<PAGE> 1
As filed with the Securities and Exchange Commission on April 4, 1995
Registration No. 33-56465
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
KMART CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
MICHIGAN 38-0729500
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
</TABLE>
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:
<TABLE>
<S> <C>
Verne C. Hampton, II Robert E. Buckholz, Jr.
Dickinson, Wright, Moon, Arthur S. Adler
Van Dusen & Freeman Sullivan & Cromwell
500 Woodward Avenue, Suite 4000 125 Broad Street
Detroit, Michigan 48226 New York, New York 10004
</TABLE>
------------------------
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. / /
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
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 BE 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 APRIL 4, 1995
$155,000,000
KMART CORPORATION
PASS THROUGH TRUSTS
PASS THROUGH CERTIFICATES 1995-K-1
PASS THROUGH CERTIFICATES 1995-K-2
---------------------
Each Certificate offered hereby will evidence an undivided interest in one
of two separate Kmart Pass Through Trusts to be formed pursuant to separate
trust agreements between Kmart and The Bank of New York Trust Company of
Florida, National Association, as trustee of Pass Through Trust 1995-K-1, and
The Bank of New York Trust Company of California, as trustee of Pass Through
Trust 1995-K-2. The Trust Property of each Pass Through Trust will consist of
Mortgage Notes issued as non-recourse obligations of separate Owner Trusts (as
defined herein) to finance the Sale-Leaseback Transactions described herein.
Each Mortgage Note will be secured by (i) an assignment of certain of the
related Owner Trust's rights as lessor under one of the Leases described herein,
including the right to receive rentals and certain other payments from Kmart,
and (ii) a first mortgage on the Property acquired by the related Owner Trust
and leased to Kmart, subject to the rights of Kmart under the related Lease, as
described more fully herein. See "Description of the Mortgage Notes". Each
Certificate will evidence a fractional undivided interest in the related Pass
Through Trust and will have no rights, benefits or interest in respect of the
other Pass Through Trust or the Trust Property held in the other Pass Through
Trust.
The Mortgage Notes issued in respect of each Property will be issued in two
series by the related Owner Trust. Each Pass Through Trust will purchase
Mortgage Notes having the same maturity date and having an interest rate
corresponding to the interest rate on the Certificates evidencing interests in
such Pass Through Trust. The maturity date of the Mortgage Notes acquired by
each Pass Through Trust will correspond to the final scheduled distribution date
for the Certificates evidencing interests in such Pass Through Trust.
(Cover page continued on following page.)
---------------------
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.
---------------------
<TABLE>
<CAPTION>
INITIAL SCHEDULED FINAL SCHEDULED INITIAL PUBLIC
PRINCIPAL INTEREST PRINCIPAL PRINCIPAL OFFERING
PASS THROUGH TRUST AMOUNT RATE DISTRIBUTION DATE DISTRIBUTION DATE PRICE(1)(2)
- ----------------------------- ------------ -------- ----------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
1995-K-1..................... $ % 100%
1995-K-2..................... 100
------------
Total................... $155,000,000
</TABLE>
- ---------------
(1) Plus accrued interest, if any, at the applicable rate from April , 1995.
(2) The underwriting commission varies by Pass Through Trust and aggregates
$ , which constitutes 0. % of the initial principal amount of the
Certificates. The underwriting commission and certain other expenses
relating to the offering, estimated at $ , will be paid by Kmart
(other than certain expenses to be paid by the Owner Trusts). All of the
proceeds from the sale of the Certificates will be used to purchase the
Mortgage Notes from the Owner Trusts. Kmart has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
---------------------
The Certificates are offered severally by the Underwriters, as specified
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that certificates will be
ready for delivery in book-entry form only through the facilities of The
Depository Trust Company on or about April , 1995, against payment therefor in
immediately available funds.
GOLDMAN, SACHS & CO. MORGAN STANLEY & CO.
INCORPORATED
---------------------
The date of this Prospectus is April , 1995.
<PAGE> 3
(Cover page continued)
Neither the Certificates nor the Mortgage Notes are direct obligations of
or guaranteed by Kmart (except to the extent that it may assume the obligations
of the related Owner Trust under any of the Mortgage Notes). The amounts
unconditionally payable by Kmart under the Leases, however, will be sufficient
to pay in full, when due, all payments required to be made on the Mortgage Notes
held in each Pass Through Trust, except upon certain optional redemptions which
require the related Owner Trust to deposit an amount sufficient to pay the
Redemption Price and Make-Whole Premium with the Corporate Indenture Trustee.
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 January 5
and July 5 of each year, commencing July 5, 1995, at the rate per annum set
forth on the cover page hereof for such Pass Through Trust until the final
distribution date for such Pass Through Trust. Scheduled payments of principal
on the Mortgage Notes held in each Pass Through Trust will be passed through to
the Certificateholders of such Pass Through Trust in the amounts and on the
dates described herein, commencing on the date specified on the cover page
hereof, unless such Mortgage Notes are earlier redeemed, until the final
distribution date for such Pass Through Trust. Any such redemption will be at a
redemption price equal to the unpaid principal amount thereof or the portion
thereof to be redeemed, plus accrued interest thereon and, in certain
circumstances, the Make-Whole Premium, if any. Because the Mortgage Notes are
subject to optional redemption under certain circumstances, the final
distribution date for the Certificates evidencing interests in a Pass Through
Trust may occur significantly earlier than the applicable date specified on the
cover page hereof. See "Description of the Mortgage Notes -- Redemption".
The Certificates will be represented by global certificates registered in
the name of The Depository Trust Company's nominee. Interests in the global
certificates will be shown in, and transfers thereof will be effected only
through, records maintained by The Depository Trust Company and its
participants. Except as provided herein, Certificates in definitive form will
not be issued. The Certificates will trade in The Depository Trust Company's
Same-Day Funds Settlement System until maturity, and secondary market activity
for the Certificates will therefore settle in immediately available funds. See
"Description of the Certificates".
---------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING MAY BE EFFECTED IN THE OPEN MARKET OR OTHERWISE, AND IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 4
AVAILABLE INFORMATION
Kmart Corporation ("Kmart" or the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934 (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 Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661 and 7 World Trade Center, 13th Floor, New York, NY 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington D.C. 20549, 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. Reports, proxy statements and other
information can be inspected and copied at the New York Stock Exchange, 20 Broad
Street, New York, NY 10005 and the Pacific Stock Exchange, 301 Pine Street, San
Francisco, CA 94104.
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. For further information, reference is hereby made to the
Registration Statement. 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 BY THE TRUSTEE
Unless and until Definitive Certificates are issued, The Bank of New York
Trust Company of Florida, National Association, as trustee of Pass Through Trust
1995-K-1, and The Bank of New York Trust Company of California, as trustee of
Pass Through Trust 1995-K-2, will send to Cede & Co., the nominee of The
Depository Trust Company, as registered holder of the Certificates, certain
periodic statements concerning distributions made with respect to the Pass
Through Trusts. See "Description of the Certificates -- Book-Entry Registration"
and "-- Reports to Certificateholders".
---------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-00327)
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
January 26, 1994;
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
April 27, 1994, July 27, 1994 and October 26, 1994;
3. The Company's Current Reports on Form 8-K filed June 8, 1994, August 19,
1994 and December 6, 1994; and
4. All other documents filed by the Company pursuant to Section 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 this Prospectus, or
in any other subsequently filed document which is also, or is deemed to be,
incorporated by reference, modifies or replaces such statement. Any such
3
<PAGE> 5
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 documents) of any
or all documents incorporated by reference in this Prospectus. Requests for such
copies should be addressed to the Corporate Reporting Department, Kmart
Corporation, 3100 West Big Beaver Road, Troy, MI 48084 (telephone no. (810)
643-1093).
4
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information contained elsewhere in, or incorporated by reference in,
this Prospectus. Certain capitalized terms used in this summary are defined
elsewhere in this Prospectus or in the Glossary of Terms.
THE COMPANY
Kmart is one of the world's largest mass merchandise retailers and operates
stores in each of the 50 states, Puerto Rico, Canada, the Czech Republic and
Slovakia and has entered into joint ventures in Mexico and Singapore. See "The
Company".
THE CERTIFICATES
PASS THROUGH TRUSTS........... Each of the two Kmart Pass Through Trusts
("Pass Through Trust 1995-K-1" and "Pass
Through Trust 1995-K-2," respectively, and,
each individually a "Pass Through Trust" and
collectively, the "Pass Through Trusts") is to
be formed pursuant to one of two Pass Through
Trust Agreements (the "Agreements") between
Kmart and The Bank of New York Trust Company of
Florida, National Association, as trustee of
Pass Through Trust 1995-K-1, and The Bank of
New York Trust Company of California, as
trustee of Pass Through Trust 1995-K-2 (each
individually a "Trustee" and collectively, the
"Trustees"). Each Pass Through Trust will be a
separate entity.
TRUST PROPERTY................ The property of each of the Pass Through Trusts
(the "Trust Property") will consist of mortgage
notes (the "Mortgage Notes") issued on a
nonrecourse basis by separate Owner Trusts
(collectively, the "Owner Trusts") to finance
the sale-leaseback and other similar
transactions described herein (collectively,
the "Sale-Leaseback Transactions"). Each Pass
Through Trust will acquire Mortgage Notes
having the same maturity date as, and an
interest rate corresponding to the interest
rate on, the Certificates evidencing interests
in such Pass Through Trust. The maturity date
of the Mortgage Notes acquired by each Pass
Through Trust will correspond to the final
scheduled distribution date applicable to the
Certificates evidencing interests in such Pass
Through Trust. The aggregate principal amount
of the Mortgage Notes held in each Pass Through
Trust will be the same as the aggregate
principal amount of the Certificates evidencing
interests in such Pass Through Trust. See
"Structure of the Transaction," "Description of
the Certificates -- General" and "Description
of the Mortgage Notes -- Security".
BOOK-ENTRY REGISTRATION....... The Certificates will be issued in fully
registered form only. 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 "Certificate Owner") will be
entitled to receive a Definitive Certificate
representing such person's interest in the
related Pass Through Trust, except in the event
that Definitive
5
<PAGE> 7
Certificates are issued under the limited
circumstances described herein. See
"Description of the Certificates -- General,"
"-- Book-Entry Registration" and "-- Definitive
Certificates".
DENOMINATIONS................. The Certificates will be issued in minimum
denominations of $1,000 initial principal
amount and integral multiples of $1,000 in
excess thereof. The denomination of each
Certificate signifies a Certificate Owner's pro
rata share of the aggregate principal amount of
the Mortgage Notes held in the related Pass
Through Trust. See "Description of the
Certificates".
REGULAR DISTRIBUTION DATES.... January 5 and July 5, commencing July 5, 1995.
SPECIAL DISTRIBUTION DATES.... The fifth day of any month.
RECORD DATES.................. The fifteenth day preceding a Regular
Distribution Date or a Special Distribution
Date.
DISTRIBUTIONS................. All payments of principal, premium, if any, and
interest received by the Trustee on the
Mortgage Notes held in a Pass Through Trust
will be distributed by the Trustee to the
holders of Certificates evidencing interests in
such Pass Through Trust on the dates referred
to below, except in certain cases where such
Mortgage Notes have been redeemed or are in
default. Scheduled payments of interest and
principal on the Mortgage Notes held in each
Pass Through Trust are due in specified amounts
on January 5 and July 5 commencing, in the case
of interest, on July 5, 1995 and, in the case
of principal, on the applicable Initial
Scheduled Principal Distribution Date set forth
on the cover page hereof, and will be
distributed to the holders of Certificates
evidencing interests in such Pass Through Trust
on the corresponding Regular Distribution Date.
Interest paid on the Mortgage Notes will be
passed through as interest on the Certificates
at the applicable rate per annum indicated on
the cover page hereof, which will be equal to
the interest rate borne by the Mortgage Notes
held in the related Pass Through Trust.
Interest on the Mortgage Notes will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months. See
"Description of the Certificates -- General".
Payments of principal, premium, if any, and
interest on the Mortgage Notes held in each
Pass Through Trust resulting from any
redemption thereof, or from actions taken in
connection with an Indenture Default, will be
distributed on a Special Distribution Date,
upon not less than 20 days' notice from the
Trustee to the holders of the related
Certificates. See "Description of the
Certificates -- Events of Default and Certain
Rights Upon an Event of Default" and
"Description of the Mortgage Notes --
Redemption".
METHOD OF DISTRIBUTIONS....... So long as the Certificates are registered in
the name of Cede as nominee of DTC,
distributions by the Trustee with respect to a
Pass Through Trust will be made in same day
funds to DTC, which will in turn make
distributions to
6
<PAGE> 8
participants in DTC ("DTC Participants")
holding positions in the Certificates
evidencing interests in such Pass Through Trust
in clearing-house or next-day funds. The final
distribution of principal with respect to the
Certificates evidencing interests in a Pass
Through Trust will be made by DTC to DTC
Participants in same day funds. Distributions
by DTC Participants to Certificate Owners will
be the responsibility of such DTC Participants
and will be made in accordance with customary
industry practices. See "Description of the
Certificates -- Payments and Distributions". At
such time, if any, as Definitive Certificates
are issued, distributions by the Trustee to
Certificateholders, other than the final
distribution, will be made by check mailed to
each Certificateholder of record on the
applicable record date at its address appearing
on the register. The final distribution with
respect to the Certificates evidencing
interests in a Pass Through Trust will be made
only upon surrender and presentation thereof at
the office or agency of the Trustee of such
Pass Through Trust. See "Description of the
Certificates -- Payments and Distributions".
THE MORTGAGE NOTES
INTEREST PAYMENTS............. Interest will be payable on the Mortgage Notes
on the unpaid principal amount thereof on
January 5 and July 5 in each year commencing
July 5, 1995.
SCHEDULED PRINCIPAL
PAYMENTS...................... Principal on the Mortgage Notes held in each
Pass Through Trust will be payable in scheduled
amounts, commencing on the applicable Initial
Scheduled Principal Distribution Date set forth
on the cover page hereof in accordance with the
principal repayment schedule set forth herein
under "Description of the Mortgage Notes --
Principal Payments".
REDEMPTION.................... Each Owner Trust, with the consent of Kmart,
may redeem all of the Mortgage Notes issued by
it, or all Owner Trusts, with the consent of
Kmart, may redeem all of the Mortgage Notes
held in either or both of the Pass Through
Trusts, in either case, on any Special
Distribution Date, at a redemption price equal
to the unpaid principal amount thereof,
together with accrued interest thereon to the
date of the redemption, plus the applicable
Make-Whole Premium, if any, calculated in the
manner described herein. See "Description of
the Mortgage Notes -- Redemption -- Optional
Redemption".
The Mortgage Notes relating to a Property will
also be subject to redemption, in whole, in the
event that (a) on or after the fifth
anniversary of the commencement of the base
term of the Lease, the Property has become
obsolete, no longer economic for Kmart's use or
surplus to Kmart's requirements, and Kmart
exercises its right to terminate the Lease with
respect to such Property (the "Termination
Right"); (b) any Owner Participant becomes a
competitor of Kmart during the term of the
Lease and the related Owner
7
<PAGE> 9
Trust's interest in the Property is transferred
to Kmart or a third party (the "Competitor
Option"); or (c) an Event of Loss occurs with
respect to such Property. Each such redemption
will be at a price equal to the unpaid
principal amount of such Mortgage Note and
accrued interest thereon, together with, in the
case of redemption described in clauses (a) and
(b) above, the applicable Make-Whole Premium,
but without premium or other prepayment penalty
of any kind in the case of a redemption
described in clause (c) above. In addition, a
redemption of the Mortgage Notes described in
clause (a) or (b) above will be subject to the
right of Kmart to assume, on a full recourse
basis, the obligations with respect to the
Mortgage Notes. In addition, a redemption of
the Mortgage Notes described in clause (a) or
(c) above will be subject to the right of Kmart
to substitute a property for the Property in
question (the "Substitution Right").
The Mortgage Notes relating to a Property will
also be subject to redemption, in whole or in
part, at a redemption price equal to the unpaid
principal amount thereof (or the portion
thereof to be redeemed) plus accrued interest
thereon, but without premium, upon the
occurrence of certain condemnations or
casualties, to the extent of any excess
condemnation awards or excess casualty
insurance proceeds.
In addition, the Mortgage Notes issued under
any particular Indenture by the related Owner
Trust will be subject to redemption by such
Owner Trust (except during any period during
which the Company is an Owner Participant or
otherwise controls such Owner Trust), in whole,
but not in part, if under such Indenture a
Lease Event of Default (other than a Lease
Event of Default related to Excepted Payments)
shall have occurred and be continuing; provided
that there is no Indenture Default resulting
other than from such Lease Event of Default.
Such redemption will be at the Redemption Price
plus the Make-Whole Premium if effected prior
to the earlier of acceleration of the
applicable Mortgage Notes or, in the case of a
Lease Event of Default arising from a Monetary
Default, the expiration of a period of 180 days
following the occurrence of such Lease Event of
Default that is continuing at the expiration of
such period. Such redemption will be at the
Redemption Price without premium if effected
after (i) delivery by the Indenture Trustees of
a notice of acceleration of the applicable
Mortgage Notes or (ii) the expiration of a
period of 180 days following the occurrence of
such Lease Event of Default arising from a
Monetary Default.
See "Description of the Mortgage Notes --
Redemption -- Optional Redemption" and "--
Redemption Upon an Event of Loss or Other
Condemnation or Casualty" and "Description of
the Leases -- Condemnation and Casualty" and
"-- Early Termination Rights".
8
<PAGE> 10
SECURITY...................... Two Mortgage Notes will initially be issued by
an Owner Trust under an indenture, mortgage and
deed of trust, assignment of rents and security
agreement (an "Indenture") affecting each
Property. The Mortgage Notes issued with
respect to each corresponding Property will be
secured by (i) an assignment to the Indenture
Trustees of certain of the related Owner
Trust's rights under the Lease with respect to
such Property, including the right to receive
rentals and certain other amounts payable
thereunder by Kmart, (ii) a first mortgage on
the Property acquired by such Owner Trust and
leased to Kmart, subject to the rights of Kmart
under the related Lease, and (iii) the Owner
Trust's rights under the Option (as hereinafter
defined). Upon an Indenture Default, the
Indenture Trustees may exercise their rights
with respect to the related Trust Estate for
the equal and ratable benefit of the Mortgage
Notes issued under or secured by that
Indenture. See "Structure of the Transaction,"
"Description of the Certificates" and
"Description of the Mortgage Notes -- Security"
and "-- Indenture Defaults, Notice and Waiver".
Although the Mortgage Notes are not direct
obligations of, or guaranteed by, Kmart (except
to the extent that Kmart may assume the
obligations of an Owner Trust thereunder, as
described under "Description of the Mortgage
Notes -- Assumption of Obligations by Kmart"),
the amounts unconditionally payable by Kmart
under the Leases will be sufficient to pay in
full when due all payments required to be made
on the Mortgage Notes except upon certain
optional redemptions which require the related
Owner Trust to deposit an amount sufficient to
pay the Redemption Price and Make-Whole Premium
with the Corporate Indenture Trustee. See
"Description of the Mortgage Notes --
Redemption -- Optional Redemption," "--
Redemption -- Make-Whole Premium" and "--
Security". Neither the Trustee, the
Certificateholders nor the Indenture Trustees
will have recourse in respect of the Mortgage
Notes against any Owner Trustee or Owner
Participant. See "Description of the Mortgage
Notes -- General".
USE OF PROCEEDS
The Certificates are being issued in order to facilitate the financing by
each Owner Trust of its purchase of a Property. Proceeds from the sale of the
Certificates will be used by the Trustees to purchase the Mortgage Notes issued
by each Owner Trust, which in turn will use the proceeds to purchase its related
Property. See "Structure of the Transaction".
The net proceeds to be received by the Company from the Sale-Leaseback
Transactions will be used (i) for general corporate purposes and (ii) in the
case of Properties to be conveyed by developers to the related Owner Trust,
primarily to repay loans made to such developers, which funded the construction
and/or acquisition of such Property.
TRUSTEES AND INDENTURE TRUSTEE
The Bank of New York Trust Company of Florida, National Association will
act as trustee for the Certificates evidencing interests in Pass Through Trust
1995-K-1 and The Bank of New York Trust Company of California will act as
trustee for the Certificates evidencing interests in Pass Through
9
<PAGE> 11
Trust 1995-K-2. The Bank of New York will act as the Corporate Indenture Trustee
under the Indentures and as paying agent and registrar for the Certificates
evidencing interests in the Pass Through Trusts.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of counsel to Kmart, each Pass Through Trust will be
classified as a grantor trust for federal income tax purposes, and each holder
of an interest in the Certificates will be treated as the owner of a pro rata
undivided interest in each of the Mortgage Notes and any other property held in
the Pass Through Trust in which the Certificates held by such holder evidence an
interest and will be required to report on its federal income tax return its pro
rata share of income from such Mortgage Notes and other property in accordance
with such holder's method of accounting. See "Certain Federal Income Tax
Consequences".
ERISA CONSIDERATIONS
A fiduciary considering purchasing Certificates for or on behalf of an
employee benefit plan should consider the issues discussed in "ERISA
Considerations".
LEGAL INVESTMENT
Institutions whose investment activities are 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".
10
<PAGE> 12
THE COMPANY
Kmart Corporation ("Kmart" or "Company") is one of the world's largest mass
merchandise retailers. The dominant portion of Kmart's business consists of U.S.
Kmart stores. As of January 25, 1995, Kmart operated 2,316 Kmart discount stores
with locations in each of the 50 United States and Puerto Rico, and Kmart
international operations consisted primarily of 128 Kmart stores in Canada and
13 department stores located in the Czech Republic and Slovakia. As part of its
international expansion strategy, Kmart has entered into joint ventures in
Mexico and Singapore, which, as of January 25, 1995, had opened four stores: two
in Mexico and two in Singapore. Kmart also holds significant equity interests in
OfficeMax, Inc. ("OfficeMax"), The Sports Authority, Inc. ("The Sports
Authority") and substantially all of the Meldisco subsidiaries of Melville
Corporation, which operate the footwear departments in domestic Kmart stores.
As of January 25, 1995, Kmart specialty retail operations consisted of the
Borders Group and Builders Square subsidiaries. Borders Group is the second
largest U.S. operator of book superstores under the Borders name and the largest
U.S. operator of mall-based bookstores under the Waldenbooks name. As of January
25, 1995, Borders Group operated 1,187 bookstores in 50 states and the District
of Columbia. See "-- Recent Developments" for a discussion of an announcement
regarding a potential Borders Group Initial Public Offering ("IPO"). Builders
Square operated 166 home improvement stores at January 25, 1995. 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.
Kmart also holds a significant investment in Thrifty PayLess Holdings, Inc.
("TPH"), an entity which resulted primarily from the combination of Kmart's
former subsidiary PayLess Drug Stores Northwest, Inc. ("PayLess") with Thrifty
Drug Stores after PayLess was sold to TPH in the first quarter of 1994. In the
fiscal 1993 consolidated financial statements, the operations of PayLess were
presented as part of discontinued operations. However, as Kmart's investment in
TPH will extend beyond the period initially planned, the operations of PayLess
have been reclassified as part of continuing operations in fiscal 1993 and
fiscal 1992. Management will continue to actively seek a buyer for this
investment during fiscal 1995 and expects that such disposition will occur
either through a private offering or other alternative means.
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
In November 1994, Kmart completed IPOs for 75% and 70% interests,
respectively, in OfficeMax, an operator of high-volume, deep-discount office
product superstores, and The Sports Authority, an operator of large-format
sporting goods stores. These offerings resulted in net cash proceeds to Kmart of
approximately $642 million for OfficeMax and $254 million for The Sports
Authority. Kmart also completed the sale of its 21.5% equity interest in Coles
Myer, the largest retailer in Australia, in November 1994, resulting in net cash
proceeds to Kmart of approximately $928 million.
Kmart also anticipates undertaking an IPO of an equity interest in Borders
Group, the timing of which will depend upon market and other conditions, and
continues to review alternatives with respect to Builders Square and initiatives
related to the Company's core business.
On March 21, 1995, the Company announced that Joseph E. Antonini had
relinquished his position as president, chief executive officer, and director of
the Company, effective immediately, and that Anthony N. Palizzi, executive vice
president and general counsel, will serve as interim president, and Ronald J.
Floto, executive vice president, Super Kmart Centers, will serve as interim
11
<PAGE> 13
chairman of the management executive committee. The Company also announced that
it will begin a search for a new chief executive officer immediately.
See "Selected Financial Information -- 1994 Fiscal Year and Fourth Quarter
Results".
As of the date of this Prospectus, Standard and Poor's Ratings Group
("S&P"), Moody's Investors Service, Inc. ("Moody's") and Duff & Phelps Credit
Rating Co. ("D&P") have assigned the ratings of "BBB", "Baa1" and "A-",
respectively, to the senior unsecured debt of Kmart. D&P has informed Kmart that
it has placed Kmart on its "credit watch" list for a potential downgrade. There
can be no assurance that the ratings set forth above may not be changed by the
respective rating agency at any time. See "Rating".
USE OF PROCEEDS
The Certificates are being issued in order to facilitate the financing by
each Owner Trust of its purchase of its respective Property. Proceeds from the
sale of the Certificates will be used by the Trustees to purchase the Mortgage
Notes issued by each Owner Trust, which in turn will use the proceeds to
purchase its respective Property. See "Structure of the Transaction".
Net proceeds of $ million to be received by the Company from the
Sale-Leaseback Transactions will be used for general corporate purposes. In the
case of Properties to be conveyed by developers to the related Owner Trust, net
proceeds of $ million will be used primarily to repay loans made to such
developers which funded the construction and/or acquisition of such Property.
See "Structure of the Transaction".
12
<PAGE> 14
SELECTED FINANCIAL INFORMATION
The following is a summary of certain selected consolidated financial
information of the Company. This summary should be read in conjunction with the
related consolidated financial statements and notes thereto included or
incorporated by reference in the Company's Annual Report on Form 10-K for the
fiscal year ended January 26, 1994 and Quarterly Report on Form 10-Q for the
quarter ended October 26, 1994 incorporated herein by reference. See
"Incorporation of Certain Documents by Reference". The information presented
below for, and as of the end of, each of the fiscal years in the five-year
period ended January 26, 1994 (except for the ratio of earnings from continuing
retail operations to fixed charges) is derived from the consolidated financial
statements of the Company, which financial statements have been audited by Price
Waterhouse LLP, independent accountants. In the opinion of the Company, the
unaudited financial information presented for the 39 weeks ended October 26,
1994 and October 27, 1993 contains all adjustments necessary for a fair
statement of the results for the interim periods. All adjustments were of a
normal and recurring nature. Results for interim periods are not necessarily
indicative of results for the full year.
<TABLE>
<CAPTION>
39 WEEKS ENDED
-------------------------
OCTOBER 26, OCTOBER 27,
1989(1) 1990 1991 1992 1993(2) 1994 1993
-------- -------- -------- -------- -------- ----------- -----------
(DOLLARS IN MILLIONS) (UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
Sales......................... $ 27,670 $ 28,133 $ 29,042 $ 31,031 $ 34,156 $25,432 $23,889
Cost of merchandise sold...... 20,310 20,614 21,243 22,800 25,646 19,134 17,762
Selling, general and
administrative expenses..... 6,277 6,435 6,603 6,875 7,636 5,952 5,567
Interest expense -- net....... 353 384 384 414 477 373 369
Income (loss) from continuing
retail operations before
income taxes................ 444 1,070 1,189 1,327 (550) 230 439
Net income (loss) from
continuing retail
operations.................. 282 712 789 882 (328) 151 287
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 $ 3,372 $ 3,918
Merchandise inventories....... 6,933 6,891 7,546 8,752 7,252 9,549 10,517
Total assets.................. 13,145 13,899 15,999 18,931 17,504 20,285 21,604
Long-term debt................ 1,480 1,701 2,287 3,237 2,227 2,022 2,757
Capital leases................ 1,549 1,598 1,638 1,698 1,720 1,865 1,732
Shareholders' equity.......... 4,972 5,384 6,891 7,536 6,093 5,959 7,398
</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 the Company's business, the ratio of earnings from
continuing retail operations to fixed charges is computed on a trailing 52
week basis. The ratio computed as described in (3) above for the 52 weeks
ended October 27, 1993 was 2.6. The deficiency of income from continuing
retail operations versus fixed charges was $809 million for the 52 weeks
ended October 26, 1994.
13
<PAGE> 15
1994 FISCAL YEAR AND FOURTH QUARTER RESULTS
For the 1994 fiscal year ended January 25, 1995, the Company had income
from continuing retail operations of $260 million. This included special
one-time pretax gains of $168 million (or $101 million after taxes) related to
the IPOs of equity interests in OfficeMax and The Sports Authority. Earnings
from continuing retail operations also included pretax charges of $257 million
for actions taken by Kmart in the fourth quarter to reduce expenses and improve
productivity going forward. These 1994 year-end actions include the
implementation of a more aggressive merchandise markdown policy on discontinued
and seasonal inventory, the sale of corporate aircraft, the previously announced
closings of regional offices and the Kmart Fashion division headquarters in
North Bergen, New Jersey and the cancellation of certain real estate projects
that did not meet recently adopted and more stringent return on investment
requirements. In fiscal 1993, there was a net loss from continuing retail
operations of $347 million, as restated to include the results of PayLess,
including a pretax restructuring charge of $1.35 billion ($862 million after
tax).
Kmart's reported net income for fiscal 1994 was $296 million, after income
of $36 million from discontinued operations. Discontinued operations, net of
income taxes, consist of equity income and a gain from the sale of the Coles
Myer stake of $68 million, which more than offset a charge of $32 million for
Furr's Cafeteria rent guarantees. This contrasts to a fiscal 1993 net loss of
$974 million after all unusual items, including the pretax restructuring charge.
Sales in fiscal 1994 were $34.03 billion, an increase of 5.9 percent from
$32.13 billion in fiscal 1993 on a comparable basis (excluding sales of PayLess,
the investment in which the Company plans to dispose of, and OfficeMax and The
Sports Authority, which were the subject of the IPOs discussed above). On an
as-reported basis (including sales of PayLess, OfficeMax and The Sports
Authority), sales in fiscal 1993 were $36.69 billion. In the fiscal 1993
consolidated financial statements (as summarized on the prior page), the
operations of PayLess were presented as part of discontinued operations;
however, as Kmart's investment in TPH will extend beyond the period initially
planned, the operations of PayLess have been reclassified as part of continuing
operations for fiscal 1993 (as shown below).
Net income from continuing retail operations for the fourth quarter of
fiscal 1994 was $129 million, after IPO gains and all charges. After pretax
gains of $168 million (or $101 million after taxes) for the IPOs and a net gain
of $16 million from discontinued operations, Kmart's net income in the fourth
quarter of fiscal 1994 was $145 million. This contrasts to the Company's fiscal
1993 net loss of $1.19 billion in the fourth quarter after all unusual items,
including a restructuring charge.
Kmart's sales in the fiscal 1994 fourth quarter were $10.44 billion, an
increase of 8.3% from $9.64 billion in the same period a year ago on a
comparable basis. On an as-reported basis in the fiscal 1993 fourth quarter,
including the PayLess Drug Stores, OfficeMax and The Sports Authority
businesses, sales were $11.01 billion.
In its 1994 earnings release, Kmart's management characterized the fiscal
1994 results as disappointing and indicated that management is committed to
reducing costs and improving financial performance. Management stated it is
accelerating the process of identifying and implementing initiatives to
strengthen the Company, including a comprehensive strategic review of Kmart's
business addressing merchandising, operational execution and financial policies.
Set forth below is Kmart's consolidated condensed statement of income for
fiscal 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
------- -------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Sales................................................................... $34,025 $36,694
Cost of merchandise sold................................................ 25,992 27,520
Selling, general and administrative expenses............................ 7,701 8,217
Interest expense -- net................................................. 494 495
Income (loss) from continuing retail operations before income taxes..... 294 (590)
Net income (loss) before discontinued operations, extraordinary item and
the effect of accounting changes...................................... 260 (347)
Net income (loss)....................................................... 296 (974)
</TABLE>
14
<PAGE> 16
STRUCTURE OF THE TRANSACTION
Concurrently with the issuance of the Certificates, Kmart will sell or
cause the sale of 16 buildings currently used as Kmart stores together with a
25-year estate-for-years interest (the "Estate-for-Years Interest") in the land
on which the Stores are situated (the "Land") for an aggregate price of
approximately $170 million to separate owner trusts (each, an "Owner Trust"),
for which Wilmington Trust Company (the "Corporate Owner Trustee") and, where
required by state law, Chemical Trust Company of California (the "Corporate
Co-Trustee") or an individual person (the "Individual Owner Trustee"), are
acting as owner trustees (the Corporate Owner Trustee, Corporate Co-Trustee and
the Individual Owner Trustee, collectively, the "Owner Trustees") under separate
trust agreements (each, an "Owner Trust Agreement") for one or more
institutional investors (each, an "Owner Participant"). Seven of these
Properties will be conveyed to the acquiring Owner Trust by developers of the
Properties at the direction of the Company pursuant to its rights under the
agreements with each developer under which the developer agreed to construct the
Store and Kmart agreed to purchase the Property upon completion of the Store.
Simultaneously with the sale of the Property to the Owner Trust, Kmart will sell
a remainder interest in the Land that follows expiration of each Owner Trust's
Estate-For-Years Interest to a trust that is unaffiliated with Kmart (the
"Remainderman"). Each Owner Trust will immediately lease each parcel of Land and
the Store thereon back to Kmart pursuant to leases (each, a "Lease") for an
initial term expiring April , 2020. The Owner Trust will have an option (the
"Option"), concurrently with the expiration of the Base Term of the Lease and
the Estate-for-Years, (a) to purchase, at fair market sales value, the
Remainderman's interest in each parcel of Land or (b) to ground lease such Land
from the Remainderman on a triple-net-lease basis. The ground lease would have a
term of 75 years (subject to earlier termination at the option of the ground
lessee). Each Owner Trust's estate for years interest in a parcel of Land,
together with such Owner Trust's fee simple title to the Store located on such
land, is referred to as a "Property".
A portion of the purchase price to be paid by an Owner Trust for each
Property will be obtained from the equity investment of the corresponding Owner
Participant. The Mortgage Notes will be issued by each Owner Trust on a
non-recourse basis to finance the remainder of the purchase price. The Mortgage
Notes will be acquired from the Owner Trusts by the Trustees with the proceeds
from the sale of the Certificates.
The Mortgage Notes will be issued under a separate indenture, mortgage and
deed of trust, assignment of rents and security agreement (each, an "Indenture")
with respect to each Property. Two Mortgage Notes will initially be issued under
each Indenture. Each Indenture will be entered into by and among The Bank of New
York (the "Corporate Indenture Trustee") and Todd N. Niemy (the "Individual
Indenture Trustee"), as trustees thereunder (the Corporate Indenture Trustee and
the Individual Indenture Trustee, in such capacities, the "Indenture Trustees"),
and the corresponding Owner Trust. Neither any Owner Trust, Owner Trustee nor
any Owner Participant will be personally liable for any amount payable under the
related Indenture or the Mortgage Notes issued thereunder.
The Mortgage Notes issued under each Indenture will be secured by an
assignment of certain of the corresponding Owner Trust's rights as lessor under
the Lease with respect to the Property securing such Mortgage Notes, including
the right to receive base rentals and certain other payments from Kmart
(excluding Excepted Payments), a first mortgage on the Property, subject to the
rights of Kmart under the related Lease and the related Option (with respect to
each such Indenture, the "Trust Estate"). The Mortgage Notes issued under the
Indenture with respect to a Property acquired by an Owner Trust will not be
secured by any of the Properties securing Mortgage Notes issued under any other
Indenture and will not be cross-defaulted with Mortgage Notes issued under any
other Indenture.
The amounts unconditionally payable by Kmart under the Leases will be
sufficient to pay in full, when due, all payments required to be made on the
Mortgage Notes, except upon certain optional redemptions which require the Owner
Trust to deposit an amount sufficient to pay the Redemption
15
<PAGE> 17
Price and Make-Whole Premium with the Corporate Indenture Trustee. See
"Description of the Mortgage Notes -- Redemption -- Optional Redemption". The
Mortgage Notes will not be recourse obligations of any Owner Participant, the
Owner Trustees or of any Owner Trust, but will be payable solely from base rents
and other amounts paid under the Lease (excluding Excepted Payments) of the
Property securing such Mortgage Notes and amounts realized from the exercise of
the Indenture Trustees' remedies under the Indenture against the related Trust
Estate.
A more detailed description of the transaction is set forth below under
"Diagram of Payments," "Description of the Certificates," "Description of the
Mortgage Notes" and "Description of the Leases".
The Pass Through Trusts will be formed pursuant to two separate Pass
Through Trust Agreements (in each case, an "Agreement"), between The Bank of New
York Trust Company of Florida, National Association, as trustee of Pass Through
Trust 1995-K-1, or The Bank of New York Trust Company of California, as trustee
of Pass Through Trust 1995-K-2 (collectively, in such capacity, the "Trustees"),
and Kmart. Concurrently with the execution and delivery of the Agreements, each
Trustee, on behalf of the related Pass Through Trust, will purchase the Mortgage
Notes to be held in the related Pass Through Trust from each Owner Trust. Each
Trustee, on behalf of the related Pass Through Trust, will purchase those
Mortgage Notes having the same maturity date and an interest rate equal to the
interest rate applicable to the Certificates evidencing interests in such Pass
Through Trust. The maturity date of the Mortgage Notes acquired by each Pass
Through Trust will correspond to the final scheduled Distribution Date
applicable to the Certificates evidencing an interest in such Pass Through
Trust. Each Trustee will distribute all payments of principal, premium, if any,
and interest received by it as holder of the Mortgage Notes to the holders of
Certificates evidencing an interest in the Pass Through Trust in which such
Mortgage Notes are held. See "Description of the Certificates" and "Description
of the Mortgage Notes".
THE PROPERTIES
The Properties consist of 16 Kmart store locations (including six
combination general-merchandise and grocery Super Kmart Centers). Certain
information regarding each of the Properties is set forth in the following
table:
<TABLE>
<CAPTION>
FACILITY
SIZE
(SQ. LOT SIZE
KMART STORE LOCATIONS FT.) (ACRES) OPENING DATE
- ------------------------------------------------------------- -------- -------- ------------
<S> <C> <C> <C>
Antioch, CA.................................................. 95,070 7.5 04/17/94
El Cajon, CA................................................. 118,840 10.9 02/10/94
Morgan Hill, CA.............................................. 106,942 8.1 02/17/94
Mission Viejo, CA............................................ 115,556 10.3 03/03/94
Highland, CA................................................. 108,015 9.5 02/17/94
Lafayette, GA................................................ 95,893 17.9 03/03/94
Sidney, NY................................................... 100,205 21.9 07/24/94
Mankato, MN.................................................. 117,191 13.1 09/11/94
McKinleyville, CA............................................ 94,420 7.7 09/25/94
Hilliard, OH................................................. 121,843 12.2 10/23/94
</TABLE>
<TABLE>
<CAPTION>
FACILITY
SIZE
(SQ. LOT SIZE
SUPER KMART CENTER LOCATIONS FT.) (ACRES) OPENING DATE
- ------------------------------------------------------------- -------- -------- ------------
<S> <C> <C> <C>
Fresno, CA................................................... 193,927 17.7 08/24/94
Sherman, TX.................................................. 169,999 23.9 05/08/94
Amsterdam, NY................................................ 169,984 34.7 09/18/94
Chillicothe, OH.............................................. 169,984 25.6 09/04/94
Waco, TX..................................................... 193,689 29.3 09/11/94
San Antonio, TX.............................................. 170,036 22.3 10/30/94
</TABLE>
16
<PAGE> 18
DIAGRAM OF PAYMENTS
The following diagram illustrates certain aspects of the payment flows
among Kmart, each Owner Trust, each Owner Participant, the Indenture Trustees,
the Trustees and the holders of the Pass Through Certificates.
Kmart will lease each Property from the corresponding Owner Trust under a
separate Lease. Two Mortgage Notes will initially be issued under each Indenture
by the corresponding Owner Trust, one with a final scheduled principal payment
due and the other with a final scheduled principal payment due
. Rent will be payable under each Lease to the corresponding Owner
Trustees; however, as a result of the assignment of such Lease to the applicable
Indenture Trustees, Kmart will make rental payments thereunder directly to the
Corporate Indenture Trustee. From such rental payments, the Corporate Indenture
Trustee will, on behalf of each Owner Trust, make payments on the Mortgage Notes
held in each Pass Through Trust to the related Trustee and will pay the balance
to each respective Owner Trust for distribution to the corresponding Owner
Participant. Each Trustee will distribute payments received on the Mortgage
Notes held in the related Pass Through Trust to the related Certificateholders.
In the event that the Corporate Indenture Trustee does not receive the full
amounts payable with respect to both Mortgage Notes issued under an Indenture,
the Corporate Indenture Trustee will be required, pursuant to the terms of such
Indenture, to distribute the amounts received on a pro rata basis in accordance
with the respective amounts due and payable on such Mortgage Notes.
<TABLE>
<S><C>
------------------
| KMART |
------------------
|
|
| Lease Rental Payments
|
|
------------------
| Corporate |
--------------- | Indenture | --------------
| Excess | Trustee for the| |
| Payments | Owner Trust(1) | | Mortgage Note Payments
| ------------------ |
| |
| ----------------------------
| | |
| | |
| | |
-------------------- -------------------- --------------------
| Corporate Owner | | Trustee for Pass | | Trustee for Pass |
| Trustee for the | | Through Trust | | Through Trust |
| Owner Trust | | 1995-K-1 | | 1995-K-2 |
-------------------- -------------------- --------------------
| | |
| | Pass Through |
| Excess | Certificate |
| Payments | Distributions |
| | |
-------------------- -------------------- --------------------
| Owner | | Holders of | | Holders of |
| Participant for | | Certificates | | Certificates |
| the Owner Trust | | | | |
-------------------- -------------------- --------------------
</TABLE>
- -------------------------
(1) There will be a separate Indenture and a separate Owner Trust with respect
to each Property.
17
<PAGE> 19
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to two separate Agreements, each
of which is to be entered into between Kmart and one of the Trustees, on behalf
of the related Pass Through Trust. Each Agreement will contain substantially the
same terms, except that the interest rates, scheduled payments of principal and
maturity dates applicable to the Mortgage Notes held in each Pass Through Trust,
the aggregate principal amount of Mortgage Notes held in each Pass Through
Trust, and the final distribution date applicable to each Pass Through Trust
will differ. The statements under this caption are a summary of the terms of the
Certificates and the Agreements and do not purport to be complete. The summary
makes use of terms defined in and is qualified in its entirety by reference to
all of the provisions of the Agreements and the Certificates, the forms of which
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part. Except as otherwise indicated, the following summary
relates to each of the Agreements, the Pass Through Trusts formed thereby and
the Certificates issued by each Pass Through Trust. Citations to the relevant
sections of the Agreements appear below in parentheses. References to the
Trustee or the Agreement, with respect to any Certificates, mean, respectively,
the Trustee under the related Agreement or the Agreement under which such
Certificates are issued.
GENERAL
The Certificates will be issued in fully registered form only. Each
Certificate will represent a fractional undivided interest in the Pass Through
Trust created by the Agreement pursuant to which such Certificate was issued.
The property of each Pass Through Trust will include the Mortgage Notes held in
such Pass Through Trust, all monies at any time paid thereon and all monies due
and to become due thereunder and funds from time to time deposited with the
Trustee in the accounts established pursuant to the related Agreement. Each
Certificate will correspond to a pro rata share of the outstanding principal
amount of the Mortgage Notes held in the related 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. (Agreements, Sections 2.01 and 2.06) 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 "Certificate Owner") will be entitled to receive a
certificate representing such person's interest in the Certificates, except as
set forth below under "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 Certificate Owners in accordance with DTC
procedures. (Agreements, Section 2.11) See "Book-Entry Registration".
Interest paid on the Mortgage Notes held in a Pass Through Trust will be
passed through to holders of Certificates evidencing interests in such Pass
Through Trust at the applicable rate per annum set forth on the cover page of
this Prospectus, which will be calculated on the basis of a 360-day year of
twelve 30-day months.
Each Certificate will represent a fractional undivided interest in the
related Pass Through Trust and will not have any rights, benefits or interest in
respect of the other Pass Through Trust or in the property held by the other
such Pass Through Trust. All payments and distributions on the Certificates will
be made only from the property of the Pass Through Trust in which such
Certificates evidence an interest. (Agreements, Section 3.05) The Certificates
do not represent an interest in or obligation of Kmart, the Trustee, any Owner
Trust, any Owner Trustee in its individual capacity, any Owner Participant, or
any of their respective affiliates. Each Certificateholder by its acceptance of
a Certificate agrees to look solely to the income and proceeds from the Trust
Property to the extent available for distribution as provided in the Agreements.
18
<PAGE> 20
None of the Agreements, the Indentures or the Leases includes financial
covenants or "event risk" provisions that would afford Certificateholders
protection in the event of a highly leveraged or other transaction involving
Kmart. The Certificateholders will have the benefit of a lien on the Property
and the other property in each Trust Estate securing the Mortgage Notes held in
the related Pass Through Trust, as discussed under "Description of the Mortgage
Notes -- Security". However, in the event that Kmart assumes the obligations of
an Owner Trust under a Mortgage Note, the Property securing such Mortgage Note
may, upon compliance with certain conditions set forth in the Indenture, be
released from the lien of the related Indenture and not subjected to the lien of
any Company Indenture, in which event Certificateholders could look only to
Kmart for payment thereof. See "Description of the Mortgage Notes -- Release of
Security" and "-- Assumption of Obligations by Kmart".
BOOK-ENTRY REGISTRATION
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 (including Goldman, Sachs & Co. and Morgan Stanley & Co.
Incorporated), 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").
Certificate 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, Certificate Owners will receive all distributions of
principal and interest from the Trustee through DTC Participants and Indirect
Participants. In addition, Certificate 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, Certificate 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 Certificate Owners, as the case may be, in accordance with
customary industry practices. The forwarding of such distributions to the
Certificate Owners will be the responsibility of such DTC Participants. The only
"Certificateholder" of a Pass Through Trust will be Cede, as nominee of DTC.
Certificate Owners will not be recognized by the Trustee as Certificateholders,
as such term is used in the Agreements, and Certificate 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. DTC Participants and Indirect
Participants with which Certificate 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 Certificate Owners.
Accordingly, although Certificate Owners will not possess Certificates, the
Rules provide a mechanism by which Certificate 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 Certificate 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
lack of a physical certificate for such Certificates.
19
<PAGE> 21
DTC has advised the Company that it will take any action permitted to be
taken by a Certificateholder under the Agreements only at the direction of one
or more DTC Participants to whose accounts with DTC the Certificates are
credited. Additionally, DTC has advised the Company that it will take such
actions with respect to any percentage of Certificateholders of each Pass
Through Trust only at the direction of and on behalf of DTC Participants whose
holdings include undivided interests that satisfy any such percentage. DTC may
take conflicting actions with respect to other undivided interests to the extent
that such actions are taken on behalf of DTC Participants whose holdings include
such undivided interests.
Neither the Company nor the Trustees 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 Kmart believes to be reliable, but Kmart has
not independently verified such information.
DEFINITIVE CERTIFICATES
The Certificates will be issued in fully registered, certificated form
("Definitive Certificates") to Certificate Owners or their nominees, rather than
to DTC or its nominee, only if (i) Kmart advises the Trustee in writing that DTC
is no longer willing or able to discharge properly its responsibilities as
depository with respect to the Certificates or is no longer eligible and Kmart
is unable to appoint a qualified successor or (ii) Kmart, at its option, elects
to terminate the book-entry system through DTC. (Agreements, Section 2.11)
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee will be required to notify all Certificate 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 will reissue the Certificates as
Definitive Certificates to Certificate Owners. (Agreements, Section 2.11)
Definitive Certificates will be freely transferable and exchangeable at the
office of the Trustee upon compliance with requirements set forth in the
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 shall be required. (Agreements, Section 2.07)
SAME-DAY SETTLEMENT AND PAYMENT
So long as the Certificates are registered in the name of Cede, as nominee
of DTC, all payments made by Kmart to the Corporate Indenture Trustee under the
Leases will be in immediately available funds and, to the extent such payments
are allocable to the Mortgage Notes, will be passed through 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.
PAYMENTS AND DISTRIBUTIONS
Payments of principal, premium, if any, and interest on the Mortgage Notes
held in each Pass Through Trust received by the Trustee will be distributed by
the Trustee to holders of Certificates evidencing interests in such Pass Through
Trust on the date such receipt is confirmed, except in certain cases when some
or all of such Mortgage Notes are in default. See "Events of Default and
20
<PAGE> 22
Certain Rights Upon an Event of Default". Payments of interest on the unpaid
principal amount of the Mortgage Notes held in each Pass Through Trust are
scheduled to be received by the Trustee on January 5 and July 5 of each year
commencing July 5, 1995, and payments of principal on the Mortgage Notes held in
each Pass Through Trust are scheduled to be received by the Trustee commencing
on the date specified on the front cover page of this Prospectus for such Pass
Through Trust (each such date, an "Initial Scheduled Principal Distribution
Date"), until the final distribution date for such Pass Through Trust (such
scheduled payments of interest and principal on the Mortgage Notes held by a
Pass Through Trust are herein referred to as "Scheduled Payments," and January 5
and July 5 of each year are herein referred to as "Regular Distribution Dates").
The Trustee will distribute on each Regular Distribution Date to the holders of
Certificates evidencing interests in a Pass Through Trust all Scheduled Payments
on the Mortgage Notes held in such Pass Through Trust, upon receipt. Each such
distribution of Scheduled Payments will be made by the Trustee to the holders of
record of the Certificates evidencing interests in the Pass Through Trust
holding the Mortgage Notes to which such Scheduled Payments relate on the
fifteenth day next preceding the applicable Regular Distribution Date, subject
to certain exceptions. (Agreements, Sections 5.01 and 5.02) If a Scheduled
Payment is not received by the Trustee on a Regular Distribution Date but is
received within ten Business Days thereafter, it will be distributed on the date
received to such holders of record. If it is received after such ten Business
Day period, it will be treated as a Special Payment and distributed as described
below.
Each Certificateholder will be entitled to receive a pro rata share of any
distribution in respect of Scheduled Payments of principal and interest made on
the Mortgage Notes held in the Pass Through Trust in which the Certificate held
by such holder evidences an interest. The Regular Distribution Dates on which,
and the amounts in which, Scheduled Payments of principal on the Mortgage Notes
held in each Pass Through Trust are payable are set forth below under
"Description of the Mortgage Notes -- Principal Payments".
Payments of principal, premium, if any, and interest received by the
Trustee on account of the redemption, if any, of the Mortgage Notes held in a
Pass Through Trust, and payments received by the Trustee following a default in
respect of the Mortgage Notes held in a Pass Through Trust (including payments
received by the Trust on account of the purchase by the Owner Trustee of such
Mortgage Notes or payments received on account of the sale of such Mortgage
Notes by the Trustee) ("Special Payments"), will be distributed on the fifth day
of a month (each, a "Special Distribution Date"). The Trustee will mail notice
to the holders of record of the Certificates evidencing interests in the related
Pass Through Trust not less than 20 days prior to the Special Distribution Date
on which any Special Payment is scheduled to be distributed by the Trustee in
the event the Mortgage Notes are to be redeemed prior to their maturity and, in
all other instances, as soon as practicable after the Trustee has received the
Special Payment. The notice will specify the anticipated Special Distribution
Date, the amount of such anticipated Special Payment, the reason for the Special
Payment and the total amount to be distributed if such Special Distribution Date
is the same date as a Regular Distribution Date. Each distribution of a Special
Payment, other than a final distribution, on a Special Distribution Date for a
Pass Through Trust will be made by the Trustee to the holders of record of the
Certificates evidencing interests in such Pass Through Trust on the fifteenth
day next preceding such Special Distribution Date. (Agreements, Section 5.02)
See "Description of the Mortgage Notes -- Redemption" and "-- Events of Default
and Certain Rights Upon an Event of Default".
Each Agreement requires that the Trustee establish and maintain, for the
benefit of the holders of Certificates evidencing interests in the Pass Through
Trust created by such Agreement, one or more segregated non-interest bearing
accounts (with respect to each such Pass Through Trust, the "Certificate
Account") for the deposit of payments representing Scheduled Payments on the
Mortgage Notes held in such Trust. (Agreements, Section 5.01) Each Agreement
also requires that the Trustee establish and maintain, for the benefit of the
holders of Certificates evidencing interests in the Pass Through Trust created
by such Agreement, one or more segregated non-interest bearing
21
<PAGE> 23
accounts (with respect to each such Pass Through Trust, the "Special Payments
Account") for the deposit of payments representing Special Payments. Pursuant to
the terms of each Agreement, the Trustee is required to deposit any Scheduled
Payments on the Mortgage Notes held in the applicable Pass Through Trust
received by it in the Certificate Account for such Pass Through Trust and to
deposit any Special Payments so received by it in the Special Payments Account
for such Pass Through Trust. (Agreements, Section 5.01) All amounts so deposited
will be distributed by the Trustee on a Regular Distribution Date or a Special
Distribution Date, as the case may be, to the holders of Certificates evidencing
interests in such Pass Through Trust. (Agreements, Section 5.02)
At such time, if any, as Definitive Certificates are issued, distributions
by the Trustee to Certificateholders, other than a final distribution, will be
made by check mailed to each Certificateholder of record on the applicable
record date at its address appearing on the register. (Agreements, Section 5.02)
The final distribution with respect to the Certificates evidencing interests in
a Pass Through Trust, however, will be made only upon presentation and surrender
of such Certificate at the office or agency of the Trustee specified in the
notice given by the Trustee of such final distribution. The Trustee will mail
such notice of the final distribution to the Certificateholders, specifying the
date set for such final distribution and the amount of such distribution.
(Agreements, Section 11.01) See "Termination of the Pass Through Trusts".
If any Regular Distribution Date or Special Distribution Date is not a
Business Day, distributions scheduled to be made on such Regular Distribution
Date or Special Distribution Date may be made on the next succeeding Business
Day without interest.
POOL FACTORS
Unless there has been an early redemption, or a default, in respect of one
or more Mortgage Notes held in a Pass Through Trust, as described under
"Description of the Mortgage Notes -- Redemption" and "-- Events of Default and
Certain Rights Upon an Event of Default," the Pool Factor for each Pass Through
Trust will decline in proportion to the Scheduled Payments of principal on the
Mortgage Notes held in such Pass Through Trust as described under "Description
of the Mortgage Notes -- Principal Payments". In the event of such redemption or
default, the Pool Factor and the Pool Balance of each Pass Through Trust
affected thereby will be recomputed after giving effect thereto and notice
thereof will be mailed to the holders of Certificates evidencing interests in
such Pass Through Trust. Each Pass Through Trust will have a separate Pool
Factor.
The "Pool Balance" for each Pass Through Trust will indicate, as of any
date, the aggregate unpaid principal amount of the Mortgage Notes held in such
Pass Through Trust on such date plus any amounts in respect of principal on such
Mortgage Notes held by the Trustee and not yet distributed. The Pool Balance for
each Pass Through Trust as of any Regular Distribution Date or Special
Distribution Date will be computed after giving effect to the payment of
principal, if any, on the Mortgage Notes held in such Pass Through Trust and the
distribution thereof to be made on that date.
The "Pool Factor" for each Pass Through Trust as of any Regular
Distribution Date or Special Distribution Date will be the quotient (rounded to
the seventh decimal place) computed by dividing the then outstanding Pool
Balance by the aggregate original principal amount of the Mortgage Notes held in
such Pass Through Trust. The Pool Factor for each Pass Through Trust will
initially be 1.0000000; thereafter, the Pool Factor for each Pass Through Trust
will decline to reflect reductions in the Pool Balance resulting from
distributions in respect of principal on the Certificates. The amount of a
Certificateholder's pro rata share of the Pool Balance of the Pass Through Trust
in which the Certificates held by such Certificateholder evidence an interest
can be determined by multiplying the original denomination of the holder's
Certificate by the Pool Factor for such Pass Through Trust as of the applicable
Regular Distribution Date or Special Distribution Date. The Pool Factor and the
Pool Balance for a Pass Through Trust will be mailed to record holders of
Certificates
22
<PAGE> 24
evidencing interests in such Pass Through Trust on each Regular Distribution
Date and Special Distribution Date.
As of the date of acquisition by the Trustees of the Mortgage Notes held in
the related Pass Through Trusts and assuming that no early redemption,
delinquency or default in respect of any Mortgage Notes occurs, the Scheduled
Payments of principal on such Mortgage Notes, and the resulting Pool Factors for
the Pass Through Trusts after giving effect to each such payment, are set forth
below.
<TABLE>
<CAPTION>
PASS THROUGH PASS THROUGH
TRUST 1995-K-1 TRUST 1995-K-2
SCHEDULED PASS THROUGH SCHEDULED PASS THROUGH
PRINCIPAL TRUST 1995-K-1 PRINCIPAL TRUST 1995-K-2
REGULAR DISTRIBUTION DATE PAYMENTS POOL FACTOR PAYMENTS POOL FACTOR
- --------------------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
</TABLE>
To the extent that the Mortgage Notes held in a Pass Through Trust are
redeemed or a delinquency or default in respect thereof occurs, the timing (and,
in the case of defaults, the amount) of distributions in respect of principal on
the Certificates evidencing an interest in such Pass Through Trust will differ
from that set forth above.
REPORTS TO CERTIFICATEHOLDERS
On each Regular Distribution Date and Special Distribution Date for a Pass
Through Trust, the Trustee will include with each distribution of a Scheduled
Payment or Special Payment to holders of record of the Certificates evidencing
interests in such Pass Through Trust a statement, giving effect to such
distribution to be made on such Regular Distribution Date or Special
Distribution Date, setting forth the following information (per $1,000 aggregate
principal amount, as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and the
amount allocable to premium, if any;
(ii) the amount of such distribution allocable to interest;
(iii) the Pool Balance and the Pool Factor for such Pass Through
Trust; and
(iv) any earnings on Special Payments derived from Permitted
Investments that are distributed to Certificateholders.
(Agreements, Section 5.03(a))
So long as the Certificates are registered in the name of Cede, as nominee
for DTC, on the Record Date prior to each Regular Distribution Date and Special
Distribution Date for a Pass Through Trust, 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 the Certificates evidencing
interests in such Pass Through Trust on such Record Date. On each Regular
Distribution Date and Special Distribution Date for a Pass Through Trust, 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 Certificate Owners.
23
<PAGE> 25
In addition, after the end of each calendar year, the Trustee will prepare
for each holder of record of Certificates evidencing interests in such Pass
Through Trust at any time during the preceding calendar year a report containing
the sum of the amounts determined pursuant to clauses (i), (ii) and (iv) above
with respect to such Pass Through Trust for such calendar year or, in the event
such person was a Certificateholder of record during a portion of such calendar
year, for the applicable portion of such calendar year. (Agreements, Section
5.03(b)) Such report and such other items shall be prepared on the basis of
information supplied to the Trustee by the DTC Participants, and shall be
delivered by the Trustee to such DTC Participants to be available for forwarding
by such DTC Participants to Certificate Owners in the manner described above.
At such time, if any, as Definitive Certificates are issued, the Trustee
will prepare and deliver the information described above to each holder of
record of Certificates evidencing interests in such Pass Through Trust as the
name of such Certificateholder appears on the records of the Trustee.
Kmart is required to furnish annually to the Trustee a certificate as to
its compliance with the conditions and covenants under the Agreements during the
preceding year. (Agreements, Section 4.03)
VOTING OF MORTGAGE NOTES
The Trustee, as holder of the Mortgage Notes held in such Pass Through
Trust, will have the right to vote and give consents and waivers in respect of
such Mortgage Notes under the Indentures. Each Agreement sets forth the
circumstances in which the Trustee shall direct any action or cast any vote as
the holder of the Mortgage Notes held in the applicable Pass Through Trust at
its own discretion and the circumstances in which the Trustee shall seek
instructions from the holders of the Certificates evidencing interests in such
Pass Through Trust. Under each Agreement, the principal amount of the Mortgage
Notes held in the related Pass Through Trust directing any action or being voted
for or against any proposal shall be in proportion to the principal amount of
Certificates held by the holders of Certificates evidencing interests in such
Pass Through Trust taking the corresponding position. (Agreements, Sections
7.01, 10.02 and 10.08)
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
An event of default under an Agreement (an "Event of Default") is defined
as the occurrence and continuance of an event of default under one or more of
the Indentures (an "Indenture Default"). See "Description of the Mortgage Notes
- -- Indenture Defaults, Notice and Waiver" for a description of the Indenture
Defaults. Since each Pass Through Trust will hold Mortgage Notes issued pursuant
to each of the Indentures, a continuing Indenture Default under any one
Indenture will result in an Event of Default under each of the Agreements and
therefore will affect each of the Pass Through Trusts. The Indentures and the
related Mortgage Notes issued thereunder do not contain cross-default
provisions, and events resulting in an Indenture Default under any of such
Indentures will not necessarily result in an Indenture Default occurring under
any other Indenture. See "Description of the Mortgage Notes -- General". If an
Indenture Default occurs under fewer than all of the Indentures, the Mortgage
Notes issued pursuant to the Indenture or Indentures with respect to which an
Indenture Default has not occurred will continue to be held in the Pass Through
Trusts and payments of principal, premium, if any, and interest on such Mortgage
Notes will continue to be distributed to the holders of the Certificates as
received.
The related Owner Trust (except during any period during which Kmart is an
Owner Participant or otherwise controls such Owner Trust) will have the right,
under certain circumstances, to cure Indenture Defaults that result from the
occurrence of a Lease Event of Default under the related Lease of a Property. If
an Owner Trust chooses to exercise such cure right, the Indenture Default, and
consequently the Event of Default under each Agreement, will be deemed to be
cured. In addition, if under any Indenture a Lease Event of Default shall have
occurred, the related Owner Trust (except during any period during which Kmart
is an Owner Participant or otherwise controls
24
<PAGE> 26
such Owner Trust) may, subject to certain conditions specified in such
Indenture, elect to redeem all of the then outstanding Mortgage Notes issued
under such Indenture, at a price equal to the Redemption Price, together with,
in the cases described herein, the applicable Make-Whole Premium, if any.
(Indentures, Sections 6.02(c) and 8.02) See "Description of the Mortgage Notes
- -- Redemption" and "-- Indenture Defaults, Notice and Waiver".
The Indenture Trustees' right to exercise remedies under each Indenture is
subject, in certain circumstances, to having exercised or to concurrently
exercising one or more remedies under the related Lease as to which a Lease
Event of Default shall have occurred. (Indentures, Section 7.02) See
"Description of the Mortgage Notes -- Remedies".
Each Agreement provides that, so long as an Indenture Default under any
Indenture shall have occurred and be continuing, the Trustee may vote all of the
Mortgage Notes issued under such Indenture that are held in the Pass Through
Trust and, upon the direction of the holders of Certificates, shall vote a
corresponding percentage of such Mortgage Notes in favor of directing the
Indenture Trustees to declare the unpaid principal amount of both Mortgage Notes
issued under such Indenture and any accrued and unpaid interest thereon to be
due and payable. Each Agreement in addition provides that, if an Indenture
Default under any Indenture shall have occurred and be continuing, the Trustee
may, and upon the direction of the holders of Certificates evidencing fractional
undivided interests aggregating not less than a majority in interest of the
related Pass Through Trust shall, vote a corresponding percentage of the
Mortgage Notes issued under such Indenture that are held in such Pass Through
Trust in favor of directing the Indenture Trustees as to the time, method and
place of conducting any proceeding for any remedy available to the Indenture
Trustees or of exercising any trust or power conferred on the Indenture Trustees
under such Indenture. (Agreements, Sections 7.01 and 7.09)
Each Indenture provides that, if an Indenture Default shall occur and be
continuing thereunder, the Corporate Indenture Trustee (subject to certain
limitations specified in the Indenture) may, or upon the instructions of the
holders of a majority in principal amount of the Mortgage Notes outstanding
under such Indenture shall, declare the unpaid principal amount of the Mortgage
Notes issued under such Indenture to be immediately due and payable, together
with any accrued and unpaid interest thereon. Further, in the case of an
Indenture Default resulting from bankruptcy or insolvency of Kmart or the
related Owner Trust, such Mortgage Notes shall immediately become due and
payable. Each Indenture further provides that, if an Indenture Default shall
occur and be continuing thereunder, the holders of a majority in aggregate
outstanding principal amount of the Mortgage Notes issued under such Indenture
may direct the Indenture Trustees with respect to the exercise of remedies
thereunder. See "Description of the Mortgage Notes -- Remedies". Accordingly,
the ability of the holders of the Certificates evidencing interests in a Pass
Through Trust to cause the Indenture Trustees to accelerate the Mortgage Notes
issued under an Indenture or to direct the exercise of remedies by the Indenture
Trustees under an Indenture will depend, in part, upon the proportion of the
aggregate outstanding principal amount of the Mortgage Notes issued under such
Indenture held in such Pass Through Trust to the aggregate outstanding principal
amount of all Mortgage Notes issued under such Indenture. If, for example, the
Mortgage Notes held in a Pass Through Trust constituted only 45% of the
outstanding principal balance of the Mortgage Notes issued under such Indenture
and even if all of the holders of Certificates evidencing interests in such Pass
Through Trust were to direct the Indenture Trustees to accelerate such Mortgage
Notes, the Mortgage Notes so voted by the Pass Through Trustee would not be
sufficient under the terms of the Indenture to compel the Indenture Trustees to
act. Moreover, there can be no assurance that the holders of Certificates
evidencing interests in the other Pass Through Trust would at such time instruct
the Pass Through Trustee to vote such Mortgage Notes in favor of such
acceleration. Each Pass Through Trust will hold Mortgage Notes with different
interest rates, maturity dates, initial principal amounts and amortization
schedules than the Mortgage Notes held in the other Pass Through Trust, and
therefore the holders of Certificates evidencing interests in a Pass Through
Trust may have interests that diverge from or conflict with those of the holders
of
25
<PAGE> 27
Certificates evidencing interests in the other Pass Through Trust. In addition,
because the Mortgage Notes held in Pass Through Trust 1995-K-1 will amortize
more quickly than those held by Pass Through Trust 1995-K-2, as principal
payments are received on the Mortgage Notes held in Pass Through Trust 1995-K-1,
the relative voting power of the holders of the Certificates evidencing
interests in such Pass Through Trust will diminish.
As an additional remedy, if an Indenture Default under an Indenture shall
have occurred and be continuing, each Agreement provides that after the Mortgage
Notes issued under such Indenture have been accelerated the Trustee may, and
upon the direction of the holders of Certificates evidencing fractional
undivided interests aggregating not less than a majority in interest of the
related Pass Through Trust shall, sell all or part of the Mortgage Notes issued
under such Indenture that are held in such Pass Through Trust for cash.
(Agreements, Section 7.01) Any proceeds received by the Trustee upon any such
sale shall be deposited in the related Special Payments Account and shall be
distributed on the next succeeding Special Distribution Date to holders of
Certificates evidencing interests in such Pass Through Trust. (Agreements,
Section 7.02) The market for Mortgage Notes in default is likely to be very
limited and there can be no assurance that they could be sold for a price equal
to the unpaid principal amount thereof and accrued interest thereon, or any
other price, if at all. If the Trustee sells any of the Mortgage Notes held in a
Pass Through Trust with respect to which an Indenture Default exists for less
than its outstanding principal amount and accrued interest thereon, the amount
of distributions made to holders of the Certificates evidencing interests in
such Pass Through Trust will be less than would otherwise be the case.
Any amount distributed to the Trustee by the Corporate Indenture Trustee
under any Indenture on account of the Mortgage Notes held in a Pass Through
Trust following an Indenture Default under such Indenture will be deposited in
the Special Payments Account and distributed to the related Certificateholders
on the next succeeding Special Distribution Date. In addition, if following an
Indenture Default under any Indenture, the related Owner Trust exercises its
option to redeem the outstanding Mortgage Notes issued under such Indenture as
described below under "Description of the Mortgage Notes -- Redemption --
Optional Redemption," the price paid by such Owner Trust to the Trustee for the
Mortgage Notes issued under such Indenture and held in a Pass Through Trust will
be deposited in the Special Payments Account for such Pass Through Trust and
distributed to the related Certificateholders on the Special Distribution Date
in respect of which such funds were deposited, which shall occur not less than
20 days after the date of notice of such Special Payment. (Agreements, Sections
5.01 and 5.02)
Any funds representing payments received by the Trustee with respect to any
defaulted Mortgage Notes held in a Pass Through Trust, or the proceeds from the
sale by the Trustee of any such Mortgage Notes received by the Trustee, will be
deposited in the Special Payments Account for such Pass Through Trust and
(except when received on a Special Distribution Date as to which notice has been
timely given), to the extent practicable, invested and reinvested by the Trustee
at the direction of Kmart in Permitted Investments maturing no later than the
next succeeding Special Distribution Date pending the distribution of such funds
on such Special Distribution Date. Permitted Investments are defined in the
Agreements as obligations of the United States. (Agreements, Article I and
Section 5.04) Following such default or sale with respect to the Mortgage Notes,
it is not anticipated that the Trustee will be able to invest in Permitted
Investments generating sufficient income to pay the interest that would
otherwise be paid on such Mortgage Notes. To the extent the Trustee is unable to
do so, the amount of interest distributable in respect of the Certificates will
be reduced.
Each Agreement provides that the Trustee shall, within 90 days after the
occurrence of a default in respect of the Pass Through Trust, give notice,
transmitted by mail, to the holders of the Certificates evidencing interests in
such Pass Through Trust of all uncured or unwaived defaults under such Agreement
known to it; provided that, except in the case of a default in the payment of
principal, premium, if any, or interest on the Mortgage Notes held in such Pass
Through Trust, the
26
<PAGE> 28
Trustee need not give such notice if the Trustee makes a good faith
determination that it is in the interests of the holders of the Certificates to
withhold such notice. The term "default," for the purpose of the provision
described in this paragraph only, shall mean the occurrence of any Event of
Default specified above, except that, in determining whether any such Event of
Default has occurred, any grace period or notice in connection therewith shall
be disregarded. (Agreements, Section 7.11)
Each Agreement contains a provision entitling the Trustee, subject to the
duty of the Trustee during a default to act with the required standard of care,
to be indemnified by the holders of the Certificates evidencing interests in the
related Pass Through Trust before proceeding to exercise any right or power
under such Agreement at the request of such Certificateholders. (Agreements,
Section 8.03)
In certain cases, the holders of Certificates evidencing fractional
undivided interests aggregating not less than 66 2/3% in interest of a Pass
Through Trust may, on behalf of the holders of all Certificates evidencing
interests in such Pass Through Trust, waive any past default or Event of Default
under the related Agreement and thereby annul any direction given by such
holders to the Indenture Trustees with respect thereto (provided that any such
waiver will be effective only if the corresponding Indenture Event of Default
has been waived under the related Indenture by the requisite holders of the
Mortgage Notes outstanding thereunder), except (i) a default in payment of the
principal, premium, if any, or interest on any of the Mortgage Notes held in
such Pass Through Trust and (ii) a default in respect of any covenant or
provision of the related Agreement that cannot be modified or amended without
the consent of each holder of a Certificate evidencing an interest in such Pass
Through Trust affected thereby. (Agreements, Section 7.10) See "Modifications of
the Agreements". Each Indenture provides that, with certain exceptions, the
holders of not less than 66 2/3% in aggregate outstanding principal amount of
the Mortgage Notes issued thereunder may, on behalf of all such holders, waive
any past default or Indenture Default thereunder. (Indentures, Section 7.14) In
the event of a waiver under an Agreement as described above, the principal
amount of the Mortgage Notes issued under the applicable Indenture and held in
the related Pass Through Trust shall be counted as waived in the determination
of the requisite percentage of Mortgage Notes required to waive a default or an
Indenture Default under such Indenture. Therefore, if the holders of
Certificates evidencing interests in a Pass Through Trust waive a past default
or Event of Default under the respective Agreement with the result that the
principal amount of Mortgage Notes held in such Pass Through Trust constitutes
the required percentage in aggregate unpaid principal amount under the
applicable Indenture, such past default or Indenture Default under such
Indenture shall be waived. For a discussion of waivers of Indenture Defaults
under the Indentures, see "Description of the Mortgage Notes -- Indenture
Defaults, Notice and Waiver".
MODIFICATIONS OF THE AGREEMENTS
Each Agreement contains provisions permitting Kmart and the Trustee to
enter into a supplement to the Agreement, without the consent of the holders of
any of the Certificates evidencing an interest in the Pass Through Trust created
thereby, (i) to evidence the succession of another corporation to Kmart and the
assumption by such corporation of Kmart's obligations under such Agreement, (ii)
to add to the covenants of Kmart for the benefit of the holders of such
Certificates, (iii) to cure any ambiguity, to correct or supplement any
defective or inconsistent provision of such Agreement or any supplement, or to
make any other provisions with respect to matters or questions arising under
such Agreement or any supplement, provided such action shall not adversely
affect the interests of the holders of such Certificates, (iv) to correct or
amplify the description of any property constituting property of the Pass
Through Trust, (v) to surrender any rights or powers conferred upon Kmart or add
to the rights of the holders of any Certificates, (vi) to evidence or provide
for a successor Trustee or to add or change any provision of such Agreement as
may be necessary to provide for or facilitate the administration of the Pass
Through Trust created thereby by more than one Trustee, or (vii) to add,
eliminate or change any provision under such Agreement
27
<PAGE> 29
to the extent necessary to continue the qualification of the Agreement under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), or to add
certain provisions expressly permitted by the Trust Indenture Act; provided,
that in each case such supplement does not cause the Pass Through Trust to
become taxable as an association within the meaning of Treasury Regulation
Section 301.7701-4 and, provided, further, that no such supplement may require
the Company to have any direct or indirect obligation (other than pursuant to
the Lease or the Participation Agreement, to the extent that the Company has
assumed the obligations of the related Owner Trust thereunder) to pay to,
guarantee, or otherwise provide for the receipt by, the Pass Through Trustee or
any Certificateholder of any of the amounts payable in respect of the Mortgage
Notes or the Certificates. (Agreements, Section 10.01)
Each Agreement also contains provisions permitting Kmart and the Trustee,
with the consent of the holders of Certificates evidencing fractional undivided
interests aggregating not less than 66 2/3% in interest of the Pass Through
Trust created thereby, to execute supplements thereto adding any provisions to
or changing or eliminating any of the provisions of the Agreement or modifying
the rights of the Certificateholders thereunder (subject to the provisos to the
preceding paragraph), except that no such supplement may, without the consent of
the holder of each Certificate so affected, (a) reduce the amount or extend the
time of payment of any amount owing or payable on the Mortgage Notes or
distributions to be made on any Certificate, or alter the currency in which any
amount payable under any such Certificate is to be paid, or impair the right of
any Certificateholder to commence legal proceedings to enforce a right to
receive payment under the Agreement, (b) reduce the percentage of the aggregate
fractional undivided interests of the Pass Through Trust provided for in such
Agreement, the consent of the holders of Certificates evidencing which is
required for any such supplement or for any waiver provided for in such
Agreement, (c) create or permit the creation of any lien on the Mortgage Notes
or deprive any Certificateholder of the benefit of the Pass Through Trust with
respect to the Mortgage Notes, whether by disposition or otherwise, except as
provided in such Agreement, or (d) modify the provisions in (a), (b) or (c) or
the provisions requiring the Trustee to provide notice of the occurrence of a
default or modify the definitions of "majority in interest of
Certificateholders", "66 2/3% in interest of Certificateholders" and
"outstanding" contained in the Agreement. (Agreements, Section 10.02)
MODIFICATION OF LEASES AND OTHER DOCUMENTS
In the event that the Trustee, as the holder of the Mortgage Notes held in
a Pass Through Trust, receives a request for its consent to any amendment,
modification or waiver under the Indenture, any Lease or any other related
document relating to such Mortgage Notes, the Trustee shall mail a notice of
such proposed amendment, modification or waiver to each record holder of a
Certificate evidencing an interest in such Pass Through Trust as of the date of
such notice. The Trustee shall request instructions from such Certificateholders
as to whether or not to consent to such amendment, modification or waiver, and
shall vote or consent, subject to the applicable vote or consent requirements of
the related Indenture or Indentures, with respect to the Mortgage Notes held in
such Pass Through Trust in the same proportion as the Certificates were actually
voted by the holders thereof. Notwithstanding the foregoing, if an Event of
Default under the related Agreement shall have occurred and be continuing, the
Trustee may in its own discretion consent to such amendment, modification or
waiver, and may so notify the Indenture Trustee under the Indenture to which
such consent relates. (Agreements, Section 10.08)
TERMINATION OF THE PASS THROUGH TRUSTS
The obligations of Kmart and the Trustee created by an Agreement will
terminate upon the distribution to holders of Certificates evidencing interests
in the Pass Through Trust created by such Agreement of all amounts required to
be distributed to them pursuant to the Agreement and the disposition of all
property held in such Pass Through Trust. The Trustee will mail to each holder
of record of a Certificate evidencing an interest in such Pass Through Trust
notice of the termination
28
<PAGE> 30
thereof, the amount of the proposed final payment and the proposed date for the
distribution of such final payment. The final distribution to any holder of a
Certificate will be made only upon surrender of such holder's Certificates at
the office or agency of the Trustee specified in such notice of termination.
(Agreements, Section 11.01)
THE TRUSTEES
The Bank of New York Trust Company of Florida, National Association is the
Trustee for Pass Through Trust 1995-K-1 and The Bank of New York Trust Company
of California is the Trustee for Pass Through Trust 1995-K-2. Each Trustee and
any agent of such Trustee may hold Certificates in their own names. (Agreement,
Section 8.05) With certain exceptions, the Trustees will make no representations
as to the validity, legality or enforceability of the Agreements, the
Certificates, the Mortgage Notes, the Indentures, the Leases, the Participation
Agreement or other related documents. (Agreements, Section 3.04)
A Trustee may resign with respect to the related Pass Through Trust at any
time upon at least 90 days' prior written notice, in which event the Company
will be obligated to appoint a successor trustee. If a Trustee ceases to be
eligible to continue as Trustee under an Agreement or becomes incapable of
acting as Trustee or becomes insolvent, the Company may remove such Trustee, or
any holder for at least six months of Certificates evidencing an interest in the
Pass Through Trust created thereby may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the removal
of such Trustee and the appointment of a successor trustee (which shall not be
the Trustee of the other Pass Through Trust). In addition, the holders of
Certificates evidencing fractional undivided interests aggregating not less than
a majority in interest of such Pass Through Trust may at any time remove the
Trustee without cause by delivering an instrument in writing to Kmart, the
Trustee, the Owner Trustees and the Indenture Trustees. Any resignation or
removal of the Trustee of a Pass Through Trust and appointment of a successor
trustee for such Pass Through Trust will not become effective until acceptance
of the appointment by the successor trustee. (Agreements, Section 8.09)
Each Agreement provides that the Company will pay the Trustee's fees and
expenses. Each Agreement further provides that the Trustee will be entitled to
indemnification by the Company for, and will be held harmless against, any loss,
liability or expense incurred by the Trustee (other than through its own willful
misconduct, bad faith or negligence or by reason of a breach of any of its
representations or warranties set forth in such Agreement). (Agreements, Section
8.08 and Article IX)
DESCRIPTION OF THE MORTGAGE NOTES
The statements under this caption are summaries of the terms of the
Mortgage Notes and the Indentures and do not purport to be complete. The
summaries make use of terms defined in and are qualified in their entirety by
reference to all of the provisions of the Mortgage Notes and the Indentures, the
forms of which have been filed as exhibits to the Registration Statement of
which this Prospectus is a part. Except as otherwise indicated, the following
summaries relate to the Mortgage Notes and the Indenture relating to each
Property in respect of which such Mortgage Notes are to be issued.
GENERAL
Two Mortgage Notes will initially be issued under each Indenture and each
Indenture will relate to a single Property. Each Indenture will be between an
Owner Trust and the Indenture Trustees. Mortgage Notes issued pursuant to each
Indenture relating to the Properties will be secured only by the Property to
which such Indenture relates and will not have cross-default or
cross-collateralization provisions.
29
<PAGE> 31
Each Owner Trust will lease a Property to Kmart. Kmart will be obligated
under the Leases to make or cause to be made rental and other payments to each
Owner Trust in amounts that will be at least sufficient to pay when due all
payments required to be made on the Mortgage Notes except in certain cases of
optional redemption which require such Owner Trust to deposit an amount
sufficient to pay the Redemption Price and Make-Whole Premium with the Corporate
Indenture Trustee. See "Redemption -- Optional Redemption". The Mortgage Notes
will not, however, be direct obligations of, or guaranteed by, Kmart (except to
the extent that Kmart may assume the obligations of such Owner Trust
thereunder). Payments under the Leases in excess of the amounts necessary to
make required payments on the Mortgage Notes will be paid by the Indenture
Trustees to the Owner Trust with respect to which such excess relates for
distribution to the corresponding Owner Participant and will not be available
for distributions on the Certificates, except in certain cases upon an Indenture
Default. Excepted Payments will not be available for distribution even upon an
Indenture Default. See "Remedies". Kmart's rental obligations under each Lease
will be general obligations of Kmart.
PRINCIPAL PAYMENTS
The aggregate principal amounts of the Mortgage Notes issued with respect
to each Property will be approximately 90% of the purchase price to the related
Owner Trust of such Property.
The aggregate principal amounts of the Mortgage Notes issued with respect
to each Property, as such Mortgage Notes are to be held in each of the Pass
Through Trusts, are as follows:
<TABLE>
<CAPTION>
PASS THROUGH TRUST PASS THROUGH TRUST
1995-K-1 % 1995-K-2 %
PROPERTY NO. MORTGAGE NOTES MORTGAGE NOTES TOTAL
- ------------ ------------------ ------------------ ------------
<S> <C> <C> <C>
1.........................................
2.........................................
3.........................................
4.........................................
5.........................................
6.........................................
7.........................................
8.........................................
9.........................................
10........................................
11........................................
12........................................
13........................................
14........................................
15........................................
16........................................
------------------ ------------------ -------------
Total................................ $ $ $155,000,000
================== ================== =============
</TABLE>
Interest will be payable on each Mortgage Note at the rate borne by such
Mortgage Note on the unpaid principal amount thereof on January 5 and July 5 in
each year, commencing July 5, 1995. Such interest will be computed on the basis
of a 360-day year of twelve 30-day months. The weighted average lives of the
Mortgage Notes held in Pass Through Trust 1995-K-1 and Pass Through Trust
1995-K-2 will be approximately and years, respectively.
If any date scheduled for any payment of principal, premium, if any, or
interest on the Mortgage Notes is not a Business Day, such payment may be made
on the next succeeding Business Day without interest.
30
<PAGE> 32
REDEMPTION
REDEMPTION UPON AN EVENT OF LOSS OR OTHER CONDEMNATION OR CASUALTY
The Mortgage Notes issued with respect to each Property will be subject to
redemption, in whole, but not in part, at a redemption price equal to the unpaid
principal amount thereof together with accrued interest thereon to the date of
redemption (the principal of the Mortgage Notes, or the portion thereof, being
redeemed, and all interest thereon to the date of redemption, are collectively
called the "Redemption Price"), without premium, upon the occurrence of an Event
of Loss (as defined under "Description of the Leases -- Condemnation and
Casualty") with respect to such Property. (Indentures, Section 6.02(a))
The Mortgage Notes with respect to each Property will also be subject to
redemption, in whole or in part, at the Redemption Price, without premium, (i)
upon the occurrence of a condemnation with respect to such Property, to the
extent that the condemnation proceeds exceed the actual cost of restoration of
the Property or (ii) upon the occurrence of a casualty with respect to such
Property, to the extent that the casualty proceeds exceed the cost of
restoration of the Property and are actually disbursed to the related Owner
Trust. See "Description of the Leases -- Condemnation and Casualty". In the case
of any partial redemption, the principal amount of the Mortgage Notes issued
with respect to the Property in question will be redeemed ratably, in the
proportion that the unpaid principal amount of each such Mortgage Note bears to
the unpaid principal amount of all such Mortgage Notes. (Indentures, Section
6.02(a))
If, prior to the date of any casualty or condemnation, Kmart exercised the
Termination Right with respect to the affected Property, then the redemption
procedures described above will not apply, but rather Kmart will proceed to
consummate such Termination Right, which will result in redemption pursuant to
the terms thereof. See "Redemption Upon Termination". In addition, upon the
occurrence of an Event of Loss, Kmart may exercise a Substitution Right with
respect to the affected Property, in which event the Mortgage Notes will not be
redeemed and Kmart will proceed to consummate the Substitution Right.
(Indentures, Article XIV) See "Description of the Leases -- Substitution".
REDEMPTION UPON TERMINATION
If Kmart exercises the Termination Right with respect to any Property or if
Kmart exercises the Competitor Option, then, unless Kmart elects to assume the
obligations of the corresponding Owner Trust under the Mortgage Notes, or, in
the case of the Termination Right, Kmart exercises its Substitution Right, the
Mortgage Notes issued with respect to such Property (or, in the case of the
exercise of the Competitor Option, all of the Mortgage Notes) will be redeemed
at a price equal to the Redemption Price plus a Make-Whole Premium. (Indentures,
Section 6.02(e))
OPTIONAL REDEMPTION
Each Owner Trust, with the consent of Kmart, may redeem all of the Mortgage
Notes issued by it at a price equal to the Redemption Price, plus a Make-Whole
Premium. (Indentures, Section 6.02(b)) Further, the Owner Trusts, with the
consent of Kmart, may redeem all of the Mortgage Notes held in either or both of
the Pass Through Trusts at a price equal to the Redemption Price, plus a
Make-Whole Premium. (Indentures, Section 6.02(d)) To effect any such redemption,
in addition to giving notice, the Owner Trust must deposit with the Corporate
Indenture Trustee an amount sufficient to pay the Redemption Price and
Make-Whole Premium. (Indentures, Section 6.03)
The Mortgage Notes issued under any particular Indenture by the respective
Owner Trust will be subject to redemption by such Owner Trust (except during any
period during which the Company is an Owner Participant or otherwise controls
such Owner Trust), in whole, but not in part, if under
31
<PAGE> 33
such Indenture a Lease Event of Default (other than a Lease Event of Default
related to Excepted Payments) shall have occurred and be continuing; provided
that no Indenture Default (that does not arise out of such Lease Event of
Default) shall have occurred and be continuing. Such redemption will be at the
Redemption Price plus the Make-Whole Premium if effected prior to the earliest
of (i) receipt by the related Owner Trust of 20 days' prior notice from the
Corporate Indenture Trustee under the applicable Indenture of its intent to
accelerate the applicable Mortgage Notes, (ii) acceleration of the applicable
Mortgage Notes or (iii) if such Lease Event of Default arises from a default
described in clauses (i), (ii) or (v) of the definition of Lease Event of
Default (a "Monetary Default"), the expiration of a period of 180 days following
the occurrence of such Lease Event of Default that is continuing at the
expiration of such period. Such redemption will be at the Redemption Price
without premium if effected after the occurrence of any event described in
clauses (i), (ii) or (iii) of the preceding sentence. Upon any Lease Event of
Default (other than a Lease Event of Default related to Excepted Payments), the
Indenture Trustees will be entitled to accelerate the Mortgage Notes and
terminate the Lease (or the Company's right to possession of the Property) only
upon 20 days' prior notice to the related Owner Trust. See "Description of the
Leases -- Remedies". (Indentures, Sections 6.02(c) and 8.02)
REDEMPTION DATES
Any redemption of the Mortgage Notes shall occur on the respective date of
redemption (the "Redemption Date") fixed in accordance with the related
Indentures. The Redemption Date shall be the date designated in the notice of
redemption given by the related Owner Trust (or by the Company pursuant to the
Lease) to the related Indenture Trustee. Any such notice must be given not less
than 45 days prior to the Redemption Date. The Redemption Date designated may be
any Special Distribution Date occurring not less than 25 days after the date of
delivery of such notice. (Indentures, Section 6.03) See "Description of the
Leases -- Early Termination".
