or in the further proviso at the end of
such definition). All such investments shall mature on or prior to the next
succeeding Determination Date and in no event shall be invested in obligations
maturing later than 90 days from the investment date. The risk of investment
loss with respect to funds in [the] [each] Rental Payment Account and [the]
[each] Capitalized Debt Service Account shall be borne by the Borrower [on
whose behalf such accounts have been established]. The risk of investment loss
with respect to funds in the Mortgage Note Account shall be borne by the
Pass-Through Trustees as holders of the Mortgage Notes. On or after the Due
Date and prior to the next succeeding Determination Date, the Trustee shall be
prohibited from selling or transferring Eligible Investments prior to maturity
unless and until a default shall have occurred under [a] [the] Mortgage Note.
In the event the Trustee shall not have received at least twenty-four hours'
written notice as to any investment direction from [the] [a] Borrower upon the
maturity of an existing investment, the Trustee shall be authorized to invest
maturing amounts in Eligible Investments described in subparagraph (iv) of the
definition thereof (or in the further proviso at the end of such definition)
until further directed in writing as to investments of such amounts.
Investment earnings and losses on any Eligible Investment shall be deposited to
or charged to the account in which the funds used for any such Eligible
Investment were deposited. The Trustee shall have no responsibility for any
loss on any Eligible Investments.
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(ii) If an Event of Default occurs under the Mortgage Notes
or the Loan Documents [with respect to a Mortgage Loan], the Borrower [of such
Mortgage Loan] shall be prohibited from directing investments as contemplated
above and the Trustee shall invest in Eligible Investments described in
subparagraph (i), (ii) or (iv) of the definition thereof (or in the further
proviso at the end of such definition) until such Event of Default is cured.
Section 4.02. Establishment of Rental Payment Account[s]; Deposits in
Rental Payment Account[s]. The Depositor (on behalf of [the] [each] Borrower)
hereby establishes [the] [a separate] Rental Payment Account with the Trustee.
[This] [Each such] account shall be maintained as a fund separate and distinct
from other accounts [(including other Rental Payment Accounts)] created under
this Trust Agreement. Prior to an Event of Default with respect to such
Borrower's Mortgage Loan pursuant to Section 7.01 hereof (except for a
Non-Monetary Tenant Default), [the] [each such] Rental Payment Account shall
remain the property of the Borrower [on whose behalf such Rental Payment
Account was established], subject to the rights of the Trustee under Section
4.03 of this Trust Agreement and under [the] [such Borrower's] Pledge
Agreement.
The Trustee shall cause to be deposited in [the] [such] Rental Payment
Account and retained therein:
(a) All payments (including Annual Rental and Additional
Rent) received pursuant to the terms of the [related] Lease [and Lease
Guaranty,] (other than Insurance Proceeds and Condemnation Proceeds) and
pursuant to the terms of the [related] Indemnity Agreement, subject to the
proviso in Section 4.01(a);
(b) Subject to the provisions of the [related] Lease, all
Insurance Proceeds received pursuant to Section 17 of [the] [such] Lease in
excess of the amounts required to make the mandatory prepayment of the
[related] Mortgage Notes pursuant to Section 3.3 of the [related] Loan
Agreement;
(c) Subject to the provisions of the [related] Lease, all
Condemnation Proceeds received pursuant to Section 18(g) of [the] [such] Lease
in excess of the amounts required to make the mandatory prepayment of the
[related] Mortgage Notes pursuant to Section 3.3 of the [related] Loan
Agreement; and
(d) All earnings (or losses) on funds held in [the]
[such] Rental Payment Account derived from Eligible Investments.
The foregoing requirements for deposit in the Rental Payment Account[s] shall
be exclusive.
Section 4.03. Permitted Withdrawals From the Rental Payment
Account[s]. The Trustee shall cause the withdrawal of funds from [the] [a]
Rental Payment Account for the following purposes and in the following order of
priority:
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(a) upon the occurrence of an Event of Default [with
respect to the related Borrower's Mortgage Loan] pursuant to Section 7.01
hereof (except for a Non-Monetary Tenant Default), to transfer to the Mortgage
Note Account [related to such Mortgage Loan] all amounts in the Rental Payment
Account [related to such Mortgage Loan] and to apply such amounts pursuant to
the provisions of Section 4.05 hereof;
(b) to transfer to the Certificate Account of each
Pass-Through Trust (i) on each Due Date an amount equal to the Mortgage Note
Payment due and unpaid as of such Due Date on the related Mortgage Note held by
such Pass-Through Trustee and (ii) on the next Business Day after receipt of
any amounts distributable under Section 3.04;
(c) to pay the Trustee and any Pass-Through Trustee for
any amounts due pursuant to Section 3.06(d) of each Pass-Through Trust
Agreement, for any unreimbursed Extraordinary Expense Advances required by [the
related] Borrower's default pursuant to the [related] Mortgage Notes or the
[related] Loan Documents, and for [such Borrower's ratable portion of] due and
unpaid Trustee's Fees and Pass-Through Trustee's Fees, and to reimburse Trustee
and any Pass-Through Trustee for any expenses, costs and liabilities for which
they are entitled to reimbursement hereunder or under the [related] Mortgage
Notes or the Loan Documents [related to such Borrower's Mortgage Loan]; prior
to an Event of Default [with respect to such Borrower's Mortgage Loan] the
Trustee's right to reimburse itself or a Pass-Through Trustee pursuant to this
clause (c) with respect to [the] [such Borrower's] Mortgage Loan is limited to
reimbursement for amounts due pursuant to Section 3.06(d) of each Pass-Through
Trust Agreement; subsequent to an Event of Default [with respect to such
Borrower's Mortgage Loan] pursuant to Section 7.01 hereof (except for a
Non-Monetary Tenant Default), the Trustee shall have a prior lien for itself
and on behalf of the Pass-Through Trustees, pari passu, on all moneys in [the]
[such Borrower's] Rental Payment Account for payment or reimbursement of
Extraordinary Expense Advances [related to such Mortgage Loan], [such
Borrower's ratable portion of] due and unpaid Trustee's Fees and Pass-Through
Trustee's Fees, and other amounts owed it or a Pass-Through Trustee and payable
by [such] Borrower under any provision of the [related] Mortgage Notes or the
[related] Loan Documents, provided, however, that so long as [(i) no default
exists under the [related] Lease Guaranty, taking into account any grace period
provided for therein, or (ii)] no direction has been given by the Pass-Through
Trustees pursuant to Section 7.01 hereof and reflecting direction given to the
Pass-Through Trustees by Certificateholders owning at least 66-2/3% of the
outstanding principal balance of the Certificates to exercise rights or
remedies under such Mortgage Notes or Loan Documents, the payments pursuant to
Section 4.03(a) and (b) above shall be made by Trustee free and clear of such
lien;
(d) to disburse to [the related] Borrower any amounts
remaining in the Rental Payment Account promptly following
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the second scheduled Remittance Date after the Closing Date, and on each
anniversary thereafter of such Remittance Date, after paying or providing for
the payment or withdrawal of amounts described in clauses (a), (b) and (c)
above.
Section 4.04. Establishment of Mortgage Note Account[s]; Deposits in
Mortgage Note Account[s]. The Trustee shall establish [the] [a separate]
Mortgage Note Account [for each Mortgage Loan]. [This] [Each such] account
shall be maintained as a fund separate and distinct from other accounts
[(including other Mortgage Note Accounts)] created under this Trust Agreement.
The Trustee shall cause to be deposited in [the] [such] Mortgage Note
Account (upon receipt by the Trustee unless otherwise specified herein) and
retained therein:
(a) All amounts received pursuant to Sections 3.01 and
3.02 hereof [with respect to the related Mortgage Loan];
(b) Net Liquidation Proceeds;
(c) Subject to the provisions of the [related] Lease, all
Insurance Proceeds received pursuant to Section 17 of [the] [such] Lease not to
exceed the amounts required to make the mandatory prepayment of the [related]
Mortgage Notes pursuant to Section 3.3 of the [related] Loan Agreement;
(d) Subject to the provisions of the [related] Lease, all
Condemnation Proceeds pursuant to Sections 18(d) and 18(g) of [the] [such]
Lease not to exceed the amounts required to make the mandatory prepayment of
the [related] Mortgage Notes pursuant to Section 3.3 of the [related] Loan
Agreement;
(e) All earnings (or losses) on funds held in [the]
[such] Mortgage Note Account derived from Eligible Investments; and
(f) All amounts required to be deposited therein under
Sections 4.01(a), [4.01(c),] [and] 4.03(a), [and 4.06.]
The foregoing requirements for deposit in the Mortgage Note Account[s] shall be
exclusive.
Section 4.05. Permitted Withdrawals From the Mortgage Note
Account[s]. The Trustee shall cause the withdrawal of funds from [the] [a]
Mortgage Note Account for the following purposes and in the following order of
priority (the transfers specified in (b) and (c) shall be made the next
Business Day after receipt of such amounts by the Trustee):
(a) to transfer to the Certificate Account of each
Pass-Through Trust (i) on each Due Date an amount equal to the Mortgage Note
Payment due and unpaid as of such Due Date on the related Mortgage Note held by
such Pass-Through Trustee and (ii) on the next Business Day after receipt of
any amounts in respect of overdue Mortgage Note Payments; provided, however,
that the
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foregoing shall not apply to amounts deposited in the Mortgage Note Account
under Section 4.01(a), [4.01(c),] [or] 4.03(a) [or 4.06] if the
maturity of the related Mortgage Loan has been accelerated pursuant to the
terms of the related Loan Documents. Any amounts referred to in the proviso
contained in the preceding sentence, together with the interest earned thereon,
shall, after such acceleration, be held in the Mortgage Note Account until such
time as they constitute Liquidation Proceeds, at which time the Net Liquidation
Proceeds attributable thereto shall be disposed of as provided in Section
4.05(c)(i);
(b) to transfer to the Certificate Account of each
Pass-Through Trust the amounts required pursuant to Section 3.01 and 3.02
hereof;
(c) to transfer to the Certificate Account of each
Pass-Through Trust as holder of a related Mortgage Note, such Mortgage Note's
ratable portion of:
(i) any [related] Net Liquidation
Proceeds,
(ii) any [related] Insurance Proceeds in
[the] [such] Mortgage Note Account, subject to the provisions of the [related]
Lease, and
(iii) any [related] Condemnation Proceeds
in [the] [such] Mortgage Note Account, subject to the provisions of the
[related Lease];
(d) to pay the Trustee and any Pass-Through Trustee for
any unreimbursed Extraordinary Expense Advances required by [the related]
Borrower's default pursuant to the [related] Mortgage Notes or the [related]
Loan Documents and for [such Borrower's ratable portion of] due and unpaid
Trustee's Fees and Pass-Through Trustee's Fees, and to reimburse Trustee and
any Pass-Through Trustee for any expenses, costs and liabilities for which they
are entitled to reimbursement hereunder or under the [related] Mortgage Notes
or the Loan Documents [related to such Borrower's Mortgage Loan]; subsequent to
an Event of Default [with respect to such Borrower's Mortgage Loan] pursuant to
Section 7.01 (except for a Non-Monetary Tenant Default), the Trustee shall have
a prior lien for itself and on behalf of the Pass-Through Trustees, pari passu,
on all moneys in the Mortgage Note Account [with respect to such Mortgage Loan]
for payment or reimbursement of Extraordinary Expense Advances [related to such
Mortgage Loan], [such Borrower's ratable portion of] due and unpaid Trustee's
Fees and Pass-Through Trustee's Fees, and other amounts owed it or a
Pass-Through Trustee and payable by [such] Borrower under any provision of the
[related] Mortgage Notes or the [related] Loan Documents, provided, however,
that so long as (i) no default exists under the [related] Lease Guaranty,
taking into account any grace period provided for therein, or (ii) no direction
has been given by the Pass-Through Trustees pursuant to Section 7.01 hereof and
reflecting direction given to the Pass-Through Trustees by Certificateholders
owning at
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least 66-2/3% of the outstanding principal balance of the Certificates to
exercise rights or remedies under such Mortgage Notes or Loan Documents, the
payments pursuant to Section 4.05(a) and (b) above shall be made by Trustee
free and clear of such lien;
(e) to transfer to the Certificate Account of each
Pass-Through Trustee as holder of a related Mortgage Note, such Mortgage Note's
ratable portion of any balance in such Mortgage Note Account upon the
termination of this Trust Agreement.
[Section 4.06. Capitalized Debt Service Account[s]. The Depositor
(on behalf of each Borrower listed in Exhibit A-4 hereto) hereby
establishes from the proceeds of the related Mortgage Loan [the] [a separate]
Capitalized Debt Service Account with the Trustee. [This] [Each such] account
shall be maintained as a fund separate and distinct from other accounts
[(including other Capitalized Debt Service Accounts)] created under this Trust
Agreement. [The] [Each such] Capitalized Debt Service Account shall remain the
property of the Borrower [on whose behalf such Capitalized Debt Service Account
was established,] subject to the rights of the Trustee under the terms of this
Trust Agreement and the pledge thereof by [such] Borrower pursuant to the
Pledge Agreement to secure [the] [such Borrower's] Mortgage Loan; provided
that, subsequent to the Trustee becoming aware of the occurrence of an Event of
Default [with respect to such Borrower's Mortgage Loan] pursuant to Section
7.01 hereof (except a Non-Monetary Tenant Default), all amounts in the
[related] Capitalized Debt Service Account shall be transferred to the Mortgage
Note Account [related to such Mortgage Loan] and shall be applied in accordance
with Section 4.05 hereof. The Trustee shall cause to be deposited into [the]
[each such] Capitalized Debt Service Account (i) the amount of the Capitalized
Debt Service Reserve received on the Closing Date [with respect to such
Mortgage Loan] and (ii) all amounts received on earnings on or income from (or
losses due from) any investments or reinvestments of [the] [such] Capitalized
Debt Service Reserve in Eligible Investments.
The Trustee shall cause the transfer of funds from [the] [each]
Capitalized Debt Service Account to the Certificate Account of a Pass-Through
Trustee on the dates and in the amounts set forth in the attached Exhibit A-4.