MAKE-WHOLE PREMIUM
The "Make-Whole Premium," if any, on any Mortgage Note (or portion thereof)
to be redeemed will be calculated by an independent investment banking
institution of national standing selected by the issuing Owner Trust and, in
every case where a Lease Event of Default or Material Default under the related
Lease has not occurred, approved in writing by the Company. The Make-Whole
Premium shall be determined as of the third Business Day prior to the applicable
Redemption Date and shall equal the excess, if any, of (i) the sum of the
present values of all the remaining Scheduled Payments on such Mortgage Note (or
the portion of each such Scheduled Payment corresponding to the portion of such
Mortgage Note to be redeemed) from the Redemption Date to the maturity date of
such Mortgage Note, discounted semi-annually on each interest payment date for
such Mortgage Note at a rate equal to the Treasury Yield plus fifty basis points
(0.50%), based on a 360-day year of twelve 30-day months over (ii) the aggregate
unpaid principal amount of such Mortgage Note (or the then unpaid portion
thereof to be redeemed) plus accrued but unpaid interest thereon (excluding, for
this purpose, any accrued interest in default).
The Treasury Yield means, with respect to each Mortgage Note (or the
portion thereof) to be redeemed, a per annum rate determined as of the date of
determination of the Make-Whole Premium equal to the weekly average yield to
maturity of United States Treasury Notes having a constant maturity as set forth
in the most recent weekly statistical release (or any successor release)
published by the Federal Reserve Bank of New York and designated "H.15 (519)
Selected Interest Rates" (the "H.15 Statistical Release"), corresponding to the
weighted average life of the Mortgage Note (calculated to the nearest 1/12 of a
year) (the "Weighted Average Life"). The Treasury Yield will be calculated by
the independent investment banking institution of national standing selected by
the Owner Trust, by interpolation (unless the Weighted Average Life of the
Mortgage Note equals a constant maturity set forth in the H.15 Statistical
Release) on a straight-line basis, between the weekly average yields (rounded,
if necessary, to the nearest 1/100 of 1%, with
32
<PAGE> 34
any figure 1/200 of 1% or above rounded upward) on (a) the United States
Treasury Notes with a constant maturity closest to and greater than the Weighted
Average Life and (b) the United States Treasury Notes with a constant maturity
closest to and less than the Weighted Average Life, or if such weekly average
yields are not available, by interpolation of comparable rates selected by the
independent investment banking institution. (Indentures, Article I)
ISSUANCE OF REFINANCING MORTGAGE NOTES
In the event of any optional redemption of any Mortgage Notes issued under
an Indenture, one or more new series of mortgage notes (the "Refinancing
Mortgage Notes") may be issued under such Indenture; provided that: (w) no
Material Default has occurred and is continuing; (x) if after such redemption
any Mortgage Notes issued under such Indenture remain outstanding, the
Refinancing Mortgage Notes (i) shall be denominated and payable in United States
dollars and shall not be in a principal amount greater than the Mortgage Notes
redeemed, (ii) shall not rank senior in any respect to the Mortgage Notes that
remain outstanding, and (iii) shall not have a maturity date after or have a
weighted average life longer than the Mortgage Notes redeemed if any of the
Mortgage Notes remaining outstanding have (a) a maturity date after or
concurrent with the maturity date of the Mortgage Notes redeemed or (b) a
weighted average life longer than the weighted average life of the Mortgage
Notes redeemed; (y) amounts payable under the Lease (other than Excepted
Payments) shall be sufficient to pay when due the principal of, premium (other
than any premium for which the Company was not previously liable under the
Lease), if any, and interest on such Refinancing Mortgage Notes and any
outstanding Mortgage Notes (including previously issued Refinancing Mortgage
Notes) when due; and (z) if Mortgage Notes remain outstanding under such
Indenture, each of Moody's, S&P and D&P shall have confirmed in writing in
advance that the issuance of such Refinancing Mortgage Notes shall not result by
itself in the downgrading of the rating assigned to the Certificates at such
time by such ratings organization. (Indentures, Section 15.02) The Refinancing
Mortgage Notes shall be secured pari passu by the related Indenture.
SECURITY
Two Mortgage Notes will initially be issued by each Owner Trust under an
Indenture, and will be secured by (i) an assignment to the Indenture Trustees of
certain of such Owner Trust's rights under the Lease with respect to the
Property subject to such Indenture, including the right to receive rentals and
certain other amounts payable thereunder by Kmart, (ii) a first mortgage on the
respective Owner Trust's Property (subject to the rights of Kmart under the
related Lease) and (iii) the Owner Trust's rights under the Option. The Mortgage
Notes issued under an Indenture will not be secured by any of the Properties
securing Mortgage Notes issued under any other Indenture and will not have
cross-default provisions, with the result that an Indenture Default under any
Indenture will not necessarily constitute an Indenture Default under any other
Indenture. Unless and until an Indenture Default has occurred and is continuing,
payments under the Lease with respect to such Property in excess of the amount
required to pay amounts owed in respect of the respective Owner Trust's Mortgage
Notes will be paid to such Owner Trust for distribution to the related Owner
Participant and, accordingly, no such excess payments distributed prior to an
Indenture Default will be available to satisfy any deficiency in the amount
available to pay the related Mortgage Note in full.
Unless and until an Indenture Default has occurred and is continuing and
the related Mortgage Notes have been declared due and payable, the Indenture
Trustees may not exercise any of the rights of the Owner Trust under the related
Lease, except the right to receive payments of rent due thereunder (other than
Excepted Payments). (Indentures, Granting Clause) The assignment by an Owner
Trust to the Indenture Trustees of its rights under the Lease will exclude,
among other things, rights of the Owner Trust and the related Owner Participant
(i) relating to indemnification by Kmart of the Owner Trust, the Owner Trustees
or the Owner Participant for certain matters, insurance proceeds payable to the
Owner Trustees in their individual capacities and to the Owner Participant
33
<PAGE> 35
(other than proceeds from casualty insurance maintained by Kmart under such
Lease), insurance proceeds payable to the Owner Trust or to the Owner
Participant under certain insurance maintained by or for the benefit of the
Owner Trustees or the Owner Participant and not required to be maintained by the
Company under the Lease and certain reimbursement payments made by Kmart to the
Owner Trust (collectively, "Excepted Payments"), as well as claim, consent and
other rights relating to the foregoing and (ii) to receive from the Company all
notices, certificates, filings, opinions of counsel and other documents or
information which the Company is required or permitted to give to the Owner
Trust, to perform all covenants and obligations of the Company under the Lease
(subject to certain restrictions), to make determinations and give consents to
be made or given by the "Landlord" under the Lease and to enforce or collect
"Excepted Rights and Payments", and certain related rights (collectively,
"Excepted Rights" and, together with Excepted Payments, "Excepted Rights and
Payments"); provided, however that certain rights will not constitute Excepted
Rights after foreclosure of the lien of the related Indenture. (Indentures,
Granting Clauses and Section 8.01)
Funds, if any, held from time to time by the Indenture Trustees with
respect to any Property, including funds held as the result of an Event of Loss
with respect to such Property or termination of the Lease relating thereto, will
be invested and reinvested in certain Permitted Investments selected by the
Corporate Indenture Trustee. The Corporate Indenture Trustee will not be
obligated to pay the amount of any loss resulting from any such investment
directed by it. (Indentures, Section 5.08)
RELEASE OF SECURITY
In certain circumstances, Kmart will have the right to terminate the Leases
with respect to the Properties. See "Redemption" and "Description of the Leases
- -- Early Termination". If Kmart were to exercise the Termination Right, and
redeem the Mortgage Notes issued with respect to a Property, the Indenture
provides that the Indenture Trustees will release such Property from the lien of
the Indenture upon receipt of, among other things, an officer's request from the
Company and the Corporate Owner Trustee describing the Property to be released,
an officer's certificate from the Company and the Corporate Owner Trustee
stating that no Material Default under the Lease has occurred and is continuing,
the Property is required or permitted to be sold, disposed of or released
pursuant to the Lease and the Indenture, and all conditions in the Indenture and
the Lease relating to such release have been complied with.
Kmart will also have the right under each Lease, if a Property becomes
uneconomic or is subject to a condemnation or casualty, to substitute a property
for the Property leased thereunder. See "Description of the Leases --
Substitution Right". In connection therewith, each Indenture provides that the
Indenture Trustees will release the Property or Properties substituted therefor
upon compliance with the provisions described in the preceding paragraph and the
delivery of all documents and instruments required by the Indenture Trustees to
subject the substitute property or properties to the lien of such Indenture.
(Indentures, Section 14.01)
Kmart will also be entitled, upon certain terminations of the Lease with
respect to a Property, to assume, on a full recourse basis, under certain
circumstances, the related Owner Trustee's obligations under the Mortgage Notes
issued with respect to the affected Property. (Indentures, Section 3.08) See
"Assumption of Obligations by Kmart". In such a case, the Property may be
released from the lien of the Indenture, upon satisfaction of the conditions
described above and under "Assumption of Obligations by Kmart".
LIMITATION OF LIABILITY
The Mortgage Notes are not direct obligations of, or guaranteed by, Kmart
(except to the extent that it assumes the obligations of an Owner Trust under
any of the Mortgage Notes), the Owner Trustees or any Owner Trust. Neither any
Owner Trust, the Owner Trustees, any Owner Participant nor the Indenture
Trustees, nor any affiliate thereof, shall be personally liable to any holder of
a
34
<PAGE> 36
Mortgage Note or to the Indenture Trustees for any amounts payable under the
Mortgage Notes or for any liability under such Indenture. All payments of
principal, premium, if any, and interest on the Mortgage Notes issued with
respect to any Property will be made only from the assets subject to the lien of
the Indenture or the income and proceeds received by the Indenture Trustees
therefrom (including Basic Rent and Additional Rent payable by Kmart under the
related Lease). (Indentures, Section 2.05) Neither any Owner Trust, the Owner
Trustees, any Owner Participant nor the Indenture Trustees shall be personally
liable for or in respect of this Prospectus.
No Owner Trustee acting in its individual capacity, Owner Participant or
any director, officer, employee, stockholder, agent or affiliate of the Owner
Trustee or Owner Participant (the "Exculpated Person") will have any obligation,
duty or liability of any kind whatsoever to the Indenture Trustee or any holder
of a Mortgage Note in connection with the exercise by any Exculpated Person of
any rights of an Owner Trust under the related Lease and the other Operative
Documents, or the taking of any action or the failure to take any action, in
each case in connection with any rights of such Owner Trust under the Lease and
the other Operative Documents. (Indentures, Section 18.01)
INDENTURE DEFAULTS, NOTICE AND WAIVER
Indenture Defaults under each Indenture include: (a) the occurrence and
continuance of any Lease Event of Default under a Lease of Property securing the
Mortgage Notes issued under such Indenture (other than a Lease Event of Default
related to Excepted Payments), (b) failure by the related Owner Trust, other
than by reason of any Lease Default or Lease Event of Default, to pay when due
any principal, premium, if any, or interest on any Mortgage Note issued
thereunder within five days after notice to the Owner Trust that such payment is
due, (c) any termination or revocation of the related Owner Trust Agreement, (d)
failure by the related Owner Trust (other than by reason of a Lease Default or
Lease Event of Default) or the related Owner Participant to perform in any
material respect any other material covenants contained in the Indenture, the
Mortgage Notes issued under such Indenture or the Participation Agreement (to
the extent that such document relates to the Property, unless the context
requires otherwise), which continues unremedied for a period of 30 days (or such
longer period (but in no event more than 180 days) if such failure has a
material adverse effect on the Holders of the Mortgage Notes and is capable of
being remedied within a reasonable period of time (but not within such 30-day
period) if within such 30-day period the related Owner Trust or Owner
Participant, as applicable, promptly commences and thereafter prosecutes with
diligence and good faith efforts to effect a cure) after notice to such Owner
Trust by the Corporate Indenture Trustee or to such Owner Trust and the
Corporate Indenture Trustee by the holders of at least a majority in unpaid
principal amount of outstanding Mortgage Notes issued under such Indenture, (e)
any representation or warranty made by the Owner Trust, the Owner Trustees (in
their individual capacities) or the related Owner Participant in the Indenture,
the Participation Agreement (to the extent that such document relates to the
Property, unless the context requires otherwise) or in any related document or
certificate furnished to the Indenture Trustees pursuant thereto being incorrect
in any material respect as of the date made, and such inaccuracy is and
continues to be material to the holders of Mortgage Notes issued under such
Indenture, which continues unremedied for a period of 30 days (or such longer
period (but in no event more than 60 days) if such falseness or inaccuracy is
susceptible to being remedied within a reasonable period of time (but not within
such 30-day period) if within such 30-day period such Owner Trust, the Owner
Trustees or Owner Participant, as applicable, promptly commences and thereafter
prosecutes with diligence and good faith efforts to effect a cure) after notice
to such Owner Trust by the Corporate Indenture Trustee or to such Owner Trust
and the Corporate Indenture Trustee by the holders of at least a majority in
unpaid principal amount of outstanding Mortgage Notes issued under such
Indenture, and (f) the occurrence of certain events of bankruptcy,
reorganization or insolvency of the related Owner Trust. (Indentures, Section
7.01)
35
<PAGE> 37
In the event Kmart fails to make any semi-annual basic rental payment, and
such failure shall constitute or become a Lease Event of Default, within 10
days' written notice of such failure the related Owner Trust may furnish to the
Indenture Trustees the amount of such rental payment, in which event the
Indenture Trustees and the holders of outstanding Mortgage Notes issued under
such Indenture may not exercise any remedies otherwise available under such
Indenture or the Lease securing the Mortgage Notes issued thereunder as the
result of such failure to make such rental payment, unless such Owner Trust
shall have previously effected on behalf of Kmart three such consecutive
payments or five such payments cumulatively. An Owner Trust may also cure any
other default by Kmart in the performance of its obligations under the related
Lease which can be cured solely by the payment of money, within 10 days after
the expiration of the grace period, if any, specified in the Lease. In addition,
each Owner Trust may cure any default by Kmart in the performance of its
obligations under the related Lease (if such default is reasonably susceptible
to cure by the Owner Trust) other than those which can be cured by the payment
of money alone, within 30 days after the expiration of the notice or grace
period provided with respect to such default on the part of the Company under
the Lease (or, such longer period, not to exceed 90 days, if such Owner Trust
promptly commences and thereafter pursues to conclusion such cure). During these
periods, the Indenture Trustees may not exercise any rights under the related
Lease and the related Mortgage Notes may not be accelerated. The value of the
Properties or the ability of Kmart to perform under the Leases could decline
during any period when the exercise of remedies under an Indenture has been
prevented through the exercise of cure rights. The cure rights described above
will not apply during any period during which Kmart is an Owner Participant or
otherwise controls the related Owner Trust. (Indentures, Section 8.03)
Each Indenture provides that the Corporate Indenture Trustee must, within
30 days after any event resulting in the occurrence of an Indenture Default
known by it, give notice thereof to the holders of the Mortgage Notes issued
thereunder, unless such Indenture Default has been cured or waived or it
determines (except in the case of a default in the payment of the principal of,
premium, if any, or interest on the Mortgage Notes) that withholding such notice
is in the best interests of the holders of the Mortgage Notes. (Indentures,
Section 9.03)
The holders of not less than 66 2/3% in aggregate unpaid principal amount
of the outstanding Mortgage Notes issued under an Indenture, by notice to the
Indenture Trustees thereunder, may on behalf of all holders waive any past
default under such Indenture except a default in the payment of the principal,
premium, if any, or interest on any such Mortgage Note or a default in respect
of any covenant or provision of such Indenture that cannot be modified or
amended without the consent of each holder of a Mortgage Note affected thereby.
(Indentures, Section 7.14)
REMEDIES
Upon the occurrence of an Indenture Default resulting from the bankruptcy,
insolvency or reorganization of the related Owner Trust, or a Lease Event of
Default resulting from the bankruptcy, insolvency or reorganization of Kmart,
the unpaid principal amount of the Mortgage Notes issued under such Indenture,
together with interest accrued but unpaid thereon without premium, and all other
amounts due thereunder and under such Indenture, shall become due and payable.
(Indentures, Section 7.02(b)) Upon the occurrence of any other Indenture
Default, the Corporate Indenture Trustee may, or when instructed by the holders
of at least a majority in aggregate outstanding principal amount of the Mortgage
Notes issued under such Indenture shall, declare the principal of all the
Mortgage Notes outstanding under such Indenture, together with the interest
accrued but unpaid thereon, but without premium, and all other amounts due
thereunder and under such Indenture, immediately due and payable. (Indentures,
Section 7.02(c))
The Indenture Trustees' right to exercise remedies under each Indenture is
subject to acceleration of the Mortgage Notes and, with respect to an Indenture
Default occurring solely by reason of a Lease Event of Default, concurrent
action to terminate the Lease or dispossess the Company or
36
<PAGE> 38
otherwise seeking to effect a comparable remedy under the related Lease as to
which a Lease Event of Default shall have occurred.
The holders of a majority in aggregate principal amount of outstanding
Mortgage Notes under an Indenture may rescind any declaration of acceleration by
the Corporate Indenture Trustee, whether made on their own accord or as directed
by holders of such Mortgage Notes, at any time prior to the sale of the Trust
Estate if (i) there has been paid or deposited with the Corporate Indenture
Trustee an amount sufficient to pay all overdue installments of interest on all
such Mortgage Notes and the principal on any Mortgage Notes that has been due
otherwise than by such declaration, all sums paid or advanced by the Indenture
Trustees under such Indenture and certain other expenses, (ii) the rescission
would not conflict with any judgment or decree and (iii) all Indenture Defaults
under such Indenture, other than the non-payment of principal that has become
due solely because of such acceleration, have been cured or waived. (Indentures,
Section 7.02(c)) Such rescission will be binding upon all holders of the
Mortgage Notes; however, no such rescission will affect any subsequent default
or impair any right or remedy consequent thereon.
Each Indenture provides that, subject to the related Owner Trust's right,
if any, to cure certain defaults or to redeem the Mortgage Notes, if any
Indenture Default has occurred and is continuing thereunder, following
acceleration of the Mortgage Notes the Indenture Trustees may, and when required
by the provisions of the Indentures relating to their duties as Indenture
Trustees shall, exercise certain rights or remedies available to them under
applicable law, including taking possession of the Trust Estate and foreclosing
the lien of the Indenture, including the lien on the Property included in the
Trust Estate, subject to the terms of the Lease. In addition, the Indenture
Trustees may not sell any part of the Trust Estate unless the related Mortgage
Notes have been accelerated or the related Mortgage Notes have become due and
payable because of the bankruptcy, insolvency or reorganization of the Owner
Trust or Kmart. (Indentures, Section 7.02(a)) If a Lease Event of Default has
occurred, the Indenture Trustees as assignees of the related Owner Trust may
also exercise remedies afforded to such Owner Trust by such Lease for a Lease
Event of Default thereunder. See "Description of the Leases -- Remedies". In
addition, the Option will be collaterally assigned to the Indenture Trustee and,
in the event of an Indenture Default and foreclosure under the Indenture, would
be exercisable by the Indenture Trustee.
In certain circumstances, the Mortgage Notes issued with respect to a
Property may be accelerated even if no default exists under the related Lease.
In such case, notwithstanding any acceleration, Kmart would not be obligated to
pay more than the amounts of rent required to be paid periodically under the
Lease (in the absence of Lease defaults). Also, although the Lease provides that
upon default thereunder Kmart can be required to pay damages in an amount at
least equal to the principal and interest on the related Mortgage Notes, it is
possible that a court would nonetheless apply a measure of damages yielding a
lesser amount.
The right of any holder of a Mortgage Note to institute an action for any
remedy under the Indenture pursuant to which such Mortgage Note was issued
(including the right to enforce payment of the principal, premium, if any, and
interest on such Mortgage Note when due) will be subject to certain conditions
precedent, including a request to the Indenture Trustees by the holders of at
least 25% in aggregate principal amount of Mortgage Notes then outstanding under
such Indenture to take action (unless a majority in interest of the
Certificateholders object in writing to such action within 30 days of such
request), and an offer to the Indenture Trustees of reasonable indemnification
against the costs, expenses and liabilities incurred by it in doing so.
(Indentures, Sections 7.08 and 7.09)
During the continuance of an Indenture Default the holders of a majority in
aggregate principal amount of Mortgage Notes outstanding under an Indenture may
(i) require the Indenture Trustees to enforce such Indenture, either by judicial
proceedings for the enforcement of payment of the Mortgage Notes and the
foreclosure of the Indenture and the sale of the Property subject to the lien of
the Indenture or, at the election of the Indenture Trustees, by the exercise of
the power of entry
37
<PAGE> 39
and/or sale or other remedies conferred under such Indenture, and (ii) direct
the time, method and place of conducting any proceeding for any remedy available
to the Indenture Trustees or of exercising any trust or power conferred on the
Indenture Trustees, provided that such direction does not conflict with any
applicable law or such Indenture and does not unduly prejudice the rights of
holders of such Mortgage Notes other than those constituting such majority, and
the Indenture Trustees may take any other action not inconsistent with such
direction which is deemed proper by the Indenture Trustees. (Indentures, Section
7.13)
If an Indenture Default under any Indenture occurs and is continuing and
the Mortgage Notes are accelerated, any sums held or received by the Indenture
Trustees may be applied to reimburse the Indenture Trustees for any tax, expense
or other loss incurred by them and to pay any other amounts due to the Indenture
Trustees prior to any payments to holders of the Mortgage Notes issued under
such Indenture. (Indentures, Section 5.03)
There are certain aspects of mortgage loans that may affect the
enforceability thereof or the ability to realize on the security, including the
scarcity of buyers at foreclosure, environmental risks relating to the
underlying property, anti-deficiency or single-action legislation and bankruptcy
laws that may limit the ability of a mortgage lender to enforce the loan and
related security agreements or affect the value of such mortgage loans. If an
Owner Trust were the subject of a bankruptcy petition, the right to exercise
virtually all remedies against such Owner Trust would be stayed (including the
right to collect payments under the related Lease). In addition, the bankruptcy
court could permit the use or disposition of Lease payments and the Property for
purposes other than making payments on the Mortgage Notes and could reduce the
amount and modify the time of payments due under the Mortgage Notes, subject to
the application of certain procedural and substantive safeguards for the benefit
of the holders of the Mortgage Notes. Although attempts will be made to
structure each Owner Trust as a bankruptcy-remote entity (for instance, its
business will be limited to participating in the Sale-Leaseback Transactions),
there can be no assurance that an Owner Trust will not become the subject of a
bankruptcy proceeding, including by reason of the bankruptcy of the related
Owner Participant and the consolidation of the assets and liabilities of such
Owner Trust with the assets and liabilities of the related Owner Participant.
Each Owner Participant currently engages in other businesses and is not subject
to any limitations on the conduct of its business. See also "Description of the
Leases -- Consequences of Kmart's Bankruptcy".
POSSIBLE RECHARACTERIZATION OF THE LEASES AS LOANS FOR CERTAIN STATE LAW
PURPOSES
For federal income tax and accounting purposes, it is the intention and
belief of the Company that each leveraged lease transaction entered into by the
Company constitutes a "true lease". It is also the intention and belief of the
Company that each such transaction constitutes a "true lease" for purposes of
applicable state law. In this regard, the Company has agreed not to take or omit
to take any action during the Lease term inconsistent with "true lease"
classification under state law. Notwithstanding the foregoing, in an action
involving the enforcement of any Lease, a court might determine that the related
leveraged lease transaction should be recharacterized as a loan, and accordingly
that the conveyance by the Company to the Owner Trust should be deemed the
granting of an equitable mortgage securing that loan. Under such circumstances,
the Owner Trust would be considered a secured lender to the Company, and the
Indenture Trustees would be considered a lender to the Owner Trustee holding an
assignment of the security. In the event of such a recharacterization, if a
Lease Event of Default occurs and either the Owner Trust or the Indenture
Trustees elects to demand payment of the amounts due under the terms of any
Lease, the Owner Trust or the Indenture Trustees would be required to comply
with the procedural requirements of, and would be subject to the legal
limitations on recovery under, the laws of the state in which the leased
property is located that are applicable to a lender seeking to enforce remedies
on default under a loan secured by real property. It is unclear whether the
mortgage interest deemed to be held by the Owner Trust in such a recharacterized
transaction would be deemed to be properly perfected and thus enforceable
against other third party creditors. If the mortgage interest were deemed
38
<PAGE> 40
perfected, the Owner Trust (and, by assignment, the Indenture Trustees) would
have a secured claim against the Company, would be required by law to proceed
first by foreclosing on the related Property, and could subsequently seek a
deficiency judgment against the Company if the value of such property, as
determined by a subsequent judicial hearing, were insufficient to redeem the
related Mortgage Notes. If such mortgage interest were not deemed perfected, it
could be defeated by other creditors or a trustee in bankruptcy, and the Owner
Trust (and, by assignment, the Indenture Trustees) would have an unsecured claim
against the Company in an amount at least equal to the principal of, and accrued
interest on, the outstanding related Mortgage Notes. Such unsecured claim would
not be subject to the limitations on lessor damages imposed by Section 502(b)(6)
of the Bankruptcy Code. See "Description of the Leases -- Consequences of
Kmart's Bankruptcy".
MODIFICATION OF INDENTURES AND OTHER DOCUMENTS
Without the consent of holders of the Mortgage Notes outstanding under any
Indenture, the provisions of the Leases, the Participation Agreement or the
Owner Trust Agreements may not be amended or modified, except: (i) if expressly
so provided for in the provisions thereof; or (ii) if such modification or
amendment does not, in the written opinion of counsel of the party requesting
such modification or amendment, materially adversely affect the interest of any
holder of the Mortgage Notes under such Indenture and will not, as evidenced in
writing by each of S&P, Moody's and D&P result in an adverse change in the
rating of the Certificates; provided, however, that the restrictions on
amendments to the related Owner Trust Agreement are limited to certain specific
provisions thereof and provided further, that no such modification to the Lease
may reduce the amount or timing of rent necessary to pay principal, premium, if
any, and interest on the related Mortgage Notes. The Indenture Trustees may give
any consent, waiver, authorization or approval under the Participation
Agreement, the Owner Trust Agreements and the Leases, if, as set forth in an
opinion of counsel from the Owner Trustees or the Company, such action does not
materially adversely affect the interest of any holder of the Mortgage Notes
under such Indenture. (Indentures, Sections 12.07(b) and (c))
The consent of neither the Indenture Trustees nor any of the holders of the
Mortgage Notes is required to make certain adjustments to the payments under the
Leases, in compliance with the provisions thereof, except that, without the
consent of the holder of each Mortgage Note affected thereby, no such
modification or waiver may extend the time for any payment under any Lease or
reduce the amount thereof below the amount necessary to pay principal, premium,
if any, and interest on the related Mortgage Notes. (Indentures, Section
12.07(c))
Each Indenture contains provisions permitting the related Owner Trust and
the Indenture Trustees, with the consent of the holders of not less than 66 2/3%
in outstanding unpaid principal amount of the Mortgage Notes issued thereunder,
to add, modify or eliminate any provision of the Indenture, except that, without
the consent of the holder of each Mortgage Note outstanding under any Indenture
affected thereby, no amendment or modification of such Indenture may (a) reduce
the amount or extend the time of payment of any amount owing or payable on the
Mortgage Notes, reduce the rate of interest on the Mortgage Notes, change the
order of priorities in which distributions under the Indenture are to be made or
with respect to the amount or time of payment of any such distribution, change
the circumstances under which any premium becomes payable or the manner in which
such premium is calculated, change the currency in which payments under any
Mortgage Note are to be made, or impair the right of any holder of any Mortgage
Note to institute suit for the enforcement of payment thereof; (b) reduce or
modify any indemnities in favor of any holder of any Mortgage Note; (c) create
or permit the creation of any lien on the Indenture Estate ranking prior to or
on a parity (other than Refinancing Mortgage Notes) with the lien of the
Indenture; (d) reduce the percentage of the aggregate outstanding unpaid
principal amount of the Mortgage Notes issued thereunder, the consent of the
holders of Mortgage Notes evidencing which is required for any such supplement
or any waiver provided for in such Indenture; or (e) modify the
39
<PAGE> 41
provisions in (a), (b), (c) or (d) or the conditions under which holders of the
Mortgage Notes may institute suit for the enforcement of any payment.
(Indentures, Section 12.02)
Each of the Owner Trusts and the Indenture Trustee will agree in the
Participation Agreement (i) to comply with the provisions of the Indenture, (ii)
not to waive any provision of the Indenture requiring Kmart's consent
thereunder, and (iii) not to amend, supplement, waive or otherwise modify any
provision of the Indenture in such a manner as to adversely affect the rights or
increase the obligations of Kmart or the Owner Participant without the prior
written consent of such party.
DISCHARGE OF LIEN
Each Indenture will cease to be of further effect when, among other things,
either (a) all Mortgage Notes have been delivered to the Indenture Trustee for
cancellation, or (b)(i) all Mortgage Notes not theretofore delivered to the
Indenture Trustees for cancellation will mature or are to be called for
redemption such that they will be due and payable within one year, and (ii) the
related Owner Trust has deposited with the Corporate Indenture Trustee in trust
an amount sufficient to pay such Mortgage Notes, including principal, premium,
if any, and interest to the date of such maturity or redemption, together with
all other sums then due and payable thereunder. (Indentures, Section 13.01)
ASSUMPTION OF OBLIGATIONS BY KMART
Upon exercise of the Termination Right or the Competitor Option, Kmart may
assume on a full recourse basis all of the obligations of the related Owner
Trust under an Indenture, including the obligations to make payments relating to
the Mortgage Notes allocable to the related Lease, provided that, prior to such
assumption, Kmart shall have delivered to the Corporate Indenture Trustee an
opinion of independent legal counsel of recognized standing to the effect that
(i) the assumption will not constitute a sale or exchange of the Mortgage Notes
within the meaning of Internal Revenue Code section 1001 and the regulations
thereunder, and (ii) the assumption will not otherwise adversely affect the
Federal income taxation of holders of the Certificates, and subject to certain
other limitations contained in the Indenture, and in connection therewith shall
execute a supplemental indenture to the related Indenture (such supplemental
indenture, together with the related Indenture, the "Company Indenture"). See
"Description of the Leases -- Early Termination". The Property will continue to
be subject to the lien of the Company Indenture, and the Company Indenture will
incorporate certain relevant provisions of the Lease or Leases so terminated,
including (among others) provisions relating to maintenance, possession and use
of the related Property or Properties, liens, insurance and events of default;
provided, however, that if legal opinions are delivered to the effect that if
the Mortgage Notes so assumed by Kmart were unsecured, the Pass Through Trusts
would not be required to register as "investment companies" under the Investment
Company Act of 1940, as amended, and that the prohibited transaction exemption
granted to Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated (as it may
be amended, modified, added to or succeeded) (see "ERISA Considerations") would
continue to be applicable with respect to the Pass Through Trusts and the
Certificates, the lien and the related Property to be released and the Mortgage
Notes will be unsecured obligations of Kmart. In that event the Company
Indenture will contain terms substantially the same as the Indenture between
Kmart and The Bank of New York, dated as of February 1, 1985 (the "1985
Indenture"), which has been filed with the Commission.
CONCERNING THE CORPORATE INDENTURE TRUSTEE
The Corporate Indenture Trustee also serves as the Trustee under the 1985
Indenture relating to certain of Kmart's debt securities (the "Debentures").
Pursuant to the Trust Indenture Act, should a default occur with respect to
either the Debentures or any Mortgage Notes, The Bank of New York would be
required to resign as trustee with respect to the Debentures or the Mortgage
40
<PAGE> 42
Notes within 90 days of such default unless such default were cured, duly waived
or otherwise eliminated.
DESCRIPTION OF THE LEASES
The statements under this caption are summaries of the terms of the Leases
and do not purport to be complete. The summaries make use of terms defined in
and are qualified in their entirety by reference to all of the provisions of
each Lease, the form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. Except as otherwise indicated, the
following summaries relate to each of the Leases securing the related Mortgage
Notes.
TERM AND RENT
Each Owner Trust will lease its respective Property to Kmart pursuant to a
Lease for an interim term and a subsequent base term commencing on April ,
1995 which together total 25 years. Kmart will have the option to extend each
Lease for at least six consecutive terms of five years each. (Lease, Articles 2
and 8). Because the Mortgage Notes and the Certificates are scheduled to be
retired during the base term of the Lease, any such extensions should not affect
the interests of the Certificateholders. So long as no Lease Event of Default
(as defined herein) exists with respect to the Lease, Kmart, as lessee
thereunder, will be entitled to undisturbed possession of the related Property,
even if there exists a default (other than a Lease Event of Default) under the
related Indenture or under an Agreement. Rents are required to be paid by Kmart
under the Leases in immediately available funds on each January 5 and July 5,
commencing on July 5, 1995 (the "Rent Payment Dates"). On each Rent Payment
Date, the aggregate amount of rents payable under the Leases will be at least
equal to the aggregate scheduled amount of principal, interest and any Make-
Whole Premium required to be paid on the outstanding Mortgage Notes on such
date, except in certain cases of optional redemption by an Owner Trust. See
"Structure of the Transaction". Kmart is obligated under each Lease to pay
interest on any late payments of rent, which shall accrue at a rate equal to the
sum of 1% plus the weighted average of the interest rates of the Mortgage Notes
from the relevant payment date to the date such payments are actually received
by the Indenture Trustee (the "Default Rate") with respect to that portion of
rent equal to the principal, interest and premium, if any, on the related
Mortgage Notes. (Lease, Article 3).
NET LEASES; NO SET-OFF
The obligations of Kmart under each Lease are those of a lessee under a
"net lease." Kmart's obligation to pay rent is absolute and unconditional, and
payments of rent under the Leases are to be made without notice, demand,
counterclaim, set-off, deduction, defense, abatement, or reduction. (Lease,
Article 4).
Each Lease also provides that it shall not be terminable by Kmart
thereunder, except under the limited circumstances as described therein, nor
shall Kmart be entitled to any abatement or reduction, with respect to any
payment of rent or other obligation under any Lease, by reason of: (i) any
damage to or destruction of a leased Property; (ii) any taking of a Property or
any part thereof by eminent domain or otherwise; (iii) any prohibition,
limitation, restriction, interference with or prevention of Kmart's use of all
or any part of a Property; (iv) any default by an Owner Trust under any Lease;
(v) any eviction by a holder of paramount title or otherwise; (vi) any purported
merger of estates resulting from Kmart's acquisition of all or any part of a
Property; or (vii) any other cause whether similar or dissimilar to the
foregoing, any present or future law to the contrary notwithstanding. (Lease,
Article 4).
REPAIRS AND MAINTENANCE
Each Lease requires Kmart to make and pay for all maintenance, replacement,
alteration and repair, both structural and non-structural, of the Property on a
timely basis, whether such
41
<PAGE> 43
maintenance, replacement, alteration and repair is foreseeable or not
foreseeable, which may be required to keep the Property in good repair and
condition, ordinary wear and tear excepted, consistent with the standard of
maintenance employed by Kmart as of the date of the Lease with respect to
similar properties owned or leased by Kmart and located in the general
geographic area where the Property is located, and in compliance with applicable
laws and health and safety standards. (Lease, Article 9). In no event is an
Owner Trust required to repair, rebuild or maintain its respective Property.
ALTERATIONS AND ADDITIONAL CONSTRUCTION
If no Material Default or Lease Event of Default (each as defined under
"Events of Default") has occurred and is continuing, Kmart may, at its own
expense, make such alterations and additions, structural or otherwise, in or to
the buildings and erect or construct additional buildings or structures on the
Property, which alterations, additions and additional buildings and structures
shall be subject to the lien of the related Indenture, provided that the fair
market value or remaining useful life of such Property shall not be diminished
thereby except to an insignificant extent and that the Property shall not, as a
result, be characterized as "limited use property". In connection with any
alterations, additions or erection of additional improvements, Kmart shall
perform and complete all work in a first-class, workmanlike manner in compliance
with applicable laws. Kmart shall maintain at all times during construction all
risk builders insurance and comprehensive general liability insurance naming the
Owner Trust and the Indenture Trustee as additional insureds. All such
additional improvements shall be and remain the property of the related Owner
Trust and shall be subject to all of the terms and provisions of the Lease.
(Lease, Article 10). All trade fixtures and furniture installed at the expense
of Kmart shall remain the property of Kmart, not subject to the lien of the
related Indenture, and shall be removed from the premises by Kmart, at its
expense, at the expiration of the term of the Lease; provided, however, that
Kmart shall have the option, during the term of the Lease, to relinquish its
property rights with respect to such trade fixtures and, after the exercise of
such option, the property specified shall be the property of the related Owner
Trust, subject to the lien of the related Indenture. (Lease, Article 27).
LIENS
Kmart, as lessee, covenants that it shall not, during the term of the
Lease, directly or indirectly create, incur, assume, suffer or permit any lien
on or with respect to the related Property or any part thereof, any rent, title
thereto or interest therein, up to and including the date of the end of such
Lease term, other than Permitted Liens. "Permitted Liens" are: (i) the
respective rights and interests of Kmart, the related Owner Trust, the related
Owner Participant, the Remainderman, the Indenture Trustee, and the Trustee;
(ii) certain liens resulting from acts of, or claims against, the related Owner
Trust or the Remainderman; (iii) liens for taxes and assessments that either are
not yet due and payable or are being contested in good faith and by appropriate
proceedings diligently conducted, so long as such proceedings do not (a) subject
the Property to imminent risk of foreclosure, forfeiture or loss or result in
the sale of the Property, (b) interfere other than to an insignificant extent
with the use, possession or disposition of the Property, (c) interfere with the
payment of rents or (d) involve any risk of loss of the priority of the lien of
the Indenture relating thereto; (iv) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising prior to or after the date
of the Lease in the ordinary course of business for amounts either not yet due
or being contested in good faith and by appropriate proceedings so long as such
proceedings shall not involve any risk of the sale, forfeiture or loss of any
part of the Property and shall not materially interfere with the use, occupancy
or disposition of the Property or interfere with the payment of rents or involve
any risk of loss of the priority of the lien of the Indenture; (v) liens arising
after the date of the Lease out of judgments or awards with respect to which at
the time an appeal or proceedings for review is being prosecuted diligently and
in good faith and that either have been bonded to the satisfaction of the
related Owner Trust and the Indenture Trustee or the enforcement of which has
been continuously stayed pending such appeal or review;
42
<PAGE> 44
(vi) easements, rights-of-way, reservations, servitudes and rights of others
against the Property which (a) are listed as Permitted Exceptions in the
Purchase Agreement (the "Purchase Agreement") dated as of the date of the Lease
or (b) are granted pursuant to the specific provisions of such Lease; and (vii)
assignments, leases and subleases expressly permitted by the Operative Documents
(as defined in the Purchase Agreement). (Lease, Article 19).
Kmart shall promptly, but no later than 30 days after the attachment
thereof, at its own expense, discharge, eliminate or bond in a manner
satisfactory to the related Owner Trust any lien that is not a Permitted Lien.
In the event such lien is not so discharged, eliminated or bonded, such Owner
Trust may pay and discharge any such lien, and Kmart shall reimburse such Owner
Trust upon demand for the amount so paid together with interest thereon at the
Default Rate. (Lease, Article 19).
ASSIGNMENT OR SUBLEASING; USE; NO CONTINUOUS OPERATION
Kmart may assign, or sublease all or any part of, its leasehold interest in
the Properties without the prior written consent of the related Owner Trust,
provided that (i) no Lease Event of Default or Material Default has occurred and
is continuing, (ii) such assignment or sublease shall be expressly subject and
subordinate to the relevant Lease, and (iii) Kmart shall remain fully and
primarily liable for the performance of its obligations under the Lease and the
other Operative Documents. Kmart's liability under any Lease shall continue
notwithstanding the rejection of such Lease or sublease pursuant to Title 11 of
the United States Code (the "Bankruptcy Code"). In the event Kmart assigns the
Lease and it is thereafter rejected in a bankruptcy or similar proceeding, a new
lease identical to the rejected Lease shall be reinstituted as between the Owner
Trust and Kmart without further act by either party. Kmart is prohibited from
mortgaging or otherwise encumbering its interest under the Lease. (Lease,
Article 17).
Each Property may be used for any lawful purpose; provided that no use of
any Property may be made by Kmart or an assignee or sublessee of Kmart that
would: (i) be a public nuisance; (ii) cause a Property to become a "tax-exempt
use property" within the meaning of Section 168(h) of the Code, or any successor
statute thereto, or to become a "tax-exempt bond financed property" within the
meaning of Section 168(g)(5) of the Code; (iii) void any certificate of
occupancy required for such Property; (iv) cancel or make it commercially
unreasonable to obtain the issuance of any insurance policy required for such
Property by the related Lease; or (v) increase the related Owner Trust's risk of
environmental liability; provided that any retail or office use shall not be
deemed to increase the risk of environmental liability for this purpose. (Lease,
Article 17).
Each Owner Trust names Kmart as its attorney-in-fact, subject to certain
limitations and conditions, to grant easements, release existing easements, make
dedications, execute annexation petitions and amend covenants and restrictions
in respect of any Property that do not impair (other than to an insignificant
extent) the usefulness of the Property for the purposes contemplated and
permitted by the Lease, or reduce the fair market value or remaining useful life
of the Property and shall not cause such Property to be characterized as
"limited use property" for certain federal income tax purposes. (Lease, Article
13).
Kmart is not obligated under the Lease to operate a business at the
Property, except as required by law or by other agreement binding on the
Property. (Lease, Article 5).
INSURANCE
Under each Lease, Kmart is required, at its own cost and expense, to carry
workers' compensation insurance with limits of no less than $5,000,000,
insurance against loss by fire and other casualties included under
extended-coverage, all-risk endorsements, in an amount not less than 100% of the
full insurable replacement value of the improvements constituting part of the
Property, comprehensive general liability insurance with minimum coverage of
$5,000,000 with respect to injury of any one person, $5,000,000 with respect to
any one accident or disaster and $5,000,000 with respect to damage to property.
In no event shall the deductible amount under such
43
<PAGE> 45
casualty insurance policies exceed $250,000. In the event that Kmart fails to
obtain or maintain such insurance, the related Owner Trust may obtain such
coverage and will be reimbursed by Kmart for the cost thereof, plus interest at
the Default Rate from the date incurred by such Owner Trust. An Owner Trust
shall have no obligation to maintain insurance of any type on the Property and
Kmart shall not have any rights to direct actions or subrogation against any
insurance policy obtained by an Owner Trust. Notwithstanding the foregoing,
Kmart may elect to self-insure any leased Property against casualty, workers'
compensation and liability risks; provided that Kmart maintains a consolidated
tangible net worth of at least $750,000,000 calculated in accordance with
generally accepted accounting principles (the "Net Worth Standard"). (Lease,
Articles 7 and 14).
CONDEMNATION AND CASUALTY
In the event of a condemnation or casualty affecting any Property, Kmart
will be obligated to continue paying rent and to restore such Property at its
own expense as nearly as practicable to the condition as existed immediately
before the condemnation or casualty occurred. Under the Lease, Kmart is
obligated to complete such restorations prior to the expiration of the term of
the Lease or as soon as possible following the termination of the Lease. If
Kmart meets the Net Worth Standard at the time of the condemnation or casualty,
or if insurance proceeds or a condemnation award due to such occurrence are less
than $250,000 and no Material Default or Lease Event of Default has occurred and
is continuing, any such insurance proceeds or condemnation awards shall be
payable to Kmart for restoration and repair of the Property. If Kmart does not
meet the Net Worth Standard at the time of such loss, and if such condemnation
award or casualty proceeds are in excess of $250,000, however, the net proceeds
of such insurance claim or condemnation award shall, if the related Indenture is
outstanding, be deposited with the Indenture Trustee and shall be disbursed to
Kmart upon progress of completion of restoration, repair, replacement or
rebuilding, subject to certain provisions set forth in the related Lease. In the
event that condemnation proceeds exceed the actual cost of restoration, the
Indenture Trustee shall have the right to retain the excess proceeds and apply
the same in accordance with the related Indenture. (Lease, Articles 14, 15, and
16).
Notwithstanding the foregoing, in the event of a casualty affecting all or
a substantial portion of a Property (a "Casualty"), Kmart may either (i) restore
the Property as set forth above or (ii) give written notice to the related Owner
Trust of its intention to terminate the Lease and make a rejectable purchase
offer to such Owner Trust within 30 days of such damage or destruction for a
price at least equal to the principal of and interest due on the related
Mortgage Notes. In the event of a permanent or temporary condemnation of the
Property or any substantial portion thereof that in Kmart's judgment renders the
Property unsuitable for its occupancy and use, or in the event of a condemnation
of the points of ingress and egress of the Property such that they shall be
materially impaired (with no reasonable replacement points of ingress-egress
provided) so that the Property is rendered unsuitable for its intended use (any
such event referred to in this sentence or any Casualty constituting an "Event
of Loss"), Kmart shall be obligated to make such a rejectable offer to purchase
the Property within 30 days of such condemnation (or, with respect to a partial
condemnation, within 90 days after the entry of a final order of taking) for a
price at least equal to the principal of and interest due on the related
Mortgage Notes. If such offer is accepted, the purchase shall be effected on the
next scheduled Rent Payment Date occurring not less than 100 days after the
related Owner Trust's receipt of such offer. (Lease, Articles 14, 15 and 40).
If Kmart makes such a rejectable offer to purchase a Property, the related
Owner Trust will have 60 days to decide whether to accept such offer. Such Owner
Trust may not reject Kmart's purchase offer unless it makes satisfactory
provisions with the Indenture Trustee for the redemption of the related Mortgage
Notes, which provisions shall include the escrowing of cash or cash equivalents
in amounts sufficient to redeem the Mortgage Notes. If Kmart's offer is rejected
and such Owner Trust makes satisfactory arrangements with the Indenture Trustee,
Kmart shall, on the Rent Payment Date on which Kmart's purchase would otherwise
have occurred, pay to the related Owner Trust all
44
<PAGE> 46
basic rent under the Lease ("Basic Rent") and any other payment under the Lease
("Additional Rent") accrued and owing under the Lease as of such Rent Payment
Date, at which time the Lease shall terminate and such Owner Trust shall receive
all attendant insurance or condemnation proceeds. If, on the other hand, Kmart's
offer is accepted and the related Owner Trust makes satisfactory arrangements
with the Indenture Trustee, the sale of the affected Property shall be closed on
the next scheduled Rent Payment Date, and the purchase price (which shall be at
least sufficient to redeem the Mortgage Notes) and all Basic Rent and Additional
Rent accrued and owing on such date shall be paid in cash to the Indenture
Trustee for the purpose of redeeming the Mortgage Notes with any excess being
paid to such Owner Trust. In the event of any such sale, any attendant insurance
or condemnation proceeds will be paid to Kmart, and title to the affected
Property shall be conveyed to Kmart. All costs and expenses in connection with
such sale shall be paid by Kmart. (Lease, Article 40).
EARLY TERMINATION RIGHTS
Kmart may exercise its Termination Right with respect to a Lease on any
Rent Payment Date on or after the fifth anniversary of the commencement of the
base term of the Lease (provided that no Lease Event of Default or Material
Default has occurred and is continuing) if it determines that the Property has
become obsolete or may no longer be economic for Kmart's use or surplus to
Kmart's needs, by providing at least 12 months' and not more than 18 months'
notice to the related Owner Trust. In such event, the Property may be (i)
transferred to Kmart for an amount sufficient to retire the related Mortgage
Notes (including the Make-Whole Premium thereon) (the "Retirement Price"), (ii)
sold to a third party, with the excess of the Retirement Price over the net sale
price being contributed by Kmart or (iii) retained by the related Owner Trust,
provided that such Owner Trust makes satisfactory provisions with the Indenture
Trustee for the redemption of the related Mortgage Notes, which provisions shall
include the escrowing of the Retirement Price for such Mortgage Notes in cash or
cash equivalents, and the Property shall thereupon be released from the lien of
the related Indenture. Under certain circumstances, Kmart may elect to assume
the obligations of the related Owner Trust under the related Mortgage Notes upon
exercise of a Termination Right with respect to the Property. See "Description
of the Mortgage Notes -- Assumption of Obligations by Kmart." (Lease, Article
39).
If an Owner Participant becomes a competitor of Kmart during the term of
the Lease, Kmart may exercise the Competitor Option (provided that no Lease
Event of Default or Material Default has occurred and is continuing) by delivery
of a notice to such Owner Participant and the Indenture Trustees. Following
receipt of such notice, the Owner Participant will have the right for a
six-month period to sell the related Properties or its interest in the related
Properties to a transferee other than Kmart or its affiliates, and if such
transfer occurs during the six-month period, the related Mortgage Notes will not
be redeemed. If a transfer by the Owner Participant does not occur during the
six-month period, the related Properties or the Owner Participant's interest in
the related Properties may be (i) transferred to Kmart for the Retirement Price
or (ii) sold to a third party, with the excess of the Retirement Price over the
net sale price being contributed by Kmart. Kmart or any third party buyer may
elect to take title to the related Properties or the Owner Participant's
interest in the related Properties subject to the lien of the Indenture or to
cause the related Mortgage Notes to be redeemed with a Make-Whole Premium. If
Kmart elects to purchase the related Properties or the Owner Participant's
interest in the related Properties subject to the lien of the Indenture, Kmart
will assume, in accordance with and subject to the terms of the Indenture,
personal liability for the payment of the related Mortgage Notes and such
Mortgage Notes will not be redeemed. In the event of any purchase subject to the
lien of the Indenture, an amount equal to the principal amount of the Mortgage
Notes secured by such Properties then outstanding plus accrued interest thereon
will be credited against the Retirement Price. (Participation Agreement, Section
3)
45
<PAGE> 47
EVENTS OF DEFAULT
The following are events of default under each Lease ("Lease Events of
Default"):
(i) the failure by Kmart to pay any installment of Basic Rent within
five days after notice to Kmart the same is due;
(ii) the failure by Kmart to make any payment constituting Additional
Rent within 15 days after notice to Kmart of non-payment;
(iii) the failure by Kmart to maintain insurance as required by the
Lease;
(iv) the failure by Kmart to perform any of its other covenants or
obligations under the Lease or any of the other Operative Documents (other
than the Tax Indemnification Agreement (as defined in the Lease)) within 30
days after notice thereof; provided that any non-monetary default that is
curable but is not susceptible to a cure within 30 days shall not be deemed
a default if a cure is commenced within 30 days after such notice and is
diligently pursued thereafter; provided further that in no event shall such
cure period for a non-monetary default exceed 180 days;
(v) certain events of bankruptcy, insolvency, reorganization pursuant
to bankruptcy or similar laws, receivership, dissolution or liquidation of
Kmart; and
(vi) any representation or warranty by Kmart in the Lease or any of
the other Operative Documents (other than the Tax Indemnification
Agreement) or in any certificate expressly required to be delivered
pursuant thereto shall have been false or incorrect when made in any
respect material to the Owner Trust or the Owner Participant and such
falseness or incorrectness is material to the Owner Trust or the Owner
Participant and continues to be material, and shall not have been cured
within 30 days after receipt of written notice by Kmart from the Owner
Trust, unless the default is curable and Kmart shall be diligently
proceeding to correct such default; provided that in no event shall such
cure period exceed 60 days.
For purposes of each Lease, a "Material Default" shall mean an event of the
type described in clauses (i) and (v) above that, with the passage of time or
the giving of notice, or both, would become a Lease Event of Default.
To the extent that any failure by Kmart to perform any covenant or
obligation or any breach of a representation or a warranty relates solely to a
Property or Properties other than the Property subject to a particular Lease,
such failure or breach shall not give rise to a Lease Event of Default under
such Lease. (Lease, Article 20).
REMEDIES
If a Lease Event of Default has occurred with respect to any Lease and is
continuing beyond any applicable cure periods, the related Owner Trust may (i)
terminate such Lease and recover damages from Kmart as described below, (ii)
re-enter the Property without terminating such Lease to remove Kmart and its
property, all at Kmart's expense, with Kmart remaining liable for the balance of
rents accruing to the end of the base term of such Lease (less the amount
received by such Owner Trust with respect to reletting the Property net of such
Owner Trust's expenses in connection therewith) and/or (iii) sell all or part of
the Property at public or private sale, free and clear of any rights of Kmart
therein, and Kmart's obligation to pay Basic Rent with respect to the Property,
or the part thereof that has been sold, for any periods commencing after the
date of such sale shall terminate. If a Lease is terminated upon the occurrence
of a Lease Event of Default thereunder, damages permitted to be recovered by the
related Owner Trust from Kmart include: (i) all rents and other payments due
under such Lease as of the date on which the Lease shall be terminated and all
other amounts due on the related Mortgage Notes, plus (ii) at the option of such
Owner Trust, any one of: (a) the difference between the termination value
identified in the related Lease (the "Termination Value") and the present value
of the fair market rental value of the
46
<PAGE> 48
Property, discounted semiannually at a 7% annual percentage rate for the
remainder of the term of the Lease; or (b) the difference between the present
value of all rents, discounted semiannually at a 7% annual percentage rate, for
the remainder of the base or applicable renewal term of the Lease (the
"Discounted Basic Rents") and the present value of the fair market rental value
of the Property for the remainder of such term, discounted semi-annually at a 7%
annual interest rate; or (c) an amount equal to the greater of the fair market
value of the Property, the Discounted Basic Rents and the Termination Value; or
(d) the difference between the Termination Value and the fair market sales value
of the Property. Fair market values are determined by agreement between Kmart
and the related Owner Trust or by appraisal. If the related Owner Trust receives
the sum of the amounts described in clauses (i) and (ii)(c) above, such Owner
Trust will convey the Property to Kmart. Because each Owner Trust has assigned
certain of its rights under the Lease to the Indenture Trustee, only the
Indenture Trustee, and not the Owner Trust, may exercise remedies following a
Lease Event of Default. (Indenture, Section 8.01) The above-described amounts
will accrue interest at the Default Rate from the final payment date specified
in the related Owner Trust's notice of default and termination of a Lease to the
date of actual payment by Kmart. (Lease, Article 21).
SUBSTITUTION
In lieu of the acquisition by Kmart of the Property in accordance with the
Lease, provided that no Material Default or Lease Event of Default has occurred
and is continuing, Kmart shall be entitled to substitute a retail store (the
"Substitute Property") for the Property provided that as of the date of such
substitution (i) the fair market value of the Substitute Property is not less
than the fair market value of the Property immediately prior to the event which
gave rise to the substitution, (ii) the useful life of the Substitute Property
is not less than the useful life of the Property immediately prior to the event
which gave rise to the substitution, (iii) Kmart shall make the same
representations and warranties with respect to the Substitute Property as it had
previously made with respect to the Property, (iv) Kmart shall deliver an
environmental assessment report, survey and title search report, each of which
shall be satisfactory, to the Owner Trust and the Indenture Trustee and (v) the
substitution shall not reduce the amount or timing of any rents due under the
Lease. Kmart shall not be entitled to substitute a Property unless (i) the
long-term senior debt securities of Kmart shall have been rated in one of the
generic rating categories that signifies "investment grade" by S&P and Moody's
and (ii) Kmart agrees to either structure the substitution transaction to avoid
any material adverse tax consequences identified in an opinion of independent
tax counsel or indemnify the related Owner Trust and Owner Participant against
such adverse tax consequences. All other terms and conditions of the Lease shall
apply to the Substitute Property. If such substitution occurs, the Substitute
Property shall replace the Property as security for the Mortgage Notes. (Lease,
Article 41).
THE PARTICIPATION AGREEMENT
The Company is required to indemnify each Owner Participant, the Owner
Trustee, each Owner Trust, the Indenture Trustees and the Remainderman for
certain losses and claims and for certain other matters. (Participation
Agreement, Section 22). Subject to certain restrictions, each Owner Participant
may transfer its interest in the Properties. (Participation Agreement, Section
2).
CONSEQUENCES OF KMART'S BANKRUPTCY
Numerous statutory provisions, including the federal bankruptcy laws and
state laws affording relief to debtors, may interfere with or affect the ability
of a secured party to realize upon collateral. For example, a court with federal
bankruptcy jurisdiction (the "Bankruptcy Court") may permit a debtor through its
plan of reorganization to cure a monetary default in respect of a mortgage by
paying arrearages within a reasonable time and reinstating the original loan
payment schedule even if the lender has accelerated the loan and a foreclosure
proceeding has been commenced in state court (provided no sale of the property
had yet occurred) prior to the filing of the debtor's petition.
47
<PAGE> 49
Some Bankruptcy Courts have approved plans, based on the particular facts of the
reorganization case, that effected the curing of a default under a mortgage by
paying arrearages over a number of years.
In the event a bankruptcy proceeding is instituted by or against Kmart
under the Title 11 of the United States Code (the "Bankruptcy Code"), Kmart, as
debtor-in-possession, or its trustee in bankruptcy, would have the right,
subject to bankruptcy court approval to assume or reject the Leases. If any
Lease were rejected, payments thereunder would terminate, thereby leaving the
related Owner Trust without cash flow to make payments on the Mortgage Notes
issued in respect of the Property leased thereunder. In the event a Lease were
rejected, the related Owner Trust (and by virtue of the Indentures, the
Indenture Trustees) would have an unsecured non-priority claim for damages
against Kmart's bankruptcy estate but, under Section 502(b)(6) of the Bankruptcy
Code, such claim 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 the Lease (plus rent already due
but unpaid). By contrast, this limitation under Section 502(b)(6) would not
apply to holders of debt securities issued by Kmart. Therefore, except during
the final year of the Lease term, if Kmart were the subject of proceedings under
the Bankruptcy Code and any Lease were rejected, the damages that could be
claimed for rejection, even assuming full recovery on such claim (which may not
occur), would not be sufficient to satisfy the outstanding amount of the
Mortgage Notes issued in respect of the Property leased thereunder. Kmart also
may have the right in a bankruptcy to assume and assign the Lease (but only if
adequate assurance of future performance by the assignee is provided) and
thereby be relieved of liability for any breach of such Lease occurring after
such assignment. Moreover, it is possible that a bankruptcy court could treat
the transactions described herein not as a leasing transaction but instead as a
secured loan to Kmart, in which case the bankruptcy court could permit Kmart to
use or dispose of the Properties, subject to providing "adequate protection"
(such as a lien on substitute collateral) to the related Owner Trust, and to
modify and to adversely affect the rights of such Owner Trust, including
reduction of the amount and modification of the timing of payments that would
otherwise have been payable by Kmart under the Leases (in which event, however,
the above-described limitation under Section 502(b)(6) of the Bankruptcy Code
would not be applicable). The occurrence of any of the foregoing events may have
a material adverse effect on the holders of the Certificates.
48
<PAGE> 50
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Dickinson, Wright, Moon, Van Dusen & Freeman, counsel to
Kmart, the following discussion accurately describes the material federal income
tax consequences of the ownership and disposition of Certificates. This
discussion is based on laws, regulations, rulings and decisions now in effect,
all of which are subject to change or different interpretation. Moreover,
certain of the anticipated federal income tax consequences discussed herein are
based on regulations of the Treasury Department ("Treasury Regulations") which
are proposed and subject to change and which are not binding authority until
adopted as final or temporary Treasury Regulations. As a result, definitive
guidance cannot be provided regarding all of the federal income tax consequences
to Certificateholders or to the Pass Through Trusts. In addition, there can be
no assurance that the Internal Revenue Service or the courts would not take
positions different from those discussed herein and which positions could be
materially adverse to Certificateholders. Investors should consult their own tax
advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership, redemption and/or disposition
of the Certificates, including the advisability of making any elections
discussed herein. This discussion does not purport to address federal income tax
consequences applicable to particular categories of investors, some of which
(for example, insurance companies and foreign investors) may be subject to
special rules.
PROSPECTIVE 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 CERTIFICATES, INCLUDING THE ADVISABILITY
OF MAKING ANY ELECTION DISCUSSED BELOW.
The Pass Through Trusts will not be indemnified for any federal income
taxes that may be imposed upon them, and the imposition of any such taxes could
result in a reduction in the amounts available for distribution to the holders
of Certificates evidencing interests in the affected Pass Through Trust.
GENERAL
Based upon an interpretation of analogous authorities under currently
applicable law, the Pass Through Trusts created by the Agreements will not be
classified as associations taxable as corporations, but, rather will be
classified as grantor trusts under Subpart E, Part I, Subchapter J of Chapter 1
of the Internal Revenue Code of 1986, as amended (the "Code"). Each
Certificateholder will be treated as the owner of a pro rata undivided interest
in each of the Mortgage Notes or any other property held in the Pass Through
Trust in which the Certificate held by such holder evidences an interest.
In reaching the conclusion that each of the Pass Through Trusts will be
classified as a grantor trust, counsel considered whether the Pass Through
Trusts could be recharacterized as "taxable mortgage pools" which are treated as
corporations 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 with terms similar to debt
obligations) with two or more maturities. Because each Pass Through Trust will
issue only one class of beneficial interest having only one maturity date, the
Pass Through Trusts could be treated as "taxable mortgage pools" only if the two
Pass Through Trusts were integrated (i.e., treated as one trust). While there is
no authority directly on point, in rendering its opinion that the Pass Through
Trusts will be treated as grantor trusts, counsel concluded that the Pass
Through Trusts should be respected as separate entities, in part, because (i)
each Pass Through Trust will own separate assets, (ii) each Pass Through Trust
will have separate independent Trustees, (iii) each Pass Through Trust will have
separate sets of Certificateholders and (iv) each Pass Through Trust will have
independent economic substance. Proposed Treasury Regulations under section
7701(i) of the Code provide that for purposes of applying the taxable mortgage
pool rules, ownership interests in entities that
49
<PAGE> 51
are classified as "investment trusts" under the rules of Treasury Regulations
section 301.7701-4(c) will not be treated as debt obligations of such trusts.
Since each Pass Through Trust is expected to be classified as an "investment
trust" under such Treasury Regulations, the Proposed Treasury Regulations would
confirm that the taxable mortgage pool rules should not apply to the Pass
Through Trusts.
Each Certificateholder, 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 the Mortgage Notes or any other property held in
the related Pass Through Trust and may, subject to applicable Code limitations
on deductions, deduct its pro rata share of the deductible expenses of the
related Pass Through Trust, at the same time and to the same extent as if it
held directly a pro rata interest in the assets of the Pass Through Trust and
received and paid directly the amounts received and paid by the Pass Through
Trust. A Certificateholder who is an individual, trust or estate will be allowed
a deduction for certain itemized deductions only to the extent they exceed, in
the aggregate, 2% of the Certificateholder's adjusted gross income and such
amounts will not be deductible in computing such taxpayer's alternative minimum
tax liability if any.
A purchaser of a Certificate will be treated as purchasing an interest in
each Mortgage Note and any other property in the related Pass Through Trust at a
price determined by allocating the purchase price paid for the Certificate among
such Mortgage Notes and other property in proportion to their fair market values
at the time of purchase of the Certificate.
SALES OF CERTIFICATES
A Certificateholder that sells a Certificate will recognize gain or loss
(in the aggregate) equal to the difference between its adjusted tax basis in the
Certificate and the amount realized on the sale (except to the extent
attributable to accrued interest, which should be taxable as interest income).
Subject to the market discount provisions of the Code (described below), any
such gain or loss will be capital gain or loss if the Certificate was held as a
capital asset and will be long-term capital gain or loss if the Certificate was
held for more than one year.
MARKET DISCOUNT
A purchaser of a Certificate subsequent to its original issue will be
considered to have acquired an interest in a Mortgage Note at a "market
discount" to the extent the remaining principal amount of the Mortgage Note
allocable to the Certificate exceeds the Certificateholder'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
Certificateholder 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.
In the case of a sale or certain other disposition of indebtedness subject
to the market discount rules, section 1276 of the Code requires that gain, if
any, from such sale or disposition be treated as ordinary income to the extent
such gain does not exceed the market discount that has accrued on such
indebtedness during the period in which it was held.
In the case of a partial principal payment on indebtedness subject to the
market discount rules, section 1276 of the Code requires that such payment be
included in gross income as ordinary income to the extent such payment does not
exceed the market discount that has accrued on such indebtedness during the
period in which it was held. The amount of any accrued discount later required
to be included in income upon a disposition, or a subsequent partial principal
payment, will be reduced by the amount of such partial principal payment
previously included in income.
Generally, market discount accrues under a straight line method, or, at the
election of the taxpayer, a constant interest method. However, in the case of
installment obligations (such as the Mortgage Notes), the manner in which market
discount is to be accrued has been left to Treasury
50
<PAGE> 52
Regulations not yet issued. Until such Treasury Regulations are issued, the
Conference Report indicates that 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) as follows: the amount of market discount that is
deemed to accrue is the amount of market discount that bears the same ratio to
the total amount of market discount remaining that the amount of stated interest
paid in the accrual period bears to the total amount of stated interest
remaining to be paid on the installment obligation as of the beginning of such
period.
Under section 1277 of the Code, if in any taxable year interest paid or
accrued on indebtedness incurred or continued to purchase or carry market
discount indebtedness exceeds the interest currently includible in income with
respect to such market discount indebtedness, deduction of such excess interest
must be deferred to the extent of the market discount allocable to the portion
of the taxable year in which such market discount indebtedness was held by the
taxpayer. The deferred portion of such interest will generally be deductible
when such market discount is included in income upon the sale or other
disposition (including repayment) of the indebtedness.
Section 1278 of the Code allows a taxpayer to make an election to include
market discount in gross income currently. If such election is made, the rules
of sections 1276 and 1277 (described above) will not apply to the taxpayer. Such
an election shall apply to all debt instruments with market discount acquired by
the taxpayer on or after the first day of the first taxable year to which the
election applies. The election shall apply to all subsequent taxable years and
may not be revoked without the consent of the Secretary of Treasury.
PREMIUM
A Certificateholder will generally be considered to have acquired an
interest in a Mortgage Note at a premium to the extent the purchaser's tax basis
allocable to such interest exceeds the remaining principal amount of the
Mortgage Note allocable to such interest. In that event, a Certificateholder
that holds a Certificate as a capital asset may elect to amortize that premium
as an offset to interest income under section 171 of the Code with corresponding
reductions in the Certificateholder's tax basis in that Mortgage Note.
Generally, such amortization is on a constant yield basis. However, in the case
of installment obligations (such as the Mortgage Notes), the Conference Report
indicates a Congressional intent that amortization be in accordance with the
rules that apply to the accrual of market discount on installment obligations.
See "Market Discount". Such an election shall apply to all debt instruments with
amortizable bond premium (other than debt instruments the interest on which is
excludible from gross income) held by the Certificateholder as of the beginning
of the taxable year for which the election applies or thereafter acquired. The
election will apply to all subsequent taxable years, and may not be revoked
without the consent of the Secretary of the Treasury.
Since the Mortgage Notes may be redeemed at a premium prior to maturity,
amortizable bond premium may be determined by reference to an early redemption
date if this results in a smaller premium attributable to the period before the
redemption date. Due to the complexities of the amortizable premium rules,
particularly where there is more than one possible redemption date and the
amount of any premium is uncertain, Certificateholders are urged to consult
their own tax advisors as to the amount of any such amortizable premium.
ORIGINAL ISSUE DISCOUNT
Generally, a holder of a debt instrument issued with original issue
discount that is not de minimis must include original issue discount in income
for federal income tax purposes as it accrues, in advance of the receipt of the
cash attributable to such income, using a method that takes into account the
compounding of interest. It is anticipated that the Mortgage Notes will not be
issued with original issue discount.
51
<PAGE> 53
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 Certificateholder complies with certain
reporting procedures or is an exempt recipient under Section 6049(b)(4) of the
Code. Any such withheld amount will be allowed as a credit against the
Certificateholder's federal income tax.
CERTAIN TAXES
The Trustee for Pass Through Trust 1995-K-1 is a national banking
association with its corporate trust office in Jacksonville, Florida. Squire,
Sanders & Dempsey, as Florida counsel to Pass Through Trustee 1995 K-1 ("Florida
Counsel"), has advised Kmart and the Underwriters that, in their opinion,
subject to certain qualifications and assumptions discussed below, under
currently applicable law, assuming that the Pass Through Trust 1995-K-1 will not
be taxable as a corporation, but, rather, will be treated as an investment trust
which is classified as a grantor trust under subpart E, Part I of Subchapter J
of the Code, (a) there are no fees, taxes or other charges payable (except taxes
imposed on fees payable to Pass Through Trustee 1995-K-1 and occupational
license taxes imposed on Pass Through Trustee 1995-K-1 for conducting its trust
business in the City of Jacksonville) to the State of Florida or the
consolidated City of Jacksonville/Duval County in connection with the execution,
delivery and performance of Pass Through Agreement 1995-K-1 or the purchase,
holding or sale of the Certificates issued pursuant to the Pass Through
Agreement 1995-K-1 (the "Pass Through Certificates 1995-K-1") which would not
have been imposed if Pass Through Trustee 1995-K-1 had not had its principal
place of business in or performed its duties under Pass Through Agreement
1995-K-1 in the City of Jacksonville, Florida, and (b) none of the Pass Through
Trustee 1995-K-1, the Pass Through Trust 1995-K-1 or holders of the Pass Through
Certificates 1995-K-1 will be subject to any fee, tax or other charge under the
laws of the State of Florida or the consolidated City of Jacksonville/Duval
County on, based on or measured by, directly or indirectly, any payments on the
Pass Through Certificates 1995-K-1 or the gross receipts, net or gross income,
tangible or intangible property, net worth or capital of Pass Through Trust
1995-K-1 which would not have been imposed if Pass Through Trustee 1995-K-1 had
not had its principal place of business in or performed its duties under Pass
Through Agreement 1995-K-1 in the City of Jacksonville, Florida.
The Trustee for Pass Through Trust 1995-K-2 is a California corporation
with its corporate trust office in Los Angeles, California. Jones, Day, Reavis &
Pogue, as California counsel to Pass Through Trustee 1995 K-2 ("California
Counsel"), has advised Kmart and the Underwriters that, in their opinion,
subject to certain qualifications and assumptions discussed below, under
currently applicable law, assuming that the Pass Through Trust 1995-K-2 will not
be taxable as a corporation, but, rather, will be treated as an investment trust
which is classified as a grantor trust under subpart E, Part I of Subchapter J
of the Code (a) there are no fees, taxes or other charges payable (except taxes
imposed on fees payable to Pass Through Trustee 1995-K-2 and utility user taxes
imposed on Pass Through Trustee 1995-K-2 for conducting its trust business in
the City of Los Angeles) to the State of California, the City of Los Angeles or
the County of Los Angeles in connection with the execution, delivery and
performance of Pass Through Agreement 1995-K-2 or the purchase, holding or sale
of the Certificates issued pursuant to Pass Through Trust Agreement 1995-K-2
(the "Pass Through Certificates 1995-K-2") which would not have been imposed if
Pass Through Trustee 1995-K-2 had not had its principal place of business in or
performed its duties under Pass Through Agreement 1995-K-2 in the City of Los
Angeles, California, and (b) none of the Pass Through Trustee 1995-K-2, the Pass
Through Trust 1995-K-2 or the holders of the Pass Through Certificates 1995-K-2
will be subject to any fee, tax or other charge under the laws of the State of
California, the City of Los Angeles or the County of Los Angeles on, based on or
measured by, directly or indirectly, any payments on the Pass Through
Certificates 1995-K-2 or the gross receipts net or gross income, tangible or
intangible property, net worth or capital of Pass Through
52
<PAGE> 54
Trust 1995-K-2 which would not have been imposed if Pass Through Trustee
1995-K-2 had not had its principal place of business in or performed its duties
under Pass Through Agreement 1995-K-2 in the City of Los Angeles, California.
The foregoing opinions are subject to the following assumptions and
qualifications: Florida Counsel's opinion is limited to the present laws of the
State of Florida and the consolidated City of Jacksonville/Duval County and
California Counsel's opinion is limited to the present laws of the State of
California, the City of Los Angeles and the County of Los Angeles, and, as to
each opinion, judicial and administrative interpretations thereunder. Such
authorities are subject to change, which may be prospective or retroactive, and
no assurance may be given as to the effect of any such change on the conclusions
reached in either of such opinions. Further, no opinion is expressed with
respect to the laws of any other jurisdiction or the effect thereof or as to
whether any particular Certificateholder may be subject to any fee, tax or other
charge under any such state or local laws because of such holder's individual
circumstances. Such opinions are based on the assumptions that the descriptions
of the facts relating to the Pass Through Certificates 1995-K-1 (in the case of
Florida Counsel's opinion) and the Pass Through Certificates 1995-K-2 (in the
case of California Counsel's opinion) set forth in the Registration Statement
are accurate and complete, that the Pass Through Agreement 1995-K-1 (in the case
of Florida Counsel's opinion) and the Pass Through Agreement 1995-K-2 (in the
case of California Counsel's opinion) will be duly executed and delivered by
each of the parties thereto in the form of such agreement reviewed by such
Counsel and that the Pass Through Trust 1995-K-1 (in the case of Florida
Counsel's opinion) and the Pass Through Trust 1995-K-2 (in the case of
California Counsel's opinion) will be operated in a manner consistent with the
Pass Through Agreement 1995-K-1 (in the case of Florida Counsel's opinion) and
the Pass Through Agreement 1995-K-2 (in the case of California Counsel's
opinion) and related documents reviewed by such Counsel. A change in such facts,
terms of the Pass Through Agreement 1995-K-1 or the Pass Through Agreement
1995-K-2, or method of operation could adversely affect such opinions. Florida
Counsel and California Counsel did not take part in the preparation of this
Prospectus or the Registration Statement, and their respective opinions
discussed herein express no opinion on the accuracy, completeness or sufficiency
of the Prospectus and the Registration Statement or other offering material
relating to the Certificates.
Neither the Pass Through Trusts nor the Certificateholders will be
indemnified for any state or local taxes imposed on them, and the imposition of
any such taxes on a Pass Through Trust could result in a reduction in the
amounts available for distribution by the holders of Certificates evidencing
interests in such Pass Through Trust. In general, should a Certificateholder or
a Pass Through Trust be subject to any state or local tax which would not be
imposed if the Trustee were located in a different jurisdiction in the United
States, the Trustee will resign and a new Trustee in such other jurisdiction
will be appointed.
PROSPECTIVE 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 CERTIFICATES.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on covered employee benefit plans, including
corporate pension and profit sharing plans ("Plans"), and on persons who are
parties in interest or disqualified persons ("Parties in Interest") with respect
to such Plans. ERISA also imposes certain duties on persons who are fiduciaries
of Plans and prohibits non-exempt transactions between a Plan and its Parties in
Interest. Governmental plans and certain church plans are not subject to ERISA.
Certain plans not subject to ERISA, such as individual retirement accounts,
certain Keogh plans, and governmental or church plans qualified under Section
401(a) of the Code, are subject to separate prohibitions in the Code against
non-exempt transactions with Parties in Interest.
53
<PAGE> 55
Investments by Plans are subject to ERISA's general fiduciary requirements,
including the requirement of investment prudence and diversification and the
requirement that a Plan's investments be made in accordance with the documents
governing the Plan. Moreover, each Plan fiduciary should determine whether,
under the general fiduciary standards of investment prudence and
diversification, an investment in the Certificates is appropriate for the Plan,
taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
Plan fiduciaries must also determine whether the acquisition and holding of
the Certificates and the operations of the Pass Through Trusts and the Owner
Trust (collectively, the "Trust Funds") would result in direct or indirect
prohibited transactions. The operations of the Trust Funds could result in
prohibited transactions if Plans that purchase the Certificates are deemed to
own an interest in the underlying assets of one or more of the Trust Funds.
There may also be an improper delegation of the responsibility to manage Plan
assets if Plans that purchase the Certificates are deemed to own an interest in
the underlying assets of the Trust Funds.
The Department of Labor (the "DOL") has granted to Goldman, Sachs & Co. and
Morgan Stanley & Co. Incorporated (collectively, the "Underwriter")
administrative exemptions ((Prohibited Transaction Exemption 89-88 (Goldman,
Sachs); Prohibited Transaction Exemption 90-24 (Morgan Stanley)) (the
"Exemption"), from certain of the prohibited transaction rules of ERISA with
respect to the initial purchase, the holding and the subsequent resale by Plans
of certificates representing interests in asset-backed pass-through trusts that
consist of certain receivables, loans and other obligations that meet the
conditions and requirements of the Exemption. The obligations covered by the
Exemption appear to include obligations such as the Mortgage Notes. The
Exemption may apply to the acquisition, holding and resale of the Certificates
by a Plan, depending upon whether certain conditions (some of which are outside
the control of the Underwriter, the Owner Trusts, the Trustees and Kmart) are
met.
Among the conditions which must be satisfied for the Exemption to apply are
the following:
(1) the acquisition of the Certificates by a Plan is on terms
(including the price for the Certificates) that are at least as favorable
to the Plan as they would be in an arm's-length transaction with an
unrelated party;
(2) the rights and interests evidenced by the Certificates acquired by
the Plan are not subordinated to the rights and interests evidenced by
other certificates of the Pass Through Trust;
(3) the Certificates acquired by the Plan have received a rating at
the time of such acquisition that is in one of the three highest generic
rating categories from S&P, Moody's, D&P or Fitch Investors Service, Inc.
("Fitch");
(4) the sum of all payments made to the Underwriter in connection with
the distribution of the Certificates represents not more than reasonable
compensation for underwriting the Certificates. The sum of all payments
made to and retained by the Owner Trustee pursuant to the sale of the
Mortgage Notes to the Pass Through Trusts represents not more than the fair
market value of such Mortgage Notes. The sum of all payments made to and
retained by a Servicer (as defined below) represents not more than
reasonable compensation for the Servicer's services under the Trust Funds
and reimbursement of the Servicer's reasonable expenses in connection
therewith;
(5) the Trustees must not be an affiliate of any member of the
Restricted Group (as defined below); and
(6) the Plan investing in the Certificates is an "accredited investor"
as defined in Rule 501(a)(1) of Regulation D under the Securities Act of
1933.
As of the date of this Prospectus, only one of the rating agencies referred
to in subparagraph (3) above, D&P, rates the senior debt securities of Kmart in
one of its three highest generic rating
54
<PAGE> 56
categories. D&P has informed Kmart that it has placed Kmart's debt securities,
currently rated by D&P as A-, which is in its third highest generic rating
category, on its "credit watch" list. Although it is a condition to issuance of
the Certificates that they be rated A- by D&P, there can be no assurance that
D&P will not lower its rating in the future. See "Rating."
Plan fiduciaries may not have available to them and may not be able to
obtain all the information necessary to satisfy themselves that the conditions
of the Exemption are satisfied. Moreover, neither the Underwriter, the Trustees,
the Owner Trusts, nor Kmart have any duty to provide Plan fiduciaries with any
such information.
The Pass Through Trusts also must meet the following requirements:
(i) the corpus of the Pass Through Trusts must consist solely of
assets of the type which have been included in other investment pools;
(ii) certificates in such other investment pools must have been rated
in one of the three highest rating categories of S&P, Moody's, D&P or Fitch
for at least one year prior to the Plan's acquisition of Certificates; and
(iii) certificates evidencing interests in such other investment pools
must have been purchased by investors other than Plans for at least one
year prior to any Plan's acquisition of Certificates.
Moreover, the Exemption provides relief from certain self-dealing
prohibited transactions if a Plan fiduciary causes a Plan to acquire
Certificates in a Pass Through Trust in which the fiduciary or its affiliate is
an obligor on no more than 5% of the fair market value of the receivables held
in the trust, provided that, among other requirements: (i) in the case of an
acquisition in connection with the initial issuance of Certificates, at least
50% of each class of Certificates in which Plans have invested is acquired by
persons independent of the Restricted Group; (ii) the Plan's investment in
Certificates does not exceed 25% of all the Certificates outstanding at the time
of the acquisition; and (iii) immediately after the acquisition, no more than
25% of the assets of the Plan managed or advised by the fiduciary are invested
in certificates representing an interest in one or more trusts containing assets
sold or serviced by the same entity. The Exemption does not apply to Plans
sponsored by Kmart, the Underwriter, the Owner Trustee, the Trustees, the
Servicers, or any affiliate of such parties (the "Restricted Group").
The Exemption also covers generally transactions in connection with the
servicing, management and operation of the Pass Through Trusts if such
transactions are entered into pursuant to a binding pooling or servicing
agreement provided or described in all material respects to the Plans prior to
their purchase of Certificates.
The DOL has issued a final regulation (29 C.F.R. Section 2510.3-101) (the
"Plan Assets Regulation") providing that, as a general rule, the underlying
assets and properties of corporations, partnerships, trusts and certain other
entities (other than operating companies) in which a Plan makes an equity
investment will be deemed for purposes of ERISA and Section 4975 of the Code to
be assets of the investing Plan, unless certain exceptions apply. Accordingly,
if a Plan purchases the Certificates, the related Pass Through Trusts and
possibly the Owner Trust will be deemed to hold plan assets unless one of the
exceptions under the Plan Assets Regulation is applicable to the Trust Funds.
Because it is not believed that the Certificates will be held by at least 100
holders independent of Kmart and each other, the only exception that may be
available is an exception applicable if less than 25% of equity interests
(determined after each sale or transfer of a Certificate) of the Certificates in
a Pass Through Trust is held at all times by "benefit plan investors," which
include Plans, IRAs and Keogh plans, governmental plans and certain other plans
not subject to ERISA. However, there can be no assurance that this exception set
forth in the Plan Assets Regulation will apply to the Trust Funds, since the
level of benefit plan investment will not be monitored.
55
<PAGE> 57
Under the terms of the Plan Assets Regulation, if the Trust Funds were
deemed to hold Plan assets by reason of a Plan's investment in a Certificate,
such Plan assets would include an undivided interest in the Mortgage Notes in
the Pass Through Trusts and possibly the assets in the Owner Trust. In such an
event, the Trustees and servicers providing services with respect to the assets
of the Trust Funds ("Servicers") may be subject to the fiduciary responsibility
provisions of Title I of ERISA. Violation of fiduciary duties by a Trustee or
Servicer could result in liability not only for the Trustee or Servicer but also
for the trustee or other fiduciary of an investing Plan, who under the
circumstances could be held liable for breaches of fiduciary standards by its
co-fiduciaries.
In addition, if the Trust Funds were deemed to hold Plan assets, the
Trustees and Servicers may be subject to the prohibited transaction provisions
of ERISA and Section 4975 of the Code with respect to transactions involving
such assets unless those transactions are subject to a statutory or
administrative exemption. Among the administrative class exemptions that may be
available in addition to the Exemption discussed above are: Prohibited
Transaction Class Exemption ("PTE") 75-1, which exempts certain securities
transactions involving employee benefit plans and certain broker-dealers and
banks; PTE 91-38 (formerly PTE 80-51), which exempts certain transactions
between bank collective investment funds and parties in interest; PTE 90-1
(formerly PTE 78-19), which exempts certain transactions with insurance company
pooled separate accounts; or PTE 84-14, which exempts certain transactions
effected on behalf of a Plan by a "qualified professional asset manager".
Any Plan fiduciary which proposes to cause a Plan to purchase Certificates
should consult with its counsel with respect to the potential applicability of
ERISA, the Exemption and the Code (including the Plan Assets Regulation) to such
investments, whether any prohibited transaction exemptions would be applicable,
and whether all conditions of any potentially applicable prohibited transaction
exemption have been satisfied. Additionally, the Plan fiduciary should consult
its counsel with respect to any valuation issues which may be presented by an
investment in Certificates.
LEGAL INVESTMENT CONSIDERATIONS
The Certificates will not constitute "mortgage related securities" under
the Secondary Mortgage Market Enhancement Act of 1984. The appropriate
characterization of the Certificates under various legal investment
restrictions, and thus the ability of investors subject to these restrictions to
purchase Certificates, may be subject to significant interpretive uncertainties.
All investors whose investment authority is subject to legal restrictions should
consult their own legal advisors to determine whether, and to what extent, the
Certificates will constitute legal investments for them.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, Kmart has agreed to cause the Trustees to sell to Goldman, Sachs &
Co. and Morgan Stanley & Co. Incorporated (together, the "Underwriters"), and
each of the Underwriters has severally agreed to purchase, the principal amount
of Certificates set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF CERTIFICATES
-------------------------------------------------------------- ----------------
<S> <C>
Goldman, Sachs & Co. ......................................... $
Morgan Stanley & Co. Incorporated.............................
----------------
Total.................................................... $155,000,000
=============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Certificates, if any
are taken.
56
<PAGE> 58
The Underwriters propose to offer the Certificates in part directly to
retail purchasers at the public offering price for such Certificates set forth
on the cover page of this Prospectus and in part to certain securities dealers
at such price less the concession of % of the principal amount of the
Certificates relating to the Pass Through Trust 1995-K-1 and % of the
principal amount of the Certificates relating to the Pass Through Trust
1995-K-2. The Underwriters may allow, and such dealers may reallow, a concession
not to exceed % of the principal amount of the Certificates relating to the
Pass Through Trust 1995-K-1 and % of the principal amount of the
Certificates relating to the Pass Through Trust 1995-K-2. After the Certificates
are released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Underwriters.
The Certificates are a new issue of securities with no established trading
market. Kmart has been advised by the Underwriters that they intend to make a
market in the Certificates but are not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Certificates.
Kmart has agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
The Underwriters perform investment banking services for Kmart in the
ordinary course of their respective businesses. Goldman, Sachs & Co. have
performed certain services to Kmart in connection with the sale of the
Properties to the Owner Trusts.
RATING
It is a condition to the issuance of the Certificates that they be rated
BBB by the Standard & Poor's Ratings Group, Baa1 by Moody's and A- by Duff &
Phelps Credit Rating Co. The ratings will not address the receipt of the
Make-Whole Premium, if any, payable upon the occurrence of an Event of Default.
A security rating is not a recommendation to buy, sell or hold securities,
may be subject to revision or withdrawal at any time by the assigning rating
agency, and should be evaluated independently of any other rating.
Kmart will be the Tenant under all of the Leases and, as such, may become
the ultimate source of payment on the Mortgage Notes and, therefore, the
ultimate source of payment 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 would
adversely affect the ratings on the Certificates.
VALIDITY OF THE CERTIFICATES
The validity of the Certificates will be passed upon for Kmart by
Dickinson, Wright, Moon, Van Dusen & Freeman, Detroit, Michigan, and for the
Underwriters by Sullivan & Cromwell, New York, New York.
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.
57
<PAGE> 59
GLOSSARY OF CERTAIN TERMS
The following is a glossary of certain terms used in this Prospectus. The
definitions of terms used in this glossary that are also used in the Agreements,
Indentures, Leases, Owner Trust Agreements and Participation Agreement are
qualified in their entirety by reference to the definitions of such terms
contained therein.
"Agreement" means each of the two separate Pass Through Trust Agreements
between Kmart and the related Trustee, pursuant to which the Pass Through Trusts
will be formed.
"Additional Rent" shall have the meaning described under "Description of
the Leases -- Events of Default".
"Bankruptcy Code" means the United States Bankruptcy Code of 1978, as
amended.
"Business Day" means any day other than Saturday or Sunday or other day on
which banking institutions in the States of New York or Michigan, the States in
which the principal offices of the Trustees, Corporate Owner Trustee or
Corporate Indenture Trustees are located, are authorized or required by law to
close.
"Cede" means Cede & Co., as nominee of DTC.
"Certificate" means any of the Pass Through Certificates to be issued under
either of the Agreements.