Upon the payment of all of the amounts set forth in Exhibit A-4 [with respect
to the Capitalized Debt Service Account established on behalf of a Borrower],
and provided that no default or Event of Default shall have occurred and be
continuing (except for a Non-Monetary Tenant Default) under any [related]
Mortgage Notes or Loan Documents, Trustee shall disburse to the [related]
Tenant without requisition any amounts remaining in [the] [such] Capitalized
Debt Service Account.]
Section 4.07. Realization Upon Defaulted Mortgage Loan.
(a) If an Event of Default with respect to a Mortgage
Loan has occurred and is continuing and if the Pass-Through Trustees vote
Percentage Interests aggregating not less than 66-2/3% of the related Mortgage
Notes to do so, the Trustee, after
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the Trustee and each Pass-Through Trustee has received indemnity for their
reasonable costs, expenses and liabilities with respect thereto to their
reasonable satisfaction from the Certificateholders in accordance with Section
8.02 (iii) hereof and in accordance with each Pass-Through Trust Agreement,
shall use its best efforts to foreclose upon or otherwise comparably convert
the ownership of such Mortgaged Estate; shall manage, conserve and protect such
Mortgaged Estate for the purposes of its disposition and sale; and shall
dispose of such Mortgaged Estate as promptly as is reasonably possible. Upon
sale or other conveyance of all or any part of such Mortgaged Estate by the
Trustee, the Trust and the Pass-Through Trusts shall have no further right,
title or interest in the Mortgaged Estate, or portion thereof, so sold or
conveyed. Notwithstanding anything herein to the contrary, a default under one
Loan Agreement or the related Loan Documents shall not constitute a default
under any other Loan Agreement or other Loan Documents.
(b) Notwithstanding the foregoing, if the Trustee has
actual knowledge or reasonably believes that all or any part of a Mortgaged
Estate is affected by hazardous or toxic wastes or substances, the Trustee need
not cause the Trust to acquire title to such Mortgaged Estate in a foreclosure
or similar proceeding. In connection with such activities, the Trustee shall
follow such practices and procedures as it shall deem necessary or advisable,
as shall be normal and usual in trustee activities by leading national banking
associations, and, in particular, the Trustee may request such certificates of
appropriate public officials and agencies, if any, a history of such Mortgaged
Estate and its uses, other evidence reasonably satisfactory to the Trustee
showing that such Mortgaged Estate conforms to existing environmental laws,
regulations and rules, and that no conditions exist in, on or beneath the
surface of such Mortgaged Estate that are or might become hazardous materials,
and including but not limited to an environmental report or reports from a
company reasonably satisfactory to Trustee, showing the current state of
storage, disposal or release of any oil, fuels, gases, chemicals, trash,
garbage or other solid wastes or hazardous materials which report or reports
shall be based upon complete and thorough on-site inspections of such Mortgaged
Estate, including but not limited to investigations of the soil, surface water
and groundwater, to confirm the presence or absence of any hazardous materials
on or beneath the surface of such Mortgaged Estate or adjacent lands. Any
expenses incurred by Trustee in connection with obtaining any such certificates
or reports, if not paid by the Borrower, shall be Extraordinary Expense
Advances.
(c) The activities set forth in Section 4.07(a) are also
subject to the proviso that the Trustee may, but shall not be required to
expend its own funds in connection with any foreclosure or towards the
restoration of a Mortgaged Estate if it shall determine that (i) such
restoration or foreclosure will increase the Net Liquidation Proceeds of the
related Mortgage Loan to holders of the related Mortgage Notes after
reimbursement for such
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expenses and (ii) such expenses will be recoverable either through Liquidation
Proceeds or revenues from such Mortgaged Estate.
Section 4.08. Trustee Compensation. The Trustee's Fee shall be paid
pursuant to the terms of the Consent and Agreement[s]. The Trustee, as
compensation for its activities hereunder (other than those covered by the
Trustee's Fee), shall be entitled to receive amounts representing reimbursement
for Extraordinary Expense Advances and reimbursement for certain expenses, as
specified by Sections 3.02, 4.03(c) and 4.05(d).
Section 4.09. Rights of the Pass-Through Trustees. The Trustee shall
afford the Pass-Through Trustees, upon reasonable notice and during normal
business hours, access to all records maintained by the Trustee in respect of
its rights and obligations hereunder and access to officers of the Trustee
responsible for such obligations. Upon request, the Trustee shall furnish the
Pass-Through Trustees with its most recent publicly available financial
statements.
ARTICLE V
ADVANCES BY TRUSTEE
Section 5.01. Advances by Trustee. The Trustee may from time to time
following an Event of Default make such Extraordinary Expense Advances with
respect to the related Mortgage Loan as the Trustee in its sole discretion
deems advisable, provided, however, that it shall not be obligated to make any
such advances unless it is satisfied as to the availability of reimbursement
pursuant to the terms hereof or from the Certificateholders.
ARTICLE VI
THE DEPOSITOR
Section 6.01. Maintaining Corporate Existence of the Depositor. The
Depositor will keep in full effect its existence, rights and franchises as a
corporation, and will obtain and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of this Trust
Agreement, the Certificates or the Mortgage Notes and to perform its duties
under this Trust Agreement.
The Depositor will not, on or after the date of execution of this Trust
Agreement (i) engage in any business or activities other than those
set forth in Article III of the Certificate of Incorporation of the Depositor,
(ii) incur any indebtedness, other than trade payables incurred in the ordinary
course of business, or (iii) amend, or propose to its shareholders for their
consent any amendment of, its Certificate of Incorporation or Bylaws without
giving notice thereof in writing not less than 30 days nor more than 90 days
prior to the date on
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which such amendment is to become effective to Trustee and without first
obtaining the written consent of Trustee.
Section 6.02. Limitation on Liability of the Depositor. Neither the
Depositor nor any of the directors, officers, employees or agents of the
Depositor shall be under any liability to the Trustee or the Certificateholders
for any action taken or for refraining from the taking of any action in good
faith pursuant to this Trust Agreement, or for errors in judgment; provided,
however, that this provision shall not protect the Depositor or any such person
against any liability which would otherwise be imposed by reason of any willful
misfeasance, bad faith or negligence in the performance of its duties or by
reason of negligent disregard of obligations and duties hereunder. The
Depositor and any director, officer, employee or agent of the Depositor may
rely in good faith on any document of any kind prima facie properly executed
and submitted by any Person respecting any matters arising hereunder.
The Depositor shall not be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its duties
pursuant to this Trust Agreement and which in its opinion may involve it in any
expense or liability; provided, however, that the Depositor may in its
discretion undertake any such action which it may deem necessary or desirable
with respect to this Trust Agreement and the rights and duties of the parties
hereto and the interests hereunder of the Pass-Through Trustees and the
Certificateholders.
ARTICLE VII
DEFAULT
Section 7.01. Events of Default. The occurrence of any event
constituting an event of default as defined in any Loan Document or any
Mortgage Note shall constitute an Event of Default under this Trust Agreement.
If an Event of Default shall occur and be continuing, then, and in each and
every such case, so long as the Event of Default shall not have been remedied
or waived, the Trustee, at the written direction of the Pass-Through Trustees
voting Percentage Interests aggregating not less than 66-2/3% of the related
Mortgage Notes, shall exercise any rights and remedies that it may have
pursuant to such Mortgage Notes or any [related] Loan Document, as modified by
the provisions of this Trust Agreement, or at law or in equity, including
injunctive relief and specific performance, provided that if as a result of the
occurrence of an Event of Default, the Trustee acquires any property other than
cash, whether pursuant to foreclosure or otherwise, the Trustee shall sell such
property as promptly as is reasonably possible. [A failure to pay with respect
to any Mortgage Note or a default under any Loan Document will not constitute a
default under any unrelated Mortgage Note or under any unrelated Loan Documents
and will not give rise to any right of the Trustee to exercise any remedies
with respect to such unrelated Mortgage Note or unrelated Loan Documents.] The
Trustee will have
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no obligation to take any action or institute, conduct or defend any litigation
under this Trust Agreement at the request, order or direction of the
Pass-Through Trustees unless Holders of Certificates representing not less than
66-2/3% of the Certificate Balance of all Certificates have offered to the
Trustee reasonable indemnity pursuant to Section 8.02(iii) against the costs,
expenses and liabilities which the Trustee may incur. The Trustee shall apply
the proceeds recovered in the enforcement of the rights and remedies under this
Trust Agreement in accordance with the terms of this Trust Agreement.
Section 7.02. Waiver of Defaults. The Trustee, at the written
direction of the Pass-Through Trustees voting Percentage Interests aggregating
not less than 66-2/3% of the related Mortgage Notes, shall waive any default
hereunder or under any Mortgage Note or Loan Document and the consequences of
any such default, except that a default in the making of any required payment
on the Mortgage Notes may only be waived by the affected Pass-Through Trustees.
The Trustee shall have no authority to exercise the right of waiver if, as a
result thereof, this Trust would become taxable as an association within the
meaning of Treasury Regulation Section 301.7701-2 or a Pass-Through Trust would
fail to be characterized as a trust for federal income tax purposes. The
Trustee may rely upon an Opinion of Counsel as set forth in Section 8.02 if it
reasonably believes that such an act may cause the Trust to become taxable as
an association within the meaning of Treasury Regulation Section 301.7701-2 or
cause or a Pass-Through Trust to fail to be characterized as a trust for
federal income tax purposes. Upon any such waiver of a past default, such
default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been remedied for every purpose of this Trust Agreement. No
such waiver shall extend to any subsequent Event of Default or impair any right
consequent thereon except to the extent expressly so waived.
Section 7.03. Notification to Pass-Through Trustees. The Trustee
shall notify the Pass-Through Trustees of any Event of Default known to the
Trustee within five (5) Business Days after obtaining knowledge thereof, unless
such Event of Default has been cured or waived before the giving of such
notice.
Section 7.04. Rights of Pass-Through Trustees to Direct Proceedings.
Anything in this Trust Agreement to the contrary notwithstanding, the
Pass-Through Trustees voting Percentage Interests aggregating not less than
66-2/3% of the [affected] Mortgage Notes shall have the right, at any time
during the continuance of an Event of Default, by an instrument or instruments
in writing executed and delivered to the Trustee, to direct the time, place and
method of conducting all proceedings to be taken in connection with the
enforcement of the terms and conditions of the Loan Documents; provided
that such direction shall not be otherwise than in accordance with the
provisions of law and the Loan Documents and provided that Holders of
Certificates representing not less than 66-2/3% of the Certificate Balance of
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all Certificates shall have provided to the Trustee reasonable indemnity
pursuant to Section 8.02 (iii) against the costs, expenses and liabilities
which the Trustee may incur in connection with such proceedings.
Section 7.05. Remedies Cumulative. No remedy given hereunder to the
Trustee or to the Pass-Through Trustees shall be exclusive of any other remedy
or remedies, and each such remedy shall be cumulative and in addition to every
other remedy given hereunder or now or hereafter given by statute, law, equity
or otherwise.
Section 7.06. Trustee Default. In the event of any breach by the
Trustee of its obligations pursuant to this Trust Agreement, the
Certificateholders and the Depositor shall be entitled to exercise all rights
and remedies to which they may be entitled at law or in equity.
Section 7.07. Notice to Tenant[s] [and Kmart]. The Trustee shall
promptly notify the [related] [Tenant and] Kmart of the exercise of any
remedies under this Trust Agreement under any Mortgage Note or under any Loan
Document. Failure to give such notice shall not impair or limit the Trustee's
right to pursue any such remedies or any other right or remedy to which it may
be entitled.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.01. Duties of Trustee. The Trustee, prior to the
occurrence of an Event of Default and after the curing of all Events of
Default which may have occurred, undertakes to perform such duties and only
such duties as are specifically set forth in this Trust Agreement. In case an
Event of Default has occurred (which has not been cured or waived), the Trustee
shall exercise such of the rights and powers vested in it by this Trust
Agreement, and use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the circumstances in the conduct of
such man's own affairs. No permissive rights of the Trustee shall be construed
as a mandatory duty of the Trustee. If the Trustee becomes aware of the
occurrence of any event which, with the giving of notice and, if applicable,
the passage of time without cure, would constitute an event of default as
defined in any Loan Document, the Trustee, if it is an appropriate party (or
an assignee of an appropriate party) to give such notice, is authorized and
directed to give such notice in accordance with such Loan Document.
The Trustee, upon receipt of any resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Trust Agreement, shall examine them to determine whether they
conform to the requirements of this Trust Agreement and if they are deemed to
be deficient, Trustee shall request cure of any such deficiency within a
reasonable period of time for such cure. If such deficiency is not cured to
the satisfaction of Trustee, the Trustee may treat the requirement pursuant to
which such instrument is furnished as not having been satisfied.
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No provision of this Trust Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own misconduct; provided, however, that:
(i) Prior to the occurrence of an Event of Default, and
after the curing or waiver of all such Events of Default which may have
occurred, the duties and obligations of the Trustee shall be determined solely
by the express provisions of this Trust Agreement, the Trustee shall not be
liable except for the performance of such duties and obligations as are
specifically set forth in this Trust Agreement, and, in the absence of bad
faith on the part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee and conforming to
the requirements of this Trust Agreement;
(ii) The Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken by it in good
faith in accordance with the direction of Pass-Through Trustees voting
Percentage Interests aggregating not less than 66-2/3% of the [affected]
Mortgage Notes as to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Trust Agreement; and
(iv) The Trustee shall have no authority to perform any
act which, if consummated, would cause the entity created hereunder to become
taxable as an association within the meaning of Treasury Regulation Section
301.7701-2 or would cause the entity created under any Pass-Through Trust
Agreement to fail to be characterized as a trust for federal income tax
purposes. The Trustee may rely upon an Opinion of Counsel, as set forth in
Section 8.02, if it reasonably believes that such an act may cause the Trust to
become taxable as an association within the meaning of Treasury Regulation
Section 301.7701-2 or would cause a Pass-Through Trust to fail to be
characterized as a trust for federal income tax purposes. Nothing in this
Section 8.01(iv) is intended to prevent the Trustee from exercising any right
or remedy to which it is entitled hereunder or under any Loan Document.
The Trustee shall not be required to expend or risk its own funds
or otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any rights or powers, if there is reasonable
grounds for believing that the repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
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Section 8.02. Certain Matters Affecting Trustee. Except as otherwise
provided in Section 8.01:
(i) The Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution, Officers' Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other
paper or document reasonably believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(ii) The Trustee may consult with counsel, and any
Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in good
faith and in accordance with such Opinion of Counsel, provided that any cost
incurred by the Trustee shall be reimbursable only to the extent provided in
Sections 3.02, 4.03(c), 4.05(d) and 4.08 hereof;
(iii) The Trustee shall be under no obligation to exercise
any of the trusts or powers vested in it by this Trust Agreement following an
Event of Default or to institute, conduct or defend any litigation
hereunder or in relation hereto at the request, order or direction of any of
the Pass-Through Trustees pursuant to the provisions of this Trust Agreement,
unless Certificateholders representing not less than 66-2/3% of the Certificate
Balance of all Certificates shall have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby; the right of the Trustee to perform any discretionary act
enumerated in this Trust Agreement shall not be construed as a duty; and the
Trustee shall not be answerable for other than negligence or willful misconduct
in performance of such act. Nothing contained herein shall, however, relieve
the Trustee of the obligation, upon the occurrence of an Event of Default
(which has not been cured or waived), to exercise such of the rights and powers
vested in it by this Trust Agreement, and to use the same degree of care and
skill in their exercise as a prudent man would exercise or use under the
circumstances in the conduct of such man's own affairs;
(iv) The Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and reasonably believed
by it to be authorized or within the discretion or rights or powers conferred
upon it by this Trust Agreement;
(v) Except with respect to notice of deficient or
missing documents described in Section 2.02, prior to the occurrence of an
Event of Default hereunder and after the curing or waiver of all Events of
Default which may have occurred, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless requested in writing so to do
by Pass-Through Trustees voting Percentage
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Interests aggregating not less than 66-2/3% of the [affected] Mortgage Notes;
provided, however, that if the payment within a reasonable time to the Trustee
of the costs, expenses or liabilities likely to be incurred by it in the making
of such investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this Trust
Agreement, the Trustee may require reasonable indemnity against such expense or
liability as a condition to such proceeding. The reasonable expense of every
such investigation shall be paid by the Certificateholders of the Pass-Through
Trusts requesting the investigation; and
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys.
Section 8.03. Trustee Not Liable for Certificates or Mortgage
Loan[s]. The recitals contained herein, in the Pass-Through Trust Agreements
and in the Certificates shall be taken as the statements of the Depositor and
the Trustee assumes no responsibility for their correctness. The Trustee makes
no representations or warranties as to the validity or sufficiency of this
Trust Agreement (except that this Trust Agreement shall be duly and validly
executed by the Trustee), the Pass-Through Trust Agreements, the Certificates,
the Mortgage Loan[s] or related documents (other than pursuant to Section 2.02
hereof). The Trustee shall not be accountable for the use or application by
the Depositor of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to or at the
direction of the Depositor with respect to the Mortgage Loan[s].
Section 8.04. Trustee May Own Certificates. The Trustee in its
corporate or any other capacity may become the owner or pledgee of Certificates
with the same rights it would have if it were not Trustee.
Section 8.05. Trustee's Fee and Expenses. The Trustee shall be
entitled to reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust) for all services rendered by it in the execution of the trust hereby
created and in the exercise and performance of any of the powers and duties
hereunder of the Trustee, and the Trustee shall be reimbursed for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Trust Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel and
of all persons not regularly in its employ), but solely from the Trustee's Fee
and amounts available as provided in Section 3.02 and in the Rental Payment
Account(s) and Mortgage Note Accounts as provided herein. Notwithstanding the
above, no such expense, disbursement or advance shall be reimbursable as may
arise from Trustee's negligence or bad faith.
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Section 8.06. Action by Co-Trustee. At any time or times, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Property may at the time be located or in which any action of the
Trustee may be required to be performed or taken, the Trustee, by an instrument
in writing signed by it, may appoint one or more Persons ("Co-Trustee") to act
as a separate trustee or co-trustee, acting jointly with the Trustee, of all
or any part of such Trust Property, to the full extent that local law makes it
necessary for such separate trustee or separate trustees or co-trustee acting
jointly with the Trustee to act. The Co-Trustee shall act as and be such upon
the following terms and conditions:
(a) Subject to the provisions of Section 8.14, all
rights, powers, duties and obligations conferred or imposed upon the Trustee
shall be conferred or imposed solely upon and solely exercised and performed by
the Trustee except as expressly provided otherwise in this Trust Agreement and
except to the extent that under any law or any jurisdiction in which any
particular act or acts are to be performed, the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations shall be exercised and performed by the Co-Trustee;
(b) No power granted by this Trust Agreement to, or which
this Trust Agreement provides may be exercised by, the Co-Trustee shall be
exercised by the Co-Trustee except jointly with, or with the consent in writing
of, the Trustee, anything contained to the contrary notwithstanding; and
(c) The Co-Trustee may at any time by an instrument in
writing, constitute the Trustee or its successor in trust hereunder its agent
or attorney-in-fact, with full power and authority, to the extent which may be
permitted by law, to do any and all acts and things and exercise any and all
discretion which it is authorized or permitted to do or exercise, for and in
its behalf and in its name.
Section 8.07. Eligibility Requirements for Trustee. The Trust shall
at all times have a Trustee which shall be a corporation organized and doing
business under the laws of a state or the United States of America, authorized
under such laws to exercise corporate trust powers, having (or, in the case of
a corporation included in a bank holding company system, the related bank
holding company shall have) a combined capital and surplus of at least
$50,000,000 in the case of United States Trust Company of New York, and of at
least $100,000,000 in the case of any successor trustee and subject to
supervision or examination by federal or state authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of
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condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect specified in Section 8.08.
Section 8.08. Resignation and Removal of Trustee. The Trustee may at
any time resign and be discharged from the trusts hereby created by giving
written notice thereof to the Depositor and the Pass-Through Trustees for
distribution to the Certificateholders. Upon receiving such notice of
resignation, the Depositor or the Pass-Through Trustees voting Percentage
Interests aggregating not less than 66-2/3% of the Mortgage Notes shall
promptly appoint a successor trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If no successor trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
If at any time any of the following events occur:
(a) the Trustee ceases to be eligible in accordance with the
provisions of Section 8.07 and fails to resign after written request therefor
by the Depositor or by a Pass-Through Trustee at the direction of any
Certificateholder who has been a bona fide Certificateholder for at least six
months; or
(b) the Trustee becomes incapable of acting, or shall be adjudged
a bankrupt or insolvent, or a receiver of the Trustee or of its property shall
be appointed, or any public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of rehabilitation, conservation
or liquidation;
then, in any such case, the Depositor or the Pass-Through Trustees may remove
the Trustee and appoint a successor trustee by written instrument, in
triplicate, one copy of which instrument shall be delivered to the Trustee so
removed one copy to Depositor, and one copy to the successor trustee.
The Pass-Through Trustees voting Percentage Interests aggregating not
less than 66-2/3% of the Mortgage Notes may at any time remove the Trustee and
appoint a successor trustee by written instrument or instruments, in
triplicate, signed by such Pass-Through Trustees, one complete set of which
instruments shall be delivered to the Trustee so removed, one complete set to
Depositor and one complete set to the successor so appointed.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall
become effective only upon acceptance of appointment by the successor trustee
as provided in Section 8.09.
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Section 8.09. Successor Trustee. Any successor trustee appointed as
provided in Section 8.07 or 8.08 shall execute, acknowledge and deliver to the
Pass-Through Trustees, to the Certificateholders and to its predecessor trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee shall become effective and such successor trustee,
without any further act, deed or conveyance, shall become fully vested with all
the rights, powers, duties and obligations of its predecessor hereunder, with
the same effect as if originally named as trustee herein. The predecessor
trustee shall deliver to the successor trustee the Loan Documents, the Mortgage
File and any other documents and statements held by it hereunder, and the
Depositor and the predecessor trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for more
fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties and obligations.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.07.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Depositor shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Registers. If the Depositor fails to mail such notice within 10
days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of the Depositor.
Section 8.10. Merger or Consolidation of Trustee. Any corporation
into which the Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be eligible under the
provisions of Section 8.07, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
Section 8.11. Resignation of Co-Trustee. The Co-Trustee or any of
its successors may resign, and may be discharged of the trusts created by this
Trust Agreement by giving written notice thereof to the Pass-Through Trustees
and to the Trustee.
Such resignation shall take effect immediately upon the acceptance of
appointment by a Person succeeding to the office of the Co-Trustee appointed
by the Trustee.
Section 8.12. Removal of Co-Trustee. The Co-Trustee or any of its
successors may be removed at any time by the Trustee or the Pass-Through
Trustees voting Percentage Interests aggregating not
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less than 66-2/3% of the Mortgage Notes, by delivery of a notice of such
removal to the Co-Trustee, to the Depositor, and to the Trustee, signed by such
Pass-Through Trustees, and such removal shall be effective upon the date
specified in such notice, and the Co-Trustee's duties and obligations hereunder
shall thereupon cease, except as specified in Section 8.14.
Section 8.13. Appointment of Successor to Co-Trustee. If at any time
the Co-Trustee or any of its successors shall die, resign or be removed or
otherwise become incapable of acting, or if for any reason the office of
Co-Trustee shall become vacant, a successor to the Co-Trustee shall forthwith
be appointed by the Trustee.
Section 8.14. Succession of Successor to Co-Trustee. Any Person
appointed as a successor to the Co-Trustee shall execute, acknowledge and
deliver to the Pass-Through Trustees, its predecessor, to the Trustee and to
the Depositor, an instrument accepting such appointment hereunder, and
thereupon such Person without any further act, deed or conveyance shall become
vested with all estates, properties, rights, powers, duties and trusts of its
predecessor in the trusts hereunder with like effect as if originally named as
Co-Trustee herein; but nevertheless, on the written request of the Depositor or
Pass-Through Trustees voting Percentage Interests aggregating not less than
66-2/3% of the Mortgage Notes or of the Trustee or of the new Co-Trustee, the
predecessor shall execute and deliver an instrument transferring to the new
Co-Trustee, upon the trusts expressed in this Trust Agreement, all the estates,
properties, rights, powers and trusts granted to it by this Trust Agreement and
shall duly assign, transfer, deliver and pay over to the new Co-Trustee any
property and money subject to the lien of this Trust Agreement held by such
predecessor. Should any instrument in writing from the Depositor or from the
Pass-Through Trustees voting Percentage Interests aggregating not less than
66-2/3% of the Mortgage Notes or from the Trustee be required by any person who
becomes the Co-Trustee for more fully and certainly vesting in and confirming
to such Co-Trustee such estates, properties, rights, powers and trusts, then,
on request, any and all such instruments in writing shall be made, executed,
acknowledged and delivered by the Depositor and/or the Trustee.
Any Co-Trustee which has resigned or been removed shall nevertheless
retain all rights of indemnity granted hereunder.
ARTICLE IX
TERMINATION
Section 9.01. Termination. The respective obligations and
responsibilities of the Depositor and the Trustee under this Trust Agreement
shall, so long as such termination does not result in the imposition of a tax
on the Trust Property, terminate upon the final payment, prepayment in full or
other liquidation of the Mortgage
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Loan[s] including the disposition of all property acquired upon foreclosure or
deed in lieu of foreclosure of [the] [any] Mortgage Loan and the remittance of
all funds due hereunder; provided, however, that in no event shall the Trust
continue beyond the expiration of 21 years from the death of the last survivor
of the descendants of Joseph P. Kennedy, the late ambassador of the United
States to the Court of St. James, living on the date hereof. Upon final
payment on the Mortgage Notes, the Trustee shall obtain from the Pass-Through
Trustees the Mortgage Notes for cancellation.
ARTICLE X
SUPPLEMENTS AND AMENDMENTS TO THIS
TRUST AGREEMENT AND OTHER DOCUMENTS;
ADDITIONAL AGREEMENTS OF TRUSTEE
Section 10.01. Supplemental Trust Agreement Without Consent of
Pass-Through Trustees. The Depositor and the Trustee, at any time and from
time to time, with the consent of Kmart (which shall not be unreasonably
withheld or delayed) but without the consent of the Pass-Through Trustees or
Certificateholders, may enter into one or more trust agreements supplemental
hereto for one or more of the following purposes:
(a) to evidence the succession of another Person to the
Depositor, or successive successions, and the assumption by the
successor of the covenants, agreements and obligations of the
Depositor herein;
(b) to add any covenants, restrictions, conditions or
provisions with respect to the Depositor as the Trustee shall consider
to be for the protection of the Pass-Through Trustees and the
Certificateholders;
(c) to surrender any rights or power conferred herein upon
the Depositor herein or to add to the rights of the Pass-Through
Trustees for the benefit of the Certificateholders;
(d) to correct or amplify the description of any property at
any time that constitutes Trust Property or better to assure, convey
and confirm unto the Trustee any such property to be included in any
such Trust Property, or to acknowledge any change relating to title to
the Mortgaged Estate which does not materially adversely affect the
rights of the Certificateholders;
(e) to evidence and provide for the acceptance and
appointment hereunder of a successor trustee and to add to or change
any of the provisions hereof as may be necessary to provide for
or facilitate the administration of the Trust by more than one
trustee pursuant to Section 8.14; or
(f) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other
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provision herein, or to make any other provisions with respect to
matters or questions arising under this Trust Agreement, provided that
such action pursuant to this Section 10.01(f) shall not materially
adversely affect the Pass-Through Trustees or the Certificateholders;
provided that no such supplemental agreement shall cause the Trust to become
taxable as an association within the meaning of Treasury Regulation Section
301.7701-2 or cause a Pass-Through Trust to fail to be characterized as a trust
for federal income tax purposes.
The Trustee is hereby authorized to join in the execution of any such
supplemental agreement, to make any further appropriate agreements and
stipulations which may be contained therein and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Trustee shall not be obligated to enter into any such supplemental agreement
which adversely affects the Trustee's own rights, duties or immunities under
this Trust Agreement or otherwise, whether in its official or individual
capacity.