"Certificate Account" means one or more non-interest bearing accounts
established and maintained by the Trustees for the Pass Through Trusts and for
the benefit of Certificateholders for the deposit of payments representing
Scheduled Payments on the Mortgage Notes.
"Certificate Owner" means, for any Pass Through Trust, any person acquiring
a beneficial interest in any Certificate issued by such Pass Through Trust.
"Certificateholder" means the registered holder of any Certificate issued
by a Pass Through Trust.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Company" means Kmart Corporation.
"Corporate Co-Trustee" means Chemical Trust Company of California, a
California corporation, in its capacity as co-trustee under certain of the Owner
Trust Agreements.
"Corporate Indenture Trustee" means The Bank of New York, a New York
corporation, in its capacity as indenture trustee under each Indenture, and any
successor thereunder.
"Corporate Owner Trustee" means Wilmington Trust Company, a Delaware
banking corporation, in its capacity as owner trustee under the Owner Trust
Agreements, and any successor thereunder.
"Definitive Certificates" means Certificates issued in fully registered,
certificated form to Certificate Owners or their nominees, rather than to DTC or
its nominee.
"DTC" means The Depository Trust Company.
"DTC Participants" means those participants for whom DTC holds securities
on deposit.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" means, with respect to each Pass Through Trust, the
occurrence and continuance of an Indenture Default under one or more of the
Indentures pursuant to which the Mortgage Notes constituting Trust Property of
such Pass Through Trust will be issued.
A-1
<PAGE> 60
"Event of Loss" means, for any Property, any Casualty or condemnation as
described in "Description of the Leases -- Condemnation and Casualty."
"Excepted Payments" means rights of each Owner Trust and Owner Participant
relating to indemnification by Kmart of each Owner Trust, the Owner Trustees or
Owner Participant for certain matters, insurance proceeds payable to the Owner
Trustees in their individual capacities and to the Owner Participant (other than
proceeds from casualty insurance maintained by Kmart under such Lease),
insurance proceeds payable to the Owner Trust or to the Owner Participant under
certain insurance maintained by or for the benefit of the Owner Trustees or the
Owner Participant and not required to be maintained by Kmart under the Lease and
certain reimbursement payments made by Kmart to the Owner Trust.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Indenture" means each of the separate Indenture, Mortgage and Deed of
Trust, Assignment of Rents and Security Agreements among the Indenture Trustees
and the related Owner Trust, in each case pursuant to which such Owner Trust
will issue the Mortgage Notes, as such Indenture may be modified, supplemented
or amended from time to time.
"Indenture Default" means, for any Indenture, each of the events designated
as an event of default in such Indenture. See "Description of the Mortgage Notes
- -- Indenture Defaults, Notice and Waiver."
"Indenture Trustees" means the Corporate Indenture Trustee, in its capacity
as an Indenture Trustee under each Indenture, and its successors and assigns
thereunder, and Todd N. Niemy, in his capacity as an Indenture Trustee under
each Indenture, and his successors and assigns thereunder.
"Indirect Participants" means those persons that clear through or maintain
a custodial relationship with a DTC Participant either directly or indirectly.
"Individual Owner Trustee" means William J. Wade, an individual residing in
New Castle County, Delaware, in his capacity as co-trustee under certain of the
Owner Trust Agreements.
"Initial Scheduled Principal Distribution Date" means the date when the
first scheduled payment of principal on the Mortgage Notes held in each Pass
Through Trust are to be received by the Trustees, such date to be specified on
the front cover page of this Prospectus for such Pass Through Trust.
"Land" means each of the separate parcels of land upon which a Store
subject to the lien of an Indenture is located.
"Lease" means each of the Leases between Kmart and the related Owner Trust,
in each case pursuant to which Kmart will lease a Store and the related Land, as
such Lease may from time to time be modified, supplemented or amended.
"Lease Event of Default" means, for any Lease, each of the events
designated as an event of default in such Lease. For a description of the events
constituting Lease Events of Default, see "Description of the Leases -- Events
of Default".
"Make-Whole Premium" shall have the meaning as described under the caption
"Description of the Mortgage Notes -- Make-Whole Premium".
"Material Default" shall have the meaning as described under "Description
of the Leases -- Events of Default."
"Monetary Default" means a Lease Event of Default caused by (a) the failure
by Kmart to pay any installment of Basic Rent when due within five days after
notice to Kmart of non-payment; (b) the failure by Kmart to make any payment
constituting Additional Rent when due within 15 days
A-2
<PAGE> 61
after notice to Kmart of non-payment; and (c) certain events of bankruptcy,
insolvency, reorganization pursuant to bankruptcy or similar laws, receivership,
dissolution or liquidation of Kmart.
"Mortgage Notes" means any of the Mortgage Notes (including any Mortgage
Notes issued in exchange, replacement or substitution therefor), issued pursuant
to any Indenture.
"Owner Participant" means one or more institutional investors for whose
benefit the related Owner Trust owns an undivided interest in the Properties
leased to Kmart pursuant to a Lease, and its permitted successors and assigns.
"Owner Participant Parent" means the parent corporation of one of the Owner
Participants and such parent corporation's successors and assigns.
"Owner Trust" means each Owner Trust created pursuant to separate Owner
Trust Agreements.
"Owner Trust Agreement" means each of the Owner Trust Agreements, between
the related Owner Participant and the Owner Trustees, pursuant to which the
Owner Trusts will be created, as supplemented and amended.
"Participation Agreement" means the Participation Agreement, among Kmart,
the Owner Trust, the Owner Trustee, each Owner Participant, the Owner
Participant Parent, the Remainderman and the Indenture Trustees.
"Pass Through Trust" means Pass Through Trust 1995-K-1 or Pass Through
Trust 1995-K-2, each to be formed pursuant to the respective Agreement.
"Pool Balance" means, for any Pass Through Trust, as of any date of
determination, the aggregate unpaid principal amount of the Mortgage Notes that
constitute Trust Property of such Pass Through Trust on such date plus the
amount of the principal payments on such Mortgage Notes held by the Trustee and
not yet distributed (other than earnings thereon and without giving effect to
any losses on investments thereof). The Pool Balance as of any Regular
Distribution Date or Special Distribution Date shall be computed after giving
effect to the payment of principal, if any, on such Mortgage Notes and the
distribution thereof being made on that date.
"Pool Factor" means, for any Pass Through Trust, as of any date of
determination, the quotient (rounded to the seventh decimal place) computed by
dividing (i) the Pool Balance by (ii) the aggregate original principal amount of
the Mortgage Notes held in such Pass Through Trust.
"Property" means the related Owner Trust's estate for years interest in
each parcel of Land, together with such Owner Trust's fee simple title to the
Store located thereon.
"Purchase Agreement" means the Agreement for Sale of Real Estate among
Kmart, the Owner Trusts and the Remainderman with respect to the sale of the
Properties and the remainder interest.
"Regular Distribution Date" means, for each Pass Through Trust, January 5
and July 5 of each year, commencing July 5, 1995.
"Remainderman" means a trust that is unaffiliated with Kmart that will
purchase the remainder interest in the Land following expiration of the
Estate-for-Years Interest.
"Rules" means the rules, regulations and procedures creating and affecting
DTC and its operations.
"Scheduled Payments" means each payment of principal of and/or interest on
a Mortgage Note held in a Pass Through Trust scheduled to be received by the
Trustee on a Regular Distribution Date.
"Special Distribution Date" means the date on which a Special Payment will
be distributed, which date will be the fifth day of a month.
A-3
<PAGE> 62
"Special Payment" means, for any Pass Through Trust, any payments of
principal, premium, if any, and interest received by the Trustee on account of
redemption, if any, of the Mortgage Notes and payments received by the Trustee
following a default in respect of the Mortgage Notes (including payments
received by the Trustee on the account of the purchase by an Owner Trust of such
Mortgage Notes or payments received on account of the sale of such Mortgage
Notes by the Trustee).
"Special Payments Account" means one or more non-interest bearing accounts
established and maintained pursuant to each Pass Through Trust for the benefit
of Certificateholders, for the deposit of payments representing Special Payments
and certain other amounts.
"Store" means the buildings, structures, alterations, modifications and
other additions to and changes in such buildings and site improvements located
on the Land.
"Trust Estate" shall have the meaning described under "Structure of the
Transaction".
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Trust Property" means, for any Pass Through Trust, all money, instruments,
including the related Mortgage Notes, and other property held as the property of
the Pass Through Trust, including all distributions thereon and proceeds
thereof.
"Trustee" means each of The Bank of New York Trust Company of Florida,
National Association, in its capacity as trustee under Pass Through Trust
1995-K-1, and its successors and assigns thereunder, and The Bank of New York
Trust Company of California, in its capacity as trustee under Pass Through Trust
1995-K-2, and its successors and assigns thereunder.
A-4
<PAGE> 63
- ---------------------------------------------------------
- ---------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR THE SOLICITATION OF
AN OFFER IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................... 3
Reports to Certificateholders by the
Trustee............................... 3
Incorporation of Certain Documents by
Reference............................. 3
Prospectus Summary...................... 5
The Company............................. 11
Use of Proceeds......................... 12
Selected Financial Information.......... 13
Structure of the Transaction............ 15
The Properties.......................... 16
Diagram of Payments..................... 17
Description of the Certificates......... 18
Description of the Mortgage Notes....... 29
Description of the Leases............... 41
Certain Federal Income Tax
Consequences.......................... 49
Certain Taxes........................... 52
ERISA Considerations.................... 53
Legal Investment Considerations......... 56
Underwriting............................ 56
Rating.................................. 57
Validity of the Certificates............ 57
Experts................................. 57
Glossary of Certain Terms............... A-1
</TABLE>
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
$155,000,000
KMART CORPORATION
PASS THROUGH TRUSTS
PASS THROUGH CERTIFICATES 1995-K-1
PASS THROUGH CERTIFICATES 1995-K-2
------------------
PROSPECTUS
------------------
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE> 64
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCES AND DISTRIBUTION.
The following expenses are expected to be incurred in connection with this
Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee........... $ 62,068.97
Printing Fee.................................................. 80,000.00*
Blue Sky Fees and Expenses.................................... 16,500.00*
Accounting Fees............................................... 30,000.00*
Rating Agency Fees............................................ 235,000.00
Legal Fees.................................................... 2,000,000.00
Trustees' Fees and Expenses................................... 55,000.00*
Miscellaneous................................................. 70,931.03
-------------
Total.................................................... $2,500,000.00
=============
</TABLE>
- -------------------------
* All of the above items except the registration fee are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
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 (the "Act"). In addition, the Registrant maintains
directors' and officers' liability insurance which, under certain circumstances,
would cover alleged violations of the Act. Insofar as indemnification for
liabilities arising under the Act may be permitted to officers and directors
pursuant to the foregoing provisions, the Registrant has been informed 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.
Therefore, in the event that a claim for such indemnification is asserted by any
officer or director the Registrant (except insofar as such claim seeks
reimbursement by the Registrant of expenses paid or incurred by an officer or
director in the successful defense of any action, suit or proceeding) will,
unless the matter has theretofore been adjudicated by precedent deemed by the
Registrant to be controlling, submit to a court of appropriate jurisdiction the
question of whether or not indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
S-1
<PAGE> 65
ITEM 16. EXHIBITS.
<TABLE>
<S> <C>
1 Form of Underwriting Agreement.*
4.1 Form of Pass Through Trust Agreement.**
4.2 Form of Indenture, Mortgage & Deed of Trust, Assignment of Rents and Security
Agreement.+**
4.3 Form of Pass Through Certificate -- included as part of Exhibit 4.1.**
4.4 Form of Note -- included as part of Exhibit 4.2.*
4.5 Form of Participation Agreement.*
4.6 Form of Lease.+**
5.1 Opinion of Dickinson, Wright, Moon, Van Dusen & Freeman as to the legality of the
securities being registered.*
8.1 Opinion of Dickinson, Wright, Moon, Van Dusen & Freeman as to tax matters.*
8.2 Opinion of Squire, Sanders & Dempsey as to tax matters.*
8.3 Opinion of Jones, Day, Reavis & Pogue as to tax matters.*
12 Statement of Computation of Ratio of Earnings to Fixed Charges.*
23.1 Consent of Price Waterhouse LLP.*
23.2 Consent of Dickinson, Wright, Moon, Van Dusen & Freeman -- included in Exhibit 5.1
and Exhibit 8.1.*
23.3 Consent of Squire, Sanders & Dempsey -- included in Exhibit 8.2.*
23.4 Consent of Jones, Day, Reavis & Pogue -- included in Exhibit 8.3.*
24 Power of Attorney (included on page S-4).
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York Trust Company of Florida, National Association.*
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York Trust Company of California.*
</TABLE>
- -------------------------
* Filed with this Amendment No. 1.
** Revised version filed herewith.
+ Separate Indentures and Leases will be entered into with respect to each
Property.
ITEM 17. UNDERTAKINGS.
A. UNDERTAKING PURSUANT TO RULE 430A
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 that time shall be deemed to be
the initial bona fide offering thereof.
B. FILINGS INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY REFERENCE
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 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
S-2
<PAGE> 66
registration statement relating to the securities offering therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. INDEMNIFICATION
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 Securities Act of 1933 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 by such director, officer or controlling person
in connection with the Pass Through Certificates 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 Securities Act of 1933 and will be governed by the final
adjudication of such issue.
S-3
<PAGE> 67
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 that the security rating requirement
will be met by the time of sale and has duly caused this Amendment No. 1 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 March 31, 1995.
KMART CORPORATION
By /s/ ANTHONY N. PALIZZI
--------------------------------------
ANTHONY N. PALIZZI
Interim President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that Anthony N. Palizzi, whose
signature appears below, constitutes and appoints Nancie W. LaDuke his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for and in his name, place and stead, in any and all capacities,
to sign any or all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
might or could be done in person hereby ratifying and confirming all that said
attorney-in-fact and agent, or her substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities indicated on March 31, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE SIGNATURE TITLE
--------- ----- --------- --------
<C> <S> <C> <C>
/s/ ANTHONY N. PALIZZI Interim President /s/ ENRIQUE C. FALLA* Director
- --------------------------------- (Principal Executive Officer) ---------------------------------
(ANTHONY N. PALIZZI) (ENRIQUE C. FALLA)
/s/ THOMAS F. MURASKY* Executive Vice President /s/ JOSEPH P. FLANNERY* Director
- --------------------------------- (Principal Financial and ---------------------------------
(THOMAS F. MURASKY) Accounting Officer) (JOSEPH P. FLANNERY)
/s/ DONALD S. PERKINS* Chairman of the Board /s/ DAVID B. HARPER* Director
- --------------------------------- and Director ---------------------------------
(DONALD S. PERKINS) (DAVID B. HARPER)
/s/ LILYAN H. AFFINITO* Director /s/ F. JAMES MCDONALD* Director
- --------------------------------- ---------------------------------
(LILYAN H. AFFINITO) (F. JAMES MCDONALD)
/s/ JOSEPH A. CALIFANO, JR.* Director /s/ J. RICHARD MUNRO* Director
- --------------------------------- ---------------------------------
(JOSEPH A. CALIFANO, JR.) (J. RICHARD MUNRO)
/s/ WILLIE D. DAVIS* Director /s/ GLORIA M. SHATTO* Director
- --------------------------------- ---------------------------------
(WILLIE D. DAVIS) (GLORIA M. SHATTO)
</TABLE>
*By: /s/ NANCIE W. LADUKE
----------------------------------
NANCIE W. LADUKE
Attorney-in-fact
S-4
<PAGE> 68
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBITS DESCRIPTION PAGE NUMBER
- -------- ----------------------------------------------------------------------- -----------
<S> <C> <C>
1 Form of Underwriting Agreement.*
4.1 Form of Pass Through Trust Agreement.**
4.2 Form of Indenture, Mortgage & Deed of Trust, Assignment of Rents and
Security Agreement.+**
4.3 Form of Pass Through Certificate -- included as part of Exhibit 4.1.**
4.4 Form of Note -- included as part of Exhibit 4.2.*
4.5 Form of Participation Agreement.*
4.6 Form of Lease.+**
5.1 Opinion of Dickinson, Wright, Moon, Van Dusen & Freeman as to the
legality of the securities being registered.*
8.1 Opinion of Dickinson, Wright, Moon, Van Dusen & Freeman as to tax
matters.*
8.2 Opinion of Squire, Sanders & Dempsey as to tax matters.*
8.3 Opinion of Jones, Day, Reavis & Pogue as to tax matters.*
12 Statement of Computation of Ratio of Earnings to Fixed Charges.*
23.1 Consent of Price Waterhouse LLP.*
23.2 Consent of Dickinson, Wright, Moon, Van Dusen & Freeman -- included in
Exhibit 5.1 and Exhibit 8.1.*
23.3 Consent of Squire, Sanders & Dempsey -- included in Exhibit 8.2.*
23.4 Consent of Jones, Day, Reavis & Pogue -- included in Exhibit 8.3.*
24 Power of Attorney (included on page S-4).
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939
of The Bank of New York Trust Company of Florida, National
Association.*
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939
of The Bank of New York Trust Company of California.*
</TABLE>
- -------------------------
* Filed with this Amendment No. 1.
** Revised version filed herewith.
+ Separate Indentures and Leases will be entered into with respect to each
Property.
<PAGE> 1
EXHIBIT 1
Draft of March 31, 1995
Kmart Corporation
Pass Through Certificates
Underwriting Agreement
April __, 1995
Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Morgan Stanley & Co. Inc.,
1251 Avenue of the Americas,
New York, New York 10020.
Dear Sirs:
Kmart Corporation, a Michigan corporation (the "Company"), proposes to form
two pass through trusts (each, a "Pass Through Trust") pursuant to two separate
Pass Through Trust Agreements (each, a "Pass Through Agreement", and
collectively the "Pass Through Agreements"), between the Company and The Bank
of New York Trust Company of California and The Bank of New York Trust Company
of Florida, National Association, as pass through trustees, respectively (each,
a "Pass Through Trustee", and collectively the "Pass Through Trustees"), and to
cause the Pass Through Trusts to issue and, subject to the terms and conditions
stated herein, sell to Goldman, Sachs & Co. and Morgan Stanley & Co. Inc. (the
"Underwriters") the aggregate principal amount of the Pass Through Certificates
(the "Securities") issued by each of the Pass Through Trusts set forth on
Schedule I hereto.
Each of the Securities will represent interests in one of two separate Pass
Through Trusts. Pursuant to each Pass Through Agreement and a separate
purchase and sale agreement (each a "Purchase and Sale Agreement"), each Pass
Through Trustee will purchase specified Mortgage Notes (the "Underlying
Mortgage Notes") each of which shall have been issued as a non-recourse
obligation of an Owner Trust for which Wilmington Trust Company and, where
required by applicable state law, William J. Wade or Chemical Trust Company of
California (collectively, such Owner Trustees are
<PAGE> 2
herein referred to as the "Owner Trustee"), each acting not in its individual
capacity but solely as Owner Trustee of such Owner Trust (collectively, such
Owner Trusts are herein referred to as the "Owner Trust") formed pursuant to
separate owner trust agreements and supplements thereto (collectively, the
"Owner Trust Agreement") by and among the Owner Trustee and the applicable
beneficial owner of the Owner Trust (collectively, such beneficial owners are
herein referred to as the "Owner Participant"), to finance 16 separate
transactions (the "Sale-Leaseback Transactions"), referred to in a
participation agreement among the Company, the Owner Participant, the Owner
Participant Parent, the Owner Trustee, the Owner Trust, the Indenture Trustees
(as defined below), the Remainderman Participant, the Remainderman Trustee and
the Remainder Purchaser (as defined below) (the "Participation Agreement"),
involving an estate for years in 16 Kmart retail stores (the "Properties")
acquired by the Owner Trustee or the Owner Trust, as the case may be, and
leased by the Owner Trustee or the Owner Trust, as the case may be, to the
Company. Pursuant to each Sale-Leaseback Transaction, the Company will lease a
Property from the Owner Trustee or the Owner Trust, as the case may be, in each
case as contemplated by the Agreement For Sale of Real Estate, among the
Company, the Remainder Purchaser, the Owner Trust (the "Purchase Agreement").
Each of the Underlying Mortgage Notes will be issued under an Indenture,
Mortgage and Deed of Trust, Assignment of Rents and Security Agreement between
The Bank of New York and Todd N. Niemy, as indenture trustees (the "Indenture
Trustees") and the Owner Trust (each, an "Indenture"), substantially in the
form filed as an exhibit to the Registration Statement. At the same time as
the sale of the estate for years interests, Kmart will sell a remainder
interest in the land underlying the Estate for Years Interests commencing on
the expiration of the estates for years interests, as evidenced by separate
deeds (each, a "Remainderman Deed"), to the remainder purchaser (the "Remainder
Purchaser"). In consideration of a cash payment and pursuant to an option
agreement (the "Option Agreement"), the Remainder Purchaser will grant the
Owner Trust an option (the "Options to Lease") to lease the land underlying its
Property from the Remainder Purchaser for additional terms commencing on the
expiration of the estate for years interests. Capitalized terms used but not
otherwise defined herein shall have the meaning, with respect to the Securities
to which such reference relates, specified in or pursuant to each Indenture
relating to each of the Underlying Mortgage Notes or each Pass Through
Agreement relating to the Securities. The term "Pass Through Documents" means
this Agreement, the Purchase Agreement, the Purchase and Sale Agreement, the
Tax
-2-
<PAGE> 3
Indemnification Agreement, between the Company and the Owner Participant (the
"Tax Indemnification Agreement"), each Pass Through Agreement, each Indenture,
each Lease, each Remainderman Deed, each Option Agreement, each Option to
Lease, the Participation Agreement, each Tripartite Agreement, among the
Company, the Owner Trust and the Remainder Purchaser.
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-3 (File No. 33-56465) in respect of
the Securities has been filed with the Securities and Exchange Commission (the
"Commission"); such registration statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding exhibits
thereto but including all documents incorporated by reference in the
prospectus contained therein, to the Underwriters, have been declared
effective by the Commission in such form; no other document with respect to
such registration statement or document incorporated by reference therein has
heretofore been filed with the Commission; and no stop order suspending the
effectiveness of such registration statement has been issued and no proceeding
for that purpose has been initiated or, to the Company's knowledge, threatened
by the Commission (any preliminary prospectus included in such registration
statement or filed with the Commission pursuant to Rule 424(a) of the rules
and regulations of the Commission under the Securities Act of 1933, as amended
(the "Act"), is hereinafter called a "Preliminary Prospectus"); the various
parts of such registration statement, including all exhibits thereto but
excluding Form T-1 and including (i) the information contained in the form of
final prospectus with the Commission pursuant to Rule 424(b) under the Act in
accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under
the Act to be part of the registration statement at the time it was declared
effective and (ii) the documents incorporated by reference in the prospectus
contained in the registration statement at the time such part of the
registration statement became effective, each as amended at the time such part
of the registration statement became effective, are hereinafter collectively
called the "Registration Statement"; such final prospectus, in the form first
filed pursuant to Rule 424(b) under the Act, is hereinafter called the
"Prospectus"; any reference herein to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents
-3-
<PAGE> 4
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Act, as of the date of such Preliminary Prospectus or Prospectus, as the case
may be; any reference to any amendment or supplement to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include any
documents filed after the date of such Preliminary Prospectus or the
Prospectus, as the case may be, under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and incorporated by reference in such
Preliminary Prospectus or Prospectus, as the case may be; and any reference to
any amendment to the Registration Statement shall be deemed to refer to and
include any annual report of the Company filed pursuant to Section 13(a) or
15(d) of the Exchange Act after the effective date of the Registration
Statement that is incorporated by reference in the Registration Statement;
(b) No order preventing or suspending the use of any Preliminary Prospectus
has been issued by the Commission, and each Preliminary Prospectus, at the
time of filing thereof, conformed in all material respects to the requirements
of the Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the rules and regulations of the Commission thereunder,
and did not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by the
Underwriters expressly for use therein;
(c) The documents incorporated by reference in the Prospectus, when they
became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and any
further documents so filed and incorporated by reference in the Prospectus or
any further amendment or supplement thereto, when such documents become
effective or are filed with the Commission, as the case may be, will
-4-
<PAGE> 5
conform in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing
to the Company by the Underwriters expressly for use therein;
(d) The Company meets the requirements for the use of Form S-3 under the
Act for purposes of the registration under the Act of the Securities; the
Company is the "issuer" within the meaning of the Act and appropriate
registrant with respect to the Securities;
(e) The Registration Statement conforms, and the Prospectus and any further
amendments or supplements to the Registration Statement or the Prospectus will
conform, in all material respects to the requirements of the Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder; the
Registration Statement does not and will not, as of the applicable effective
date as to the Registration Statement and any amendment thereto contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and the Prospectus does not and will not, as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information furnished
in writing to the Company by the Underwriters through Goldman, Sachs & Co.
expressly for use therein; on the effective date of the Registration Statement
and as of the Time of Delivery (as defined below), each Pass Through Agreement
relating to the Securities did and will comply in all material respects with
the requirements of the Trust Indenture Act and the rules thereunder;
(f) Neither the Company nor any of its subsidiaries has sustained since the
date of the latest audited financial statements included or incorporated
-5-
<PAGE> 6
by reference in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus, that is
material to the Company and its subsidiaries taken as a whole; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock (other than pursuant to any executive compensation or other employee
benefit plan the terms of which have been filed with the Commission and other
than in connection with the conversion of the Company's Series C Preferred
Stock into shares of the Company's common stock) or any material change in the
long-term debt of the Company or any of its subsidiaries or any material
adverse change, or any development of which the Company is aware and that the
Company has reasonable cause to believe involves a prospective material
adverse change, in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the Company and its
subsidiaries taken as a whole, otherwise than as set forth or contemplated in
the Prospectus;
(g) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Michigan, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus, to execute and deliver the Pass
Through Documents to which it is a party and to perform its obligations under
each such Pass Through Document, and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under the
laws of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so qualified
in any such jurisdiction; and each significant subsidiary of the Company (as
such term is defined in Rule 1-02 of Regulation S-X under the Act) (a
"Material Subsidiary") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation;
(h) All of the issued shares of capital stock of each Material Subsidiary
have been duly and validly authorized and issued, are fully paid and
-6-
<PAGE> 7
non-assessable and (except for directors' qualifying shares and 321,938 shares
of Borders Group, Inc.'s Series A Preferred Stock owned by Planet Music, Inc.
and except as otherwise set forth in the Prospectus) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances, equities
or claims;
(i) This Agreement has been duly authorized, executed and delivered by the
Company; each of the other Pass Through Documents to which it is a party has
been duly authorized and, when delivered by the Company, will have been duly
executed and delivered by the Company and will constitute a valid and legally
binding instrument, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles; when the Securities are executed, authenticated,
issued and delivered pursuant to any Pass Through Agreement, such Securities
will have been duly and validly executed, authenticated, issued and delivered
and will be entitled to the benefits provided by the Pass Through Agreement
under which they are to be issued, which is substantially in the form filed as
an exhibit to the Registration Statement; and each Pass Through Agreement has
been duly qualified under the Trust Indenture Act;
(j) Each of the Securities and the Pass Through Documents conforms or will
upon execution conform in all material respects to the respective descriptions
thereof in the Prospectus;
(k) The compliance by the Company with all of the provisions of this
Agreement and each of the other Pass Through Documents to which it is a party
and the consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other material agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject except for such conflicts,
breaches, violations, or defaults that individually or in the aggregate do not
and would not have a Material Adverse Effect and do not and would not
materially and adversely affect the consummation of the transactions
-7-
<PAGE> 8
contemplated by this Agreement and the Registration Statement, nor will such
action result in any violation of the provisions of (i) the Articles of
Incorporation or By-laws of the Company or (ii) any statute or any order, rule
or regulation of any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their properties except
in the case of (ii), such violations that individually or in the aggregate do
not and would not have a Material Adverse Effect and do not and would not
materially and adversely affect the consummation of the transactions
contemplated by this Agreement and the Registration Statement; and no consent,
approval, authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the issue and sale
of the Securities, the valid authorization, execution and delivery by the
Company of this Agreement and any of the other Pass Through Documents to which
it is a party in accordance with the provisions thereof or the consummation by
the Company of the transactions contemplated by this Agreement or such other
Pass Through Documents, except the registration under the Act of the
Securities, such as have been obtained under the Trust Indenture Act and such
consents, approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the Underwriters;
(l) The Company is not in violation of (i) its Articles of Incorporation or
By-laws or (ii) in default in the performance or observance of any material
obligation, covenant or condition contained in any indenture, mortgage, deed
of trust, loan agreement, lease or other agreement or instrument to which it
is a party or by which it or any of its properties may be bound except in the
case of (ii), such defaults that individually or in the aggregate do not and
would not have a Material Adverse Effect and do not and would not materially
and adversely affect the consummation of the transactions contemplated by this
Agreement and the Registration Statement;
(m) The statements set forth in the Prospectus under the caption
"Description of Certificates", insofar as they purport to constitute a summary
of the terms of the Securities, and under the captions "Underwriting" insofar
as they purport to describe the provisions of this Agreement, "Structure of
the Transaction", "Description of the Mortgage Notes",
-8-
<PAGE> 9
"Description of the Leases", "ERISA Considerations", "Federal Income Tax
Consequences" and "Certain Taxes", insofar as they purport to describe the
provisions of the laws and documents referred to therein, correctly summarize
all such provisions that are material to holders of the Securities;
(n) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely to the Company or
any of its subsidiaries, would individually or in the aggregate have a
Material Adverse Effect; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(o) None of the Indentures is required to be qualified under the Trust
Indenture Act of 1939, and none of the Pass Through Trusts is required to be
registered under the Investment Company Act of 1940;
(p) The Company is not and, after giving effect to the offering and sale of
the Securities, will not be an "investment company" or an entity "controlled"
by an "investment company", as such terms are defined in the Investment
Company Act of 1940, as amended (the "Investment Company Act"); and
(q) Price Waterhouse, who have certified certain financial statements of
the Company and its consolidated subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
2. Subject to the terms and conditions herein set forth, each of the
Underwriters agrees, severally and not jointly, to purchase from each of the
Pass Through Trustees, at the respective purchase prices set forth in Schedule
II hereto, the principal amount of the Securities issued by each Pass Through
Trust set forth opposite its name in Schedule I hereto. As compensation to the
Underwriters for their respective commitments and obligations hereunder in
respect of the Securities, including their undertaking to offer the Securities
for sale to the public, the Company
-9-
<PAGE> 10
will pay (or cause to be paid) to the Underwriters the respective percentage of
the aggregate principal amount of the Securities issued by each Pass Through
Trust set forth in Schedule II hereto. Such payment will be made by Federal
funds check or other immediately available funds to the order of Goldman, Sachs
& Co., as representatives of the Underwriters, at the time heretofore agreed by
the Company and the Underwriters.
3. Upon the authorization by the Pass Through Trustees of the release of
the Securities, the several Underwriters propose to offer the Securities for
sale upon the terms and conditions set forth in the Prospectus.
4. Securities to be purchased by each of the Underwriters hereunder in
definitive form and registered in the name of Cede & Co., as nominee for The
Depository Trust Company ("DTC"), shall be delivered by or on behalf of the
Company to Goldman, Sachs & Co., against payment by the Underwriters of the
respective purchase prices therefor set forth on Schedule II hereto, by wire
transfer, certified or official bank check or checks payable to the order of
the corresponding Pass Through Trustee in Federal or other similar immediately
available funds, all at the office of Sullivan & Cromwell, 125 Broad Street,
New York, New York 10004, at 9:30 A.M. New York City time, on April __, 1995,
or at such other place and time and date as you and the Company may agree upon
in writing, such time and date being herein called the "Time of Delivery".
Such Securities, in definitive form and registered in the name of Cede & Co.,
as nominee for DTC, will be made available for inspection at least twenty-four
hours prior to the Time of Delivery at the above office of Sullivan & Cromwell.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by Goldman, Sachs & Co.
and to file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day following
the execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or Prospectus prior
to the Time of Delivery which shall be disapproved by you promptly after
reasonable notice thereof; to advise you, promptly after it receives notice
thereof, of the time when any amendment to the Registration Statement has been
filed or becomes effective or any supplement to
-10-
<PAGE> 11
the Prospectus or any amended Prospectus has been filed and to furnish you
with copies thereof; to file timely all reports and any definitive proxy or
information statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent
to the date of the Prospectus and for so long as the delivery of a prospectus
is required in connection with the offering or sale of the Securities; to
advise you, promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the use
of any Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and, in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or suspending
any such qualification, to use promptly its best efforts to obtain the
withdrawal of such order;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as you may request and to comply with such laws so
as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Securities, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus in such
quantities as you may from time to time reasonably request, and, if the
delivery of a prospectus is required at any time in connection with the
offering or sale of the Securities and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall be necessary
during such same period to amend or supplement the Prospectus or to file under
the
-11-
<PAGE> 12
Exchange Act any document incorporated by reference in the Prospectus in order
to comply with the Act, the Exchange Act or the Trust Indenture Act, to notify
you and upon your request to file such document and to prepare and furnish
without charge to the Underwriters and to any dealer in securities as many
copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such statement
or omission or effect such compliance; and in case either of the Underwriters
are required to deliver a prospectus in connection with sales of any of the
Securities at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriters, to
prepare and deliver to such Underwriters as many copies as you may request of
an amended or supplemented Prospectus complying with Section 10(a)(3) of the
Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)), an
earning statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and regulations
of the Commission thereunder (including at the option of the Company, Rule
158);
(e) During the period beginning from the date hereof and continuing to and
including the later of the Time of Delivery and such earlier time as you may
notify the Company, not to offer, sell, contract to sell or otherwise dispose
of any securities of the Company that are substantially similar to the
Securities;
(f) To furnish to the holders of the Securities upon request of any such
holder as soon as practicable after the end of each fiscal year an annual
report (including a balance sheet and statements of income, shareholders'
equity and cash flows of the Company and its consolidated subsidiaries
certified by independent public accountants) and, as soon as practicable after
the end of each of the first three quarters of each fiscal year (beginning
with the fiscal quarter ending after the effective date of the Registration
Statement), consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail; and
-12-
<PAGE> 13
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you upon request copies of all reports
or other communications (financial or other) furnished to shareholders, and
deliver to you upon request (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the Commission or
any national securities exchange on which the Securities or any class of
securities of the Company is listed; and (ii) such additional information
concerning the business and financial condition of the Company as you may from
time to time reasonably request in connection with your acting as Underwriters
hereunder or as market maker in the Securities (such financial statements to
be on a consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its shareholders
generally or to the Commission).
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Securities under the Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus and the Prospectus and amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of printing or producing this
Agreement, each Indenture, each Pass Through Agreement, each of the other Pass
Through Documents, the Blue Sky and Legal Investment Memoranda and any other
documents in connection with the offering, purchase, sale and delivery of the
Securities; (iii) all expenses in connection with the qualification of the
Securities for offering and sale under state securities laws as provided in
Section 5(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky and legal investment surveys in an amount not to exceed $16,500; (iv)
any fees charged by securities rating services for rating the Securities; (v)
the cost of preparing the Securities; (vi) the fees and expenses of the
Indenture Trustees, the Owner Trustees and the Pass Through Trustees and any
agent of any such trustee and the fees and disbursements of counsel for any
such trustee in connection with the Indentures, the Pass Through Agreements,
the other Pass Through Documents and the Securities; (vii) all other fees,
expenses and disbursements which are stated to be for its account in the Pass
Through Documents; (viii) fees of counsel to the Underwriters (other
-13-
<PAGE> 14
than the fees payable pursuant to clause (iii) above); and (ix) all other costs
and expenses incident to the performance of its obligations hereunder and under
the Pass Through Documents which are not otherwise specifically provided for in
this Section. It is understood, however, that, except as provided in this
Section, Section 8 and Section 10 hereof, the Underwriters will pay all of
their expenses, transfer taxes on resale of any of the Securities by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company herein are, at and as of the Time of Delivery, true
and correct, the condition that the Company shall have performed all of its
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 5(a)
hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or to the Company's knowledge
threatened by the Commission; and all requests for additional information on
the part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have furnished
to you such opinion or opinions, dated the Time of Delivery, with respect to
the incorporation of the Company, the validity of the Securities and the Pass
Through Agreements with respect thereto, the Registration Statement, the
Prospectus and other related matters as you may reasonably request, and such
counsel shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(c) Dickinson, Wright, Moon, Van Dusen & Freeman, counsel for the Company,
shall have furnished to you their written opinion, dated the Time of Delivery,
in the form of Exhibit A-1 attached hereto and Anthony N. Palizzi, Executive
Vice President and General Counsel of the Company, shall have furnished to you
his written opinion, dated the Time of Delivery, in the form of Exhibit A-2
attached hereto;
-14-
<PAGE> 15
(d) The Underwriters shall have received the opinion of Richards, Layton &
Finger, counsel for the Owner Trustee, dated the Time of Delivery, in the form
of Exhibit B attached hereto;
(e) The Underwriters shall have received the opinion of Hunton & Williams,
counsel for the Owner Participant, dated the Time of Delivery, in the form of
Exhibit C attached hereto;
(f) The Underwriters shall have received the opinion of Emmet, Marvin &
Martin, LLP, counsel for the Indenture Trustees, dated the Time of Delivery,
in the form of Exhibit D attached hereto;
(g) The Underwriters shall have received the opinions of Squire, Sanders &
Dempsey, counsel for Pass Through Trustee 1995-K-1, and Jones, Day, Reavis &
Pogue, counsel for Pass Through Trustee 1995-K-2, dated the Time of Delivery,
in the form of Exhibits E-1 and E-2, respectively, attached hereto;
(h) The Underwriters shall have received the opinion of Kelley, Drye &
Warren, counsel for the Remainder Purchaser, dated the Time of Delivery, in
the form of Exhibit F hereto;
(i) The Underwriters shall have received the opinions of special counsel in
the respective States in which the Properties are located, each dated the Time
of Delivery, with respect to such matters as you may reasonably require and in
form and substance satisfactory to you;
(j) On the date of the Prospectus at a time prior to the execution of this
Agreement, at 9:30 a.m., New York City time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at the Time of Delivery, Price Waterhouse
shall have furnished to you a letter or letters, dated the respective date of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto;
(k) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included
or incorporated by reference in the Prospectus any loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by
-15-
<PAGE> 16
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the Prospectus, that is
material to the Company and its subsidiaries taken as a whole, and (ii) since
the respective dates as of which information is given in the Registration
Statement and the Prospectus there shall not have been any change in the
capital stock (other than pursuant to any executive compensation or other
employee benefit plan the terms of which have been filed with the Commission
and other than in connection with the conversion of the Company's Series C
Preferred Stock into shares of the Company's common stock) or any material
change in the long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development of which the Company is aware and
that the Company has reasonable cause to believe involves a prospective
material adverse change, in or affecting the general affairs, management,
financial position, shareholders' equity or results of operations of the
Company and its subsidiaries taken as a whole, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case
described in Clause (i) or (ii), is in your judgment so material and adverse
as to make it impracticable or inadvisable to proceed with the public offering
or the delivery of the Securities on the terms and in the manner contemplated
in the Prospectus;
(l) On or after the date hereof and prior to the Time of Delivery (i) no
downgrading shall have occurred in the rating accorded the Company's debt
securities by any "nationally recognized statistical rating organization," as
that term is defined by the Commission for purposes of Rule 436(g)(2) under
the Act and (ii) no such organization shall have publicly announced that it
has under surveillance or review, with possible negative implications, its
rating of any of the Company's debt securities;
(m) At the Time of Delivery, Standard & Poor's Ratings Group ("S&P"),
Moody's Investors Service, Inc. ("Moody's") and Duff & Phelps Credit Rating
Co. ("D&P") (each, a "Rating Agency") shall each have furnished to you a
letter or letters, dated the Time of Delivery, stating that S&P, Moody's and
D&P have provided the Securities with at least a BBB, a Baa1 and an A-rating,
respectively;
(n) You shall have received any opinions of counsel delivered to any Rating
Agency in respect of
-16-
<PAGE> 17
the Securities, in form and substance satisfactory to you, together with a
letter stating that the Underwriters and the Company may rely on such opinions
as if they were addressed to you;
(o) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange; (ii) a suspension or material
limitation in trading in the Company's securities; (iii) a general moratorium
on commercial banking activities in New York declared by either Federal or New
York State authorities; or (iii) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of a
national emergency or war, if the effect of any such event specified in this
clause (iii) in your judgment makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Securities on the terms and in
the manner contemplated by the Prospectus;
(p) All conditions specified in each of the Purchase and Sale Agreement
and the Purchase Agreement to be performed or satisfied on or prior to the
Time of Delivery, as the case may be, shall have been performed or satisfied;
and the Underwriters shall have received copies of all documents delivered
under each of such Purchase and Sale Agreement and the Purchase Agreement,
which shall be executed copies in the case of Pass Through Documents and such
other documents as you shall reasonably request and shall be true and complete
copies of executed documents in the case of any other documents; and
(q) The Company shall have furnished or caused to be furnished to you at
the Time of Delivery certificates of the Treasurer or Chief Financial Officer
of the Company reasonably satisfactory to you as to the accuracy of the
representations and warranties of the Company herein at and as of such Time of
Delivery, as to the performance by the Company of all of its obligations
hereunder to be performed at or prior to such Time of Delivery, as to the
matters set forth in subsections (a) and (k) of this Section and as to such
other matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each of the
Underwriters against any losses, claims, damages or liabilities, joint or
several, to which such Underwriters may become subject, under the Act or
otherwise,
-17-
<PAGE> 18
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements in the Registration Statement not misleading, or to make
the statements in any Preliminary Prospectus or the Prospectus not misleading
in the light of the circumstances under which they were made, and will
reimburse each of the Underwriters for any legal or other expenses reasonably
incurred by such Underwriters in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that (i)
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by the Underwriters through Goldman, Sachs
& Co. expressly for use therein and (ii) the Company shall not be liable to the
Underwriters under the indemnity agreement in this subsection (a) with respect
to any Preliminary Prospectus to the extent that any such loss, claim, damage
or liability of the Underwriters results from the fact that the Underwriters
sold Securities to a person as to whom it shall be established that there was
not sent or given, at or prior to the written confirmation of such sale, a copy
of the Prospectus or of the Prospectus as then amended or supplemented in any
case where such delivery is required by the Act if the Company has previously
furnished copies thereof in sufficient quantity and in a sufficiently timely
manner to the Underwriters and such loss, claim, damage or liability of the
Underwriters results from an untrue statement or omission of a material fact
contained in the Preliminary Prospectus which was identified in writing to the
Underwriters prior to the time of the determination of the purchase price
referred to in Section 2 hereof and corrected in the Prospectus or in the
Prospectus as then amended or supplemented.
(b) Each of the Underwriters will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement
-18-
<PAGE> 19
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by the Underwriters expressly for use therein; and
will reimburse the Company for any legal or other expenses reasonably incurred
by the Company in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party
shall not relieve it from any liability which it may have to any indemnified
party otherwise than under such subsection. In case any such action shall be
brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except with
the consent of the indemnified party, be counsel to the indemnifying party),
and, after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses
of other counsel or any other expenses, in each case subsequently incurred by
such indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an
-19-
<PAGE> 20
unconditional release of the indemnified party from all liability arising out
of such action or claim and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of any
indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from the
offering of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c)
above, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total proceeds from the offering, net of compensation paid to
the Underwriters with respect thereto (before deducting expenses), received by
the Pass Through Trusts bear to the underwriting commission received by the
Underwriters, in each case as set forth on the cover page of the Prospectus.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Underwriters on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid
-20-
<PAGE> 21
or payable by an indemnified party as a result of the losses, claims, damages
or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act; and the obligations of
the Underwriters under this Section 8 shall be in addition to any liability
which the respective Underwriters may otherwise have and shall extend, upon the
same terms and conditions, to each officer and director of the Company
(including any person who, with his consent, is named in the Registration
Statement as about to become a director of the Company) and to each person, if
any, who controls the Company within the meaning of the Act.
9. The respective indemnities, agreements, representations, warranties and
other statements of the Company and the several Underwriters, as set forth in
this Agreement or made by them, respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation (or any
statement as to the results thereof) made by the Underwriters or any
controlling person of the Underwriters, or the Company, or any officer or
director or controlling person of the Company, and shall survive delivery of
and payment for the Securities.
10. If the Securities are not delivered by or on behalf of the Company as
provided herein, the Company will reimburse the Underwriters for all
out-of-pocket expenses approved in writing by Goldman, Sachs & Co., including
fees and disbursements of counsel, reasonably incurred by the Underwriters in
making preparations for the purchase, sale and delivery of the Securities, but
the Company shall then
-21-
<PAGE> 22
be under no further liability to the Underwriters except as provided in Section
6 and Section 8 hereof.
All statements, requests, notices, and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex
or facsimile transmission to Goldman, Sachs & Co., as representatives of the
Underwriters, c/o Goldman, Sachs & Co. at 85 Broad Street, New York, New York
10004, Attention: Registration Department; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of
the Company set forth in the Registration Statement, Attention: Vice President
and Treasurer.
11. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and, to the extent provided in Section 8 and
Section 9 hereof, the officers and directors of the Company and each person who
controls the Company or the Underwriters, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser
of any of the Securities from the Underwriters shall be deemed a successor or
assign by reason merely of such purchase.
12. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
13. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
14. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such respective counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us five counterparts hereof, and upon the acceptance hereof by you,
this letter
-22-
<PAGE> 23
and such acceptance hereof shall constitute a binding agreement between each of
the Underwriters and the Company.
Very truly yours,
KMART CORPORATION
By:______________________________
Name:
Title:
Accepted as of the date hereof:
...........................
(Goldman, Sachs & Co.)
MORGAN STANLEY & CO. INC.
By: ____________________
Name:
Title:
-23-
<PAGE> 24
SCHEDULE I
<TABLE>
<CAPTION> Principal Principal
Amount of Amount of
Securities to Securities to Aggregate
be Purchased be Purchased Principal
from Pass from Pass Amount of
Through Trust Through Trust Securities to
Underwriters 1995-K-1 1995-K-2 be Purchased
- ------------ ------------- ------------- -------------
<S> <C> <C> <C>
Goldman, Sachs & Co. $ $ $
Morgan Stanley & Co. Inc. _____________ _____________ _____________
Total $ $ $
</TABLE>
-24-
<PAGE> 25
SCHEDULE II
PURCHASE PRICE AND COMPENSATION
Purchase Price
Pass Through Trust 1995-K-1 -- 100% of the principal amount thereof plus
accrued interest, if any, thereon at the rate specified in the Prospectus to
the Time of Delivery.
Pass Through Trust 1995-K-2 -- 100% of the principal amount thereof plus
accrued interest, if any, thereon at the rate specified in the Prospectus to
the Time of Delivery.
Compensation to Underwriters
$_________ (0.___% of the principal amount of the Securities)
-25-
<PAGE> 26
ANNEX I
Pursuant to Section 7(j) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
prospective financial statements and/or pro forma financial
information) examined by them and included or incorporated by reference
in the Registration Statement or the Prospectus comply as to form in
all material respects with the applicable accounting requirements of
the Act or the Exchange Act, as applicable, and the related published
rules and regulations thereunder; and, if applicable, they have made a
review in accordance with standards established by the American
Institute of Certified Public Accountants of the consolidated interim
financial statements, selected financial data, pro forma financial
information, prospective financial statements and/or condensed
financial statements derived from audited financial statements of the
Company for the periods specified in such letter, as indicated in their
reports thereon, copies of which have been furnished to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included in the Company's quarterly
report on Form 10-Q incorporated by reference into the Prospectus as
indicated in their reports thereon copies of which have been separately
furnished to the Representatives; and on the basis of specified
procedures including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding whether
the unaudited condensed consolidated financial statements referred to
in paragraph (vi)(A)(i) below comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations, nothing
came
-26-
<PAGE> 27
to their attention that caused them to believe that the unaudited
condensed consolidated financial statements do not comply as to form in
all material respects with the applicable accounting requirements of
the Act and the Exchange Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with
respect to the consolidated results of operations and financial
position of the Company for the five most recent fiscal years included
in the Prospectus and included or incorporated by reference in Item 6
of the Company's Annual Report on Form 10-K for the most recent fiscal
year agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements for such
five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus
under selected captions with the disclosure requirements of Regulation
S-K and on the basis of limited procedures specified in such letter
nothing came to their attention as a result of the foregoing procedures
that caused them to believe that this information does not conform in
all material respects with the disclosure requirements of Items 301,
302, 402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, inquiries of officials of
the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) (i) the unaudited condensed consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the
Prospectus and/or included or incorporated by reference in
the
-27-
<PAGE> 28
Company's Quarterly Reports on Form 10-Q incorporated by
reference in the Prospectus do not comply as to form in all
material respects with the applicable accounting
requirements of the Exchange Act and the related published
rules and regulations or any material modifications should
be made to the unaudited consolidated statements of income,
consolidated balance sheets and consolidated
statements of cash flows included or incorporated by
reference in the Company's Quarterly Reports on Form 10-Q
incorporated by reference in the Prospectus, for them to be
in conformity with generally accepted accounting
principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not agree
with the corresponding items in the unaudited consolidated
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited
consolidated financial statements included or incorporated
by reference in the Company's Annual Report on Form 10-K
for the most recent fiscal year;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived the
unaudited condensed financial statements referred to in
Clause (A) and any unaudited income statement data and
balance sheet items included in the Prospectus and referred
to in Clause (B) were not determined on a basis
substantially consistent with the basis for the audited
financial statements included or incorporated by reference
in the Company's Annual Report on Form 10-K for the most
recent fiscal year;
(D) any unaudited pro forma consolidated condensed
financial statements included or incorporated by reference
in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or
the pro forma adjustments have not been properly applied to
the historical amounts in the compilation of those
statements;
-28-
<PAGE> 29
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any
changes in the consolidated capital stock (other than
issuances of capital stock upon exercise of options and
stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in
each case which were outstanding on the date of the latest
balance sheet included or incorporated by reference in the
Prospectus) or any increase in the consolidated long-term
debt of the Company and its subsidiaries, or any decreases
in consolidated net current assets or shareholder's equity
or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in
each case as compared with amounts shown in the latest
balance sheet included or incorporated by reference in the
Prospectus, except in each case for changes, increases or
decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
(F) for the period from the date of the latest
financial statements included or incorporated by reference
in the Prospectus to the specified date referred to in
Clause (E) there were any decreases in consolidated net
revenues or operating profit or the total or per share
amounts of consolidated net income or other items specified
by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared
with the comparable period of the preceding year and with
any other period of corresponding length specified by the
Representatives, except in each case for increases or
decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included or incorporated by reference in the Prospectus and
the limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (vi) above, they have
carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from
-29-
<PAGE> 30
the general accounting records of the Company and its subsidiaries,
which appear in the Prospectus (excluding documents incorporated by
reference) or in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Representatives or in documents
incorporated by reference in the Prospectus specified by the
Representatives, and have compared certain of such amounts, percentages
and financial information with the accounting records of the Company
and its subsidiaries and have found them to be in agreement.
-30-
<PAGE> 31
Exhibit A-1
[Section 7(c) Opinion of Dickinson, Wright,
Moon, Van Dusen & Freeman]
(i) Assuming that the Securities have been duly
authorized, executed, authenticated, issued and delivered by
the relevant Pass Through Trustee, the Securities have been
duly authorized, executed, authenticated, issued and delivered
and are validly issued and outstanding and entitled to the
benefits provided by the Pass Through Agreement; the
Securities and the Pass Through Agreements conform in all
material respects to the descriptions thereof in the
Prospectus; and each Pass Through Agreement has been duly
qualified under the Trust Indenture Act;
(ii) Each Pass Through Document to which the Company
is a party constitutes a valid and legally binding instrument
of the Company, enforceable against it in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
fraudulent conveyance, moratorium, reorganization and other
laws of general applicability relating to or affecting
creditors' rights, to the discretionary nature of equitable
remedies such as receivership, specific performance,
injunctive relief and the like and to general principles of
equity including requirements of reasonableness and good faith
in the exercise of rights and remedies and such other matters
if and as may be set forth in the opinions of local counsel
referred to in Section 7(i) of this Agreement;
(iii) No consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body having jurisdiction over the
Company or any of its subsidiaries is required for the issue
and sale of the Securities, the valid authorization, execution
and delivery by the Company of this Agreement and any of the
other Pass Through Documents in accordance with the provisions
thereof or the consummation by the Company of the transactions
contemplated by, or the performance of its obligations under,
this Agreement and the other Pass Through Documents to which
the Company is a party, except such as have been obtained
under the Act and the Trust Indenture Act, such consents,
approvals, authorizations, registrations or
<PAGE> 32
qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution
of the Securities by the Underwriters and the filing of
certain of the Pass Through Documents with state and local
officials in the jurisdictions in which the Properties are
located;
(iv) The statements set forth in the Prospectus
under the caption "Description of Certificates", insofar as
they purport to constitute a summary of the terms of the
Securities, and under the captions "Underwriting", insofar as
they purport to describe the provisions of this Agreement,
"Structure of the Transaction", "Description of the Mortgage
Notes", "Description of the Leases", "ERISA Considerations"
and "Federal Income Tax Consequences", insofar as they purport
to describe the provisions of the laws and documents referred
to therein, and insofar as they relate to statements of law or
legal conclusions, are correct in all material respects;
(v) The Company is not an "investment company" or
an entity "controlled" by an "investment company", as such
terms are defined in the Investment Company Act;
(vi) The documents incorporated by reference in the
Prospectus or any further amendment or supplement thereto made
by the Company prior to the Time of Delivery (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may
be, complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder;
and such counsel has no reason to believe that any of such
documents filed subsequent to the effective date of the
Registration Statement, when such documents became effective
or were so filed, as the case may be, contained, in the case
of a registration statement which became effective under the
Act, an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or,
in the case of other documents which were filed under the Act
or the Exchange Act
-2-
<PAGE> 33
with the Commission, an untrue statement of a material fact or
omitted to state a material fact necessary in order to make
the statements therein, in the light of the circumstances
under which they were made when such documents were so filed,
not misleading; and
(vii) The Registration Statement and the Prospectus
and any further amendments and supplements thereto made by the
Company prior to the Time of Delivery (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion) comply as to form
in all material respects with the requirements of the Act and
the Trust Indenture Act and the rules and regulations
thereunder;
Such opinion may state that in passing upon the forms of the
Registration Statement and the Prospectus, and except as otherwise specifically
referred to in paragraph (iv) above, such counsel has relied, insofar as any
opinions involve factual matters, to the extent they deem proper, upon
certificates of officers of the Company and certificates of public officials.
The opinion should also state that, in connection with the preparation of the
Registration Statement and the Prospectus, such counsel has had discussions
with certain of the Company's officers and representatives, with other counsel
for the Company, with representatives of the independent accountants of the
Company, and with representatives of the Underwriters and counsel for the
Underwriters and that such counsel's preparation and examination of the
Registration Statement and the Prospectus and its discussions did not disclose
to them any information that gives them reason to believe that, as of its
effective date, the Registration Statement or any further amendment thereto
made by the Company prior to the Time of Delivery (other than the financial
statements and related schedules contained or incorporated by reference
therein, as to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that, as of its date, the Prospectus or any further amendment or supplement
thereto made by the Company prior to the Time of Delivery (other than the
financial statements and related schedules contained or incorporated by
reference therein, as to which such counsel need express no opinion) contained
an untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading or that, as of the Time of
-3-
<PAGE> 34
Delivery, the Prospectus or any further amendment or supplement thereto made by
the Company prior to the Time of Delivery (other than the financial statements
and related schedules contained or incorporated by reference therein, as to
which such counsel need express no opinion) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
-4-
<PAGE> 35
Exhibit A-2
[Section 7(c) Opinion of Anthony N. Palizzi]
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Michigan, with power and authority
(corporate and other) to own its properties, to hold
properties under lease and otherwise to conduct its business
as described in the Prospectus;
(ii) The Company has been duly qualified as a
foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so
as to require such qualification or is subject to no material
liability or disability by reason of the failure to be so
qualified in any such jurisdiction (such counsel being
entitled to rely in respect of the opinion in this
subparagraph upon opinions of local counsel and in respect of
matters of fact upon certificates of officers of the Company,
provided that such counsel shall state that such counsel
believes that both you and such counsel are justified in
relying upon such opinions and certificates);
(iii) Each Material Subsidiary has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation,
and all of the issued shares of capital stock of each such
Material Subsidiary have been duly and validly authorized and
issued, are fully paid and non-assessable, and (except for
directors' qualifying shares and 321,938 shares of Borders
Group, Inc.'s Series A Preferred Stock held by Planet Music,
Inc., and except as otherwise set forth in the Prospectus) are
owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims (such counsel
being entitled to rely in respect of the opinion in this
subparagraph upon opinions of local counsel and in respect of
matters of fact upon certificates of officers of the Company
or its subsidiaries, provided that such counsel shall state
that such counsel believes that both you and such counsel are
justified in relying upon such opinions and certificates);
<PAGE> 36
(iv) To the best of such counsel's knowledge and
other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property of
the Company or any of its subsidiaries is the subject which,
if determined adversely to the Company or any of its
subsidiaries, would have, or which in the aggregate present a
reasonable likelihood of sufficient determinations adverse to
the Company or any of its subsidiaries that would have, a
material adverse effect on the business, prospects,
operations, financial condition, shareholders' equity or
results of operations of the Company and its subsidiaries
taken as a whole (a "Material Adverse Effect"), and, to the
best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others;
(v) This Agreement and each Pass Through Document
to which the Company is a party has been duly authorized,
executed and delivered by the Company;
(vi) The compliance by the Company with all of the
provisions of this Agreement and each of the other Pass
Through Documents to which it is a party and the consummation
of the transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument known to such counsel to
which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of
its subsidiaries is subject, except for such conflicts,
breaches, violations, or defaults that individually or in the
aggregate do not and would not have a Material Adverse Effect
and do not and would not materially and adversely affect the
consummation of the transactions contemplated by this
Agreement and the Registration Statement, nor will such
actions result in any violation of (a) the provisions of the
Articles of Incorporation or By-laws of the Company or (b) any
statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the
Company or any
-2-
<PAGE> 37
of its subsidiaries or any of their properties except, in the
case of violations under subclause (b) of this subparagraph,
if any, such violations that individually or in the aggregate
do not and would not have a Material Adverse Effect and do not
and would not materially and adversely affect the consummation
of the transactions contemplated by this Agreement and the
Registration Statement;
(vii) The Company is not (a) in violation of its
Articles of Incorporation or By-laws or (b) in default in the
performance or observance of any material obligation, covenant
or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties
may be bound except, in the case of defaults under subclause
(b) of this subparagraph, if any, such defaults individually
or in the aggregate do not and would not have a Material
Adverse Effect and do not and would not materially and
adversely affect the consummation of the transactions
contemplated by this Agreement and the Registration Statement;
and
(viii) Such counsel does not know of any amendment to
the Registration Statement required to be filed or of any
contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or required
to be incorporated by reference into the Prospectus or
required to be described in the Registration Statement or the
Prospectus which are not filed or incorporated by reference or
described as required.
-3-
<PAGE> 38
Exhibit B
[Section 7(d) Opinion of Richards, Layton & Finger]
1. The Corporate Owner Trustee is a banking corporation, duly
incorporated, validly existing and in good standing under the laws of
the State of Delaware, and the Owner Trustee or the Owner Trust, as the
case may be, has the power and authority to execute, deliver and
perform each of the Pass Through Documents to which it is a party, to
acquire, own, lease and give a lien on and security interest in all of
its right, title and interest in and to the property constituting the
Properties and any other property constituting the Indenture Estate,
and to issue, execute, deliver and perform the Mortgage Notes.
2. The Owner Trustee, in its individual and trust capacities,
has duly authorized, executed and delivered each Pass Through Document
to which it is a party. Each such Pass Through Document constitutes a
legal, valid and binding obligation of the Owner Trustee or the Owner
Trust, as the case may be, enforceable against the Owner Trustee or the
Owner Trust, as the case may be, in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
3. Each Owner Trust has been duly formed and is legally and
validly existing in good standing as a business trust and a separate
legal entity under the Delaware Business Trust Act, 12 Del.C. Section
3801, et seq. (the "Delaware Act"), and has power and authority to
execute, deliver and perform each of the Pass Through Documents to
which it is a party in accordance with their terms and to execute,
deliver and perform the Mortgage Notes.
4. The Mortgage Notes have been duly executed and delivered
by the Owner Trustee or the Owner Trust, as the case may be, in
accordance with the terms of the Indenture and the Owner Trust
Agreement, and constitute legal, valid and binding obligations of the
Owner Trustee or the Owner Trust, as the case may be, enforceable
against the Owner Trustee in accordance with their terms and the terms
of the Indentures; and the holders of the Mortgage Notes are entitled
to the benefits and security afforded by the Indentures in
<PAGE> 39
accordance with their terms and the terms of the Indentures.
5. With respect to each Property, the Owner Trustee or Owner
Trust, as the case may be, has received from the Company or applicable
seller such title to such Property as the Company or applicable seller
conveyed to the Owner Trustee or Owner Trust, as the case may be,
subject to the rights of the Owner Trustee or Owner Trust, as the case
may be, and the Company under the Lease and the Remainder Purchaser
under the Remainderman Deed and the security interest created pursuant
to the related Indenture; and to our knowledge, there exist no Liens
affecting the title of the Owner Trustee or Owner Trust, as the case
may be, to any Indenture Estate resulting from claims against the Owner
Trustee or Owner Trust, as the case may be, not related to the
ownership of such Indenture Estate or the administration of such
Indenture Estate or any other transaction pursuant to the related
Indenture or any document included in such Indenture Estate.
6. The authorization, execution, delivery and performance by
the Owner Trustee or Owner Trust, as the case may be, of the Pass
Through Documents to which it is a party and the consummation of the
transactions therein contemplated and compliance with the terms
thereof, and the issuance, execution and delivery and performance of
the Mortgage Notes thereunder, do not and will not result in the
violation of the provisions of the charter or by-laws of the Owner
Trustee, and do not and will not conflict with, or result in a breach
of any terms or provisions of, or constitute a default under, or result
in the creation or the imposition of any lien, charge or encumbrance
upon any property or assets of the Owner Trustee, under any indenture,
mortgage or other agreement or instrument known to us to which the
Owner Trustee is a party or by which it or any of its property is
bound, or any Delaware or Federal law, rule or regulation governing the
Owner Trustee's banking or trust powers, or of any judgment, order or
decree known to us to be applicable to the Owner Trustee, or any court,
regulatory body, administrative agency, government or governmental body
having jurisdiction over the Owner Trustee or its properties.
7. No authorization, approval, consent, license or order of,
giving of notice to, registration with, or taking of any other action
in respect of, any Federal or state governmental authority or agency
pursuant to
-2-
<PAGE> 40
any Delaware or Federal law governing the banking or trust powers of
the Owner Trustee, is required for the authorization, execution,
delivery and performance by the Owner Trustee of the Pass Through
Documents to which it is a party or the consummation of any of the
transactions contemplated thereby by the Owner Trustee or the issuance,
execution, delivery and performance of the Mortgage Notes (except such
as shall have been duly obtained, given or taken); and such
authorization, execution, delivery, performance, consummation, and
issuance do not conflict with or result in a breach of the provisions
of any such law.
8. There are no proceedings pending, or to the best of our
knowledge, threatened, and to the best of our knowledge there is no
existing basis for any such proceeding against or affecting the Owner
Trustee or the Owner Trust, as the case may be, before any governmental
authority which would, either in any one case or in the aggregate, if
adversely determined, materially and adversely affect the Owner
Trustee's or the Owner Trust's, as the case may be, ability to perform
its obligations under any of the Pass Through Documents to which it is
a party. To the best of our knowledge, the Owner Trustee or the Owner
Trust, as the case may be, is not in default with respect to any order
of any governmental authority which default would, either in any one
case or in the aggregate, materially adversely affect the Owner
Trustee's or the Owner Trust's, as the case may be, ability to perform
its obligations under any of the Pass Through Documents.
9. (a) There are no fees, taxes or other charge payable by
the Owner Trustee (except taxes imposed on fees payable by the Owner
Trustee) to the State of Delaware or any political subdivision thereof
in connection with the execution, delivery and performance of any of
the Pass Through Documents or in connection with execution, issuance
and delivery of the Mortgage Notes and (b) neither the Owner Trustee
nor the Owner Trust will be subject to any fee, tax or other charge
under the laws of the State of Delaware or any political subdivision
thereof in existence on the date hereof, on, based on or measured by,
directly or indirectly, any payments under the Mortgage Notes or the
gross receipts, net income or value of the Indenture Estate or the
trust created by the Owner Trust Agreement.
-3-
<PAGE> 41
Exhibit C
[Section 7(e) Opinion of Hunton & Williams]
1. Each Owner Participant is a corporation duly incorporated,
validly existing and in good standing as a corporation under the laws
of the State of Delaware, and has the requisite corporate power and
authority to execute, deliver and perform its respective obligations
under each of the Participation Agreement, the Tax Indemnification
Agreement and the Owner Trust Agreements (the "Owner Participant
Documents").
2. Each of the Owner Participant Documents has been duly each
Owner Participant, and each such document, on the date of execution
thereof, constituted and currently constitutes the legal, valid and
binding obligations of such Owner Participant, enforceable against the
Owner Participant in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
3. Neither the execution and delivery of each of the Owner
Participant Documents by each Owner Participant nor the consummation by
such Owner Participant of any of the transactions therein contemplated,
nor the fulfillment of, or compliance with the terms and provisions of
any thereof, (A) requires the consent or approval of, the giving of
notice to, the registration with, or the taking of any other action
with respect to, any federal or state governmental authority or agency,
or (B) contravenes any federal or state law, governmental rule or
regulation binding on any Owner Participant (except no opinion is given
as to any federal or state law, governmental rule or regulation to
which such Owner Participant may be subject because of the activities
of the Company, as lessee), or (C) results in the breach of any of the
terms, conditions or provisions of the Certificate of Incorporation or
By-Laws, each as amended to date, of each Owner Participant, or (D) to
our knowledge, is in violation of any judgment or order applicable to
each Owner Participant or results in any breach of or constitutes any
default under, or results in the imposition of, any lien upon the Trust
Estate under any indenture, mortgage, bank credit agreement, note or
bond purchase agreement, long-term agreement, long-term lease, license
or other material contract, agreement or instru-
<PAGE> 42
ment to which the Owner Participant is a party or by which the Owner
Participant or any material part of its properties is bound, or
constitutes or will constitute a default thereunder (other than
breaches, defaults or violations which do not materially and adversely
affect the ability of each Owner Participant to perform its obligations
under the Owner Participant Documents).
4. To the best of our knowledge, there are no pending or
threatened actions or proceedings affecting any Owner Participant's
ability to perform its obligations under the Owner Participant
Documents before any court or administrative agency or arbitrator that
questions the validity or enforceability of the Owner Participant
Documents or that, if adversely determined, would materially and
adversely affect the ability of the Owner Participant to perform its
obligations under the Owner Participant Documents.
5. Each Owner Participant is an entity separate and distinct
from the Owner Trust.
-2-
<PAGE> 43
Exhibit D
[Section 7(f) Opinion of Emmet, Marvin & Martin, LLP]
1. The Indenture Trustee is a corporation, duly incorporated,
validly existing and in good standing under the laws of the
State of New York, and has the corporate power and authority
to execute, deliver and perform each of the Indentures and the
Participation Agreement.
2. The Indenture Trustee, in its individual and trust capacities,
has duly authorized, executed and delivered each of the
Indentures and the Participation Agreement. Each of the
Indentures and the Participation Agreement constitutes a
legal, valid and binding obligation of the Indenture Trustee
enforceable against the Indenture Trustee in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors'
rights and to general equity principles.
3. The Mortgage Notes have been duly authenticated and delivered
by the Indenture Trustee in accordance with the terms of the
Indentures.
4. The authorization, execution, delivery and performance by the
Indenture Trustee of the Indentures and the Participation
Agreement, and the authentication and delivery of the Mortgage
Notes thereunder, do not and will not result in the violation
of the provisions of the charter or by-laws of the Indenture
Trustee, and do not and will not conflict with, or result in a
breach of any terms or provisions of, or constitute a default
under, or result in the creation or the imposition of any
lien, charge or encumbrance upon any property or assets of the
Indenture Trustee, under any indenture, mortgage or other
agreement or instrument known to us to which the Indenture
Trustee is a party or by which it or any of its property is
bound, or any law of the State of New York or Federal law,
rule or regulation governing the Indenture Trustee's banking
or trust powers, or of any judgment, order or decree known to
us to be applicable to the Indenture Trustee, or any court,
regulatory body, administrative agency,
<PAGE> 44
government or governmental body having jurisdiction over the
Indenture Trustee or its properties.
5. No authorization, approval, consent, license or order of,
giving of notice to, or registration with, any governmental
authority or agency pursuant to any Federal or New York law
governing the banking or trust powers of the Indenture
Trustee, is required for the authorization, execution and
delivery by the Indenture Trustee of the Indentures and the
Participation Agreement or the performance by the Indenture
Trustee of its duties thereunder.
6. To the best of our knowledge, but without independent
investigation, there are no proceedings pending or threatened,
against or affecting the Indenture Trustee before any
governmental authority which would, either in any one case or
in the aggregate, if adversely determined, materially and
adversely affect the Indenture Trustee's ability to perform
its obligations under any of the Indentures or the
Participation Agreement.
7. (a) There are no fees, taxes or other charges payable (except
taxes imposed on fees payable to the Indenture Trustee) to the
State of New York or any political subdivision thereof in
connection with the execution, delivery and performance of the
Indentures or the Participation Agreement which would not have
been imposed if the Indenture Trustee had not had its
principal place of business in or performed its duties under
the Indentures in the State of New York and (b) neither the
Indenture Trustee nor the trust created under each of the
Indentures will be subject to any fee, tax or other charge
under the laws of the State of New York or any political
subdivision thereof in existence on the date hereof, on, based
on or measured by, directly or indirectly, any payments under
the Mortgage Notes or the gross receipts, net income or value
of the Indenture Estate which would not have been imposed if
the Indenture Trustee had not had its principal place of
business in or performed its duties under the Indentures in
the State of New York.]
-2-
<PAGE> 45
Exhibit E-1
[Section 7(g) Opinion of Squire, Sanders & Dempsey]
1. The Pass Through Trustee is a national banking
association, duly organized, validly existing and in good standing under the
laws of the United States of America, and the Pass Through Trustee has the
corporate power and authority to execute, deliver and perform the Pass Through
Trust Agreement.
2. The Pass Through Trustee, in its individual and trust
capacities, has duly authorized, executed and delivered the Pass Through
Agreement, and the Pass Through Agreement constitutes a legal, valid and
binding obligation of the Pass Through Trustee.
3. In any action or proceeding arising out of or relating to
the Pass Through Agreement or the Securities in any court of the State of
Florida or in any federal court sitting in the State of Florida, such court
would recognize and give effect to the provisions of Section 2.14 of the Pass
Through Agreement by which the parties agree that the Pass Through Agreement
and the certificates shall be governed by, and construed in accordance with,
the laws of the State of New York.
4. The Securities have been duly authorized and validly
executed, issued, authenticated, and delivered by the Pass Through Trustee
pursuant to the Pass Through Agreement.
5. The execution, delivery and performance by the Pass
Through Trustee of the Pass Through Agreement does not and will not result in
the violation of the provisions of the charter or by-laws of the Pass Through
Trustee, or any Florida or Federal law, rule or regulation governing the
exercise of the Pass Through Trustee's banking or trust powers, or of any
judgment, order or decree known to us to be applicable to the Pass Through
Trustee, of any court, regulatory body, administrative agency, government or
governmental body having jurisdiction over the Pass Through Trustee or its
properties.
6. No authorization, approval, consent, license or order of,
giving of notice to, or registration with, any governmental authority or agency
pursuant to any applicable Florida or Federal law governing the banking or
trust powers of the Pass Through Trustee, is required for the authorization,
execution and delivery by the Pass Through
<PAGE> 46
Trustee of the Pass Through Trust Agreement or the issuance, execution and
delivery of the Securities.
7. To the best of our knowledge, but without any independent
investigation whatsoever, there are no proceedings pending or threatened
against the Pass Through Trustee before any governmental authority which would,
either in any one case or in the aggregate, if adversely determined, materially
and adversely affect the Pass Through Trustee's ability to perform its
obligations under the Pass Through Agreement.
8. (a) There are no fees, taxes or other charges payable by
the Pass Through Trustee (except taxes imposed on fees payable by the Pass
Through Trustee and occupational license taxes imposed on the Pass Through
Trustee for conducting its trust business in the City of Jacksonville, Florida)
to the State of Florida or the consolidated City of Jacksonville/Duval County
in connection with the execution, delivery and performance of any of the Pass
Through Agreement or the purchase, holding or sale of the Securities which
would not have been imposed if the Pass Through Trustee had not had its
principal place of business in or performed its duties under the Pass Through
Agreement in the City of Jacksonville, Florida and (b) none of the Pass Through
Trustee, the Pass Through Trust or the holders of the Securities will be
subject to any fee, tax or other charge under the laws of the State of Florida
or the Consolidated City of Jacksonville/Duval Country in existence on the date
hereof, on, based on or measured by, directly or indirectly, any payments on
the Securities or the gross receipts, net or gross income, tangible or
intangible property, net worth or capital of the Pass Through Trust which would
not have been imposed if the Pass Through Trustee had not had its principal
place of business in or performed its duties under the Pass Through Agreements
in the City of Jacksonville, Florida.
-2-
<PAGE> 47
Exhibit E-2
[Section 7(g) Opinion of Jones, Day, Reavis & Pogue]
1. The Pass Through Trustee is a corporation, duly
incorporated, validly existing and in good standing under the laws of the State
of California, and the Pass Through Trustee has the corporate power and
authority to execute, deliver and perform the Pass Through Trust Agreement.
2. The Pass Through Trustee has duly authorized, executed and
delivered the Pass Through Agreement, and the Pass Through Agreement
constitutes a legal, valid and binding obligation of the Pass Through Trustee.
3. In any action or proceeding arising our of or relating to
the Pass Through Agreement or the Securities in any court of the State of
California or in any federal court sitting in the State of California, such
court would recognize and give effect to the provisions of Section 2.14 of the
Pass Through Agreement by which the parties agree that the Pass Through
Agreement and the Certificates shall be governed by, and construed in
accordance with, the laws of the State of New York.
4. The Securities have been duly authorized and validly
executed, issued, authenticated, and delivered by the Pass Through Trustee
pursuant to the Pass Through Agreement.
5. The execution, delivery and performance by the Pass
Through Trustee of the Pass Through Agreement does not and will not result in
the violation of the provisions of the charter or by-laws of the Pass Through
Trustee, or any California or Federal law, rule or regulation governing the
exercise of the Pass Through Trustee's banking or trust powers, or of any
judgment, order or decree known to us to be applicable to the Pass Through
Trustee, of any court, regulatory body, administrative agency, government or
governmental body having jurisdiction over the Pass Through Trustee or its
properties.
6. No authorization, approval, consent, license or order of,
giving of notice to, or registration with, any governmental authority or agency
pursuant to any applicable California or Federal law governing the banking or
trust powers of the Pass Through Trustee, is required for the authorization,
execution and delivery by the Pass Through
<PAGE> 48
Trustee of the Pass Through Trust Agreement or the issuance, execution and
delivery of the Securities.
7. To the best of our knowledge, but without any independent
investigation whatsoever, there are no proceedings pending or threatened
against the Pass Through Trustee before any governmental authority which would,
either in any one case or in the aggregate, if adversely determined, materially
and adversely affect the Pass Through Trustee's ability to perform its
obligations under any of the Pass Through Agreement.
8. (a) There are no fees, taxes or other charges payable
(except taxes imposed on fees payable by the Pass Through Trustee and utility
user taxes imposed on the Pass Through Trustee for conducting its trust
business in the City of Los Angeles) to the State of California, the City of
Los Angeles or the county of Los Angeles in connection with the execution,
delivery and performance of the Pass Through Agreement or the purchase, holding
or sale of the Securities which would not have been imposed if the Pass Through
Trustee had not had its principal place of business in or performed its duties
under the Pass Through Trust Agreement in the City of Los Angeles, California
and (b) none of the Pass Through Trustee, the Pass Through Trust or the holders
of the Securities will be subject to any fee, tax or other charge under the
laws of the State of California, the City of Los Angeles or the county of Los
Angeles in existence on the date hereof, on, based on or measured by, directly
or indirectly, any payments on the Securities or the gross receipts, net or
gross income, tangible or intangible property, net worth or capital of the Pass
Through Trust which would not have been imposed if the Pass Through Trustee had
not had its principal place of business in or performed its duties under the
Pass Through Agreements in the City of Los Angeles, California.
-2-
<PAGE> 49
Exhibit F
[Section 7(h) Opinion of Remainder Purchaser]
1. The Remainder Purchaser is a business trust, duly
organized, validly existing and in good standing under the laws of the
State of Delaware, and the Remainder Purchaser has the power and
authority to execute, deliver and perform each of the Pass Through
Documents to which it is a party, to acquire, own, lease and give a
lien on and security interest in all of its right, title and interest
in and to the property constituting the Properties.
2. The Remainder Purchaser has duly authorized, executed and
delivered each Pass Through Document to which it is a party. Each such
Pass Through Document constitutes a legal, valid and binding obligation
of the Remainder Purchaser enforceable against the Remainder Purchaser
in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles.
3. With respect to each Property, the Remainder Purchaser has
received from the Company or applicable seller such title to such
Property as the Company or applicable seller conveyed to the Remainder
Purchaser, subject to the rights of the Owner Trustee, the Owner Trust
and the Company under the Lease, the Estate for Years and the Options
to Lease and the security interest created pursuant to the related
Indenture; and to our knowledge, there exist no Liens affecting the
title of the Remainder Purchaser to any title conveyed by the
Remainderman Deed resulting from claims against the Remainder Purchaser
not related to the ownership of such title conveyed by the Remainderman
Deed or any other transaction pursuant to the Sale and Leaseback
Transactions.
4. The authorization, execution, delivery and performance by
the Remainder Purchaser of the Pass Through Documents to which it is a
party and the consummation of the transactions therein contemplated and
compliance with the terms thereof, do not and will not result in the
violation of the provisions of the charter or by-laws of the Remainder
Purchaser, and do not and will not conflict with, or result in a breach
of any terms or provisions of, or constitute a default
<PAGE> 50
under, or result in the creation or the imposition of any lien, charge
or encumbrance upon any property or assets of the Remainder Purchaser,
under any indenture, mortgage or other agreement or instrument known to
us to which the Remainder Purchaser is a party or by which it or any of
its property is bound, or any Delaware or Federal law, or of any
judgment, order or decree known to us to be applicable to the Remainder
Purchaser, or any court, regulatory body, administrative agency,
government or governmental body having jurisdiction over the Remainder
Purchaser or its properties.
5. No authorization, approval, consent, license or order of,
giving of notice to, registration with, or taking of any other action
in respect of, any Federal or state governmental authority or agency
pursuant to any Delaware or Federal law governing the corporate powers
of the Remainder Purchaser, is required for the authorization,
execution, delivery and performance by the Remainder Purchaser of the
Pass Through Documents to which it is a party or the consummation of
any of the transactions contemplated thereby by the Remainder Purchaser
(except such as shall have been duly obtained, given or taken); and
such authorization, execution, delivery, performance, consummation, and
issuance do not conflict with or result in a breach of the provisions
of any such law.
6. There are no proceedings pending, or to the best of our
knowledge, threatened, and to the best of our knowledge there is no
existing basis for any such proceeding against or affecting the
Remainder Purchaser before any governmental authority which would,
either in any one case or in the aggregate, if adversely determined,
materially and adversely affect the Remainder Purchaser's ability to
perform its obligations under any of the Pass Through Documents to
which it is a party. To the best of our knowledge, the Remainder
Purchaser is not in default with respect to any order of any
governmental authority which default would, either in any one case or
in the aggregate, materially adversely affect the Remainder Purchaser's
ability to perform its obligations under any of the Pass Through
Documents.
7. (a) There are no fees, taxes or other charge payable by
the Remainder Purchaser (except taxes imposed on fees payable by the
Remainder Purchaser) to the State of Delaware or any political
subdivision thereof in connection with the execution, delivery and
performance of any of the Pass Through Documents and
-2-
<PAGE> 51
(b) the Remainder Purchaser will not be subject to any fee, tax or
other charge under the laws of the State of Delaware or any political
subdivision thereof in existence on the date hereof, on, based on or
measured by, directly or indirectly, any payments under the Pass
Through Documents or the gross receipts, net income or value of the
interest created by the Remainderman Deed.
-3-
<PAGE> 1
EXHIBIT 4.1
Draft of March 31 1995
================================================================================
PASS THROUGH TRUST AGREEMENT-1995-K-[1/2]
Dated as of
April __, 1995
Between
[PASS THROUGH TRUSTEE [1/2]],
as Pass Through Trustee,
and
KMART CORPORATION
================================================================================
<PAGE> 2
CROSS REFERENCE SHEET
Between
Provisions of the Trust Indenture Act of 1939, as amended,
and the Pass Through Trust Agreement:
<TABLE>
<CAPTION>
Section of
Section of the Act the Agreement
- ------------------ -------------
<S> <C>
310(a) (1) and (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.11
310(a) (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.14
310(a) (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
310(a) (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
310(b) (i)-(iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.09, 8.10, 8.12
310(b) (remainder) . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.01
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
312(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.02
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
313(b) (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
313(b) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03
314(c) (1) and (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.07
314(c) (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
314(d) (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
314(d) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
314(d) (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.07
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
315(a), (c) and (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
315(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
316(a) (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.09, 7.10
316(a) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
316(a) (last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01(b)
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.03, 7.05
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.08
</TABLE>
__________________________________
* Intentionally deleted.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
DECLARATION OF TRUST;
ISSUANCE OF PASS THROUGH CERTIFICATES;
ACQUISITION OF MORTGAGE NOTES
SECTION 2.01. Designations; Aggregate Amount;
Declaration of Trust . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.02. Payment and Delivery . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.03. Limitation of Powers . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.04. Execution of Pass Through Certificates . . . . . . . . . . . . . . 9
SECTION 2.05. Certificate of Authentication . . . . . . . . . . . . . . . . . . 10
SECTION 2.06. Form of Pass Through Certificates . . . . . . . . . . . . . . . . 10
SECTION 2.07. Registration, Transfer and Exchange . . . . . . . . . . . . . . . 10
SECTION 2.08. Mutilated, Destroyed, Lost and
Stolen Pass Through Certificates . . . . . . . . . . . . . . . . 11
SECTION 2.09. Cancellation of Pass Through Certificates;
Destruction Thereof . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.10. Temporary Pass Through Certificates . . . . . . . . . . . . . . . 12
SECTION 2.11. Pass Through Certificates Issuable in the
Form of a Registered Global Security . . . . . . . . . . . . . . 13
ARTICLE III
CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 3.01. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.02. Offices for Payments; Registrar . . . . . . . . . . . . . . . . . 15
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Pass Through Trust Agreement.
-i-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 3.03. Representations and Warranties of the Pass
Through Trustee . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.04. No Representations or Warranties as to
Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.05. Payments from Trust Property Only . . . . . . . . . . . . . . . . 17
SECTION 3.06. Limitation of the Company's Liability . . . . . . . . . . . . . . 17
ARTICLE IV
CERTIFICATEHOLDER LISTS AND REPORTS BY
THE COMPANY AND THE PASS THROUGH TRUSTEE
SECTION 4.01. Certificateholder Lists; Ownership of Pass
Through Certificates . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.02. Disclosure of Certificateholder Lists . . . . . . . . . . . . . . 17
SECTION 4.03. Reports by the Company . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.04. Reports by the Pass Through Trustee . . . . . . . . . . . . . . . 18
ARTICLE V
RECEIPT AND DISTRIBUTION OF INCOME
AND PROCEEDS FROM THE TRUST PROPERTY
SECTION 5.01. Certificate Account and Special Payments Account . . . . . . . . . 19
SECTION 5.02. Distributions from Certificate Account and
Special Payments Account . . . . . . . . . . . . . . . . . . . . 19
SECTION 5.03. Statements to Certificateholders . . . . . . . . . . . . . . . . . 21
SECTION 5.04. Investment of Special Payment Moneys . . . . . . . . . . . . . . . 21
SECTION 5.05. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VI
CONCERNING THE CERTIFICATEHOLDERS
SECTION 6.01. Evidence of Action Taken by Certificateholders . . . . . . . . . . 22
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Pass Through Trust Agreement.
-ii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 6.02. Proof of Execution of Instruments and of Holding
of Certificates . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6.03. Certificateholders to be Treated as Owners . . . . . . . . . . . . 23
SECTION 6.04. Pass Through Certificates Owned by the Company,
Owner Trust, Remainderman, Owner Trustees and
Owner Participant Deemed Not Outstanding . . . . . . . . . . . . 24
SECTION 6.05. Right of Revocation of Action Taken . . . . . . . . . . . . . . . 24
ARTICLE VII
REMEDIES OF PASS THROUGH TRUSTEE
AND CERTIFICATEHOLDERS
SECTION 7.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 7.02. Incidents of Sale of Mortgage Notes . . . . . . . . . . . . . . . 26
SECTION 7.03. Pass Through Trustee May Prove Debt . . . . . . . . . . . . . . . 27
SECTION 7.04. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.05. Suits for Enforcement . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 7.06. Discontinuance of Proceedings . . . . . . . . . . . . . . . . . . 28
SECTION 7.07. Limitations on Suits by Certificateholders . . . . . . . . . . . . 28
SECTION 7.08. Unconditional Right of Certificateholders to Receive
Scheduled Payments and Special Payments
and to Institute Certain Suits . . . . . . . . . . . . . . . . . 29
SECTION 7.09. Control by Certificateholders . . . . . . . . . . . . . . . . . . 29
SECTION 7.10. Waiver of Past Events of Default . . . . . . . . . . . . . . . . . 29
SECTION 7.11. Notice of Pass Through Defaults . . . . . . . . . . . . . . . . . 30
ARTICLE VIII
CONCERNING THE PASS THROUGH TRUSTEE
SECTION 8.01. Acceptance by Pass Through Trustee . . . . . . . . . . . . . . . . 30
SECTION 8.02. Pass Through Trustee's Liens . . . . . . . . . . . . . . . . . . . 30
SECTION 8.03. Certain Rights of the Pass Through Trustee . . . . . . . . . . . . 31
SECTION 8.04. Pass Through Trustee Not Responsible for Recitals . . . . . . . . 32
SECTION 8.05. Pass Through Trustee and Agents May Hold Pass
Through Certificates; Collections . . . . . . . . . . . . . . . 32
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Pass Through Trust Agreement.
-iii-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 8.06. Moneys Held by Pass Through Trustee . . . . . . . . . . . . . . . 32
SECTION 8.07. Right of Pass Through Trustee to Rely on Officer's
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 8.08. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 8.09. Resignation and Removal of Pass Through Trustee;
Appointment of Successor . . . . . . . . . . . . . . . . . . . . 33
SECTION 8.10. Disqualification; Conflicting Interests . . . . . . . . . . . . . 34
SECTION 8.11. Persons Eligible for Appointment as Pass Through
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 8.12. Acceptance of Appointment by Successor Trustee . . . . . . . . . . 35
SECTION 8.13. Merger, Conversion, Consolidation or Succession to
Business of Pass Through Trustee . . . . . . . . . . . . . . . . 36
SECTION 8.14. Appointment of Separate Pass Through Trustees . . . . . . . . . . 36
SECTION 8.15. Appointment of Authenticating Agent . . . . . . . . . . . . . . . 38
ARTICLE IX
INDEMNIFICATION OF PASS THROUGH
TRUSTEE BY THE COMPANY . . . . . . . . . . . . . . . . . . . 40
ARTICLE X
SUPPLEMENTS AND AMENDMENTS TO THIS PASS
THROUGH AGREEMENT AND OTHER DOCUMENTS
SECTION 10.01. Supplemental Agreements Without Consent of
Certificateholders . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 10.02. Supplemental Agreements With Consent of
Certificateholders . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 10.03. Effect of Supplemental Agreements . . . . . . . . . . . . . . . . 43
SECTION 10.04. Documents to Be Given to Pass Through Trustee . . . . . . . . . . 43
SECTION 10.05. Notation on Pass Through Certificates in Respect
of Supplemental Agreements . . . . . . . . . . . . . . . . . . . 44
SECTION 10.06. Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 10.07. Revocation and Effect of Consents . . . . . . . . . . . . . . . . 44
SECTION 10.08. Amendments, Waivers, Etc., of
Indenture Documents . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Pass Through Trust Agreement.