Section 10.02. Supplemental Agreements With Consent of Pass-Through
Trustees. With the consent of the Pass-Through Trustees voting Percentage
Interests of not less than 66-2/3% of the Mortgage Notes, the Depositor and the
Trustee may, from time to time and at any time, enter into an agreement or
agreements supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Trust
Agreement or of any agreements supplemental hereto or of modifying in any
manner the rights of the Pass-Through Trustees and the Certificateholders;
provided, however, that no such supplemental agreement shall cause the Trust to
become taxable as an association within the meaning of Treasury Regulation
Section 301.7701-2 or cause a Pass-Through Trust to fail to be characterized as
a trust for federal income tax purposes; and provided further that, except as
expressly permitted under the terms of this Trust Agreement, without the
consent of each Certificateholder affected thereby and, with respect to (b) and
(unless there is a monetary default under the [related] Lease) (c) below,
Kmart, no such amendment of or supplement to this Trust Agreement or
modification of the terms of, or consent under, any provision hereof, shall
(a) modify any of the provisions of Section 7.03 or this
Section 10.02, or the definition of "Pass-Through Trust," "Pass-
Through Trustee," or "Certificateholder" as set forth in Article I
hereof;
(b) modify the definition of "Percentage Interest" as set
forth in Article I hereof or reduce the Percentage Interest vote that
is required for any such supplement to this Trust Agreement, or the
consent required from the Pass-Through Trustees for any waiver
provided for in this Trust Agreement;
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<PAGE> 39
(c) reduce the amount or extend the time of payment of any
amount owing or payable under the Mortgage Notes;
(d) impair the right of any Pass-Through Trustee or
Certificateholder to commence legal proceedings to enforce a right to
receive payment on a Mortgage Note; or
(e) create or permit the creation of any lien on the Trust
Property or any part thereof [(other than the Second Mortgage and the
Option Agreement)], or deprive any Certificateholder of the benefit of
this Trust Agreement, whether by disposition of such Trust Property or
otherwise.
Upon the request of the Depositor and upon the filing with the Trustee
of evidence of the vote of the Pass-Through Trustees, and the consent of the
Certificateholders and Kmart, if applicable, required under this Section, the
Trustee shall join with the Depositor in the execution of such supplemental
agreement unless such supplemental agreement affects the Trustee's own rights,
duties or immunities under this Trust Agreement or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental agreement.
It shall not be necessary for the vote of the Pass-Through Trustees
under this Section to approve the particular form of any proposed supplemental
agreement, and it shall be sufficient if such consent shall approve the
substance thereof. Kmart shall be entitled to receive a copy of the form of
proposed supplemental agreement.
Promptly after the execution by the Depositor and the Trustee of any
supplemental agreement pursuant to the provisions of this Section, the Trustee
shall deliver a notice to the Pass-Through Trustees for distribution to the
Certificateholders, which notice shall set forth in general terms the substance
of such supplemental agreement. Any failure of the Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental agreement.
Section 10.03. Effect of Supplemental Agreement. Upon the execution
of any supplemental agreement pursuant to the provisions hereof, this Trust
Agreement shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights, obligations, duties
and immunities under this Trust Agreement of the Trustee, the Depositor, the
Pass-Through Trustees and the Certificateholders shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental agreement shall be and be deemed to be part of the terms and
conditions of this Trust Agreement for any and all purposes. The Trustee shall
deliver to Kmart a true and correct copy of the final form of supplemental
agreement as executed by the Depositor and the Trustee.
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<PAGE> 40
Section 10.04. Documents to Be Given to Trustee. The Trustee,
subject to the provisions of Sections 8.02, may receive an Officer's
Certificate and an Opinion of Counsel as conclusive evidence that any such
supplemental agreement complies with the applicable provisions of this Trust
Agreement.
Section 10.05. Granting of Easements. The Trustee, at the direction
of [the] [a] Tenant and the [related] Borrower, may grant, release, modify or
amend easements, licenses, rights-of-way, dedications and other rights or
privileges in the nature of easements with respect to the [related] Mortgaged
Estate, which the Trustee determines do not materially adversely affect the
security of the Trust Property. The Trustee shall, upon request of [such]
Tenant, certify that the rights or privileges so granted or released are no
longer part of the Trust Property for purposes of this Trust Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Trust Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Trust Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Trust Agreement.
Section 11.02. Recordation of Agreement. To the extent required by
applicable law, this Trust Agreement is subject to recordation in appropriate
public offices for real property records in the county or other comparable
jurisdiction in which [the] [each] Mortgaged Estate is situated, and in any
other appropriate public recording office or elsewhere, such recordation to be
effected by the Trustee accompanied by an Opinion of Counsel to the effect that
such recordation materially and beneficially affects the interests of the
Pass-Through Trusts and Certificateholders or is necessary in connection with
the [related] Mortgage Loan.
Section 11.03. Duration of Agreement. This Trust Agreement shall
continue in existence and effect until terminated as herein provided.
SECTION 11.04. GOVERNING LAW. THIS TRUST AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
Section 11.05. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to
36
<PAGE> 41
have been duly given if personally delivered at or mailed by first class or
registered mail, postage prepaid, to (i) in the case of the Depositor,
National Tenant Finance Corporation, 40 North Central Avenue, Suite 2700,
Phoenix, Arizona 85004-4441, Attention: Norman C. Storey, and (ii) in the case
of the Trustee or a Pass-Through Trustee, United States Trust Company of New
York, c/o U.S. Trust Company of California, N.A., Suite 2700, 555 South Flower
Street, Los Angeles California 90071 Attention: Corporate Trust Division, or
such other addresses as such Persons may hereafter designate. Any notice
required or permitted to be mailed to a Certificateholder shall be given by
registered mail, postage prepaid, or by express delivery service, at the
address of such Certificateholder as shown in the related Certificate Register.
A copy of each notice of an Event of Default and all other notices or
communications hereunder, including the text of any proposed or final amendment
or supplement to this Trust Agreement, given by or to the Certificateholders,
the Trustee or the Depositor shall be contemporaneously transmitted to Kmart,
3100 West Big Beaver Road, Troy, Michigan 48084, Attention: Vice President -
Real Estate, or to such other address as Kmart may have designated by written
notice to the Trustee. The provisions of the foregoing sentence are for the
express benefit of Kmart, shall be enforceable by it, and may not be modified
or eliminated without its consent.
Section 11.06. Counterparts. For the purpose of facilitating the
recordation of this Trust Agreement as herein provided and for other purposes,
this Trust Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
Section 11.07. Submission to Jurisdiction. Each party hereto hereby
consents to the jurisdiction of any state or federal court located within the
County of New York, State of New York and irrevocably agrees that all actions
or proceedings relating to this Trust Agreement may be litigated in such courts
and each such party waives any objection which it may have based on improper
venue or forum non conveniens to the conduct of any proceeding in any such
court, waives personal service of any and all process upon it and consents that
all such service or process be made by registered or certified mail (return
receipt requested) or messengered to it at its address set forth in Section
11.08 or to its Agent referred to below at such Agent's address set forth below
and that service so made shall be deemed to be completed in accordance with
Section 11.08. Each party hereto hereby appoints the Prentice Hall Corporation
System, Inc., with an office on the date hereof at 15 Columbus Circle, New
York, New York 11023 as its Agent for the purpose of accepting service of any
process within the State of New York and shall execute any confirmation thereof
requested by the other party hereto. Nothing in this Section shall affect the
right of any party hereto to serve legal process in any other manner permitted
by law to bring any action or proceeding in the courts of any jurisdiction
against the other party or to enforce a judgment obtained in the courts of any
other jurisdiction.
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<PAGE> 42
Section 11.08. Gender; Number. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular
or plural, as the context shall require.
Section 11.09. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Depositor to the Trustee to take any
action under this Trust Agreement, the Depositor shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Trust Agreement
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel all such conditions precedent have been complied with.
Section 11.10. Statements Required in Certificate or Opinion. Each
Officers' Certificate and Opinion of Counsel with respect to compliance with a
covenant or condition provided for in this Trust Agreement shall include:
(a) a statement that each Person making such Officers' Certificate
or Opinion of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such Officers' Certificate or Opinion of Counsel are based;
(c) a statement that, in the opinion of each such Person, he has
made such examination or investigation as is necessary to enable such Person to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement that, in the opinion of such Person, such covenant
or condition has been complied with; provided, however, that with respect to
matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or
certificates of public officials.
Section 11.11. Benefits of Trust Agreement. Nothing in this Trust
Agreement express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, the Pass-Through Trustees and the
Certificateholders, any benefit or any legal or equitable right, remedy or
claim under this Trust Agreement.
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<PAGE> 43
IN WITNESS WHEREOF, the Depositor and the Trustee have caused their
names to be signed hereto by their respective officers thereunto duly
authorized as of the day and year first above written.
NATIONAL TENANT FINANCE CORPORATION, a
Delaware corporation
By_______________________________
Name_____________________________
Title____________________________
UNITED STATES TRUST COMPANY OF NEW YORK, a
New York banking corporation
By_______________________________
Name_____________________________
Title____________________________
39
<PAGE> 44
STATE OF _______________ ]
] ss.
CITY OF ________________ ]
On the ____ day of _________, 199_ before me, a Notary Public in
and for said State, personally appeared ______________, known to me (or proved
to me on the basis of satisfactory evidence) to be the person who executed the
within instrument as ___________ on behalf of NATIONAL TENANT FINANCE
CORPORATION, a Delaware corporation, and acknowledged to me that such
Corporation executed the within instrument pursuant to its Bylaws or a
resolution of its Board of Directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
[NOTARIAL SEAL]
_______________________________
Notary Public
My Commission Expires:
______________________
STATE OF _______________ ]
] ss.
CITY OF ________________ ]
On the ____ day of _________, 199_ before me, a Notary Public in
and for said State, personally appeared ______________, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person who
executed the within instrument as to be a ______________ on behalf of UNITED
STATES TRUST COMPANY OF NEW YORK, a New York banking corporation, and
acknowledged to me that such association executed the within instrument
pursuant to its Bylaws or a resolution of its Board of Directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
[NOTARIAL SEAL]
_______________________________
Notary Public
My Commission Expires:
______________________
<PAGE> 45
EXHIBIT A-1
MORTGAGE NOTE SCHEDULE
<TABLE>
<S> <C> <C> <C>
(i) Borrower Name -
(ii) Mortgaged Estate - See Exhibit A attached
hereto
(iii) Maturity Date - _____ __, 20__
(iv) Rate - ____%
(v) First Due Date - ________ __, 199_
(vi) Mortgage Payments - See Exhibit B attached
hereto
(vii) Original Principal
Balance of Mortgage
Note - $_______________
</TABLE>
<PAGE> 46
EXHIBIT A-3
CONTENTS OF MORTGAGE FILE
With respect to the Mortgage Loan, the Mortgage File shall
include each of the following items:
<PAGE> 47
EXHIBIT A-4
CAPITALIZED DEBT SERVICE ACCOUNT SCHEDULE
<TABLE>
<S> <C> <C> <C>
(i) Borrower Name -
(ii) Tenant Name -
(iii) Payments:
Date Amount
---- ------
$
</TABLE>
<PAGE> 48
EXHIBIT C
FORM OF TRUSTEE CERTIFICATION
_______ __, 199_
National Tenant Finance Corporation
40 North Central Avenue
Suite 2700
Phoenix, Arizona 85004-4441
Re: Collateral Trust Agreement ("Trust Agreement") dated as of
_______ __, 1994 by and between National Tenant Finance
Corporation, as Depositor, and United States Trust Company
of New York as Trustee, Mortgage Pass-Through Certificates
(____________________) [Series 199_-_ and Series 199_-_]
Gentlemen:
In accordance with Section 2.02 of the Trust Agreement, the
undersigned, as Trustee, hereby certifies that, as to the Mortgage Notes listed
in the Mortgage Note Schedule, it has reviewed the related Loan Documents and
the Mortgage Note Schedule and has determined that:
(i) All Loan Documents required to be delivered to the Trustee
pursuant to Section 2.01 of the Trust Agreement are in its possession;
and
(ii) Such documents have been reviewed by it and such documents
do not contain any omissions, defects or irregularities within the
meaning of Sections 2.01 or 2.02 of the Trust Agreement.
The Trustee further certifies that, as to the Mortgage Loan[s], the
Trustee has no notice or knowledge (a) of any claims, liens or encumbrances on
the Mortgage Notes adverse to the Pass-Through Trustees, (b) that the Mortgage
Notes were overdue or have been dishonored, (c) of evidence on the face of the
Mortgage of any security interest or other right or interest therein or in the
Mortgage Notes, or (d) of any defense against or claim to the Mortgage Notes by
any other party.
The Trustee has made no independent examination of any Loan Documents
beyond the review specifically required in the Trust Agreement. The Trustee
makes no representations or warranties as to the validity, legality,
sufficiency, enforceability or genuineness of any of the Loan Documents
(other than the statements made herein) or the collectibility, insurability,
effectiveness or suitability of the Mortgage Loan[s].
C-1
<PAGE> 49
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Trust Agreement.
UNITED STATES TRUST COMPANY OF
NEW YORK
By_____________________________
Name___________________________
Title__________________________
C-2
<PAGE> 1
EXHIBIT 4.9
LEASE GUARANTY AGREEMENT
THIS AGREEMENT ("Agreement") dated as of ________, 199_, among
______________________________________________, a _________ limited
[partnership] [liability company] ("Landlord"), having an address at
________________________________________ and KMART CORPORATION, a Michigan
corporation ("Guarantor"), having its principal office at 3100 West Big Beaver
Road, Troy, Michigan 48084, and ______________ ("Tenant"), a ____________
corporation, having an address at _____________, solely for purposes of Section
5 of this Agreement,
W I T N E S S E T H :
Contemporaneously herewith, Landlord, as landlord, is entering into a
certain lease ("Lease") dated as of ________, 19__, for certain demised
premises defined in the Lease ("Demised Premises") located on real property in
the City of ________, County of ________, State of _________, which property is
more particularly described in Exhibit A attached thereto, with
Tenant, as tenant. Pursuant to a Loan Agreement of even date
herewith between Landlord, as Borrower, and National Tenant Finance
Corporation, a Delaware corporation, as Lender ("Lender"), Landlord is
obtaining the funds necessary to acquire the Demised Premises [and construct
the Tenant Improvements thereon]. Guarantor owns a controlling interest in the
outstanding capital stock of Tenant and is executing this Agreement as an
inducement to the Landlord to enter into the Lease and to Lender to enter into
the Loan Agreement. All capitalized terms used but not otherwise defined
herein shall have the meaning assigned to such terms in the Lease.
NOW, THEREFORE, in consideration of the premises, the parties agree as
follows:
1. Guarantor hereby absolutely and unconditionally guarantees to the
Landlord the full and punctual payment (and not merely collectability),
performance and observance by the Tenant of all of the terms, conditions,
covenants and obligations to be performed and observed by the Tenant under the
Lease (collectively, "Guaranteed Obligations"). Unless sooner terminated
pursuant to Section 5, this Agreement shall terminate with respect to
Guaranteed Obligations which arise, or are incurred solely with respect to
events occurring, after the earlier of the expiration of the Primary Term of
the Lease or the Loan Payoff.
2. Guarantor hereby assents to all of the provisions of the Lease and
waives demand, protest, notice of any indulgences or extensions granted to
Tenant, any requirement of diligence or promptness on the part of the Landlord
in the enforcement of the Lease and any notice thereof, any requirement that
Landlord take any action whatsoever against the Tenant or any other party or
against the assets of Tenant or any other party or file any claim in the
bankruptcy of the Tenant and any other notice to Guarantor, provided, however,
Guarantor shall be furnished with a copy of the
1
<PAGE> 2
notice of or relating to default under or termination of the Lease to which
Tenant is entitled or which is served upon Tenant at the time the same is sent
to or served upon Tenant. Any failure of notice shall not affect Guarantor's
liability hereunder, provided, however, that the time for Guarantor's
performance hereunder shall not commence until such notice is given to
Guarantor pursuant to Section 8.
3. Except as otherwise provided herein, the liability of Guarantor
hereunder is irrevocable, continuing, absolute, independent and unconditional
and shall in no way be affected by any circumstance which may constitute a
defense or legal or equitable discharge, in whole or in part, including,
without limitation, (a) the release or discharge of Tenant or the impairment or
modification of its liability in any creditors', receivership, or bankruptcy
proceeding or from any other cause whatsoever, (b) any alteration of or
amendment to the Lease which alteration or amendment has been consented to in
writing by the Guarantor; (c) any sale, assignment, sublease, pledge or
mortgage of the rights or obligations of Tenant under the Lease; (d) any
application or release of any security or other guaranty given for the
performance and observance of the covenants and conditions in the Lease on
Tenant's part to be performed and observed, provided, however, that any
application of any security given with respect to Tenant's performance under
the Lease shall reduce pro tanto the liability of Guarantor hereunder; (e) any
termination of the Lease except as expressly provided in the next succeeding
sentence; (f) any (i) defect in compliance with specifications, condition of
the Demised Premises, design, operation or fitness for use of the Demised
Premises which result from the construction of the Improvements which comprise
a part of the Demised Premises or, (ii) any damage to or loss or destruction of
the Demised Premises or any interruption or cessation in the use of the Demised
Premises or any portion thereof by Tenant, whether or not without fault on the
part of Tenant or any other person; or (g) any defense to enforcement of this
Guaranty that Guarantor is entitled to assert and Guarantor hereby waives the
right to assert any such defense including, but not limited to, those based on
(i) failure of Tenant to qualify to do business in the jurisdiction where the
property subject to the Lease is located, (ii) lack of Tenant of corporate
authority to enter into the Lease or to carry out the provisions of the Lease,
(iii) lack of Tenant's due authorization, execution and delivery of the Lease,
(iv) unenforceability of the Lease against Tenant in accordance with its terms,
(v) any charter or bylaw provision or agreement, statute, rule or regulation
binding on Tenant which conflicts with the Lease or the performance of any
obligation of Tenant under the Lease, or (vi) any stay or other impediment to
the exercise of Landlord's rights hereunder resulting from any bankruptcy or
other insolvency proceeding and in this respect Guarantor recognizes Landlord's
right to receive interest on any obligations guaranteed hereby after the
commencement of any such bankruptcy or insolvency proceeding. Notwithstanding
Sections 3(a) and (f)(ii) above, Guarantor shall be relieved of all future
liability with respect to Guaranteed Obligations which arise or are
2
<PAGE> 3
incurred solely with respect to events occurring after (x) the rejection of the
Lease by the trustee or debtor-in-possession in Landlord's bankruptcy
proceeding, as a result of which the Lease is terminated and, notwithstanding
Tenant's compliance with the provisions of Article 23(c) of the Lease, the
Tenant is deprived thereby of its possessory rights pursuant to the Lease, or
(y) the Lease is properly terminated by Tenant pursuant to Articles 17 or 18
thereof. The obligation and liability of Guarantor hereunder shall not be
impaired, diminished, abated or otherwise affected by any setoff, defense or
counterclaim that Tenant or any other person may have or claim to have, at any
time or from time to time. There shall be no condition precedent to
Guarantor's obligations hereunder that Landlord at any time demand or resort
for payment or performance to Tenant, its properties or assets or to any
security, property or other rights or remedies whatsoever, and Landlord shall
have the right to enforce this Agreement irrespective of whether or not legal
proceedings or other enforcement efforts against Tenant are pending. Without
limiting the foregoing, it is understood that repeated and successive demands
may be made and recoveries may be had hereunder as and when, from time to time,
Tenant shall default under the terms of the Lease.
4. Guarantor hereby acknowledges and consents to the present assignment
by Landlord of all of its right, title and interest herein to
______________________ ("Lender"), a ___________ corporation, and hereby
further acknowledges and consents to the sale, conveyance, transfer and
absolute assignment by Lender of such right, title and interest to
__________________________ ("Trustee") pursuant to the [Collateral] Trust
Agreement dated as of ________, 19__ [under which the Trustee holds this
Agreement and the rights hereunder for the benefit of the Pass-Through Trustees
(as defined in the Collateral Trust Agreement) pursuant to the Pass-Through
Trust Agreements (as defined in the Collateral Trust Agreement)] under which
the Mortgage Pass-Through Certificates (_____________________________) Series
_____ [and Series _______]("Certificates") are issued. Upon such sale,
conveyance, transfer and absolute assignment to Trustee, Trustee shall be
deemed to be Lender and shall succeed to all to rights of Lender. No amendment
or modification of, or waiver by or consent of the Landlord in respect of, any
of the provisions of this Agreement shall be effective unless Trustee shall have
joined in such amendment, modification, waiver or consent or shall have given
its prior written consent thereto. Trustee shall have the sole right to
exercise all rights, privileges and remedies (either in its own name or in the
name of Landlord for the use and benefit of Trustee) which by the terms of this
Agreement or by applicable law are permitted or provided to be exercised by the
Landlord.
5. (a) Certain Definitions.
(i) "Affiliate" shall mean any person or entity controlling,
controlled by or under common control with any other person or entity.
3
<PAGE> 4
(ii) "Indemnity Agreement" shall mean that certain Indemnity
Agreement dated as of , 199 , made by and between Guarantor and
Lender.
(iii) "Investment Grade" shall mean a credit rating issued by
Standard & Poor's ("S&P") which is equal to or greater than the existing
S&P rating of BBB- and is not on credit watch or a credit rating
issued by Moody's Investor Services ("Moody's") which is equal to or greater
than the existing Moody's Investors Service rating of Baa3 and is not on credit
watch.
(iv) "Investment Grade Status" shall mean that the long term
senior unsecured debt of the entity issuing such debt has been continuously
rated Investment Grade for a period of not less than twelve (12) full calendar
months immediately prior to the occurrence of the Termination Event.
(v) "New Guarantor" shall mean an entity which is an Affiliate
of the Assignee or Purchaser and which on or before an Effective Date or
Closing Date, whichever is applicable, executes and delivers to Landlord and
Trustee a New Lease Guaranty Agreement.
(vi) "New Lease Guaranty Agreement" shall mean a lease guaranty
agreement in form and content, except as provided in Section 5(d), the same as
this Agreement, which has a term equal to the remaining period during which
this Agreement would apply to the Guaranteed Obligations but for the
application of Section 5(c).
(vii) "New Note Put Agreement" shall mean a note put agreement
between Trustee, Tenant, Assignee (if an Assumption Agreement has been
executed), and New Guarantor, if applicable, in form and content the same as
the Note Put Agreement, revised as necessary to reflect the omission of New
Guarantor pursuant to Section 5(c)(iv) and to omit any provisions relating to
"Lease Guaranty Termination" as a Triggering Event.
(viii) "Note Put Agreement" shall mean the Note Put Agreement
dated as of even date with this Agreement by and among Lender, Tenant and
Guarantor.
(ix) "Put" shall have the meaning assigned to it in the Note
Put Agreement.
(x) "Qualified Assignment" shall mean that Tenant assigns the
Lease to a third party other than Guarantor or an Affiliate of Guarantor
("Assignee") and (i) Assignee executes an assumption agreement ("Assumption
Agreement") in form and content acceptable to Landlord and Trustee pursuant
to which Assignee absolutely and unconditionally assumes all of the
obligations of the Tenant pursuant to the Lease arising from and after the date
("Effective Date") upon which the Assignment is effective, and (ii) Assignee is
an entity which has achieved Investment Grade Status or Assignee delivers or
causes to be delivered, together with its Assumption Agreement, a New Lease
Guaranty Agreement by the New Guarantor which has achieved Investment Grade
Status. If, as of the Effective Date, the requirements of (i) above are
satisfied but not the requirements of (ii) above, and, thereafter the
requirements of (ii) are satisfied,
4
<PAGE> 5
then, effective as of any later date that either Assignee or the New Guarantor
achieves Investment Grade Status and not before, a Qualified Assignment shall
be deemed to have occurred.
(xi) "Qualified Sale of Tenant" shall mean a sale to a third
party other than Guarantor or an Affiliate of Guarantor ("Purchaser")
of more than a fifty percent (50%) interest in all of the issued and
outstanding capital stock of the Tenant and in connection therewith Tenant or
Guarantor delivers to Landlord a New Lease Guaranty Agreement executed by a New
Guarantor, which on the date of acquisition of such interest in the Tenant's
capital stock ("Closing Date"), is an entity which has achieved Investment
Grade Status. If, as of the Closing Date, the New Guarantor has not achieved
Investment Grade Status, then, effective as of any later date that the New
Guarantor achieves Investment Grade Status and not before, a Qualified Sale of
Tenant shall be deemed to have occurred.
(xii) "Put Exercise Notice" shall have the meaning assigned to it
in Section 5(b).
(xiii) "Tenant Achieves Investment Grade Status" shall mean
Tenant, independent of its corporate parent, any subsidiary or Affiliate or
any of them, and independent of any credit support or enhancement provided by
any one or more of them, has achieved Investment Grade Status.
(xiv) "Termination Event" shall mean the occurrence of either
a "Qualified Assignment", a "Qualified Sale of Tenant", or "Tenant Achieves
Investment Grade Status".
(xv) "Termination Notice" shall have the meaning assigned to it
in Section 5(b).
(xvi) "Triggering Event" shall have the meaning assigned to it in
the Note Put Agreement.
(b) At any time following the occurrence of a Termination Event,
Guarantor and Tenant may elect to deliver notice ("Termination Notice") by
Guarantor and Tenant to Landlord and the Trustee of the occurrence of a
Termination Event specifying the nature of the Termination Event and the date
of its occurrence accompanied by evidence of such occurrence. Upon receipt of
the Termination Notice the Trustee shall (i) notify the Certificate Holders of
[the] [each Pass-Through] Trust [which has an interest in this Agreement] that
a Triggering Event has occurred, and (ii) the Trustee shall have the right on
the terms and conditions set forth in the applicable Trust Agreement to
exercise the Put which is exercisable pursuant to the Note Put Agreement as a
result of the occurrence of a Triggering Event.
(c) In the event Guarantor and Tenant deliver the Termination
Notice, and after the Trustee gives the notice thereof to the Certificate
Holders pursuant to Section 5(b), then, if the Trustee is instructed by the
5
<PAGE> 6
Certificate Holders pursuant to the provisions of any applicable Trust
Agreement[s] not to exercise the Put, the Note Put Agreement shall terminate,
and the Indemnity Agreement and this Agreement shall terminate, with respect to
all Claims (as defined in the Indemnity Agreement), or Guaranteed Obligations,
respectively, which arise, or are incurred solely with respect to events
occurring after the later of the completion of the foregoing or the
satisfaction of each of the following conditions precedent which is applicable:
(i) in all cases, no uncured default by Tenant then exists
pursuant to the Lease or the Note Put Agreement and no uncured default
by Guarantor exists pursuant to this Agreement or the Note Put Agreement;
(ii) with respect to a Qualified Assignment or a Qualified Sale
of Tenant, Trustee shall have received such documents as it may request from
Borrower necessary to grant an existing, perfected first security interest in
favor of Trustee in the New Lease Guaranty Agreement;
(iii) with respect to a Qualified Assignment or a Qualified Sale
of Tenant, Guarantor and Tenant shall deliver to Landlord and Trustee a legal
opinion addressed to Landlord and Trustee from legal counsel acceptable to
Landlord and Trustee and in form and content acceptable to Landlord and
Trustee, that (1) any Assumption Agreement or New Lease Guaranty Agreement is
duly authorized, has been duly executed and delivered by Assignee or New
Guarantor, as applicable, is enforceable in accordance with its terms and
conditions, and covering such other matters relating to the Assumption
Agreement, New Lease Guaranty Agreement and transaction resulting in the
Qualified Assignment or the Qualified Sale of Tenant as Landlord and Trustee
shall reasonably request, and (2) Trustee has an existing validly perfected
lien and security interest in the New Lease Guaranty Agreement;
(iv) in all cases, the Tenant, if Tenant has achieved Investment
Grade Status, or the Assignee, if Assignee is an entity which has
achieved Investment Grade Status and if not, the New Guarantor, shall deliver
to Trustee (1) a New Note Put Agreement defining "Lease Default" or
"Lease/Lease Guaranty Default" (as defined therein), as applicable, with
respect to a default pursuant to the Lease and the New Lease Guaranty, if
applicable, and the new indemnity agreement, if applicable, and (2) a legal
opinion addressed to Trustee from counsel and in form and content, all of
which are acceptable to Trustee, that the New Note Put Agreement is duly
authorized, has been duly executed and delivered by Tenant, Assignee or the
New Guarantor, is enforceable in accordance with its terms and conditions and
covering such other matters relating to the New Note Put Agreement as Trustee
shall reasonably request.