-iv-
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
ARTICLE XI
TERMINATION OF PASS THROUGH TRUSTS;
UNCLAIMED MONEYS
<S> <C> <C>
SECTION 11.01. Termination of Pass Through Trust . . . . . . . . . . . . . . . . 45
SECTION 11.02. Application by Pass Through Trustee of Funds
Deposited for Payment of Pass Through Certificates . . . . . . . 45
SECTION 11.03. Transfer of Moneys Held by Pass Through Trustee
Unclaimed for Two Years and Eleven Months . . . . . . . . . . . 45
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Capacity in Which Acting . . . . . . . . . . . . . . . . . . . . . 46
SECTION 12.02. No Legal Title to Trust Property in
Certificateholders . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 12.03. Certificates Nonassessable and Fully Paid . . . . . . . . . . . . 46
SECTION 12.04. Pass Through Agreement for the Benefit of the
Company, the Pass Through Trustee and the
Certificateholders . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 12.05. Limitation on Rights of Certificateholders . . . . . . . . . . . . 46
SECTION 12.06. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 12.07. Officer's Certificates and Opinions of Counsel;
Statements to Be Contained Therein . . . . . . . . . . . . . . . 47
SECTION 12.08. Conflict of Any Provision of Pass Through Agreement
with the Trust Indenture Act . . . . . . . . . . . . . . . . . . 48
SECTION 12.09. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 12.10. No Oral Modifications or Continuing Waivers . . . . . . . . . . . 49
SECTION 12.11. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 12.12. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 12.13. Normal Commercial Relations . . . . . . . . . . . . . . . . . . . 49
SECTION 12.14. Governing Law; Counterpart Form . . . . . . . . . . . . . . . . . 49
SECTION 12.15. Tax Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 12.16. Distributions Due on Days Other than Business Days . . . . . . . . 50
SECTION 12.17. Notices and Reports to Duff & Phelps and Moody's . . . . . . . . . 50
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Pass Through Trust Agreement.
-v-
<PAGE> 8
<TABLE>
<CAPTION>
Page
----
<S> <C>
SCHEDULE A-I - Schedule of Mortgage Notes to be Acquired
EXHIBIT A - Form of Pass Through Certificate
EXHIBIT B - Letter of Representations
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Pass Through Trust Agreement.
-vi-
<PAGE> 9
PASS THROUGH TRUST AGREEMENT-1995-K-[1/2], dated as of March __, 1995,
between KMART CORPORATION, a Michigan corporation (the "Company"), and [PASS
THROUGH TRUSTEE [1/2]], a _______________ organized under the laws of
_______________________, as trustee (the "Pass Through Trustee").
RECITALS
WHEREAS, capitalized terms used herein shall have the respective
meanings set forth or referred to in Article I hereof;
WHEREAS, pursuant hereto the Company and the Pass Through Trustee do
hereby declare the creation of a Pass Through Trust for the benefit of the
Certificateholders of Pass Through Certificates to be issued pursuant to such
Pass Through Trust, and the initial Certificateholders as the grantors of the
Pass Through Trust, by their respective acceptances of such Pass Through
Certificates, will join in the creation of such Pass Through Trust;
WHEREAS, the Pass Through Certificates will evidence fractional
undivided interests in the Pass Through Trust pursuant to which they will be
issued, and will have no rights, benefits or interest in respect of any other
separate Pass Through Trust or the Trust Property held in any such other Pass
Through Trust;
WHEREAS, the Trust Property will include Mortgage Notes issued by the
Owner Trusts pursuant to the Indentures, which Mortgage Notes are of the same
tenor as the Pass Through Certificates to be issued in respect of such Pass
Through Trust, and the Pass Through Trustee will hold such Mortgage Notes in
trust as Trust Property for the benefit of the Certificateholders;
WHEREAS, the Company has duly authorized the execution and delivery of
this Pass Through Agreement as the "issuer," as such term is defined in and
solely for purposes of the Securities Act, of the Pass Through Certificates to
be issued in respect of each Pass Through Trust and as the "obligor," as such
term is defined in and solely for purposes of the Trust Indenture Act, with
respect to all such Pass Through Certificates, and is undertaking to perform
certain administrative and ministerial duties hereunder and is also undertaking
to pay the fees and expenses of the Pass Through Trustee;
WHEREAS, this Pass Through Agreement, as it may be supplemented from
time to time, is subject to the provisions of the Trust Indenture Act and
shall, to the extent applicable, be governed by such provisions;
IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto
as follows:
<PAGE> 10
ARTICLE I
DEFINITIONS
The following terms (except as otherwise expressly provided) for all
purposes of this Pass Through Agreement have the respective meanings specified
in this Section. All other terms used in this Pass Through Agreement that are
defined in the Trust Indenture Act (as defined below) or the definitions of
which in the Securities Act (as defined below) are referred to in the Trust
Indenture Act (except as herein otherwise expressly provided), have the
meanings assigned to such terms in the Trust Indenture Act and in the
Securities Act as in force at the date of this Pass Through Agreement. All
accounting terms used and not expressly defined herein have the meanings given
to them in accordance with generally accepted accounting principles, and the
term "generally accepted accounting principles" means the accounting principles
that are generally accepted at the date or time of any computation or otherwise
at the date hereof. The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Pass Through Agreement as a whole and not
to any particular Article, Section or other subdivision. References to
designated "Articles," "Sections," "subsections" and other subdivisions of this
Pass Through Agreement are to the designated Articles, Sections, subsections
and other subdivisions of this Pass Through Agreement as originally executed.
The terms defined in this Article include the plural as well as the singular.
"Affiliate" has, for any Person, the meaning specified in Rule 0-2
under the Trust Indenture Act.
"Authenticating Agent" means any Person authorized by the Pass Through
Trustee pursuant to Section 8.15 to act on behalf of the Pass Through Trustee
to authenticate Pass Through Certificates.
"Business Day" means any day other than Saturday, Sunday or other day
on which banking institutions in the States of New York or Michigan are
authorized or required by law or executive order to close.
"Certificate Account" means the account or accounts created and
maintained for the Pass Through Trust pursuant to Section 5.01(a).
"Certificate Owner" means 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.
"Certificateholder" means the registered holder of any Pass Through
Certificate as evidenced on the Register.
-2-
<PAGE> 11
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the execution and delivery of this Pass Through Agreement such Commission
is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties on such date.
"Company" means Kmart Corporation, a Michigan corporation, and its
permitted successors and assigns hereunder.
"Corporate Trust Office" means the corporate trust office of the Pass
Through Trustee located at ________________________________________________, or
such other office at which the Pass Through Trustee's corporate trust business
shall be administered and which the Pass Through Trustee shall have specified
by notice in writing to the Company and the Certificateholders.
"Corporate Indenture Trustee" has the meaning specified in the
Indentures.
"Corporate Owner Trustee" has the meaning specified in the Indentures.
"Depository" means the depository of the Registered Global
Certificates, if any, representing the Pass Through Certificates and any
successor to such depository appointed by the Company pursuant hereto. Such
depository initially shall be The Depository Trust Company, a New York
corporation.
"Distribution Date" means any Regular Distribution Date or Special
Distribution Date, or both.
"Dollars" and "$" mean lawful currency of the United States of America.
"Event of Default" has the meaning specified in Section 7.01 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fractional Undivided Interest" means, for any Pass Through
Certificate, the fractional undivided interest in the Pass Through Trust that
is evidenced thereby.
"Government Obligations" means direct obligations of the United States
of America which are not callable, redeemable or payable prior to maturity, in
whole or in part, directly or indirectly, by any Person.
"Indenture" means each Indenture, Mortgage and Deed of Trust,
Assignment of Rents and Security Agreement dated as of March __, 1995 among the
Indenture Trustees and the related Owner Trust, pursuant to which each Mortgage
Note is issued, as such agreement may be modified, supplemented or amended from
time to time in accordance with the
-3-
<PAGE> 12
Indenture Documents. In the event the Company assumes the obligations of the
Owner Trust under any Indenture pursuant to Section 3.08 thereof by the
execution and delivery of a Company Indenture (as defined in the Indenture),
such Company Indenture shall be included within the meaning of Indenture as
used in this Agreement.
"Indenture Documents" means, for any Mortgage Note, the related
Indenture, the related Trust Agreement (and any supplement thereto), the
Participation Agreement, the related Lease, [OTHERS?] and the Mortgage Notes,
in each case as defined in such Indenture.
"Indenture Event of Default" means, for any Indenture, any event or
condition defined as an "Indenture Event of Default" in such Indenture.
"Indenture Trustees" means the Persons defined as such in the
Indentures.
"Initial Regular Distribution Date" means the first Regular
Distribution Date following the Issuance Date for such Pass Through Trust.
"Issuance Date" means the date of the issuance of the Pass Through
Certificates which shall be the date defined as the Closing Date in the
Underwriting Agreement.
"Lease" means, for any Mortgage Note, the related agreement between
the Company, as lessee, and the related Owner Trust, as lessor, dated as of the
date hereof.
"Letter of Representations" means a letter from the Company and the
Pass Through Trustee to, and accepted by, the Depository substantially in the
form attached as Exhibit B hereto, as such letter may be modified or
supplemented, or any successor letter thereto.
"Lien" means any mortgage, pledge, lien, charge, disposition of title,
encumbrance, lease or security interest.
"Majority in Interest of Certificateholders" and "66 2/3% in Interest
of Certificateholders" means, respectively, on any date, Pass Through
Certificates then Outstanding (or the proxy therefor) representing in the
aggregate not less than a majority or 66 2/3%, respectively, of the aggregate
Fractional Undivided Interests of the Pass Through Certificates then
Outstanding.
"Mortgage Note" means any of the Mortgage Notes (including any
mortgage notes issued in exchange, replacement or substitution therefor),
issued pursuant to the Indentures and described herein, or on a schedule
attached hereto, which are to be held by the Pass Through Trustee as part of
the Trust Property. The Mortgage Notes are listed on Schedule A hereto. In
the event that the Company assumes the obligations of the related Owner Trust
under any Mortgage Note by the issuance of Company Mortgage Notes (as defined
in the
-4-
<PAGE> 13
Indentures) in substitution therefor, the Company Mortgage Notes shall be
deemed to be included within the meaning of Mortgage Notes as used in this
Agreement.
"Officer's Certificate" means a certificate signed by a Responsible
Officer of the Company, the Corporate Indenture Trustee or the Corporate Owner
Trustee, as the case may be, delivered to the Pass Through Trustee. Each such
certificate shall include the statements provided for in Section 12.07.
"Opinion of Counsel" means a written opinion of legal counsel to the
Company or an Owner Trust or the Indenture Trustees, as the case may be,
designated by the Company or such Owner Trust or the Indenture Trustees, as the
case may be, and reasonably satisfactory to the Pass Through Trustee.
"Outstanding" means, when used with respect to Pass Through
Certificates, as of the date of determination and subject to the provisions of
Section 6.04, all Pass Through Certificates theretofore authenticated and
delivered under this Pass Through Trust Agreement, with the exception of the
following:
(i) Pass Through Certificates theretofore cancelled by
the Pass Through Trustee or delivered to the Pass Through Trustee for
cancellation pursuant to Section 2.09;
(ii) All Pass Through Certificates if money in the amount
required to make the final distribution thereon in accordance with
Section 11.01 has been theretofore deposited with the Pass Through
Trustee in trust for the Certificateholders pending such final
distribution;
(iii) Pass Through Certificates which have been paid
pursuant to Section 2.09 or in exchange for or in lieu of which other
Pass Through Certificates have been authenticated and delivered
pursuant to Article II hereof other than any such Pass Through
Certificates in respect of which then shall have been presented to the
Pass Through Trustee proof satisfactory to it that such Pass Through
Certificates are held by a bona fide purchaser; and
(iv) Pass Through Certificates alleged to have been
destroyed, lost or stolen which have been paid as provided in Section
2.08 hereof.
"Overdue Scheduled Payment" means, for any Pass Through Trust,
any Scheduled Payment that is not received within ten Business Days after the
Regular Distribution Date applicable to such Scheduled Payment.
"Owner Participant" means the Person defined as such in the
Participation Agreement.
-5-
<PAGE> 14
"Owner Trust" is as defined in the Indentures.
"Owner Trustees" is as defined in the Indentures.
"Participation Agreement" means the agreement, dated as of the
date hereof, among the Company, the Owner Participants, the Owner Trustees, the
Owner Trust, the Indenture Trustees, the Remainderman Participant, the
Remainderman Trustee and the Remainderman, as the same may be amended, modified
or supplemented from time to time in accordance with the terms thereof and
hereof.
"Pass Through Agreement," "this Pass Through Agreement" and
other like words mean this Pass Through Trust Agreement as the same may be
modified, supplemented or amended from time to time in accordance with the
provisions hereof.
"Pass Through Certificate" means any of the Certificates
executed, authenticated and delivered by the Pass Through Trustee, in
accordance with and pursuant to this Pass Through Agreement.
"Pass Through Default" means an Event of Default or an event
or condition that, with the giving of notice or the lapse of time or both,
would become an Event of Default.
"Pass Through Trust" means the trust created in accordance
with this Pass Through Agreement, the rest of which consists of the Trust
Property.
"Pass Through Trustee" means [PASS THROUGH TRUSTEE 1/2], a
__________ ___________________, not in its individual capacity except as
expressly stated herein, but solely in its capacity as Pass Through Trustee
under this Pass Through Agreement, and its successors and assigns as Pass
Through Trustee hereunder.
"Permitted Investments" means any Government Obligations.
"Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint-stock company, trust,
nonincorporated organization or government or any agency or political
subdivision thereof.
"Pool Balance" means, as of any date of determination, the
aggregate unpaid principal amount of the Mortgage Notes that constitute Trust
Property on such date plus the amount of the principal payments on such
Mortgage Notes held by the Pass Through Trustee and not yet distributed (other
than earnings thereon and without giving effect to any losses on investments
thereof). The Pool Balance as of any Regular Distribution Date or Special
Distribution Date shall be computed after giving effect to the payment of
principal, if any, on such Mortgage Notes and the distribution thereof being
made on that date.
-6-
<PAGE> 15
"Pool Factor" means, as of any date of determination, the
quotient (rounded to the seventh decimal place) computed by dividing (i) the
Pool Balance by (ii) the aggregate original principal amount of the Mortgage
Notes.
"Purchase and Sale Agreement" is as defined in the Indentures.
"Record Date" means for any Regular Distribution Date and any
Special Distribution Date, the 15th day preceding such Regular Distribution
Date or Special Distribution Date, as the case may be, in any event, whether or
not such date is a Business Day.
"Register" has the meaning set forth in Section 3.02 hereof.
"Registered Global Certificate" means the Pass Through
Certificate, if any, issued to the Depository in accordance with Article II and
bearing the legend prescribed in Section 2.11(a).
"Registrar" has the meaning set forth in Section 3.02 hereof.
"Regular Distribution Date" means any date specified in
Section 5.02(a) for the distribution of any Scheduled Payment to the
Certificateholders.
"Remainderman" is as defined in the Indentures.
"Remainderman Participant" is as defined in the Indentures.
"Remainderman Trustee" is as defined in the Indentures.
"Responsible Officer" means the president or any other officer
with authority of at least a vice president; or, in the case of the Pass
Through Trustee, an officer or assistant officer of the Pass Through Trustee in
its Corporate Trust Department.
"Scheduled Payment" means any scheduled payment of interest on
or principal of and interest on any Mortgage Note that constitutes Trust
Property hereof to be made in the amounts and on the dates set forth for such
payment in such Mortgage Note, but does not include any Overdue Scheduled
Payment.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Distribution Date" means the date specified in
Section 5.02(a) on which a Special Payment is to be distributed to the
Certificateholders.
-7-
<PAGE> 16
"Special Payment" means any payment (including any Overdue
Scheduled Payment) other than a Scheduled Payment on any Mortgage Note that
constitutes Trust Property, or any proceeds from the sale of such Mortgage Note
pursuant to Article VII.
"Special Payments Account" means the account or accounts
created and maintained pursuant to Section 5.01(b).
"Trust Agreement" is as defined in the Indentures.
"Trust Indenture Act" means (except as otherwise provided in
Sections 10.01, and 10.06) the Trust Indenture Act of 1939, as in force at the
date as of which this Pass Through Agreement was first qualified under such
Act; provided, however, that in the event the Trust Indenture Act of 1939 is
amended after such date, "Trust Indenture Act" means, to the extent required by
any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Property" means all money, instruments, including the
Mortgage Notes, and other property held as the property of the Pass Through
Trust, including all monies at any time paid thereon and all monies due and to
become due thereunder and proceeds thereof.
"Underwriters" means the several Underwriters named in the
Underwriting Agreement.
"Underwriting Agreement" means the Underwriting Agreement
dated ___________, 1995 between the Company and Goldman, Sachs & Co. as
Underwriters.
ARTICLE II
DECLARATION OF TRUST;
ISSUANCE OF PASS THROUGH CERTIFICATES;
ACQUISITION OF MORTGAGE NOTES
SECTION 2.01. Designations; Aggregate Amount; Declaration of Trust.
(a) The Pass Through Trust created hereby shall be designated Kmart
Corporation Pass Through Trust-1995-K-[1/2] (herein sometimes called the "Pass
Through Trust"). The Pass Through Certificates evidencing Fractional Undivided
Interests in such Pass Through Trust shall be designated as the "Kmart
Corporation-1995-K-[1/2] Pass Through Certificates" (herein sometimes called
the "Pass Through Certificates"). The aggregate amount of Pass Through
Certificates that may be authenticated, executed, delivered and Outstanding in
accordance with this Pass Through Agreement is limited to $[______________].
All Pass Through Certificates shall be substantially identical except as to
denomination. The Pass Through Certificates will evidence Fractional Undivided
Interests in the Pass Through Trust created hereby, and will have no rights,
benefits or interest in respect of any other separate pass
-8-
<PAGE> 17
through trust, if any, or the Trust Property, if any, held in such other pass
through trust. All Pass Through 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 the actual time or times of
authentication and delivery, all in accordance with the terms and provisions of
this Pass Through Agreement.
(b) Each initial Certificateholder, by its payment for and
acceptance of any Pass Through Certificate is hereby deemed, (1) as grantor, to
join in the creation and declaration of this Pass Through Trust, and (2) as
beneficiary of this Pass Through Trust, to authorize and direct the Pass
Through Trustee to execute and deliver all documents to which the Pass Through
Trustee is a party that may be necessary or desirable to consummate the
transactions contemplated hereby and to exercise its rights and perform its
duties under this Pass Through Agreement.
The Pass Through Trustee hereby acknowledges and accepts this grant of
trust and declares that it will hold the Trust Property for the use and benefit
of the Certificateholders.
SECTION 2.02. Payment and Delivery. Subject to the terms set forth
herein, on the Issuance Date (i) the Underwriters shall execute a wire transfer
or intra-bank transfer, or deliver a federal funds check to the Corporate Owner
Trustee or as the Corporate Owner Trustee may direct on behalf of the Pass
Through Trustee in the amount of the total proceeds payable by such
Underwriters pursuant to the Underwriting Agreement with respect to the Pass
Through Certificates and (ii) the Pass Through Trustee shall deliver the
executed and authenticated Pass Through Certificates to the Underwriters as
provided in the Underwriting Agreement upon receipt by the Corporate Owner
Trustee on behalf of the Pass Through Trustee of such proceeds.
SECTION 2.03. Limitation of Powers. The Pass Through Trust is hereby
constituted solely for the purpose of making the investment in the Mortgage
Notes provided for herein and in the Purchase and Sale Agreement, and, except
as set forth herein, the Pass Through Trustee shall not be authorized or
empowered to acquire any other investments or engage in any other activities
and, in particular, the Pass Through Trustee shall not be authorized or
empowered to do anything that would cause such Pass Through Trust to fail to
qualify as a "grantor trust" for federal income tax purposes (including as
subject to this restriction, acquiring any Property (as defined in the
respective Indenture) by bidding for such Mortgage Notes or otherwise, or
taking any action with respect to any such Property once acquired).
SECTION 2.04. Execution of Pass Through Certificates. The Pass
Through Certificates shall be signed by the Pass Through Trustee on behalf of
the Pass Through Trust by an authorized officer of the Pass Through Trustee.
Such signatures may be the manual or facsimile signatures of such officer.
-9-
<PAGE> 18
If any officer of the Pass Through Trustee who signs any of the Pass
Through Certificates subsequently ceases to be such officer before the Pass
Through Certificate so signed is authenticated and delivered by the Pass
Through Trustee, such Pass Through Certificate nevertheless may be
authenticated and delivered as though the person who signed such Pass Through
Certificate had not ceased to be such officer of the Pass Through Trustee; and
any Pass Through Certificate may be signed on behalf of the Pass Through
Trustee by such person or persons as, at the actual date of the execution of
such Pass Through Certificate, are the proper officers of the Pass Through
Trustee, although at the date of the execution and delivery of this Pass
Through Agreement any such person was not such officer.
SECTION 2.05. Certificate of Authentication. The Pass Through
Trustee shall duly authenticate and deliver Pass Through Certificates in
authorized denominations equalling, in the aggregate, the aggregate principal
amount of the Mortgage Notes, and evidencing the entire ownership of the Pass
Through Trust. Only such Pass Through Certificates as shall bear thereon a
certificate of authentication substantially in the form set forth in Exhibit A,
executed by the Pass Through Trustee or an Authenticating Agent by manual or
facsimile signature of one of its authorized signatories, shall be entitled to
the benefits of this Pass Through Trust Agreement or be valid or obligatory for
any purpose. Such certificate of authentication executed by the Pass Through
Trustee upon any Pass Through Certificate shall be conclusive evidence, and the
only evidence, that the Pass Through Certificate has been duly authenticated
and delivered hereunder and that the Certificateholder is entitled to the
benefits of the Pass Through Trust.
SECTION 2.06. Form of Pass Through Certificates. The Pass Through
Certificates shall be substantially in the form set forth in Exhibit A hereto.
Subject to the provisions of Section 2.11 hereof, the Pass Through Certificates
shall be issuable as registered securities without coupons and shall be
numbered, lettered, or otherwise distinguished from one another. The Pass
Through Certificates shall be issued in denominations of $1,000 initial
principal amount and any integral multiple thereof and shall be dated the date
of their authentication.
The Pass Through Certificates may be issued with appropriate
insertions, omissions, substitutions and variations, and may have imprinted or
otherwise reproduced thereon such legend or legends, not inconsistent with the
provisions of this Pass Through Agreement, as may be required to comply with
any law or with any rules or regulations pursuant thereto, or with the rules of
any securities exchange on which such Pass Through Certificates are admitted to
trading, or to conform to general usage.
SECTION 2.07. Registration, Transfer and Exchange. The Pass Through
Trustee shall keep at each office or agency to be maintained for the purpose as
provided in Section 3.02, a Register or Registers in which, subject to such
reasonable regulations as it may prescribe, it shall register, and shall
register the transfer of, Pass Through Certificates as
-10-
<PAGE> 19
provided in this Article. Such Register shall be in written form in the
English language or in any other form capable of being converted into such form
within a reasonable time.
Upon due presentation for registration of transfer of any Pass Through
Certificate at any such office or agency, the Pass Through Trustee shall
execute, on behalf of the Pass Through Trust, authenticate and deliver in the
name of the transferee or transferees a new Pass Through Certificate or Pass
Through Certificates in authorized denominations and evidencing a like
aggregate Fractional Undivided Interest.
Any Pass Through Certificate or Pass Through Certificates may be
exchanged for a Pass Through Certificate or Pass Through Certificates in other
authorized denominations. Pass Through Certificates to be exchanged shall be
surrendered at any office or agency to be maintained by the Pass Through Trust
for the purpose as provided in Section 3.02, and the Pass Through Trustee shall
execute, authenticate and deliver in exchange therefor the Pass Through
Certificate or Pass Through Certificates which the Certificateholder making the
exchange shall be entitled to receive, bearing numbers not contemporaneously or
previously outstanding.
All Pass Through Certificates presented for registration of transfer,
exchange, redemption or payment shall (if so required by the Pass Through
Trustee) be duly endorsed by, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Pass Through Trustee duly
executed by, the Certificateholder or his attorney-in-fact duly authorized in
writing.
The Pass Through Trustee may require payment from the
Certificateholder of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any exchange or registration of
transfer of Pass Through Certificates. No service charge to the
Certificateholder shall be made for any such transaction.
All Pass Through Certificates issued upon any transfer or exchange of
Pass Through Certificates shall evidence ownership in the Pass Through Trust
and be entitled to the same benefits under this Pass Through Agreement as the
Pass Through Certificates surrendered upon such transfer or exchange.
SECTION 2.08. Mutilated, Destroyed, Lost and Stolen Pass Through
Certificates. If any mutilated Pass Through Certificate is surrendered to the
Pass Through Trustee, the Pass Through Trustee shall execute, on behalf of the
Pass Through Trust, authenticate and deliver in exchange therefor a new Pass
Through Certificate bearing a number not contemporaneously outstanding.
If there shall be delivered to the Pass Through Trustee and any agent
of the Pass Through Trustee (i) evidence to their satisfaction of the
destruction, loss or theft of any Pass Through Certificate and (ii) such
security or indemnity as may be required by them to save each of them and the
Company harmless, then, in the absence of notice to the Pass Through
-11-
<PAGE> 20
Trustee that such Pass Through Certificate has been acquired by a bona fide
purchaser, the Pass Through Trustee shall execute, on behalf of the Pass
Through Trust, authenticate and deliver, in lieu of any such destroyed, lost or
stolen Pass Through Certificate, a new Pass Through Certificate bearing a
number not contemporaneously outstanding.
If, at the time a notice of termination has been given pursuant to
Section 11.01, any Pass Through Certificate becomes mutilated, destroyed, lost
or stolen, the Pass Through Trustee in its discretion may, instead of issuing a
new Pass Through Certificate, pay such Pass Through Certificate.
Upon the issuance of any new Pass Through 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 connection
therewith.
Every new Pass Through Certificate issued pursuant to this Section in
lieu of any destroyed, lost or stolen Pass Through Certificate shall constitute
conclusive evidence of the Fractional Undivided Interest evidenced by the Pass
Through Certificate that it replaces, whether or not the destroyed, lost or
stolen Pass Through Certificate may be enforceable at any time by anyone, and
shall be entitled to all the benefits of this Pass Through Trust Agreement
equally and proportionately with any and all other Pass Through Certificates
duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Pass Through
Certificates.
SECTION 2.09. Cancellation of Pass Through Certificates; Destruction
Thereof. All Pass Through Certificates surrendered for payment, redemption,
registration of transfer or exchange, if surrendered to any agent of the Pass
Through Trustee, shall be delivered to the Pass Through Trustee for
cancellation or, if surrendered to the Pass Through Trustee, shall be cancelled
by it; and no Pass Through Certificates shall be issued in lieu thereof except
as expressly permitted by any of the provisions of this Pass Through Agreement.
The Pass Through Trustee shall destroy cancelled Pass Through Certificates held
by it.
SECTION 2.10. Temporary Pass Through Certificates. Pending the
preparation of definitive Pass Through Certificates, the Pass Through Trustee
may execute, on behalf of the Pass Through Trust, authenticate and deliver
temporary Pass Through Certificates (printed, lithographed, typewritten or
otherwise reproduced, in each case in form satisfactory to the executing
officer of the Pass Through Trustee, as evidenced by such officer's execution
thereof). Such temporary Pass Through Certificates shall be issuable as
registered Pass Through Certificates without coupons, of any authorized
denomination, and substantially in the form of the definitive Pass Through
Certificates but with such omissions, insertions and variations as may be
appropriate for temporary Pass Through Certificates, all as may be determined
by the executing officer of the Pass Through Trustee, as evidenced by such
-12-
<PAGE> 21
officer's execution thereof. Temporary Pass Through Certificates may contain
such reference to any provisions of this Pass Through Agreement as may be
appropriate. Every such temporary Pass Through Certificate shall be executed
and authenticated by the Pass Through Trustee upon the same conditions and in
substantially the same manner, and with like effect, as the definitive Pass
Through Certificates. Without unreasonable delay, the Company shall furnish
definitive Pass Through Certificates and thereupon temporary Pass Through
Certificates shall be surrendered in exchange therefor without charge at any
office or agency to be maintained by the Pass Through Trustee for such purpose
pursuant to Section 3.02, and the Pass Through Trustee shall execute,
authenticate and deliver in exchange for such temporary Pass Through
Certificates such definitive Pass Through Certificates evidencing a like
aggregate Fractional Undivided Interest in authorized denominations. Until so
exchanged, temporary Pass Through Certificates shall be entitled to the same
benefits hereunder as definitive Pass Through Certificates.
SECTION 2.11. Pass Through Certificates Issuable in the Form of a
Registered Global Security. (a) The Pass Through Trustee shall, in accordance
with this Article, execute on behalf of the Pass Through Trust, 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 Pool Balance, (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 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."
(b) Notwithstanding any other provision of this Section or of
Section 2.07, the Registered Global Certificates may be transferred, in whole
but not in part and in the manner provided in Section 2.07, 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 Company 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) at any time the Company advises the Pass Through
Trustee in writing that the Depository is no longer willing or able to properly
discharge its responsibilities or if at any time the Depository shall no longer
be eligible under subsection (c) above, and the Company is unable to appoint a
qualified successor within 90 days after the Company
-13-
<PAGE> 22
receives such notice or becomes aware of such condition, as the case may be, or
(ii) the Company at any time and in its sole discretion determines that the
Pass Through Certificates shall no longer be represented by Registered Global
Certificates and that the provisions of this Section shall no longer apply to
such Pass Through Certificates, then this Section shall no longer be applicable
to the Pass Through 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 Pass Through 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 on
behalf of the Pass Through Trust, authenticate and deliver Pass Through
Certificates in definitive registered form without coupons, in authorized
denominations, and in an aggregate Fractional Undivided Interest equal to the
Fractional Undivided 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 Pass Through
Certificates in definitive registered form without coupons, in authorized
denominations, such Registered Global Certificates shall be cancelled by the
Pass Through Trustee. The Company shall bear all costs of the preparation,
execution, authentication and delivery of such Pass Through Certificates. Such
Pass Through 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 Pass
Through Certificates to the Persons in whose names such Pass Through
Certificates are so registered.
(e) As long as the Pass Through Certificates are represented by
the Registered Global Certificates, all distributions shall be made to the
holders of such Registered Global Certificates as the Certificateholders, or to
such Persons as such holders may designate, by wire transfer of immediately
available funds on the date such distributions are due, and the Company 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 Pass Through Certificates in definitive
registered form are issued pursuant to paragraph (d) above, on the Record Date
prior to each Regular Distribution Date and Special Distribution 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 Certificates on such Record
Date. The Pass Through Trustee shall mail to each such Depository participant
the statements described in Section 5.03.
-14-
<PAGE> 23
ARTICLE III
CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 3.01. Covenants of the Company.
(a) The Company shall not (i) consolidate with or merge into any
other corporation under circumstances in which the Company is not the surviving
corporation or (ii) convey, transfer or lease all or substantially all of its
assets as an entirety to any Person, unless the corporation formed by such
consolidation or into which the Company is merged or the Person which acquired
by conveyance, transfer or lease substantially all of the assets of the Company
as an entirety shall be a corporation organized and existing under the laws of
the United States of America or any State or the District of Columbia, and
shall execute and deliver to the Pass Through Trustee an agreement reasonably
satisfactory in form and substance to the Pass Through Trustee containing an
effective assumption by such successor corporation of the due and punctual
performance and observance of each covenant and condition to be performed or
observed by the Company hereunder.
(b) Upon any consolidation or merger, or any conveyance, transfer
or lease of substantially all the assets of the Company as an entirety, the
successor corporation formed by such consolidation or the Person into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Agreement with the same effect as if such successor
corporation or such Person, as the case may be, had been named as the Company
herein and therein. No such conveyance, transfer or lease of substantially all
of the assets of the Company as an entirety shall have the effect of releasing
the Company or any successor corporation which shall theretofore have become
such in the manner prescribed in this Section from its liability hereunder.
(c) An Officer's Certificate and an Opinion of Counsel of the
Company shall be conclusive evidence that any consolidation, merger, sale,
lease or conveyance, and any assumption complies with the provisions of this
Section and the Pass Through Trustee shall be entitled to rely upon the same
for all purposes hereof.
(d) The Company shall provide written notice as soon as
practicable to Duff & Phelps and Moody's (at the addresses set forth in Section
12.17 hereof) of any merger, consolidation or conveyance, transfer or lease of
substantially all the assets of the Company. In addition, the Company shall
provide copies to Duff & Phelps and Moody's (at the addresses set forth in
Section 12.17 hereof) of its quarterly and annual financial statements and any
environmental, engineering and other reports prepared from time to time with
respect to a Property.
SECTION 3.02. Offices for Payments; Registrar. So long as any Pass
Through Certificates remain outstanding, the Pass Through Trustee will maintain
the following:
-15-
<PAGE> 24
(a) an office or agency where such Pass Through Certificates may be presented
for payment and (b) a facility or agency in New York, New York where such Pass
Through Certificates may be presented for registration of transfer and for
exchange and for redemption as provided in this Pass Through Agreement (the
"Registrar"). The Registrar shall keep a register (the "Register") with
respect to the Pass Through Certificates and their transfer and exchange. The
Pass Through Trustee may appoint one or more co-registrars ("Co-Registrars")
and may terminate any such appointment at any time upon written notice. The
term "Registrar" includes any Co-Registrar.
The Corporate Indenture Trustee shall initially act as Registrar and
shall initially serve as an office where Pass Through Certificates can be
presented for payment.
SECTION 3.03. Representations and Warranties of the Pass Through
Trustee. The Pass Through Trustee, in its individual capacity, represents,
warrants and agrees that:
(i) it is a validly existing __________________ duly
organized under the laws of ________________, holding a valid
certificate to do business as ___________ _________________ with
banking and trust powers and has the corporate power and authority to
enter into and perform its obligations under this Pass Through
Agreement;
(ii) this Pass Through Agreement has been duly authorized
by all necessary corporate action on its part, and neither the
execution and delivery hereof nor its performance of any of the terms
and provisions hereof will violate any Federal or state law or
regulation relating to its banking or trust powers or contravene or
result in any breach of, or constitute any default under its articles
of association, or by-laws or the provisions of any indenture,
mortgage, contract or other agreement to which it is a party or by
which it or its properties may be bound or affected;
(iii) this Pass Through Agreement has been duly executed and
delivered by it and, assuming that this Pass Through Agreement is the
legal, valid and binding obligation of the Company, is the legal,
valid and binding obligation of the Pass Through Trustee, enforceable
against the Pass Through Trustee in accordance with its terms except
as limited by bankruptcy, insolvency, moratorium, reorganization,
receivership, fraudulent conveyance or similar laws or equitable
principles of general application to or affecting the enforcement of
creditors' rights and remedies generally from time to time in effect,
regardless of whether such enforceability is considered in a
proceeding in equity or at law; and
(iv) no Pass Through Trustee's Lien (as described in Section
8.02 hereof) is in existence. The execution, delivery and performance
by Pass Through Trustee of this Pass Through Trust Agreement (as Pass
Through Trustee or in its individual capacity) will not subject the
Trust Property, or any portion thereof, to any such Pass Through
Trustee Liens.
-16-
<PAGE> 25
SECTION 3.04. No Representations or Warranties as to Documents. The
Pass Through Trustee neither makes nor shall be deemed to have made any
representation or warranty as to the validity, legality or enforceability of
this Pass Through Agreement, any Pass Through Certificates or any Indenture
Documents or as to the correctness of any statement contained in any thereof,
except for the representations and warranties of the Pass Through Trustee made
in its individual capacity under this Pass Through Agreement or in any other
Indenture Documents.
SECTION 3.05. Payments from Trust Property Only. All payments to be
made by the Pass Through Trustee shall be made only from the income and the
proceeds from the Trust Property and only to the extent that the Pass Through
Trustee shall have sufficient income or proceeds from the Trust Property to
enable the Pass Through Trustee to make distributions of the amounts due in
respect of the Pass Through Certificates thereunder. Each Certificateholder by
its acceptance of a Pass Through Certificate agrees that it will look solely to
the income and proceeds from the Trust Property to the extent available for
distribution to it as provided herein and that the Pass Through Trustee is not
personally liable to such Certificateholder for any amounts payable under such
Pass Through Trust except as expressly provided herein.
SECTION 3.06. Limitation of the Company's Liability. The Company is a
party to this Pass Through Agreement solely for purposes of meeting the
requirements of the Securities Act and the Trust Indenture Act, and therefore
shall not be liable hereunder, except as otherwise expressly provided herein,
or under the terms of Pass Through Certificates, except as otherwise expressly
provided therein.
ARTICLE IV
CERTIFICATEHOLDER LISTS AND REPORTS BY
THE COMPANY AND THE PASS THROUGH TRUSTEE
SECTION 4.01. Certificateholder Lists; Ownership of Pass Through
Certificates. The Pass Through Trustee shall preserve in as current a form as
is reasonably practicable the most recent list available to it of the names and
addresses of the Certificateholders. If the Pass Through Trustee is not the
Registrar, the Company shall cause the Registrar to furnish to the Pass Through
Trustee semi-annually not more than 15 days after each Record Date, as of such
Record Date, or 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, containing all the information in the possession or
control of the Registrar as to the names and addresses of the
Certificateholders and the amounts of the Pass Through Certificates held by
such Certificateholders.
SECTION 4.02. Disclosure of Certificateholder Lists. Each and every
Certificateholder, by receiving and holding such Pass Through Certificate,
agrees with the Company
-17-
<PAGE> 26
and the Pass Through Trustee that neither the Company, the Pass Through
Trustee, the Pass Through Trustee in its individual capacity nor any agent of
any of the foregoing shall be held accountable by reason of the disclosure of
any such information as to the names and addresses of any Certificateholders in
accordance with the provisions of Section 312 of the Trust Indenture Act,
regardless of the source from which such information was derived, and that the
Pass Through Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under Section 312(b) of the Trust Indenture
Act.
SECTION 4.03. Reports by the Company. The Company covenants:
(i) to file with the Pass Through Trustee, within 30 days
after the Company is required to file the same with the Commission,
copies of the annual reports and of the information, documents, and
other reports (or copies of such portions of any of the foregoing as
the Commission may from time to time by rules and regulations
prescribe) which the Company may be required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act or, if
the Company is not required to file information, documents, or reports
pursuant to either of such Sections of the Exchange Act, then to file
with the Pass Through Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission,
such of the supplementary and periodic information, documents, and
reports which may be required pursuant to Section 13 of the Exchange
Act, in respect of a security listed and registered on a national
securities exchange, as may be prescribed from time to time in such
rules and regulations;
(ii) to file with the Pass Through Trustee and the
Commission, in accordance with rules and regulations prescribed from
time to time by the Commission, such additional information,
documents, and reports with respect to compliance by the Company with
the conditions and covenants provided for in this Pass Through
Agreement as may be required from time to time by such rules and
regulations;
(iii) to transmit to the Certificateholders in the manner and
to the extent required by Section 313(c) of the Trust Indenture Act,
such summaries of any information, documents and reports required to
be filed by the Company pursuant to subsections (i) and (ii) of this
Section 4.03 as may be required by rules and regulations prescribed
from time to time by the Commission;
(iv) to furnish to the Pass Through Trustee, on or before
April 30 of each calendar year commencing 1996, a brief certificate
from the principal executive officer, principal financial officer or
principal accounting officer of the Company as to his or her knowledge
of the Company's compliance with all conditions and covenants under
this Pass Through Agreement. For purposes of this subsection (iv),
such compliance shall be determined without regard to any period of
grace or requirement of notice provided under this Pass Through
Agreement; and
-18-
<PAGE> 27
(v) to furnish to the Pass Through Trustee such opinions
as may be required by Section 314(b) of the Trust Indenture Act.
SECTION 4.04. Reports by the Pass Through Trustee.
(a) On or before March 31 of each calendar year commencing in
1996, the Pass Through Trustee shall transmit to Certificateholders such
reports concerning the Pass Through Trustee and its actions under this Pass
Through Trust Agreement as may be required pursuant to the Trust Indenture Act
at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Certificateholders, be filed by the Pass Through Trustee with
each stock exchange upon which the Pass Through Certificates are listed, with
the Commission and with the Company. The Company will notify the Pass Through
Trustee when the Pass Through Certificates are listed on any stock exchange, in
accordance with Section 313(c) of the Trust Indenture Act.
ARTICLE V
RECEIPT AND DISTRIBUTION OF INCOME
AND PROCEEDS FROM THE TRUST PROPERTY
SECTION 5.01. Certificate Account and Special Payments Account. (a)
The Pass Through Trustee shall establish and maintain for the Pass Through
Trust, on behalf of the Certificateholders, a Certificate Account as one or
more segregated non-interest bearing accounts. The Pass Through Trustee shall
hold such Certificate Account in trust for the benefit of the
Certificateholders, and shall make or permit withdrawals therefrom only as
provided in this Pass Through Agreement. Upon receipt of any Scheduled
Payment, the Pass Through Trustee shall immediately deposit such Scheduled
Payment in the Certificate Account.
(b) The Pass Through Trustee shall establish and maintain for the
Pass Through Trust, on behalf of the Certificateholders, a separate Special
Payments Account, as one or more segregated non-interest bearing accounts. The
Pass Through Trustee shall hold such Special Payments Account in trust for the
benefit of the Certificateholders and shall make or permit withdrawals
therefrom only as provided in this Pass Through Agreement. Upon receipt of any
Special Payment, the Pass Through Trustee shall immediately deposit such
Special Payment in the Special Payments Account.
(c) The Pass Through Trustee shall present any Mortgage Note to
the Corporate Indenture Trustee on the date of its stated final maturity, or on
such earlier date as such Mortgage Note is to be redeemed in whole pursuant to
the relevant Indenture.
-19-
<PAGE> 28
SECTION 5.02. Distributions from Certificate Account and Special
Payments Account. (a) The Regular Distribution Dates shall be January 5 and
July 5, commencing on July 5, 1995, or if any such day is not a Business Day,
the next succeeding Business Day. The Special Distribution Date for any month
in which a Special Payment is to be distributed shall be the ______________ day
of such month.
(b) On each related Regular Distribution Date, upon receipt of any
Scheduled Payment due on the Mortgage Notes on such Regular Distribution Date,
the Pass Through Trustee shall distribute out of the Certificate Account the
entire amount deposited therein pursuant to Section 5.01(a) by paying to each
Certificateholder of record at the close of business on the Record Date for
such Regular Distribution Date (except as provided in Section 11.01 concerning
the final distribution), at the address for such Certificateholder appearing in
the Register, such Certificateholder's pro rata share (based on the aggregate
Fractional Undivided Interest in the Pass Through Trust held by such
Certificateholder) of the aggregate amount in the Certificate Account.
(c) On each Special Distribution Date, upon receipt of any Special
Payment on the Mortgage Notes or realized upon the sale of any such Mortgage
Notes, the Pass Through Trustee shall distribute out of the Special Payments
Account the entire amount of such Special Payment deposited therein pursuant to
Section 5.01(b) by paying to each Certificateholder of record at the close of
business on the Record Date for such Special Distribution Date (except as
provided in Section 11.01 concerning the final distribution), at the address
for such Certificateholder appearing in the Register, such Certificateholder's
pro rata share (based on the aggregate Fractional Undivided Interest in the
Pass Through Trust held by such Certificateholder) of the aggregate amount in
the Special Payments Account on account of such Special Payment.
(d) The Pass Through Trustee shall, at the expense of the Company,
notify each Certificateholder by mail at its address as it appears in the
Register of each Special Payment. If the Mortgage Notes are to be redeemed or
purchased in whole prior to their maturity, such notice shall be mailed not
less than 20 days prior to the date any such Special Payment is scheduled to be
distributed. For any other Special Payment, such notice shall be mailed as
soon as practicable after the Pass Through Trustee has received such Special
Payment. Such notices of Special Payments shall set forth:
(i) the Special Distribution Date and the Record Date
therefor (except as otherwise provided in Section 11.01);
(ii) the amount of the Special Payment for each $1,000
initial principal amount and the amount thereof constituting
principal, premium, if any, and interest on the Mortgage Notes;
(iii) the reason for the Special Payment; and
-20-
<PAGE> 29
(iv) if the Special Distribution Date is the same date as
a Regular Distribution Date, the total amount to be received on such
date for each $1,000 initial principal amount.
If the amount of premium, if any, payable upon the redemption or purchase in
whole of a Mortgage Note has not been calculated at the time that the Pass
Through Trustee mails the notice of the related Special Payment, it shall be
sufficient if the notice sets forth the other amounts to be distributed and
states that any premium received will also be distributed.
(e) Any Scheduled Payment or Special Payment to be distributed
pursuant to this Article shall be payable at any office or agency maintained
for such purpose pursuant to Section 3.02, provided that any Scheduled Payment
may be payable at the option of the Pass Through Trustee by mailing checks for
such Scheduled Payment payable to or upon the written order of the
Certificateholders entitled thereto as they appear on the Register.
Notwithstanding the foregoing to the contrary, so long as all of the
Outstanding Pass Through Certificates are held by a Depository (or its
nominee), each Scheduled Payment and Special Payment shall be made by wire
transfer of funds in accordance with the agreement with such Depository.
SECTION 5.03. Statements to Certificateholders. (a) On each Regular
Distribution Date and Special Distribution Date, the Pass Through Trustee shall
include with each distribution to Certificateholders a statement, giving effect
to such distribution to be made on such Regular Distribution Date or Special
Distribution Date, as the case may be, setting forth the following information
(as to (i) and (ii) below, for each $1,000 initial principal amount Pass
Through Certificate):
(i) The amount of such distribution allocable to
principal and the amount allocable to premium, if any, on the Mortgage
Notes;
(ii) The amount of such distribution allocable to interest
on the Mortgage Notes;
(iii) The Pool Balance and the Pool Factor; and
(iv) Any earnings on Special Payments derived from
Permitted Investments that are distributed to Certificateholders.
(b) Within a reasonable period of time after the end of each
calendar year but not later than the latest date permitted by law, the Pass
Through Trustee shall furnish to each Person who at any time during such
calendar year was a Certificateholder a statement containing the sum of the
amounts determined pursuant to clauses (a)(i), (a)(ii) and (a)(iv) of this
Section for such calendar year or, in the event such Person was a
Certificateholder during a portion of such calendar year, for the applicable
portion of such year.
-21-
<PAGE> 30
SECTION 5.04. Investment of Special Payment Moneys. Any money
received by the Pass Through Trustee pursuant to Section 5.01(b) representing a
Special Payment that is not to be promptly distributed shall, to the extent
practicable, be invested by the Pass Through Trustee at the direction of the
Company in Permitted Investments maturing no later than the next succeeding
Special Distribution Date pending distribution of such Special Payment pursuant
to Section 5.02. Any investment made pursuant to this Section 5.04 shall be in
such Permitted Investments having maturities not later than the date that such
moneys are required to be used to make the payment required under Section 5.02
on the applicable Special Distribution Date and the Pass Through Trustee shall
hold any such Permitted Investments until maturity. The proceeds upon maturity
of any Permitted Investment shall not be reinvested pending distribution. The
Pass Through Trustee shall have no liability with respect to any investment
made pursuant to this Section, other than by reason of its own negligent
action, its own negligent failure to act or its own willful misconduct. All
income and earnings from such investments shall be distributed on such Special
Distribution Date as part of such Special Payment.
SECTION 5.05. Withholding Taxes. The Pass Through Trustee shall
withhold any taxes required to be withheld under applicable law, regulation or
rule, including any interest or penalty in connection therewith, on payments to
any Certificateholder except to the extent that such Certificateholder has
furnished evidence satisfactory to the Pass Through Trustee of any exemption
from or reduction in withholding claimed by such Certificateholder and such
withholding on payments shall constitute a payment to the Certificateholder.
In the event that such evidence furnished by such Certificateholder to
establish its withholding exemption is false, inaccurate or no longer true, the
Certificateholder shall be liable for such amounts necessary to indemnify the
Company and the Pass Through Trustee for expenses attributable to such false,
inaccurate or untrue evidence and any related contests or disputes and the same
may be withheld from distributions otherwise distributable to such Holder. To
the extent that the Pass Through Trustee fails, with respect to any
Certificateholder, to withhold and pay over any such taxes to the appropriate
taxing authority, the Pass Through Trustee shall, upon a claim being made for
such taxes by such authority, take all reasonable steps to recover such taxes
from such Certificateholder, including, without limitation, withholding the
amount of such taxes from subsequent distributions, if any, to such
Certificateholder.
The Pass Through Trustee agrees (i) that it will timely pay the
amounts withheld pursuant to this Section 5.05 to the appropriate authority,
(ii) that it will file any necessary withholding tax returns or statements when
due and (iii) that, as promptly as possible after the payment of such amounts,
it will deliver to the Company, the Indenture Trustees and the Owner Trusts
appropriate documentation showing the payment of such amounts, together with
such additional documentary evidence as the Company may reasonably request from
time to time. The Pass Through Trustee agrees to file any other information
reports as it may be required to file under United States law.
-22-
<PAGE> 31
ARTICLE VI
CONCERNING THE CERTIFICATEHOLDERS
SECTION 6.01. Evidence of Action Taken by Certificateholders. (a)
Any request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Pass Through 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 otherwise expressly
provided herein, such action shall become effective when such instrument or
instruments are delivered to the Pass Through Trustee. Proof of execution of
any instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Pass Through Agreement and (subject to Sections 8.02
and 8.03) conclusive in favor of the Pass Through Trustee, if made in the
manner provided in this Article.
(b) For the purpose of determining the Certificateholders entitled
to vote or consent to any direction, waiver or other action of such
Certificateholders under Section 7.09 or 7.10, the Company may set a record
date for such vote or consent by specifying such record date in an Officer's
Certificate delivered to the Pass Through Trustee. Notwithstanding Section
316(c) of the Trust Indenture Act, such record date shall be a date not more
than 15 days prior to the first solicitation of such vote or consent.
SECTION 6.02. Proof of Execution of Instruments and of Holding of
Certificates. The fact and date of the execution by any Certificateholder of
any instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgements of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Certificateholder executing the same, may also
be proved in any other manner which the Pass Through Trustee deems sufficient.
The holding of Pass Through Certificates shall be proved by the Register.
SECTION 6.03. Certificateholders to be Treated as Owners. Prior to
due presentment for registration of transfer of any Pass Through Certificate,
the Indenture Trustees, the Pass Through Trustee, the Registrar, if any, and
the Company, and any agent of the Indenture Trustees, the Pass Through Trustee,
the Registrar or the Company may deem and treat the Person in whose name such
Pass Through Certificate shall be registered upon the Register as the absolute
owner of such Pass Through Certificate (whether or not such Pass Through
Certificate shall be overdue and notwithstanding any notation of ownership or
other writing thereon) for the purpose of receiving, subject to the provisions
of this Pass Through Agreement, Scheduled Payments and Special Payments with
respect to such Pass Through Certificate and for all other purposes; and none
of the Indenture Trustees,
-23-
<PAGE> 32
the Pass Through Trustee, nor any such agent, the Registrar or the Company
shall be affected by any notice to the contrary. All such payments so made to
any such person, or upon his order, shall be valid, and, to the extent of the
sum or sums so paid, effectual to satisfy and discharge the liability for
moneys payable upon any such Pass Through Certificate.
SECTION 6.04. Pass Through Certificates Owned by the Company, Owner
Trust, Remainderman, Owner Trustees and Owner Participant Deemed Not
Outstanding. In determining whether the Certificateholders of the requisite
aggregate Fractional Undivided Interest have given or concurred in any request,
demand, authorization, direction, consent or waiver under this Pass Through
Agreement, Pass Through Certificates that are owned by the Company, an Owner
Trust, the Remainderman, an Owner Trustee or an Owner Participant or any
obligor on the Mortgage Notes or by any Affiliate of any of the foregoing shall
be disregarded and deemed not to be Outstanding for the purpose of any such
determination; provided that for the purpose of determining whether the Pass
Through Trustee shall be protected in relying on any such request, demand,
authorization, direction, consent or waiver, only if a Responsible Officer of
the Pass Through Trustee has actual knowledge that certain Pass Through
Certificates are so owned shall such Pass Through Certificates be so
disregarded; and provided further that if all Pass Through Certificates that
would be deemed Outstanding in the absence of the foregoing provision are owned
by the Company, an Owner Trust, the Remainderman, an Owner Trustee or an Owner
Participant or any obligor on such Mortgage Notes or by any Affiliate of any of
the foregoing, then such Pass Through Certificates shall be deemed Outstanding
for the purpose of any such determination. Pass Through Certificates so owned
that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Pass Through Trustee the
pledgee's right so to act with respect to such Pass Through Certificates and
that the pledgee is not the Company, the Owner Trust, the Remainderman, an
Owner Trustee or the Owner Participant or any obligor upon the Mortgage Notes
or any Affiliate of any of the foregoing. In case of a dispute as to such
right, the advice of counsel shall be full protection in respect of any
decision made by the Pass Through Trustee in accordance with such advice. Upon
request of the Pass Through Trustee, the Company, the Remainderman, each Owner
Trustee and the Owner Participant shall furnish to the Pass Through Trustee
promptly an Officer's Certificate listing and identifying all Pass Through
Certificates, if any, known by the Company, the Remainderman, the Owner
Trustees or the Owner Participants, as the case may be, to be owned or held by
or for the account of any of the above-described persons; and, subject to
Section 8.03, the Pass Through Trustee shall be entitled to accept such
Officer's Certificates as conclusive evidence of the facts set forth therein
and of the fact that all Pass Through Certificates not listed therein are
Outstanding for the purpose of any such determination.
SECTION 6.05. Right of Revocation of Action Taken. At any time prior
to (but not after) the evidencing to the Pass Through Trustee, as provided in
Section 6.01, of any action taken by the Certificateholders of the percentage
in aggregate of Fractional Undivided Interests specified in this Pass Through
Agreement in connection with such action, any Certificateholder of a Pass
Through Certificate, the serial number of which is shown by the
-24-
<PAGE> 33
evidence to be included among the serial numbers of the Pass Through
Certificates, the Certificateholders of which have consented to such action,
may, by filing written notice at the Corporate Trust Office and upon proof of
holding as provided in this Article, revoke such action so far as concerns such
Pass Through Certificate. Except as aforesaid, any such action taken shall be
conclusive and binding upon such Certificateholder and upon all future
Certificateholders and owners of such Pass Through Certificate and of any Pass
Through Certificates issued in exchange or substitution therefor or in lieu
thereof, irrespective of whether or not any notation in regard thereto is made
upon any such Pass Through Certificate or otherwise. Any action taken by such
Certificateholders of the percentage in aggregate of Fractional Undivided
Interests specified in this Pass Through Agreement in connection with such
action shall be conclusively binding upon the Pass Through Trustee and all the
Certificateholders.
ARTICLE VII
REMEDIES OF PASS THROUGH TRUSTEE
AND CERTIFICATEHOLDERS
SECTION 7.01. Events of Default. If an Indenture Event of Default
relating to any Mortgage Note that constitutes Trust Property (an "Event of
Default") shall occur and be continuing, then, and in each and every case, the
Pass Through Trustee may vote all of such Mortgage Notes, and upon the
direction of a Majority in Interest of Certificateholders, the Pass Through
Trustee shall vote a corresponding percentage of such Mortgage Notes in favor
of directing the related Indenture Trustees to declare the unpaid principal of
such Mortgage Notes then outstanding, together with interest accrued but unpaid
thereon and all other amounts due under such Mortgage Notes and the related
Indenture, to be due and payable under, and in accordance with the provisions
of, such Indenture. In addition, if such Indenture Event of Default shall have
occurred and be continuing, the Pass Through Trustee may, in accordance with
such related Indenture, vote such Mortgage Notes to direct the Indenture
Trustees regarding the exercise of such remedies provided in such Indenture.
An Event of Default with respect to one Indenture will not constitute a default
under any other Indenture and will not give rise to any right of the Indenture
Trustee or the Pass Through Trustee (i) to exercise any remedies with respect
to such unrelated Indenture or (ii) to vote any Mortgage Notes issued pursuant
to such other Indenture in favor of exercising any such remedies.
If an Event of Default shall have occurred and be continuing, and
after the Mortgage Notes shall have become due and payable under Section
7.02(b) or 7.02(c) of the related Indenture, the Pass Through Trustee also may
in its discretion, and upon the direction of a Majority in Interest of
Certificateholders shall, by such officer or agent as it may appoint, sell,
convey, transfer and deliver any Mortgage Notes held in the Pass Through Trust,
without recourse to or warranty by the Pass Through Trustee or any
Certificateholder, to any Person. In any such case, but subject to compliance
with the Securities Act and other
-25-
<PAGE> 34
applicable laws and regulations, the Pass Through Trustee shall sell, assign,
contract to sell or otherwise dispose of and deliver any such Mortgage Notes in
one or more parcels at public or private sale or sales, at any location or
locations at the option of the Pass Through Trustee, all upon such terms and
conditions as it may reasonably deem advisable and at such prices as it may
reasonably deem advisable, for cash. The Pass Through Trustee may, in its
discretion, at any such sale restrict the prospective bidders or purchasers as
to their number, nature of business and investment intention, including,
without limitation, a requirement that the persons making such purchases
represent and agree to the satisfaction of the Pass Through Trustee that they
are purchasing the Mortgage Notes for their account, for investment, and not
with a view to the distribution or resale of any thereof. If the Pass Through
Trustee so decides or is required to sell or otherwise dispose of any Mortgage
Notes pursuant to this Section, the Pass Through Trustee shall take such of the
actions described above as it may reasonably deem most effective to complete
the sale or other disposition of such Mortgage Notes, so as to provide for the
payment in full of all amounts due with respect to such Mortgage Notes.
Notwithstanding the foregoing, any action taken by the Pass Through Trustee
under this Section shall not, in the reasonable judgment of the Pass Through
Trustee, be adverse to the best interests of the Certificateholders.
SECTION 7.02. Incidents of Sale of Mortgage Notes. Upon any sale of
all or any part of the Mortgage Notes held in the Pass Through Trust made
either under the power of sale given under this Pass Through Agreement or
otherwise for the enforcement of this Pass Through Agreement, the following,
subject to compliance with securities laws and the provisions of Section 7.01,
shall be applicable:
(1) Certificateholders or Pass Through Trustee May
Purchase Mortgage Notes. Any Certificateholder, the Pass Through
Trustee in its individual or, subject to Section 2.03, any other
capacity or any other Person may bid for and purchase any of the
Mortgage Notes, and upon compliance with the terms of sale, may hold,
retain, possess and dispose of such Mortgage Notes in its or their own
absolute right without further accountability.
(2) Discharge of Purchaser. The receipt of the Pass
Through Trustee or of the officer making such sale shall be a
sufficient discharge to any purchaser for his purchase money, and,
after paying such purchase money and receiving such receipt, such
purchaser or its personal representative or assigns shall not be
obliged to see to the application of such purchase money, or be in any
way answerable for any loss, misapplication or non-application
thereof.
(3) Application of Moneys Received upon Sale. Any moneys
collected by the Pass Through Trustee upon any sale made either under
the power of sale given by this Pass Through Agreement or otherwise
for the enforcement of the Pass Through Trust, shall be deposited and
distributed as a Special Payment as provided in Article V.
-26-
<PAGE> 35
SECTION 7.03. Pass Through Trustee May Prove Debt. If any amount
payable under any Mortgage Note held by the Pass Through Trust is not paid when
due and payable, and such non-payment constitutes an Indenture Event of
Default, the Pass Through Trustee, in its own name, as trustee of an express
trust, as holder of such Mortgage Note shall be, to the extent permitted by and
in accordance with the terms of the Indenture Documents, entitled and empowered
to institute any action or proceedings at law or in equity for the collection
of the sums so due and unpaid, and may prosecute any such action or proceedings
to judgment or final decree, and, subject to the terms of the Indenture, may
enforce any such judgment or final decree against the Owner Trust or other
obligor upon such Mortgage Notes and collect in the manner provided by law out
of the property of the Owner Trust or other obligor upon such Mortgage Notes,
wherever situated, the moneys adjudged or decreed to be payable.
All rights of action and of asserting claims under this Pass Through
Agreement, or under any of the Pass Through Certificates, may be prosecuted and
enforced by the Pass Through Trustee without the possession of any of such Pass
Through Certificates or the production thereof in any trial or other
proceedings relative thereto, and any such action or proceedings instituted by
the Pass Through Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Pass Through Trustee, each
predecessor Pass Through Trustee and their respective agents and attorneys,
shall be for the ratable benefit of the Certificateholders.
In any proceedings brought by the Pass Through Trustee (and also any
proceedings involving the interpretation of any provision of this Pass Through
Agreement) the Pass Through Trustee shall be held to represent all the
Certificateholders, and it shall not be necessary to make any such
Certificateholders parties to any such proceedings.
SECTION 7.04. Remedies Cumulative. Each and every right, power and
remedy given to the Pass Through Trustee specifically or otherwise hereunder
shall be cumulative and shall be in addition to every other right, power and
remedy specifically given thereunder or now or hereafter existing at law, in
equity or by statute, and each and every right, power and remedy whether
specifically given hereunder or otherwise existing may be exercised from time
to time and as often and in such order as may be deemed expedient by the Pass
Through Trustee or the Certificateholders, and the exercise or the beginning of
the exercise of any power or remedy shall not be construed to be a waiver of
the right to exercise at the same time or thereafter any other right, power or
remedy. No delay or omission by the Pass Through Trustee or of any such
Certificateholder in the exercise of any right, remedy or power or in the
pursuance of any remedy shall impair any such right, power or remedy or be
construed to be a waiver of any default on the part of an Owner Trust, or the
Company or to be an acquiescence therein. Every right and remedy given by this
Article or by law to the Pass Through Trustee or to the Certificateholders may
be exercised from time to time, and as often as may be deemed expedient, by the
Pass Through Trustee or by the Certificateholders, as the case may be.
-27-
<PAGE> 36
SECTION 7.05. Suits for Enforcement. If an Event of Default has
occurred, has not been waived and is continuing, the Pass Through Trustee may
in its discretion and subject to its rights of appropriate indemnification
under Sections 7.07 and 8.03 and Article IX hereof, to the extent permitted by
and in accordance with the Indenture Documents, proceed to protect and enforce
its rights and rights of the Certificateholders by such appropriate judicial
proceedings as the Pass Through Trustee shall deem most effectual to protect
and enforce any of such rights, either at law or in equity or in bankruptcy or
otherwise, whether for the specific enforcement of any covenant or agreement
hereunder or in aid of the exercise of any power granted hereunder or to
enforce any other legal or equitable right vested in the Pass Through Trustee
or the Certificateholders hereunder or by law; provided that any sale of any
portion of the Trust Property shall be done in accordance with Section 7.02.
SECTION 7.06. Discontinuance of Proceedings. If the Pass Through
Trustee or any Certificateholder institutes any proceeding to enforce any
right, power or remedy hereunder, and such proceeding is discontinued or
abandoned for any reason or is determined adversely to the Pass Through Trustee
or such Certificateholder, then and in every such case the Owner Trust,
Indenture Trustees, the Pass Through Trustee, the Certificateholders and the
Company shall, subject to any determination in such proceeding, be restored to
their former positions and rights under the Pass Through Trust with respect to
the Trust Property and all rights, remedies and powers of the Pass Through
Trustee and such Certificateholders shall continue as if no such proceeding had
been instituted.
SECTION 7.07. Limitations on Suits by Certificateholders. No
Certificateholder shall have any right by virtue or by availing of any
provision hereof to institute any action or proceeding at law or in equity or
in bankruptcy or otherwise upon or under or with respect to the Pass Through
Trust, or for the appointment of a trustee, receiver, liquidator, custodian or
other similar official or for any other remedy thereunder, unless:
(1) such Certificateholder previously has notified the
Pass Through Trustee in writing of an Event of Default and of the
continuance thereof, as provided herein;
(2) the Certificateholders of the Pass Through
Certificates then Outstanding (or proxies therefor) representing in
the aggregate not less than 25% of the aggregate Fractional Undivided
Interests then Outstanding have requested in writing that the Pass
Through Trustee institute such action or proceedings in its own name
as trustee hereunder (unless the Holders of a Majority in Interest of
the aggregate Fractional Undivided Interests then Outstanding shall
object in writing within 30 days of such request);
(3) such Certificateholders have offered to the Pass
Through Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request;
-28-
<PAGE> 37
(4) the Pass Through Trustee for 60 days after its
receipt of such notice, request and offer of indemnity has failed to
institute any such action or proceedings; and
(5) no direction inconsistent with such written request
has been given to the Pass Through Trustee during such 60-day period
pursuant to Section 7.09;
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 Certificateholders shall have any right in any
manner whatever to affect, disturb or prejudice the rights of any other
Certificateholder or to obtain or seek to obtain priority over or preference to
any other Certificateholder or to enforce any right hereunder or under the Pass
Through Certificates, except in the manner provided herein and therein and for
the equal, ratable and common benefit of all 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 7.08. Unconditional Right of Certificateholders to Receive
Scheduled Payments and Special Payments, and to Institute Certain Suits.
Notwithstanding any other provision in this Pass Through Agreement or any Pass
Through Certificate issued pursuant hereto, the right of any Certificateholder
to receive distributions on such Pass Through Certificate of Scheduled Payments
or Special Payments pursuant to Article V on or after the respective due dates
set forth herein, or, subject to Section 7.07, to institute suit for the
enforcement of any such distribution on or after such respective dates as
provided herein, or therein shall not be impaired or affected without the
consent of such Certificateholder, except as to a postponement of an interest
payment consented to as provided in Section 7.10.
SECTION 7.09. Control by Certificateholders. A Majority in Interest
of Certificateholders shall have the right to direct the Pass Through Trustee
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 on the Pass Through Trustee under the Pass Through Trust; provided
that such direction is not otherwise than in accordance with law and the
provisions hereof and the Pass Through Trustee has received, to the extent
provided in Sections 7.07 and 8.03 and Article IX hereof, such reasonable
indemnification as it may require against the costs, expenses and liabilities
to be incurred by the Pass Through Trustee.
Nothing in this Pass Through Agreement shall impair the right of the
Pass Through Trustee in its discretion to take any action deemed proper by the
Pass Through Trustee and which is not inconsistent with such direction by
Certificateholders.
SECTION 7.10. Waiver of Past Events of Default. Upon written
instructions from not less than 662/3% in Interest of Certificateholders, the
Pass Through Trustee shall waive any past Event of Default and its consequences
and thereby annul any directive given by the
-29-
<PAGE> 38
Pass Through Trustee on behalf of such holders to the Indenture Trustees and,
upon such waiver, such Event of Default will cease to exist and any Event of
Default arising therefrom will be deemed to have been cured for every purpose,
but no such waiver will extend to any subsequent or other Event of Default or
impair any right consequent thereon; provided that any such waiver will be
effective to waive any such past Event of Default and its consequences as
described above if, but only if, the correlative Indenture Event of Default has
been waived under the related Indenture by the requisite holders of the
Mortgage Notes outstanding under such related Indenture; and provided further
that in the absence of written instructions from all Certificateholders (or the
proxy therefor), the Pass Through Trustee shall not waive any Event of Default
(i) consisting of the failure to pay any principal of, or premium, if any, or
interest on, or other amounts due under, any Mortgage Note and the consequent
failure to distribute any Scheduled Payment or Special Payment pursuant to
Article V on or after the respective due date therefor or (ii) in respect of a
covenant or provision hereunder that, under Article X hereof, cannot be
modified or amended without the consent of each Certificateholder (or the proxy
therefor).
SECTION 7.11. Notice of Pass Through Defaults. The Pass Through
Trustee shall, in the manner and to the extent required by Section 313(c) of
the Trust Indenture Act, notify the Certificateholders of any Pass Through
Defaults within 90 days from the occurrence thereof, unless such Pass Through
Defaults have been cured before the giving of such notice; provided that under
no circumstances shall the Pass Through Trustee give such notice until the
earlier of the time at which such Pass Through Default becomes an Event of
Default or the expiration of a period of 30 days from the occurrence of such
Pass Through Default; and provided, further, that except in the case of a Pass
Through Default resulting from the failure to pay the principal, premium, if
any, or interest on any Mortgage Note that constitutes part of the Trust
Property, the Pass Through Trustee shall not be required to provide such notice
if it in good faith determines that the withholding of such notice is in the
interests of the Certificateholders.
ARTICLE VIII
CONCERNING THE PASS THROUGH TRUSTEE
SECTION 8.01. Acceptance by Pass Through Trustee. The Pass Through
Trustee hereby accepts the trusts imposed upon it by this Pass Through
Agreement and acknowledges its acceptance of all right, title, and interest in
and to the Mortgage Notes conveyed pursuant to Section 2.01, and hereby
declares that it holds and will hold such right, title, and interest, together
with all other property constituting the Trust Property, for the benefit of all
then present and future Certificateholders, upon the trusts set forth herein.
SECTION 8.02. Pass Through Trustee's Liens. The Pass Through Trustee
agrees that it will, in its individual capacity and at its own cost and expense
(but without any right of indemnity in respect of any such cost or expense
under Article IX hereof) promptly take
-30-
<PAGE> 39
such action as may be necessary to duly discharge all Liens on any part of the
Trust Property that result from claims against it in its individual capacity
not related to the administration of such Trust Property or any other
transaction pursuant to this Pass Through Agreement.
SECTION 8.03. Certain Rights of the Pass Through Trustee. Subject to
Section 315 of the Trust Indenture Act:
(a) the Pass Through Trustee may rely and shall be
protected in acting or refraining from acting upon any resolution,
Officer's Certificate or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture,
note, coupon, security or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(b) any request of the Indenture Trustees or an Owner
Trust shall be sufficiently evidenced by an Officer's Certificate and
any resolution of the Board of Directors of the Corporate Indenture
Trustee or the Corporate Owner Trustees, as the case may be, may be
sufficiently evidenced by a copy of the applicable board resolution
included as part of the Officer's Certificate.
(c) the Pass Through Trustee may consult with counsel and
the written advice of such counsel or Opinion of Counsel shall be full
and complete authorization and protection in respect of any action
taken, suffered or omitted to be taken by it hereunder in good faith
and in accordance with such written advice or Opinion of Counsel;
(d) the Pass Through Trustee shall not be obligated to
exercise any of the trusts or powers vested in it hereunder at the
request, order or direction of the Certificateholders in accordance
with the provisions thereof, unless such Certificateholders have
offered to the Pass Through Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred
therein or thereby;
(e) the Pass Through Trustee shall not be liable for any
action taken or omitted by it in good faith hereunder in accordance
with the direction of the holders of the applicable principal amount
specified hereunder of the aggregate Fractional Undivided Interests
then outstanding;
(f) prior to the occurrence of an Event of Default
hereunder and after the curing or waiving of all Events of Default
hereunder, 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, appraisal, bond, debenture, note, coupon,
security, or other paper or document unless requested in writing to do
so by the Majority in Interest of
-31-
<PAGE> 40
Certificateholders; but the Pass Through Trustee, in its discretion,
may make such further inquiry or investigation into such facts or
matters as it may see fit;
(g) the Pass Through Trustee may execute any of the
trusts or powers under the Pass Through Trust or perform any duties
thereunder either directly or by or through agents or attorneys not
regularly in its employ and the Pass Through Trustee shall not be
responsible for any misconduct or negligence on the part of any such
agent or attorney appointed by it with due care; and
(h) the Pass Through Trustee shall not be required to
expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise
of any of its rights or powers hereunder, if the Pass Through Trustee
has determined in good faith that the repayment of such funds or
adequate indemnity against such liability is not reasonably assured to
it.
SECTION 8.04. Pass Through Trustee Not Responsible for Recitals. The
Pass Through Trustee assumes no responsibility for the correctness of the
recitals contained herein or in any Pass Through Certificates, except for the
execution and authentication of such Pass Through Certificates by the Pass
Through Trustee in accordance with Section 2.04, 2.05 and 8.15, respectively
and its representations and warranties in Section 3.03 hereof.
SECTION 8.05. Pass Through Trustee and Agents May Hold Pass Through
Certificates; Collections. The Pass Through Trustee and any agent of the Pass
Through Trustee, in its individual or any other capacity, may become the owner
or pledgee of Pass Through Certificates with the same rights it would have if
it were not the Pass Through Trustee or such agent, subject to Section 8.10
and, subject to the applicable provisions of the Trust Indenture Act, may
otherwise deal with the Company, the Indenture Trustees or the Owner Trust and
receive, collect, hold and retain collections therefrom with the same rights it
would have if it were not the Pass Through Trustee or such agent (subject to
the provisions of Section 6.04 hereof).
SECTION 8.06. Moneys Held by Pass Through Trustee. Subject to
Sections 5.04 and 11.03 hereof, all moneys received by the Pass Through Trustee
shall, until used or applied as provided herein, be held in trust for the
purposes for which they were received, and shall be segregated from all other
funds and not commingled with the funds of any other Person. Subject to Section
5.04, neither the Pass Through Trustee nor any agent thereof shall be under any
liability for interest on any moneys received by it hereunder.
SECTION 8.07. Right of Pass Through Trustee to Rely on Officer's
Certificate. Subject to Section 8.03, whenever in the administration of the
Pass Through Trust, the Pass Through Trustee shall deem it necessary or
desirable that a matter be proved or established prior to taking or suffering
or omitting any action thereunder, such matter (unless other evidence in
respect thereof is specifically prescribed herein) may, in the absence of bad
faith on the part of the Pass Through Trustee, be deemed to be conclusively
proved and
-32-
<PAGE> 41
established by an Officer's Certificate delivered to the Pass Through Trustee
by the Company, the Indenture Trustees or the Owner Trust, as the case may be,
and such certificate, in the absence of bad faith on the part of the Pass
Through Trustee, shall be full warrant to the Pass Through Trustee for any
action taken, suffered or omitted by it under the provisions of this Pass
Through Agreement upon the faith thereof.
SECTION 8.08. Compensation. The Company covenants and agrees to pay,
and the Pass Through Trustee shall be entitled to receive, reasonable
compensation and payment or reimbursement for its reasonable advances, expenses
and disbursements (including the reasonable compensation and expenses and
disbursements of its counsel, agents and other persons not regularly in its
employ) in connection with its services rendered hereunder or in any way
relating to or arising out of the administration of the Pass Through Trust or
the Trust Property, except any such advance, expense or disbursement
attributable to the Pass Through Trustee's negligence, willful misconduct or
bad faith or incurred as a result of the breach of its representation and
covenant set forth in Section 8.02.
SECTION 8.09. Resignation and Removal of Pass Through Trustee;
Appointment of Successor. (a) No resignation or removal of the Pass Through
Trustee and no appointment of a successor Pass Through Trustee pursuant to this
Article shall become effective until the acceptance of appointment by the
successor Pass Through Trustee under Section 8.12 hereof.
(b) The Pass Through Trustee may resign as such at any time
without cause by giving at least 90 days prior written notice to the Company,
the Indenture Trustees and the Owner Trust, such resignation to be effective
upon the acceptance of the trusteeship by a successor Pass Through Trustee. In
addition, a Majority in Interest of Certificateholders may at any time remove
the Pass Through Trustee without cause by an instrument in writing delivered to
the Company, the Owner Trust, the Indenture Trustees and the Pass Through
Trustee, and the Pass Through Trustee shall promptly notify each
Certificateholder of such removal in writing, such removal to be effective upon
the acceptance of the trusteeship by a successor Pass Through Trustee. In the
case of the resignation or removal of the Pass Through Trustee, a Majority in
Interest of Certificateholders may appoint a successor Pass Through Trustee by
an instrument signed by such Certificateholders. If a successor Pass Through
Trustee shall not have been appointed within 120 days after such notice of
resignation or removal, the Pass Through Trustee, the Company or any
Certificateholder may apply to any court of competent jurisdiction to appoint a
successor Pass Through Trustee to act until such time, if any, as a successor
shall have been appointed as provided above. The successor Pass Through
Trustee so appointed by such court shall immediately and without further act be
superseded by any successor Pass Through Trustee appointed as provided above
within one year from the date of the appointment by such court.
(c) 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
-33-
<PAGE> 42
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 8.11 to act as Pass Through
Trustee and fails to resign after written request for such resignation
by the Company or by any such bona fide Certificateholder; or
(iii) the Pass Through Trustee becomes incapable of acting,
or shall be adjudged a bankrupt or insolvent, or a receiver or
liquidator of the Pass Through Trustee or of its property shall be
appointed, or any public officer takes 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, (1) the Company may remove the Pass Through Trustee and
appoint a successor trustee by written instrument, in duplicate, executed by a
Responsible Officer of the Company, one copy of which instrument shall be
delivered to the Pass Through Trustee so removed and one copy to the successor
trustee, or (2) subject to the provisions of Section 7.07, 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, which removal and appointment
shall become effective upon acceptance of appointment by the successor trustee
as provided in Section 8.12. The successor Pass Through Trustee so appointed
by such court shall immediately and without further act be superseded by any
successor Pass Through Trustee appointed by the Certificateholders as provided
in subsection (a) above within one year from the date of appointment by such
court.
(d) In the event that a Responsible Officer of the Pass Through
Trustee has actual knowledge, or receives notice that a Certificateholder or
the Pass Through Trust has become subject to any state or local tax which would
not be imposed if the Corporate Trust Office were located in a jurisdiction
within the United States other than the jurisdiction in which the Corporate
Trust Office is then located, the Pass Through Trustee shall resign immediately
in the manner and with the effect specified in this Section.
(e) All of the provisions of this Section 8.09 except paragraphs
(c)(i) and (d) shall apply to any Authenticating Agent.
SECTION 8.10. Disqualification; Conflicting Interests. If the Pass
Through Trustee has or shall acquire a conflicting interest within the meaning
of the Trust Indenture Act, the Pass Through Trustee shall either eliminate
such interest or resign, to the extent and in the manner provided by, and
subject to the provisions of, the Trust Indenture Act and this Pass Through
Agreement.
-34-
<PAGE> 43
SECTION 8.11. Persons Eligible for Appointment as 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 Trust Indenture Act and shall be a corporation organized and doing business
under the laws of the United States of America or of any State or the District
of Columbia having a combined capital and surplus of at least $100,000,000 and
a minimum long-term debt rating of BBB by Duff & Phelps Credit Rating Co.
("Duff & Phelps") and Baa by Moody's Investors Service, Inc. ("Moody's) (if
either such entity then assigns a rating to such corporation's long-term debt),
or if both Duff & Phelps and Moody's do not then rate such corporation's
long-term debt, the equivalent rating from a "nationally recognized statistical
rating organization" as that term is used in Rule 15c3-1 under the Securities
Exchange Act of 1934, as amended ("Rule 15c3-1"), or a direct or indirect
subsidiary of such a corporation, or a member of a bank holding company group,
having a combined capital and surplus of at least $100,000,000 and a minimum
long-term debt rating of BBB by Duff & Phelps and Baa by Moody's (if either
such entity then assigns a rating to such corporation's long-term debt), or if
both Duff & Phelps and Moody's do not then rate such corporation's long-term
debt, the equivalent rating from a "nationally recognized statistical rating
organization" as that term is used in Rule 15c3-1, and such subsidiary or
member itself having a capital and surplus of at least $10,000,000, which
corporation is authorized under such laws to exercise corporate trust powers
and is subject to supervision or examination by Federal, State or District of
Columbia authority; provided, that the Pass Through Trustee shall not be the
trustee under Pass Through Trust Agreement-1995-K-_ (but may be a member of the
same bank holding company group). 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. If at any time the Pass Through Trustee ceases to
be eligible in accordance with the provisions of this Section to act as trustee
hereunder, the Pass Through Trustee shall resign immediately as Pass Through
Trustee in the manner and with the effect specified in Section 8.09.
SECTION 8.12. Acceptance of Appointment by Successor Trustee. Any
successor trustee appointed as provided in Section 8.09 shall execute and
deliver to the Company and to its predecessor trustee an instrument accepting
such appointment and thereupon the resignation or removal of the predecessor
trustee shall become effective and such successor trustee, without any further
act, deed or conveyance, shall become vested with all rights, powers, duties
and obligations of its predecessor, as if such successor trustee were
originally named as trustee hereunder. Notwithstanding the foregoing, on the
written request of the Company or the successor trustee, the trustee ceasing to
act shall, upon payment of its charges then unpaid and subject to Section
11.04, duly assign, transfer and deliver to the successor trustee all
properties and moneys at the time held by it with respect to such Pass Through
Trust and shall execute and deliver an instrument transferring to such
successor trustee all such rights, powers, duties and obligations. Upon
request of any such successor
-35-
<PAGE> 44
trustee, the Company shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all
such rights and powers.
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 8.11 to act as trustee hereunder.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the successor trustee shall notify the Certificateholders of such
appointment by first-class mail at their last addresses as they shall appear in
the Register, and shall mail a copy of such notice to the Company, the
Indenture Trustees and the Owner Trusts. If the acceptance of appointment is
substantially contemporaneous with the resignation, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
8.09.
SECTION 8.13. Merger, Conversion, Consolidation or Succession to
Business 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 all or
substantially all of the corporate trust business of the Pass Through Trustee,
shall be the successor of the Pass Through Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Pass Through Certificates shall have
been authenticated, but not delivered, by the Pass Through Trustee then in
office, any successor by merger, conversion or consolidation to such
authenticating Pass Through Trustee may adopt such authentication and deliver
the Pass Through Certificates so authenticated with the same effect as if such
successor Pass Through Trustee had itself authenticated the Pass Through
Certificates.
SECTION 8.14. Appointment of Separate Pass Through Trustees. (a)
With the prior consent of the Company, which consent shall not be unreasonably
withheld or delayed, at any time or times, for the sole purpose of meeting any
legal requirements of any jurisdiction in which any part of the Trust Property
of the Pass Through Trust 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 individuals or corporations to act as separate trustee or separate
trustees or co-trustee, acting jointly with the Pass Through Trustee, of all or
any part of such Trust Property, limited 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.
(b) The Pass Through Trustee and, at the request of the Pass
Through Trustee, the Company, shall execute, acknowledge and deliver all such
instruments as may be required by the legal requirements of any jurisdiction or
by any such separate trustee or separate trustees or co-trustee for the purpose
of more fully confirming such title, rights or duties to such separate trustee
or separate trustees or co-trustee. Upon the acceptance in writing of such
-36-
<PAGE> 45
appointment by any such separate trustee or separate trustees or co-trustee,
it, he, she or they shall be vested with such title to such Trust Property or
any part thereof, and with such rights, powers, duties and obligations, as
shall be specified in the instrument of appointment, and such rights, powers,
duties and obligations shall be conferred or imposed upon and exercised or
performed by the Pass Through Trustee, or the Pass Through Trustee and such
separate trustee or separate trustees or co-trustee jointly with the Pass
Through Trustee subject to all the terms of this Pass Through Agreement, except
to the extent that under any law of 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 such separate
trustee or separate trustees or co-trustee, as the case may be. Any separate
trustee or separate trustees or co-trustee may, at any time by an instrument in
writing, constitute the Pass Through Trustee its, her or his attorney-in-fact
and agent with full power and authority to do all acts and things and to
exercise all discretion on its, her or his behalf and in its, her or his name.
In case any such separate trustee or co-trustee shall die, become incapable of
acting, resign or be removed, the title to any Trust Property and all assets,
property, rights, powers, duties and obligations and duties of such separate
trustee or co-trustee shall, so far as permitted by law, vest in and be
exercised by the Pass Through Trustee, without the appointment of a successor
to such separate trustee or co-trustee unless and until a successor is
appointed.
(c) All provisions of this Pass Through Agreement which are for
the benefit of the Pass Through Trustee (including without limitation Article
IX hereof) shall extend to and apply to each separate trustee or co-trustee
appointed pursuant to the foregoing provisions of this Section 8.14.
(d) Every additional trustee and separate trustee hereunder shall,
to the extent permitted by law, be appointed and act and the Pass Through
Trustee shall act, subject to the following provisions and conditions:
(i) the Pass Through Certificates shall be authenticated
and delivered, and all powers, duties, obligations and rights
conferred upon the Pass Through Trustee in respect of the receipt,
custody, investment and payment of moneys shall be exercised, solely
by the Pass Through Trustee;
(ii) all other rights, powers, duties and obligations
conferred or imposed upon the Pass Through Trustee shall be conferred
or imposed and exercised or performed by the Pass Through Trustee and
such additional trustee or trustees and separate trustee or trustees
jointly except to the extent that under any law of 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
(including the holding of title to the Trust Property in any such
jurisdiction) shall be exercised and performed by such additional
trustee or trustees or separate trustee or trustees;
-37-
<PAGE> 46
(iii) no power hereby given to, or exercisable by, any such
additional trustee or separate trustee shall be exercised hereunder by
such additional trustee or separate trustee except jointly with, or
with the consent of, the Pass Through Trustee; and
(iv) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder.
If at any time the Pass Through Trustee shall deem it no longer necessary or
prudent in order to conform to any such law, the Pass Through Trustee shall
execute and deliver all instruments and agreements necessary or proper to
remove any additional trustee or separate trustee.
(e) Any request, approval or consent in writing by the Pass
Through Trustee to any additional trustee or separate trustee shall be
sufficient warrant to such additional trustee or separate trustee, as the case
may be, to take such action as may be so requested, approved or consented to.
(f) Notwithstanding any other provision of this Section 8.14, the
powers of any additional trustee or separate trustee shall not exceed those of
the Pass Through Trustee hereunder.
SECTION 8.15. Appointment of Authenticating Agent. The Pass Through
Trustee may appoint an Authenticating Agent or Agents which shall be authorized
to act on behalf of the Pass Through Trustee to authenticate Pass Through
Certificates issued upon original issue and upon exchange, registration of
transfer or partial redemption or pursuant to Section 2.08, and Pass Through
Certificates so authenticated shall be entitled to the benefits of this Pass
Through Agreement and shall be valid and obligatory for all purposes as if
authenticated by the Pass Through Trustee hereunder. Wherever reference is
made in this Pass Through Agreement to the authentication and delivery of Pass
Through Certificates by the Pass Through Trustee or the Pass Through Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Pass Through Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Pass Through Trustee by an Authenticating Agent. Each Authenticating Agent
shall be acceptable to the Company and shall at all times be a corporation
organized and doing business under the laws of the United States of America,
any State thereof or the District of Columbia, authorized under such laws to
act as Authenticating Agent, having a combined capital and surplus of not less
than $100,000,000, or a direct or indirect subsidiary of such a corporation, or
a member of a bank holding company group, having a combined capital and surplus
of at least $100,000,000 and such subsidiary or member itself having a capital
and surplus of at least $10,000,000, and subject to supervision or examination
by Federal, State or District of Columbia authority; provided, that the
Authenticating Agent shall not be the authenticating agent under Pass Through
Trust Agreement 1995-K-_ (but may be a member of the same bank holding company
group). If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or the requirements of said supervising or
-38-
<PAGE> 47
examining authority, then for the purposes of this Section, the combined
capital and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Pass Through Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Pass Through Trustee and to the Company. The Pass
Through Trustee may at any time terminate the agency of an Authenticating Agent
by giving written notice thereof to such Authenticating Agent and to the
Company. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time such Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, the Pass Through
Trustee may appoint a successor Authenticating Agent which shall be acceptable
to the Company and shall mail written notice of such appointment by first-class
mail, postage prepaid, to all Holders as their names and addresses appear in
the Register. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if originally named as
an Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
The Pass Through Trustee agrees to pay to each Authenticating Agent
from time to time reasonable compensation for its services under this Section,
and the Pass Through Trustee shall be entitled to be reimbursed for such
payments, subject to the provisions of Section 8.08.
The Bank of New York shall initially act as Authenticating Agent.
If an appointment is made pursuant to this Section, the Pass Through
Certificates may have endorsed thereon, in addition to the Pass Through
Trustee's certificate of authentication, an alternative certificate of
authentication in the following form:
-39-
<PAGE> 48
This is one of the Pass Through Certificates referred to in the
within-mentioned Pass Through Agreement.
[PASS THROUGH TRUSTEE],
As Trustee
By: [AUTHENTICATING AGENT]
As Authenticating Agent
By: ______________________
Authorized Signatory
ARTICLE IX
INDEMNIFICATION OF PASS THROUGH
TRUSTEE BY THE COMPANY
The Company hereby agrees, whether or not any of the transactions
contemplated hereby shall be consummated, to assume liability for, and does
hereby indemnify, protect, save and keep harmless the Pass Through Trustee, in
its individual capacity, and its successors, assigns, agents and servants, with
respect to the claims of the Pass Through Trustee for payment or reimbursement
under Section 8.08 and from and against any and all liabilities, obligations,
losses, damages, penalties, taxes (excluding any taxes payable by the Pass
Through Trustee on or measured by any compensation received by the Pass Through
Trustee for its services under this Pass Through Agreement), claims, actions,
suits, costs, expenses or disbursements (including legal fees and expenses) of
any kind and nature whatsoever which may be imposed on, incurred by or asserted
against the Pass Through Trustee in its individual capacity (whether or not
also agreed to be indemnified against by any other Person under any other
document) in any way relating to or arising out of this Pass Through Agreement,
or the enforcement of any of the terms hereof, or in any way relating to or
arising out of the administration of the Pass Through Trust or the Trust
Property or the action or inaction of the Pass Through Trustee hereunder,
except only (i) in the case of willful misconduct, negligence or bad faith of
the Pass Through Trustee in the performance of its duties hereunder or (ii) as
otherwise provided in Sections 8.02 and 8.08 hereof. The indemnities contained
in this Article IX shall survive the termination of this Pass Through Agreement
or the Pass Through Trust and the resignation or removal of the Pass Through
Trustee hereunder or thereunder.
-40-
<PAGE> 49
ARTICLE X
SUPPLEMENTS AND AMENDMENTS TO THIS
PASS THROUGH AGREEMENT AND OTHER DOCUMENTS
SECTION 10.01. Supplemental Agreements Without Consent of
Certificateholders. The Company and the Pass Through Trustee may enter into an
agreement or agreements supplemental hereto for one or more of the following
purposes:
(a) to evidence the succession of another Person to the
Company, or successive successions, and the assumption by the
successor of the covenants, agreements and obligations of the Company
herein;
(b) to add to the covenants of the Company such further
covenants, restrictions, conditions or provisions as the Pass Through
Trustee shall consider to be for the protection of the
Certificateholders;
(c) to surrender any rights or power conferred upon the
Company 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 Pass Through Trustee any such property to
be included in any such Trust Property;
(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 the requirements of Section 8.12;
(f) to modify, eliminate or add to the provisions of this
Pass Through Agreement to the extent necessary to continue the
qualification of this Pass Through Agreement (including any
supplemental agreement) under the Trust Indenture Act, or under any
similar Federal statute enacted after the date hereof, and to add to
this Pass Through Agreement such other provisions as may be expressly
permitted by the Trust Indenture Act, excluding, however, the
provisions referred to in Section 316(a)(2) of the Trust Indenture Act
as in effect on the date hereof or any corresponding provision in any
similar Federal statute enacted after the date hereof; or
(g) 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(g) shall not adversely
affect the interests of the Certificateholders;
-41-
<PAGE> 50
provided that no such agreement or supplemental agreement shall cause the Pass
Through Trust to become taxable as an association within the meaning of
Treasury Regulation Section 301.7701-4; and provided further that no such
agreement or supplemental agreement may require the Company to have any direct
or indirect obligation (other than pursuant to the Lease or the Participation
Agreement) to pay or guarantee or otherwise provide for the receipt by, the
Pass Through Trustee or any Certificateholder of any of the amounts payable in
respect of the Mortgage Notes and/or the Pass Through Certificates.
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 that 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 that adversely affects the Pass Through Trustee's own rights, duties
or immunities under this Pass Through Agreement or otherwise, whether in its
trust or individual capacity.
Any supplemental agreement authorized pursuant to this Section may be
executed without the consent of the Certificateholders of the outstanding Pass
Through Certificates, notwithstanding any of the provisions of Section 10.02.
SECTION 10.02. Supplemental Agreements With Consent of
Certificateholders. With the consent (evidenced as provided in Article VI) of
not less than 66 2/3% in Interest of Certificateholders, the Company and the
Pass Through 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 Pass Through Agreement or of modifying in any manner the rights of the
Certificateholders; provided that no such agreement or supplemental agreement
shall cause the Pass Through Trust to become taxable as an association within
the meaning of Treasury Regulation Section 301.7701-4; and provided further
that no such agreement or supplemental agreement may require the Company to
have any direct or indirect obligation (other than pursuant to the Lease or the
Participation Agreement) to pay or guarantee or otherwise provide for the
receipt by, the Pass Through Trustee or any Certificateholder of any of the
amounts payable in respect of the Mortgage Notes and/or the Pass Through
Certificates; and provided further that, without the consent of each
Certificateholder (or the proxy therefor) affected thereby, no such amendment
of or supplement to this Pass Through Agreement or modification of the terms
of, or consent under, any thereof, shall (aa) modify any of the provisions of
Section 7.11 or this Section 10.02, or the definitions of "Majority in Interest
of Certificateholders," "66 2/3% in Interest of Certificateholders" and
"Outstanding" as set forth in Article I and Section 6.04 hereof, (bb) reduce
the percentage of the Outstanding Pass Through Certificates, the consent of
holders of which is required for any such supplement to this Pass Through Trust
Agreement, or the consent of the holders of which is required for any waiver
(of compliance with certain provisions hereof or certain defaults hereunder and
their consequences) provided for in this Pass Through Agreement, (cc) reduce
the amount or extend the time of payment of any amount owing or payable on the
Mortgage Notes or
-42-
<PAGE> 51
distributions to be made on any Pass Through Certificate pursuant to Article V,
or alter the currency in which any amount payable under any such Pass Through
Certificate is to be paid, or impair the right of any Pass Through
Certificateholder to commence legal proceedings to enforce a right to receive
payment hereunder, or (dd) 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 with respect to the Trust Property, whether
by disposition of such Trust Property or otherwise, except as provided in
Section 7.02 or in connection with the exercise of remedies under Article VII.
Upon the request of the Company and upon the filing with the Pass
Through Trustee of evidence of the consent of the Certificateholders required
under this Section and the other documents, if any, required by Section 6.01,
the Pass Through Trustee shall join with the Company 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
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.
It shall not be necessary for the consent of the Certificateholders
under this Section to approve the particular form of any proposed supplemental
agreement, but it shall be sufficient if such consent shall approve the
substance thereof.
Promptly after the execution by the Company 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 on the
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 Agreements. Upon the execution
of any supplemental agreement pursuant to the provisions hereof, this Pass
Through 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 hereunder of the Pass Through Trustee, the
Company and the Certificateholders shall thereafter be determined, exercised
and enforced hereunder and thereunder, 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 Agreement and Pass Through Trust for any and
all purposes.
SECTION 10.04. Documents to be Given to Pass Through Trustee. The
Pass Through Trustee, subject to the provisions of Sections 8.02, 8.03 and
8.07, 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 Agreement.
-43-
<PAGE> 52
SECTION 10.05. Notation on Pass Through Certificates in Respect of
Supplemental Agreements. Pass Through 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 Company
or the Pass Through Trustee shall so determine, new Pass Through Certificates
so modified as to conform, in the opinion of the Company and the Pass Through
Trustee, to any modification of this Pass Through Agreement contained in any
such supplemental agreement may be provided by the Company, executed and
authenticated by the Pass Through Trustee and delivered in exchange for the
Outstanding Pass Through Certificates.
SECTION 10.06. Trust Indenture Act. Any supplemental agreement
executed pursuant to the terms of this Article shall on the date of the
execution thereof conform to the provisions of the Trust Indenture Act as in
force on such date.
SECTION 10.07. Revocation and Effect of Consents. Until an amendment
or waiver becomes effective, a consent to it by a Certificateholder is a
continuing consent by such Certificateholder and every subsequent
Certificateholder of the related Pass Through Certificate, even if notation of
the consent is not made on such Pass Through Certificate. However, any such
Certificateholder or subsequent Certificateholder may revoke the consent as to
his Pass Through Certificate if the Pass Through Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Certificateholder
affected by such amendment or waiver.
SECTION 10.08. Amendments, Waivers, Etc., of Indenture Documents. If
the Pass Through Trustee, as holder of any Mortgage Note in trust for the
benefit of the Certificateholders, receives a request for a consent to any
modification, amendment or supplement to the Indenture or other Indenture
Document or to give any consent, waiver, authorization or approval under the
Indenture or such other Indenture Documents, the Pass Through Trustee shall
forthwith notify each Certificateholder as shown on the Register as of such
date, of such request. Such notice shall request instructions from such
Certificateholders with respect to such request. Subject to Section 7.10, the
Pass Through Trustee shall, as the holder of such Mortgage Note, consent or
vote with respect thereto in the same proportion as so instructed by the
respective Certificateholders. Notwithstanding the foregoing, but subject to
Sections 7.01 and 7.09, if an Event of Default shall have occurred and be
continuing, the Pass Through Trustee may, in its own discretion and at its own
direction, consent and notify the Indenture Trustees of such consent to any
modification, amendment, supplement or waiver under any Indenture Document.
-44-
<PAGE> 53
ARTICLE XI
TERMINATION OF PASS THROUGH TRUSTS;
UNCLAIMED MONEYS
SECTION 11.01. Termination of Pass Through Trust. The Pass Through
Trust and the respective obligations and responsibilities of the Company and
the Pass Through Trustee hereunder shall terminate upon the distribution to all
Certificateholders and the Pass Through Trustee of all amounts required to be
distributed to them pursuant to this Pass Through Agreement and the disposition
of all property held as part of the Trust Property of such Pass Through Trust;
provided, however that in no event shall the Pass Through Trust created by this
Pass Through Agreement continue beyond the expiration of 21 years from the
death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador to the Court of St. James, living on the date of this Pass Through
Agreement.
Notice of termination of the Pass Through Trust, specifying the
applicable Distribution Date upon which the Certificateholders may surrender
their Pass Through Certificates to the Pass Through Trustee for payment of the
final distribution and cancellation thereof, shall be mailed promptly by the
Pass Through Trustee to such Certificateholders not less than 20 days prior to
such final distribution specifying (i) the Distribution Date upon which such
final distribution will be made and that such distribution will be made only
upon presentation and surrender of the related Pass Through Certificates at the
office or agency of the Pass Through Trustee specified therein, (ii) the amount
of any such final distribution, and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable. The Pass Through
Trustee shall notify the Registrar at the time such Certificateholders are
notified of such final distribution. Upon presentation and surrender of the
Pass Through Certificates, the Pass Through Trustee shall distribute all
amounts distributable on such Pass Through Certificates on such Distribution
Date pursuant to Section 5.02.
SECTION 11.02. Application by Pass Through Trustee of Funds Deposited
for Payment of Pass Through Certificates. Subject to Section 11.03, all moneys
deposited with the Pass Through Trustee for payment pursuant to Section 11.01
shall be held in trust and applied by it to the prompt payment in accordance
with the provisions of the Pass Through Certificates and this Pass Through
Agreement, to the Certificateholders of all sums due and to become due thereon.
SECTION 11.03. Transfer of Moneys Held by Pass Through Trustee
Unclaimed for Two Years and Eleven Months. Any moneys deposited with or paid
to the Pass Through Trustee to be distributed on any Pass Through Certificate
and not applied but remaining unclaimed for two years and eleven months after
the date upon which such amount has become due and payable, shall, unless
otherwise required by mandatory provisions of applicable escheat or abandoned
or unclaimed property law, be paid to the Indenture Trustees by the Pass
Through Trustee and the applicable Certificateholder shall, unless otherwise
required by mandatory provisions of applicable escheat or abandoned or
unclaimed property
-45-
<PAGE> 54
laws, thereafter look only to the Indenture Trustees for any payment which such
Certificateholder may be entitled to collect, and all liability of the Pass
Through Trustee with respect to such moneys shall thereupon cease.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Capacity in Which Acting. The Pass Through Trustee
acts hereunder not in its individual capacity but solely as trustee except as
expressly provided herein.
SECTION 12.02. No Legal Title to Trust Property in
Certificateholders. No Certificateholder shall have legal title to any part of
the Trust Property. No transfer, by operation of law or otherwise, of any Pass
Through Certificate or other right, title and interest of any Certificateholder
in and to such Trust Property shall operate to terminate the Pass Through Trust
or entitle such Certificateholder or any successor or transferee of such
Certificateholder to an accounting or to the transfer to it of legal title to
any part of the Trust Property.
SECTION 12.03. Certificates Nonassessable and Fully Paid. No
Certificateholder shall be personally liable for obligations of the Pass
Through Trust, the Pass Through Certificates shall be nonassessable for any
losses or expenses of the Pass Through Trust or for any reason whatsoever, and
upon authentication of such Pass Through Certificates by the Pass Through
Trustee pursuant to Section 3.02, such Pass Through Certificates will be and
shall be deemed fully paid. No Certificateholder shall have any right (except
as expressly provided herein) to vote or in any manner otherwise control the
operation and management of the Trust Property, the Pass Through Trust, or the
obligations of the parties hereto, nor shall anything set forth herein in the
Pass Through Certificates be construed so as to constitute the
Certificateholders from time to time as partners or members of an association.
SECTION 12.04. Pass Through Agreement for the Benefit of the Company,
the Pass Through Trustee and the Certificateholders. Nothing in this Pass
Through Agreement or in any Pass Through Certificate, whether express or
implied, shall be construed to give to any person other than the Company, the
Pass Through Trustee, as trustee and in its individual capacity, and the
Certificateholders any legal or equitable right, remedy or claim under or in
respect of this Pass Through Agreement, the Pass Through Trust or any such Pass
Through Certificate.
SECTION 12.05. Limitation on Rights of Certificateholders. The death
or incapacity of any Certificateholder shall not operate to terminate the Pass
Through Trust, nor entitle such Certificateholder's legal representatives or
heirs to claim an accounting or to take any action or commence any proceeding
in any court for a partition or winding up of the
-46-
<PAGE> 55
Pass Through Trust, or otherwise affect the rights, obligations, and
liabilities of the parties hereto or any of them. No Certificateholder shall
be entitled to revoke the Pass Through Trust.
SECTION 12.06. Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all notices, requests, demands, authorizations,
directions, consents, waivers or documents provided or permitted by this Pass
Through Agreement to be made, given, furnished or filed shall be in writing,
mailed by certified mail, postage prepaid, or by confirmed telex or telecopy,
and (i) if to the Pass Through Trustee, at its office at ________
_______________________________________ (telecopier (___) ___________),
Attention: Corporate Trust Department (with a copy to The Bank of New York at
101 Barclay Street, Floor 12W, New York, New York 10286 (telecopier (212)
815-4135, Attention: Corporate Trust -- MBS Administration) or (ii) if to the
Company, addressed to it at its Corporate Offices, 3100 West Big Beaver Road,
Troy, Michigan 48084 (telecopier (801) 643-____), Attention: ____________ (with
a copy to the General Counsel at the same address). Any party hereto may
change the address to which notices to such party will be sent by giving notice
of such change to the other party to this Pass Through Agreement.
Where this Pass Through Agreement provides for notice to
Certificateholders, such notice shall be sufficiently given (unless otherwise
expressly provided herein) if in writing and mailed, first-class postage
prepaid, to each such Certificateholder entitled thereto, at his last address
as it appears in the Register. In any case where notice to Certificateholders
is given by mail, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Certificateholder shall affect the
sufficiency of such notice with respect to other Certificateholders. Where
this Pass Through Agreement provides for notice in any manner, such notice may
be waived in writing by the person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Certificateholders shall be filed with the Pass
Through Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of or irregularities in regular
mail service, it shall be impracticable to mail notice to any
Certificateholders when such notice is required to be given pursuant to any
provision of this Pass Through Agreement, then any manner of giving such notice
as shall be satisfactory to the Pass Through Trustee shall be deemed to be a
sufficient giving of such notice.
SECTION 12.07. Officer's Certificates and Opinions of Counsel;
Statements to be Contained Therein. Upon any application or demand by the
Company to the Pass Through Trustee to take any action, the Company shall
furnish to the Pass Through Trustee (i) an Officer's Certificate stating that
all conditions precedent, if any, provided for in this Pass Through Agreement
relating to the proposed action have been complied with and that the proposed
action is in conformity with the requirements of this Pass Through Agreement,
and (ii) an Opinion of Counsel stating that in the opinion of such counsel all
such conditions
-47-
<PAGE> 56
precedent, if any, have been complied with, except that in the case of any such
application or demand as to which the furnishing of such documents is
specifically required by any provision of this Pass Through Agreement relating
to such particular application or demand, no additional certificate or opinion
need be furnished.
Each certificate or opinion required by this Pass Through Agreement
and delivered to the Pass Through Trustee with respect to compliance with a
condition or covenant provided for in this Pass Through Agreement, except for
the certificate required by Section 4.03(iv) shall include (a) a statement that
the person making such certificate or opinion 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
certificate or opinion are based, (c) a statement that, in the opinion of such
person, he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been complied with and (d) a statement as to whether or not, in
the opinion of such person, such condition or covenant has been complied with.
Any certificate, statement or Opinion of Counsel may be based, insofar
as it relates to factual matters or information with respect to which is in the
possession of the Company, upon the certificate, statement or opinion of or
representations by an officer or officers of the Company unless such counsel
knows that the certificate, statement or opinion or representations with
respect to the matters upon which his certificate, statement or opinion may be
based as aforesaid are erroneous, or in the exercise of reasonable care should
know that the same are erroneous.
Any certificate, statement or opinion of an officer of the Company or
of counsel thereto may be based, insofar as it relates to accounting matters,
upon a certificate or opinion of or representations by an accountant or firm of
accountants employed by the Company unless such officer or counsel, as the case
may be, knows that the certificate or opinion or representations with respect
to the accounting matters upon which his certificate, statement or opinion may
be based as aforesaid are erroneous, or in the exercise of reasonable care
should know that the same are erroneous.
Any certificate or opinion of any independent firm of public
accountants filed with the Pass Through Trustee shall contain a statement that
such firm is independent.
SECTION 12.08. Conflict of Any Provision of Pass Through Agreement
with the Trust Indenture Act. If and to the extent that any provision of this
Pass Through Agreement limits, qualifies or conflicts with another provision
included in this Pass Through Agreement by operation of Sections 310 to 317,
inclusive, of the Trust Indenture Act (an "incorporated provision"), such
incorporated provision shall control.
SECTION 12.09. Severability. Any provision of this Pass Through
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the
-48-
<PAGE> 57
remaining provisions hereof or thereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 12.10. No Oral Modifications or Continuing Waivers. No terms
or provisions of this Pass Through Agreement or any Pass Through Certificates
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party or other person against whom
enforcement of the change, waiver, discharge or termination is sought; and any
waiver of the terms hereof or thereof shall be effective only in the specific
instance and for the specific purpose given.
SECTION 12.11. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of
the parties hereto and the successors and permitted assigns of each, all as
herein provided. Any request, notice, direction, consent, waiver or other
instrument or action by any Certificateholder shall bind the successors and
assigns of such Certificateholder.
SECTION 12.12. Headings. The headings of the various Articles and
Sections herein and in the table of contents hereto are for the convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
SECTION 12.13. Normal Commercial Relations. Anything contained in
this Pass Through Agreement to the contrary notwithstanding, the Pass Through
Trustee and any Certificateholder, or any bank or other affiliate of any such
party, may conduct any normal banking or other financial transactions, and have
normal banking or other commercial relationships, with the Company fully to the
same extent as if this Pass Through Agreement were not in effect including,
without limitation, the making of loans or other extensions of credit to the
Company for any purpose whatsoever, whether related to any of the transactions
contemplated hereby or otherwise.
SECTION 12.14. Governing Law; Counterpart Form. THIS PASS THROUGH
AGREEMENT AND EACH PASS THROUGH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Pass
Through Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 12.15. Tax Intent. The execution and delivery of this Pass
Through Agreement shall constitute an acknowledgement by the Company and the
Pass Through Trustee on behalf of the Certificateholders that they intend to
establish (for Federal tax purposes) a grantor trust of which the
Certificateholders are the beneficiaries, rather than an
-49-
<PAGE> 58
association taxable as a corporation. The powers granted and obligations
undertaken in this Pass Through Agreement shall be construed so as to further
such intent.
SECTION 12.16. Distributions Due on Days Other than Business Days.
If any Distribution Date is not a Business Day, then such distribution need not
be made on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on the applicable Distribution Date, and
no interest shall accrue for the intervening period.
SECTION 12.17. Notices and Reports to Duff & Phelps and Moody's. The
Pass Through Trustee shall provide written notice as soon as practicable to
Duff & Phelps and Moody's of (i) any Event of Default, (ii) any amendments to
or modifications of this Pass Through Agreement or the Mortgage Notes, (iii)
any proposed removal, replacement or resignation of the Pass Through Trustee,
and (iv) the final payment to Certificateholders.
Additionally, the Pass Through Trustee, at the expense of the Company,
shall provide copies promptly upon receipt to Duff & Phelps and Moody's of all
reports and certificates delivered pursuant to Section 4.03 and 12.07 hereof.
The Pass Through Trustee shall also provide, at the expense of the Company,
such other information regarding the Company or any Property (as defined in any
Indenture) as may be reasonably requested by Duff & Phelps or Moody's to the
extent the Pass Through Trustee has such information. Duff & Phelps and Moody's
shall not be charged any expense in connection with the foregoing.
Unless otherwise agreed, such notices, reports and copies required to
be delivered under this Section 12.07 and Section 3.01 shall be delivered (i)
if to Duff & Phelps, at its office at 17 State Street - 12th Floor, New York,
New York 10004 and (ii) if to Moody's, at its office at 99 Church Street - 4th
Floor, New York, New York 10007.
IN WITNESS WHEREOF, the parties hereto have caused this Pass Through
Agreement to be duly executed this ____ day of _________ 1995 by their
respective officers thereunto duly authorized, and acknowledge that this Pass
Through Agreement has been
-50-
<PAGE> 59
made and delivered in the City of New York, and this Pass Through Agreement
shall be effective only upon such execution and delivery.
[PASS THROUGH TRUSTEE], Pass Through Trustee
By: _______________________________________
Title:
KMART CORPORATION
By: _______________________________________
Title:
-51-
<PAGE> 60
Exhibit A to Pass Through Trust Agreement-1995-K-[1/2]
FORM OF 1995-K-[1/2] PASS THROUGH CERTIFICATE
Unless this Pass Through 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 or 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
THEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein. [This paragraph
is required only if the Pass Through Certificates are to be represented by the
Registered Global Certificate.]
CUSIP No. ____________
PASS THROUGH TRUST-1995-K-[1/2]
____% Pass Through Certificate
Final Scheduled Regular Distribution Date: ___________, 20__
evidencing a fractional undivided interest in a pass through trust,
the property of which includes certain Mortgage Notes, each secured by
a Property or Properties leased to Kmart Corporation.
Certificate No. ____
$___________ Fractional Undivided Interest representing ________% of the Trust
per $1,000 face amount.
THIS CERTIFIES THAT _____________, for value received, is the registered owner
of a $_________ (_____________ dollars) Fractional Undivided Interest in the
Kmart Corporation Pass Through Trust-1995-K-[1/2] (the "Pass Through Trust")
created by [PASS THROUGH TRUSTEE], as trustee (the "Pass Through Trustee"),
pursuant to the Pass Through Trust Agreement-1995-K-_ dated as of March __,
1995 (the "Pass Through Agreement"), between the Pass Through Trustee and Kmart
Corporation, a corporation incorporated under Michigan law (the "Company"), a
summary of certain of the pertinent provisions of which is set forth below. To
the extent not otherwise defined herein, the capitalized terms used herein have
the meanings assigned to them in the Pass Through Agreement. This Certificate
is one of the duly authorized Certificates designated as "Kmart
Corporation-1995-K-[1/2] Pass
A-1
<PAGE> 61
Through Certificates". This Pass Through Certificate is issued under and is
subject to the terms, provisions, and conditions of the Pass Through Agreement,
to which the Certificateholder of this Pass Through Certificate by virtue of
the acceptance hereof assents and by which such Certificateholder is bound.
The property of the Pass Through Trust (the "Trust Property") includes certain
Mortgage Notes (the "Mortgage Notes"). As of the date hereof, each of the
Mortgage Notes is secured by a Property or Properties leased to the Company and
an assignment of certain rents payable by the Company.
The Pass Through Certificates represent fractional undivided interests
in the Pass Through Trust and the Trust Property, and have no rights, benefits
or interest in respect of any other separate trust established pursuant to the
terms of any other Pass Through Agreement or other Pass Through Certificates
issued pursuant thereto.
Subject to and in accordance with the terms of the Pass Through
Agreement, from funds then available to the Pass Through Trustee, there will be
distributed on each ________ and ___________ (a "Regular Distribution Date"),
commencing on _______, 1995, to the Person in whose name this Pass Through
Certificate is registered at the close of business on the fifteenth day
preceding the applicable Regular Distribution Date, an amount in respect of the
Scheduled Payments on the Mortgage Notes due on such Regular Distribution Date,
the receipt of which has been confirmed by the Pass Through Trustee, equal to
the product of the percentage interest in the Pass Through Trust evidenced by
this Pass Through Certificate and an amount equal to the sum of such Scheduled
Payments. Subject to and in accordance with the terms of the Pass Through
Agreement, if Special Payments on the Mortgage Notes are received by the Pass
Through Trustee, from funds then available to the Pass Through Trustee, there
shall be distributed on the applicable Special Distribution Date, to the Person
in whose name this Pass Through Certificate is registered at the close of
business on the fifteenth day preceding such Special Distribution Date, an
amount in respect of such Special Payments on the Mortgage Notes, the receipt
of which has been confirmed by the Pass Through Trustee, equal to the product
of the percentage interest in the Pass Through Trust evidenced by this Pass
Through Certificate and an amount equal to the sum of such Special Payments so
received. If a Distribution Date is not a Business Day, distribution shall be
made on the immediately following Business Day with the same force and effect
as if made on such Distribution Date and no interest shall accrue during the
intervening period. The Special Distribution Date shall be the ___________ day
of the month determined as provided in the Pass Through Agreement. The Pass
Through Trustee shall mail notice of each Special Payment and the Special
Distribution Date therefor to the Certificateholder of this Pass Through
Certificate.
Distributions on this Pass Through Certificate will be made by the
Pass Through Trustee to the Person entitled thereto, without the presentation
or surrender of this Pass Through Certificate or the making of any notation
hereon. Except as otherwise provided in the Pass Through Agreement and
notwithstanding the above, the final distribution on this Pass Through
Certificate will be made after notice mailed by the Pass Through Trustee of the
A-2
<PAGE> 62
pendency of such distribution and only upon presentation and surrender of this
Pass Through Certificate at the office or agency of the Pass Through Trustee
specified in such notice.
Reference is hereby made to the further provisions of this Pass
Through Certificate set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this place.
This Pass Through Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
Unless the certificate of authentication hereon has been executed by
the Pass Through Trustee, by manual signature, this Pass Through Certificate
shall not be entitled to any benefit under the Pass Through Trust or be valid
for any purpose.
IN WITNESS WHEREOF, the Pass Through Trustee has caused this Pass
Through Certificate to be duly executed.
PASS THROUGH TRUST-1995-K-[1/2]
By: [PASS THOUGH TRUSTEE],
as Pass Through Trustee
By: ________________________________________
Title:
[FORM OF PASS THROUGH TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
Dated: ______________, 1995
This is one of the Pass Through Certificates referred to in the
within-mentioned Pass Through Agreement.
[PASS THROUGH TRUSTEE],
as Pass Through Trustee
By: ________________________
Authorized Signatory
A-3
<PAGE> 63
[Reverse]
The Pass Through Certificates do not represent an obligation of, or an
obligation guaranteed by, or an interest in, the Company, the Pass Through
Trustee or any affiliate thereof. The Pass Through Certificates are limited in
right of payment, all as more specifically set forth on the face hereof and in
the Pass Through Agreement. All payments or distributions made to
Certificateholders under the Pass Through Agreement shall be made only from the
Trust Property and only to the extent that the Pass Through Trustee shall have
sufficient income or proceeds from the Trust Property to make such payments in
accordance with the terms of the Pass Through Agreement. Each
Certificateholder of this Pass Through Certificate, by its acceptance hereof,
agrees that it will look solely to the income and proceeds from the Trust
Property to the extent available for distribution to such Certificateholder as
provided in the Pass Through Agreement. This Pass Through Certificate does not
purport to summarize the Pass Through Agreement and reference is made to the
Pass Through Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds, and duties evidenced hereby. A copy of the
Pass Through Agreement may be examined during normal business hours at the
principal office of the Pass Through Trustee, and at such other places, if any,
designated by the Pass Through Trustee, by any Certificateholder upon request.
The Pass Through Agreement permits, with certain exceptions provided
therein, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Certificateholders under the
Pass Through Trust at any time by the Company and the Pass Through Trustee with
the consent of the Majority in Interest of Certificateholders in the Pass
Through Trust. Any such consent by the Certificateholder of this Pass Through
Certificate shall be conclusive and binding on such Certificateholder and upon
all future Certificateholders of this Pass Through Certificate and of any Pass
Through Certificate issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this Pass
Through Certificate. The Pass Through Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the
Certificateholders of any of the Pass Through Certificates.
As provided in the Pass Through Agreement and subject to certain
limitations set forth therein, the transfer of this Pass Through Certificate is
registrable in the Register upon surrender of this Pass Through Certificate for
registration of transfer at the facilities or agencies maintained by the Pass
Through Trustee, duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Pass Through Trustee and the Registrar
duly executed by the Certificateholder hereof or such Certificateholder's
attorney-in-fact duly authorized in writing, and thereupon one or more new Pass
Through Certificates of authorized denominations evidencing the same aggregate
Fractional Undivided Interest in the Pass Through Trust will be issued to the
designated transferee or transferees.
A-4
<PAGE> 64
The Pass Through Certificates are issuable only as registered Pass
Through Certificates without coupons in minimum denominations of $1,000
Fractional Undivided Interest and integral multiples thereof. As provided in
the Pass Through Agreement and subject to certain limitations set forth
therein, Pass Through Certificates are exchangeable for new Pass Through
Certificates of authorized denominations evidencing the same aggregate
Fractional Undivided Interest in the Pass Through Trust, as requested by the
Certificateholder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Pass Through Trustee may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Pass Through Trustee, the Indenture Trustees, the Registrar, and
the Company and any agent of the Pass Through Trustee, the Indenture Trustees,
the Registrar, or the Company may treat the person in whose name this Pass
Through Certificate is registered as the owner hereof for all purposes, and
neither the Pass Through Trustee, the Indenture Trustees, the Registrar, or the
Company nor any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Pass Through
Agreement and the Pass Through Trust created thereby shall terminate upon the
distribution to Certificateholders of all amounts required to be distributed to
them pursuant to the Pass Through Agreement and the disposition of all property
held as part of the Trust Property.
A-5
<PAGE> 1
EXHIBIT 4.2
Kmart Store No.: [STORE NO.]~
[TOWN, STATE]~
THIS INDENTURE IS A MORTGAGE, DEED OF TRUST AND SECURITY AGREEMENT OF BOTH REAL
AND PERSONAL PROPERTY, INCLUDING GOODS THAT ARE OR ARE TO BECOME FIXTURES ON
THE REAL ESTATE DESCRIBED HEREIN. THIS INDENTURE CONTAINS AFTER-ACQUIRED
PROPERTY PROVISIONS. THIS INDENTURE IS TO BE FILED FOR RECORD IN THE RECORDS
WHERE MORTGAGES OR DEEDS OF TRUST OF REAL PROPERTY ARE RECORDED. THIS
INDENTURE SHOULD ALSO BE APPROPRIATELY INDEXED AS A FIXTURE FINANCING STATEMENT
UNDER THE UNIFORM COMMERCIAL CODE. THIS INDENTURE SECURES OBLIGATIONS
CONTAINING PROVISIONS FOR MODIFICATIONS IN THE TERMS OF THE SECURED
OBLIGATIONS.
INDENTURE, MORTGAGE AND DEED OF TRUST,
ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
Dated as of March __, 1995
Among
REAL ESTATE FINANCE TRUST 1995-K-_____,
a Delaware business trust,
Owner Trust
and
THE BANK OF NEW YORK and
TODD N. NIEMY,
Indenture Trustees
When recorded return to:
SULLIVAN & CROMWELL
250 Park Avenue
New York, New York 10177-0021
Attention: Ms. Sheila Lynch
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GRANTING CLAUSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE I
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II
ISSUE, EXECUTION, FORM AND
REGISTRATION OF THE MORTGAGE NOTES
SECTION 2.01. Authentication and Delivery of
Mortgage Notes . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.02. Execution of Mortgage Notes . . . . . . . . . . . . . . . . . . 18
SECTION 2.03. Certificate of Authentication . . . . . . . . . . . . . . . . . 18
SECTION 2.04. Form and Terms of Mortgage Notes;
Payments of Principal, Premium
and Interest . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.05. Payments from Indenture Estate Only . . . . . . . . . . . . . . 21
SECTION 2.06. Registration, Transfer and Exchange . . . . . . . . . . . . . . 22
SECTION 2.07. Mutilated, Defaced, Destroyed, Lost
and Stolen Mortgage Notes . . . . . . . . . . . . . . . . . . 24
SECTION 2.08. Cancellation of Mortgage Notes;
Destruction Thereof . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.09. Termination of Interest in
Indenture Estate . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE III
COVENANTS
SECTION 3.01. Payment of Principal, Premium
and Interest . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.02. Offices for Payments, Etc. . . . . . . . . . . . . . . . . . . 26
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 3.03. Appointment to Fill a Vacancy in Office
of Corporate Indenture Trustee . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.04. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.05. Covenants of the Trust Company and
the Owner Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.06. Property Alterations and Substitutions
of the Indenture Estate . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.07. Further Assurances; Financing
Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.08. Assumption of Obligations of Owner
Trust by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.09. No Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IV
HOLDER LISTS . . . . . . . . . . 34
ARTICLE V
RECEIPT, DISTRIBUTION AND APPLICATION OF
INCOME FROM THE INDENTURE ESTATE
SECTION 5.01. Basic Rent Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 5.02. Event of Loss and Replacement;
Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.03. Payment After Indenture Event of
Default, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.04. Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.05. Other Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.06. Payments to Owner Trust . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.07. Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.08. Investment of Amounts Held by
Indenture Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.09. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE VI
REDEMPTION OF MORTGAGE NOTES
SECTION 6.01. No Redemption or Prepayment Prior
to Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.02. Redemption of Mortgage Notes . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.03. Redemption; Notice to Corporate Indenture
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.04. Mortgage Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.05. Notice of Redemption to Holders . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.06. Right to Reject Tenant's Purchase
Offer or Notice of Termination . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.07. Mortgage Notes Payable on
Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VII
REMEDIES OF INDENTURE TRUSTEES
AND HOLDERS
SECTION 7.01. Indenture Event of Default . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.02. Remedies; Acceleration of Maturity;
Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.03. Exercise of Remedies, and Suits for
Enforcement, by Indenture Trustees;
Owner Trust's Right to Redeem the
Mortgage Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.04. Additional Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 7.05. Indenture Trustees May File Proofs
of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 7.06. Indenture Trustees May Enforce Claims
Without Possession of the Mortgage
Notes; Represent Holders . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 7.07. Application of Money Collected . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.08. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.09. Unconditional Right of Holders to
Receive Principal, Premium, if any,
and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 7.10. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . 54
SECTION 7.11. Rights and Remedies Cumulative and
Subject to Applicable Law . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.12. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.13. Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.14. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.15. Waiver of Appraisement; Laws . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.16. Special State Law Addendum . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.17. No Cross-Collateralization . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE VIII
RIGHTS OF THE OWNER TRUST
AND THE OWNER PARTICIPANT
SECTION 8.01. Certain Rights of Owner Trust and Owner
Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 8.02. Owner Trust's Right to Elect to Redeem
and to Provide for Payment . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.03. Certain Rights of Owner Trust and
Owner Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.04. Company Ownership of Owner Trust . . . . . . . . . . . . . . . . . . . . 63
ARTICLE IX
THE INDENTURE TRUSTEES
SECTION 9.01. Acceptance of Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.02. Duties and Responsibilities of the
Indenture Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.03. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.04. Certain Rights of the Indenture
Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.05. Issuance of Mortgage Notes
or Recording; Warranty . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.06. Indenture Trustees, Owner Trustees
and Agents May Hold Mortgage Notes;
Collections, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.07. Moneys Held by Indenture Trustees . . . . . . . . . . . . . . . . . . . . 68
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 9.08. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.09. The Co-Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.10. Co-Indenture Trustee Acting with
Corporate Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.11. Easements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.12. Resignation and Removal; Appointment
of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.13. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . 70
SECTION 9.14. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 9.15. Persons Eligible for Appointment as
Corporate Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.16. Appointment of Separate Trustees . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.17. Trustees' Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE X
CONCERNING THE HOLDERS
SECTION 10.01. Evidence of Action Taken by Holders . . . . . . . . . . . . . . . . . . . 74
SECTION 10.02. Proof of Execution of Instruments
and of Holding of the Mortgage Notes . . . . . . . . . . . . . . . . . . 74
SECTION 10.03. Holders to Be Treated as Owners . . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.04. Mortgage Notes Owned by Owner Trust,
Owner Trustees, Owner Participant
and the Company Deemed
Not Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.05. Right of Revocation of Action Taken . . . . . . . . . . . . . . . . . . . 75
SECTION 10.06. Voting Rights of Pass Through Trustee . . . . . . . . . . . . . . . . . . 76
ARTICLE XI
INDEMNIFICATION OF INDENTURE TRUSTEES
BY OWNER TRUST . . . . . . . . . 76
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE XII
SUPPLEMENTS AND AMENDMENTS TO THIS
INDENTURE AND OTHER DOCUMENTS
SECTION 12.01. Supplemental Indentures Without Consent
of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 12.02. Supplemental Indentures With Consent
of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.03. Effect of Supplemental Indenture . . . . . . . . . . . . . . . . . . . . 80
SECTION 12.04. Documents to be Given to Indenture
Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 12.05. Notation on Mortgage Notes in
Respect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . 80
SECTION 12.06. No Request Necessary for Lease
Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 12.07. Amendments, Waivers, Etc. of Other
Indenture Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
SECTION 13.01. Satisfaction and Discharge of Indenture;
Termination of Indenture . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 13.02. Application by Indenture Trustees of
Funds Deposited for Payment of
Mortgage Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 13.03. Transfer of Moneys Held by Indenture
Trustees Unclaimed for Two Years and
Eleven Months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
</TABLE>
vi
<PAGE> 8
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE XIV
SUBSTITUTIONS AND RELEASES
SECTION 14.01. Substitution of Property Included
in the Indenture Estate During
Continuation of Lease . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 14.02. Execution of Releases . . . . . . . . . . . . . . . . . . . . . . . . . . 86
ARTICLE XV
ISSUANCE OF REFINANCING MORTGAGE NOTES
SECTION 15.01. Creation and Forms of Refinancing
Mortgage Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 15.02. Issuance of Refinancing Mortgage
Notes After Redemption . . . . . . . . . . . . . . . . . . . . . . . . . 86
ARTICLE XVI
ASSIGNMENT OF LEASES AND RENTS
SECTION 16.01. Making of Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 16.02. Receipt of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 16.03. Irrevocability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 16.04. Owner Trust Remains Liable . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 16.05. Ongoing Right to Collect Rents;
Receivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 16.06. Article XVI Not Intended to Override . . . . . . . . . . . . . . . . . . 91
ARTICLE XVII
SECURITY AGREEMENT AND FINANCING STATEMENT . . 91
</TABLE>
vii
<PAGE> 9
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE XVIII
MISCELLANEOUS
SECTION 18.01. Exculpation and Release of Liability . . . . . . . . . . . . . . . . . . 93
SECTION 18.02. Capacity in Which Acting . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 18.03. No Legal Title to Indenture Estate
in Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 18.04. Sale of Indenture Estate by
Indenture Trustees is Binding . . . . . . . . . . . . . . . . . . . . . 94
SECTION 18.05. Indenture for Benefit of Owner
Trust, Indenture Trustees and
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 18.06. No Action Contrary to the Company's
Rights Under the Lease . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 18.07. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 18.08. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . 95
SECTION 18.09. Form of Documents Delivered to
Indenture Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 18.10. Act of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 18.11. Effect of Headings and Table of
Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 18.12. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 18.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 18.14. Governing Law; Interpretation . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 18.15. Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 18.16. Company Not a Party . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 18.17. Special State Law Addendum . . . . . . . . . . . . . . . . . . . . . . . 98
</TABLE>
EXHIBIT A-1 - Form of Mortgage Note due [Maturity Date K-1]
EXHIBIT A-2 - Form of Mortgage Note due [Maturity Date K-2]
SCHEDULE I - Description of Land
viii
<PAGE> 10
INDENTURE, MORTGAGE AND DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY
AGREEMENT (this "Indenture") dated as of March __, 1995 between Real Estate
Finance Trust 1995-K-_____, a Delaware business trust (the "Owner Trust")
created under the Trust Agreement (as hereinafter defined) whose principal
place of business and mailing address are set forth in Section 18.07, of which
Wilmington Trust Company (together with its permitted successors and assigns,
the "Corporate Owner Trustee") and William J. Wade (together with his permitted
successors and assigns, the "Individual Owner Trustee"), acting not
individually, except as otherwise provided herein (when acting in such
individual capacity, the "Trust Company" and "William J. Wade", respectively),
but solely as trustees for the Owner Trust (the Corporate Owner Trustee and the
Individual Owner Trustee, collectively in such capacities, the "Owner
Trustees"), and The Bank of New York, a banking corporation organized and
existing under the laws of the State of New York, whose principal place of
business and mailing address are set forth in Section 18.07, and Todd N. Niemy,
whose residence and mailing address are set forth in Section 18.07, as
Corporate Indenture Trustee and Co-Indenture Trustee, respectively, hereunder
(collectively, together with their permitted successors and assigns, the
"Indenture Trustees").
RECITALS
WHEREAS, capitalized terms used herein shall have the respective meanings
set forth or referred to in Article I hereof, and in particular, the following
terms shall have the following meanings:
Aggregate Initial Principal Amount of the $[TOTAL PRINCIPAL AMOUNT]~
Mortgage Notes:
Initial Principal Amount of Mortgage Note K-1: $[K-1 PRINCIPAL AMOUNT]~
Initial Principal Amount of Mortgage Note K-2: $[K-2 PRINCIPAL AMOUNT]~
WHEREAS, the Owner Trust has concurrently herewith acquired from the
Company, or from a Person under an agreement with the Company to construct
certain Improvements and sell the Property to the Company, (a) an estate for
years in and to the parcel of land (such parcel, the "Land") more fully
described in Schedule I hereto and (b) fee title in and to the Improvements;
and
WHEREAS, the Owner Trust and the Indenture Trustees desire to enter into,
execute and deliver this Indenture, pursuant to which the Owner Trust will
initially execute and deliver and the Corporate Indenture Trustee will
initially authenticate two Mortgage Notes in the forms of Exhibit A-1 and
Exhibit A-2, respectively, in the principal amounts
<PAGE> 11
of Initial Principal Amount of Mortgage Note K-1 and the Initial Principal
Amount of Mortgage Note K-2, respectively; and
WHEREAS, the Owner Trust desires by this Indenture to provide, among
other things, (i) for the issuance by the Owner Trust of the Mortgage Notes,
(ii) for the assignment, mortgage and pledge by the Owner Trust to the
Indenture Trustees, as part of the Indenture Estate hereunder, among other
things, of all of the Owner Trust's right, title and interest in and to the
Property and the Indenture Documents and all payments and other amounts
received hereunder or thereunder in accordance with the terms hereof (other
than Excepted Rights and Payments), as security for, among other things, the
Owner Trust's obligations to the Holders and for the ratable benefit and
security of such Holders; and
WHEREAS, all things have been done to make the Mortgage Notes, when
executed by the Owner Trust, and authenticated, issued and delivered hereunder,
the valid obligations of the Owner Trust; and
WHEREAS, all things necessary to make this Indenture the valid, binding
and legal obligation of the Owner Trust enforceable in accordance with its
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity or except as limited by
applicable laws which may affect the remedies provided for in this Indenture,
have been done and performed and have happened;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, (A) to secure (i) the
payment of the principal of, and interest on and all other amounts in respect
of the Mortgage Notes from time to time Outstanding (including any Refinancing
Mortgage Notes hereafter issued and from time to time Outstanding), and (ii)
the performance and observance of the covenants herein contained and the
performance and observance by the Owner Trust of all of its covenants and
provisions contained herein and (only with respect to the Property encumbered
hereby) in the Indenture Documents to which it is a party for the benefit of
the Holders and the Indenture Trustees, and (iii) all future advances and
readvances that may subsequently be made to the Owner Trust by the Indenture
Trustees, evidenced by the Mortgage Notes, and all renewals and extensions
thereof, provided, however, nothing contained herein shall create an obligation
on the part of the Indenture Trustees to make future advances or readvances to
the Owner Trust and (iv) all fees of the Indenture Trustees and charges and
expenses of collection incurred by the Indenture Trustees, including court
costs and reasonable attorneys' fees, and (B) in consideration of the premises
and of the purchase of the Mortgage Notes by the purchasers thereof, the Owner
Trust has executed and delivered this Indenture; and the Owner Trust has
irrevocably granted, and by these presents and by the execution and delivery
hereof and of the Mortgage Notes, and the Owner Trust does hereby irrevocably
grant, bargain, convey, warrant, assign, collaterally assign, mortgage, pledge,
sell, alien,
2
<PAGE> 12
remise, release, transfer, hypothecate, deliver, set over and confirm (the
foregoing acts being referred to herein as simply the "Grant"), to and for the
benefit of the Indenture Trustees and their successors and assigns forever, in
trust upon the terms herein set forth, (x) for the benefit and security of the
Holders of the Mortgage Notes, without priority of any over the others, and (y)
upon the issuance of any Refinancing Mortgage Notes, for the benefit of the
Holders of such Refinancing Mortgage Notes (on a parity with the Holders of the
Mortgage Notes hereafter issued and Outstanding), all right, title and interest
of the Owner Trust (but only to the extent conveyed to the Owner Trust under
the Operative Documents and only to the extent assigned by operation of this
Indenture) in and to its interest in, to and under all of the property, rights,
privileges and franchises described in the following Granting Clauses,
exclusive, however of all Excepted Rights and Excepted Payments (collectively,
described as the "Indenture Estate"), to wit:
Granting Clause First
The Owner Trust's estate for years interest in the Land, together with
the Owner Trust's right, title and interest in the Option Agreement and in all
and singular the tenements, hereditaments, easements, rights of way, rights,
privileges and appurtenances in and to the Land, belonging or in any way
appertaining thereto, including any streets, ways, alleys, gores or strips of
land adjoining the Land and all sewer rights, waters, water courses, water
rights and powers, mineral rights, air rights and all development rights
whatsoever in any way belonging, relating or appertaining to any of the
Property and/or Improvements, or which hereafter shall in any way belong,
relate or be appurtenant thereto and whether now owned or hereafter acquired by
the Owner Trust; all claims or demands of the Owner Trust at law or in equity,
in possession or expectancy of, in and to the Land; and subject to the
provisions of this Indenture, all rents, income, revenues, issues, awards,
proceeds, deposits, tenders, profits and other benefits from and in respect of
the property described in this Granting Clause First and/or Granting Clause
Second or from any business, if any, conducted thereon by the Owner Trust, in
each case whether now existing or hereafter arising or acquired by the Owner
Trust, it being the intention of the parties hereto that, so far as may be
permitted by law, all property of the character hereinabove described that is
now owned or held or is hereafter acquired by the Owner Trust and affixed,
attached and annexed to the Property shall be and remain or become and
constitute a portion of the Indenture Estate and the security covered by and
subject to the lien hereof.
Granting Clause Second
The entire right, title and interest of the Owner Trust in the
Improvements, including the Owner Trust's right, title and interest in all
Alterations and other additions to or changes in the Improvements now located
or at any time hereafter constructed or placed
3
<PAGE> 13
upon the Land and all building equipment, fixtures and goods of every kind and
nature to become fixtures on the Land or in any such Improvements.
Granting Clause Third
All Basic Rent and Additional Rent (including amounts payable under
[ARTICLES 37 AND 38] of the Lease and Trustee Expenses); all payments, receipts
and other consideration of any sort whatsoever payable under the Lease,
including any of the same payable to the Owner Trust, as lessor under the
Lease, as a result of or in respect of any casualty, condemnation or economic
obsolescence relating to the Property, any termination of the Lease, whether by
reason of the Company's default thereunder or otherwise, including any property
delivered in substitution of the Property; and all other right, title and
interest of the Owner Trust, as lessor under the Lease (including all extended
and renewal terms under the Lease) and such other rights, title and interest as
are described in Article XVI, subject to application of certain monies in
accordance with Article V hereof.
Granting Clause Fourth
All of the Owner Trust's right, title and interest in, to and under (a)
all general intangibles relating to design, development, operation, management
and use of the Property, (b) all certificates of occupancy, zoning variances,
building, use or other permits, approvals, authorizations and consents obtained
from and all materials prepared for filing or filed with any governmental
agency in connection with the development, use, operation or management of the
Property (except for any such permits and approvals that are not transferable
by law), (c) all construction, service, architectural and other similar
contracts concerning the design, construction, management, operation, occupancy
and/or use of the Property, (d) all architectural drawings, plans,
specifications, soil tests, feasibility studies, engineering reports and
similar materials relating to any portion of or all of the Property and (e) all
payment and performance bonds or warranties or guarantees relating to the
Property;
Granting Clause Fifth
Proceeds of all of the foregoing and any and all other moneys and
property which may from time to time become subject to the Lien hereof or which
may come into the possession or be subject to the control of the Indenture
Trustees pursuant to this Indenture or any other instrument included in the
Indenture Estate (other than Excepted Rights and Payments), including casualty
insurance proceeds and all awards which may at any time be made to the Owner
Trust for the taking by eminent domain of the whole or any part of the
Indenture Estate or any interest therein and other property, if any, delivered
to the Indenture Trustees by or on behalf of the Owner Trust, it being the
intention of the Owner Trust and it being hereby agreed that all property
hereafter
4
<PAGE> 14
acquired by the Owner Trust and required to be subjected to the Lien of this
Indenture or intended so to be (other than Excepted Rights and Payments) shall
forthwith upon the acquisition thereof by the Owner Trust be subject to the
Lien of this Indenture as if such property were at the date hereof owned by the
Owner Trust and were specifically described in this Indenture and such Lien
were granted hereby or pursuant hereto.
PROVIDED, HOWEVER, that the foregoing Granting Clauses shall not subject
to the Lien of this Indenture any Excepted Rights and Payments, and
PROVIDED FURTHER, HOWEVER, the Lien of this Indenture shall be
subordinate to the leasehold estate created in favor of the Company under the
Lease.
TO HAVE AND TO HOLD the Indenture Estate and all parts thereof unto the
Indenture Trustees and their successors and assigns to their own use and
benefit forever, but in trust, nevertheless for the benefit and security of the
Holders for the use and purposes and with the power and authority and subject
to the terms and conditions mentioned and set forth in this Indenture,
WITH POWER OF SALE, to the extent permitted by applicable law, upon the
terms and conditions herein set forth for the benefit and security of the
Outstanding Mortgage Notes and for the enforcement of the payment of the
principal of and interest on the Outstanding Mortgage Notes in accordance with
their terms, and all other sums payable hereunder or thereunder and the
performance and observance of the provisions of the Outstanding Mortgage Notes,
this Indenture and any other Indenture Document, all as herein set forth.
BUT IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and
security of the Holders from time to time of the Mortgage Notes Outstanding
hereunder without any priority of any one over any other,
AND UPON THE TRUSTS and subject to the covenants and conditions
hereinafter set forth:
IT IS HEREBY COVENANTED AND AGREED that anything herein contained to the
contrary notwithstanding, the Owner Trust shall remain liable under the
Indenture Documents to perform all of its respective obligations thereunder,
all in accordance with and pursuant to the terms and provisions thereof, and
the Indenture Trustees and the Holders shall have no obligation or liability
under any thereof by reason of or arising out of the assignment hereunder, nor
shall the Indenture Trustees or any Holder be required or obligated in any
manner to perform or fulfill any obligations of the Owner Trust under or
pursuant to any of the Indenture Documents to make any payment, or to make any
inquiry as to the nature or sufficiency of any payment received by it, or
present or file
5
<PAGE> 15
any claim, or take any action to collect or enforce the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time
or times.
Effective upon the occurrence and continuance of an Indenture Event of
Default, and subject to the terms hereof, the Owner Trust does hereby appoint
and constitute the Indenture Trustees, and each of them, the true and lawful
attorneys of the Owner Trust, irrevocably, with full power (in the name of the
Owner Trust, or otherwise) to ask, require, demand and receive any and all
moneys and claims for moneys (in each case including insurance and requisition
proceeds) due and to become due under or arising out of the Indenture Documents
(other than Excepted Rights and Payments) and all other property which now or
hereafter constitutes part of the Indenture Estate, to endorse any checks or
other instruments or orders in connection therewith and to file any claims or
to take any action or to institute any proceedings which the Indenture Trustees
may deem to be necessary or advisable in the premises. Under the Lease, the
Company is directed to make all payments of Basic Rent and all other amounts
which are required to be paid to or deposited with the Lessor pursuant to the
Lease (other than Excepted Rights and Payments) directly to the Corporate
Indenture Trustee at such address or addresses or account as the Corporate
Indenture Trustee shall specify, for application as provided in this Indenture.
The Owner Trust agrees that, promptly on receipt thereof, it will transfer to
the Corporate Indenture Trustee any and all moneys (other than Excepted Rights
and Payments) from time to time received by it constituting part of the
Indenture Estate, for distribution by the Corporate Indenture Trustee pursuant
to this Indenture, except that the Owner Trust may accept for distribution
pursuant to the Trust Agreement any amounts distributed to it by the Indenture
Trustees under this Indenture.
The Owner Trust agrees that at any time and from time to time, upon the
written request of the Indenture Trustees, it will promptly and duly execute
and deliver or cause to be duly executed and delivered any and all such further
instruments and documents as the Indenture Trustees may reasonably deem
necessary or desirable in obtaining the full benefits of the Grant made
hereunder and of the rights and powers granted herein.
The Owner Trust (sometimes herein referred to as "Grantor") does hereby
warrant and represent that it has not mortgaged, assigned or pledged, and
hereby covenants that it will not mortgage, assign or pledge, so long as this
Indenture shall remain in effect and shall not have been terminated pursuant to
Section 13.01 hereof, any of its estate, right, title or interest hereby
assigned, to anyone other than the Indenture Trustees. With respect to such
estate, right, title and interest hereby assigned, the Grantor will not, except
as provided in this Indenture or with respect to Excepted Rights and Payments,
(i) enter into any agreement terminating, amending or supplementing any of the
Indenture Documents, or execute any waiver or modification of, or consent
under, the terms of any of the Indenture Documents or accept a surrender of the
Company's interest under the Lease or subordinate the Lease, (ii) accept any
payment from the Company under any Indenture Document, (iii) settle or
compromise any claim arising under any of the
6
<PAGE> 16
Indenture Documents or (iv) submit or consent to the submission of any dispute,
difference or other matter arising under or in respect of any of the Indenture
Documents to arbitration thereunder. For purposes of subsequent references
herein, this paragraph shall be regarded as the seventh paragraph following the
Habendum Clause.
IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto as
follows:
ARTICLE I
DEFINITIONS
The following terms (except as otherwise expressly provided) for all
purposes of this Indenture and of any indenture supplemental hereto have the
respective meanings specified in this Article. All accounting terms used and
not expressly defined herein have the meanings given to them in accordance with
generally accepted accounting principles, and the term "generally accepted
accounting principles" means such accounting principles which are generally
accepted at the date or time of any computation or otherwise at the date
hereof. The words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision. The terms defined in this Article include the
plural as well as the singular. For all purposes of this Indenture, capitalized
terms used but not defined herein have the respective meanings assigned thereto
in the Lease [OR, IF NOT DEFINED THEREIN, IN THE PARTICIPATION AGREEMENT]. The
terms "Property", "Improvements" and "Land" shall mean all or any portion of
the Property, Improvements and Land, respectively. The term "including" shall
be deemed followed by the phrase "without limitation".
"Acceleration Date" means the date as of which the unpaid principal of
all Outstanding Mortgage Notes, together with interest accrued but unpaid
thereon, premium, if any, and all other amounts due thereunder shall become due
and payable under either Section 7.02(b) or 7.02(c) hereof.
"Additional Leases" shall have the meaning given such term in Section
16.01.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
when used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
7
<PAGE> 17
"Alterations" means all alterations, additions, additional buildings and
structures on or to the Improvements.
"Business Day" means any day other than Saturday, Sunday or other day on
which banking institutions in the States of New York, Delaware and Michigan are
authorized or required by law to close.
"Co-Indenture Trustee" means Todd N. Niemy of Long Beach, New York and,
subject to the provisions of Article IX hereof, his successors in the trusts
hereby created.
"Company" means Kmart Corporation, a Michigan corporation, and subject to
the Lease, its successors and assigns.
"Company Indenture" has the meaning set forth in Section 3.08(a).
"Company Mortgage Notes" has the meaning set forth in Section 3.08(a).
"Conveyancing Documents" means the Kmart Transaction Documents (as
defined in the Purchase Agreement, but only to the extent that such document
relates to the Property), other than the Participation Agreement and the Tax
Indemnification Agreement.
"Corporate Indenture Trustee" means The Bank of New York, a banking
corporation organized and existing under the laws of the State of New York and,
subject to the provisions of Article IX hereof, its successors in the trusts
hereby created.
"Corporate Owner Trustee" means Wilmington Trust Company, a Delaware
banking corporation, acting not in its individual capacity but solely as
trustee and, subject to the provisions of the Trust Agreement, its successors
in the trusts thereby created.
"Corporate Trust Office" means the corporate trust office of the
Corporate Indenture Trustee located at 101 Barclay Street, New York, New York
10286 or such other office at which the Corporate Indenture Trustee's corporate
trust business shall be administered that the Corporate Indenture Trustee shall
have specified by notice in writing to the Company, the Owner Trust, the Owner
Participant and the Holders.
"Distribution Date" has the meaning set forth in the Pass Through Trust
Agreements.
"Dollars" and "$" mean lawful currency of the United States of America.
"Duff & Phelps" has the meaning set forth in Section 3.05(c) hereof.
8
<PAGE> 18
"Excepted Payments" means (i) any and all indemnity payments and interest
thereon (including special tax indemnities, general tax indemnities and other
general indemnities, whether or not such payments are denominated as Additional
Rent) paid or payable by the Company to the Owner Participant, the Owner Trust,
the Trust Company or William J. Wade in their individual capacities, or any
other Person pursuant to the Lease, the Participation Agreement, this
Indenture, the Indenture Documents, the Tax Indemnification Agreement or any
other Operative Document as a result of claims made or losses suffered by any
such Person; (ii) any payment in respect of insurance (other than casualty
insurance maintained by the Company pursuant to the Lease) by any Person, or
amounts payable by the Company in respect of deductibles or self-insurance in
effect (other than for casualty losses), in each case, payable as a result of
insurance claims made, or losses suffered, by the Owner Trust, the Trust
Company, William J. Wade or the Indenture Trustees in their respective
individual capacities or by the Owner Participant or any other Person; (iii)
any payment in respect of insurance maintained by or for the benefit of the
Owner Participant (whether directly or through the Owner Trust) and not
required to be maintained by the Company under the Lease; (iv) fees,
disbursements or expenses payable by the Company to the Trust Company or
William J. Wade (or any successor trustee or co-trustee) in their respective
individual capacities for acting as trustees of the Owner Trust; (v) any
out-of-pocket costs and expenses incurred by the Owner Trustees, as trustees or
in their respective individual capacities, which are reimbursable by the
Company to them or to the Owner Trust or the Owner Participant by virtue of any
transactions which are contemplated by the Lease or any other Operative
Document; (vi) any amount payable to the Owner Participant by any transferee as
the purchase price of the Owner Participant's interest in the Trust Estate (or
a portion thereof) and any amount payable to the Owner Trust or Owner
Participant pursuant to Section 19 of the Participation Agreement; and (vii)
all rights of the Owner Trust or the Owner Participant or any other Person
under the Operative Documents, whether or not a Lease Event of Default, an
unmatured Lease Default, an Indenture Event of Default or an Indenture Default
has occurred and is continuing, to demand, collect, sue for, give notices, make
determinations, exercise all rights with respect to and otherwise obtain all
amounts from the Company due the Owner Trust, the Owner Trustees or the Owner
Participant, on account of any such indemnities or payments referred to in
clauses (i) through (vi) above; provided, however, that the rights referred to
in this clause (vii) shall not be deemed to include the exercise of any remedy
to terminate the Lease or to terminate the Company's right to possession
thereunder (except upon release of the Property from the Lien of this
Indenture) but shall include the right to proceed by appropriate court action
or actions, either at law or in equity, to enforce performance by the Company
of the applicable covenants and terms referenced above or to recover damages
for the breach thereof.
"Excepted Rights" has the meaning set forth in Section 8.01 hereof.
"Excepted Rights and Payments" has the meaning specified in Section 8.01.
9
<PAGE> 19
"Federal Bankruptcy Code" means Title 11 of the United States Code, as
amended.
"Grantor" shall have the meaning given such term hereinabove.
"Holder" means each registered holder or holders from time to time of the
Mortgage Notes as evidenced on the Register.
"Improvements" means any and all buildings, personalty and site
improvements now or hereafter constructed or located on the Land, together with
all licenses, rights, privileges and easements appurtenant thereto.
"Indebtedness" of any Person means at any time, without duplication, (i)
all obligations of such Person for borrowed money or the deferred purchase
price of property, or evidenced by bonds, debentures, notes or other similar
instruments, or arising under leases that are properly capitalized under
generally accepted accounting principles applicable to such Person and (ii) all
guarantees by such Person of such obligations described in clause (i) above.
"Indenture", "this Indenture" and other like words mean this Indenture as
the same may be modified, supplemented or amended from time to time in
accordance with the provisions hereof.
"Indenture Default" means an Indenture Event of Default or an event or
condition that, with the giving of notice or the lapse of time or both, would
become an Indenture Event of Default.
"Indenture Documents" means the Participation Agreement (only to the
extent that such document relates to the Property unless the context clearly
requires the contrary), the Lease, the Option Agreement, the Trust Agreement
(and any supplement thereto), this Indenture and the Mortgage Notes.
"Indenture Estate" means the property and rights subject to the Lien
hereof pursuant to the Granting Clauses of this Indenture; provided, however,
that the term "Indenture Estate" does not include any Excepted Rights and
Payments.
"Indenture Event of Default" has the meaning specified in Section 7.01
hereof.
"Indenture Trustees" means the Corporate Indenture Trustee and the
Co-Indenture Trustee.
"Independent Investment Banker" means an independent investment banking
institution of national standing appointed by the Owner Trust (and, in each
case where a Lease Event of Default or a Material Default has not occurred,
approved in writing by
10
<PAGE> 20
the Company) that is independent in fact, does not have any direct financial
interest, or any material indirect financial interest, in the Company or the
Owner Participant or any Affiliate of the Company or the Owner Participant, is
not connected with the Company or the Owner Participant or any Affiliate of the
Company or the Owner Participant as an officer, employee, promoter,
underwriter, trustee, partner, director or Person performing similar functions;
provided, that if the Corporate Indenture Trustee shall not have received
written notice of such an appointment at least 10 days prior to a Redemption
Date or if an Indenture Event of Default which is not caused by a Lease Event
of Default shall have occurred and be continuing, "Independent Investment
Banker" shall mean such an institution appointed by the Corporate Indenture
Trustee.
"Individual Owner Trustee" means William J. Wade, acting not in his
individual capacity but solely as trustee, and, subject to the provisions of
the Trust Agreement, his successors in the trusts thereby created.
"Initial Principal Amount of Mortgage Note K-1" and "Initial Principal
Amount of Mortgage Note K-2" have the meanings given such terms in the first
Recital hereof.
"Installment Payment Amount" means, with respect to each Mortgage Note,
the amount of the installment payment of principal, if any, due and payable on
each Installment Payment Date, which amount shall be equal to the product of
the original principal amount of such Mortgage Note and the Installment Payment
Percentage for such Installment Payment Date; provided, however, that in the
event of a partial redemption of the Mortgage Notes as provided in Article VI,
each subsequent Installment Payment Amount shall, effective as of the
Installment Payment Date immediately following the Redemption Date, be reduced
as provided in Section 6.02(a).
"Installment Payment Date" means each date on which an installment of
principal of a Mortgage Note is due and payable under the terms of such
Mortgage Note, as set forth in Exhibit A-1 or A-2 hereto, as applicable.
"Installment Payment Percentage" means, with respect to each Installment
Payment Date, the percentage set forth opposite such Installment Payment Date
in Exhibit A-1 or A-2 hereto, as applicable.
"Interest Payment Date" means each date on which interest is due and
payable under the terms of a Mortgage Note, as set forth in Exhibit A-1 or A-2
hereto, as applicable.
"Land" has the meaning set forth in the Recitals of this Indenture.
"Lease" means the Lease, dated as of March __, 1995, between the Owner
Trust or the Owner Trustee, as the case may be, and the Company, with respect
to the
11
<PAGE> 21
Property, as the same may be modified, supplemented or amended from time to
time in accordance with the provisions thereof and hereof.
"Lease Default" means any event or condition which, with notice or lapse
of time or both, if uncured, would constitute a Lease Event of Default.
"Lease Event of Default" means any "Event of Default" as defined in
[ARTICLE 20 OF THE LEASE].
"Lessor" means the lessor under the Lease.
"Lien" means any mortgage, pledge, lien, charge, disposition of title,
encumbrance, lease or security interest.
"Make-Whole Premium" means, with respect to the principal amount of any
Mortgage Note to be redeemed or to be paid by reason of redemption, the amount
which an Independent Investment Banker determines as of the third Business Day
prior to the applicable Redemption Date equals the excess, if any, of (i) the
sum of the present values of all the remaining scheduled payments of principal
of and interest on such Mortgage Note as of the Redemption Date (or the portion
of each such scheduled payment corresponding to the portion of such Mortgage
Note to be redeemed), from the Redemption Date to the stated Maturity Date of
such Mortgage Note, discounted semi-annually on each Interest Payment Date at a
rate equal to the Treasury Yield plus fifty basis points (0.50%), based on a
360-day year of twelve 30-day months, over (ii) the aggregate unpaid principal
amount of such Mortgage Note (or the then unpaid portion to be redeemed) plus
accrued and unpaid interest thereon (excluding, for this purpose, any accrued
interest in default).
"Material Default" means any "Material Default" as defined in Article 20
of the Lease.
"Maturity Date" means, with respect to each Mortgage Note, the date
specified therein as the date on which all of the remaining unpaid principal
and accrued but unpaid interest payable under the applicable Mortgage Note is
scheduled to be paid in full.
"Moody's" has the meaning set forth in Section 3.05(c) hereof.
"Mortgage Notes" means the Mortgage Notes originally issued by the Owner
Trust hereunder and any Mortgage Notes issued in connection with the transfer,
assignment, partial redemption or replacement of any Mortgage Note pursuant to
this Indenture. The term "Mortgage Notes" shall also include, as the context
may require, Refinancing Mortgage Notes.
12
<PAGE> 22
"Officer's Certificate" and "Officer's Request" and "Officer's Order"
mean, respectively, a certificate or request or order signed by a Responsible
Officer of the Corporate Owner Trustee or the Company, as the case may be,
delivered to the Corporate Indenture Trustee.
"Operative Documents" shall mean (only to the extent that such document
relates to the Property unless the context requires otherwise) the Indenture
Documents, the Tax Indemnification Agreement, each Purchase and Sale Agreement,
the Conveyancing Documents, the Participation Agreement, the Pass Through Trust
Agreements and the Pass Through Certificates.
"Opinion of Counsel" means a written opinion of legal counsel to the
Company or the Owner Trust, as the case may be, designated by the Company or
the Owner Trust, as the case may be, and reasonably satisfactory to the
Corporate Indenture Trustee and the Owner Trust and addressed to the party or
parties to whom it is to be delivered, which opinion may include reasonable
assumptions, limitations, qualifications and exclusions.
"Option Agreement" means the Option Agreement, dated as of March __,
1995, between the Remainderman and the Owner Trust.
"Other Indentures" means the various instruments titled "Indenture,
Mortgage and Deed of Trust, Assignment of Rents and Security Agreement", dated
the date hereof, entered into by the related Owner Trusts and the Indenture
Trustees, provided, however, an "Other Indenture" shall cease to be an "Other
Indenture" at such time as the obligations thereunder are assumed under
provisions of Section 3.08(a) thereof.
"Other Leases" has the meaning set forth in Section 7.17 hereof.
"Other Mortgage Notes" means those mortgage notes issued by the Other
Owner Trusts pursuant to the Other Indentures, including any refinancing
mortgage notes which may be issued thereunder.
"Other Owner Trusts" means those several Delaware business trusts (other
than the Owner Trust), each established pursuant to a Trust Agreement, dated as
of March __, 1995, and any supplement thereto, among the Trust Company, the
Individual Owner Trustee, if any, and the Owner Participant.
"Outstanding" means, when used with respect to the Mortgage Notes, as of
the date of determination, and subject to the provisions of Section 10.04
hereof, all Mortgage Notes theretofore executed and delivered under this
Indenture, with the exception of the following:
13
<PAGE> 23
(i) Mortgage Notes theretofore canceled by the Corporate Indenture
Trustee or delivered to the Corporate Indenture Trustee for cancellation
pursuant to Section 2.08 of this Indenture or otherwise;
(ii) Mortgage Notes for which payment or redemption money in the
necessary amount has been theretofore deposited with the Corporate
Indenture Trustee in trust for the Holders of such Notes pursuant to
Section 13.01 hereof; provided, that if such Mortgage Notes are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Corporate Indenture
Trustee has been made;
(iii) Mortgage Notes in exchange for or in lieu of which other
Mortgage Notes have been authenticated and delivered pursuant to Article
II hereof; and
(iv) Mortgage Notes alleged to have been destroyed, lost or stolen
which have been paid as provided in Section 2.07 hereof.
"Owner Participant" means the Owner Participant that is a party to the
Trust Agreement, and also includes any Person to which such corporation (or any
successor) transfers its right, title and interest in and to the Trust Estate
in accordance with the Trust Agreement, the Participation Agreement, the Lease
and this Indenture.
"Owner Trust" means Real Estate Finance Trust 1995-K-____, the Delaware
business trust formed under the Trust Agreement. Such term shall, as the
context may require or permit, include any successor or successors to the Owner
Trust the owner of the Property and Lessor under the Lease, to the extent
permitted under this Indenture.
"Owner Trustees" means, collectively, the Corporate Owner Trustee and the
Individual Owner Trustee in their respective trust capacities under the Trust
Agreement unless otherwise specifically provided.
"Participation Agreement" means (only to the extent it refers to the
Property unless the context requires otherwise) the Participation Agreement,
dated as of March __, 1995, among the Company, the Owner Participants, the
Owner Participant Parent, the Owner Trustees, the Owner Trust, the Other Owner
Trusts, the Indenture Trustees, the Remainderman Participant, the Remainderman
Trustee, and the Remainderman, as the same may be amended, modified or
supplemented from time to time in accordance with the terms thereof and hereof.
"Pass Through Certificate" means any of the Pass Through Certificates
issued pursuant to either of the Pass Through Trust Agreements.
14
<PAGE> 24
"Pass Through Trust" means either or both (as the context may require) of
the Pass Through Trusts created pursuant to the respective Pass Through Trust
Agreements.
"Pass Through Trust Agreement" means either or both (as the context may
require) of (a) Pass Through Trust Agreement, dated as of March __, 1995,
between the Company and The Bank of New York Trust Company of Florida, National
Association, as trustee under Pass Through Trust Agreement-1995-K-1, and (b)
Pass Through Trust Agreement, dated as of March __, 1995, between the Company
and The Bank of New York Trust Company of California, as trustee under Pass
Through Trust Agreement-1995-K-2, as either of such agreements may from time
to time be supplemented or amended.
"Pass Through Trustees" means collectively the trustees under Pass
Through Trust Agreement-1995-K-1 and Pass Through Trust Agreement-1995-K-2,
respectively.
"Permitted Investments" means: (i) Direct obligations of, or obligations
the principal of and interest on which are unconditionally guaranteed by, the
United States of America; (ii) obligations of agencies of the United States of
America which are unconditionally guaranteed by or otherwise afforded the full
faith and credit of the United States of America; and (iii) time deposits
secured exclusively by any of the obligations described in (i) or (ii) above,
provided that all of the foregoing shall have maturities of less than one year.
Any such investments shall have a maturity or be redeemable without penalty on
or before any date on which the funds invested therein are reasonably expected
to be required to be applied as provided in this Indenture.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
nonincorporated organization or government or any agency or political
subdivision thereof.
"Property" means the interest in the Land and the Improvements now owned
or hereafter acquired by Owner Trust, including all of Lessor's right, title
and interest in all Alterations now or hereafter made, and in all building
equipment, fixtures and goods of every nature and kind that are now or become
fixtures on the Land or on any such Improvements and Alterations.
"Purchase Agreement" means the Agreement for Sale of Real Estate, dated
as of March __, 1995, among the Company, the Remainderman Purchaser, the Owner
Trust and the Other Owner Trusts.
"Purchase and Sale Agreement" means one of the two separate agreements,
dated as of March __, 1995, among the Company, the related Owner Trust and the
Pass
15
<PAGE> 25
Through Trustees, pursuant to which the Mortgage Notes will be acquired by the
Pass Through Trustees.
"Record Date" means the 15th day preceding an Interest Payment Date,
Installment Payment Date or Redemption Date, whether or not such date is a
Business Day.
"Redemption Date" means, when used with respect to any Mortgage Note (or
portion thereof) to be redeemed, the date fixed for such redemption by or
pursuant to Section 6.03 of this Indenture.
"Redemption Price" means, when used with respect to any Mortgage Note to
be redeemed, 100% of the unpaid principal amount thereof (or when used with
respect to any Mortgage Note which is to be partially redeemed, the portion of
the principal balance thereof to be redeemed) plus accrued interest to the
Redemption Date and, where specifically provided for herein, the applicable
Make-Whole Premium, if any.
"Refinancing Mortgage Notes" means any mortgage notes issued pursuant to
Article XV hereof to refinance the indebtedness represented by the Mortgage
Notes.
"Register" has the meaning set forth in Section 3.02 hereof.
"Registrar" has the meaning set forth in Section 3.02 hereof.
"Relevant Date" has the meaning set forth in Section 3.08 hereof.
"Remainderman" means the RemainderMart Trust, a Delaware business trust
formed under the Remainderman Trust Agreement, together with its successors and
assigns.
"Remainderman Participant" means the Remainderman Limited Partnership, a
Connecticut limited partnership, together with its successors and assigns.
"Remainderman Trust Agreement" means the Business Trust Agreement, dated
as of March __, 1995, between the Remainderman Participant and the Remainderman
Trustee, as the same may be modified, supplemented or amended from time to time
in accordance with the provisions thereof.
"Remainderman Trustee" means Wilmington Trust Company, not in its
individual capacity but solely as trustee under the Remainderman Trust
Agreement, together with its successors and assigns.
"Responsible Officer" means the president or any other officer with
authority of at least a vice president; or, in the case of the Corporate
Indenture Trustee, an officer of the Corporate Indenture Trustee in its
corporate trust department; or, in the case of the
16
<PAGE> 26
Corporate Owner Trustee, an officer of the Corporate Owner Trustee in its
Corporate Trust Administration department.
"Securities Act" means the Securities Act of 1933, as amended.
"Special State Law Addendum" means that addendum, if any, to this
Indenture setting forth special granting clauses, provisions regarding remedies
of the Indenture Trustees and certain other provisions which are necessary or
appropriate to reflect the laws and regulations of the state in which the
Property is located.
"Standard & Poor's" has the meaning set forth in Section 3.05(c) hereof.
"Tax Indemnification Agreement" means the Tax Indemnification Agreement,
dated as of March __, 1995, between the Company and the Owner Participant.
"Treasury Yield" means, with respect to the calculation of the Make-Whole
Premium, a per annum rate determined as of the date of determination of the
Make-Whole Premium equal to the weekly average yield to maturity of United
States Treasury Notes having a constant maturity as set forth in the most
recent weekly statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "H.15(519) Selected Interest
Rates" (the "H.15 Statistical Release"), corresponding to the weighted average
life of the Mortgage Note (calculated to the nearest 1/12 of a year) (the
"Weighted Average Life"); such yield described in this clause to be calculated
by the Independent Investment Banker, by interpolation (unless the Weighted
Average Life of the Mortgage Note equals a constant maturity set forth in the
H.15 Statistical Release) on a straight-line basis, between the weekly average
yields (rounded, if necessary, to the nearest 1/100 of 1% with any figure of
1/200 of 1% or above rounded upward) on (a) the United States Treasury Notes
with a constant maturity closest to and greater than the Weighted Average Life
and (b) the United States Treasury Notes with a constant maturity closest to
and less than the Weighted Average Life, or if such weekly average yields are
not available, by interpolation of comparable rates selected by the Independent
Investment Banker.
"Trust Agreement" means the Trust Agreement of Real Estate Finance Trust
1995-K-__, dated as of March ___, 1995, between the Owner Participant and the
Corporate Owner Trustee, as the same may be modified, supplemented or amended
from time to time in accordance with the provisions thereof, hereof and of the
Participation Agreement.
"Trust Company" means Wilmington Trust Company, a Delaware banking
corporation, in its individual capacity and not as an Owner Trustee, and its
successors under the Trust Agreement, in their respective individual capacities
and not as Owner Trustees.
17
<PAGE> 27
"Trust Estate" means the estate held by the Owner Trust.
ARTICLE II
ISSUE, EXECUTION, FORM AND
REGISTRATION OF THE MORTGAGE NOTES
SECTION 2.01. Authentication and Delivery of Mortgage Notes. Forthwith
upon the execution and delivery of this Indenture, Mortgage Notes in the
respective principal amounts of the Initial Principal Amount of Mortgage Note
K-1 and the Initial Principal Amount of Mortgage Note K-2, and which, in the
aggregate, do not exceed the amount specified in Section 2.04 (except as
otherwise provided in Sections 2.06 and 2.07) shall be executed by the Owner
Trust and delivered to the Corporate Indenture Trustee for authentication, and
the Corporate Indenture Trustee shall thereupon authenticate and deliver said
Mortgage Notes, without any further action by the Owner Trust, and register
such Mortgage Notes in the name of a Pass Through Trustee as directed by the
Corporate Owner Trustee pursuant to an Officer's Order delivered to the
Corporate Indenture Trustee.
SECTION 2.02. Execution of Mortgage Notes. The Mortgage Notes shall be
executed by the Corporate Owner Trustee, on behalf of the Owner Trust, by a
Responsible Officer of the Corporate Owner Trustee under its corporate seal
reproduced thereon and attested by its Secretary or one of its Assistant
Secretaries or its Assistant Cashier. The signature of any of the officers of
the Corporate Owner Trustee on the Mortgage Notes may be manual or facsimile. A
Mortgage Note bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Corporate Owner Trustee shall bind
the Owner Trust, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication and delivery of such
Mortgage Note or did not hold such offices at the respective dates of such
Mortgage Note. At any time and from time to time after the execution and
delivery of this Indenture, the Owner Trust may deliver Mortgage Notes executed
by the Corporate Owner Trustee on behalf of Owner Trust to the Corporate
Indenture Trustee for authentication, together with instructions from a
Responsible Officer of the Corporate Owner Trustee for the authentication and
delivery of such Mortgage Notes, and the Corporate Indenture Trustee in
accordance therewith shall authenticate and deliver such Mortgage Notes in
accordance with the terms of this Indenture and not otherwise.
SECTION 2.03. Certificate of Authentication. Only if a Mortgage Note
shall bear thereon a certificate of authentication substantially in the form
set forth in Exhibit A-1 or A-2, as applicable, executed by the Corporate
Indenture Trustee by manual signature of one of its authorized signatories,
shall it be entitled to the security and benefits of this Indenture or be valid
or obligatory for any purpose. Such certificate by the Corporate
18
<PAGE> 28
Indenture Trustee shall be conclusive evidence, and the only evidence, that the
Mortgage Note has been duly authenticated and delivered hereunder and that the
Holder thereof, as evidenced on the Register, is entitled to the security and
benefits of this Indenture.
SECTION 2.04. Form and Terms of Mortgage Notes; Payments of Principal,
Premium and Interest. The Mortgage Notes and the Corporate Indenture Trustee's
certificate of authentication shall be substantially in the forms set forth in
Exhibits A-1 and A-2 hereto respectively. The Mortgage Notes shall be issuable
as registered securities without coupons and shall be numbered, lettered, or
otherwise distinguished in such manner or in accordance with such plans as the
Owner Trust may determine with the approval of the Corporate Indenture Trustee.
The aggregate principal amount of Mortgage Notes (except with respect to
Refinancing Mortgage Notes, which shall be limited as provided in Article XV
hereof, and as otherwise provided in Sections 2.06 and 2.07) that may be
authenticated and delivered under this Indenture is limited to the Initial
Principal Amount of Mortgage Note K-1 and Initial Principal Amount of Mortgage
Note K-2. Each Mortgage Note shall be issued in registered form only and in
denominations of $1,000,000 initial principal amount and any integral multiple
thereof (provided that one Mortgage Note maturing on each Maturity Date may be
in a different principal amount in order to represent the balance of the
principal indebtedness evidenced by all Mortgage Notes maturing on such
Maturity Date), shall be dated the date of its authentication, shall have the
scheduled Installment Payment Dates, Interest Payment Dates and Maturity Date,
and shall bear interest at the rate per annum, specified in the forms of
Mortgage Notes attached hereto as Exhibits A-1 and A-2, respectively.
Any of the Mortgage Notes may be issued with appropriate insertions,
omissions, substitutions and variations, and may have imprinted or otherwise
reproduced thereon such legend or legends, not inconsistent with the provisions
of this Indenture, as may be required to comply with any law or with any rules
or regulations pursuant thereto, or with the rules of any securities exchange
on which the Mortgage Notes are admitted to trading, or to conform to general
usage.
Each Mortgage Note shall bear interest from the date of issuance thereof
or from the most recent date to which interest has been paid and duly provided
for, as the case may be, which shall be payable on the Interest Payment Dates
until the principal thereof is paid to the Corporate Indenture Trustee or made
available to the Corporate Indenture Trustee for payment in the manner herein
provided. Interest shall be calculated on the basis of a 360-day year of twelve
30-day months.
The principal of each Mortgage Note shall be payable in installments, on
each Installment Payment Date and the Maturity Date, in amounts equal to the
Installment Payment Amount for such Installment Payment Date and the Maturity
Date.
19
<PAGE> 29
The principal of, and premium, if any, and interest on, the Mortgage
Notes shall be payable to or at the direction of the Holders thereof in
immediately available funds by wire transfer to an account in the United States
designated by the respective Holder.
The Refinancing Mortgage Notes shall have the terms set forth in the
indenture supplements pursuant to which they are issued.
The Holders at the close of business on any Record Date with respect to
any Installment Payment Date or Interest Payment Date shall be entitled to
receive the Installment Payment Amount or interest, if any, payable on such
Installment Payment Date or Interest Payment Date notwithstanding any transfer
or exchange of such Mortgage Note subsequent to the Record Date and prior to
such Installment Payment Date or Interest Payment Date. Any Installment Payment
Amount payable on an Installment Payment Date, or any interest payable on the
Mortgage Note which is not punctually paid or duly provided for on any Interest
Payment Date (herein called, respectively, a "Defaulted Installment" and
"Defaulted Interest") shall forthwith cease to be payable to the registered
Holder on the relevant Record Date by virtue of his having been such Holder;
and such Defaulted Interest shall be paid by the Owner Trust, at its election
in each case, as provided in clause (1) or (2) below:
(1) the Owner Trust shall make payment of any Defaulted
Installment or Defaulted Interest to the Persons in whose names the
Mortgage Notes are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Owner Trust shall notify the Corporate
Indenture Trustee in writing of the amount of the Defaulted Installment
or Defaulted Interest proposed to be paid on the Mortgage Notes and the
date of the proposed payment, and at the same time the Owner Trust shall
deposit with the Corporate Indenture Trustee an amount of money equal to
the aggregate amount proposed to be paid in respect of such Defaulted
Installment or Defaulted Interest as of the special record date
established as provided below, or shall make arrangements satisfactory to
the Corporate Indenture Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the persons entitled to such Defaulted Installment or
Defaulted Interest as in this clause provided. No interest shall continue
to accrue on the amount of the Defaulted Installment from and after the
date on which such Defaulted Installment is so deposited. Thereupon the
Corporate Indenture Trustee shall fix a special record date for the
payment of such Defaulted Installment or Defaulted Interest which shall
be not more than 15 days and not less than 10 days after the receipt by
the Corporate Indenture Trustee of the notice of the proposed payment.
The Corporate Indenture Trustee shall promptly notify the Owner Trust and
the Registrar of such special record date and, in the name of the Owner
Trust, shall cause notice of the proposed payment of such Defaulted
Installment or Defaulted Interest and the special record date therefor to
be mailed, first-class postage prepaid,
20
<PAGE> 30
to each Holder at its address as it appears in the Register, not less
than 10 days prior to such special record date. Notice of the proposed
payment of such Defaulted Installment or Defaulted Interest and the
special record date therefor having been mailed as aforesaid, such
Defaulted Installment or Defaulted Interest shall be paid to the Persons
in whose names the Mortgage Notes are registered on such special record
date and shall no longer be payable pursuant to the following clause (2);
or
(2) the Owner Trust shall make, or cause to be made, payment of
any Defaulted Installment or Defaulted Interest in any other lawful
manner not inconsistent with the requirements of any securities exchange
on which the Pass Through Certificates may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Owner Trust to the Corporate Indenture Trustee of the proposed payment
pursuant to this clause, such payment shall be deemed practicable by the
Corporate Indenture Trustee.
Subject to the foregoing provisions of this Section, any Mortgage Note
issued upon registration of transfer of, or in exchange for or in lieu of, any
other Mortgage Note shall carry the rights to interest and Installment Payment
Amounts accrued and unpaid, and interest to accrue, which were carried by such
other Mortgage Note, and each such Mortgage Note shall bear interest from
whatever date shall be necessary so that neither gain nor loss in interest
shall result from such transfer, exchange or replacement.