(v) in all cases, the party upon whose rating the Termination
Event is based, either the Tenant, Purchaser, Assignee or New Guarantor, has
achieved Investment Grade Status and Guarantor has provided Trustee with
evidence thereof from S&P or Moody's publications.
(d) Notwithstanding anything in this Section 5 to the contrary, a
termination of Guarantor's obligations pursuant to this Lease Guaranty
Agreement upon the occurrence of a Termination Event
6
<PAGE> 7
in compliance with this Section 5 shall not apply to any New Guarantor. Any
New Lease Guaranty Agreement shall not contain this Section 5 or any provision
similar to this Section 5 providing a means for any New Guarantor to terminate
its obligations pursuant to this Lease Guaranty Agreement.
(e) Guarantor and Tenant shall reimburse Trustee for any and all
expenses, including but not limited to expenses incurred in retaining legal
counsel, incurred by Trustee in connection with the exercise by such party of
its rights under this Section 5.
6. This Agreement shall inure to the benefit of the Landlord and its
successors and assigns including, but not limited to, Lender and Trustee and
any assignee of the Landlord's interest in the Lease including, but not limited
to, Lender and Trustee. This Agreement shall be binding upon Guarantor and its
respective successors and assigns; provided that Guarantor shall not delegate
any of its obligations hereunder without the prior written consent of the
Trustee; and provided further that no delegation of any of its obligations
hereunder shall relieve Guarantor thereof and Guarantor shall remain primarily
and originally liable thereon.
7. This Agreement may not be changed or terminated orally, but only by a
written instrument signed by the party against whom enforcement of any change
or termination is sought.
8. Notices required pursuant to this Agreement shall be in writing and
deemed to be property served on receipt thereof if personally delivered, sent
by certified or registered mail (return receipt requested, postage prepaid) or
by overnight courier service which delivers only upon signed receipt of the
addressee: (i) to Landlord at _____________________________, Attention:
____________, with a copy to ______________ or (ii) to Kmart Corporation at
3100 West Big Beaver Road, Troy Michigan 48084, Attention: Vice President-Real
Estate. A copy of any notices hereunder shall be sent to United States Trust
Company of New York, c/o U.S. Trust Company of California, N.A., 555 South
Flower Street, Suite 2700, Los Angeles, California 90071, Attention: Corporate
Trust Division. The parties to receive notice and the addresses for notice may
be changed by the party entitled to notice by giving notice of such change
pursuant to this Section. The date of notice shall be the date of receipt of
notice or the date of attempted delivery of the notice by the overnight courier
service or the U.S. Postal Service to the addressee or its agent.
9. In the event of any dispute between the parties hereto in regard to
the subject matter hereof, the prevailing party shall be entitled to recover
its reasonable costs, including attorney's fees and expenses at all trial and
appellate levels.
10. The Guarantor hereby agrees that any indebtedness of the Tenant now
or hereafter held by the Guarantor is hereby subordinated in right of payment
to the Guaranteed Obligations, and any such indebtedness of the Tenant to the
Guarantor collected or
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<PAGE> 8
received by the Guarantor after a default under the Lease has occurred and is
continuing shall be held in trust for the Trustee and shall be paid over to the
Trustee as payments become due under the Lease to be credited and applied
against the Guaranteed Obligations, in such order as the Loan Agreement
provides, provided, however, if a default by Guarantor pursuant to this
Agreement has occurred and is continuing, any such payments may be credited
and applied against the Guaranteed Obligations in such order as the Trustee
may determine, without in either event in any way affecting, impairing or
limiting the liability of the Guarantor under this Guaranty.
11. This Agreement shall be construed and enforced in accordance with the
laws of the State of New York.
12. Guarantor hereby (i) consents to the jurisdiction of any state or
federal court located within the County of New York, State of New York and
irrevocably agrees that all actions or proceedings relating to this Agreement
may be litigated in such courts, (ii) waives any objection which it may have
based on improper venue or forum non conveniens to the conduct of any
proceeding in any such court, (iii) waives personal service of any and all
process upon it, and consents that all such service or process be made by
registered or certified mail (return receipt requested) or messengered to it
at its address set forth in Section 8 or to its Agent referred to below at such
Agent's address set forth below, and, that service so made shall be deemed to
be completed in accordance with Section 8. Guarantor hereby appoints CT
Corporation System with an office on the date hereof at 1633 Broadway, New
York, New York 10019 as its Agent for the purpose of accepting service of any
process within the State of New York. Upon Landlord's request Guarantor shall
take any action reasonably necessary to confirm such appointment of Agent.
Nothing contained in this Section shall affect the right of Landlord to serve
legal process in any other manner permitted by law, to bring any action or
proceeding in the courts of any jurisdiction against Guarantor, or to enforce a
judgment obtained in the courts of any other jurisdiction.
IN WITNESS WHEREOF, each of the parties has duly executed this Agreement
by a duly authorized person and Guarantor has caused its corporate seal to be
hereunder affixed as of the day and year first above written.
KMART CORPORATION
By
---------------------------
Its
-----------------------
TENANT
By
---------------------------
Its
-----------------------
8
<PAGE> 9
Accepted by:
,
-------------------------------
a limited
---------
[partnership] [liability company]
By: ,
--------------------------
[a corporation,]
---------
its [General Partner]
[ ]
-----------------
[By
-------------------------
Its
---------------------]
ACKNOWLEDGEMENT
STATE OF )
---------
) ss.
County of )
--------
The foregoing instrument was acknowledged before me this day of
--
, 199 by , of KMART CORPORATION, a
- ------- - --------------------- ---------------
Michigan corporation, on behalf of the corporation.
------------------------------
Notary Public
My Commission Expires:
- ----------------------
ACKNOWLEDGEMENT
STATE OF )
---------
) ss.
County of )
--------
The foregoing instrument was acknowledged before me this day of
--
, 199 by , , of [TENANT], a
- ------- - --------------------- ---------------
corporation, on behalf of the corporation.
------------------------------
Notary Public
My Commission Expires:
- ----------------------
9
<PAGE> 10
STATE OF )
---------
) ss.
County of )
--------
The foregoing instrument was acknowledged before me this day of
--
, 199 by , [of , a
- ------ - --------------------- -----------------------------
corporation], the [sole general partner] [ ] of
- --------- -------
, a limited [partnership] [liability
- --------------------------- -------------
company], on behalf of the .
---------------------------
------------------------------
Notary Public
My Commission Expires:
- ----------------------
10
<PAGE> 1
EXHIBIT 4.14
NOTE PUT AGREEMENT
THIS NOTE PUT AGREEMENT ("Agreement") is made as of the ___ day of
_______, 19__, by and [among] [between] KMART CORPORATION [("Kmart")]
[Tenant], a Michigan corporation, [__________________ ("Tenant"), a _______
corporation,] and NATIONAL TENANT FINANCE CORPORATION ("Lender"), a Delaware
corporation, each of which confirms and agrees as follows:
SECTION 1: RECITALS
1.1 Loan. Pursuant to the Loan Agreement ("Loan Agreement") dated as
of even date herewith, between Lender and _________ _________("Borrower"), a
___________ limited [partnership] [liability company], Lender has agreed to
make Borrower the Loan, to be evidenced by the Note[s]. The proceeds of the
Loan will be used pursuant to the Loan Agreement to finance the acquisition,
construction or development of the Demised Premises. As a material inducement
to Lender to make the Loan, Tenant, as the Tenant of the Demised Premises
pursuant to the Lease, [and Kmart, as the Guarantor of the Lease pursuant to the
Lease Guaranty Agreement, have each] [has] agreed to enter into this Agreement.
1.2 Terms; Governing Document. All capitalized terms used herein,
unless otherwise expressly provided, shall have the meaning set forth in the
Loan Agreement. In the event of any conflict between the terms and provisions
of this Agreement and the Loan Agreement, the terms and conditions of this
Agreement shall govern and prevail.
SECTION 2: PURCHASE OF NOTE
2.1 Certain Additional Definitions. For purposes of this Section 2,
the following terms shall have the following meanings:
"Business Day" means any day other than (i) Saturday or Sunday,
or (ii) a day on which banks in New York are required by law to be closed or
are customarily closed.
"Called Principal" means the unpaid principal balance of the
Note[s] to be paid as part of the Purchase Price upon exercise of the Put.
"Certificate Balance" shall have the meaning assigned to it in
the [Collateral] Trust Agreement.
"Certificates" shall have the meaning assigned to it in Section
3.2.
"[Collateral Trust Agreement" shall have the meaning assigned
to it in the Loan Agreement.]
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<PAGE> 2
"Completion Date" means the second anniversary of the date of
the Note or Notes with respect to which the Put is exercised.
"Completion of Construction" shall have the meaning assigned to
it in Section 8.1 of the Loan Agreement.
"Consent and Agreement" means the Consent and Agreement dated as
of even date herewith among [Kmart,] Lender, Borrower, Tenant and Trustee
relating to the Lease, [Lease Guaranty,] this Agreement and certain other
related matters.
"Demised Premises" shall have the meaning assigned to it in the
Lease pursuant to which the Tenant is a Tenant.
"Discounted Prepayment Value" means, with respect to any amount
of Called Principal, the amount obtained by (i) discounting all Remaining
Scheduled Payments with respect to such Called Principal from their respective
scheduled due dates to the Purchase Date with respect to such Called Principal,
in accordance with generally accepted financial practice and at a discount
factor (applied on a semiannual basis) equal to the Reinvestment Yield and (ii)
adding together such discounted Remaining Scheduled Payments.
"Facility" means the Demised Premises.
"Failure of Completion" means Completion of Construction of the
Facility does not occur on or before the Completion Date.
["Indemnity Agreement" means the Indemnity Agreement dated as of
even date herewith by and between Kmart and Lender, executed by Kmart to induce
Lender to accept the Lease Guaranty in the form offered by Kmart.]
["Investment Grade Status" shall have the meaning assigned to it
in the Lease Guaranty.]
["Kmart Purchase Date" means the Business Day first occurring
fifteen (15) Business Days after Lender or the Trustee gives the Tenant
Default Notice to Kmart and Tenant.]
"Lease" means the Lease executed by Tenant described in Exhibit
1.1C to the Loan Agreement.
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<PAGE> 3
["Lease Guaranty" means that certain Lease Guaranty Agreement,
described in Exhibit 1.1C to the Loan Agreement, executed by Kmart which
guarantees the payment and performance of the Tenant under the Lease.]
["Lease Guaranty Termination" means the occurrence of a
Termination Event pursuant to the terms of the Lease Guaranty with respect to
which a Termination Notice is given by Kmart and Tenant pursuant to Section
5(b) of the Lease Guaranty. ]
"Lease[/Lease Guaranty] Default" means: [(i)] with respect to
the Lease [and Lease Guaranty] described in Exhibit 1.1C to the Loan Agreement,
the failure of (x) the Tenant under the Lease to pay when due any Annual Rental
or Additional Rent as defined in the Lease due under such Lease for a period of
[ten (10)] [thirty (30)] days after notice to the Tenant of such default [and
(y) Kmart to pay any such Annual Rental or Additional Rent pursuant to the
terms of an existing related Lease Guaranty, if any, within thirty (30) days
after notice to Kmart of the Tenant's initial failure to do so; provided that,
the notices required pursuant to clause (x) and clause (y) may be given
concurrently, and,] provided [further] that, no notice referred to in the
foregoing clause [(x) or clause (y)] shall be required in the event that
Landlord or Trustee shall be stayed or prohibited by operation of law or
otherwise from the giving of such notice[, and, (ii) with respect to the
Indemnity Agreement, the occurrence of an Event of Default (as defined therein)
which continues beyond the expiration of any applicable cure period].
"Lender" means National Tenant Finance Corporation, a Delaware
corporation, and any of its successors and assigns.
"Make-Whole Premium" means, with respect to any amount of Called
Principal, an amount equal to the positive excess, if any, as of
the Purchase Date of the Discounted Prepayment Value of the Called Principal
over such Called Principal.
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<PAGE> 4
"Maturity Date" means ___________, 20__ , for Note Number ,
and , 20 , for Note Number .
["Minimum Investment Grade": means a rating of at least Baa3, in
the case of a rating by Moody's, and a rating of at least BBB-, in the case of
a rating by S&P, or the then equivalent of such rating by Moody's or S&P or, to
the extent applicable, by another Rating Agency.]
["Moody's" means Moody's Investors Service or any successor
thereto.]
"Note" or "Notes" means the Note or Notes issued pursuant to the
Loan Agreement and designated as Note Number _______ [and Note Number _______]
and any replacement therefor pursuant to the Loan Agreement.
"Pass-Through Trustees" shall have the meaning assigned to it in
the Loan Agreement.
"Purchase Date" means Tenant Purchase Date [or Kmart Purchase
Date, as applicable].
"Purchase Price" means [with respect to any Note] the sum of the
unpaid principal balance of [the] [such] Note, accrued interest thereon to the
relevant Purchase Date plus if the Triggering Event is a Lease [/Lease
Guaranty] Default, a Failure of Completion or Lease Guaranty Termination, the
Make-Whole Premium. In the event the unpaid principal balance of the Note or
Notes, accrued interest thereon to the applicable Purchase Date or Make-Whole
Premium are released, discharged, impaired or modified in the manner
contemplated by Section 3.2(vii), the Purchase Price shall be calculated
without giving effect to any such release, discharge, impairment or
modification.
"Purchaser shall have the meaning assigned to it in Section
2.2(d).
"Put" means exercise of the right of Lender or the Trustee to
require the Tenant to purchase the Note or Notes pursuant to Section 2.2 of
this Agreement [,and, in the event of the Tenant's failure to do so, to require
Kmart to purchase the Note or Notes pursuant to Section 2.2 of this Agreement].