SECTION 2.05. Payments from Indenture Estate Only. (a) The terms of
this Section 2.05 shall apply for all purposes of this Indenture (except as
provided in Section 3.08(a)(iii)) and the other Indenture Documents, including
any agreement or instrument required or contemplated to be delivered hereunder,
notwithstanding anything herein or therein that may be construed to the
contrary (and regardless whether any particular provision hereof or thereof
makes reference to this Section 2.05).
(b) The Owner Trust shall not be required to make any payments under this
Indenture except from the Indenture Estate. Each Holder, by its acceptance of a
Mortgage Note, agrees it will look solely to the Indenture Estate as provided
herein and that none of the Owner Participant, the Owner Trust, the Trust
Company, William J. Wade, nor the Indenture Trustees is personally liable to
such Holder for any amounts payable under this Indenture or such Mortgage Note
or for any amounts payable or liability under any Mortgage Note or this
Indenture, except as expressly provided herein in the case of the Trust
Company, William J. Wade, the Owner Trust or the Indenture Trustees, or in the
case of the Owner Trustees, except to the extent of the willful misconduct or
gross negligence of the Owner Trustees.
(c) It is expressly understood and agreed by and among the parties
hereto, for themselves and their respective successors and assigns, that
nothing herein contained shall be construed as creating any liability of the
Owner Trust or any beneficiary of the Owner
21
<PAGE> 31
Trust or any of their respective affiliates or any of their respective
officers, directors, shareholders, partners, venturers, trustees (except for
the Owner Trustees which shall be governed by Section 2.05(d) hereof),
beneficiaries, employees or agents (the Owner Trust and such other Persons
being collectively called "Lessor Parties"), individually or personally, for
breach of any representation or warranty or to observe or perform any agreement
or covenants, either express or implied, contained herein, all such liability,
if any, being expressly waived by each other party hereto and by each and every
person now or hereafter claiming by, through or under any of the other parties
hereto, and that, so far as any Lessor Party, individually or personally, is
concerned, each other party hereto and any person claiming by, through or under
any of the other parties hereto shall look solely to the right, title and
interest of the Owner Trust in the Indenture Estate or, with respect to the
Owner Participant, to the right, title and interest of the Owner Participant in
the Indenture Estate, except as provided in the Participation Agreement for the
performance of any obligation under this Indenture and the satisfaction of any
liability arising therefrom.
(d) It is expressly understood and agreed by the parties hereto that (i)
this Indenture is executed and delivered by the Trust Company and William J.
Wade, not individually or personally but solely as Owner Trustees on behalf of
the Owner Trust under the Trust Agreement, in the exercise of the powers and
authority conferred and vested in them as the Corporate Owner Trustee and the
Individual Owner Trustee, as the case may be, (ii) each of the representations,
undertakings and agreements herein made on the part of the Owner Trust (other
than those specifically made by the Trust Company in its individual capacity)
is made and intended not as personal representations, undertakings and
agreements by the Trust Company or William J. Wade, as the case may be, but is
made and intended for the purpose for binding only the Trust Estate (as defined
in the Trust Agreement) created by the Trust Agreement, (iii) nothing herein
contained shall be construed as creating any liability on the part of the Trust
Company or William J. Wade, individually or personally, to perform any covenant
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the Indenture Trustees and by any Person claiming by,
through or under the Indenture Trustees and (iv) under no circumstances shall
the Trust Company (except in respect of those representations, warranties,
undertakings and agreements made by the Trust Company in its individual
capacity) or William J. Wade be personally liable for the payment of any
Indebtedness or expenses of the Owner Trustees or the Owner Trust or be liable
for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Owner Trustees or the Owner Trust under this
Indenture or the other Indenture Documents.
SECTION 2.06. Registration, Transfer and Exchange. The Owner Trust
shall keep, at the office or agency to be maintained for the purpose as
provided in Section 3.02, a Register on which, subject to such reasonable
regulations as it may prescribe, it shall register, and shall register the
transfer of, Mortgage Notes as provided in this Article.
22
<PAGE> 32
Such Register shall be in written form in the English language or in any other
form capable of being converted into such form within a reasonable time and
shall show the name and address of each Holder and the principal amount held by
such Holder.
Upon due presentation for registration of transfer of any Mortgage Note
at any such office or agency, the Corporate Owner Trustee shall execute on
behalf of the Owner Trust and the Corporate Indenture Trustee shall
authenticate and deliver in the name of the transferee or transferees a new
Mortgage Note or Mortgage Notes having the same Maturity Date, Installment
Payment Dates, scheduled aggregate Installment Payment Amounts, Interest
Payment Dates and interest rate and in authorized denominations and the same
aggregate principal amount as the Mortgage Notes being transferred.
Any Mortgage Note or Mortgage Notes may be exchanged for a Mortgage Note
or Mortgage Notes having the same Maturity Date, Installment Payment Dates,
scheduled aggregate Installment Payment Amounts, Interest Payment Dates and
interest rate but in other authorized denominations, in an equal aggregate
principal amount. Mortgage Notes to be exchanged shall be surrendered at the
office or agency to be maintained by the Owner Trust for the purpose as
provided in Section 3.02, and, upon the surrender of such Mortgage Notes for
exchange, the Corporate Owner Trustee on behalf of the Owner Trust shall
execute and the Corporate Indenture Trustee shall authenticate and deliver in
exchange therefor, the Mortgage Note or Mortgage Notes which the Holder making
the exchange shall be entitled to receive, bearing numbers not
contemporaneously or previously outstanding.
All Mortgage Notes presented for registration of transfer, exchange,
redemption or payment shall (if so required by the Owner Trust or the Corporate
Indenture Trustee) be duly endorsed by, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Owner Trust
and the Corporate Indenture Trustee duly executed by, the Holder or its
attorney-in-fact duly authorized in writing. As a condition to any transfer,
the Corporate Indenture Trustee shall require evidence satisfactory to it as to
the compliance of any such transfer with the Securities Act and shall not
permit any transfer if, in the opinion of counsel to the Company or the Owner
Trust, the transfer would be required to be registered thereunder.
The Corporate Indenture Trustee may require payment from the Holder of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any exchange or registration of transfer of Mortgage
Notes. No service charge to the Holder shall be made for any such transaction.
The Corporate Indenture Trustee shall not be required to exchange or
register a transfer of any Mortgage Note (a) for a period of 15 days
immediately preceding the first mailing of notice of redemption in full of the
Mortgage Notes pursuant to Section 6.02
23
<PAGE> 33
or (b) with respect to which notice of redemption in full has been given
pursuant to Section 6.03 and such notice has not been revoked.
All Mortgage Notes issued upon any registration of transfer or exchange
of Mortgage Notes shall be valid obligations of the Owner Trust, evidencing the
same debt, and entitled to the same security and benefits under this Indenture,
as the Mortgage Notes surrendered upon such registration of transfer or
exchange.
SECTION 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Mortgage
Notes. If any Mortgage Note shall become mutilated or defaced or be destroyed,
lost or stolen, the Owner Trust in its discretion may execute, and upon the
oral or written request of any officer of the Corporate Owner Trustee, the
Corporate Indenture Trustee shall authenticate and deliver, a new Mortgage Note
having the same Maturity Date, Installment Payment Dates, Interest Payment
Dates, scheduled aggregate Installment Payment Amounts, Interest Payment Dates
and interest rate, bearing a number not contemporaneously or previously
outstanding, in exchange and substitution for the mutilated or defaced Mortgage
Note, or in lieu of and substitution for the Mortgage Note so destroyed, lost
or stolen. If the Mortgage Note being replaced has been defaced or mutilated,
such Mortgage Note shall be surrendered to the Corporate Indenture Trustee. If
the Mortgage Note being replaced has been destroyed, lost or stolen, the
applicant for a substitute Mortgage Note shall furnish to the Owner Trust and
to the Indenture Trustees and any agent of the Owner Trust or the Indenture
Trustees such security or indemnity as may be reasonably required by them to
indemnify and defend and to save each of them harmless and, in every case of
destruction, loss or theft, evidence to their satisfaction of the destruction,
loss or theft of such Mortgage Note and of the ownership thereof; provided,
however, the unsecured indemnity of a Pass Through Trustee, in its capacity as
Holder of a Mortgage Note, shall be sufficient to obtain the issuance of a
substitute Mortgage Note hereunder.
Upon the issuance of any substitute Mortgage Note, the Owner Trust or the
Corporate Indenture Trustee may require payment from the Holder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other reasonable expenses (including the reasonable
fees and expenses of the Corporate Indenture Trustee) connected therewith. In
case any Mortgage Note which has matured or is about to mature, or has been
called for redemption in full, shall become mutilated or defaced or be
destroyed, lost or stolen, the Owner Trust may, instead of issuing a substitute
Mortgage Note, pay or authorize the payment of the same (without surrender
thereof except in the case of a mutilated or defaced Mortgage Note), if the
applicant for such payment shall furnish to the Owner Trust and to the
Indenture Trustees and any agent of the Owner Trust or the Indenture Trustees
such security or indemnity as any of them may reasonably require to save each
of them harmless; provided, however, the unsecured indemnity of a Pass Through
Trustee, in its capacity as Holder of a Mortgage Note, shall be sufficient to
obtain such payment hereunder, and, in every
24
<PAGE> 34
case of destruction, loss or theft, the applicant shall also furnish to the
Owner Trust and the Indenture Trustees and any agent of the Owner Trust or the
Indenture Trustees evidence to their satisfaction of the apparent destruction,
loss or theft of such Mortgage Note and of the ownership thereof.
Every substitute Mortgage Note issued pursuant to the provisions of this
Section shall constitute an original additional contractual obligation of the
Owner Trust, whether or not the destroyed, lost or stolen Mortgage Note shall
be enforceable at any time by anyone, and shall be entitled to all the security
and benefits of (but shall be subject to all the limitations of rights set
forth in) this Indenture equally and proportionately with any and all other
Mortgage Notes duly authenticated and delivered hereunder. All Mortgage Notes
shall be held and owned upon the express condition that, to the extent
permitted by law, the foregoing provisions are exclusive with respect to the
replacement or payment of mutilated, defaced, or destroyed, lost or stolen
Mortgage Notes and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment of negotiable instruments
or other securities without their surrender.
SECTION 2.08. Cancellation of Mortgage Notes; Destruction Thereof. All
Mortgage Notes surrendered for payment, redemption, registration of transfer or
exchange, if surrendered to the Owner Trust or any agent of the Owner Trust or
the Indenture Trustees, shall be delivered to the Corporate Indenture Trustee
for cancellation or, if surrendered to the Corporate Indenture Trustee, shall
be canceled by it; and no Mortgage Notes shall be issued in lieu thereof except
as expressly permitted by any of the provisions of this Indenture. The
Corporate Indenture Trustee shall destroy canceled Mortgage Notes held by it
and deliver a certificate of destruction to the Owner Trust. If the Owner Trust
shall acquire any of the Mortgage Notes, such acquisition shall not operate as
a redemption or satisfaction of the indebtedness represented by such Mortgage
Notes unless and until the same are delivered to the Corporate Indenture
Trustee for cancellation.
SECTION 2.09. Termination of Interest in Indenture Estate. A Holder
shall not, as such, have any further interest in, or other right with respect
to, the Indenture Estate when and if the principal amount of and premium, if
any, and interest on and other amounts due under all Mortgage Notes held by
such Holder and all other sums payable to such Holder hereunder shall have been
paid in full.
25
<PAGE> 35
ARTICLE III
COVENANTS
SECTION 3.01. Payment of Principal, Premium and Interest. Subject to
Section 2.05, the Owner Trust covenants and agrees that it will duly and
punctually pay or cause to be paid the principal of, and interest, premium and
all other amounts due on, the Mortgage Notes at the place or places, at the
respective times and in the manner provided in this Indenture and in the
Mortgage Notes.
Principal and interest and other amounts due from the Owner Trust
hereunder or under the Mortgage Notes shall be payable in Dollars on the due
date thereof, by wire transfer of immediately available funds to an account in
the United States designated by the Corporate Indenture Trustee such that the
Corporate Indenture Trustee shall be in receipt of immediately available funds
at or before 12:00 noon (New York City time) on the date on which such amount
is due hereunder and under the terms of the Mortgage Notes, or such earlier
date or time as may be necessary to ensure timely payment on the Pass Through
Certificates. If any amount payable under the Mortgage Notes or under this
Indenture falls due, or is permitted thereunder or hereunder to be paid, on a
day which is not a Business Day, then such sum shall be payable on the next
succeeding Business Day, without additional interest thereon for the period of
such extension.
SECTION 3.02. Offices for Payments, Etc. So long as the Mortgage Notes
remain Outstanding, the Owner Trust will maintain an office or agency in New
York, New York, where the Mortgage Notes may be presented for payment,
registration of transfer and exchange as provided in this Indenture (the
"Registrar"). The Registrar shall keep a register (the "Register") with respect
to the Mortgage Notes and their transfer and exchange. The Owner Trust may
appoint one or more co-registrars ("Co-Registrars") for the Mortgage Notes and
may terminate any such appointment at any time upon written notice. The term
"Registrar" includes any Co-Registrar.
The Corporate Indenture Trustee shall initially act as Registrar.
SECTION 3.03. Appointment to Fill a Vacancy in Office of Corporate
Indenture Trustee. The Owner Trust, whenever necessary to avoid or fill a
vacancy in the office of the Corporate Indenture Trustee, shall appoint, in the
manner provided in Section 9.12, a successor Corporate Indenture Trustee, so
that there shall at all times be a Corporate Indenture Trustee hereunder.
SECTION 3.04. [Intentionally Omitted].
26
<PAGE> 36
SECTION 3.05. Covenants of the Trust Company and the Owner Trust.
(a) The Trust Company and William J. Wade each, as to itself only,
hereby covenants and agrees that (i) it will not directly or indirectly create,
incur, assume or suffer to exist any Liens on or with respect to the Indenture
Estate or any of the properties or assets of the Indenture Estate resulting
from the acts or omissions of or claims against the Trust Company or William J.
Wade in their individual capacity (including the nonpayment of any taxes based
on or measured by the revenues or income of the Trust Company or William J.
Wade), except (x) to the extent arising in connection with any obligation
required to be satisfied by the Company pursuant to any Indenture Document or
the Participation Agreement, and (y) any Lien resulting from the non-payment of
any tax which the Company has agreed in any Indenture Document or the
Participation Agreement to pay or reimburse, and (ii) it will perform its
covenants under the Indenture Documents. In the event William J. Wade or a
Responsible Officer of the Corporate Owner Trustee shall have actual knowledge
of an Indenture Default, prompt written notice of such Indenture Default will
be given to the Corporate Indenture Trustee, the Company and the Owner
Participant.
(b) The Owner Trust hereby covenants and agrees as follows:
(i) the Owner Trust has, and shall continue to have, full power
and lawful authority to grant, release, convey, assign, transfer,
mortgage, pledge, hypothecate and otherwise create the Lien and security
interest vested hereby;
(ii) the Owner Trust will perform its obligations under the Lease
and the Participation Agreement;
(iii) if requested by the Corporate Indenture Trustee, the Owner
Trust will furnish to the Corporate Indenture Trustee, promptly upon
receipt thereof, duplicates or copies of any reports, notices, requests,
demands, certificates, financial statements and other instruments
furnished to the Owner Trust under the Lease;
(iv) the Owner Trust will not enter into or engage in any business
or other activity, directly or indirectly, other than the business of
owning and operating the Property, the leasing thereof to the Company and
the carrying out of the transactions contemplated hereby and by the
Lease, the Trust Agreement and the other Indenture Documents;
(v) the Owner Trust will not directly or indirectly create, incur
or assume any Lien on or against the Indenture Estate (other than the
Lien of this Indenture) or any part thereof resulting from the acts or
omissions of or claims against the Owner Trust (including the nonpayment
of any taxes based on or measured by the revenues or income of the Owner
Trust), except (x) to the extent arising in connection with
27
<PAGE> 37
any obligation required to be satisfied by the Company pursuant to any
Indenture Document, and (y) any Lien resulting from the non-payment of
any such tax which the Company has agreed in any Indenture Document to
pay or reimburse;
(vi) the Owner Trust will not sell, lease, transfer, convey,
assign or otherwise dispose of its interest in the Indenture Estate or
any part thereof, except as expressly contemplated by [ARTICLES 39 AND 40
OF THE LEASE], [SECTIONS 2 AND 3 OF THE PARTICIPATION AGREEMENT] or as
permitted below in Section 3.05(c) or 3.05(e) or Article XIV hereof, or
as required below by this Section 3.05;
(vii) the Owner Trust shall not, except as provided in any
Indenture Document, (A) make or permit to remain outstanding any loan or
advance by the Owner Trust to any Person; (B) own or acquire any stock or
securities of any Person or guarantee any obligation of any Person; (C)
create, assume or suffer to exist any Indebtedness other than the
Mortgage Notes; (D) make loans or advances to Affiliates of the Owner
Trust or any Owner Participant; or (E) commingle its assets with the
assets of any of its Affiliates or any Affiliate of the Owner
Participant; and
(viii) the Owner Trust shall at all times maintain the following
procedures to avoid or minimize any risk of substantive consolidation of
the Owner Trust with the bankruptcy or reorganization of the Owner
Participant or any other Person: (A) maintenance of books and records and
bank accounts separate from those of any other Person; (B) filing or
causing to be filed tax returns separate from the Owner Participant or
any of its Affiliates (except to the extent required by applicable law,
rule or regulation or to the extent permitted by applicable law to be
included in a consolidated or unitary group, as appropriate); (C) except
as specifically provided in the Trust Agreement, conducting business with
Affiliates of the Owner Trust or the Owner Participant (or any Affiliate
thereof) on an arm's-length basis; (D) observance of trust (or similar
organizational) formalities; and (E) holding the Owner Trust out to the
public as a legal entity separate and distinct from any of the Owner
Trust's Affiliates and from the Owner Participant or any Affiliate
thereof (The Trust Agreement (or similar organizational documents) shall
incorporate the restrictions and covenants contained in clauses (iv)
through (viii) of this Section 3.05(b)).
(c) Notwithstanding anything to the contrary contained in Section
3.05(b), but subject to the provisions of the Participation Agreement, the
Owner Trust shall have the right, from time to time, to convey all (but not
less than all) of the assets constituting the Indenture Estate, subject to the
Lien of this Indenture, provided that (EXCEPT WITH RESPECT TO A CONVEYANCE BY
THE OWNER TRUST TO THE COMPANY IN ACCORDANCE WITH SECTION ____ OF THE
PARTICIPATION AGREEMENT), as a condition to such conveyance, (i) the Indenture
Trustees shall have received written confirmation from each of Standard &
Poor's Ratings Group or its successor ("Standard & Poor's"), Moody's Investors
28
<PAGE> 38
Service, Inc. or its successor ("Moody's") and Duff & Phelps Credit Rating Co.
("Duff & Phelps") or its successor (if such entity is then rating the Pass
Through Certificates) to the effect that such conveyance, by itself, would not
result in a withdrawal or downgrading of the credit rating assigned to the Pass
Through Certificates then outstanding, (ii) the Corporate Indenture Trustee
shall have received an Opinion of Counsel for the Owner Trust that, in the
event the Owner Participant or other beneficiary, or a shareholder of or
partner in such transferee were to file a petition or otherwise be adjudged a
bankrupt under the Federal Bankruptcy Code, the bankruptcy court having
jurisdiction over the case would not substantively consolidate the assets of
such transferee with the assets of any such owner participant without the
consent of the interested parties (which include the Indenture Trustees and the
Holders) so that their respective assets and liabilities would not be dealt
with as if the assets were held and the liabilities incurred by a single
entity, and (iii) the Owner Participant or beneficiary shall enter into
covenants in favor of the Indenture Trustees comparable to the above terms of
this Section 3.05(b). Upon any such transfer, the transferee shall enter into
an indenture supplemental hereto pursuant to which the transferee will assume
the obligations of the transferor hereunder, and the provisions hereof shall be
appropriately amended (subject to Article XII hereof) to reflect such transfer
and assumption.
(d) Any transfer or attempted transfer by the Owner Trust of all or any
part of the Indenture Estate, except in compliance with the terms hereof, shall
be null and void and of no force or effect.
(e) In the case of any appointment of a co-Owner Trustee or a successor
to an Owner Trustee or a co-Owner Trustee pursuant to the Trust Agreement or
any merger, conversion, consolidation or sale of substantially all of the
corporate trust business of the Corporate Owner Trustee in a manner permitted
by the Trust Agreement, the Owner Trustee or successor Owner Trustee, as the
case may be, shall give prompt written notice thereof to the Corporate
Indenture Trustee and Section 3.05(b)(vi), (c) and (d) shall not apply to any
transfer to such co-Owner Trustee or successor Owner Trustee.
(f) The Owner Trust will deliver to the Corporate Indenture Trustee,
within 120 days after the end of each fiscal year, a written statement signed
by the President or a Vice President or a corporate trust officer of the
Corporate Owner Trustee, stating, as to the signer thereof, that:
(1) a review of the files held by the Owner Trust regarding the
activities of the Owner Trust during such year and of performance by the
Owner Trust of its obligations under this Section 3.05 and the seventh
paragraph following the Habendum Clause has been made under his or her
supervision; and
(2) to the best of his or her knowledge, based on such review, the
Owner Trust has fulfilled all its obligations under this Section 3.05 and
the seventh paragraph
29
<PAGE> 39
following the Habendum Clause throughout such year, or, if there has been
a default in the fulfillment of any such obligation, specifying each such
default known to him or her and the nature and status thereof.
(g) THE TRUST COMPANY, IN ITS INDIVIDUAL CAPACITY AND AS OWNER TRUSTEE,
MAKES (i) NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
VALUE, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY, FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT OR FITNESS FOR
USE OF THE PREMISES (OR ANY PART THEREOF) OR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE LAND AND
IMPROVEMENTS (OR ANY PART THEREOF), except that the Owner Trustee hereby
represents and warrants that on the Closing Date the Owner Trustee shall have
received whatever title and rights to the land and improvements conveyed to it
by the Operative Documents delivered on such Closing Date, and (ii) no
representation or warranty as to the validity, sufficiency, legality or
enforceability of any Operative Document, or as to the correctness of any
statement contained therein except, in the case of the Trust Company, to the
extent that any such statement in this Indenture, the Lease, the Purchase
Agreement, the Purchase and Sale Agreements or the Participation Agreement or
any other Operative Document was or is expressly made by the Trust Company in
its individual capacity, and except that the Trust Company, as and to the
extent that such documents are executed by it, hereby represents and warrants
in its individual capacity that (x) it has the requisite corporate power and
authority to execute and deliver the Operative Documents to which it is a
party, (y) such Operative Documents have been, and the Mortgage Notes, upon
execution and delivery, will have been, duly executed and delivered by one or
more of the Authorized Officers of the Owner Trustee and (z) each of such
Operative Documents is a valid, binding and enforceable obligation of the Trust
Company.
SECTION 3.06. Property Alterations and Substitutions of the Indenture
Estate. (a) Upon the making of any Alterations title to which vests in the
Owner Trust, such Alterations shall be deemed to be a part of the Property and
covered by the Lien of this Indenture. Any part of the Improvements which are
demolished by the Company, and any Alterations the title to which becomes
vested in the Company as lessee, as permitted under the terms of the Lease,
shall be deemed to be no longer a part of the Property or covered by the Lien
of this Indenture.
(b) If the Company elects to substitute a new property for the Property
in accordance with and subject to the terms and conditions of [ARTICLE 41 OF
THE LEASE], the Property shall be released from the Lien of this Indenture upon
compliance with the provisions of said [ARTICLE 41] and Section 14.01 hereof.
30
<PAGE> 40
(c) The Owner Trust and Indenture Trustees covenant and agree, at the
Company's expense, to enter into such releases, supplements or amendments to
the Indenture as may be necessary or appropriate to effect the changes,
substitutions, releases and other modifications contemplated by this Section
3.06 or as may be required by Article XIV hereof, and to deliver such opinions,
instruments and certificates as may reasonably be requested in connection
therewith.
SECTION 3.07. Further Assurances; Financing Statements. At any time and
from time to time, upon the reasonable request of the Corporate Indenture
Trustee, the Owner Trust shall promptly and duly execute and deliver any and
all such further instruments and documents (provided to the Owner Trust in
execution form) as may be reasonably specified in such request and as are
necessary or desirable to perfect, preserve or protect the Liens and
assignments created or intended to be created hereby, or to obtain for the
Indenture Trustees the full benefit of the specific rights and powers granted
herein, including the execution and delivery of Uniform Commercial Code
financing statements and continuation statements with respect thereto, or
similar instruments relating to the perfection of the Liens or assignments
created or intended to be created hereby.
SECTION 3.08. Assumption of Obligations of Owner Trust by the Company.
(a) The Company shall have the right to assume all of the rights and
obligations of the Owner Trust under this Indenture in respect of the Mortgage
Notes in accordance with and pursuant to [ARTICLE[S] 39(E) Section __ OF THE
LEASE] [OR SECTION 3 OF THE PARTICIPATION AGREEMENT] (any date on which such
assumption is permitted being referred to hereinafter as the "Relevant Date"),
provided the Company shall have delivered to the Corporate Indenture Trustee,
on or prior to the Relevant Date, an opinion of independent legal counsel of
recognized standing to the effect that (i) the assumption will not constitute a
sale or exchange of the Mortgage Notes within the meaning of Internal Revenue
Code Section 1001 and the regulations thereunder, and (ii) the assumption will
not otherwise adversely affect the Federal income taxation of holders of Pass
Through Certificates and, if on or prior to the Relevant Date:
(i) the Company shall have delivered to the Owner Trust and the
Corporate Indenture Trustee a certificate, dated the Relevant Date, of a
Responsible Officer stating that the Company has paid to the Owner Trust
all amounts required to be paid to the Owner Trust pursuant to the Lease
or the Participation Agreement, as the case may be, in connection with
such assumption;
(ii) no Lease Event of Default or Material Default shall have
occurred and be continuing as of the proposed assumption and the
Corporate Indenture Trustee shall have received an Officer's Certificate,
dated the Relevant Date, from the Company to such effect;
31
<PAGE> 41
(iii) the Indenture Trustees and the Company shall have executed
and delivered to each other and to the Owner Trust a supplement to this
Indenture (which shall be in the form of [EXHIBIT ___ TO THE
PARTICIPATION AGREEMENT] except as otherwise provided in Section 3.08(b)
below) pursuant to which the Company shall assume all of the liabilities
and obligations of the Owner Trust hereunder on a full recourse basis
(i.e., without the protection of Section 2.05(a) or other similar
provisions hereof), and the Company shall have duly executed an
assumption of the Mortgage Notes (from and after the execution and
delivery of such supplement and such assumption (the "Assumption"), this
Indenture, as supplemented, shall be referred to as the "Company
Indenture" and the Mortgage Notes shall be referred to as the "Company
Mortgage Notes") and shall have delivered a copy of the Assumption to
each Holder of record of the Mortgage Notes on the Relevant Date;
(iv) the Owner Trust and Corporate Indenture Trustee shall have
received, on or prior to the Relevant Date, evidence of all filings,
recordings and other action referred to in the Opinion or Opinions of
Counsel referred to below; and
(v) the Owner Trust and Corporate Indenture Trustee shall have
received an Opinion or Opinions of Counsel for the Company, dated the
Relevant Date, and which shall be to the effect that, after giving effect
to the Company Indenture and the Company Mortgage Notes:
(A) each of the Company Indenture and the Company Mortgage
Notes constitute the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the rights of creditors generally and by general principles of
equity, and except as limited by applicable laws which may affect
the remedies provided for in the Company Indenture, which laws,
however, do not in the opinion of such counsel make the remedies
provided for in the Company Indenture inadequate for the
practicable realization of the rights and benefits provided for in
the Company Indenture; and
(B) unless the form of Company Indenture shall be as provided
in Section 3.08(b), the Lien on the Property created by this
Indenture will, upon effecting all filings, recordings and other
actions specified therein, continue on the Property under the
Company Indenture and that the priority of such Lien will not be
adversely affected thereby (provided, that in lieu of an opinion as
to the priority of the Lien there may be provided title insurance
to such effect);
then, automatically and without the requirement of further action by any
Person, effective as of the Relevant Date, the Owner Trust and the Owner
Trustees shall be released from all of their liabilities and obligations under
this Indenture in respect of the Mortgage
32
<PAGE> 42
Notes or otherwise hereunder (other than any obligations or liabilities of the
Owner Trustees in their individual capacities incurred on or prior to the
Relevant Date or arising out of or based upon events occurring on or prior to
the Relevant Date, which obligations and liabilities shall remain the sole
responsibility of the respective Owner Trustees in their individual
capacities). In such event, the Mortgage Notes so assumed by the Company shall
become Company Mortgage Notes and shall cease to be "Other Mortgage Notes" as
such term is used in any Other Indenture and this Indenture shall cease to be
an "Other Indenture" under any Other Indenture. The Owner Trust may request and
the Indenture Trustees shall provide documentary evidence (in form and
substance reasonably satisfactory to the Owner Trust and the Owner Participant)
confirming the release referred to in the second preceding sentence.
(b) Notwithstanding the provisions of Section 3.08(a)(iii) to the
contrary, if the Opinion of Counsel referred to in Section 3.08(a)(v) includes
opinions (which opinions shall also be delivered to the Owner Trust and the
Owner Participant) to the effect that, if the Company Mortgage Notes were
unsecured obligations of the Company and, in the case of clause (ii) below, the
exemption referred to in said clause (ii) were applicable with respect to the
Pass Through Trusts and the Pass Through Certificates immediately prior to the
assumption of the Mortgage Notes by the Company (it being agreed that such
exemption shall be assumed to be applicable unless such Opinion of Counsel
concludes to the contrary),
(i) neither of the Pass Through Trusts will be required to
register as an "investment company" under the Investment Company Act of
1940, as amended; and
(ii) the Prohibited Transaction Exemption 89-88 granted to
Goldman, Sachs & Co. by the United States Department of Labor (and any
amendment, modification, addition or successor to such exemption) with
respect to certain of the prohibited transaction restrictions of Section
406 of the Employee Retirement Income Security Act of 1974, as amended,
and of Section 4975 of the Internal Revenue Code of 1986, as amended,
will continue to be applicable with respect to the Pass Through Trusts
and the Pass Through Certificates even if the Company Mortgage Notes were
not secured by the lien of the Company Indenture on the Property;
then the supplement to the Indenture resulting in the Company Indenture shall
effect a restatement of the Indenture so that it contains essentially the same
terms and conditions (other than provisions relating particularly to the
amounts payable with respect to the Mortgage Notes, the manner of payment and
restrictions on transfer, which shall be the same as those included herein
except to the extent necessary to reflect the fact that the Mortgage Notes are
no longer secured by the Property) as that certain Indenture dated as of
February 1, 1985, by and between the Company and The Bank of New York, as
trustee, and the Lien on the Property will be released (upon compliance with
the
33
<PAGE> 43
applicable provisions of Section 14.01 hereof) and the Company Mortgage Notes
will be unsecured general obligations of the Company. In such instance and at
the request and expense of the Company, the Indenture Trustees will join in the
execution, delivery and recording of a separate supplement to this Indenture
for recording purposes which will reflect the release of the Lien on the
Property.
SECTION 3.09. No Merger. Except with the consent of the Holders of 100%
in principal amount of the Outstanding Mortgage Notes, the remainderman
interest, the estate for years interest and leasehold estate, shall not merge
but shall always be kept separate and distinct, notwithstanding the union of
said estates or any part thereof in the Owner Trust, the Company, the
Remainderman, or any other party, whether by purchase or otherwise; provided,
however, that if the Company purchases the remainderman interest and the estate
for years interest pursuant to the Lease or the Participation Agreement, such
estates shall merge.
ARTICLE IV
HOLDER LISTS
The Registrar shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Corporate Indenture Trustee (or its agent) is not the
Registrar, the Owner Trust shall cause the Registrar to furnish to the
Corporate Indenture Trustee semi-annually not more than 15 days after each
Record Date, as of such Record Date, or at such other times as the Corporate
Indenture Trustee may request in writing, a list, in such form and as of such
date as the Corporate Indenture Trustee may reasonably require, containing all
the information in the possession or control of the Registrar as to the names
and addresses of the Holders and the amounts and Maturity Date of the Mortgage
Notes held by such Holders.
ARTICLE V
RECEIPT, DISTRIBUTION AND APPLICATION OF
INCOME FROM THE INDENTURE ESTATE
SECTION 5.01. Basic Rent Distribution. (a) Except as otherwise provided
in Section 5.03 hereof, each installment of Basic Rent and any payment of
interest on overdue installments of Basic Rent (each of which shall be deemed
paid upon receipt by the Corporate Indenture Trustee pursuant to Section 3.01),
and any payment received by the Indenture Trustees pursuant to Section 8.03(a)
hereof in respect of Basic Rent or
34
<PAGE> 44
interest on overdue installments of Basic Rent shall be promptly distributed by
the Corporate Indenture Trustee in the following order of priority:
first, so much of such installment or payment as shall be required
to pay in full the aggregate amount of the payment or payments of
principal, premium (if any), interest and other amounts (as well as any
interest on overdue principal and premium) then due under all the
Mortgage Notes shall be distributed to the Holders ratably, without
priority of one over the other, in the proportion that the amount of such
payment or payments then due under each such Mortgage Note bears to the
aggregate amount of the payments then due under all such Mortgage Notes,
and
second, the balance, if any, of such installment or payment
remaining thereafter shall be distributed to the Owner Trust, or as the
Owner Trust may request.
(b) Subject to Section 5.03, if, at the time of receipt by the
Indenture Trustee of an installment of Basic Rent (whether or not then
overdue), there shall have occurred and be continuing an Indenture Event of
Default, then the Corporate Indenture Trustee shall retain such payment (to the
extent the Corporate Indenture Trustee is not then required to distribute such
amount pursuant to clause "first" of Section 5.01(a)) as part of the Indenture
Estate and shall not distribute any such payment pursuant to clause "second" of
Section 5.01(a) until the earliest of (i) the first Business Day occurring more
than 180 days following (A) in the case of an Indenture Event of Default under
Section 7.01(b), the date of the occurrence of such Indenture Event of Default
and (B) in the case of any other Indenture Event of Default, the date on which
the Indenture Trustee shall have received notice of such Indenture Event of
Default, whereupon such payment shall be distributed pursuant to clause
"second" of Section 5.01(a) and no further withholding of Rent on account of
such Indenture Event of Default shall be effected, (ii) such time as the
Mortgage Notes shall have been declared, or shall have become, due and payable
pursuant to Section 7.02(a), in which case such payment shall be distributed
pursuant to Section 5.03 and (iii) such time as such Indenture Event of Default
shall no longer be continuing, in which case such payment shall be distributed
pursuant to clause "second" of Section 5.01(a).
SECTION 5.02. Event of Loss and Replacement; Redemption. (a) Except as
otherwise provided in Section 5.03 hereof, any payment (other than Excepted
Rights and Payments) received by the Indenture Trustees from payments in
respect of Additional Rent payable under [ARTICLE 40 OF THE LEASE] or as the
result of redemption of the Mortgage Notes pursuant to Section 6.02 (other than
Section 6.02(c)) hereof, shall be distributed by the Corporate Indenture
Trustee in the following order of priority:
first, so much of such payments or amounts as shall be required to
pay in full the aggregate unpaid principal amount of the Mortgage Notes
then due and payable, all accrued but unpaid interest thereon to the
Redemption Date therefor, and all other
35
<PAGE> 45
amounts due thereunder whether by acceleration or otherwise (other than
premium or interest thereon), shall be distributed to the Holders, and if
the aggregate amount so to be distributed shall be insufficient to pay
all such amounts in full as aforesaid, then such amount shall be
distributed ratably, without priority of one over the other, in the
proportion that the aggregate unpaid principal amount of all Mortgage
Notes then due and payable held by each such Holder, the accrued but
unpaid interest thereon to the Redemption Date therefor and all other
amounts due thereunder, bears to the aggregate unpaid principal amount of
all Outstanding Mortgage Notes, the accrued but unpaid interest thereon
to the Redemption Date therefor and all other amounts due thereunder
(other than premium or interest thereon); and
second, as provided in clause "third" of Section 5.03 hereof;
(b) Any payments received in respect of the [equity portion of Basic
Rent and of Termination Value, when the debt is assumed directly] pursuant to
[ARTICLE 39(e) OF THE LEASE] or [SECTION 3 OF THE PARTICIPATION AGREEMENT]
shall be distributed by the Corporate Indenture Trustee in the manner provided
in clause "third" of Section 5.03 hereof.
SECTION 5.03. Payment After Indenture Event of Default, Etc. Except as
otherwise provided in Section 5.04(b) hereof, all payments received and all
amounts held or realized by the Indenture Trustees (including amounts of excess
moneys referred to in Section 7.04(e)) (i) after (x) an Indenture Event of
Default shall have occurred and so long as such an Indenture Event of Default
shall be continuing, and (y) the Indenture Trustees have initiated action under
Section 7.02(a), or (ii) after the Mortgage Notes shall have become due and
payable as provided in Section 7.02(b) or (c) hereof, shall be promptly
distributed by the Corporate Indenture Trustee in the following order of
priority:
first, so much of such payments or amounts as shall be required to
reimburse the Indenture Trustees for any tax (other than income tax on,
or measured by, fees payable to the Indenture Trustees in their
individual capacities pursuant to any Indenture Document), expense,
charge or other loss (including all amounts to be expended at the expense
of, or charged upon the tolls, rents, issues, profits, products, revenues
and other income of the Indenture Estate pursuant to Section 7.03(a)
hereof) incurred by the Indenture Trustees in the protection, exercise or
enforcement of any right, power or remedy under this Indenture for the
benefit of the Holders (to the extent not previously reimbursed),
including the reasonable expenses of any sale, taking or other
proceeding, reasonable attorneys' fees and expenses, court costs, and any
other reasonable expenditures incurred or reasonable expenditures or
advances made by the Indenture Trustees under this Indenture or any
damages sustained by the Indenture Trustees in connection therewith, upon
such Indenture Event of
36
<PAGE> 46
Default, shall be applied by the Indenture Trustees in reimbursement of
such expenses and payment of such fees;
second, so much of such payments or amounts remaining as shall be
required to pay in full the aggregate unpaid principal amount of the
Mortgage Notes then due and payable, all accrued but unpaid interest
thereon to the date of distribution and all other amounts due thereunder
(including any premium, if any), whether by acceleration or otherwise,
shall be distributed to the Holders, and if the aggregate amount so to be
distributed shall be insufficient to pay all such amounts in full as
aforesaid, then such amount shall be distributed ratably, without
priority of one over the other, in the proportion that the aggregate
unpaid principal amount of all Outstanding Mortgage Notes then due and
payable held by each such Holder, the accrued but unpaid interest thereon
to the date of distribution and all other amounts due thereunder, bears
to the aggregate unpaid principal amount of all Outstanding Mortgage
Notes, accrued but unpaid interest thereon to the date of distribution
and all other amounts due thereunder; and
third, the balance, if any, of such payments or amounts remaining
shall be distributed to the Owner Trust for distribution pursuant to the
Trust Agreement.
SECTION 5.04. Certain Payments. (a) Except as otherwise provided in
this Indenture, any payments received by the Indenture Trustees which are to be
applied according to any provision in any other Indenture Document shall be
applied thereunder in accordance therewith.
(b) Notwithstanding anything herein to the contrary, the Corporate
Indenture Trustee will distribute, promptly upon receipt by the Indenture
Trustees, any Excepted Rights and Payments and any indemnity or other payment
received by them from the Owner Trust or the Company pursuant to Article 6 of
the Lease and Sections 22 and 23 of the Participation Agreement or as
Additional Rent, directly to the Person (which may include the Owner
Participant, the Owner Trustees or the Indenture Trustees in their individual
capacities) entitled thereto.
SECTION 5.05. Other Payments. Any payments received by the Indenture
Trustees for which no provision as to the application thereof is made elsewhere
in this Indenture or in any other Indenture Document shall be distributed by
the Corporate Indenture Trustee (a) except as otherwise provided in Section
5.03, to the extent received or realized at any time prior to the payment in
full of all obligations to the Holders, in the order of priority specified in
Section 5.01 hereof, and (b) to the extent received or realized at any time
after payment in full of all obligations to the Holders, in the manner provided
in clause "third" of Section 5.03 hereof.
37
<PAGE> 47
SECTION 5.06. Payments to Owner Trust. Any amounts distributed
hereunder by the Corporate Indenture Trustee to the Owner Trust shall be paid
to the Owner Trust by wire transfer of immediately available funds at [OWNER
TRUST WIRE INSTRUCTIONS] or at such office and to such account or accounts of
such entity or entities as shall be designated by notice from the Owner Trust
to the Corporate Indenture Trustee from time to time.
SECTION 5.07. Application of Payments. Each payment made in respect of
the Mortgage Notes (exclusive of premium) shall, except as otherwise provided
herein, be applied, first, to the payment of interest on such Mortgage Note due
and payable to the date of such payment, as provided in such Mortgage Note, as
well as any interest on overdue principal due thereunder, second, to the
payment of any other amount (other than the principal of such Mortgage Note)
due hereunder to the Holder of such Mortgage Note or under such Mortgage Note,
third, to the payment of the principal of such Mortgage Note if then due
hereunder or under such Mortgage Note, and fourth, the balance, if any,
remaining thereafter, to the payment of the principal of such Mortgage Note
remaining unpaid (provided that such Mortgage Note shall not be subject to
prepayment without the consent of the affected Holder except as permitted by
Sections 6.02, 6.06 and 8.02 hereof). Any amounts received in respect of the
Make-Whole Premium (including interest on overdue payments thereof) shall be
applied only to the obligation to pay the Make-Whole Premium (and interest on
overdue payments thereof) as provided hereunder, and if the aggregate amount so
to be distributed shall be insufficient to pay all premium due and payable in
full, then such amount shall be distributed ratably, without priority of one
over the other, in the proportion that the aggregate unpaid premium of all
Mortgage Notes then due and payable held by each such Holder bears to the
aggregate unpaid premium of all Outstanding Mortgage Notes then due thereunder.
SECTION 5.08. Investment of Amounts Held by Indenture Trustees. Amounts
held by the Indenture Trustees pursuant to Section 5.01 hereof, pursuant to
Section 5.02 hereof or pursuant to any provision of any Indenture Document
providing for investment of sums pursuant to this Section 5.08 shall be
invested by the Corporate Indenture Trustee from time to time in Permitted
Investments selected by or on behalf of the Owner Trust. In the event that the
Owner Trust shall not select Permitted Investments, such Permitted Investments
shall be selected by the Corporate Indenture Trustee from those described in
clause (i) of the definition of Permitted Investments. Unless otherwise
expressly provided in this Indenture, any income realized as a result of any
such investment, net of the Corporate Indenture Trustee's reasonable fees and
expenses in making such investment, shall be held as a part of the Indenture
Estate and applied by the Corporate Indenture Trustee in the same manner as the
principal amount of such investment is to be applied and any losses, net of
earnings and such reasonable fees and expenses, shall be charged against the
principal amount invested. The Corporate Indenture Trustee shall not be liable
for any loss resulting from any investment made by
38
<PAGE> 48
it other than by reason of its willful misconduct or gross negligence, and any
such investment may be sold (without regard to its maturity) by the Corporate
Indenture Trustee without instructions whenever the Corporate Indenture Trustee
reasonably believes such sale is necessary to make a distribution required by
this Indenture.
SECTION 5.09. Withholding Taxes. The Corporate Indenture Trustee shall
withhold any taxes required to be withheld under applicable law, regulation or
rule, including any interest or penalty in connection therewith, on payments to
any Holder except to the extent that such Holder has furnished evidence
satisfactory to the Corporate Indenture Trustee of any exemption from or
reduction in withholding claimed by such Holder and such withholding on
payments shall constitute a payment to the Holder. In the event that such
evidence furnished by such Holder to establish its withholding exemption is
false, inaccurate or no longer true, the Holder shall be liable for such
amounts necessary to indemnify the Corporate Indenture Trustee, for expenses
attributable to such false, inaccurate or untrue evidence and any related
contests or disputes, and the same may be withheld from distributions otherwise
distributable to such Holder and any such withholding on payments shall
constitute a payment to the Holder. To the extent that the Corporate Indenture
Trustee fails, with respect to any Holder, to withhold and pay over any such
taxes to the appropriate taxing authority, the Corporate Indenture Trustee
shall, upon a claim being made for such taxes by such authority, take all
reasonable steps to recover such taxes from such Holder, including withholding
the amount of such taxes from subsequent distributions, if any, to such Holder.
Neither the Owner Trustee nor the Owner Participant shall have any liability
for the failure of the Corporate Indenture Trustee to withhold taxes in the
manner provided for herein or for any false, inaccurate or untrue evidence
provided by a Holder hereunder.
The Corporate Indenture Trustee agrees (i) that it will timely pay the
amounts withheld pursuant to this Section 5.09 to the appropriate authority,
(ii) that it will file any necessary withholding tax returns or statements when
due and (iii) that, as promptly as possible after the payment of such amounts,
it will deliver to the Owner Trust and the Company appropriate documentation
showing the payment of such amounts, together with such additional documentary
evidence as the Owner Trust or the Company may reasonably request from time to
time. The Corporate Indenture Trustee agrees to file any other information
reports as it may be required to file under United States law.
ARTICLE VI
REDEMPTION OF MORTGAGE NOTES
SECTION 6.01. No Redemption or Prepayment Prior to Maturity. Except as
provided in Sections 6.02 and 8.02 hereof, the Mortgage Notes may not be
redeemed or prepaid prior to their respective Maturity Dates.
39
<PAGE> 49
SECTION 6.02. Redemption of Mortgage Notes. The Outstanding Mortgage
Notes shall be redeemed:
(a) At the Redemption Price, without premium:
(1) in whole, in connection with the occurrence of a substantial
or total casualty at the Property and the Company's resultant delivery
under [ARTICLE 14(f) OF THE LEASE] of a Tenant's Purchase Offer in
accordance with [ARTICLE 40 OF THE LEASE], unless the Company exercises
its right to substitute another property in lieu of the Property in
accordance with [ARTICLE 41 OF THE LEASE], in which case, the terms of
Sections 3.06 and 14.01 hereof shall govern;
(2) in whole, in connection with the occurrence of a Condemnation
described in the first sentence of [ARTICLE 15(a) OF THE LEASE] and the
Company's resultant delivery under [SAID ARTICLE 15(a)] of a Tenant's
Purchase Offer in accordance with [ARTICLE 40 OF THE LEASE], unless the
Company exercises its right to substitute another property in lieu of the
Property in accordance with [ARTICLE 41 OF THE LEASE], in which case, the
terms of Sections 3.06 and 14.01 hereof shall govern;
(3) in whole or in part, to the extent of the amount actually to
be disbursed to the Owner Trust pursuant to [ARTICLE 16(c) OF THE LEASE]
in connection with the occurrence of damage or destruction of the
Property; or
(4) in whole or in part, to the extent of the "excess proceeds"
described in [THE FOURTH SENTENCE OF ARTICLE 15(d) OF THE LEASE] arising
as a result of a Condemnation.
In the case of any partial redemption pursuant to this Section 6.02(a), (i)
each Outstanding Mortgage Note shall be redeemed ratably, without priority of
one over the other, in the proportion that the aggregate unpaid principal
amount of the Mortgage Notes held by each Holder bears to the aggregate unpaid
principal amount of all Outstanding Mortgage Notes, and (ii) each subsequent
Installment Payment Amount payable in respect of any such Mortgage Note shall,
effective as of the Installment Payment Date immediately following the
Redemption Date, be reduced (but not below zero) by the percentage that the
principal portion of the Redemption Price bears to the total aggregate unpaid
principal amount of such Mortgage Note immediately before such redemption.
(b) Other than as provided elsewhere in this Section 6.02, in whole, if
the Owner Trust, with the consent of the Company (as evidenced by an Officer's
Certificate), gives notice of redemption to the Indenture Trustees, at the
Redemption Price which shall include the applicable Make-Whole Premium.
40
<PAGE> 50
(c) In whole, if the Owner Trust, at the direction of the Owner
Participant at any time gives notice of redemption to the Indenture Trustees
pursuant and subject to Section 8.02(a) hereof, at a price equal to the
Redemption Price, which shall include the Make-Whole Premium in the
circumstances expressly providing for the Make-Whole Premium in Section
8.02(b), and otherwise without premium.
(d) In whole or in part, with the consent of the Company (as evidenced
by an Officer's Certificate), if the Owner Trust gives at least 25 days' prior
irrevocable notice to the Indenture Trustees specifying the Mortgage Notes and
all Other Mortgage Notes having the Maturity Date to be redeemed (which shall
be the Mortgage Notes and Other Mortgage Notes having the same Maturity Date)
and provided all Outstanding Mortgage Notes, Other Mortgage Notes, Company
Mortgage Notes and other notes then held in the same Pass Through Trust,
whether or not issued by the Owner Trust, are simultaneously being redeemed, at
the Redemption Price, which shall include the applicable Make-Whole Premium.
(e) In whole, at the Redemption Price, which shall include the
applicable Make-Whole Premium, (i) in connection with the Company's exercise of
its termination right pursuant to [ARTICLE 39 OF THE LEASE], unless the Company
elects to assume the Mortgage Notes pursuant to [ARTICLE 39(e)] OF THE LEASE]
and Section 3.08 hereof or to substitute a property in lieu of the Property or
(ii) in connection with a sale pursuant to Section 3 of the Participation
Agreement, unless the Company elects to assume the Mortgage Notes pursuant to
Section 3 of the Participation Agreement and Section 3.08 hereof. The
Redemption Date for the redemption of Mortgage Notes pursuant to this Section
shall be the date determined in accordance with Section 6.03 hereof.
SECTION 6.03. Redemption; Notice to Corporate Indenture Trustee. In
case of any redemption of Mortgage Notes, the Owner Trust shall, at least 45
days prior to the Redemption Date, notify the Corporate Indenture Trustee and
the Registrar by an Officer's Order of (1) such Redemption Date (subject, to
the extent applicable, to Section 8.02(a)), (2) the principal amount of
Mortgage Notes to be redeemed, and (3) the basis upon which, pursuant to this
Indenture, such principal amount and Make-Whole Premium, if any, has been or
will be computed and an estimate of the amount of the Make-Whole Premium. Any
notice delivered to the Corporate Indenture Trustee which, under the terms of
the Lease is characterized as a Redemption Notice, shall be considered to be a
notice of redemption hereunder. The notice of redemption shall be revocable if
it is given more than 45 days prior to the Redemption Date, but it shall state
a date on which it shall be irrevocable (which shall not be less than 25 days
prior to the Redemption Date). If not otherwise provided and not previously
revoked, any redemption notice shall become irrevocable on the 25th day prior
to the Redemption Date stated therein. The Redemption Date shall be any
Distribution Date occurring not less than 25 days after the giving of such
notice. Any delivery by the Company of a Tenant's Purchase Offer under [ARTICLE
14(f) OR ARTICLE 15(a) OF THE LEASE] or a Notice of
41
<PAGE> 51
Termination under [ARTICLE 39(a) OF THE LEASE] (unless accompanied with a
notice by the Company that it will assume the Mortgage Notes in accordance with
[ARTICLE 39(e) OF THE LEASE] and Section 3.08 hereof) shall automatically
constitute the Owner Trust's Officer's Order under this Section 6.03, subject
to revocation as provided in this Section 6.03 (which revocation shall
automatically be deemed made upon the Owner Trust's notice and deposit of funds
under Section 6.06 hereof if such notice is given and deposit made prior to the
date that the Company notice shall have become irrevocable, in which case the
Owner Trust's notice under Section 6.06 shall constitute the notice of
redemption under this Section 6.03). Any other notice by the Owner Trust under
Section 6.06 shall automatically constitute a notice of redemption under this
Section 6.03, as long as the deposit due under said Section 6.06 shall have
been timely made. Further, any notice of redemption pursuant to Section 6.02(b)
or (d) that shall not be effective unless, concurrently with such notice, the
Owner Trust shall deposit with the Corporate Indenture Trustee an amount
sufficient to pay the Redemption Price together with the Make-Whole Premium.
SECTION 6.04. Mortgage Notes Redeemed in Part. For all purposes of this
Indenture, unless the context otherwise requires, all provisions relating to
the redemption of Mortgage Notes shall relate, in the case of any Mortgage Note
redeemed or to be redeemed only in part, to the portion of the principal of
such Mortgage Note which has been or is to be redeemed. Any Mortgage Note which
is to be redeemed only in part shall be so redeemed by the payment to the
Holder (without the necessity of presentation or surrender on the part of the
Holder) of the amount necessary to effect such redemption in accordance with
this Article VI and the Corporate Indenture Trustee shall note on its records
the fact of such payment and the amount of the principal amount of, and of each
remaining Installment Payment Amount of, said Mortgage Note remaining unpaid
after such payment. Such notification, in the absence of manifest error, shall
be conclusive evidence of the amount of such payment and the remaining unpaid
principal amount of, and of each remaining Installment Payment Amount of, such
Mortgage Note and shall be binding upon the Holder and all subsequent Holders
of any Mortgage Note issued upon registration of a transfer thereof or in
exchange therefor.
SECTION 6.05. Notice of Redemption to Holders. (a) Notice of
redemption shall be given by the Corporate Indenture Trustee by first-class
mail, postage prepaid, mailed not less than 20 nor more than 30 days prior to
the Redemption Date to each Holder of Mortgage Notes to be redeemed, at the
Holder's address appearing in the Register (unless, in the case of Mortgage
Notes held by a Pass Through Trustee, a different method shall be acceptable to
the Holder). No such notice shall be given until such time as the redemption
notice given or deemed given by the Owner Trust, or by the Company, as lessee
under the Lease, on behalf of the Owner Trust, shall have become irrevocable.
42
<PAGE> 52
All notices of redemption to Holders shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Mortgage Notes are to be
redeemed, the principal amount of the particular Mortgage Notes to be
redeemed,
(4) that on the Redemption Date the Redemption Price will become
due and payable upon each such Mortgage Note (or the portion thereof to
be redeemed), and that interest thereon (or on the portion thereof to be
redeemed) shall cease to accrue on and after said date (unless the
Redemption Price shall not be paid as required hereunder), and
(5) in the case of a redemption in whole of a Mortgage Note, the
place or places where such Mortgage Note is to be surrendered for payment
of the Redemption Price.
SECTION 6.06. Right to Reject Tenant's Purchase Offer or Notice of
Termination. If the Owner Trust desires (i) to reject Tenant's Purchase Offer
made under [ARTICLE 14(f) OR ARTICLE 15(a) OF THE LEASE], or (ii) to decline
the Company's Notice of Termination issued pursuant to [ARTICLE 39 OF THE
LEASE], then if the Owner Trust so notifies the Corporate Indenture Trustee and
deposits with the Corporate Indenture Trustee, contemporaneously with the
giving of such notice, an amount sufficient to pay the Redemption Price,
without premium, of the Mortgage Notes to be redeemed under Section 6.02(a) or
Section 6.02(e) hereof, as the case may be, the Corporate Indenture Trustee
shall give, promptly on receipt of the amount referred to above but in no event
more than five days thereafter, the written confirmation for the benefit of the
Company necessary for the Owner Trust to take any such action under the Lease.
The Owner Trust shall have no right to take the actions described in any of
clauses (i) and (ii) above, except as provided above in this Section 6.06, or
any other action that would result in the termination of the Lease.
SECTION 6.07. Mortgage Notes Payable on Redemption Date. On the
Redemption Date, the Outstanding Mortgage Notes (or the portion thereof) to be
redeemed shall become due and payable, and from and after such Redemption Date
(unless there shall be a default in the payment of the Redemption Price) such
Mortgage Notes (or the portion thereof to be redeemed) shall cease to bear
interest. On the Redemption Date (or upon surrender of the Mortgage Note if it
is to be redeemed in whole) such Mortgage Note (or the portion thereof to be
redeemed) shall be paid at the Redemption Price.
43
<PAGE> 53
If any Mortgage Note (or portion thereof) called for redemption shall not
be so paid on the Redemption Date (or upon surrender thereof for redemption if
it is to be redeemed in whole), the principal amount to be redeemed shall,
until deposited with the Corporate Indenture Trustee, continue to bear interest
from the Redemption Date at the interest rate applicable to such Mortgage Note.
ARTICLE VII
REMEDIES OF INDENTURE TRUSTEES
AND HOLDERS
SECTION 7.01. Indenture Event of Default. "Indenture Event of Default"
means any of the following events (whatever the reason for such Indenture Event
of Default and whether such event shall be voluntary or involuntary or come
about or be effected by operation of law or pursuant to or in compliance with
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(a) any Lease Event of Default (other than a Lease Event of
Default relating solely to Excepted Rights and Payments) shall have
occurred and be continuing; or
(b) the failure of the Owner Trust other than by reason of a Lease
Default or Lease Event of Default to pay when due any payment of
principal of or premium, if any, or interest on any Mortgage Note within
five days after notice to the Owner Trust that such payment is due; or
(c) any representation or warranty made by the Owner Participant,
the Trust Company, William J. Wade or the Owner Trust herein or in the
Participation Agreement (only to the extent that such document relates to
the Property, unless the context requires otherwise) or any other
Indenture Document or in any document or certificate furnished to the
Indenture Trustees in connection herewith or pursuant hereto shall prove
to have been false or incorrect when made in any respect material to the
Holders, and such falseness or incorrectness is material to such Holders,
and continues to be material and if capable of remedy, is not remedied
for 30 days (or such longer period (but in no event more than 60 days) if
such falseness or incorrectness is susceptible of being remedied within a
reasonable period of time (but not within such 30-day period) and if
within such 30-day period the Owner Trust, the Trust Company, William J.
Wade or the Owner Participant, as applicable, promptly commences, and
thereafter prosecutes with diligence and good faith to completion,
efforts to effect such remedy) after there has been given to the Owner
Trust, by registered or certified mail, a written notice specifying such
44
<PAGE> 54
breach and requiring it to be remedied and stating that such notice is a
"Notice of Indenture Default" hereunder, by the Corporate Indenture
Trustee or to the Owner Trust and the Corporate Indenture Trustee by the
Holders of not less than a majority in aggregate unpaid principal amount
of Outstanding Mortgage Notes; or
(d) any termination or revocation of the Trust Agreement; or
(e) any failure by the Owner Trustees (other than by reason of a
Lease Default or a Lease Event of Default), in their individual
capacities or on behalf of the Owner Trust, to observe or perform in any
material respect any other material covenant or obligation of the Owner
Trustees, individually, or the Owner Trust contained in this Indenture or
any failure by the Owner Participant to observe or perform in any
material respect any other material covenant or obligation of the Owner
Participant contained in the Participation Agreement (only to the extent
that such document relates to the Property, unless the context requires
otherwise) which, in either case, has a material adverse effect on the
Holders and is not remedied within a period of 30 days (or such longer
period (but in no event more than 180 days) if such failure is
susceptible of being remedied within a reasonable period of time (but not
within such 30-day period) and if within such 30-day period the Owner
Trust or the Owner Participant, as applicable, promptly commences and
thereafter prosecutes with diligence and good faith to completion efforts
to effect such remedy) after there has been given to the Owner Trust by
registered or certified mail, a written notice specifying such breach and
requiring it to be remedied and stating that such notice is a "Notice of
Indenture Default" hereunder, by the Corporate Indenture Trustee or to
the Owner Trust and the Corporate Indenture Trustee by the Holders of not
less than a majority in aggregate unpaid principal amount of Outstanding
Mortgage Notes; or
(f) if the Owner Trust shall file a petition in bankruptcy or for
reorganization or for an arrangement pursuant to any federal or state
bankruptcy law or any similar federal or state law, or shall be
adjudicated a bankrupt or become insolvent or shall make an assignment
for the benefit of creditors or shall admit in writing its inability to
pay its debts generally as they become due; or
(g) if a petition or answer proposing the adjudication of the
Owner Trust as a bankrupt or its reorganization pursuant to any federal
or state bankruptcy law or any similar federal or state law shall be
filed in any court and the Owner Trust shall consent to or acquiesce in
the filing thereof or such petition or answer shall not be discharged or
denied within 90 days after the filing thereof.
45
<PAGE> 55
SECTION 7.02. Remedies; Acceleration of Maturity; Rescission. (a) If
an Indenture Event of Default shall have occurred and be continuing and so long
as the same shall be continuing unremedied, then and in every such case, after
the Mortgage Notes shall have become due and payable under Section 7.02(b) or
7.02(c), the Indenture Trustees may, and when required by the provisions of
Article IX hereof shall, exercise (subject to the provisions hereof expressly
restricting the Indenture Trustees' rights or remedies herein, including
Sections 8.02 and 8.03), any or all of the rights and powers and pursue any or
all of the remedies with respect to any or all of the Indenture Estate accorded
to the Owner Trust in [ARTICLE 21 OF THE LEASE], if a Lease Event of Default
shall have occurred and be continuing, and may, subject to the terms of the
Lease, take possession of all or any part of the Indenture Estate subject to
the Lien hereof or pursuant hereto and may exclude the Owner Trust and, subject
to the terms of the Lease, the Company and all persons claiming by, through or
under any of them wholly or partly therefrom, and (subject to the provisions
hereof expressly restricting the Indenture Trustees' rights or remedies herein)
the Indenture Trustees may exercise any other right or remedy in lieu of or in
addition to the foregoing which may be available to them hereunder or under
applicable law or proceed by appropriate court action to enforce the terms
hereof, of the Lease or both, to recover damages for the breach hereof, of the
Lease or both; provided, however, that the foregoing shall not be construed as
modifying the parties' agreement that the Lien hereof shall be subordinate to
the leasehold estate of the Lessee under the Lease; provided further, however,
that notwithstanding any provision herein to the contrary, the Indenture
Trustees shall not sell any of the Indenture Estate unless a declaration of
acceleration has been made pursuant to Section 7.02(c) or the Mortgage Notes
have become due and payable pursuant to Section 7.02(b). Notwithstanding the
foregoing or any other provision herein, the Indenture Trustees shall not be
entitled to exercise any remedy hereunder as a result of an Indenture Event of
Default occurring solely by reason of one or more Lease Events of Default
unless the Corporate Indenture Trustee shall be concurrently taking action
under [ARTICLE 21 OF THE LEASE] to terminate the Lease or dispossess the
Company or otherwise seeking to effect a comparable remedy.
(b) If an Indenture Event of Default referred to in paragraph (f) or (g)
of Section 7.01 hereof shall have occurred, or if a Lease Event of Default
referred to in Article 20(v) of the Lease shall have occurred and be continuing
at such time as the Indenture Trustees are still constrained from terminating
the Lease or the Company's right to possession, then and in every such case the
unpaid principal of all Outstanding Mortgage Notes, together with interest
accrued but unpaid thereon, and all other amounts due thereunder and hereunder
shall immediately and without further act become due and payable, without
premium or penalty, and without presentment, demand, protest or notice, all of
which are hereby waived.
(c) If any Indenture Event of Default or Lease Event of Default not
described in the preceding paragraph (b) shall have occurred and be continuing,
then and in every such
46
<PAGE> 56
case, the Corporate Indenture Trustee may on its own accord or at the direction
of Holders of not less than a majority in aggregate unpaid principal amount of
Outstanding Mortgage Notes at any time (but subject to the provisions hereof
expressly restricting the Indenture Trustees' rights or remedies herein
including Sections 8.02 and 8.03), by written notice or notices to the Owner
Trust and the Company, declare the principal of all the Mortgage Notes to be
due and payable, whereupon the unpaid principal of all Outstanding Mortgage
Notes, together with accrued but unpaid interest thereon, and all other amounts
due thereunder, shall immediately become due and payable without premium or
penalty, and without presentment, demand, protest or other notice, all of which
are hereby waived. At any time after such declaration and prior to the sale or
disposition of the Indenture Estate, however, the Holders of not less than a
majority in aggregate unpaid principal amount of Outstanding Mortgage Notes, by
notice to the Corporate Indenture Trustees and the Owner Trust, may rescind
such declaration, whether made by the Corporate Indenture Trustee on its own
accord or as directed, if (x) there has been paid or deposited with the
Corporate Indenture Trustee a sum sufficient to pay all overdue installments of
interest on all Mortgage Notes and premium, if any, due otherwise than by
virtue of such declaration of acceleration, principal on any Mortgage Notes
that have become due otherwise than by such declaration of acceleration, all
sums paid or advanced by the Indenture Trustees hereunder and the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustees,
their agents and counsel, (y) the rescission would not conflict with any
judgment or decree and (z) all other Indenture Defaults and Indenture Events of
Default (other than the nonpayment of principal that has become due solely
because of such acceleration) have been either cured (or will be cured as a
result thereof, or with regard to an Indenture Default or Lease Default, are
being cured in accordance with the applicable provisions hereof or of the
Lease) or waived. No such rescission shall affect any subsequent default or
impair any right consequent thereon.
SECTION 7.03. Exercise of Remedies, and Suits for Enforcement, by
Indenture Trustees; Owner Trust's Right to Redeem the Mortgage Notes. (a) At
any sale of any or all of the Indenture Estate pursuant to the exercise by the
Indenture Trustees of any of the remedies afforded by this Article, the
Indenture Trustees, the Owner Trust, the Owner Participant and the Company may
bid for and purchase such property. To the extent permitted by applicable law,
the Owner Trust hereby waives any rights now or hereafter conferred by statute
or otherwise by applicable law which may require the Indenture Trustees to
sell, lease or otherwise use any portion of the Indenture Estate in mitigation
of the damages as set forth in this Section or which may otherwise limit or
modify any of the Indenture Trustees' or Holders' rights or remedies under this
Section.
Whenever, prior to any sale of the Indenture Estate, or any part thereof,
all arrears of interest upon the Mortgage Notes, together with all sums paid or
advanced by the Indenture Trustees under any provision hereof and the
reasonable and proper charges, expenses and liabilities of the Indenture
Trustees, their agents and counsel, and all other
47
<PAGE> 57
sums then payable by the Owner Trust hereunder, including the outstanding
principal of, together with all other accrued unpaid interest, if any, on the
Mortgage Notes which shall then be due and payable (otherwise than upon
declaration of acceleration pursuant to Section 7.02(c) hereof), shall be paid
by or for the account of the Owner Trust and/or collected out of the Indenture
Estate or provision satisfactory to the Indenture Trustees shall be made for
such payment, and all Indenture Defaults and Indenture Events of Default shall
be cured or waived, then, so long as no declaration of acceleration has been
made pursuant to Section 7.02(c) hereof or, if such a declaration has been
made, upon rescission and annulment thereof pursuant to Section 7.02(c) hereof,
the Indenture Trustees shall surrender to the Owner Trust, its successors or
assigns, possession of the Indenture Estate (subject to the Lien of this
Indenture) and shall pay over at the direction of the Owner Trust to the Person
specified in such direction the amount of any tolls, rents, issues, profits,
products, revenues and other income of the Indenture Estate arising from the
exercise of any remedies by the Indenture Trustees hereunder then remaining
unexpended in the hands of the Indenture Trustees and thereupon the Owner Trust
and the Indenture Trustees shall be restored to their former positions and
rights hereunder in respect of the Indenture Estate, but no such surrender
shall extend to or affect any subsequent Indenture Default or Indenture Event
of Default or impair any right consequent thereon. Upon every taking of
possession of any portion of the Indenture Estate pursuant to this Article, the
Indenture Trustees may, from time to time, at the expense of the Indenture
Estate, make all such expenditures for maintenance, insurance, repairs,
replacements, alterations, additions and improvements to and of the Indenture
Estate, as they may deem proper. In each such case, subject to the terms of the
Lease, the Indenture Trustees shall have the right to use, operate, lease,
control or manage the Indenture Estate, and to exercise all rights and powers
of the Owner Trust relating to the Indenture Estate, as the Indenture Trustees
shall deem appropriate, including the right to enter into any and all such
agreements with respect to the use, operation, leasing, control or management
of the Indenture Estate or any part thereof, as the Indenture Trustees may
determine; and the Indenture Trustees shall be entitled to collect and receive
directly all tolls, rents (including Basic Rent), issues, profits, products,
revenues and other income of the Indenture Estate and every part thereof,
without prejudice, however, to the right of the Indenture Trustees under any
provision of this Indenture to collect and receive all cash held by, or
required to be deposited with, the Indenture Trustees hereunder. In accordance
with the terms of Section 5.03 hereof, such tolls, rents, issues, profits,
products, revenues and other income shall be applied to pay the expenses of
using, operating, leasing, controlling or managing the Indenture Estate, and of
all maintenance, insurance, repairs, replacements, alterations, additions and
improvements, and to make all payments which the Indenture Trustees may be
required or may elect to make, if any, for taxes, assessments, insurance or
other proper charges upon the Indenture Estate or any part thereof (including
the employment of appraisers, engineers and accountants in accordance with
Section 9.04(g) hereof), and all other payments which the Indenture Trustees
may be required or authorized to make under any provision of this Indenture,
including Section 5.03 hereof, as well as just and reasonable
48
<PAGE> 58
compensation for the services of the Indenture Trustees, and of all persons
properly engaged and employed by the Indenture Trustees.
(b) Subject to Sections 8.02, 8.03 and 9.02 hereof, if an Indenture
Event of Default occurs and is continuing and the Indenture Trustees shall have
obtained possession of or title to any or all of the Indenture Estate, the
Indenture Trustees shall not be obligated to use or operate any of the
Indenture Estate or cause any of the Indenture Estate to be used or operated
directly or indirectly by the Indenture Trustees, or either of them, or through
agents or other representatives or to lease, license or otherwise permit or
provide for the use or operation of any or all of the Indenture Estate by any
other person unless (i) the Corporate Indenture Trustee shall have been able to
obtain insurance in kinds, at rates and in amounts satisfactory to it in its
discretion to protect the Indenture Estate and the Indenture Trustees, as
Indenture Trustees and individually, against any and all liability for loss or
damage to the Indenture Estate and for public liability and property damage
resulting from use or operation of the Indenture Estate and (ii) funds are
available in the Indenture Estate to pay for all such insurance or, in lieu of
such insurance, the Indenture Trustees are furnished with indemnification from
the Holders or any other Person upon terms and in amounts satisfactory to the
Corporate Indenture Trustee in its discretion to protect the Indenture Estate
and the Indenture Trustees, as Indenture Trustees and individually, against any
and all such liabilities.
(c) If, after the expiration of all applicable notice and cure periods,
and subject to Sections 8.02 and 8.03, there shall be a failure to make a
scheduled payment of the principal of any Mortgage Note when due, or of the
Redemption Price upon call for redemption, or if there shall be a failure to
pay the premium, if any, or interest on any Mortgage Note when the same becomes
due and payable, then (subject to the provisions hereof expressly restricting
the Indenture Trustees' exercise of rights or remedies), the Indenture Trustees
may institute, in their own names and as trustees of an express trust, a
judicial proceeding for the collection of the sums so due and unpaid on the
Mortgage Note, and may prosecute such proceeding to judgment or final decree,
and may enforce such judgment or final decree with respect to the whole amount
of any such sums so due and unpaid.
If an Indenture Event of Default occurs and is continuing, then (subject
to the provisions hereof expressly restricting the Indenture Trustees' exercise
of rights or remedies), the Indenture Trustees may in their discretion proceed
to protect and enforce their rights and the rights of the Holders by such
appropriate judicial proceedings as the Indenture Trustees shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
49
<PAGE> 59
SECTION 7.04. Additional Remedies. In addition to the remedies provided
for in Sections 7.02 and 7.03 hereof, upon the occurrence of an Indenture Event
of Default, the Indenture Trustees (subject to the provisions hereof expressly
restricting the Indenture Trustee's exercise of rights or remedies) may take
any or all of the following actions, at the same or at different times (subject
to the provisions hereof expressly restricting the Indenture Trustees' exercise
of rights or remedies):
(a) Subject to the rights of the Company under the Lease, enter upon and
take possession of any or all of the Indenture Estate, and lease and let the
Indenture Estate, or any part thereof, and receive all the rents (including
Basic Rent), issues and profits thereof which are overdue, due or to become
due, and apply the same, after payment of all reasonably necessary charges and
expenses, on account of the Mortgage Notes, and the Indenture Trustees are
hereby given and granted full power and authority to do any act or thing which
the Owner Trust might or could do in connection with the management and
operation of any or all of the Indenture Estate. This covenant shall become
effective either with or without any action brought to foreclose this Indenture
and without applying at any time for a receiver of such rents.
(b) Institute an action of mortgage foreclosure, or take other action as
the law may allow, at law or in equity, for the enforcement of this Indenture,
and proceed thereon to final judgment and execution of the entire unpaid
balance of the Mortgage Notes which are then due and payable including costs of
suit, interest and reasonable attorneys' fees. In case of any sale of the
Indenture Estate by virtue of judicial proceedings, the Indenture Estate may be
sold in one parcel and as an entirety or in such parcels, manner or order as
the Indenture Trustees in their sole discretion may elect. Subject to the
rights of the Company under the Lease, the failure to make any tenants parties
defendant to a foreclosure proceeding and to foreclose their rights will not be
asserted by the Owner Trust as a defense in any proceeding instituted by the
Indenture Trustees to realize upon the Indenture Estate.
(c) Appoint a receiver of the rents, issues and profits of the Indenture
Estate without the necessity of proving either the depreciation or the
inadequacy of the value of the security or the insolvency of the Owner Trust or
any Person who may be legally or equitably liable to pay moneys secured hereby,
or any other statutory grounds for such appointment, and the Owner Trust and
each such Person waive such proof and hereby consent to the appointment of a
receiver.
(d) In the event that during the pendency of any Indenture Event of
Default, the Owner Trust, Owner Participant, or any Affiliate of any of them,
is in fact (not constructively) physically occupying the Indenture Estate, or
any part thereof, it is hereby agreed that the Owner Trust shall pay such
reasonable rental monthly in advance as the Indenture Trustees shall demand for
the Indenture Estate, or the part so occupied, and
50
<PAGE> 60
the use of personal property covered by this Indenture, such amounts to be
applied in accordance with Section 5.03 of this Indenture.
(e) Apply on account of the Mortgage Notes and the interest and premium,
if any, thereon or on account of any arrearages of interest thereon, or on
account of any balance due pursuant to the Mortgage Notes or after a
foreclosure sale of the Indenture Estate, or any part thereof, all in
accordance with the provisions of Section 5.03, any unexpended moneys other
than Excepted Rights and Payments still retained by the Corporate Indenture
Trustee that were paid to the Corporate Indenture Trustee by the Company
pursuant to the Lease or otherwise or by the Owner Trust for the payment of, or
as security for the payment of, taxes, assessments, municipal or governmental
rates, charges, liens, water or sewer rents, or insurance premiums, if any, or
in order to secure the performance of some other act by or obligation of the
Owner Trust or the Company.
(f) Exercise any and all other rights and remedies granted under this
Indenture or now or hereafter existing in equity, at law, by virtue of statute
or otherwise.
(g) With or without entry, personally or by their agents or attorneys,
sell the Indenture Estate and all estate, right, title, interest, claim and
demand therein and right of redemption thereof at one or more private or public
sales, as an entirety or in parcels and at such times and places and upon such
terms as may be specified in the notice or notices of sale to be given to the
Owner Trust or as may be required by law. Any number of sales may be conducted
from time to time. The power of sale shall not be exhausted by any one or more
such sales as to any part of the Indenture Estate remaining unsold, but shall
continue unimpaired until all of the Indenture Estate shall have been sold or
the Mortgage Notes and all indebtedness of the Owner Trust secured hereby shall
have been paid. In addition, as to each Property, the Indenture Trustees will
have the statutory power of sale, if any, as may be provided by the law of the
state in which such Property is located. As to each Property this Indenture is
made upon the statutory conditions provided for by the laws of the state in
which such Property is located. The Indenture Trustees may postpone the sale of
the Indenture Estate by public announcement at the time and place of such sale,
and from time to time thereafter may further postpone such sale by public
announcement made at the time of sale fixed by the preceding postponement.
(h) Notwithstanding anything to the contrary provided or implied in any
of the Indenture Documents, if either of the Indenture Trustees is or becomes a
competitor to the Company, it shall not be barred or restricted in any manner
in enforcing any of the remedies provided in this Indenture.
SECTION 7.05. Indenture Trustees May File Proofs of Claim. In case of
the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the
51
<PAGE> 61
Company or any other obligor upon the Lease or the Owner Trust or any other
obligor on the Mortgage Notes or the property of the Company, the Owner Trust
or of such other obligor or their creditors, the Indenture Trustees
(irrespective of whether the principal of the Mortgage Notes shall then be due
and payable as therein expressed or by declaration in accordance with Section
7.02 hereof, or otherwise, and irrespective of whether the Indenture Trustees
shall have made any demand for the payment of overdue principal, premium, if
any, or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(i) to file and prove such proofs of claim and to file such other
papers or documents as may be necessary or advisable in order to have the
claims of the Indenture Trustees (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Indenture
Trustees, their agents and counsel) and of the Holders allowed in such
judicial proceeding, and
(ii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or
other similar official) in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Indenture Trustees, and in the event
that the Indenture Trustees shall consent to the making of such payments
directly to the Holders, to pay to the Indenture Trustees any amount due to
them for the reasonable compensation, expenses, disbursements and advances of
the Indenture Trustees, their agents and counsel, and any other amounts due to
the Indenture Trustees in connection therewith.
Nothing herein contained shall be deemed to authorize the Indenture
Trustees to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Mortgage Notes or the rights of any Holder thereof, or to authorize the
Indenture Trustees to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 7.06. Indenture Trustees May Enforce Claims Without Possession
of the Mortgage Notes; Represent Holders. All rights of action and claims
under this Indenture or the Mortgage Notes may be prosecuted and enforced by
the Indenture Trustees without the possession of any of the Mortgage Notes or
the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Indenture Trustees shall be brought in their own
names as trustees of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustees, their agents and counsel,
be for the ratable benefit of the Holders of the Mortgage Notes. In any
proceedings brought by the Indenture Trustees (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Indenture Trustees shall be a party) the Indenture
52
<PAGE> 62
Trustees shall be held to represent all the Holders, and it shall not be
necessary to make any Holders parties to such proceedings.
SECTION 7.07. Application of Money Collected. Subject to the provisions
of Section 7.03(a) hereof, any money collected by the Indenture Trustees
pursuant to this Article (other than Excepted Rights and Payments) shall be
promptly applied by the Corporate Indenture Trustee, as specified in Section
5.03 hereof at, in the case of payment to the Holders, the date or dates fixed
by the Corporate Indenture Trustee which shall in no event be later than the
next succeeding Distribution Date and, in case of the distribution of such
money on account of principal, premium, if any, or interest, upon surrender
thereof if fully paid.
SECTION 7.08. Limitation on Suits. No Holder of a Mortgage Note shall
have any right to institute any proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(1) such Holder has previously given written notice to the
Corporate Indenture Trustee of a continuing Indenture Event of Default;
(2) the Holders of not less than 25% in unpaid principal amount of
the Outstanding Mortgage Notes shall have made written request to the
Corporate Indenture Trustee for the Indenture Trustees to institute
proceedings in respect of such Indenture Event of Default in their own
names as Indenture Trustees hereunder (unless the Holders of a majority
in aggregate unpaid principal amount of the Outstanding Mortgage Notes
shall object in writing to such proceedings within 30 days of such
request);
(3) such Holder or Holders have offered to the Indenture Trustees
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Indenture Trustees for 60 days after the Corporate
Indenture Trustee's receipt of such notice, request and offer of
indemnity have failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Corporate Indenture Trustee during such 60 day period by the
Holders of a majority in Outstanding principal amount of the Mortgage
Notes;
it being understood and intended that no one or more Holders of the Mortgage
Notes shall have any right in any manner whatever by virtue of, or by availing
of, any provision of this Indenture to affect, disturb or prejudice the rights
of any other Holders of the Mortgage Notes, or to obtain or to seek to obtain
priority or preference over any
53
<PAGE> 63
other Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the ratable benefit of all the Holders.
SECTION 7.09. Unconditional Right of Holders to Receive Principal,
Premium, if any, and Interest. Notwithstanding any other provision in this
Indenture, but subject to Section 2.05, any Holder shall have the right, which
is absolute and unconditional, to receive payment of the principal of and
(subject to Section 2.04 hereof) interest on its Mortgage Notes as expressed
therein (or, in the case of redemption, on the Redemption Date) and of the
premium, if any, on such Mortgage Notes from such source when due and payable
and to institute suit for the enforcement of any such payment, and such right
shall not be impaired without the consent of such Holder, provided that no
Holder shall have the right to enforce any judgment or otherwise exercise
remedies against any Excepted Rights and Payments, it being understood and
intended that no one or more Holders of the Mortgage Notes shall have any right
in any manner whatever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders of
the Mortgage Notes or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the ratable benefit of all the Holders.
SECTION 7.10. Restoration of Rights and Remedies. If the Indenture
Trustees have, or any Holder has, instituted any proceeding to enforce any
right or remedy or in the exercise of any power under this Indenture by
foreclosure, entry or otherwise and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Indenture
Trustees or to such Holder, then and in every case the Owner Trust and the
Holders shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions and rights hereunder,
including the position and rights of the Indenture Trustees with respect to the
Indenture Estate, and thereafter all rights, powers and remedies of the
Indenture Trustees and the Holders shall continue as though no such proceeding
had been instituted.
SECTION 7.11. Rights and Remedies Cumulative and Subject to Applicable
Law. Except as may otherwise expressly be provided to the contrary herein, no
right, power or remedy herein conferred upon or reserved to the Indenture
Trustees or to the Holders is intended to be exclusive of any other right,
power or remedy and every right, power and remedy shall, to the extent
permitted by law, be cumulative and concurrent and in addition to every other
right, power and remedy given hereunder or now or hereafter existing at law or
in equity or otherwise and may be exercised from time to time and as often and
in such order as may be deemed expedient by the Indenture Trustees or the
Holders. The exercise of any right, power or remedy shall not be construed as a
waiver of the right to exercise at the same time or thereafter any other right,
power or remedy. The exercise of any right, power or remedy shall be subject to
applicable law and the
54
<PAGE> 64
provisions hereof expressly restricting the Indenture Trustees' exercise of
rights or remedies.
SECTION 7.12. Delay or Omission Not Waiver. (a) No delay or omission
of the Indenture Trustees or of any Holder to exercise any right, power or
remedy accruing upon any Indenture Event of Default shall impair any such
right, power or remedy or constitute a waiver of any such Indenture Event of
Default or an acquiescence therein. Subject to the provisions hereof expressly
restricting the Indenture Trustees' exercise of rights or remedies, every
right, power and remedy given by this Article or by law to the Indenture
Trustees or the Holders may be exercised from time to time, and as often as may
be deemed expedient, by the Indenture Trustees or by the Holders, as the case
may be.
(b) Notwithstanding anything to the contrary contained herein, so long
as a Pass-Through Trustee is the registered Holder of any Mortgage Note
hereunder, the Indenture Trustees shall not be authorized or empowered to
acquire title to all or any portion of the Indenture Estate or to take any
action with respect to all or any portion of the Indenture Estate so acquired
by them, or either of them, if such acquisition or action would cause the
related Pass-Through Trust to fail to qualify as a "grantor trust" for Federal
income tax purposes.
SECTION 7.13. Control by Holders. The Holders of a majority of the
aggregate unpaid principal amount of the Outstanding Mortgage Notes shall have
the right, during the continuance of an Indenture Event of Default,
(1) to require the Indenture Trustees to proceed to enforce this
Indenture, either by judicial proceedings for the enforcement of the
payment of the Mortgage Notes and the foreclosure of this Indenture and
the sale of the Indenture Estate or, at the election of the Indenture
Trustees, by the exercise of the power of entry and/or sale or other
remedies hereby conferred, and
(2) to direct the time, method and place of conducting any
proceeding for any remedy available to the Indenture Trustees or
exercising any trust or power conferred on the Indenture Trustees;
provided that
(A) such direction shall not be in conflict with any rule of
law or with this Indenture and shall not unduly prejudice the
rights of Holders other than those constituting such majority, and
(B) the Indenture Trustees may take any other action deemed
proper by the Indenture Trustees which is not inconsistent with
such direction.
55
<PAGE> 65
SECTION 7.14. Waiver of Past Defaults. The Holders of not less than
66 2/3% of the aggregate unpaid principal amount of the Outstanding Mortgage
Notes may on behalf of all Holders waive any past default hereunder and its
consequences, except a default
(1) in the payment of the principal of, premium, if any, or
interest on the Mortgage Notes; or
(2) in respect of a covenant or provision hereof which expressly
under this Indenture cannot be modified or amended without the consent of
each Holder affected thereby.
Upon any such waiver, such default shall cease to exist, and any
Indenture Event of Default arising therefrom shall be deemed to have been cured
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 7.15. Waiver of Appraisement; Laws. (a) The Owner Trust
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any appraisement, valuation, stay, extension or
redemption law wherever enacted, now or at any time hereafter in force, in
order to prevent or hinder the enforcement of this Indenture or the absolute
sale of the Indenture Estate, or any part thereof, or the possession thereof by
any purchaser at any sale under this Article; and the Owner Trust, for itself
and all who may claim under it, so far as it now or hereafter lawfully may,
hereby waives the benefit of all such laws.
(b) Subject to the rights of the Company under the Lease, the Owner
Trust, for itself and all who may claim under it, so far as it now or hereafter
lawfully may, hereby waives and releases:
(i) All benefit that might accrue to the Owner Trust by virtue of
any present or future law exempting the Indenture Estate, or any part of
the proceeds arising from any sale of the Indenture Estate, from
attachment, levy or sale on execution; and
(ii) Exemption from civil process; and
(iii) Redemption or extension of time for payment; and
(iv) Any right to have the Indenture Estate marshalled.
The Owner Trust further agrees that any court having jurisdiction to
foreclose this Indenture may order the sale of the Indenture Estate as an
entirety.
56
<PAGE> 66
(c) If any law in this Section referred to and now in force, of which
the Owner Trust or its successors might take advantage despite this Section,
shall hereafter be repealed or cease to be in force, such law shall not
thereafter be deemed to constitute any part of the contract herein contained or
to preclude the application of this Section.
SECTION 7.16. Special State Law Addendum. In addition to the remedies
set forth above and elsewhere herein, the Indenture Trustees, or either of
them, shall have those additional rights and remedies set forth in the Special
State Law Addendum, if any.
SECTION 7.17. No Cross-Collateralization. Notwithstanding anything in
this Indenture to the contrary, although the Indenture Trustees have entered
into the Other Indentures pursuant to which the Other Mortgage Notes were
issued by the Other Owner Trust and the Other Owner Trust's interests as lessor
under leases with the Company were assigned (the "Other Leases") and which
contain similar or identical provisions, the parties hereto and thereto desire
and intend that (i) each of such documents (or any documents executed in
furtherance thereof or pursuant thereto) shall be, and shall be deemed to be,
separate and independent from this Indenture and the Mortgage Notes secured
hereby (or any documents executed in furtherance hereof or pursuant hereto),
and (ii) none of such documents (or any documents executed in furtherance
thereof or pursuant thereto) or the real or personal property encumbered
thereby shall be, or shall be deemed to be, cross-collateralized or cross-
defaulted with this Indenture (or any documents executed in furtherance hereof
or pursuant hereto), the Mortgage Notes secured hereby or the Property
encumbered hereby.
ARTICLE VIII
RIGHTS OF THE OWNER TRUST
AND THE OWNER PARTICIPANT
SECTION 8.01. Certain Rights of Owner Trust and Owner Participant.
Notwithstanding any other provision of this Indenture, including the Granting
Clauses, or any of the other Indenture Documents, but subject always to the
final paragraphs of Sections 8.01 and 12.07(c), the following rights ("Excepted
Rights", collectively with Excepted Payments herein referred to as "Excepted
Rights and Payments") shall be reserved to the Owner Trust or the Owner
Participant, as the case may be (as separate and independent rights), to the
extent described herein:
(a) at all times prior to the completion of the foreclosure of the
Lien of this Indenture or other action that acts to divest the Owner
Trust of its rights as Landlord under the Lease, the Owner Trust shall
have the right, independently of, and not to the exclusion of, the
Indenture Trustees, (i) to receive from the Company all notices,
certificates, reports, filings, opinions of counsel and other documents
and all
57
<PAGE> 67
information which the Company is permitted or required to give or furnish
to the Owner Trust pursuant to any Indenture Document, (ii) to inspect
the Property to the extent provided in the Lease and to enforce
performance or observance by the Company of any such rights by the
exercise of the right to proceed by appropriate court actions, either at
law or in equity or to recover damages for the breach thereof, (iii) to
receive estoppel certificates from the Company under the Lease, (iv) to
give notices of non-performance under the Lease and (v) to seek legal or
equitable remedies to require the Company to maintain required insurance
coverage under the Lease;
(b) at all times, the Owner Trust shall have the right to perform
all covenants and obligations on behalf of the Company pursuant to
Section 42 of the Lease (it being understood that such performance will
cure an Indenture Event of Default only to the extent set forth in
Section 8.03 hereof);
(c) at all times prior to the completion of the foreclosure of the
Lien of this Indenture or other action that acts to divest the Owner
Trust of its rights as Landlord under the Lease, the Owner Trust, to the
exclusion of the Indenture Trustees, shall have the right, provided that
the Owner Trust shall have complied with Section 6.06 hereof, to (i) make
any determination to be made on the part of the "Landlord" under the
Lease with respect to the Company's purchase options under the Lease
(including the right to accept or reject Tenant's Purchase Offer or
Notice of Termination); and (ii) select or approve as satisfactory any
accountants, engineers or counsel to render services for or issue
opinions to the Owner Trust pursuant to express provisions of the
Indenture Documents and to make all decisions and determinations and take
all actions in respect of its tax options under any of the Indenture
Documents;
(d) so long as no Indenture Event of Default shall have occurred
and be continuing and there shall have occurred no acceleration of the
Mortgage Notes, the Owner Trust shall have the right to the exclusion of
the Indenture Trustees to do the following with respect to the Property:
(i) to grant and release easements, licenses, rights of way, or releases
of the Property that satisfy the criteria set forth in Article 13 of the
Lease; and (ii) subject, however, to the greater restrictions on the
Owner Trust imposed pursuant to Section 8.01(c), to make any
determination or give any consent expressly provided in the Lease to be
made or given by the "Landlord" under Articles 6; 8; 14; 15; 16; 17; 27;
39; 40; 41; and 45 of the Lease;
(e) provided no Indenture Event of Default has occurred and is
continuing (other than an Indenture Event of Default caused by a Lease
Event of Default), the right of the Owner Trust (but not to the exclusion
of the Indenture Trustees and subject to the right of the Indenture
Trustee to revoke or abridge such right), to enforce performance of the
covenants of the Company under the Lease, it being
58
<PAGE> 68
agreed that the Indenture Trustee retains the exclusive right to exercise
and enforce all rights, powers and remedies under the Lease upon the
occurrence of a Lease Event of Default, subject to the other provisions
hereof;
(f) subject to Section 3.10, and upon the agreement of the
Corporate Indenture Trustee and the Owner Trust, prior to acceleration of
the Mortgage Notes, the rights of the Owner Trust to make petitions,
motions and decisions in any bankruptcy, insolvency or similar
proceedings involving the Company;
(g) prior to the completion of the foreclosure of the Lien of this
Indenture, the Owner Trust shall have the right to do all of the
following with respect to the Property: (i) enter into with or provide to
the Company or any other Person, certificates and other documents or
information which is required by any Indenture Documents to be given by
the Owner Trust; and (ii) to make Rental Adjustments in accordance with
Section 21 of the Participation Agreement, subject, in all cases, to the
requirement set forth in Article 3(d) of the Lease regarding the
sufficiency of the Company's obligations under the Lease to satisfy
amounts required to be paid hereunder and under the other Indenture
Documents;
(h) each of the Owner Trust, the Trust Company, William J. Wade
and the Owner Participant shall have the right, to the exclusion of the
Indenture Trustees, to demand, collect, sue for, give notices, make
determinations, exercise all rights with respect to or otherwise receive
and enforce the payment of Excepted Rights and Payments (but, with
respect to Excepted Rights, only for so long as the same constitute
Excepted Rights) due and payable to it and to seek legal or equitable
remedies to require the Company to perform or comply with any of its
obligations which otherwise constitute Excepted Rights and Payments (but,
with respect to Excepted Rights, only for so long as the same constitute
Excepted Rights); and
(i) prior to any foreclosure or other exercise of remedies
hereunder that operates to divest the Owner Trust of its rights as
Landlord under the Lease, the Indenture Trustee shall not take any action
that would reduce Lessee's obligations to the Landlord under the Lease,
without the prior consent of the Owner Trust.
Notwithstanding the foregoing provisions of this Section 8.01, but subject
always to the right of the Owner Trust or the right of the Owner Participant on
behalf of the Owner Trust under Sections 8.02 and 8.03 hereof, the Indenture
Trustees shall at all times have the right, to the exclusion of the Owner Trust
and the Owner Participant, to (A) declare the Lease to be in default and (B)
subject to the provisions of Section 7.02(a) hereof and the other provisions
hereof expressly restricting the Indenture Trustee's exercise of remedies
hereunder, exercise the remedies set forth in Article 21 of the Lease and in
Article VII hereof.
59
<PAGE> 69
SECTION 8.02. Owner Trust's Right to Elect to Redeem and to Provide for
Payment. (a) The Owner Trust may, but shall be under no obligation to, redeem
all but not less than all of the Mortgage Notes then Outstanding at any time
after a Lease Event of Default (other than a Lease Event of Default related to
Excepted Payments) has occurred and is continuing and provided that no
Indenture Event of Default (that does not arise out of such Lease Event of
Default) has occurred and is continuing.
Such redemption shall be effected by the Owner Trust (1) notifying the
Corporate Indenture Trustee of such election, which notice in order to be
effective shall state that it is irrevocable and shall designate the Redemption
Date (which date shall be the next occurring Distribution Date following such
notice to the Corporate Indenture Trustee, unless such date is less than 25
days after the giving of such notice, in which event the Redemption Date shall
be the second occurring Distribution Date after the giving of such notice), and
(2) irrevocably depositing with the Corporate Indenture Trustee, at the time of
the delivery of such notice and in the manner provided for in Section 6.06
hereof, as the case may be, the sum of amounts contemplated by clause "first"
under Section 5.03 and the aggregate unpaid principal amount of and accrued and
unpaid interest (through the Redemption Date) on all such Mortgage Notes,
together with the Make-Whole Premium if provided for in Section 8.02(b), after
taking into account amounts then held by the Indenture Trustees for
distribution under Section 5.03. The Corporate Indenture Trustee shall notify
each Holder of such redemption in the manner provided for in Section 6.05
hereof. If the Owner Trust shall not cause the redemption of the Mortgage Notes
to occur and all or a portion of the Indenture Estate is liquidated through
foreclosure or otherwise, all amounts received from the sale of the Indenture
Estate shall be paid and distributed in the manner provided in Section 5.03.
Further, and without limiting the foregoing, if a Lease Event of Default shall
have occurred and be continuing, provided that no Indenture Event of Default
that does not arise out of a Lease Event of Default has occurred and is
continuing, the Corporate Indenture Trustee shall not accelerate the Mortgage
Notes and shall not terminate the Lease or terminate the Company's right to
possession of the Property until the expiration of 20 days after notice to the
Owner Trust of the Corporate Indenture Trustee's intention to do so, and if the
Owner Trust shall deliver the notice of redemption and shall deposit the
applicable redemption amount pursuant to this Section 8.02(a) and the Mortgage
Notes shall be redeemed, the Corporate Indenture Trustee shall not accelerate
the Mortgage Notes and shall not terminate the Lease or terminate the Company's
right to possession of the Property.
(b) The Redemption Price payable by the Owner Trust in connection with
a redemption described in Section 8.02(a) shall include the Make-Whole Premium
only if the Owner Trust's notice of such redemption (and the concurrent deposit
of the Redemption Price) in accordance with Section 8.02(a) is given prior to
the earliest of (i) receipt of the Corporate Indenture Trustee's notice
referred to in the last sentence of Section 8.02(a), (ii) acceleration of the
Mortgage Notes pursuant to Section 7.02 hereof
60
<PAGE> 70
or (iii) in any case involving a Lease Event of Default described in clauses
(i), (ii) or (v) of Article 20 of the Lease (a "Monetary Default"), the
expiration of a period of 180 days following the occurrence of such Lease Event
of Default that is continuing at the expiration of such period. If the
redemption of the Mortgage Notes is effected after (i) such notice, (ii) such
acceleration or (iii) in the case of a Monetary Default, the expiration of such
180 day period, whichever is earlier, then the Redemption Price shall be the
amounts described in Section 8.02(a), but without the Make-Whole Premium, and
shall be effected by the same form of notice (and concurrent deposit of the
Redemption Price (other than the Make-Whole Premium) described in Section
8.02(a)). The Owner Participant may, on behalf of the Owner Trust, give the
notice of redemption, and make payments permitted to be made by the Owner
Trust, under this Section 8.02. Notwithstanding anything to the contrary herein
or in any other Indenture Documents, it is acknowledged and agreed by the Owner
Trust that the Company shall have no obligation under the Lease or any other
Indenture Document for any Make-Whole Premium payable under this Section
8.02(b) for any redemption by the Owner Trust pursuant to Section 8.02(a) even
if such premium shall be paid by the Owner Trust.
(c) From and after the deposit by the Owner Trust of the applicable
Redemption Price (and any other amounts required to be deposited under Section
8.02(a) and (b)) with the Corporate Indenture Trustee, the Indenture Trustees
shall not declare the Lease in default or exercise any of the rights, powers or
remedies pursuant to [ARTICLE 21 THEREOF] or pursuant to Article VII hereof.
SECTION 8.03. Certain Rights of Owner Trust and Owner Participant. (a)
If (i) the Company shall fail to make any payment of Basic Rent under the Lease
and such failure shall constitute a Lease Event of Default, and (ii) the Owner
Trust shall not have previously effected on behalf of the Company three such
consecutive payments or five such payments cumulatively, then the Owner Trust
may (but need not) pay to the Corporate Indenture Trustee, at any time prior to
the expiration of a period of 10 days from the Owner Trust's receipt of written
notice of such failure (prior to the expiration of which 10 day period the
Indenture Trustees by virtue of such default shall not exercise any of the
rights, power or remedies pursuant to [ARTICLE 21 OF THE LEASE] or Article VII
hereof), an amount equal to the full amount of such payment of Basic Rent,
together with any interest due thereon on account of the delayed payment
thereof, and such payment by the Owner Trust shall be deemed to cure any
Indenture Event of Default which arose from such failure of the Company (but
such cure shall not relieve the Company of any of its obligations).
(b) If the Company shall fail to perform or observe any covenant,
condition or agreement to be performed or observed by it under the Lease,
including any payment of rent or other sums due and payable other than Basic
Rent, which failure constitutes a Lease Event of Default, and if (but only if)
the performance or observance thereof can be effected by the payment of money
alone (it being understood that actions such as the
61
<PAGE> 71
obtaining of insurance and the procurement of maintenance services can be so
effected), then the Owner Trust may (but need not) pay to the Corporate
Indenture Trustee (or to such other person as may be entitled to receive the
same), at any time prior to the expiration of a period of 10 days after the
expiration of the notice or grace period, if any, provided with respect to such
failure on the part of the Company in [ARTICLE 20 OF THE LEASE] (prior to the
expiration of which 10-day period the Indenture Trustees by virtue of such
Lease Event of Default shall not exercise any of the rights, powers or remedies
pursuant to [ARTICLE 21 THEREOF] or Article VII hereof), all sums necessary to
effect the performance or observance of such covenant or agreement of the
Company, together with any interest due thereon on account of the delayed
payment thereof, and such payment by the Owner Trust shall be deemed to cure
any Indenture Event of Default which arose from such failure of the Company
(but such cure shall not relieve the Company of any of its obligations).
(c) If the Company shall fail to perform or observe any covenant,
condition or agreement to be performed or observed by it under the Lease other
than those which can be effected by the payment of money alone and such failure
constitutes a Lease Event of Default and the same is reasonably susceptible to
cure by the Owner Trust, then the Owner Trust may (but need not) take such
action at any time prior to the expiration of a period of 30 days after the
expiration of the notice or grace period, if any, provided with respect to such
failure on the part of the Company in [ARTICLE 20 OF THE LEASE]; provided,
however, that if within such grace or cure period, the Owner Trust promptly
commences to cure and thereafter pursues to conclusion the curing of such
default, diligently in good faith (such period, which shall in no event exceed
90 days, the "Extended Cure Period"), then the Indenture Trustees will not take
any action to exercise any of their remedies (including acceleration of the
Mortgage Notes) or take any action to effect a termination of the Lease or
reenter or take possession of the Property as a consequence of such default
during the period of such cure (prior to the expiration of which 30-day period
and, if applicable, the Extended Cure Period, the Indenture Trustees by virtue
of such Lease Event of Default shall not exercise any of the rights, powers or
remedies pursuant to [ARTICLE 21 OF THE LEASE] or Article VII hereof),
necessary to effect the performance or observance of such covenant or agreement
of the Company, and such action shall be deemed to cure any Indenture Event of
Default which arose from such failure of the Company (but such cure shall not
relieve the Company of any of its obligations).
(d) Upon any payment of Basic Rent by the Owner Trust in accordance with
Section 8.03(a), or upon any payment of any other sums or incurrence of any
expenses by the Owner Trust in accordance with Section 8.03(b) or (c), the
Owner Trust shall, to the extent of such payments, be subrogated, in the case
of any such payment in accordance with Section 8.03(a), to the rights of the
Indenture Trustees as assignee hereunder of the Owner Trust, or, in the case of
any payment or the incurrence of any expenses, in accordance with Section
8.03(b) or (c), to the rights of the Indenture
62
<PAGE> 72
Trustees or such other Person, as the case may be, which actually received such
payment or for whose benefit such expenses were incurred, as the case may be
(and in the case of a payment, any interest due thereon on account of the
delayed payment thereof), and shall be entitled to receive such payment or
reimbursement upon its receipt by the Indenture Trustees or such other Person,
as aforesaid (but in each case only if all amounts of principal of, and premium
and interest on, the Mortgage Notes at the time due and payable, together with
interest due thereon on account of the delayed payment thereof shall have been
paid in full); provided that the Owner Trust shall not attempt to recover any
such amount paid by it on behalf of the Company pursuant to this Section 8.03
except by demanding of the Company payment of such amount or by commencing an
action against the Company to require the payment of such amount, and not by
the exercise of remedies under [ARTICLE 21 OF THE LEASE].
(e) Notwithstanding the foregoing provisions of this Section 8.03 or
anything else that may be contained herein or in any other Indenture Document
(or that may be available at law or equity) to the contrary, it is agreed that
except as expressly stated in Article VII or this Section 8.03, in
consideration for the rights expressly granted above in this Section 8.03 and
elsewhere in this Indenture and the other Indenture Documents, no other cure
periods shall be provided to the Owner Trust with respect to any Indenture
Event of Default (including any Lease Event of Default), regardless of whether
the same is attributable in whole or in part to the Company's default under the
Lease. Without limiting the foregoing but subject to Section 8.02, it is
acknowledged that the Owner Trust shall not have the right to cure or attempt
to cure any event described in [ARTICLE 20(V) OF THE LEASE].
(f) Provided that no Indenture Event of Default that does not arise out
of a Lease Event of Default has occurred and is continuing, (i) prior to the
expiration of the 10-day period referred to in Section 8.03(a) (provided there
remains any cure right available to the Owner Trust under Section 8.03(a)),
(ii) prior to the expiration of the 10-day period referred to in Section
8.03(b), and (iii) prior to the expiration of the Extended Cure Period, in each
case to the extent applicable, the Indenture Trustees shall not accelerate the
Mortgage Notes or take any action to terminate the Lease or dispossess the
Company from the Property.
SECTION 8.04 Company Ownership of Owner Trust. Notwithstanding anything
herein to the contrary, if the Company shall become the Owner Participant or
shall otherwise control the Owner Trust, whether pursuant to the terms of any
Indenture Document or otherwise, then the rights afforded to the Owner Trust
under Sections 8.01, 8.02 and 8.03 shall not be applicable.
63
<PAGE> 73
ARTICLE IX
THE INDENTURE TRUSTEES
SECTION 9.01. Acceptance of Trusts. The Indenture Trustees hereby
accept the trusts imposed upon them by this Indenture, and covenant and agree
to perform the same as expressed herein and agree to receive and disburse all
moneys constituting part of the Indenture Estate in accordance with the terms
hereof.
SECTION 9.02. Duties and Responsibilities of the Indenture Trustees.
(a) Except during the continuance of an Indenture Event of Default,
(1) the Indenture Trustees undertake to perform such duties and
only such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Indenture Trustees, and the Indenture Trustees agree that
they will not manage, control, use, sell, dispose of or otherwise deal
with any part of the Indenture Estate, except as required by the terms of
the Lease and as otherwise provided herein; and
(2) in the absence of bad faith on their part, the Indenture
Trustees may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustees, or either of them, and
conforming to the requirements of this Indenture; but in the case of any
such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Indenture Trustees, the
Corporate Indenture Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture.
(b) In case an Indenture Event of Default has occurred and is
continuing, the Indenture Trustees shall exercise such of the rights and powers
vested in them by this Indenture, and shall 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 his own affairs.
(c) No provision of this Indenture, including Section 9.04, shall be
construed to relieve the Indenture Trustees from liability for their own
negligent action, their own negligent failure to act, or their own bad faith or
willful misconduct, except that
(1) this subsection (c) shall not be construed to limit the effect
of subsection (a) of this Section;
64
<PAGE> 74
(2) the Indenture Trustees shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Corporate
Indenture Trustee, unless it shall be proved that the Corporate Indenture
Trustee was negligent in ascertaining the pertinent facts;
(3) the Indenture Trustees shall not be liable with respect to any
action taken or omitted to be taken by them in good faith in accordance
with the direction of the Holders of not less than a majority (or such
other amount as may be specified herein) of the aggregate unpaid
principal amount of the Outstanding Mortgage Notes relating to the time,
method and place of conducting any proceeding for any remedy available to
the Indenture Trustees, or exercising any trust or power conferred upon
the Indenture Trustees, under this Indenture; and
(4) no provision of this Indenture shall require the Indenture
Trustees to expend or risk their own funds or otherwise incur any
financial liability in the performance of any of their duties hereunder,
or in the exercise of any of their rights or powers, if they shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
them.
(d) Whether or not herein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Indenture Trustees shall be subject to the provisions of this
Section.
(e) The Indenture Trustees shall not waive any provision of this
Indenture the waiver of which requires the Company's consent without having
obtained such consent.
SECTION 9.03. Notice of Defaults. Upon the occurrence of any Indenture
Default hereunder actually known to it, the Corporate Indenture Trustee shall
(x) promptly send notice thereof to the Company, the Owner Trust and the Owner
Participant, and (y) within 30 days after the occurrence thereof, transmit by
mail (unless, in the case of Mortgage Notes held by a Pass Through Trustee, a
different method shall be acceptable to it) notice of such Indenture Default to
all Holders, as their names and addresses appear in the Register, unless such
Indenture Default shall have been cured or waived; provided, that in the case
of any default of the character specified in Section 7.01(c) or 7.01(e) hereof
no such notice to Holders shall be given until at least 30 days after the
occurrence thereof, and provided further, that, except in the case of a default
in the payment of the principal of, premium, if any, or interest on the
Mortgage Notes or in the payment of any other amounts due with respect to the
Mortgage Notes, the Corporate Indenture Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Corporate Indenture Trustee in good faith determines that the withholding of
such notice is in the interest of the Holders. Copies of notices of any
Indenture Events of Default arising under Section 7.01(a) or (b) hereof shall
be provided to Duff &
65
<PAGE> 75
Phelps, Moody's and Standard & Poor's at their respective principal offices in
New York, New York.
SECTION 9.04. Certain Rights of the Indenture Trustees.
(a) The Indenture Trustees may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond, debenture, note, coupon, security or other paper or document
believed by them to be genuine and to have been signed or presented by the
proper party or parties.
(b) Any request, direction, order or demand of the Owner Trust mentioned
herein shall be sufficiently evidenced by an Officer's Certificate (unless
other evidence in respect thereof be herein specifically prescribed) upon which
the Indenture Trustees may rely, subject to the provisions of Section 9.02 and
the other provisions of this Section, to prove or establish a matter set forth
therein.
(c) The Indenture Trustees may consult with counsel and any advice or
Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by it hereunder in
good faith and in accordance with such advice or Opinion of Counsel.
(d) The Indenture Trustees shall be under no obligation to exercise any
of the trusts or powers vested in them by this Indenture at the request, order
or direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Indenture Trustees
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred therein or thereby.
(e) The Indenture Trustees shall not be liable for any action taken or
omitted by them in good faith and believed by them to be authorized or within
the discretion, rights or powers conferred upon them by this Indenture.
(f) Prior to the occurrence of an Indenture Event of Default hereunder
and after the curing or waiving of all Indenture Events of Default, the
Indenture Trustees 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, appraisal, bond,
debenture, note, coupon, security, or other paper or document unless requested
in writing to do so by the Holders of not less than a majority in aggregate
unpaid principal amount of the Outstanding Mortgage Notes; provided that, if
the payment within a reasonable time to the Corporate Indenture 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 Corporate Indenture Trustee, not
reasonably assured to the Corporate Indenture Trustee by the security afforded
to it by the terms of this Indenture,
66
<PAGE> 76
the Corporate Indenture Trustee may require reasonable indemnity against such
expenses or liabilities as a condition to proceeding. The reasonable expenses
of every such examination shall be paid by the Owner Trust or, if paid by the
Indenture Trustees or any predecessor trustee, shall be repaid by the Owner
Trust upon demand.
(g) The Indenture Trustees may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys not regularly in their employ and the Indenture Trustees
shall not be responsible for any misconduct or negligence (other than
misconduct or negligence in the handling and transfer of funds or holding of
investments hereunder) on the part of any such agent or attorney appointed with
due care by it hereunder.
(h) None of the provisions contained in this Indenture shall require the
Indenture Trustees to expend or risk their own funds or otherwise incur
personal financial liability in the performance of any of their duties or in
the exercise of any of their rights or powers, if the Indenture Trustees shall
have determined in good faith that the repayment of such funds or adequate
indemnity against such liability is not reasonably assured to them.
(i) The Indenture Trustees shall not be personally liable, in case of
entry by them upon the Indenture Estate, for debts contracted or liabilities or
damages incurred in the management or operation of the Indenture Estate.
SECTION 9.05. Issuance of Mortgage Notes or Recording; Warranty. The
Indenture Trustees make no representation as to the value or condition of the
Indenture Estate or any part thereof, as to the title of the Owner Trust
thereto or as to the security afforded thereby or hereby, or as to the validity
or genuineness of any securities at any time pledged or deposited with the
Indenture Trustees hereunder (other than, in the case of the Corporate
Indenture Trustee, Permitted Investments with the Corporate Indenture Trustee
in its individual capacity). In addition, the Indenture Trustees make no
representation or warranty as to the validity, sufficiency, legality or
enforceability of the Trust Agreement, this Indenture, the Mortgage Notes, the
Lease, the Participation Agreement or any other Indenture Document or as to the
correctness of any statement contained in any thereof, except to the extent
that any such statement was or is expressly made by the Indenture Trustees,
provided that the Indenture Trustees hereby represent and warrant that this
Indenture has been executed and delivered by the Indenture Trustees (in the
case of the Corporate Indenture Trustee, by one of its officers who is duly
authorized to execute and deliver such document on its behalf). Subject to
Section 9.13 hereof, the Indenture Trustees shall have no responsibility with
respect to the recording, rerecording, filing or re-filing, under the laws of
any jurisdiction, of this Indenture or any other document or statement that may
be required or permitted to be recorded, rerecorded, filed or refiled under any
such laws to protect the security interests created by or pursuant to the
Granting Clauses of this Indenture or Article XVI or XVII hereof.
67
<PAGE> 77
SECTION 9.06. Indenture Trustees, Owner Trustees and Agents May Hold
Mortgage Notes; Collections, Etc. Any of the Indenture Trustees or Owner
Trustees, in their individual capacities, or any agent or affiliate of the
Owner Trustees or the Indenture Trustees, in its individual or any other
capacity, may become the owner or pledgee of any Mortgage Notes with the same
rights they would have if they were not the Indenture Trustees, the Owner
Trustees or such agent or affiliate and may otherwise deal with the Owner Trust
and receive, collect, hold and retain collections from the Owner Trust with the
same rights they would have if they were not the Indenture Trustees, the Owner
Trustees or such agent or affiliate (subject to the provisions of Section
10.04).
SECTION 9.07. Moneys Held by Indenture Trustees. Subject to Sections
5.08 and 13.03 hereof, all moneys received by the Indenture Trustees (or their
agent or attorney-in-fact) shall, until used or applied as herein provided, be
held in trust, and segregated from other funds, for the purposes for which they
were received. Neither the Owner Trust nor, subject to Section 5.08, the
Indenture Trustees nor any agent thereof shall be under any liability for
interest on any moneys received by it hereunder except, in the case of the
Corporate Indenture Trustee, Permitted Investments with the Corporate Indenture
Trustee in its individual capacity. All Permitted Investments shall be held in
the name of the Corporate Indenture Trustee on behalf of the Holders, and, to
the extent possible, the Corporate Indenture Trustee shall take and maintain
possession of Permitted Investments.
SECTION 9.08. Compensation. Unless a Lease Event of Default has
occurred and is continuing in respect of the Company's failure to make a
payment required to be made by it under the Lease, the Owner Trust covenants
and agrees to pay, and the Indenture Trustees shall be entitled to receive,
reasonable compensation and payment or reimbursement for their reasonable
advances, expenses and disbursements (including the reasonable compensation and
expenses and disbursements of their counsel, agents and other persons not
regularly in their employ) in connection with their services rendered hereunder
or in any way relating to or arising out of the administration of the Indenture
Estate. The Indenture Trustees agree that they shall have no right against any
Holder, the Trust Company or William J. Wade in their individual capacities, or
the Owner Participant for any fee as compensation for its services as trustee
under this Indenture.
SECTION 9.09. The Co-Indenture Trustee. (a) Notwithstanding anything
herein to the contrary, the Co-Indenture Trustee hereby appoints the Corporate
Indenture Trustee as its agent or attorney, with full power and authority,
insofar as permitted by law, to exercise any and all rights, powers, duties and
obligations conferred upon the Co-Indenture Trustee by this Indenture. The
Corporate Indenture Trustee hereby acknowledges and accepts such appointment.
68
<PAGE> 78
(b) The Corporate Indenture Trustee, at any time, by an instrument in
writing executed by it, may remove the Co-Indenture Trustee, and in such event,
by an instrument in writing executed by it, may appoint a successor or
successors to the Co-Indenture Trustee, anything contained herein to the
contrary notwithstanding. The Co-Indenture Trustee shall at all times be an
officer of the Corporate Indenture Trustee.
SECTION 9.10. Co-Indenture Trustee Acting with Corporate Indenture
Trustee. Notwithstanding anything herein to the contrary, the rights, powers,
duties and obligations conferred or imposed upon the Indenture Trustees or any
of them shall be conferred or imposed upon and exercised or performed by the
Corporate Indenture Trustee, or the Corporate Indenture Trustee and the
Co-Indenture Trustee jointly, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed, the
Corporate Indenture 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-Indenture Trustee.
SECTION 9.11. Easements. The rights of the Indenture Trustees hereunder
shall be subject to the rights of the Owner Trust to grant, release, make or
permit such easements, licenses, rights of way, changes in zoning, Alterations,
subdivisions, releases of Land and similar matters as required by the Lease
and, at the request of the Owner Trust and the expense of the Company, the
Indenture Trustees shall join in any such grant or release.
SECTION 9.12. Resignation and Removal; Appointment of Successor. (a)
No resignation or removal of any Indenture Trustee and no appointment of a
successor Indenture Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Indenture Trustee under
Section 9.13 hereof.
(b) An Indenture Trustee may resign at any time by giving at least 30
days' prior written notice thereof to the Owner Trust. If an instrument of
acceptance by a successor Indenture Trustee shall not have been delivered to
the Owner Trust and such Indenture Trustee within 30 days after the giving of
such notice of resignation, the resigning Indenture Trustee, the Owner Trust or
Holders holding a majority in aggregate unpaid principal amount of the
Outstanding Mortgage Notes may petition any court of competent jurisdiction for
the appointment of a successor Indenture Trustee.
(c) An Indenture Trustee may be removed at any time by act of the
Holders of a majority in aggregate unpaid principal amount of the Outstanding
Mortgage Notes delivered to such Indenture Trustee and to the Owner Trust.
(d) If at any time the Corporate Indenture Trustee shall cease to be
eligible under Section 9.15 hereof and shall fail to resign after written
request therefor by the Owner Trust, or by any Holder, or if at any time the
Corporate Indenture Trustee shall become
69
<PAGE> 79
incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver
of the Corporate Indenture Trustee or of its property shall be appointed, or
any public officer shall take charge or control of the Corporate Indenture
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case, (i) the Owner Trust may
remove such Corporate Indenture Trustee, or (ii) any Holder of a Mortgage Note
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Corporate Indenture Trustee
and the appointment of a successor Corporate Indenture Trustee.
(e) If an Indenture Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Indenture Trustee for
any cause, the Owner Trust shall promptly appoint a successor Indenture
Trustee. If, within one year after such resignation or removal or the
occurrence of such vacancy or incapability, a successor Indenture Trustee shall
be appointed by act of the Holders of a majority in aggregate unpaid principal
amount of the Outstanding Mortgage Notes delivered to the Owner Trust and the
retiring Indenture Trustee, the successor Indenture Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor
Indenture Trustee and supersede the successor Indenture Trustee appointed by
the Owner Trust. If no successor Indenture Trustee shall have been so appointed
by the Owner Trust or the Holders and accepted appointment in the manner
hereinafter provided, any Holder of a Mortgage Note may, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Indenture Trustee.
(f) The Corporate Indenture Trustee shall give notice of each
resignation and each removal of an Indenture Trustee and each appointment of a
successor Indenture Trustee by mailing written notice of such event by
first-class mail, postage prepaid, to the Owner Trust, the Company and to the
Holders of Mortgage Notes as their names and addresses appear in the Register.
Each notice shall include the name of the successor Indenture Trustee and, if
the successor is a successor Corporate Indenture Trustee, the address of its
Corporate Trust Office or, if the successor is a successor Co-Indenture
Trustee, the address of the Co-Indenture Trustee, as the case may be.
SECTION 9.13. Acceptance of Appointment by Successor. Every successor
Indenture Trustee appointed hereunder shall execute, acknowledge and deliver to
the Owner Trust, the Company and to the retiring Indenture Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Indenture Trustee shall become effective and such successor
Indenture Trustee, without any further act, deed or conveyance, shall become
vested with all the estates, properties, rights, powers, trusts and duties of
the retiring Indenture Trustee; and the retiring Indenture Trustee shall
execute and deliver an instrument conveying and transferring to such successor
Indenture Trustee upon the trusts herein expressed all the estates, properties,
rights, powers and trusts of the retiring Indenture Trustee, and shall duly
assign, transfer and deliver to such successor Indenture Trustee all property
and money held by such
70
<PAGE> 80
retiring Indenture Trustee hereunder, subject to the Lien provided by Article
XI hereof. Upon request of any such successor Indenture Trustee, the Owner
Trust, the Company and the remaining Indenture Trustee shall execute any and
all instruments for more fully and certainly vesting in and confirming to such
successor Indenture Trustee all such estates, properties, rights, powers and
trusts.
No successor Indenture Trustee shall accept its appointment unless at the
time of such acceptance such successor Indenture Trustee shall be eligible
under this Article.
SECTION 9.14. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Corporate Indenture 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 Corporate
Indenture Trustee shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of the Corporate Indenture
Trustee, shall be the successor of the Corporate Indenture Trustee hereunder,
provided such corporation shall be otherwise eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Mortgage Notes shall have been
authenticated, but not delivered, by the Corporate Indenture Trustee then in
office, any successor by merger, conversion or consolidation to such
authenticating Corporate Indenture Trustee may adopt such authentication and
deliver the Mortgage Notes so authenticated with the same effect as if such
successor Corporate Indenture Trustee had itself authenticated such Mortgage
Notes.
SECTION 9.15. Persons Eligible for Appointment as Corporate Indenture
Trustee. There shall at all times be a Corporate Indenture Trustee hereunder
which shall be a corporation organized and doing business under the laws of the
United States of America or of any State or the District of Columbia having a
combined capital and surplus of at least $250,000,000, or a direct or indirect
subsidiary of such a corporation, or a member of a bank holding company group,
having a combined capital and surplus of at least $250,000,000 and such
subsidiary or member itself (unless the parent or an affiliated member who,
together with such subsidiary, has the required combined capital and surplus,
guarantees the obligations of such subsidiary or member) having capital and
surplus, in the case of the original Corporate Indenture Trustee or an
affiliate of the original Corporate Indenture Trustee, of at least $100,000,000
and in any other case of at least $150,000,000. Such Corporate Indenture
Trustee shall be authorized under such laws to exercise corporate trust powers
and shall be subject to supervision or examination by Federal, State or
District of Columbia 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. No corporation shall be eligible to serve as
Corporate Indenture Trustee if such corporation is an obligor
71
<PAGE> 81
upon the Mortgage Notes or under any other Indenture Document or is an
Affiliate of such an obligor. In case at any time the Corporate Indenture
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Corporate Indenture Trustee shall resign immediately in the manner
and with the effect specified in Section 9.12. Notwithstanding anything
contained herein to the contrary, the Corporate Indenture Trustee (or any
successor) hereunder must be the corporate indenture trustee under the Other
Indentures and any Company Indenture.
SECTION 9.16. Appointment of Separate Trustees. (a) At any time or
times, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Indenture Estate may at the time be located or in which
any action of the Corporate Indenture Trustee may be required to be performed
or taken and which are not met by the appointment of the Indenture Trustees
hereunder, the Corporate Indenture Trustee, by an instrument in writing signed
by it, may appoint one or more individuals or corporations to act as separate
trustee or separate trustees or co-trustee, acting jointly with the Corporate
Indenture Trustee, of all or any part of the Indenture Estate, to the full
extent that local law makes it necessary for such separate trustee or separate
trustees or co-trustee acting jointly with the Corporate Indenture Trustee to
act.
(b) The Indenture Trustees and, at the reasonable request of the
Indenture Trustees, the Owner Trust and the Company shall execute, acknowledge
and deliver all such instruments as may be required by the legal requirements
of any jurisdiction or by any such separate trustee or separate trustees or
co-trustee for the purpose of more fully confirming such title, rights or
duties to such separate trustee or separate trustees or co-trustee. Upon the
acceptance in writing of such appointment by any such separate trustee or
separate trustees or co-trustee, it, he or they shall be vested with such title
to the Indenture Estate or any part thereof, and with such rights, powers,
duties and obligations, as shall be specified in the instrument of appointment,
and such rights, powers, duties and obligations shall be conferred or imposed
upon and exercised or performed by the Indenture Trustees, or the Indenture
Trustees and such separate trustee or separate trustees or co-trustee jointly
with the Indenture Trustees subject to all the terms of this Indenture, except
to the extent that under any law of any jurisdiction in which any particular
act or acts are to be performed the Indenture Trustees 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 such separate
trustee or separate trustees or co- trustee, as the case may be. Any separate
trustee or separate trustees or co-trustee may at any time by an instrument in
writing constitute the Corporate Indenture Trustee its or his attorney-in-fact
and agent with full power and authority to do all acts and things and to
exercise all discretion on its or his behalf and in its or his name. In case
any such separate trustee or co-trustee shall die, become incapable of acting,
resign or be removed, the title to the Indenture Estate and all assets,
property, rights, powers, duties and obligations and duties of such separate
trustee or co-trustee shall, so far as permitted by law, vest in and be
exercised by the Indenture
72
<PAGE> 82
Trustees, without the appointment of a successor to such separate trustee or
co-trustee unless and until a successor is appointed.
(c) All provisions of this Indenture which are for the benefit of the
Indenture Trustees (including Article XI hereof) shall extend to and apply to
each separate trustee or co-trustee appointed pursuant to the foregoing
provisions of this Section 9.16.
(d) Every additional trustee and separate trustee hereunder shall, to
the extent permitted by law, be appointed and act and the Indenture Trustees
shall act, subject to the following provisions and conditions:
(i) the Mortgage Notes shall be authenticated and delivered, and
all powers, duties, obligations and rights conferred upon the Indenture
Trustees in respect of the receipt, custody, investment and payment of
moneys shall be exercised, solely by the Corporate Indenture Trustee;
(ii) all other rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustees shall be conferred or imposed and
exercised or performed by the Indenture Trustees and such additional
trustee or trustees and separate trustee or trustees jointly except to
the extent that under any law of any jurisdiction in which any particular
act or acts are to be performed, both of the Indenture Trustees shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Indenture Estate in any such jurisdiction) shall be
exercised and performed by such additional trustee or trustees or
separate trustee or trustees;
(iii) no power hereby given to, or exercisable by, any such
additional trustee or separate trustee shall be exercised hereunder by
such additional trustee or separate trustee except jointly with, or with
the consent of, the Indenture Trustees; and
(iv) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder.
If at any time the Indenture Trustees shall deem it no longer necessary or
prudent in order to conform to any local law referred to in Section 9.16(a),
the Indenture Trustees shall execute and deliver an indenture supplemental
hereto and all other instruments and agreements necessary or proper to remove
any additional trustee or separate trustee.
(e) Any request, approval or consent in writing by the Indenture
Trustees to any additional trustee or separate trustee shall be sufficient
warrant to such additional trustee
73
<PAGE> 83
or separate trustee, as the case may be, to take such action as may be so
requested, approved or consented to.
(f) Notwithstanding any other provision of this Section 9.16, the powers
of any additional trustee or separate trustee shall not exceed those of the
Indenture Trustees hereunder.
SECTION 9.17. Trustees' Liens. The Indenture Trustees in their
individual capacities agree that they will at their own cost and expense
promptly take such action as may be necessary to duly discharge and satisfy in
full all Liens on the Indenture Estate which result from claims against them
arising out of events or conditions not related to their interest in the
Property, the administration of the Indenture Estate or the performance of
their duties hereunder.
ARTICLE X
CONCERNING THE HOLDERS
SECTION 10.01. Evidence of Action Taken by Holders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Holders may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such Holders in person or by an agent duly appointed in writing, and, except
as otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to the Corporate Indenture Trustee
and, if expressly required herein, to the Co-Indenture Trustee or the Owner
Trust. Proof of execution of any instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to
Sections 9.02 and 9.04) conclusive in favor of the Indenture Trustees and the
Owner Trust, if made in the manner provided in this Article.
(b) For the purpose of determining the Holders entitled to vote or
consent to any direction, waiver or other action of such Holders under this
Indenture, the Owner Trust may set a record date for such vote or consent by
specifying such record date in an Officer's Certificate delivered to the
Indenture Trustees. Such record date shall be a date not more than 15 days
prior to the first solicitation of such vote or consent.
SECTION 10.02. Proof of Execution of Instruments and of Holding of the
Mortgage Notes. Subject to Sections 9.02 and 9.04, the execution of any
instrument by a Holder or his agent or proxy may be proved in accordance with
such reasonable rules and regulations as may be prescribed by the Corporate
Indenture Trustee. The holding of the Mortgage Notes shall be proved by the
Register.
74
<PAGE> 84
SECTION 10.03. Holders to Be Treated as Owners. Prior to due
presentment for registration of transfer of a Mortgage Note, the Owner Trust,
the Indenture Trustees, any agent of the Owner Trust or the Indenture Trustees,
and the Registrar shall deem and treat the Person in whose name such Mortgage
Note shall be registered upon the Register as the absolute owner of such
Mortgage Note (whether or not such Mortgage Note shall be overdue and
notwithstanding any notation of ownership or other writing thereon) for the
purpose of receiving payment of or on account of and, subject to the provisions
of this Indenture, interest and Installment Payment Amounts on such Mortgage
Note and for all other purposes; and neither the Owner Trust nor the Indenture
Trustees (nor any agent of the Owner Trust or the Indenture Trustees), if any,
nor the Registrar shall be affected by any notice to the contrary. All such
payments so made to any such person, or upon his order, shall be valid, and, to
the extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for moneys payable upon any such Mortgage Note.
SECTION 10.04. Mortgage Notes Owned by Owner Trust, Owner Trustees,
Owner Participant and the Company Deemed Not Outstanding. In determining
whether the Holders of the requisite aggregate unpaid principal amount of the
Outstanding Mortgage Notes have given or concurred in any direction, consent or
waiver under this Indenture, Mortgage Notes which are owned by the Owner Trust,
any Owner Trustee, any Owner Participant, the Company or by any Affiliate of
any of the foregoing shall be disregarded and deemed not to be Outstanding for
the purpose of any such determination; provided that for the purpose of
determining whether the Indenture Trustees shall be protected in relying on any
such direction, consent or waiver, only if a Responsible Officer of the
Corporate Indenture Trustee has actual knowledge that certain Mortgage Notes
are so owned shall such Mortgage Notes be so disregarded; provided further that
if all Mortgage Notes which would be deemed Outstanding in the absence of the
foregoing provision are owned by the Owner Trust, any Owner Trustee, any Owner
Participant, or the Company or by any Affiliate of any of the foregoing, then
such Mortgage Notes shall be deemed Outstanding for the purpose of any such
determination. Mortgage Notes so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction
of the Corporate Indenture Trustee the pledgee's right so to act with respect
to such Mortgage Notes and that the pledgee is not the Owner Trust, any Owner
Trustee, the Owner Participant or the Company or any Affiliate of any of the
foregoing. In case of a dispute as to such right, the advice of counsel shall
be full protection in respect of any decision made by the Indenture Trustees in
accordance with such advice. Upon request of the Corporate Indenture Trustee,
each of the Owner Trust, the Owner Trustees and the Owner Participant, shall
furnish to the Corporate Indenture Trustee promptly an Officer's Certificate
listing and identifying all Mortgage Notes, if any, known by the Owner Trust,
the Owner Trustees or the Owner Participant, as the case may be, to be owned or
held by or for the account of it or any of its Affiliates; and, subject to
Sections 9.02 and 9.04, the Indenture Trustees shall be entitled to accept such
Officer's Certificates as conclusive evidence of the facts set forth therein
and of the fact
75
<PAGE> 85
that all Mortgage Notes not listed therein are Outstanding for the purpose of
any such determination.
SECTION 10.05. Right of Revocation of Action Taken. At any time prior
to (but not after) the evidencing to the Indenture Trustees, as provided in
Section 10.01, of the taking of any action by the Holders of the percentage in
aggregate unpaid principal amount of the Outstanding Mortgage Notes specified
in this Indenture in connection with such action, any Holder of a Mortgage
Note, the serial number of which is shown by the evidence to be included among
the serial numbers of the Mortgage Notes the Holders of which have consented to
such action, may, by filing written notice at the Corporate Trust Office and
upon proof of holding as provided in this Article, revoke such action so far as
concerns such Mortgage Note. Except as aforesaid, any such action taken by the
Holder shall be conclusive and binding upon such Holder and upon all future
Holders and owners of such Mortgage Note and of any Mortgage Notes issued in
exchange or substitution therefor or in lieu thereof, irrespective of whether
or not any notation in regard thereto is made upon any such Mortgage Note or
otherwise. Any action taken by the Holders of the percentage in aggregate
unpaid principal amount of the Mortgage Notes specified in this Indenture in
connection with such action shall be conclusively binding upon the Owner Trust,
the Owner Trustees, the Owner Participant, the Indenture Trustees and the
Holders of all the Mortgage Notes.
SECTION 10.06. Voting Rights of Pass Through Trustee. So long as a
Mortgage Note is held by a Pass Through Trustee, the Pass Through Trustee may
vote differing percentages of such Mortgage Notes in respect of any action
hereunder in accordance with instructions received by it from a corresponding
percentage of holders of the Pass Through Certificates, as provided in the
related Pass Through Trust Agreement.
ARTICLE XI
INDEMNIFICATION OF INDENTURE
TRUSTEES BY OWNER TRUST
The Owner Trust hereby agrees to assume liability for, and does hereby
indemnify, protect, save and keep harmless the Indenture Trustees from and
against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, suits, costs, expenses or disbursements (including legal fees
and expenses) of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Indenture Trustees, or either of them, in
any way relating to or arising out of this Indenture, or any other Indenture
Documents and any taxes payable in connection with the protection, exercise or
enforcement of any right, power or remedy hereunder or any other Indenture
Document (but in no event including any taxes payable by the Indenture Trustees
on or measured by any compensation received by the Indenture Trustees for their
services
76
<PAGE> 86
under this Indenture), except (i) in the case of bad faith, willful misconduct
or gross negligence (simple negligence in the case of their handling and
transfer of funds or holding of investments hereunder) of the Indenture
Trustees in the performance of their duties hereunder or breach by the
Indenture Trustees of their duties hereunder, or (ii) as may result from the
inaccuracy of any representation or warranty of the Indenture Trustees herein
or in any other Indenture Document, or (iii) as otherwise provided in Section
9.02(c) or 9.17 hereof, or (iv) those for which the Company is not obligated to
indemnify the Indenture Trustees under the Lease or the Participation
Agreement; provided that so long as the Lease is in effect, or if the Lease is
not in effect for reasons other than a default thereunder but the Company shall
continue to be obligated to pay or indemnify the Indenture Trustees under the
Lease, Participation Agreement or under the other Indenture Documents, the
Indenture Trustees shall not have or make any claim under this Article XI for
any claim or expense indemnified by the Company under the Lease or
Participation Agreement unless a Lease Event of Default has occurred and is
continuing in respect of the Company's failure to make a payment required to be
made by it under the Lease. The Indenture Trustees shall be entitled to
indemnification, from the Indenture Estate, subject to the foregoing
exceptions, for any liability, obligation, loss, damage, penalty, claim,
action, suit, cost, expense or disbursement indemnified against pursuant to
this Article XI to the extent not reimbursed by the Company or others, but
without releasing any of them from their respective agreements of
reimbursement. The indemnities contained in this Article XI shall survive the
termination of this Indenture and the resignation or removal of the Indenture
Trustees.
ARTICLE XII
SUPPLEMENTS AND AMENDMENTS TO THIS
INDENTURE AND OTHER DOCUMENTS
SECTION 12.01. Supplemental Indentures Without Consent of Holders. The
Owner Trust (when authorized by the Owner Participant), and the Indenture
Trustees, at any time and from time to time, without the consent of Holders,
subject to Section 16 of the Participation Agreement, may enter into one or
more indentures supplemental hereto for one or more of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge any property
or assets to the Indenture Trustees as security for the Mortgage Notes;
(b) to evidence the succession of another Person to the Owner
Trust, or successive successions, and the assumption by the successor of
the covenants, agreements and obligations of the Owner Trust herein and
in the Mortgage Notes in accordance with the terms of the Trust Agreement
and this Indenture;
77
<PAGE> 87
(c) to add to the covenants of the Owner Trust such further
covenants, restrictions, conditions or provisions as consented (in the
case of the Owner Trust) to by the Owner Participant and as the Owner
Trust and the Indenture Trustees shall consider to be for the protection
of the Holders, and to make the occurrence, or the occurrence and
continuance, of a default in any such additional covenants, restrictions,
conditions or provisions an Indenture Event of Default permitting the
enforcement of all or any of the several remedies provided herein;
provided that in respect of any such additional covenant, restriction,
condition or provision such supplemental indenture may provide for a
particular period of grace after default (which period may be shorter or
longer than that allowed in the case of other defaults) or may provide
for an immediate enforcement upon such an Indenture Event of Default or
may limit the remedies available to the Indenture Trustees upon such an
Indenture Event of Default or may limit the right of the Holders of a
majority in aggregate unpaid principal amount of the Outstanding Mortgage
Notes to waive such an Indenture Event of Default;
(d) to surrender any rights or power conferred herein upon the
Owner Trust or the Owner Participant or to add to the rights of the
Holders of the Mortgage Notes;
(e) (i) to correct or supplement any provision contained herein,
in any supplemental indenture or in the Mortgage Notes which may be
defective or inconsistent with any other provision contained herein or in
any supplemental indenture or in the Mortgage Notes; or (ii) to make such
other provisions in regard to matters or questions arising under this
Indenture or under any supplemental indenture as the Owner Trust may deem
necessary or desirable, provided that in the case of (i) and (ii) above,
such change does not materially adversely affect the interests of any
Holder; or (iii) to cure any ambiguity or to correct any mistake;
(f) to correct or amplify the description of any property at any
time subject to the Lien of this Indenture or better to assure, convey
and confirm unto the Indenture Trustees any property subject or required
to be subject to the Lien of this Indenture or to subject property
substituted for any property to the Lien of this Indenture in accordance
with the provisions hereof and of the Lease or to release from the Lien
of this Indenture property that has been substituted or removed in
accordance with the terms of this Indenture and the Lease;
(g) to add, eliminate or change any provision hereunder so long as
such action shall not materially adversely affect the interests of any
Holder;
78
<PAGE> 88
(h) to provide for the assumption by the Company of the
obligations of the Owner Trust hereunder in accordance with the terms and
conditions applicable thereto specified in Section 3.08 hereof;
(i) in the event of a transfer of the interest in the Indenture
Estate as permitted by the terms and conditions of Section 3.05 hereof,
to provide for the assumption by the transferee of such interest of the
obligations hereunder of the transferor; and
(j) to issue any Refinancing Morgage Notes as authorized by
Section 15.02 hereof.
The Indenture Trustees are hereby authorized to join in the execution of
any such supplemental indenture, 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
Indenture Trustees shall not be obligated to enter into any such supplemental
indenture which adversely affects the Indenture Trustees' own rights, duties or
immunities under this Indenture or otherwise, whether in their trust or
individual capacities.
SECTION 12.02. Supplemental Indentures With Consent of Holders. With
the consent (evidenced as provided in Article X) of the Holders of not less
than 662/3% in aggregate unpaid principal amount of the Outstanding Mortgage
Notes, the Owner Trust and the Indenture Trustees may, from time to time and at
any time, subject to Section 16 of the Participation Agreement, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of any supplemental indenture or of modifying in any manner
the rights of the Holders; provided, however, without the consent of each
Holder affected thereby, no such amendment of or supplement to this Indenture
or any indenture supplemental hereto, or modification of the terms of, or
consent under, any thereof, shall:
(a) modify any of the provisions of Section 7.09 or 10.04 or this
Section 12.02;
(b) reduce the amount or extend the time of payment of any amount
owing or payable under the Mortgage Notes or reduce the interest payable
on the Mortgage Notes or alter or modify the provisions of Article V
hereof with respect to the order of priorities in which distributions
thereunder shall be made as between the Holder and the Owner Trust or
with respect to the amount or time of payment of any such distribution,
or alter or modify the circumstances under which a premium shall be
payable or change the manner in which such premium is calculated, or
alter the currency in which any amount payable under
79
<PAGE> 89
any Mortgage Note is to be paid, or impair the right of any Holder to
commence legal proceedings to enforce a right to receive payment
hereunder;
(c) reduce, modify or amend any indemnities in favor of any Holder;
(d) create or permit the creation of any Lien on the Indenture
Estate or any part thereof prior to or pari passu with the Lien of this
Indenture, except as expressly permitted herein, or deprive any Holder of
the benefit of the Lien of this Indenture on the Indenture Estate except
as provided in Article XIV hereof; or
(e) reduce the percentage of the unpaid principal amount of the
Outstanding Mortgage Notes the consent of the Holders of which is
required for any such supplement, or the consent of the Holders of which
is required for any waiver (of compliance with certain provisions hereof
or certain defaults hereunder and their consequences) provided for in
this Indenture.
This Section 12.02 shall not apply to any indenture or indentures
supplemental hereto permitted by, and complying with, the terms of Section
12.06 hereof.
Upon the request of the Owner Trust (at the direction of the Owner
Participant) and upon the filing with the Indenture Trustees of evidence of the
consent of the Holders and the other documents, if any, required by Section
10.01, the Indenture Trustees shall join with the Owner Trust in the execution
of such supplemental indenture unless such supplemental indenture affects the
Indenture Trustees' own rights, duties or immunities under this Indenture or
otherwise, in which case the Indenture Trustees may in their discretion, but
shall not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such consent shall approve the substance thereof.
Promptly after the execution by the Owner Trust and the Indenture
Trustees of any supplemental indenture pursuant to the provisions of this
Section, the Corporate Indenture Trustee shall mail a notice thereof by
first-class mail to the Holders at their addresses as they shall appear on the
registry books of the Registrar, setting forth in general terms the substance
of such supplemental indenture. Any failure of the Corporate Indenture Trustee
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture.
SECTION 12.03. Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith and
the respective rights,
80
<PAGE> 90
limitations of rights, obligations, duties and immunities under this Indenture
of the Indenture Trustees, the Owner Trust and the Holders 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 indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 12.04. Documents to be Given to Indenture Trustees. The
Indenture Trustees, subject to the provisions of Sections 9.02 and 9.04, may
receive an Officer's Certificate and an Opinion of Counsel as conclusive
evidence that any such supplemental indenture complies with the applicable
provisions of this Indenture.
SECTION 12.05. Notation on Mortgage Notes in Respect of Supplemental
Indentures. A Mortgage Note authenticated and delivered after the execution of
any supplemental indenture pursuant to the provisions of this Article may bear
a notation in form approved by the Indenture Trustees as to any matter provided
for by such supplemental indenture. If the Owner Trust or the Indenture
Trustees shall so determine, new Mortgage Notes so modified as to conform, in
the opinion of the Owner Trust and the Indenture Trustees, to any modification
of this Indenture contained in any such supplemental indenture may be prepared
and executed by the Owner Trust, authenticated by the Corporate Indenture
Trustee and delivered in exchange for the Mortgage Note.
SECTION 12.06. No Request Necessary for Lease Supplement.
Notwithstanding anything contained in Section 12.02 hereof, no written request
or consent of the Indenture Trustees or any Holder pursuant to Section 12.02
hereof shall be required to enable the Owner Trust to enter into any supplement
to the Lease with the Company pursuant to the terms of the Lease to subject
other property thereto or to execute and deliver an indenture supplement in
accordance with and subject to the terms of Article XIV hereof.
SECTION 12.07. Amendments, Waivers, Etc. of Other Indenture Documents.
(a) Except for Excepted Rights and Payments, without the consent of the
Holders of not less than a majority in aggregate unpaid principal amount of the
Outstanding Mortgage Notes, the respective parties to the Participation
Agreement, the Lease or the Trust Agreement may not modify, amend or supplement
the Lease, [SECTION 5.06 OF THE TRUST AGREEMENT], or [SECTIONS 8 & 18 OF THE
PARTICIPATION AGREEMENT] or give any consent, waiver, authorization or approval
under any of the Indenture Documents for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions thereof or of
modifying in any manner the rights of the respective parties thereunder;
provided, however, that the actions specified in Sections 8.01 and 8.02 or in
subsection (b) of this Section 12.07 may be taken without the consent of any
Holder.
81
<PAGE> 91
(b) The Participation Agreement, the Lease and the Trust Agreement may,
at any time and from time to time, be amended or supplemented without the
consent of any Holder:
(i) to effect any modification, amendment, addition or deletion
expressly contemplated in and provided for in the Lease, the
Participation Agreement or the Trust Agreement (it being acknowledged
that any provision regarding the procedure for effecting any
modification, amendment, addition or deletion shall not be a provision
within the meaning of this clause (i)); or
(ii) to effect any modification or amendment of, addition to or
deletion from the Lease, the Participation Agreement or the Trust
Agreement if, as set forth in an Opinion of Counsel rendered by counsel
to the party requesting such action addressed to the other parties to the
applicable agreement, such modification, amendment, addition or deletion
shall not materially adversely affect the interests of any Holder and
will not, as evidenced in writing by each of S&P, Moody's and Duff &
Phelps (if such entity is then rating the Pass Through Certificates),
result in an adverse change in the rating of the Certificates.
The Indenture Trustees may, without the consent of any Holder, give any
consent, waiver, authorization or approval under any Indenture Document,
whether or not provided for therein, if, as reflected in an Opinion of Counsel,
such consent, waiver, authorization or approval does not materially adversely
affect the interests of any Holder.
The consent of neither the Indenture Trustees nor any of the Holders
shall be required for any amendment or supplement to the Lease necessary to
make Rental Adjustments or Termination Value adjustments, provided that such
Rental Adjustments and Termination Value adjustments shall in all instances
comply with the terms of [ARTICLE 3(D) OF THE LEASE] and Section 12.07(c) of
this Indenture.
(c) No modification, amendment, supplement, consent, waiver,
authorization or approval with respect to the Lease, whether effected pursuant
to subsection (a) or pursuant to subsection (b) of this Section 12.07 and
anything in such subsections or elsewhere in this Indenture or in the other
Indenture Documents to the contrary notwithstanding, shall, without the consent
of the Holder of each Outstanding Mortgage Note directly or indirectly affected
thereby, reduce the amount of, or change the timing of payment of, any payment:
such that (x) the Basic Rent payable pursuant to the Lease on any Installment
Payment Date shall be less than the Installment Payment Amount plus interest
due on such Installment Payment Date, (y) the Termination Values applicable on
any Purchase Offer Termination Date or Termination Date, as applicable,
together with the Basic Rent, if any, due and unpaid to and including the
Purchase Offer Termination or the Termination Date (as applicable), shall be
insufficient to satisfy in full the
82
<PAGE> 92
scheduled outstanding principal amount of the Mortgage Notes as of such date,
together with all interest accrued but unpaid thereon to such date, and (z) the
Make-Whole Premium and other premium, if any, payable by the Company pursuant
to the Lease shall be less than the Make-Whole Premium and other premium, if
any, due under this Indenture.
(d) Prior to the foreclosure of the interest of the Owner Trust in
respect of the Property (or deed in lieu thereof), the Indenture Trustees shall
not, without the consent of the Owner Trust, modify, amend or supplement any
Indenture Document so as to release the Company from any of its obligations in
respect of the payment of Basic Rent, Additional Rent, Termination Value or any
other payments in respect of the Demised Premises as set forth in the Lease, or
reduce the amount of, or change the time or manner of payment of or the
absolute and unconditional character of, such obligations, or impose or create
any obligation on the part of the Owner Trustee or the Owner Participant under
the Lease.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
SECTION 13.01. Satisfaction and Discharge of Indenture; Termination of
Indenture. If at any time after (a) the Owner Trust shall have delivered to
the Corporate Indenture Trustee for cancellation all Mortgage Notes theretofore
authenticated (other than any Mortgage Notes which shall have been mutilated,
defaced, destroyed, lost or stolen and which shall have been replaced or paid
as provided in Section 2.07 and Mortgage Notes for the payment of which money
held in trust hereunder has been paid and discharged from such trust as
provided in Section 13.03) or (b) (i) all Mortgage Notes not theretofore
delivered to the Corporate Indenture Trustee for cancellation shall have become
due and payable, or are by their terms to become due and payable within one
year or are to be called for redemption such that they will become due and
payable within one year under arrangements satisfactory to the Indenture
Trustees for the giving of notice of redemption by the Indenture Trustees in
the name and at the expense of the Owner Trust, and (ii) the Owner Trust shall
have irrevocably deposited or caused to be deposited with the Corporate
Indenture Trustee as trust funds an amount sufficient to pay at the Maturity
Date or on such Redemption Date all such Mortgage Notes (and any Installment
Payment Amounts on such Mortgage Notes) not theretofore delivered to the
Corporate Indenture Trustee for cancellation, including principal and interest
due or to become due on or prior to the Maturity Date or Redemption Date, as
the case may be, and if, in any such case, the Owner Trust shall also pay or
cause to be paid all other sums then payable hereunder by the Owner Trust, then
this Indenture shall cease to be of further effect (except as to (i) rights of
registration of transfer and exchange, (ii)
83
<PAGE> 93
substitution of mutilated, defaced, destroyed, lost or stolen Mortgage Notes,
(iii) rights of Holders to receive payments of principal thereof and interest
thereon, upon the original stated due dates therefor (but not upon
acceleration), (iv) the rights, obligations, indemnities and immunities of the
Indenture Trustees hereunder, (v) the rights of the Holders with respect to any
premium payable with respect to the Mortgage Notes as provided in the next
succeeding paragraph, and (vi) the rights of the Holders as beneficiaries
hereof with respect to the property so deposited with the Indenture Trustees
payable to all or any of them), and the Indenture Trustees, on demand of the
Owner Trust accompanied by an Officer's Certificate and an Opinion of Counsel
(with respect to the foregoing conditions, including the irrevocability of the
funds deposited) and at the cost and expense of the Owner Trust, shall execute
proper instruments acknowledging such satisfaction of and discharging this
Indenture.
Upon (or at any time after) payment in full to the Corporate Indenture
Trustee, as trust funds, of an amount sufficient to pay, when due, the
principal of and interest on and all other amounts due under all Mortgage
Notes, and provided that there shall then be no other amounts due to the
Holders and the Indenture Trustees hereunder or under any of the other
Indenture Documents or otherwise secured hereby (in all cases, other than any
premium payable by the Company under the Lease), the Owner Trust shall direct
the Indenture Trustees to execute and deliver to or as directed in writing by
the Owner Trust an appropriate instrument releasing the Property and other
property forming a part of the Indenture Estate from the Lien of this Indenture
and releasing the Indenture Documents from the assignment thereof hereunder,
and the Indenture Trustees shall execute and deliver such instrument as
aforesaid and, at the Owner Trust's expense, will execute and deliver such
other instruments or documents as may be reasonably requested by the Owner
Trust to give effect to such release; provided, however, that this Indenture
and the trusts created hereby shall terminate earlier and this Indenture shall
be of no further force or effect upon any sale or other final disposition by
the Indenture Trustees of all property forming a part of the Indenture Estate
and the final distribution by the Indenture Trustees of all moneys or other
property or proceeds constituting part of the Indenture Estate in accordance
with the terms hereof. Except as aforesaid otherwise provided, this Indenture
and the trusts created hereby shall continue in full force and effect in
accordance with the terms hereof.
SECTION 13.02. Application by Indenture Trustees of Funds Deposited for
Payment of Mortgage Notes. Subject to Section 13.03, all moneys deposited with
the Corporate Indenture Trustee pursuant to Section 13.01 shall be held in
trust and applied by it to the prompt payment in accordance with the provisions
of the Mortgage Notes and this Indenture to the Holders of the particular
Mortgage Notes for the payment or redemption of which such moneys have been
deposited with the Corporate Indenture Trustee, of all sums due and to become
due thereon for principal and interest.
84
<PAGE> 94
SECTION 13.03. Transfer of Moneys Held by Indenture Trustees Unclaimed
for Two Years and Eleven Months. Any moneys deposited with or paid to the
Corporate Indenture Trustee for the payment of the principal of or interest on
the Mortgage Notes and not applied but remaining unclaimed for two years and
eleven months after the date upon which such principal or interest shall have
become due and payable, shall, unless otherwise required by mandatory
provisions of applicable escheat or abandoned or unclaimed property law, be
paid to the Owner Trust by the Indenture Trustees and the Holders of the
Mortgage Notes, as general unsecured creditors, shall, unless otherwise
required by mandatory provisions of applicable escheat or abandoned or
unclaimed property laws, thereafter look only to the Owner Trust for any
payment which such Holders may be entitled to collect, and all liability of the
Indenture Trustees with respect to such moneys shall thereupon cease.
ARTICLE XIV
SUBSTITUTIONS AND RELEASES
Section 14.01. Substitution of Property Included in the Indenture Estate
During Continuation of Lease. So long as the Lease is in effect, if the
Company exercises its substitution right pursuant to [ARTICLE 41 OF THE LEASE],
then upon satisfaction of all conditions to such substitution specified in said
[ARTICLE 41], the Owner Trust shall have the right to obtain, in accordance
with the provisions of this Indenture and the Lease, a release of the Property
from the Lien of this Indenture, but only upon satisfaction of the following:
(a) Receipt by and deposit with the Indenture Trustees of an
Officer's Request from the Company and the Corporate Owner Trustee
describing the Property and the substitute property (as such term is used
in said [ARTICLE 41]);
(b) The Owner Trust shall have executed and delivered to the
Indenture Trustees a new indenture (in form and substance as similar to
this Indenture as reasonably practical) subjecting the substitute
property to the Lien of this Indenture;
(c) Receipt by and deposit with the Indenture Trustees of a
favorable Opinion of Counsel as to the validity and perfection of the
mortgage and security interest in the substitute property upon effecting
the filing, recordation and other action referred to therein;
(d) Receipt by and deposit with the Indenture Trustees of an
Officer's Certificate from the Company and the Corporate Owner Trustee
dated not more than five days prior to the application for such release,
setting forth in substance that such Property is required or permitted to
be so sold, disposed of or released from the
85
<PAGE> 95
Lien hereof pursuant to the Lease and that all conditions precedent
herein and in the Lease provided for relating to such release have been
complied with;
(e) Receipt by and deposit with the Indenture Trustees of an (i)
Opinion of Counsel delivered by the Company to the Indenture Trustees and
the Owner Trust stating that the certificates, opinions and other
instruments which have been or are therewith delivered to and deposited
with the Indenture Trustees conform to the requirements of this Indenture
and the Lease and that the Property to be released as contemplated hereby
may be lawfully released from the Lien of this Indenture, and (ii)
Officer's Certificate to the effect that all conditions precedent herein
provided for relating to such release have been duly complied with; and
(f) Satisfaction of such conditions as are set forth in [ARTICLE
41 OF THE LEASE].
SECTION 14.02. Execution of Releases. Upon any release provided for
under Sections 3.08 and 14.01, the Indenture Trustees shall execute and deliver
to the Owner Trust an instrument releasing their Lien in and to the Property
(to the extent provided for under Section 3.08 or Section 14.01) and shall
execute for recording in public offices, at the expense of the Company, such
instruments in writing as the Owner Trust or the Company shall reasonably
request and as shall be reasonably acceptable to the Indenture Trustees in
order to make clear upon public records that such Lien has been released under
the laws of the applicable jurisdiction. The Owner Trust hereby waives and
releases any and all rights existing or that may be acquired to any penalties,
forfeit or damages from or against the Indenture Trustees for failure to
execute and deliver any document in connection with the release of a Lien or to
file any certificate in compliance with any law or statute requiring the filing
of the same in connection with the release of a Lien, except for failure by the
Indenture Trustees to execute and deliver any document or to file any
certificate as may be specifically requested in writing by the Owner Trust or
the Company.
ARTICLE XV
ISSUANCE OF REFINANCING MORTGAGE NOTES
SECTION 15.01. Creation and Forms of Refinancing Mortgage Notes.
Refinancing Mortgage Notes shall be created by an indenture supplemental hereto
authorized by the Owner Trust, as evidenced by an Officer's Certificate of the
Corporate Owner Trustee and establishing the terms and provisions of such
Mortgage Notes and the form of such Mortgage Notes. Each series of Refinancing
Mortgage Notes may differ from the Mortgage Notes initially issued hereunder
and as between series in any respect not in conflict with the provisions of
this Indenture and as may be prescribed in the supplemental indenture creating
such Mortgage Notes.
86
<PAGE> 96
SECTION 15.02. Issuance of Refinancing Mortgage Notes After Redemption.
Following a redemption of the Mortgage Notes of any Maturity Date in accordance
with Section 6.02(b), 6.02(c) or 6.02(d) hereof, so long as no Lease Default
arising under [ARTICLE 20(i), 20(ii) OR 20(v)] of the Lease shall have occurred
and be continuing, the Owner Trust, with the consent of the Company, may issue
and sell, and the Corporate Indenture Trustee shall authenticate and deliver,
one or more new series of Mortgage Notes ("Refinancing Mortgage Notes") in an
aggregate principal amount up to the aggregate principal amount of the Mortgage
Notes then being redeemed and having such terms and provisions (including
interest rate, amortization schedule, maturity date and redemption provisions)
as the Owner Trust shall deem appropriate and as shall be approved by the
Company; provided that if after such redemption any Mortgage Notes remain
outstanding, the Refinancing Mortgage Notes:
(i) shall be denominated and payable in United States Dollars and
shall not be in a principal amount greater than the Mortgage Notes
redeemed;
(ii) shall not rank senior in any respect to the Mortgage Notes
which remain outstanding; and
(iii) shall not have a maturity after or have a weighted average
life longer than the Mortgage Notes redeemed if any of the Mortgage Notes
which remain outstanding have (x) a Maturity Date after or concurrent
with the Maturity Date of the Mortgage Notes redeemed or (z) a weighted
average life longer than the weighted average life of the Mortgage Notes
redeemed;
provided further that it shall be a condition to such issuance that (x) the
Basic Rent payable pursuant to the Lease on any Installment Payment Date shall
be not less than the Installment Payment Amount plus interest due on such
Installment Payment Date, (y) the Termination Values applicable on any Purchase
Offer Termination Date or Termination Date, as applicable, together with the
Basic Rent, if any, due and unpaid to and including the Purchase Offer
Termination or the Termination Date (as applicable), shall be at least
sufficient to satisfy in full the scheduled outstanding principal amount of the
Mortgage Notes as of such date, together with all interest accrued but unpaid
thereon to such date, and (z) the Make-Whole Premium and other premium, if any,
payable by the Company pursuant to the Lease shall be not less than the Make-
Whole Premium and other premium, if any, due under this Indenture; provided
further that, prior to authentication and delivery of such Refinancing Mortgage
Notes, the Indenture Trustees shall have received written evidence from
Standard & Poor's, Moody's and Duff & Phelp's (if such entity is then rating
the Pass Through Certificates) to the effect that the issuance of such
Refinancing Mortgage Notes, by itself, would not result in a withdrawal or
downgrading of the credit rating assigned to the Pass Through Certificates that
will be outstanding immediately after such issuance.
87
<PAGE> 97
ARTICLE XVI
ASSIGNMENT OF LEASES AND RENTS
SECTION 16.01. Making of Assignment. The Owner Trust by these presents
does hereby irrevocably assign, transfer, set over and convey to the Indenture
Trustees, all the following-described properties, whether now owned or held or
hereafter acquired, exclusively and without any reservation thereof unto the
Indenture Trustees (except as herein otherwise expressly provided), exclusive,
however, of all Excepted Payments and Rights and only to the extent the same
have been conveyed to the Owner Trust pursuant to the Operative Documents:
(a) All of the estate, right, title, interest, benefits, powers and
privileges of the Owner Trust, as Lessor, under the Lease, other than Excepted
Rights and Payments, including, but not by way of limitation, (i) the immediate
and continuing right to make claim for, receive, collect and receipt for all
rents, income, revenues, issues, profits, insurance proceeds, condemnation
awards and other sums payable to or receivable by the Owner Trust under the
Lease, or pursuant to any provisions thereof, whether as rent or as the
purchase price for any interest in the Property or otherwise (except sums
payable directly to any person other than the Lessor under the Lease)
(collectively, the "Lease Rents"), including all cash, securities or letters of
credit delivered or deposited pursuant thereto to secure performance by the
Company of its obligations thereunder, (ii) the right and power (which right
and power are coupled with an interest) upon the purchase by the Company of the
interest of the Owner Trust in the Property in accordance with the Lease to
execute and deliver as attorney-in-fact of the Owner Trust an appropriate
special warranty deed or other instrument necessary to convey the interest of
the Owner Trust therein, or to pay over or assign to such purchaser those
insurance proceeds and condemnation awards to which it is entitled under
[ARTICLES 14 AND 15 OF THE LEASE] if such purchaser becomes obligated to
purchase the interest of the Owner Trust in the Property and to perform all
other necessary or appropriate acts as said agent and attorney-in-fact with
respect to any such purchase and conveyance at any time when the Owner Trust
fails to deliver any such document after 10 Business Days notice to a
Responsible Officer of the Corporate Owner Trustee, but only if such failure
shall continue for 10 Business Days after the giving by the Corporate Indenture
Trustee to the Corporate Owner Trustee of a second notice therefor, (iii) the
right to declare a Lease Event of Default under the Lease to be in default
under ARTICLE 20 THEREOF, (iv) the right to exercise remedies under or with
respect to the Lease, including ARTICLE 21 THEREOF, (v) the right to give all
notices, and, after a Lease Event of Default (subject to Sections 7.02(a) and
8.02), give all consents, releases and other instruments, (vi) the right to
give all notices of default and to take all action upon the happening of a
default under the Lease, including the commencement, conduct and consummation
of proceedings as shall be permitted under any provision of the Lease, or by
law or in equity, (vii) the right, not to the exclusion of the Owner Trust, to
receive copies of all notices sent to the Owner
88
<PAGE> 98
Trust, as Lessor under the Lease, (ix) the Owner Trust's interest under the
Lease in the Company's tangible and intangible property used or arising in
connection with the Property, including, but not limited to, permits, licenses,
contract rights and prepaid expenses, and (x) the right to do any and all other
things whatsoever which the Owner Trust or any lessor is, or may be entitled to
do under the Lease, it being understood and agreed that the assignment of the
right to receive any amounts payable under the Lease in respect of any
Make-Whole Premium is an absolute, unconditional and irrevocable assignment,
not intended or to be construed as a collateral assignment and that the Owner
Trust reserves no right, interest or remedy in or to such amounts, except if
such amounts have been paid by the Owner Trust.
(b) All of the Owner Trust's estate, right, title, interest, benefits,
powers and privileges, to and under all other leases, subleases or licenses of
the Property, any license, concession, management, mineral or other agreements
of a similar kind that permit the use or occupancy of the Property or any part
thereof for any purpose in return for any payment, or permit the extraction or
taking of any gas, oil, water or other minerals from the Property or any part
thereof in return for payment of any fee, rent or royalty, now or hereafter
entered into by the Owner Trust (collectively, the "Additional Leases" and,
together with the Lease, the "Leases"), together with all estate, rights,
title, interest, benefits, powers and privileges of the Owner Trust, as lessor,
under the Additional Leases including, but not by way of limitation, the
immediate and continuing right to make claim for, receive, collect and receipt
for all charges, fees, income, issues, profits, receipts, rents, revenues or
royalties payable under any of the Additional Leases (collectively, the
"Additional Lease Rents") and all right, title and interest of the Owner Trust
thereunder, including all cash, securities or letters of credit delivered or
deposited thereunder to secure performance by the lessees of their obligations
thereunder.
(c) All of the Owner Trust's estate, right, title, interest, benefits,
powers and privileges, to and under all agreements or contracts (other than the
Lease) for the sale or other disposition of all or any part of the Property,
now or hereafter entered into by the Owner Trust (collectively, the
"Contracts") together with all estate, rights, title, interest, benefits,
powers and privileges of the Owner Trust under the Contracts including, but not
by way of limitation, the immediate and continuing right to make claim for,
receive, collect and receipt for all charges, fees, income, issues, profits,
receipts, rents, revenues or royalties payable under any of the Contracts
(collectively, the "Contract Rents" and, together with the Lease Rents and the
Additional Lease Rents, the "Rents") and all right, title and interest of the
Owner Trust thereunder, including all cash, securities or letters of credit
deposited thereunder to secure performance by the lessees of their obligations
thereunder; provided, however, no provision of this Article XVI shall be deemed
to imply that such Contracts are permitted under this Indenture or any other
Indenture Document.
89
<PAGE> 99
(d) All of the Owner Trust's right, title and interest in and to all
claims and rights to the payment of money at any time arising in connection
with any rejection or breach of the Lease by the Company or a trustee of the
Company (or any Additional Lease by any lessee thereunder or trustee of any
such lessee) under Section 365 of the Federal Bankruptcy Code, including all
rights to recover damages arising out of such breach or rejection, all rights
to charges payable by the Company or such trustee (or by such lessee or
trustee) in respect of the Property or any portion thereof following the entry
of an order for relief under the Federal Bankruptcy Code in respect of such
lessee and all rentals and other charges outstanding under the Lease (or
Additional Lease) as of the date of entry of such order for relief.
SECTION 16.02. Receipt of Payments. The Owner Trust hereby designates
the Corporate Indenture Trustee to receive all payments of Rents, purchase
prices and other sums payable to the Lessor under the Lease or any Additional
Lease (but not Excepted Rights and Payments), and designates the Corporate
Indenture Trustee to receive (in addition to, and not to the exclusion of, the
Owner Trust) duplicate originals of all notices, undertakings, demands,
statements, documents, financial statements and other communications which the
Company or any other lessee is required or permitted to give, make, deliver to
or serve pursuant to the Lease or any Additional Lease. The Owner Trust agrees
to direct the Company and such other lessees to deliver to the Corporate
Indenture Trustee, at its address set forth in Section 18.07 or at such other
address or to such other Person as the Corporate Indenture Trustee shall
designate, all such payments and sums and duplicate originals of all such
notices, undertakings, demands, statements, documents, financial statements and
other communications, and no delivery thereof by the Company or such other
lessee shall be of any force or effect unless, in the case of such payments and
sums, made to the Corporate Indenture Trustee and, in the case of such notices,
undertakings, demands, statements, documents and other communications, made to
the Owner Trust and also made to the Corporate Indenture Trustee, in each case,
as herein provided.
SECTION 16.03. Irrevocability. The Owner Trust agrees that this
assignment hereinabove set forth is irrevocable and that it will not take any
action as Lessor under the Lease or otherwise which is inconsistent with this
Indenture.
SECTION 16.04. Owner Trust Remains Liable. Notwithstanding the
provisions of this Article XVI, the Owner Trust will at all times promptly and
faithfully perform in all material respects, or cause to be performed in all
material respects, all of the covenants, conditions and agreements contained in
the Lease or any Additional Lease of the Property now or hereafter existing on
the part of the Lessor thereunder to be kept and performed with respect to the
Property.
SECTION 16.05. Ongoing Right to Collect Rents; Receivers. If,
notwithstanding the terms of this assignment, a petition or order for
sequestration of rents, or the
90
<PAGE> 100
appointment of a receiver or some similar judicial action or order is deemed
required under applicable state law to allow the Indenture Trustees to continue
to collect the moneys described in paragraphs (a), (b), (c) and (d) of Section
16.01 hereof, then it is agreed by the Owner Trust that any proof of claim or
similar document filed by the Indenture Trustees in connection with the breach
or rejection of the Lease by the Company thereunder or the trustee of any such
lessee under Section 365 of the Federal Bankruptcy Code shall for the purpose
of perfecting the Indenture Trustees' rights conferred in said paragraph (d) be
deemed to constitute action required under such state law. Upon an Indenture
Event of Default, the Owner Trust hereby consents to the appointment of a
receiver for the Property as a matter of right and without any requirement for
notice to the Owner Trust and without regard to the solvency of the Owner Trust
or to the collateral that may be available for the satisfaction of the Mortgage
Notes and all other obligations under the Indenture Documents.
SECTION 16.06. Article XVI Not Intended to Override. Nothing in this
Article XVI is intended to override any other provision of this instrument.
ARTICLE XVII
SECURITY AGREEMENT AND FINANCING STATEMENT
(a) From the date of its separate recording in the real estate records
and the fixture filing records, this Indenture shall be effective as a security
agreement and financing statement by and between the Owner Trust, as debtor,
and the Indenture Trustees, as secured parties, filed as a security agreement
and financing statement pursuant to the Uniform Commercial Code in the State in
which the Property is located with respect to all goods constituting part of
the Indenture Estate which are or are to become fixtures related to the Land
and Improvements. For this purpose, the address of the debtor is the address
of the Owner Trust set forth in Section 18.07 hereof, and the address of the
secured party is the address of the Corporate Indenture Trustee set forth in
Section 18.07 hereof. This Indenture covers goods which are or are to become
fixtures.
(b) The Owner Trust hereby grants the Indenture Trustees a security
interest in such portions of the Trust Estate which may be subject to a
security interest under Article 9 of the Uniform Commercial Code, as enacted in
the jurisdiction in which the Property is located, and in all additions
thereto, substitutions therefor and proceeds thereof, for the purpose of
securing all indebtedness now or hereafter secured by this Indenture. The Owner
Trust agrees, at the expense of the Company, to execute and deliver financing
and continuation statements covering such Property from time to time and in
such form as the Indenture Trustees may reasonably require to perfect and
continue the perfection of the Indenture Trustees' lien or security interest
with respect to the Property. Subject to Sections 7.02, 7.11, 8.02 and 8.03 and
the provisions hereof expressly restricting the
91
<PAGE> 101
Indenture Trustees' rights and remedies herein, upon the occurrence of any
Indenture Event of Default hereunder, the Indenture Trustees shall have the
rights and remedies of a secured party under the Uniform Commercial Code, as
enacted in the jurisdiction in which the Property is located, and, at the
Indenture Trustees' option, the Indenture Trustees may also invoke the remedies
provided elsewhere in this Indenture as to such Property, subject to the terms
hereof.
(c) This Indenture constitutes a financing statement filed as a fixture
filing under the Uniform Commercial Code as enacted in the jurisdiction in
which the Property is located, filed in the fixture filing records of the
county in which the Property is located with respect to any and all fixtures
included within the term "Indenture Estate" and with respect to any goods or
other personal property that may now be or hereafter become such a fixture.
PARTS OF THE COLLATERAL ARE, OR ARE TO BECOME, FIXTURES ON THE REAL ESTATE.
(d) The Owner Trust and the Indenture Trustees agree that the filing of
any such financing statement or statements in the records normally having to do
with personal property shall not in any way affect the agreement of the Owner
Trust and the Indenture Trustees that everything used by the Owner Trust, its
agents, employees, and contractors and owned by the Owner Trust in connection
with the production of income from the Property or adapted for use therein or
which is described or reflected in this Indenture is, and at all times and for
all purposes and in all proceedings, legal or equitable, shall be, regarded as
part of the real estate conveyed hereby regardless of whether (i) any such item
is physically attached to the improvements, (ii) serial numbers are used for
the better identification of certain items, or (iii) any such item is referred
to or reflected in any such financing statement or statements so filed at any
time. Similarly, the mention in any such financing statement or statements of
the rights in and to (i) the proceeds of any fire and/or hazard insurance
policy, or (ii) any award in eminent domain proceedings for a taking or for
loss of value, or (iii) the Owner Trust's interest as lessor in any present or
future lease or the rights of the Owner Trust to income growing out of the use
and/or occupancy of the Property, whether pursuant to lease or otherwise, shall
not in any way alter any of the rights of the Indenture Trustees as determined
by this Indenture or affect the priority of the Indenture Trustees' security
interest granted hereby or by any other recorded document, it being understood
and agreed that such mention in such financing statement or statements is
solely for the protection of the Indenture Trustees in the event any court
shall at any time hold with respect to the foregoing clauses (i), (ii), or
(iii) of this sentence, that notice of the Indenture Trustees' priority of
interest, to be effective against a particular class of persons, must be filed
in the Uniform Commercial Code Records.
(e) The Owner Trust warrants that the Owner Trust's name, identity or
legal structure and principal place of business are as set forth in Section
18.07 hereof. The Owner Trust covenants and agrees that the Owner Trust will
furnish the Corporate
92
<PAGE> 102
Indenture Trustee with notice of any change in the matters addressed by the
first sentence of this subsection (e) within thirty (30) days after the
effective date of any such change and the Owner Trust, at the Indenture
Trustees' request, will promptly execute any financing statements or other
instruments reasonably deemed necessary by the Indenture Trustees to prevent
any filed financing statement from losing its perfected status.
(f) The information contained in this Article is provided in order that
this Indenture shall comply with the requirements of the Uniform Commercial
Code, as enacted in States in which the Property is located, for instruments to
be filed as financing statements. The "Debtor" is the Owner Trust and the
"Secured Party" is the Indenture Trustees, collectively; the identities or
structure and residence or principal places of business of "Debtor" is set
forth in Section 18.07 hereof; the mailing address of the "Secured Party" from
which information concerning the security interest may be obtained, and the
mailing address of "Debtor" are as set forth in Section 18.07 hereof; and a
statement indicating the types, or describing the terms, of collateral is set
forth in the Granting Clauses above. The respective Maturity Dates of the
Mortgage Notes are as set forth in Exhibits A-1 and A-2 hereto.
ARTICLE XVIII
MISCELLANEOUS
SECTION 18.01. Exculpation and Release of Liability. Without in any way
affecting the limitations on liability set forth in the Operative Documents,
the Indenture Trustees, and each Holder by accepting a Mortgage Note hereunder,
hereby acknowledge and agree that none of the Trust Company, William J. Wade,
the Owner Participant, or any director, officer, employee, stockholder, agent
or affiliate of the Trust Company, William J. Wade or the Owner Participant
(the "Exculpated Persons") shall have any obligation, duty or liability of any
kind whatsoever to the Indenture Trustees or any such Holder in connection with
the exercise by any Exculpated Person of any rights of the Owner Trust or the
taking of any action or the failure to take any action by any Exculpated Person
in connection with any rights of the Owner Trust under the Operative Documents
and each such Holder hereby waives and releases, to the extent permitted by
Applicable Law, each Exculpated Person of any and all such obligations, duties
or liabilities.
SECTION 18.02. Capacity in Which Acting. Each of the Owner Trustees (or
their permitted successors or assigns) and the Indenture Trustees (or their
permitted successors) acts hereunder not in its individual capacity but solely
as trustee except as expressly provided herein and in the other Indenture
Documents, and, in the case of Trust Company and Individual Owner Trustee (or
their respective permitted successors or assigns), in the Trust Agreement.
93
<PAGE> 103
SECTION 18.03. No Legal Title to Indenture Estate in Holders. No Holder
in its capacity as a Holder shall have legal title to any part of the Indenture
Estate. No transfer, by operation of law or otherwise, of any Mortgage Note or
other right, title and interest of any Holder in and to the Indenture Estate or
hereunder shall operate to terminate this Indenture or entitle such Holder or
any successor or transferee of such Holder to an accounting or to the transfer
to it of legal title to any part of the Indenture Estate.
SECTION 18.04. Sale of Indenture Estate by Indenture Trustees is
Binding. Any sale or other conveyance of all or any part of the Indenture
Estate by the Indenture Trustees made pursuant to the terms of this Indenture
and of the Lease shall bind the Company, the Owner Trust, the Holders and the
Owner Participant and shall be effective to transfer or convey all right, title
and interest of the Indenture Trustees, the Owner Trust, the Owner Participant
and such Holders therein and thereto. No purchaser or other grantee shall be
required to inquire as to the authorization, necessity, expediency or
regularity of such sale or conveyance or as to the application of any sale or
other proceeds with respect thereto by the Indenture Trustees.
SECTION 18.05. Indenture for Benefit of Owner Trust, Indenture Trustees
and Holders. Nothing in this Indenture, whether express or implied, shall be
construed to give to any person other than the Trust Company, William J. Wade,
the Owner Trust, the Company, the Indenture Trustees, as trustees and in their
individual capacities, and the Holders, and their respective successors and
permitted assigns, any legal or equitable right, remedy or claim under or in
respect of this Indenture.
SECTION 18.06. No Action Contrary to the Company's Rights Under the
Lease. Notwithstanding any of the provisions of this Indenture to the
contrary, so long as no Lease Event of Default shall have occurred and be
continuing, it is agreed that the Company shall be entitled to have peaceable
and quiet enjoyment of the Property during the term of the Lease as against any
claims by the Indenture Trustees, or any Persons claiming by, through or under
any of them. For purposes of this Section, the Owner Trust shall not be deemed
to claim by, through or under the Indenture Trustees.