"Put Notice" means the notice given by the Lender or the
Trustee pursuant to Section 2.2(c) of its election to exercise the Put.
["Rating Agency" and "Rating Agencies" mean Moody's and S&P and,
if either Moody's or S&P (but not both) ceases to rate the indebtedness of
corporations generally, or unsubordinated, senior, unsecured indebtedness of
Kmart in particular, then another comparable rating agency of recognized
national standing in the United States.]
["Rating Decline" means that:
(i) the rating assigned to unsubordinated, senior,
unsecured indebtedness of Kmart on such date by either Moody's or S&P: (a)
declines to a rating below the Minimum Investment Grade, or (b) further
declines, in the event then rated below the Minimum Investment Grade; or
(ii) (a) unsubordinated, senior, unsecured indebtedness
of Kmart ceases to be rated by either Moody's or S&P (other than by reason of
such Rating Agency ceasing to rate the indebtedness of corporations generally)
at such time as the rating then assigned by the remaining such Rating Agency
shall be below Minimum Investment Grade or (b) unsubordinated, senior,
unsecured indebtedness of Kmart ceases to be rated by either Moody's or S&P at
such time as the rating then assigned by the remaining such Rating Agency shall
be at least the Minimum Investment Grade and Kmart is unable to have such debt
rated by another Rating Agency within ninety (90) days thereafter; or
(iii) unsubordinated, senior, unsecured indebtedness of
Kmart ceases to be rated by both Moody's and S&P for any reason (except if,
through no fault of Kmart, both Moody's and S&P are unable to provide a rating
due to a business failure or interruption affecting both Moody's and S&P).
For purposes of determining whether a Rating Decline shall have occurred
pursuant to clause (i) after the occurrence of an event described in clause
(ii), the rating initially assigned by any Rating Agency engaged by Kmart
pursuant to clause (ii) to replace any rating withdrawn or otherwise terminated
by Moody's or S&P shall be compared to the last rating assigned by Moody's or
S&P, as the case may be, to determine if the circumstances described in (i)(a)
or (b) exist.]
"Reinvestment Yield" means with respect to the Called Principal,
the sum of (x) the yield to maturity implied by the following: (i) the yields
reported as of 10:00 a.m. (New York City time) on the third Business Day
preceding the Purchase Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Service (or such other display
as may replace Page 678 on the Telerate Service) for actively traded U.S.
Treasury securities having a maturity equal (as near as practicable) to the
Remaining Average Life of the Called Principal being paid or prepaid as of such
Purchase Date, or (ii) if such yields shall not be reported as of such time or
the yields reported as of such time shall not be ascertainable, the Treasury
Constant Maturity Series yields reported, for the latest day for which such
yields shall have been so reported as of the third Business Day preceding the
Purchase Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity equal (as
near as practicable) to the Remaining Average Life of the Called Principal
being paid or prepaid as of such Purchase Date, and (y) fifty (50) basis
points. Such implied yield shall be determined, if necessary, by (a)
converting U.S. Treasury bill quotations to bond-equivalent yields in
accordance with accepted financial practice and (b) interpolating linearly
between reported yields.
"Remaining Average Life" means, with respect to Called Principal
of [the] [a] Note, the number of years (calculated
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<PAGE> 5
to the nearest one-twelfth year) obtained by dividing (i) such Called Principal
into (ii) the sum of the products obtained by multiplying (a) each Remaining
Scheduled Payment of such Called Principal (but not of the interest thereon) by
(b) the number of years (calculated to the nearest one-twelfth year) which will
elapse between the Purchase Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to Called
Principal, all payments of such Called Principal and interest thereon that
would be due on or after the Purchase Date with respect to such Called
Principal if no payment of such Called Principal were made prior to the
[applicable] Maturity Date.
["Restructuring" means (i) any consolidation with or merger into
another corporation by Kmart, or the conveyance, transfer, lease or other
disposal by Kmart of all or substantially all of its assets to another Person,
or consolidation with or merger into Kmart by any corporation, or the sale or
exchange of shares of stock of Kmart for cash or shares of stock or other
securities of any other Person pursuant to a transaction in which a majority of
all classes of voting stock of Kmart is changed into or exchanged for cash,
securities, or other property, (ii) a recapitalization, including any special
dividend and any other extraordinary distribution of assets or obligations of
Kmart or any of its subsidiaries to shareholders or Kmart in an amount
aggregating during any twelve-month period, 25% or more of shareholder's equity
or (iii) any repurchase by Kmart or any of its subsidiaries of 25% or more of
Kmart's outstanding common stock during any twelve-month period.]
["Restructuring Event" means the consummation of a
Restructuring which results in a downgrading of Kmart's unsubordinated, senior,
unsecured debt to a credit rating of less than BB- by S&P or Ba3 by Moody's,
or the equivalent, or, if S&P and Moody's are no longer doing business, by a
comparable nationally recognized rating agency approved by the
Certificateholders.]
"S&P" means Standard & Poor's Corporation, or any successor
thereto.
["Tenant Default Notice" means the notice given by Lender or the
trustee to Kmart and Tenant in the event Tenant fails to purchase the Note on
the tenant Purchase Date.]
["Termination Notice" shall have the meaning assigned in Section
5(b) of the Lease Guaranty.]
"Tenant Purchase Date" means the Business Day first occurring
fifteen (15) Business Days after Lender or the Trustee gives the Put Notice to
[Kmart and] Tenant.
"Triggering Event" means (i) a Lease [/Lease Guaranty] Default,
[or] (ii) a Failure of Completion [or] (iii) a Lease Guaranty Termination
(iv) a Rating Decline or (v) Restructuring Event].
"Trust Agreement" shall have the meaning assigned to it in the
Loan Agreement.
"Trustee" shall have the meaning assigned in Section 3.2.
2.2 Purchase of Note Following a Triggering Event.
(a) If a Triggering Event occurs, Trustee will have the right
to require Tenant to purchase the Note or Notes in whole but not in part on
the Tenant Purchase Date at the Purchase Price [and, in the event of the
Tenant's failure to do so, the right to require Kmart to purchase the Note or
Notes in whole but not in part on the Kmart Purchase Date at the Purchase
Price].
(b) If a Triggering Event occurs without a purchase of the Note
or Notes pursuant to Section 2.2(a), and subsequent to such Triggering Event
another Triggering Event occurs, Lender will again have the rights, and Tenant
[and Kmart] again will have the obligations, set forth in this Section 2.2.
[Kmart's and] Tenant's obligations shall continue pursuant to this Agreement so
long as the Note or Notes remain[s] outstanding.
(c) In the event Trustee elects to exercise the Put, Lender or
Trustee shall do so by causing a notice to be mailed to Kmart and Tenant ("Put
Notice"), which Put Notice shall state (i) the occurrence of a Triggering
Event, (ii) the Tenant Purchase Date, (iii) the estimated Purchase Price, (iv)
the manner in which the Purchase Price has been determined, and (v) that Lender
elects to have Tenant purchase the Note or Notes on the Tenant Purchase Date
[or, in the event of Tenant's failure to do so, to have Kmart purchase the Note
on the Kmart Purchase Date.] Upon receipt of the Put Notice, Tenant shall
purchase the Note or Notes in accordance
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<PAGE> 6
with the provisions of this Agreement on the Tenant Purchase Date [and, in the
event the Tenant fails to purchase the Note or Notes as required by this
Agreement, upon receipt of the Tenant Default Notice Kmart shall purchase the
Note or Notes on the Kmart Purchase Date in accordance with the provisions of
this Agreement.] Tenant [or Kmart] shall not be excused from any obligation
either may have under this Agreement by reason of any notice required hereunder
not being timely given or being defective, provided, however, [Kmart's and]
Tenant's time for performance shall be extended by a period equal to any
period of delay in receiving such notice or caused by the correction of such
notice, if defective.
(d) In connection with the purchase of the Note or Notes
pursuant to this Section 2.2, (i) Lender or [the Series A Pass-Through Trustee
or the Series B Pass-Through] Trustee, as appropriate, shall, on or before the
Tenant Purchase Date, duly endorse the Note or Notes in blank without recourse
or assign the Note or Notes in blank without recourse and assign in blank
without recourse all right, title and interest of Lender under the Loan
Documents; and (ii) Tenant shall on or before 2:00 p.m. (New York City time)
on the Tenant Purchase Date, [or, in the event of Tenant's failure to do so,
Kmart shall, on or before 2:00 p.m. (New York City time) on the Kmart Purchase
Date,] pay the Purchase Price to Trustee, by wire transfer of immediately
available funds in lawful currency of the United States of America at
___________, ABA #__________ for credit to Account Number __________ (Mortgage
Pass-Through Certificates (___________________________) Series ____). The
Trustee shall hold the Note or Notes until payment in full of the Purchase
Price to the Trustee and shall then and thereupon surrender the Note or Notes,
the Loan Documents and the assignments thereof to [whichever of] Tenant [or
Kmart is the purchaser] ("Purchaser") and has paid such Purchase Price. In
addition, Trustee [and the Pass-Through Trustees] shall execute and deliver to
the Tenant, on or before the Tenant Purchase Date, [or to Kmart, if Kmart is the
Purchaser, on or before the Kmart Purchase Date], such other documents as may be
reasonably required by the Purchaser and/or the Title Company in order to
permit the Title Company to ensure valid transfer of the interest of the
Trustee [and the Pass-Through Trustees] in the Note and/or the Loan Documents
to the Purchaser as required herein.
[2.3 Purchase of Note Following a Restructuring Event.
Notwithstanding the notice provisions of Section 2.2 hereof, if in the
reasonable opinion of Kmart, but without any express or implied duty to conduct
any inquiry in such regard, a proposed Restructuring will result in a
Restructuring Event, then Kmart will be obligated to purchase the Notes prior
to the consummation of the proposed Restructuring, if such date is known to
and/or within the control of Kmart. If a Restructuring Event does occur,
whether or not Kmart had been of the opinion that the credit downgrade would
occur, then Kmart must provide the Trustee immediately with a notice of the
occurrence of the Restructuring Event, and the Trustee will have the right to
require Kmart to purchase the Notes, whereupon Kmart will be obligated to
purchase the Notes for the Purchase Price as soon as possible but not later
than fifteen (15) Business Days after the exercise of the Put on the same
terms and conditions as provided in Section 2.2, to the extent such terms and
conditions do not conflict with this Section 2.3.]
SECTION 3. SUCCESSORS AND ASSIGNS
3.1 General. This Agreement shall be binding upon [Kmart,] Tenant
and [their] [its] respective successors and assigns; provided that [Kmart and]
Tenant shall not delegate any of [their] [its] respective obligations hereunder
without the prior written consent of Trustee; and, provided further that, no
delegation of any of such obligations hereunder shall relieve [Kmart or] Tenant
thereof, and the party so delegating such obligation shall remain primarily and
originally liable thereon. Each successive holder or holders of the Note[s]
shall have all rights and privileges of [the Pass-Through] Trustee[s] hereunder.
3.2 Consent to Assignment. [Kmart and] Tenant [each] hereby
acknowledges and consents to the sale, conveyance, transfer
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<PAGE> 7
and absolute assignment by Lender of all of its right, title and
interest under this Agreement, [in the Note or Notes] and any and all
Loan Documents to _________________________________ ("Trustee") as Trustee,
pursuant to the [Collateral] Trust Agreement [with respect to this Agreement
and the other Loan Documents] under which the Trustee holds the foregoing for
the benefit of the Pass-through Trustees (as defined below) as holders of the
Notes. [Kmart and] Tenant [each] hereby acknowledges and consents to the sale,
conveyance, transfer and absolute assignment by Lender of all of its right,
title and interest in the Notes to the Pass-Through Trustees pursuant to the
Series A Pass-Through Trust Agreement [and the Series B Pass-Through Trust
Agreement] under which the Mortgage Pass-Through Certificates
(___________________________________________) Series ____ [and Series ___]
("Certificates") will be issued. Upon such sale, conveyance, transfer and
absolute assignment to Trustee [and to the Pass-through Trustees], Trustee
shall be deemed to be Lender hereunder and shall succeed to all rights and
obligations of Lender hereunder. Trustee shall have the sole right to exercise
all rights, privileges and remedies (either in its own name[,] or in the name
of the Lender for the use and benefit of Trustee [or in the name of or for and
on behalf of the Pass-Through Trustees for the use and benefit of such
Pass-Through Trustees.]) which by the terms of this Agreement or by applicable
law are permitted or provided to be exercised by the Lender. [Kmart and] Tenant
[each] further acknowledges and agrees that each successive holder or holders of
the Note or Notes, including but not limited to Lender, accepts transfer of the
Note or Notes in reliance upon [Kmart's and] Tenant's representations,
warranties, covenants, agreements and other obligations hereunder. In order to
further induce any such successive holder or holders of the Note or Notes,
including but not limited to, Lender, to accept such assignment and its
obligations under this Agreement, [Kmart and] Tenant [each] hereby makes the
following representations, warranties, covenants and agreements:
(i) [neither Kmart nor] Tenant has [no] [any] right, including
any claim, counterclaim, right of setoff or deduction or other defense of any
kind (including but not limited to any defenses available to a surety or
guarantor) to withhold performance of its obligations hereunder (collectively,
"Put Defenses"),
(ii) in the event [Kmart or] Tenant becomes aware of any Put
Defenses, [Kmart and] Tenant [each] hereby waives and agrees not to assert the
same against the Trustee, [the Pass-Through Trustees] or any other holder of
the Note[s], provided that nothing herein shall (i) prevent Tenant or Kmart
from asserting, as a Put Defense, that a Triggering event has not occurred, or
that a Trustee has failed to comply with the requirements hereof or of a Trust
Agreement in connection with the exercise of its right hereunder, or that a
Trustee has otherwise violated the provisions hereof or of a Trust Agreement to
the extent such violation constitutes a Put Defense, or (ii) prevent Tenant or
Kmart from contesting a Trustee's computation of the Purchase Price;
(iii) upon consummation of the sale, conveyance, transfer and
absolute assignment to Trustee [and to the Pass-Through Trustees], [Kmart and]
Tenant [each] waives any right to challenge the status of [the Pass-Through]
Trustee[s] as [a] bonafide purchaser[s] of the Note[s] for value and holder[s]
in due course [or to challenge the status of Trustee as holder of the
Collateral (as defined in the Collateral Trust Agreement), including this
Agreement, in trust for the benefit of the Pass-Through Trustees as holders of
the Notes];
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<PAGE> 8
(iv) the Trustee[, the Pass-Through Trustees] and each holder of
the Note or Notes are and shall be third-party beneficiaries of this Agreement;
(v) upon consummation of the sale, conveyance, transfer and
absolute assignment to Trustee [and the Pass-Through Trustees], Trustee and its
successors and assigns shall be deemed to be the Lender hereunder, and shall
succeed to all rights of Lender hereunder;
(vi) [Kmart and] Tenant [each] hereby acknowledges and agrees
that any and all rights hereunder granted to Trustee may be exercised and
enforced by Trustee, including pursuant to legal process (and that any such
exercise and enforcement by Trustee shall have the same force and effect as
the exercise and enforcement by Lender); and
(vii) no release or discharge of Borrower from any liability of
Borrower pursuant to [the] [a] Note, nor any impairment or modification of any
such liability, in any bankruptcy or insolvency proceeding filed by or against
Borrower nor the waiver by Lender of or the existence of any default by
Borrower under any of the Loan Documents shall diminish or excuse [Kmart or]
Tenant's obligation to pay the Purchase Price pursuant to this Agreement with
respect to an exercise of the Put.
SECTION 4. [KMART'S] [TENANT'S] REPRESENTATIONS AND WARRANTIES.
4.1 [Kmart's] [Tenant's] Representations and Warranties. [Kmart]
[Tenant] represents and warrants that (i) it is a corporation duly organized,
validly existing and in good standing under the laws of the State of Michigan
and is duly qualified and in good standing as a foreign corporation authorized
to do business in the state in which the Demised Premises are located, (ii) it
has full power, authority and legal right to execute and deliver, and to
perform and observe the provisions of the [Lease Guaranty,] [the Indemnity
Agreement,] the Consent and Agreement, this Agreement and any other document
relating to the Loan or the Lease executed by [Kmart] [Tenant], (iii) there has
been no material adverse change in the business or condition, financial or
otherwise, of [Kmart] [Tenant] since the date of [Kmart's] [Tenant's] last
audited financial report, (iv) there are no actions, proceedings or
investigations pending or threatened against or affecting [Kmart] [Tenant] (or
any basis therefor known to [Kmart] [Tenant] before any court, arbitrator,
administrative agency or other governmental authority, which if adversely
decided would materially and adversely affect the financial condition or
operations of [Kmart] [Tenant], or its ability to carry out any of the terms,
covenants and conditions of the Lease, [the Lease Guaranty, the Indemnity
Agreement], the Consent and Agreement, this Agreement or any other document
relating to the Loan or the Lease (executed by [Kmart or] Tenant), (v) the
execution and delivery by [Kmart] [Tenant] of the Lease [Guaranty,] the Consent
and Agreement, this Agreement, or any of the other documents relating to the
Loan or the Lease (executed by [Kmart or] Tenant) have been duly authorized by
all necessary corporate action and each is enforceable in accordance with its
terms, (vi) neither the execution and delivery of the Lease
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<PAGE> 9
[Guaranty], the Consent and Agreement, this Agreement or any other
document relating to the Loan or the Lease (executed by [Kmart or] Tenant), nor
compliance with the terms and provisions thereof, conflicts or will conflict
with or result in a breach of any of the terms, conditions or provisions of the
Articles of Incorporation or Bylaws of [Kmart] [Tenant], or of any law,
rule, regulation, order, writ, injunction, judgment or decree of any court,
arbitration or administering agency or governmental authority, or of any
agreement or other instrument to which [Kmart] [Tenant] is a party or by which
it or its assets is bound or subject, or constitutes or will constitute a
default thereunder, and (vii) [Kmart] [Tenant] is not in default under any
judgment, order, decree, rule or regulation of any court, arbitrator,
administrative agency or other governmental authority to which it may be
subject.
4.2 [Tenant's Representations and Warranties. The Tenant
represents and warrants that (i) it is a corporation duly organized, validly
existing and in good standing under the laws of the State of ____________ and
is duly qualified and in good standing as a foreign corporation authorized to
do business in the state in which the Demised Premises are located, (ii) it has
full power, authority and legal right to execute and deliver, and to perform
and observe the provisions of the Lease, the Consent and Agreement, this
Agreement or any other document relating to the Loan or the Lease (executed by
Tenant) (iii) there has been no material adverse change in the business or
condition, financial or otherwise, of the Tenant since the date of Tenant's
last audited financial report, (iv) there are no actions, proceedings or
investigations pending or threatened against or affecting the Tenant (or any
basis therefor actually known to the Tenant) before any court, arbitrator,
administrative agency or other governmental authority, which if adversely
decided would materially and adversely affect the financial condition or
operations of the Tenant, or its ability to carry out any of the terms,
covenants and conditions of the Lease, the Consent and Agreement, this
Agreement or any other document relating to the Loan or the Lease (executed by
Tenant), (v) the execution and delivery by the Tenant of the Lease, the
Consent and Agreement, this Agreement or any other document relating to the
Loan or the Lease (executed by Tenant) have been duly authorized by all
necessary corporate action and each is enforceable in accordance with its
terms, (vi) neither the execution and delivery of the Lease, the Consent and
Agreement, this Agreement or any other document relating to the Loan or the
Lease (executed by Tenant) nor compliance with the terms and provisions
thereof, conflicts or will conflict with or result in a breach of any of the
terms, conditions or provisions of the Certificate of Incorporation or By-Laws
of the Tenant, or of any law, order, writ, injunction or decree of any court
or governmental authority, or of any agreement or other instrument to which the
Tenant is a party or by which it is bound, or constitutes or will constitute a
default thereunder, and (vii) the Tenant is not in default under any
judgment, order, decree, rule or regulation of any court, arbitrator,
administrative agency or other governmental authority to which it may be
subject.] [Intentionally Omitted.]
9
<PAGE> 10
SECTION 5. GENERAL
5.1 Counterparts. This Agreement may be executed in counterparts by
the parties but all such counterparts together shall constitute one and the
same document.
5.2 Notices. All notices, requests, demands or other communications
pursuant to this Agreement shall be in writing and shall be deemed to be
properly served on receipt thereof if personally delivered, sent by certified
or registered mail (postage prepaid, return receipt requested) addressed, in
the case of [Kmart] [Tenant], to Kmart, 3100 West Big Beaver Road, Troy,
Michigan 48084-3163, Attention: Senior Vice President, Real Estate Department;
[in the case of Tenant, to Tenant, _____________________________,
Attention:______________;] in the case of Lender, to National Tenant Finance
Corporation, 40 N. Central Avenue, Suite 2700, Phoenix, Arizona 85004
Attention: Norman C. Storey; in the case of Trustee, which shall receive
copies of all communications hereunder, to United States Trust Company of New
York, c/o U.S. Trust Company of California, N.A., Suite 2700, 555 South Flower
Street, Los Angeles, California 90071, Attention: Corporate Trust Division; or
to such other address as any party may designate in writing. The date of
notice shall be the date of receipt of notice or the date of attempted delivery
of the notice by the overnight courier service or the U.S. Postal Service to
the addressee or its agent at the address specified.
5.3 Section Headings. Section headings are not to be considered a
part of this Agreement and are included solely for convenience of reference and
are not intended to be full or accurate descriptions of the contents thereof.
5.4 Applicable Law. This Agreement shall be construed and enforced
under the laws of the State of New York without giving effect to the choice of
law principles thereof.
5.5 Severability. Should any provision of this Agreement for any
reason be declared unenforceable by a court of competent jurisdiction
(sustained on appeal, if any), such unenforceability shall not affect the
enforceability of any other provision hereof or thereof, all of which shall
remain in force and effect as if this Agreement had been executed with the
unenforceable provisions thereof eliminated and it is hereby declared the
intention of the parties hereto that they would have executed the remaining
provision of this Agreement without including therein any such part, parts or
portion which may for any reason be hereafter declared unenforceable, provided
that, if any provision of this Agreement shall be unenforceable by reason of a
final judgment of a court of competent jurisdiction based on a court's ruling
(sustained on appeal, if any) that such provision is unenforceable because of
the excessive degree of magnitude of the obligation imposed thereby on any
party, that unenforceable obligation shall be reduced in magnitude or degree by
the minimum degree or magnitude necessary in order to permit the provision to
be enforceable by Lender. In the event the provisions of the immediately
preceding sentence apply, the parties shall make
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<PAGE> 11
appropriate adjustment to the provisions of this Agreement to give effect to
the benefits intended to be conferred upon the parties hereby.
5.6 Waiver. No delay or omission by Lender or Trustee in exercising
any right hereunder shall impair any right of such party under this Agreement
or be construed as such party's waiver of or acquiescence in any breach. No
such delay or omission by a party shall be construed as a variation or waiver
of any of the terms, conditions or provisions of this Agreement. No purported
waiver of any right of a party hereunder shall be effective unless it is
written and signed by an authorized representative of a such party. No waiver
by a party of any breach shall constitute a waiver of any other prior or
subsequent breach or of the same breach after notice to a party demanding
strict performance. A party shall not be estopped to take or from taking any
action with respect to any breach because of any delay by a party in giving
notice of such breach or exercising any remedy based thereon.
5.7 Submission to Jurisdiction. Lender, Trustee, [Kmart] and Tenant
each hereby consents to the jurisdiction of any state or federal court located
within the County of New York, State of New York and irrevocably agrees that
all actions or proceedings relating to this Agreement may be litigated in such
courts and [Kmart and] Tenant each waives any objection which it may have based
on improper venue or forum nonconveniens to the conduct of any proceeding in
any such court, waives personal service of any and all process upon it, and
consents that all such service or process be made by registered or certified
mail (return receipt requested) or messengered to it at its address set forth
in Section 5.2 or to its Agent referred to below at such Agent's address set
forth below, and, that service so made shall be deemed to be completed in
accordance with Section 5.2. [Kmart and] Tenant [each] hereby appoints CT
Corporation System, Inc. with an office on the date hereof at
_____________________________ as its Agent for the purpose of accepting service
of any process within the State of New York. Upon Lender's or Trustee's
request [Kmart and] Tenant shall each take any action reasonably necessary to
confirm such appointment of Agent. Nothing contained in this Section shall
affect the right of Lender to serve legal process in any other manner permitted
by law, to bring any action or proceeding in the courts of any jurisdiction
against Kmart, or to enforce a judgment obtained in the courts of any other
jurisdiction.
5.8 Amendments. This Agreement may be amended or modified only
with the written consent of all parties hereto or, if applicable, their
successors and assigns.
5.9 Expenses. [Kmart and] Tenant shall pay or cause to be paid and
save the Lender and Trustee harmless against liability for the payment of
reasonable out-of-pocket expenses, including counsel fees and disbursements,
incurred or paid by the Lender or Trustee in connection with (i) any
amendments, waivers or consents pursuant
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<PAGE> 12
to the provisions hereof and thereof; or (ii) the enforcement of this
Agreement.
5.10 Further Assurances. Lender, in favor of Tenant [or Kmart],
shall, after the execution of this Agreement, at the request of Tenant [or
Kmart], execute, acknowledge and deliver such other documents or instruments and
take any other or further acts as may be reasonably required to evidence or
confirm the transaction contemplated hereby or as may otherwise be necessary to
carry out or to fulfill Lender's covenants and obligations hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above set forth.
[KMART CORPORATION,
a Michigan corporation
By:
--------------------------------
Its:
---------------------------
(KMART)]
------------------------------------,
a corporation
------------------
By:
--------------------------------
Its:
---------------------------,
(TENANT)
NATIONAL TENANT FINANCE CORPORATION,
a Delaware corporation
By:
-------------------------------
Its:
--------------------------,
(LENDER)
12
<PAGE> 1
KMART CORPORATION AND SUBSIDIARY COMPANIES
EXHIBIT 12 - INFORMATION ON RATIO OF EARNINGS
TO FIXED CHARGES COMPUTATION
Restated to exclude discontinued operations
<TABLE>
<CAPTION>
Fiscal Year Ended Trailing 52 Weeks Ended
----------------------------------------- --------------------------
January 29, January 27, January 26, July 27, July 28,
(Millions) 1992 1993 1994 1994 1993
----------- ------------ ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Pre-tax income from continuing
operations (1) $1,189 $1,327 $(550) $ (642) $1,191
Equity income of unconsolidated affiliated
retail companies that exceeds distributions (26) (12) (20) (28) (22)
Fixed charges per below 582 664 763 761 778
Less interest capitalized during the period (10) (14) (11) (11) (20)
------ ------ ----- ------ ------
Earnings from continuing operations 1,735 1,965 182 80 1,927
====== ====== ===== ====== ======
Fixed Charges:
Interest expense 398 442 490 489 513
Rent expense - portion of operating rentals
representative of the interest factor 172 206 260 259 249
Other 12 16 13 13 16
------ ------ ----- ------ ------
582 664 763 761 778
====== ====== ===== ====== ======
Ratio of earnings to fixed charges (2) 3.0 3.0 N/A N/A $ 2.48
====== ====== ===== ====== ======
</TABLE>
(1) Pre-tax income from continuing operations for 1993 includes a pre-tax
provision of $1,348 million for store restructuring and other charges.
(2) The deficiency of income from continuing retail operations versus fixed
charges was $581 million for the fiscal year ended January 26, 1994 and $681
million for the 52 weeks ended July 27, 1994.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 4 to the Registration Statement on
Form S-3 of our report dated March 15, 1994, which appears on Annex V page
V-21 of Kmart Corporation's definitive Proxy Statement dated April 28, 1994,
which is incorporated by reference in Kmart Corporation's Annual Report on Form
10-K for the year ended January 26, 1994. We also consent to the incorporation
by reference of our report on the Financial Statement Schedules, which appears
on page 11 of such Annual Report on Form 10-K. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Price Waterhouse
Detroit, Michigan 48243
October 31, 1994