SECTION 18.07. Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all notices, requests, demands, approvals,
authorizations, directions, consents, waivers or documents provided or
permitted by this Indenture to be made, given, furnished or filed shall be in
writing, transmitted by hand delivery or by a nationally recognized overnight
courier or by mailing the same by registered or certified mail, return receipt
requested, and (i) if to the Owner Trust, addressed to the Owner Trust in care
of Wilmington Trust Company, as Corporate Owner Trustee, at its office at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19801-0001,
Attention: Corporate Trust Administration (with a copy to the Owner Participant
at the address provided for notice pursuant to the introduction to the
Participation Agreement), (ii) if to the Indenture Trustees, to the Corporate
Indenture Trustee at its office at 101
94
<PAGE> 104
Barclay Street, Floor 12W, New York, New York 10286, Attention: Corporate Trust
- - MBS Administration (with a copy to (a) the Individual Indenture Trustee at
420 Shore Road, Long Beach, New York 11561 and (b) the Owner Participant at the
address provided for notice pursuant to the introduction to the Participation
Agreement) and (iii) if to the Company, to 3100 West Big Beaver Road, Troy,
Michigan 48084, Attention: Vice President and Treasurer. Any party hereto may
change the address to which notices to such party will be sent by giving notice
of such change to the other parties to this Indenture. All such notices shall
be deemed given upon receipt. The inability to make delivery because of a
changed address of which no notice was given, or rejection or refusal to accept
any notice offered for delivery, shall be deemed to be receipt of the notice as
of the date of such inability to deliver or rejection or refusal to accept.
Where this Indenture provides for notice to Holders, such notice shall be
sufficiently given (unless otherwise expressly provided herein) if in writing
and mailed, first-class postage prepaid, to each Holder entitled thereto, at
his last address as it appears in the Register or, in the case of Mortgage
Notes held by a Pass Through Trustee, such notice may be given in any manner
acceptable to the Pass Through Trustee. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Corporate Indenture Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of or irregularities in regular mail
service, it shall be impracticable to mail notice to the Owner Trust and
Holders when such notice is required to be given pursuant to any provision of
this Indenture, then any manner of giving such notice as shall be satisfactory
to the Indenture Trustees shall be deemed to be a sufficient giving of such
notice.
The Company shall be entitled to receive copies of all notices, requests,
demands, approvals, authorizations, directions, consents, waivers or documents
required or permitted by this instrument, including, but not limited to, copies
of any proposed or final supplemental indentures entered into pursuant to
Article XII hereof.
SECTION 18.08. Compliance Certificates and Opinions. Upon any
application or request by the Owner Trust to the Indenture Trustees to take any
action under any provision of this Indenture, the Owner Trust shall furnish to
the Indenture Trustees an Officer's Certificate, stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any,
95
<PAGE> 105
have been complied with, except that in the case of any such application or
request as to which the furnishing of documents is specifically required by any
provision of this Indenture relating to such particular application or request,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 18.09. Form of Documents Delivered to Indenture Trustees. In
any case where several matters are required to be certified by, or covered by
an opinion of, any specified Person, it is not necessary that all such matters
be certified by, or covered by the opinion of, only one such Person, or that
they be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company or of the
Corporate Owner Trustee may, insofar as it relates to legal matters, be based
upon a certificate or opinion of, or representations by, counsel, unless such
officer knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the matters upon
which his certificate or opinion is based are erroneous. Any such certificate
or any Opinion of Counsel may, insofar as it relates to factual matters, be
based upon a certificate or opinion of, or representations by, an officer or
officers of the Company or of any Owner Trustee stating that the information
with respect to such factual matters is in the possession of the Company or of
the Corporate Owner Trustee, unless such counsel knows or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous. Any Officer's Certificate,
Officer's Request or Officer's Order shall be signed by a Responsible Officer
who is generally familiar with the terms of and the transactions
96
<PAGE> 106
contemplated by this Indenture and the other Indenture Documents and, to the
extent that there are any statements of factual matters contained therein, be
limited to such factual matters which are within the personal knowledge of such
Responsible Officer.
Whenever any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, he may, but need not, consolidate such
instruments into one.
SECTION 18.10. Act of Holders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture
to be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders 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 Corporate Indenture Trustee and, if hereby
expressly required, to the Owner Trust. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Indenture and (subject to Sections 9.02 and 9.04 hereof)
conclusive in favor of the Indenture Trustees and the Owner Trust if made in
the manner provided in this Section.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Mortgage Note shall bind the Holder
of every Mortgage Note issued upon the registration of transfer thereof, or in
exchange therefor or in lieu thereof, in respect of anything done or suffered
to be done by the Indenture Trustees or the Owner Trust in reliance thereon,
whether or not notation of such action is made upon such Mortgage Note.
SECTION 18.11. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 18.12. Successors and Assigns. All covenants, agreements,
representations and warranties in this Indenture by the Indenture Trustees and
the Owner Trust shall bind and, to the extent permitted hereby, shall inure to
the benefit of and be enforceable by their respective successors and assigns,
whether or not so expressed.
SECTION 18.13. Severability. In the event any provision in this
Indenture or in the Mortgage Notes shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
SECTION 18.14. Governing Law; Interpretation. This Indenture and each
of the Mortgage Notes are being executed and delivered in the State of New York
and, except
97
<PAGE> 107
as provided below, the provisions hereof and of the Mortgage Notes (including
all provisions thereof regarding the contracting for, charging or receiving of
interest) shall be construed in accordance with and governed by the laws of the
State of New York, except that at all times the provisions for the creation,
perfection and enforcement of the liens and security interests created
hereunder shall be governed by and construed according to the laws from time to
time in effect in the State in which the Property is situated.
In any jurisdiction in which this Indenture shall be deemed to be a deed
of trust the beneficiaries thereof shall be deemed to be the Holders of the
Mortgage Notes issued and Outstanding hereunder.
SECTION 18.15. Estoppel Certificates. The Indenture Trustees, from time
to time (but not more frequently than twice during any calendar year), upon not
less than 15 days' prior notice (a "Request Notice") from the Owner Trust,
shall execute, acknowledge and deliver a certificate (an "Estoppel
Certificate") to such party as directed by the Owner Trust stating that to the
actual knowledge of the party providing such Estoppel Certificate (i) this
Indenture is unmodified and in full force and effect (or, if there have been
modifications or supplements, that this Indenture is in full force and effect
as modified or supplemented, and setting forth such modifications and
supplements) (ii) the aggregate unpaid principal amount and any accrued but
unpaid interest (as of the date of the Estoppel Certificate) evidenced by the
Outstanding Mortgage Notes and the dates to which scheduled Installment Payment
Amounts and interest have been paid and (iii) the amount of Basic Rent
received, it being intended that an Estoppel Certificate may be relied upon by
such party or any prospective purchaser or mortgagee of its estate specified in
the related Request Notice.
SECTION 18.16. Company Not a Party. No reference to the Company in this
Indenture shall mean that the Company has any obligations under this Indenture,
all obligations of the Company being as set forth in the Indenture Documents to
which it is a party (including, however, provisions thereof that create
obligations of the Company by reference to this Indenture).
SECTION 18.17. Special State Law Addendum. The provisions contained in
the Special State Law Addendum are hereby incorporated herein and made a part
hereof.
98
<PAGE> 108
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed and, by parties in corporate form, by their respective officers
thereunto duly authorized, and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first above written.
[SEAL] Real Estate Finance Trust 1995-K-__, a
Delaware business trust
By: Wilmington Trust Company, not
in its individual capacity,
except as otherwise provided,
but solely as Corporate Owner
Trustee,
Attest: By:_______________________________
Name: ___________________________
Title:
__________________________________
Name:_____________________________
Assistant Secretary
By: ____________________________________
William J. Wade, not in his
individual capacity, except as
otherwise provided, but solely as
Individual Owner Trustee
WITNESSES
__________________________________
PRINT NAME:
__________________________________
PRINT NAME:
99
<PAGE> 109
[CORPORATE SEAL] The Bank of New York, as
Corporate Indenture Trustee
Attest: By:_______________________________
Name: _________________________
Title: Assistant Vice President
__________________________________
Name:_____________________________
Assistant Secretary
Todd N. Niemy
__________________________________
Co-Indenture Trustee
WITNESSES
__________________________________
PRINT NAME:
__________________________________
PRINT NAME:
This document prepared by:
SULLIVAN & CROMWELL
250 Park Avenue
New York, New York 10177
Attn: Arthur S. Adler, Esq.
100
<PAGE> 110
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
Know all men by these presents that before me, the below-named Notary
Public in and for the State and County named above duly commissioned to take
acknowledgments, there personally appeared [___________________] and
[______________________], each of whom is personally known to me to be a person
named in and who signed the legal instrument to which this acknowledgment is
attached and which was produced to me in the State and County aforesaid, and
being by me first duly sworn each did acknowledge before me, depose and say to
me that he is, respectively, and [__________________] of Wilmington Trust
Company, a Delaware state banking association, in its capacity as Trustee named
as one of the parties to the aforementioned legal instrument; that he knows the
seal of said corporation; that the seal imprinted on the legal instrument to
which this acknowledgement is attached is an imprint of the true seal of said
corporation; that after being duly informed of the contents and import of such
legal instrument he had signed and caused the seal of such corporation in its
capacity as Trustee to be imprinted on such legal instrument as the officer of
such corporation indicated above; that he had signed and sealed the same in the
name of and on behalf of such corporation in such capacity by the authority,
order and resolution of its Board of Directors; that he had signed his name
thereto on behalf of said corporation in such capacity by like order; that the
execution of said legal instrument was the free and voluntary act and deed of
said corporation in such capacity for the consideration, purposes, and uses set
forth in such legal instrument; that he had delivered such legal instrument to
the other parties thereto as such; and that on behalf of said corporation in
such capacity he had received a true copy of such legal instrument without
charge.
IN WITNESS WHEREOF, I have signed and imprinted my official notarial seal
on this acknowledgment in the State and County named above on the ___ day of
March, 1995.
My commission expires:
__________________________________
Notary Public
Print Name:_______________________
<PAGE> 111
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
Know all men by these presents that before me, the below-named Notary
Public in and for the State and County named above duly commissioned to take
acknowledgments, there personally appeared William J. Wade, who is personally
known to me to be a person named in and who signed the legal instrument to
which this acknowledgment is attached and which was produced to me in the State
and County aforesaid, and being by me first duly sworn did acknowledge before
me, depose and say to me that he is a trustee of Real Estate Finance Trust
1995-K-______, a Delaware business trust, named as one of the parties to the
aforementioned legal instrument; that after being duly informed of the contents
and import of such legal instrument he had signed such legal instrument as the
trustee of such trust indicated above; that he had signed the same in the name
of and on behalf of such trust; that the execution of said legal instrument was
the free and voluntary act and deed of said trust for the consideration,
purposes, and uses set forth in such legal instrument; that he had delivered
such legal instrument to the other parties thereto as such; and that on behalf
of said trust he had received a true copy of such legal instrument without
charge.
IN WITNESS WHEREOF, I have signed and imprinted my official notarial seal
on this acknowledgment in the State and County named above on the ____ day of
March, 1995.
My commission expires:
__________________________________
Notary Public
Print Name:_______________________
<PAGE> 112
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
Know all men by these presents that before me, the below-named Notary
Public in and for the State and County named above duly commissioned to take
acknowledgments, there personally appeared_____________________________________
and _______________________, each of whom is personally known to me
to be a person named in and who signed the legal instrument to which this
acknowledgment is attached and which was produced to me in the State and County
aforesaid, and being by me first duly sworn each did acknowledge before me,
depose and say to me that he is, respectively, vice president and assistant
secretary of The Bank of New York, named as one of the parties to the
aforementioned legal instrument; that he knows the seal of said corporation;
that the seal imprinted on the legal instrument to which this acknowledgement
is attached is an imprint of the true seal of said corporation; that after
being duly informed of the contents and import of such legal instrument he had
signed and caused the seal of such corporation to be imprinted on such legal
instrument as the officer of such corporation indicated above; that he had
signed and sealed the same in the name of and on behalf of such corporation by
the authority, order and resolution of its Board of Directors; that he had
signed his name thereto on behalf of said corporation by like order; that the
execution of said legal instrument was the free and voluntary act and deed of
said corporation for the consideration, purposes, and uses set forth in such
legal instrument; that he had delivered such legal instrument to the other
parties thereto as such; and that on behalf of said corporation he had received
a true copy of such legal instrument without charge.
IN WITNESS WHEREOF, I have signed and imprinted my official notarial seal
on this acknowledgment in the State and County named above on the ____ day of
March, 1995.
My commission expires:
__________________________________
Notary Public
Print Name:_______________________
<PAGE> 113
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
Know all men by these presents that before me, the below-named Notary
Public in and for the State and County named above duly commissioned to take
acknowledgments, there personally appeared Todd N. Niemy, who is personally
known to me to be a person named in and who signed the legal instrument to
which this acknowledgment is attached and which was produced to me in the State
and County aforesaid, and being by me first duly sworn did acknowledge before
me, depose and say to me that after being duly informed of the contents and
import of such legal instrument he had signed such legal instrument as his free
and voluntary act and deed for the consideration, purposes, and uses set forth
in such legal instrument; that he had delivered such legal instrument to the
other parties thereto as such; and that he had received a true copy of such
legal instrument without charge.
IN WITNESS WHEREOF, I have signed and imprinted my official notarial seal
on this acknowledgment in the State and County named above on the ____ day of
March, 1995.
My commission expires:
__________________________________
Notary Public
Print Name:_______________________
<PAGE> 114
SCHEDULE I
<PAGE> 115
OHIO STATE LAW ADDENDUM
This Addendum modifies and supplements the Indenture, Open-End Mortgage
and Deed of Trust, Assignment of Rents and Security Agreement (the "Indenture")
dated as of March ___, 1995 among Real Estate Finance Trust 1995-K-___, a
Delaware business trust, and The Bank of New York and Todd N. Niemy, Indenture
Trustees.
The Indenture secures unpaid balances of loan advances made after the
Indenture is delivered to the recorder for record, to the extent that the total
unpaid loan indebtedness, exclusive of interest thereon, does not exceed the
maximum amount of $500,000,000 which may be outstanding at any time.
IN WITNESS WHEREOF, this Addendum is executed effective as of the date of
the Indenture.
Signed and acknowledged in the
presence of: Real Estate Finance Trust 1995-K-___,
a Delaware business trust
Sign here:____________________
Print here:___________________ By: Wilmington Trust Company, not in
its individual capacity, except as
Sign here:____________________ otherwise provided, but solely as
Print here:___________________ Corporate Owner Trustee,
Sign here:____________________
Print here:___________________ By:
Name: ____________________________
Title:
Sign here:____________________
Print here:___________________
By: __________________________________
William J. Wade, not in his
individual capacity, except as
otherwise provided, but solely as
Individual Owner Trustee
<PAGE> 116
The Bank of New York
Corporate Indenture Trustee
By:
Name: ____________________________
Title: Assistant Vice President
Todd N. Niemy
______________________________________
Co-Indenture Trustee
<PAGE> 117
STATE OF __________________)
) ss.
COUNTY OF _________________)
The foregoing instrument was acknowledged before me this _____ day of
______________, 1995 by __________________, the _______________________ of
__________________, a Delaware business trust, on behalf of the trust.
__________________________
Notary Public
My Commission Expires: _________________ [SEAL]
STATE OF __________________)
) ss.
COUNTY OF _________________)
The foregoing instrument was acknowledged before me this _____ day of
______________, 1995 by __________________, the _______________________ of
__________________, a Delaware business trust, on behalf of the trust.
__________________________
Notary Public
My Commission Expires: _________________ [SEAL]
<PAGE> 118
SPECIAL MINNESOTA STATE LAW ADDENDUM TO
INDENTURE, MORTGAGE AND DEED OF TRUST,
ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
This Special State Law Addendum is attached to and made a part of that
certain Indenture, Mortgage and Deed of Trust, Assignment of Rents and Security
Agreement dated as of March, 1995 between Real Estate Finance Trust 1995-K-__,
a Delaware business trust, The Bank of New York and Todd N. Niemy, Indenture
Trustees (the "Indenture"). All capitalized terms not otherwise defined herein
shall have the respective meanings set forth in the Indenture.
A. Tax Identification Number of Debtor. In addition to the information
provided in the security agreement and financing statement contained in Article
XVII of the Indenture, the I.R.S. tax identification number for the Debtor is:
38-0729-500.
B. Application of Rents. Notwithstanding any provision to the contrary
contained in the Indenture, all Lease Rents, Additional Lease Rents and other
amounts (collectively, "Rents"), if any, collected by Indenture Trustee
pursuant to Article XVI of the Indenture (Article XVI of the Indenture, as
amended and supplemented hereby is hereinafter referred to as the "Assignment
of Rents") shall be held and applied in the following order:
1. To payment of all reasonable fees of the receiver, if one shall be
appointed, approved by the Court;
2. To the repayment when due of all tenant security deposits, with
interest thereon, pursuant to the provisions of the Minnesota Statutes,
Section 504.20;
3. To payment when due of all delinquent or current real estate taxes
and special assessments payable with respect to the Indenture Estate, or
the periodic escrow for the payment of said taxes or special assessments;
4. To payment when due of all premiums for the insurance required by
the provisions of the Indenture, or the periodic escrow for the payment of
said premiums;
5. To payments of expenses incurred for normal maintenance of the
Indenture Estate;
6. To payment of expenses incurred by the Indenture Trustee or its
agents for the management and operation of the Indenture Estate, including
the cost of any
<PAGE> 119
independent contractor retained by the Indenture Trustee to manage and
operate the Indenture Estate;
7. Any excess amounts remaining after the above payments shall be
paid to the Indenture Trustee in payment of the obligations secured by the
Indenture in such order of application as the Indenture Trustee may or
elect, subject to the provisions of the Indenture.
The rights and powers of the Indenture Trustee under the Assignment of Rents,
and the application of Rents pursuant to this paragraph, shall continue and
remain in full force and effect both before and after commencement of any
action or procedure to foreclose the Indenture, after the foreclosure sale of
the Indenture Estate in connection with the foreclosure of the Indenture, and
until expiration of the period of redemption from any such foreclosure sale,
whether or not any deficiency from the unpaid balance of the obligations
secured by the Indenture exists after such foreclosure sale.
It is the intention of the parties hereto that the Assignment of Rents
shall confer upon the Indenture Trustee the fullest rights, remedies and
benefits available pursuant to Minnesota Statutes, Sections 576.01 and 559.17.
C. Future Advances.
1. To the extent that this Indenture secures future advances, the
amount of such advances is not currently known. The acceptance of this
Indenture by the Indenture Trustee confirms that the Indenture Trustee is
aware of the provisions of Minnesota Statutes Section 287.05, subd. 5, and
intends to comply with the requirements contained therein.
2. The maximum principal amount of indebtedness secured by this
Indenture at any one time, excluding advances made by the Indenture
Trustee in protection of the Indenture Estate or the lien of this
Indenture, shall be $500,000,000.
3. The representations contained in this section are made solely for
the benefit of county recording authorities in determining the mortgage
registry tax payable as a prerequisite to the recording of this Indenture.
The Owner Trustee acknowledges that such representations do not constitute
or imply an agreement by the Indenture Trustee to make any future advances
to the Owner Trustee.
D. Maturity. The loan secured by the Trust Indenture matures on
_________, _____.
<PAGE> 120
GEORGIA STATE LAW ADDENDUM TO INDENTURE, MORTGAGE AND DEED OF TRUST,
ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
This Addendum modifies and supplements the foregoing Indenture, Mortgage
and Deed of Trust, Assignment of Rents and Security Agreement among Real Estate
Finance Trust 1995-K-___, a Delaware business trust, and The Bank of New York
and Todd N. Niemy, Indenture Trustees, dated March ___, 1995 and is
incorporated therein. Any inconsistency between this Addendum and the foregoing
Indenture shall be controlled by this Addendum.
This document is renamed an Indenture, Mortgage, Deed of Trust, Deed to
Secure Debt, Assignment of Rents and Security Agreement and is intended as a
Deed to Secure Debt and not a Mortgage.
This Deed to Secure Debt secured a total principal indebtedness of
[INSERT WORDS] ($ [INSERT NUMBERS] ) with a final maturity date of
_____________.
If all obligations secured hereby shall be fully satisfied, paid and
performed, Indenture Trustees or Co-Indenture Trustee, as the case may be,
shall, at the request of Owner Trustees or Individual Owner Trustees, as the
case may be, promptly deliver to Owner Trustees or Individual Owner Trustee, as
the case may be, in recordable form, all such documents as shall be necessary
to reconvey the Property to Owner Trustees or Individual Owner Trustee, as the
case may be, and to release the Property from the liens, security interests,
conveyances and assignments created or evidenced hereby. This Paragraph shall
not, under any circumstances, be interpreted to be a defeasance clause, this
instrument constituting a deed to secure debt with regard to such Property, and
not a mortgage.
Upon the occurrence and during the continuance of an Indenture Event of
Default, Owner Trustees or Individual Owner Trustee, as the case may be, hereby
grant to Indenture Trustees or Co-Indenture Trustee, as the case may be, the
following irrevocable power of attorney: to sell all or any part of the
Property at auction at the usual place for conducting sales at the court house
in the county where the Property or any part thereof lies in said State to the
highest bidder for cash, after advertising the time, terms and place of such
sale once a week for four weeks immediately preceding such sale (but without
regard to the number of days intervening between the date of publication of the
first advertisement and the date of sale) in a newspaper in which Sheriff's
sales are advertised in said county, all other notice being hereby waived by
Owner Trustees or Individual Owner Trustee, as the case may be, and Indenture
Trustees or Co-Indenture Trustee, as the case may be, or any person on behalf
of Indenture Trustees or Co-Indenture Trustee, as the case may be, may bid and
purchase the Property at such sale and may apply all or any part of the
indebtedness secured hereby as a credit
<PAGE> 121
to the purchase or purchaser or purchasers at such sale and grant a sufficient
conveyance of said Property in fee simple, with full warranties of title, which
conveyance may contain recitals setting forth the Indenture Event(s) of Default
upon which the execution of power of sale herein granted depends, and Owner
Trustees or Individual Owner Trustee, as the case may be, hereby constitute and
appoint Indenture Trustees or Co-Indenture Trustee, as the case may be, as the
agent and attorney-in-fact of Owner Trustees or Individual Owner Trustee, as
the case may be, to make such sale and conveyance, and thereby to divest Owner
Trustees or Individual Owner Trustee, as the case may be, of all right, title
and equity that Owner Trustees or Individual Owner Trustee, as the case may be,
may have in and to the Property and to vest same in the purchaser or purchasers
at such sale or sales and all the acts and doings of said agency and
attorney-in-fact are hereby ratified and confirmed. Owner Trustees or
Individual Owner Trustee, as the case may be, hereby constitute and make such
recitals, and Owner Trustees or Individual Owner Trustee, as the case may be,
hereby covenant and agree that the recitals so to be made by Indenture Trustees
or Co-Indenture Trustee, as the case may be, shall be binding and conclusive
upon Owner Trustees or Individual Owner Trustee, as the case may be, and the
heirs, executors, administrators and assigns of Owner Trustees or Individual
Owner Trustee, as the case may be, and that the conveyance to be made by
Indenture Trustees or Co-Indenture Trustee, as the case may be, shall be
effectual to bar all equity of redemption (including any statutory redemption)
of Owner Trustees or Individual Owner Trustee, as the case may be, or the
successors in interest of Owner Trustees or Individual Owner Trustee, as the
case may be, in and to said Property.
The power and agency hereby granted are coupled with an interest and are
irrevocable by death or otherwise and are granted as cumulative to the remedies
for collection of the indebtedness secured hereby provided by law and shall not
be exhausted by one exercise thereof by may be exercised until full payment of
such indebtedness hereby secured.
In the event of any such foreclosure sale or sales under the power herein
granted, Owner Trustees or Individual Owner Trustee, as the case may be, shall
be deemed a tenant holding over and shall forthwith deliver possession to the
purchaser or purchasers at such sale or be summarily dispossessed according to
the provisions of law applicable to tenants holding over.
Owner Trustees or Individual Owner Trustee, as the case may be, hereby
waive and renounce all homestead and exemption rights provided for by the
Constitution and the laws of the United States and any state, in and to the
Property as against the collection of the indebtedness secured hereby, or any
part hereof.
BY EXECUTION OF THIS DEED TO SECURE DEBT, OWNER TRUSTEES OR
INDIVIDUAL OWNER TRUSTEE, AS THE CASE MAY
<PAGE> 122
BE, EXPRESSLY: (A) ACKNOWLEDGE THE RIGHT OF INDENTURE TRUSTEES OR
CO-INDENTURE TRUSTEE, AS THE CASE MAY BE, TO ACCELERATE THE OBLIGATIONS
SECURED HEREBY AND THE POWER OF ATTORNEY GIVEN HEREIN TO INDENTURE
TRUSTEES OR CO-INDENTURE TRUSTEE, AS THE CASE MAY BE, TO SELL THE PROPERTY
BY NONJUDICIAL FORECLOSURE UPON AN EVENT OF DEFAULT BY OWNER TRUSTEES OR
INDIVIDUAL OWNER TRUSTEE, AS THE CASE MAY BE, WITHOUT ANY JUDICIAL HEARING
AND WITHOUT ANY NOTICE OTHER THAN SUCH NOTICE (IF ANY) AS IS SPECIFICALLY
REQUIRED TO BE GIVEN UNDER THE PROVISIONS OF THIS DEED TO SECURE DEBT; (B)
WAIVES ANY AND ALL RIGHTS WHICH OWNER TRUSTEES OR INDIVIDUAL OWNER
TRUSTEE, AS THE CASE MAY BE, MAY HAVE UNDER THE CONSTITUTION OF THE UNITED
STATES OF AMERICA (INCLUDING, WITHOUT LIMITATION, THE FIFTH AND FOURTEENTH
AMENDMENTS THEREOF), THE VARIOUS PROVISIONS OF THE CONSTITUTION FOR THE
SEVERAL STATES, OR BY REASON OF ANY OTHER APPLICABLE LAW, (1) TO NOTICE
AND TO JUDICIAL HEARING PRIOR TO THE EXERCISE BY INDENTURE TRUSTEES OR
CO-INDENTURE TRUSTEE, AS THE CASE MAY BE, OF ANY POWER OF SALE HEREIN
PROVIDED, EXCEPT SUCH NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED TO BE
GIVEN UNDER THE PROVISIONS OF THIS DEED TO SECURE DEBT OR APPLICABLE LAW,
AND (2) CONCERNING THE APPLICATION, RIGHTS OR BENEFITS OF ANY STATUTE OF
LIMITATION OR ANY MORATORIUM, REINSTATEMENT, MARSHALLING, FORBEARANCE,
APPRAISEMENT, VALUATION, STAY, EXTENSION, HOMESTEAD, EXEMPTION OR
REDEMPTION LAWS; (C) ACKNOWLEDGES THAT OWNER TRUSTEES OR INDIVIDUAL OWNER
TRUSTEE, AS THE CASE MAY BE, HAVE READ THIS DEED TO SECURE DEBT AND ANY
AND ALL QUESTIONS OF OWNER TRUSTEES OR INDIVIDUAL OWNER TRUSTEE, AS THE
CASE MAY BE, REGARDING THE LEGAL EFFECT OF THIS DEED TO SECURE DEBT AND
ITS PROVISIONS HAVE BEEN EXPLAINED FULLY TO OWNER TRUSTEES OR INDIVIDUAL
OWNER TRUSTEE, AS THE CASE MAY BE, AND OWNER TRUSTEES OR INDIVIDUAL OWNER
TRUSTEE, AS THE CASE MAY BE, HAVE CONSULTED WITH COUNSEL OF ITS CHOICE
PRIOR TO EXECUTING THIS DEED TO SECURE DEBT; AND (D) ACKNOWLEDGES THAT ALL
WAIVERS OF THE AFORESAID RIGHTS HAVE BEEN MADE KNOWINGLY, INTENTIONALLY
AND WILLINGLY BY OWNER TRUSTEES OR INDIVIDUAL OWNER TRUSTEE, AS THE CASE
MAY BE, AS PART OF A BARGAINED-FOR LOAN TRANSACTION AND THAT THIS DEED TO
SECURE DEBT IS VALID AND ENFORCEABLE BY INDENTURE TRUSTEES OR CO-INDENTURE
TRUSTEE, AS THE CASE
<PAGE> 123
MAY BE, AGAINST OWNER TRUSTEES OR INDIVIDUAL OWNER TRUSTEE, AS THE CASE
MAY BE, IN ACCORDANCE WITH ALL THE TERMS AND CONDITIONS HEREOF.
_______________________________________
INITIAL
<PAGE> 124
SPECIAL STATE LAW ADDENDUM WITH
RESPECT TO PROPERTY LOCATED IN TEXAS
THIS SPECIAL STATE LAW ADDENDUM is executed in connection with and amends
and is attached to and incorporated into that certain Indenture, Mortgage and
Deed of Trust, Assignment of Rents and Security Agreement dated as of March 2,
1994 (the "Indenture") among REAL ESTATE FINANCE TRUST 1995-K, a Delaware
business trust and the BANK OF NEW YORK and TODD N. NIEMY, Indenture Trustees.
To the extent that the Indenture covers property located in the state of
Texas it is amended and modified in the following manner:
1. Title to the property is held in the name of Wilmington Trust Company
as the Trustee of the Owner Trust (the "Owner Trustee") and therefore the
grantor of this Deed of Trust is the Owner Trustee and all references to the
Owner Trust are amended to refer to the Owner Trustee.
2. The granting clause of the Deed of Trust which begins on page 2 with
"NOW THEREFORE, . . ." and continues through the colon on page 3 shall be
deleted and replaced with the following:
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that (A) to secure (i) the
payment of the principal of, and interest on and all other amounts in
respect to the Mortgage Notes from time to time Outstanding and (ii) the
performance and observance of the covenant herein contained and the
performance and observance by the Owner Trustee of all of its covenants
and provisions contained herein and (only with respect to the Property
encumbered hereby) in the Indenture Documents to which it is a party for
the benefit of the Holders and the Indenture Trustees and (iii) all future
advances and readvances that may subsequently be made to the Owner Trustee
by the Indenture Trustees, evidenced by the Mortgage Notes, and all
renewals and extensions thereof, provided, however, nothing contained
herein shall create an obligation on the part of the Indenture Trustees to
make future advances or readvances to the Owner Trustee and (iv) all fees
of the Indenture Trustees and charges and expenses of collection incurred
by the Indenture Trustees, including court costs and reasonable attorneys'
fees, and (B) in consideration of the premises and of the purchase of the
Mortgage Notes by the purchasers thereof, the Owner Trustee has executed
and delivered this Indenture; and the Owner Trustee has irrevocably
granted, and by these presents and by the execution and delivery hereof
and of the Mortgage Notes, the Owner Trustee does hereby irrevocably grant
bargain, convey, warrant, assign, collaterally assign, mortgage, pledge,
sell, alien, remise, release, transfer, hypothecate, deliver, set over and
confirm (the foregoing
<PAGE> 125
acts being referred to herein as simply the "Grant"), to Mortgage Trustee
and Mortgage Trustee's substitutes and successors in trust upon the terms
herein set forth to the extent that it constitutes real property and to
the extent that it does not constitute real property, grants, conveys,
assigns, transfers, mortgages, and pledges to and creates a security
interest in favor of the Indenture Trustees (x) for the benefit and
security of the Holders of the Mortgage Notes, without priority of any
over the others, and (y) upon the issuance of any Refinancing Mortgage
Notes, for the benefit of the Holders of such Refinancing Mortgage Notes
(on a parity with the Holders of the Mortgage Notes hereafter issued
Outstanding), all right, title and interest of the Owner Trustee (but only
to the extent conveyed to the Owner Trustee under the Operative Documents
and only to the extent described in this Indenture) in and to its interest
in, to and under all of the property, rights, privileges and franchises
described in the following Granting Clauses, exclusive, however of all
Excepted Rights and Excepted Payments (collectively, described as the
"Indenture Estate"), to wit:
3. The "To Have and To Hold" paragraph on page 5 is deleted and replaced
with the following:
TO HAVE AND TO HOLD the Indenture Estate and all parts thereof unto
the Mortgage Trustee and the Mortgage Trustee's substitutes or successors,
but in trust, nevertheless for the benefit and security of the Holders for
the use and purposes and with the power and authority and subject to the
terms and conditions mentioned and set forth in this Indenture.
4. The paragraph that begins at the bottom of page 6 and continues on to
page 7 is deleted and replaced with the following:
The Owner Trustee (sometimes herein referred to as "Grantor") does
hereby warrant and represent that it has not mortgaged, assigned or
pledged, and hereby covenants that it will not mortgage, assign or pledge,
as long as this Indenture shall remain in effect and shall not have been
terminated pursuant to Section 13.01 hereof, any of its estate, right,
title or interest described in this Indenture, to anyone other than the
Mortgage Trustee for the benefit of the Indenture Trustees. With respect
to such estate, right, title and interest described in this Indenture, the
Grantor will not, except as provided in this Indenture or with respect to
Excepted Rights and Payments, (i) enter into any agreement terminating,
amending or supplementing any of the Indenture Documents, or execute any
waiver or modification of, or consent under, the terms of any of the
Indenture Documents (or, if Grantor's interest in the Land is a leasehold,
surrender its interest under the Ground Lease) or accept a surrender of
the Company's interest under the Lease or subordinate the lease, (ii)
accept any payment from the Company under any Indenture Document, (iii)
settle or compromise any claim arising under any of the Indenture
Documents
<PAGE> 126
or (iv) submit or consent to the submission of any dispute, difference or
other matter arising under or in respect of any of the Indenture Documents
to arbitration thereunder. For purposes of subsequent references herein,
this paragraph shall be regarded as the seventh paragraph following the
Habendum Clause.
5. The following definition is added between the definition of Mortgage
Notes and Officers Certificate on page 13:
Mortgage Trustee means ______________ and his substitutes or
successors as Mortgage Trustee as established pursuant to the terms of
this Indenture.
6. Paragraph (d) on page 29 is deleted and replaced with the following:
(d) Any transfer or attempted transfer by the Owner Trustee of all or
any part of the Indenture Estate, except in compliance with the terms
hereof, shall entitle the Indenture Trustees to accelerate the Mortgage
Notes and declare the same to be immediately due and payable.
7. Subparagraph (g) on page 51 is hereby deleted in its entirety and
replaced with the following:
The Indenture Trustees may require the Mortgage Trustee to sell all or
part of the Indenture Estate, at public auction, to the highest bidder,
for cash, at the county courthouse of the county in Texas in which the
Indenture Estate or any part thereof is situated, between the hours of
10:00 o'clock a.m. and 4:00 o'clock p.m. on the first Tuesday of any
month, after giving notice of the time, place and terms of said sale and
of the property to be sold, by posting written notice thereof at the
courthouse door of the county in which the sale is to be made and by
filing said notice with the County Clerk of said county at least
twenty-one (21) days preceding the date of the sale, and if the property
to be sold is in more than one county, a notice shall be posted at the
courthouse door and filed with the County Clerk of each county in which
the property to be sold is situated. In addition, the Indenture Trustees
shall, at least twenty-one (21) days preceding the date of sale, serve
written notice of the proposed sale by certified mail on each debtor
obligated to pay the debt secured hereby according to the records of the
Indenture Trustees. Service of such notice shall be completed upon deposit
of the notice, enclosed in a postpaid wrapper, property addressed to such
debtor at the most recent address as shown by the records of the
Indenture Trustees, in a post office or official depository under the care
and custody of the United States Postal Service. The affidavit of any
person having knowledge of the facts to the effect that such service was
completed shall be prima facie evidence of the fact of service. Any notice
that is required or permitted to be given to the Owner Trustee must be
addressed to the Owner Trustee at the Owner Trustee's address as stated
above. Any notice that is to be given by certified
<PAGE> 127
mail to any other debtor may, if no address for such other debtor is shown
by the records of the Indenture Trustees, be addressed to such other
debtor at the address of the Owner Trustee, as is shown by the records of
the Indenture Trustees. Notwithstanding the foregoing provisions of this
paragraph, notice of such sale given in accordance with the requirements
of the applicable laws of the State of Texas in effect at the time of such
sale shall constitute sufficient notice of such sale. Mortgage Trustee may
sell all or any portion of the Indenture Estate, together or in lots or
parcels, and may execute and deliver to the purchaser or purchasers of
such property good and sufficient deeds of conveyance of fee simple title
with covenants of general warranty made on behalf of the Owner Trustee. In
no event shall Mortgage Trustee be required to exhibit, present or display
at any such sale any of the personalty described herein to be sold at such
sale. The Mortgage Trustee making such sale shall receive the proceeds
thereof and shall apply the same in accordance with the terms of this
Indenture. Payment of the purchase price to the Mortgage Trustee shall
satisfy the obligation of the purchaser at such sale therefor, and such
purchaser shall not be responsible for the application thereof. The sale
or sales by Mortgage Trustee of less than the whole of the Indenture
Estate shall not exhaust the power of sale herein granted, and Mortgage
Trustee is specifically empowered to make a successive sale or sales under
such power until the whole of the Indenture Estate shall be sold; and if
the proceeds of such sale or sales of less than the whole of the Indenture
Estate shall be less than the aggregate of the indebtedness secured hereby
and the expenses thereof, this Indenture and the lien, security interest
and assignment hereof shall remain in full force and effect as to the
unsold portion of the Indenture Estate, just as though no sale or sales
had been made; provided, however, that the Owner Trustee shall never have
any right to require the sale or sales of less than the whole of the
Indenture Estate, but the Indenture Trustees shall have the right, at
their sole election, to request Mortgage Trustee to sell less than the
whole of the Indenture Estate. At such sale (1) Owner Trustee hereby
agrees, in its behalf and in behalf of its heirs, executors,
administrators, successors, personal representatives and assigns, that any
and all recitals made in any deed of conveyance given by Mortgage Trustee
with respect to the identity of Indenture Trustees, the occurrence or
existence of any default, the acceleration of the maturity of any of the
indebtedness, the request to sell, the notice of sale, the giving of
notice to all debts legally entitled thereto, the time, place, terms, and
manner of sale, and receipt, distribution and application of the money
realized therefrom, or the due and proper appointment of a substitute
trustee, and, without being limited by the foregoing, with respect to any
other act or thing having been duly done by Indenture Trustees or by
Mortgage Trustee hereunder, shall be taken by all courts of law and equity
as prima facie evidence that the statements or recitals state facts and
are without further question to be so accepted, and the Owner Trustee
hereby ratifies and confirms every act that Mortgage Trustee or any
substitute mortgage trustee hereunder may lawfully do in the premises by
virtue hereof, and (2) the purchaser may disaffirm any easement granted,
or rental, lease or other contract made in violation of any
<PAGE> 128
provision of this Indenture, and may take immediate possession of the
Indenture Estate free from, and despite the terms of, such grant of
easement and rental or lease contract. Indenture Trustees may bid and
become the purchaser of all or any part of the Indenture Estate at any
trustee's or foreclosure sale hereunder, and the amount of Indenture
Trustees' successful bid may be credited on the indebtedness secured
hereby.
In the event of a trustee's sale hereunder and if at the time of such
sale, the Owner Trustee or any other party occupies the portion of the
Indenture Estate so sold or any part thereof, such occupant shall
immediately become the tenant of the purchaser at such sale, which tenancy
shall be a tenancy from day to day, terminable at the will of either
tenant or landlord, at a reasonable rental per day based upon the value of
the portion of the Indenture Estate so occupied, such rental to be due and
payable daily to the purchaser. An action of forcible detainer shall lie
if the tenant holds over after a demand in writing for possession of such
property.
If, for any reason, Indenture Trustees prefer to appoint a substitute
trustee hereunder, Indenture Trustees may, from time to time, by written
instrument, appoint one or more substitute trustees, who shall succeed to
all the estate, rights, powers, and duties of the original Mortgage
Trustee named herein. Such appointment may be executed by anyone acting in
a representative capacity, and such appointment shall be presumed to have
been executed with appropriate authority, absent proof to the contrary.
<PAGE> 129
SPECIAL STATE LAW ADDENDUM (CALIFORNIA)
To
Indenture, Mortgage, Deed of Trust, Assignment
of Rents and Security Agreement
This Addendum modifies and supplements the Indenture, Mortgage and
Deed of Trust, Assignment of Rents and Security Agreement to which it is
appended.
A. This document is renamed an Indenture, Mortgage, Assignment of
Rents, Security Agreement and Fixture Filing.
B. Granting Clause Third is amended and restated as follows:
Granting Clause Third
Subject and subordinate to the provisions of Article XVI
(Assignment of Rents and Leases): All Basic Rent and Additional Rent
(including amounts payable under [ARTICLES 37 AND 38] of the Lease and Trustee
Expenses); all payments, receipts and other consideration of any sort
whatsoever payable under the Lease, including any of the same payable to the
Owner Trust, as Lessor under the Lease, as a result of or in respect of any
casualty, condemnation or economic obsolescence relating to the Property, any
termination of the Lease, whether by reason of the Company's default thereunder
or otherwise, including any property delivered in substitution of the Property;
and all other right, title and interest of the Owner Trust, as Lessor under the
Lease (including all extended and renewal terms under the Lease) and such other
rights, title and interest as are described in Article XVI, subject to
application of certain monies in accordance with Article V hereof.
C. Granting Clause Fourth is Amended and Restated as follows:
Granting Clause Fourth
All of the Owner Trust's right, title and interest in, to and
under (a) all general intangibles relating to design, development, operation,
management and use of the Property, (b) all certificates of occupancy, zoning
variances, building, use or other permits, approvals, authorizations and
consents obtained from and all materials prepared for filing or filed with any
governmental agency in connection with the development, use, operation or
management of the Property (except for any such permits and approvals that are
not transferable by law), (c) all construction, service, architectural and
other similar contracts concerning the design, construction, management,
operation, occupancy and/or use of the Property, (d) all architectural
drawings, plans, specifications, soil tests, feasibility studies, appraisals,
engineering reports and similar materials relating to any
<PAGE> 130
portion of or all of the Property; (e) all payment and performance bonds or
warranties or guarantees relating to the Property; and (f) all instruments,
accounts and general intangibles which evidence or reflect any debt arising on
account of the Leases, which is owed by any tenant under a Lease to Owner
Trust, or its assignees.
D. The introductory paragraph of Section 16.01 of Article XVI
(Assignment of Leases and Rents), is amended and restated as follows:
SECTION 16.01. Making of Assignment. The Owner Trust by these
presents does hereby absolutely and irrevocably assign, transfer, set over and
convey to the Indenture Trustees, all the following-described properties,
whether now owned or held or hereafter acquired, exclusively and without any
reservation thereof unto the Indenture Trustees (except as herein otherwise
expressly provided), exclusive, however, of all Excepted Payments and Rights
and only to the extent the same have been conveyed to the Owner Trust pursuant
to the Operative Documents.
<PAGE> 131
STATE OF _______________________)
) SS.
COUNTY OF ______________________)
On _______________________ 1995, before me, _______________, personally
appeared ___________________________, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), an that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature _________________________________ (Seal)
<PAGE> 132
Draft of March 31, 1995
Kmart Store No.: [STORE NO.]~
[TOWN, STATE]~
EXHIBIT A-[1/2]~
FORM OF MORTGAGE NOTE 1995-K-[1/2]~
THIS MORTGAGE NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND NO RESALE, TRANSFER OR OTHER DISPOSITION OF
THIS MORTGAGE NOTE SHALL BE MADE UNLESS THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS ARE COMPLIED WITH OR SUCH
RESALE, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS. NONE OF THE OWNER TRUSTEES, THE OWNER TRUST, THE INDENTURE
TRUSTEES, THE REMAINDERMAN OR THE COMPANY IS OBLIGATED TO REGISTER THE OFFER OR
SALE OF THIS MORTGAGE NOTE UNDER THE SECURITIES ACT OR ANY OTHER SECURITIES
LAW.
No. [1/2]~ $[K-1/K-2 PRINCIPAL]~
[RATE]~% MORTGAGE NOTE DUE [MATURITY DATE]~
REAL ESTATE FINANCE TRUST 1995-K-__, A DELAWARE BUSINESS TRUST
Interest Rate Maturity Date
[RATE]~% DUE [MATURITY DATE]~
Real Estate Finance Trust 1995-K-__, a Delaware business trust (the "Owner
Trust") of which Wilmington Trust Company and William J. Wade are acting not in
their respective individual capacities but solely as Owner Trustees (herein in
such capacities called the "Owner Trustees") under that certain Trust Agreement
dated as of March __, 1995, between the Owner Participant named therein and the
Owner Trustees (herein as such Trust Agreement may be amended or supplemented
from time to time called the "Trust Agreement"), hereby promises to pay to
[PASS THROUGH TRUSTEE K-1/K-2]~, as trustee of that certain Pass Through Trust
1995-K-[1/2]~ created by that certain Pass Through Trust Agreement dated as of
March __, 1995, or registered assigns (collectively, the "Holder"), the
principal sum of $[K-1/K-2 PRINCIPAL]~, in installments on the Installment
Payment Dates set forth in the reverse hereof with the final installment due
and payable on the Maturity Date specified above in such coin or currency of
the United States of America as at the time of payment shall be legal tender
for the payment of public and private debts, and to pay interest on the
principal outstanding from time to time, semiannually on each Interest Payment
Date which shall be January 5 and July 5 of each calendar year commencing July
5, 1995 in like coin or currency at the rate per annum set forth above from the
date of issuance hereof or from the most recent date to which interest has been
paid or duly provided for. The Record Date for each Installment Payment Date,
Interest Payment Date and Redemption Date shall be the 15th day preceding each
such date
<PAGE> 133
whether or not such date is a Business Day. The Holder at the close of
business on any Record Date with respect to any Installment Payment Date or
Interest Payment Date shall be entitled to receive the Installment Payment
Amount or interest, if any, payable on such Installment Payment Date or
Interest Payment Date notwithstanding any transfer or exchange of this Mortgage
Note subsequent to the Record Date and prior to such Installment Payment Date
or Interest Payment Date. Notwithstanding the provisions of the preceding
sentence, any Installment Payment Amount or any interest payable on this
Mortgage Note which is not punctually paid or duly provided for on any
Installment Payment Date or Interest Payment Date (herein called, respectively,
a "Defaulted Installment" and "Defaulted Interest") shall forthwith cease to be
payable to the registered Holder on the relevant Record Date by virtue of his
having been such Holder; and such Defaulted Interest may be paid by the Owner
Trust, at its election in each case, as provided in clause (1) or (2) below:
(1) The Owner Trust shall make payment of any Defaulted Installment
or Defaulted Interest to the Person in whose name this Mortgage Note is
registered at the close of business on a special record date for the
payment of such Defaulted Interest, which shall be fixed in the manner
provided in Section 2.04 of the Indenture. Notice of the proposed payment
of such Defaulted Installment or Defaulted Interest and the special record
date therefor shall be mailed by first-class mail, postage prepaid, to the
Holder at its address as it appears in the Register, not less than 10 days
prior to such special record date. Upon the mailing of such notice, such
Defaulted Installment or Defaulted Interest shall be paid to the Person in
whose name this Mortgage Note is registered on such special record date
and shall no longer be payable pursuant to the following clause (2).
(2) The Owner Trust may make, or cause to be made, payment of any
Defaulted Installment or Defaulted Interest in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Pass Through Certificates may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Owner Trust to
the Corporate Indenture Trustee (as defined below) of the proposed payment
pursuant to this clause, such payment shall be deemed practicable by the
Corporate Indenture Trustee.
If any amount payable under this Mortgage Note, or under the Indenture, falls
due on a day that is not a Business Day, then such sum shall be payable on the
next succeeding Business Day, without additional interest thereon for the
period of such extension; subject to the foregoing, if any principal or premium
payable under this Mortgage Note or under the Indenture is not paid or duly
provided for when due, then interest shall accrue on such sum until payment
thereof has been made.
This Mortgage Note is one of the Mortgage Notes issued and to be issued
under that certain Indenture, Mortgage and Deed of Trust, Assignment of Rents
and Security Agreement dated as of April __, 1995 (herein as amended,
supplemented or modified from time to time
-2-
<PAGE> 134
called the "Indenture"), among the Owner Trust, The Bank of New York (the
"Corporate Indenture Trustee"), and Todd N. Niemy (the "Co-Indenture Trustee",
the Corporate Indenture Trustee and the Co-Indenture Trustee being referred to
collectively as the "Indenture Trustees"). The Indenture Estate (as defined in
the Indenture) secures the indebtedness evidenced by the Mortgage Notes.
Payment of the principal of, premium, if any, and interest on this
Mortgage Note will be made in immediately available funds by wire transfer to
an account in the United States designated by the Holder hereof not later than
the date provided therefor or the reverse side hereof, provided that the final
installment of principal of this Mortgage Note shall be payable only upon
presentation and surrender of this Mortgage Note.
Wilmington Trust Company, William J. Wade, The Bank of New York, and Todd
N. Niemy are not acting individually hereunder, but solely as trustees of the
Owner Trust and as Indenture Trustees, respectively. Limitations on the
obligations of the Owner Trust, and the trustees thereof, are set forth in
Section 2.05 of the Indenture.
Reference is made to the further provisions set forth on the reverse
hereof. Such provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Mortgage Note shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose unless this Mortgage Note
has been executed on behalf of the Owner Trust by the manual or facsimile
signature of one of the officers of the Corporate Owner Trustee and
authenticated on behalf of the Corporate Indenture Trustee by the manual
signature of one of the officers of the Corporate Indenture Trustee, in each
case as specified in Sections 2.02 and 2.03 of the Indenture.
Nothing contained herein or in the Indenture shall be construed as
creating any liability under this Mortgage Note of the Owner Trust or any
beneficiary of the Owner Trust, or any of their respective affiliates or any of
their respective officers, directors, shareholders, partners, venturers,
trustees (except for the Owner Trustees which are governed by the immediately
following paragraph), beneficiaries, employees or agents (the Owner Trust and
such other Persons being collectively called "Lessor Parties"), individually or
personally, except as otherwise specifically provided herein and in the
Indenture. All such liability, if any, is expressly waived by the Holder by
its acceptance of this Mortgage Note, for itself and for each person now or
hereafter claiming by, through or under the Holder, and that, so far as any
Lessor Party, individually or personally, is concerned, the Holder and any
person claiming by, through or under the Holder shall look solely to the right,
title and interest of the Owner Trust in the Indenture Estate or, with respect
to the Owner Participant, to the right, title and interest of the Owner
Participant in the Indenture Estate, except as provided in the Participation
Agreement for the performance of any obligation under this Mortgage Note and
the satisfaction of any liability arising therefrom. For purposes of this
paragraph, the Owner Trust shall be deemed to include any permitted successors
to the Owner Trust's interest in the Property.
-3-
<PAGE> 135
The Holder of this Mortgage Note, by its acceptance hereof, expressly
understands and agrees that (i) this Mortgage Note is executed and delivered by
Wilmington Trust Company not individually or personally but solely as Corporate
Owner Trustee on behalf of the Owner Trust under the Trust Agreement, in the
exercise of the powers and authority conferred and vested in it as the
Corporate Owner Trustee, (ii) each of the undertakings and agreements herein
made on the part of the Owner Trust (other than those specifically in the
Indenture made by Wilmington Trust Company in its individual capacity) are made
and intended not as personal undertakings and agreements by Wilmington Trust
Company but are made and intended for the purpose for binding only the Trust
Estate (as defined in the Trust Agreement) created by the Trust Agreement,
(iii) nothing herein contained shall be construed as creating any liability on
the part of Wilmington Trust Company or William J. Wade, individually or
personally, to perform any covenant either expressed or implied contained
herein or in the Indenture, all such liability, if any, being expressly waived
by the Holder by its acceptance of this Mortgage Note, for itself and for any
person claiming by, through or under the Holder and (iv) under no circumstances
(except in respect of those representations, warranties, undertakings and
agreements made by Wilmington Trust Company, in its individual capacity) shall
Wilmington Trust Company or William J. Wade, be personally liable for the
payment of any Indebtedness (as defined in the Indenture) or expenses of the
Owner Trustees or the Owner Trust or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by the
Owner Trustees or the Owner Trust under this Mortgage Note or the other
Indenture Documents (as defined in the Indenture).
Capitalized terms used herein without definition shall have the respective
meanings assigned to such terms in the Indenture.
IN WITNESS WHEREOF, the Owner Trust has caused this Mortgage Note to be
duly executed in its name by an officer of the Corporate Owner Trustee
thereunto duly authorized.
Date: April __, 1995
Real Estate Finance Trust 1995-K-__,
a Delaware business trust,
By: Wilmington Trust Company, not in its
individual capacity but solely as
Corporate Owner Trustee
By:_______________________________________
Authorized Officer
-4-
<PAGE> 136
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Mortgage Notes referred to in the within-mentioned
Indenture.
Dated: April __, 1995
The Bank of New York, not in its
individual capacity but solely as
Corporate Indenture Trustee
By:_______________________________________
Authorized Signatory
-5-
<PAGE> 137
[Reverse]
On each Installment Payment Date, the principal payable on this Mortgage
Note shall be equal to the Installment Payment Percentage specified on Schedule
I hereto for such Installment Payment Date multiplied by the initial principal
amount of this Mortgage Note which is set forth on the face hereof (an
"Installment Payment Amount"), subject to earlier redemption, in whole or in
part, or mandatory tender for purchase described briefly below and more fully
described in Article VI of the Indenture.
As more fully provided in the Indenture, this Mortgage Note is subject to
redemption in whole or in part, by notice mailed not less than 20 days prior to
the applicable Redemption Date (unless, if this Mortgage Note is held by a Pass
Through Trustee (as defined in the Indenture), a different method shall be
acceptable to such Holder), under the circumstances set forth in Section 6.02
of the Indenture at a redemption price (the "Redemption Price") set forth
below.
The Corporate Indenture Trustee shall give prompt notice of any such
redemption by first-class mail (unless, in the case of Mortgage Notes held by a
Pass Through Trustee, a different method is acceptable to such Holder) to
Holders stating the Redemption Date, the Redemption Price, the principal amount
to be redeemed if less than the entire unpaid principal amount hereof, and the
place or places where the Mortgage Notes may be surrendered if the entire
principal amount hereof is to be redeemed.
The Redemption Price of each Mortgage Note shall be equal to the unpaid
principal amount hereof together with interest accrued thereon to the
Redemption Date; together with, in certain circumstances more fully described
in the Indenture, a premium, equal to the Make-Whole Premium (as defined in,
and calculated by an Independent Investment Banker in accordance with, the
Indenture).
Any redemption of this Mortgage Note only in part shall be effected by the
payment to the Holder (without the necessity of presentation or surrender of
this Mortgage Note on the part of the Holder) of the amount necessary to effect
such redemption in accordance with Article VI of the Indenture and the
Corporate Indenture Trustee shall note on its records the fact of such payment
and the amount of the principal amount of, and each remaining Installment
Payment Amount of, this Mortgage Note remaining unpaid after such payment.
Such notation, in the absence of manifest error, shall be conclusive evidence
of the amount of such payment and the remaining unpaid principal amount, and
each remaining Installment Payment Amount of, of this Mortgage Note and shall
be binding upon the Holder and all subsequent Holders of this Mortgage Note
issued upon registration of a transfer thereof or in exchange therefor. As a
result of any such redemption in part, each subsequent Installment Payment
Amount shall, effective as of the Installment Payment Date immediately
following the Redemption Date, automatically (without further act) be reduced
(but not below zero) by the percentage that the total aggregate unpaid
principal portion of the redemption amount of this Mortgage Note and the other
Mortgage Notes issued pursuant to the Indenture being redeemed bears to the
total
-6-
<PAGE> 138
aggregate unpaid principal amount of this Mortgage Notes and the other Mortgage
Note issued pursuant to the Indenture immediately before such redemption.
Under Section 3.08 of the Indenture, the Company is, under certain
circumstances, permitted to assume all of the liabilities and obligations of
the Owner Trust under the terms of this Mortgage Note, and liabililities of the
Owner Trust under the Indenture. In the event the Company assumes, on a full
recourse basis, all of such liabilities and obligations, the lien of the
Indenture on the Property (as defined in the Indenture) will continue except as
provided in the next sentence. If certain legal opinions described in Section
3.08(b) of the Indenture are rendered, this Mortgage Note and the other
Mortgage Notes issued under the Indenture will become general unsecured
obligations of the Company, the lien on the Property will be released, and
there will be a restatement of the Indenture so it shall thereafter contain
terms which are essentially the same (except as provided in the Indenture) as
those set forth in the Company's indenture, dated February 1, 1985, by and
between the Company and The Bank of New York, as trustee, for certain unsecured
debt obligations of the Company. In either event, the Company will execute an
assumption of this Mortgage Note. As a result of any such assumption, the
Owner Trust will be automatically released from any and all liabilities and
obligations hereunder and under the Indenture.
Reference is made to the Indenture and all supplements and amendments
thereto (a copy of which is on file with the Corporate Indenture Trustee at its
principal corporate trust office) for the definitions of capitalized terms used
but not defined herein and for a more complete statement of the terms and
provisions thereof, including a statement of the properties conveyed, pledged
and assigned thereby, the nature and extent of the security, the respective
rights of the Owner Trust, the Indenture Trustees and the Holders, and the
terms upon which the Mortgage Notes are, and are to be, executed and delivered,
to all of which terms and conditions in the Indenture each Holder hereof agrees
by its acceptance of this Mortgage Note. In the event of any conflict or
inconsistency between the provisions of this Mortgage Note and the Indenture,
the Indenture will control.
All payments of principal, premium, if any, and interest to be made
hereunder and under the Indenture (other than payments made in connection with
optional redemptions by the Owner Trust and payments made in connection with
the exercise of cure rights by the Owner Trust), shall not be required to be
made except from the Indenture Estate or the income and proceeds received by
the Indenture Trustees therefrom and shall be made in accordance with the terms
of Article II of the Indenture. Each Holder hereof, by its acceptance of this
Mortgage Note, agrees (x) that except as expressly provided above, it will look
solely to the Indenture Estate or the income and proceeds received by the
Indenture Trustees therefrom, to the extent available for distribution to the
Holder hereof as provided in the Indenture and (y) that neither the Owner Trust
nor the Owner Participant is liable, and neither the Owner Trustees nor the
Indenture Trustees are liable in their individual capacities, to the Holder
hereof or, in the case of the Owner Trust and the Owner Trustees, to the
Indenture Trustees, for any amounts payable under this Mortgage Note or the
Indenture or, except as provided in the Indenture with respect to the
-7-
<PAGE> 139
Owner Trust and the Owner Trustees, or the Indenture Trustees, for any
liability under the Indenture.
If an Indenture Event of Default shall occur and be continuing, subject to
the terms of the Indenture the principal of this Mortgage Note may be declared
due and payable in the manner and with the effect provided in the Indenture,
and the Indenture Trustees may, in certain circumstances, take possession of
all or any part of the Indenture Estate and sell all or part of the Indenture
Estate at public or private sale, as the Indenture Trustees may determine, or
otherwise dispose of, hold, use, operate, lease to others or keep idle all or
part of the Indenture Estate as the Indenture Trustees in their sole discretion
may determine; provided, however, the Indenture Trustees shall not be obligated
to use or operate all or part of the Indenture Estate directly or indirectly by
themselves or through agents or representatives or to lease, license or
otherwise permit or provide for the use or operation of all or part of the
Indenture Estate by others with title remaining in the Indenture Trustees
without adequate insurance or indemnification for liability for loss or damage
to such Indenture Estate and for public liability and property damage as
provided in the Indenture.
The Indenture provides that in certain events any declaration of
acceleration of the Mortgage Notes and its consequences may be rescinded by the
Holders of at least a majority in aggregate principal amount of Outstanding
Mortgage Notes. Moreover, if, and only if, a Lease Event of Default shall
occur, the Indenture Trustees may declare the Lease to be in default, and may,
to the exclusion of the Owner Trust, exercise one or more of the remedies of
the Lessor provided in the Lease, subject to certain requirements and
limitations set forth in the Indenture.
The Owner Trust may, subject to certain limitations set forth in the
Indenture, cure a default by the Company under the Lease arising from the
failure of the Company to make any Basic Rent payments under the Lease if such
failure shall constitute a Lease Event of Default and the Owner Trust shall not
have previously effected on behalf of the Company three such consecutive
payments or five such payments cumulatively. The Owner Trust may, subject to
certain limitations set forth in the Indenture, cure any other default by the
Company in the performance of its obligations under the Lease (i) which can be
cured solely by the payment of money by making such payment on behalf of the
Company and (ii) other than a default which can be effected by the payment of
money, by taking such action as may otherwise be required under any covenant,
condition or agreement to be performed or observed by the Company under the
Lease.
The right of the Holder hereof to institute an action for any remedy under
the Indenture is subject to certain restrictions specified in the Indenture,
except that the right of the Holder of this Mortgage Note to receive payment of
the principal of and interest and the premium if any on this Mortgage Note on
the respective due dates or the Redemption Price on any Redemption Date, and to
institute suit for the enforcement of any such payment, shall not be impaired
or affected without the consent of the Holder. Notwithstanding anything to the
contrary herein, (i) no Holder shall have the right to enforce any judgment or
otherwise exercise remedies against
-8-
<PAGE> 140
certain indemnity and reimbursement payments to which the Owner Trust or the
Owner Participant may be entitled under the terms of the lease of the Property
(which are referred to in the Indenture as the "Excepted Rights and Payments"),
and (ii) no one or more Holders of the Mortgage Notes shall have any right in
any manner whatever by virtue of, or by availing of, any provision of the
Indenture to affect, disturb or prejudice the rights of any other Holders of
the Mortgage Notes, or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under the Indenture, except in
the manner therein provided and for the ratable benefit of all the Holders.
The Mortgage Notes are issuable only as registered Mortgage Notes without
coupons in denominations of $1,000,000 and integral multiples thereof (provided
that one Mortgage Note maturing on each Maturity Date may be in a different
principal amount in order to represent the balance of the principal
indebtedness evidenced by all Mortgage Notes maturing on such Maturity Date).
So long as any of the Mortgage Notes remain Outstanding, the Corporate
Indenture Trustee will maintain an office or agency in New York, New York where
the Mortgage Notes may be presented for payment, registration of transfer and
exchange as provided in the Indenture. As provided in the Indenture and
subject to certain limitations therein, this Mortgage Note is transferable, and
upon surrender of this Mortgage Note for registration of transfer at the
principal corporate trust office of the Corporate Indenture Trustee, or at the
office or agency maintained for such purposes, duly endorsed by, or accompanied
by a written instrument of transfer in form satisfactory to the Owner Trust and
the Corporate Indenture Trustee duly executed by, the Holder or his/her
attorney-in-fact duly authorized in writing, one or more new Mortgage Notes
having the same Maturity Date, Installment Payment Dates, scheduled aggregate
Installment Payment Amounts, Interest Payment Dates and interest rate and of
authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees. As a condition to any such
transfer the Corporate Indenture Trustee shall require evidence satisfactory to
it as to the compliance of any such transfer with the Securities Act and shall
not permit any transfer if, in the opinion of counsel to the Company or the
Owner Trust, the transfer would be required to be registered thereunder.
As provided in the Indenture and subject to certain limitations therein,
the Mortgage Notes are exchangeable for an equal aggregate principal amount of
Mortgage Notes having the same Maturity Date, Installment Payment Dates,
scheduled aggregate Installment Payment Amounts, Interest Payment Dates,
interest rate and of authorized denominations, as requested by the Holder
surrendering the same, upon presentation thereof for such purpose at the
principal corporate trust office of the Corporate Indenture Trustee, or at an
office or agency maintained for such purpose.
No service charge to the Holder shall be made for any such registration of
transfer or exchange, but the Corporate Indenture Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
-9-
<PAGE> 141
Prior to the due presentment for registration of transfer of this Mortgage
Note, the Owner Trust, the Indenture Trustees, any agent of the Owner Trust or
the Indenture Trustees, and the Registrar, may deem and treat the person in
whose name this Mortgage Note is registered as the absolute owner hereof for
all purposes whether or not this Mortgage Note is overdue, and neither the
Owner Trust, the Indenture Trustees (nor any agent of the Owner Trust or the
Indenture Trustees), nor the Registrar, shall be affected by notice to the
contrary.
Except as provided in the Indenture, the Indenture and the Mortgage Notes
shall be construed in accordance with and governed by the laws of the State of
New York.
-10-
<PAGE> 142
SCHEDULE I
Installment Payment Installment Payment
Date Percentage
___________ ________%
___________ ________%
___________ ________%
___________ ________%
___________ ________%
___________ ________%
___________ ________%
___________ ________%
[Repeat as required] [Repeat as required]
-11-
<PAGE> 1
EXHIBIT 4.5
PARTICIPATION AGREEMENT
among
KMART CORPORATION,
as Tenant
____________________________________
as Owner Participant
____________________________________,
as Owner Participant and as Owner Participant Parent
WILMINGTON TRUST COMPANY,
not in its individual capacity (except as expressly stated
herein) but solely as Owner Trustee under 16 separate
Trust Agreements with the related Owner Participant dated as of
the date hereof, as Owner Trustee
WILLIAM J. WADE,
not in his individual capacity (except as expressly stated
herein) but solely as Owner Trustee of Real Estate Finance
Trust 1995-K-4, 1995-K-15 and 1995-K-17
REAL ESTATE FINANCE TRUST 1995-K-3, 1995-K-4,
1995-K-5, 1995-K-6, 1995-K-7, 1995-K-8, 1995-K-9,
1995-K-10, 1995-K-12, 1995-K-14, 1995-K-15, 1995-K-16,
1995-K-17, 1995-K-18, 1995-K-19 and 1995-K-20, Delaware
business trusts created under the Trust Agreements, as Landlord
THE BANK OF NEW YORK
and
TODD N. NIEMY,
acting not individually but solely as trustees under
16 instruments captioned "Indenture, Mortgage and
Deed of Trust, Assignment of Rents and Security Agreement,"
dated as of the date hereof, as Indenture Trustee
REMAINDERMART LIMITED PARTNERSHIP,
as Remainderman Participant
WILMINGTON TRUST COMPANY,
not in its individual capacity (except as expressly stated
herein) but solely as Remainderman Trustee under the
Remainderman Trust Agreement with Remainderman Participant dated
as of the date hereof, and
THE REMAINDERMART TRUST, a Delaware business trust
created under the Remainderman Trust Agreement,
as Remainderman
Dated as of April __, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
------- ----
<S> <C> <C>
1. CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. RESTRICTION OF TRANSFERS BY OWNER PARTICIPANT
AND LANDLORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. OWNER PARTICIPANT AS COMPETITOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. TRANSFER BY REMAINDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
5. OWNER PARTICIPANT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
6. COVENANTS OF TENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
7. LANDLORD COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
8. COVENANTS OF OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
9. COVENANTS OF INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
10. COVENANTS OF REMAINDERMAN PARTICIPANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
11. COVENANTS OF REMAINDERMAN TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
12. COVENANTS OF REMAINDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
13. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
14. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
15. SEVERABILITY; BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
16. INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
17. PAYMENT OF EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
18. TERMINATION OR REVOCATION OF TRUST UNDER TRUST
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
19. EXCHANGE OF OBLIGATION OF LANDLORD BY THE TENANT . . . . . . . . . . . . . . . . . . . . . . . . .40
20. INTERIM INTEREST PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
21. BASIC RENTAL ADJUSTMENTS AFTER CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
22. GENERAL INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
</TABLE>
- i -
<PAGE> 3
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C> <C>
23. GENERAL TAX INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
24. TRUSTEE LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
25. EXTENT OF INTEREST OF NOTEHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
26. NO MERGER OF TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
27. REMAINDERMAN PARTICIPANT'S GRANT OF RIGHT OF FIRST
OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
28. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
29. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
30. SURVIVAL OF AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
31. ENVIRONMENTAL REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
32. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
33. NO WAIVER; REMEDIES CUMULATIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
34. INTENT OF PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
35. METHOD OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
</TABLE>
Exhibit A - Form of Assignment and Assumption Agreement
Exhibit B - Form of Company Indenture
- ii -
<PAGE> 4
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Term Where Defined
- ---- -------------
<S> <C>
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indenture
Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indenture
Competitor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2 & 3
Competitor Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3
Competitor Option Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3
Competitor Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3
Corporate Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indenture
Corporate Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
Estate of Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase Agreement
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease
Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6
Exercise Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3
Fee Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 13
Governmental Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 13
Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase Agreement
Ground Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Option Agreement
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indenture
Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase Agreement
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
Individual Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
Institution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2
Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Legal Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase Agreement
Lessor Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indenture
Material Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease
Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indenture
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease
Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 14
Operative Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase Agreement
Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase Agreement
Owner Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
Owner Participant Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
Owner Participant Parent Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase Agreement
Owner Participant Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2
Owner Participant 6-Month Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3
Owner Participant's Economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 21
Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
Owner Trustee Deeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase Agreement
Owner Trustee Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase Agreement
Pass Through Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indenture
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indenture
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<CAPTION>
Term Where Defined
- ---- -------------
<S> <C>
Personalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Purchase Agreement
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Recitals
Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Recitals
Remainderman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introduction
Remainderman Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introduction
Remainderman Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introduction
Remainderman Purchase Deeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Purchase Agreement
Remainderman Purchase Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Lease
Rent Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Lease
Rental Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 21
Sale Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 3
Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introduction
Tenant Competitor Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 3
Tenant Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 3
Third Party Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 3
Third Party Competitor Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 3
Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2
Tripartite Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Purchase Agreement
Trust Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introduction
Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2
U.S. Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2
</TABLE>
- iv -
<PAGE> 6
PARTICIPATION AGREEMENT
AGREEMENT, DATED AS OF APRIL ___, 1995, among KMART CORPORATION, a
Michigan corporation, having an address at 3100 West Big Beaver Road, Troy,
Michigan 48084 ("Tenant"), _________________, a Delaware corporation, having an
address at c/o ________________________________________________ (an "Owner
Participant"), _______________________________, a Delaware corporation, having
an address at _________________________ (an "Owner Participant" and "Owner
Participant Parent"), REAL ESTATE FINANCE TRUST 1995-K-3, REAL ESTATE FINANCE
TRUST 1995-K-4, REAL ESTATE FINANCE TRUST 1995-K-5, REAL ESTATE FINANCE TRUST
1995-K-6, REAL ESTATE FINANCE TRUST 1995-K-7, REAL ESTATE FINANCE TRUST
1995-K-8, REAL ESTATE FINANCE TRUST 1995-K-9, REAL ESTATE FINANCE TRUST
1995-K-10, REAL ESTATE FINANCE TRUST 1995-K-12, REAL ESTATE FINANCE TRUST
1995-K-14, REAL ESTATE FINANCE TRUST 1995-K-15, REAL ESTATE FINANCE TRUST
1995-K-16, REAL ESTATE FINANCE TRUST 1995-K-17, REAL ESTATE FINANCE TRUST
1995-K-18, REAL ESTATE FINANCE TRUST 1995-K-19 and REAL ESTATE FINANCE TRUST
1995-K-20, Delaware business trusts created under 16 separate Trust Agreements,
dated as of even date herewith, for the benefit of the related Owner
Participant (the "Trust Agreements"), having an address at c/o Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attn: Corporate Trust Administration (collectively, or with
respect to a single entity, "Landlord"), WILMINGTON TRUST COMPANY ("Corporate
Owner Trustee") and, with respect to Real Estate Finance Trust 1995-K-4,
1995-K-15 and 1995-K-17, WILLIAM J. WADE ("Individual Owner Trustee"), acting
not individually (except as expressly stated herein) but solely as Owner
Trustee (collectively "Owner Trustee") under the Trust Agreements with the
related Owner Participant, having an address at Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-0001, THE BANK OF NEW YORK, a New
York banking corporation ("Corporate Indenture Trustee") and TODD N. NIEMY
("Individual Indenture Trustee"), having an address at 101 Barclay Street, New
York, New York 10286, acting not individually (except as expressly provided
herein) but solely as trustees (collectively, the "Indenture Trustee") under 16
instruments captioned Indenture, Mortgage and Deed of Trust, Assignment of
Rents and Security Agreement, dated as of even date herewith, between the
related Landlord and the Indenture Trustee (collectively, or, with respect to a
single instrument in respect of a single Property, the "Indenture"),
REMAINDERMART LIMITED PARTNERSHIP, a Connecticut limited partnership, having an
address at c/o Relco, Inc., 3 Stamford Landing, 46 Southfield Avenue, Stamford,
Connecticut 06092 ("Remainderman Participant"), THE REMAINDERMART TRUST, a
Delaware business trust created under the Remainderman Trust Agreement, dated
as of even date herewith, for the benefit of Remainderman Participant (the
"Remainderman Trust Agreement"), having an address at c/o Wilmington Trust
Company, Rodney Square North, 1100
<PAGE> 7
North Market Street, Wilmington, Delaware 19890-0001, Attn: Corporate Trust
Department ("Remainderman") and WILMINGTON TRUST COMPANY, not in its individual
capacity (except as expressly stated herein) but solely as Remainderman Trustee
under the Remainderman Trust Agreement with Remainderman Participant, having an
address at Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attn: Corporate Trust Department ("Remainderman Trustee").
W I T N E S S E T H:
WHEREAS, the parties hereto have, as of the date hereof, entered into
certain agreements, including a certain Agreement for Sale of Real Estate (the
"Purchase Agreement") among Tenant, as seller, Landlord, as purchaser and
Remainderman as remainder purchaser, and 16 leases (collectively, the "Leases",
or with respect to a single lease in respect of a single Property, the "Lease")
between the related Landlord, as lessor, and Tenant, as lessee, pursuant to
which property more particularly described therein (individually, a "Property"
and collectively, the "Properties") has been leased by Landlord to Tenant; and
WHEREAS, the parties hereto desire to enter into this Agreement in order
to undertake certain obligations and to clarify certain of their obligations
pursuant to the Lease and the other Operative Documents.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Certain Definitions. Capitalized terms used herein, unless
otherwise defined, shall have the same meanings ascribed to them in the Lease,
except to the extent of a specific reference to another Operative Document in
connection with such term or in the Index of Defined Terms.
2. Restriction on Transfers by Owner Participant and Landlord. (a)
Notwithstanding anything to the contrary contained in this Agreement or any
other Operative Document, no Owner Participant shall (except as permitted by
Sections 2(b), (c) and (f)) Transfer all or any part of its Owner Participant
Interest by transferring the beneficial interest with respect to such Property
to any Person (other than Tenant pursuant to Section 3 or pursuant to the terms
of the Lease, including Article 21 thereof). "Owner Participant Interest"
means, with respect to each Property, the related Owner Participant's right,
title and interest in and to the related Trust Agreement, the trust estate
created and held under
- 3 -
<PAGE> 8
such Trust Agreement, as defined in Section 2.02 of such Trust Agreement (the
"Trust Estate"), such Property and the Operative Documents (to the extent
related to such Property). "Transfer" means a sale, assignment, conveyance,
mortgaging, grant of security interest or other transfer. Notwithstanding
anything to the contrary contained in this Agreement, the appointment of a
co-trustee or a successor to a trustee or co-trustee of Landlord or any merger,
conversion, consolidation or sale of substantially all of the corporate trust
business of any trustee or co-trustee of Landlord shall not constitute a
Transfer under this Agreement.
(b) Each Owner Participant may effect a Transfer of all (but
not less than all) of its interest in one or more Properties through the
assignment of its beneficial interest therein or may Transfer all (but not less
than all) of its Owner Participant Interest upon not less than thirty (30)
days' prior written notice from such Owner Participant to Tenant, Owner Trustee
and Indenture Trustee if:
(i) the transferee is (I)(A) a United States Person for
federal income tax purposes (a "U.S. Person"), (B) any bank, finance
company, insurance company, credit company, leasing corporation or other
financial institution or institutional investor (an "Institution") and
(C) either (x) has a tangible net worth (computed in accordance with
generally accepted accounting principles consistently applied) of at
least $75,000,000, or (y) provides a full and unconditional guaranty, in
a form reasonably satisfactory to Tenant and Owner Trustee, of all of
such transferee's obligations by an Institution or a corporation which
has a tangible net worth (as so computed) of at least $75,000,000,
provided, that this clause (C) shall not be applicable to any holder of
a lien for the benefit of the holders of the Notes as provided in the
Operative Documents (a "Fee Mortgage") permitted under the Lease, the
designee of any such holder or any purchaser or other transferee of such
holder or its designee at foreclosure or by deed or assignment in lieu
thereof or (II) a wholly-owned subsidiary of Owner Participant Parent
which is a U.S. Person, provided, that if the subsidiary does not have a
tangible net worth of at least $75,000,000, Owner Participant Parent
shall provide a guaranty, in substantially the form of the Owner
Participant Parent Guaranty, of all of such transferee's obligations;
(ii) the transferee enters into an agreement or agreements
(substantially in the form attached as Exhibit A) whereby the transferee
(A) confirms that it has the requisite power and authority to enter into
and carry out the transactions contemplated hereby and that it shall be
deemed a party to this Agreement, the Tax Indemnification Agreement, the
related Trust Agreements and each and every Operative
- 4 -
<PAGE> 9
Document entered into by the transferring Owner Participant (except if
the transferee is any purchaser or other transferee of the holder of a
Fee Mortgage permitted under the Lease or its designee at foreclosure or
by deed or assignment in lieu thereof, then such confirmation shall not
apply to the Tax Indemnification Agreement or any other Operative
Document (other than the related Trust Agreements) not assigned or
pledged to such holder of a Fee Mortgage), (B) agrees to be bound by all
the terms of, and to undertake all the obligations of the transferring
Owner Participant contained in this Agreement, the Tax Indemnification
Agreement, the related Trust Agreements and any such Operative Document
with respect to the interest being transferred, and (C) makes the
representations and warranties in substantially the form made in Section
13(b) by such Owner Participant (with such changes as are appropriate to
reflect such transferee's form of organization), provided that this
clause (ii) shall not apply to the holder of a Fee Mortgage permitted
under the Lease or any designee of such holder;
(iii) provided that no Material Default under any Lease has
occurred and is continuing, the transferee is not, and is not an
Affiliate of, a Competitor of Tenant; for purposes of this Section 2,
"Competitor" means any national general merchandise retailer operating a
business similar to Kmart as of the Closing Date; provided, a transferee
and any of its Affiliates shall not be deemed to be a Competitor solely
by reason of their ownership of securities or other interests of any
entity that is a national general merchandise retailer operating a
business similar to Kmart so long as either (A) in the case of a
transferee that is an Institution, (a) such securities are held as
portfolio investments and (b) either (1) the consolidated sales of such
entity for its latest fiscal year were less than $100,000,000.00, (2)
such transferee or its Affiliates do not beneficially own in the
aggregate more than a 25% equity interest in such entity on a fully
diluted basis and such entity is not an Affiliate (other than by virtue
of the rights and powers that arise solely from the ownership of such
equity interest) of such transferee or any of its Affiliates or (3) the
book value of the interest of the transferee and its Affiliates in such
entity does not exceed 1% of the consolidated assets of the transferee
and its Affiliates determined at the end of its latest fiscal year or
(B) in all other cases, (a) such entity is not an Affiliate of such
transferee or any of its Affiliates and (b) the transferee and its
Affiliates do not beneficially own in the aggregate more than a 5%
equity interest in such entity on a fully diluted basis;
(iv) the Transfer does not violate or create a relationship
that would be in violation of any applicable law,
- 5 -
<PAGE> 10
order or regulation and does not constitute a "prohibited transaction"
within the meaning of the Employee Retirement Income Security Act of
1974, as amended ("ERISA");
(v) no registration pursuant to the Securities Act of 1933, as
amended, and the rules and regulations thereunder is required in
connection with the Transfer; and
(vi) Owner Participant and the transferee furnish to Tenant and
Owner Trustee evidence of, and legal opinions of counsel reasonably
acceptable to Tenant and Owner Trustee with respect to, compliance with
the immediately preceding clauses (ii)(A) and (v) (in form and substance
reasonably satisfactory to Tenant).
(c) Notwithstanding anything to the contrary contained in this
Section 2, each Owner Participant may effect a Transfer of all (but not less
than all) of its interest in one or more Properties or all (but not less than
all) of its Owner Participant Interest, in each case as security for the Notes.
(d) Notwithstanding anything to the contrary contained in this
Agreement or any other Operative Document and provided no Material Default
under any Lease has occurred and is continuing, but subject to any other
restrictions contained in the Indenture, Landlord shall not Transfer all or
any part of its right, title or interest in and to any Property or any
Operative Document to any Person (other than Tenant pursuant to this Agreement
or the Lease) during the term of the Lease with respect to such Property except
(i) as security for the Notes, (ii) in connection with a Transfer contemplated
by the Lease (including as security to any holder of a Fee Mortgage permitted
under the Lease and including pursuant to an exercise of remedies under Article
21 of the Lease), (iii) in connection with a Transfer permitted by Section 3,
or (iv) in connection with the foreclosure (or deed or assignment in lieu of
foreclosure) by any holder (or designee of any holder) of a Fee Mortgage
permitted under the Lease; provided, that, after the Notes shall no longer be
outstanding, each Owner Participant shall have the right to terminate its
related Trust Agreements and direct Landlord to transfer Landlord's right,
title or interest in and to the related Properties, Trust Estate, this
Agreement, Trust Agreements, the Tax Indemnification Agreement or any other
Operative Document to such Owner Participant and to amend, supplement or modify
any of the Operative Documents or to enter into such other agreements as such
Owner Participant deems reasonably necessary to evidence such transactions, in
each case, in form and substance reasonably satisfactory to Tenant.
(e) The transferring Owner Participant shall pay all
reasonable costs and expenses (including, without limitation, those of Tenant)
incurred in connection with any Transfer pursuant to
- 6 -
<PAGE> 11
Section 2(b) or, if such costs and expenses are incurred by any other party,
they shall be reimbursed by such Owner Participant to such party, within 30
days following demand. Tenant shall pay all reasonable costs and expenses
(including, without limitation, those of the affected Owner Participant)
incurred in connection with any Transfer pursuant to Sections 2(c), 2(d)(i),
(ii), (iii) and (iv) (but only a foreclosure in connection with an Event of
Default under the Lease) or, if such costs and expenses are incurred by any
other party, they shall be reimbursed by Tenant to such party, within 30 days
following demand. The payment of expenses in connection with a Transfer
pursuant to Section 2(d)(ii) shall be governed by the provisions of this
Section 2(e), except as otherwise expressly provided in the Lease.
(f) Notwithstanding anything to the contrary contained in this
Agreement or any other Operative Document, upon or at any time after
termination of the Lease with respect to a Property, no provision of this
Agreement (including, without limitation, this Section 2), other than Sections
13, 14, 15, 22, 23 and 30 shall apply with respect to such Property or interest
thereon or with respect thereto.
(g) From and after any Transfer effected in accordance with
this Section 2, the transferee shall be deemed an "Owner Participant" (or, in
the case of a complete Transfer by each Owner Participant, the "Owner
Participant") for all purposes of the Operative Documents and shall be deemed
to have paid that portion of the [equity portion of the Owner Trustee Purchase
Price allocable to the transferring Owner Participant], or in the case of a
partial Transfer, that portion of the [equity portion of the Owner Trustee
Purchase Price] previously made by the transferring Owner Participant to the
extent attributable to the interest transferred to it, and each reference to
the transferring Owner Participant contained in the Operative Documents shall
be deemed to include a reference to the transferee for all purposes.
Notwithstanding the foregoing provisions of this Section
2, after any Transfer effected in accordance with this Section 2, the
transferring Owner Participant shall not be released from any obligation
arising or accruing prior to such Transfer, but shall not be liable for any
obligation arising or accruing after such Transfer to the extent of such
Transfer. Notwithstanding any Transfer effected in accordance with this Section
2, the transferring Owner Participant shall nevertheless be entitled to all
benefits accrued and all rights vested or arising with respect to the period
prior to such Transfer, including, without limitation, any right to
indemnification under this Agreement or the Tax Indemnification Agreement, to
the exclusion of the transferee unless the transferring Owner Participant shall
have assigned such benefits and rights to the transferee and provided
- 7 -
<PAGE> 12
evidence of such assignment in form and substance satisfactory to Tenant.
Notwithstanding anything in this Section 2 to the
contrary, the transfer restrictions set forth in this Section 2 shall not apply
to any transfer of stock by the stockholders of any Owner Participant or any
Affiliate of such Owner Participant. Unless as may otherwise be specifically
provided, and except for any successor or assign that is an Affiliate of any
Owner Participant, the foregoing sentence shall not be binding upon, inure to
the benefit of, or be enforceable by any successor or assign of any of the
Owner Participants named herein.
3. Owner Participant as Competitor.
(a) Notwithstanding anything to the contrary contained in this
Agreement or any other Operative Document, if any Owner Participant enters a
new line of business and thereby becomes a Competitor (as defined in subsection
(h) below) (or an Affiliate of a Competitor) of Tenant at any time during the
term of the Lease, Tenant shall have the exclusive and irrevocable option (the
"Competitor Option"), so long as no Material Default or Event of Default under
any Lease has occurred and is continuing, for a period of one year (the
"Competitor Option Period") after an executive officer of Tenant having
oversight of the transactions contemplated by the Operative Documents has
actual knowledge that such Owner Participant has become a Competitor (or an
Affiliate of a Competitor), to cause such Owner Participant to sell all (but
not less than all) of its Owner Participant Interest, all (but not less than
all) of the related Properties or all (but not less than all) of its interest
in all of the related Properties as provided in this Section 3.
(b) The Competitor Option shall be exercisable by an
irrevocable exercise notice (an "Exercise Notice") delivered by Tenant to the
affected Owner Participant and the Indenture Trustee. The Exercise Notice
shall specify the date on which Tenant obtained knowledge that such Owner
Participant has become a Competitor as set forth in subsection (a) above.
(c) The affected Owner Participant shall have the sole right
for a period of 6 months following receipt of the Exercise Notice ("Owner
Participant 6-Month Period") in which to sell its Owner Participant Interest,
the related Properties or its interest in the related Properties to a
transferee other than Tenant or its affiliates pursuant to Section 2(b) hereof.
(d) In the event that a sale has not occurred pursuant to
subsection (c), Tenant shall, during the period beginning on the
- 8 -
<PAGE> 13
day following expiration of the Owner Participant 6-Month Period and ending on
the last day of the Competitor Option Period, obtain cash bids for the purchase
of the Owner Participant Interest or the Properties from persons other than
Tenant or its affiliates that meet the requirements set forth in Section 2(b)
hereof ("Third Party Buyer"). If Tenant obtains a bid acceptable to Tenant and
Owner Participant, Third Party Buyer shall purchase the Owner Participant
Interest or the Properties, as the case may be, as set forth in subsection (e)
below. If Tenant is unable to obtain an acceptable bid from a Third Party
Buyer before the end of the Competitor Option Period, Tenant shall purchase the
Owner Participant Interest or the Properties, as the case may be, as set forth
in subsection (e) below. In either case, Tenant shall deliver a notice (the
"Sale Notice") to Owner Participant and Indenture Trustee that Tenant or Third
Party Buyer, as the case may be, has elected to purchase the Owner Participant
Interest or the Properties.
(e) If Tenant shall deliver the Sale Notice, Landlord shall sell either to
Third Party Buyer (a "Third Party Competitor Sale") or Tenant (a "Tenant
Competitor Sale"), as the case may be, the Owner Participant Interest or the
Properties for the price defined below (the "Competitor Price"). In the event
of a Third Party Competitor Sale, (A) the Competitor Price payable by the Third
Party Buyer to Landlord shall be an amount equal to the bid acceptable to
Tenant and Owner Participant as set forth in subsection (d) hereof and (B)
Tenant shall pay or cause to be paid to the Landlord, at the closing of the
Third Party Competitor Sale, an amount (the "Tenant Supplement") equal to the
excess, if any, of Termination Value determined as of the closing of the Third
Party Competitor Sale and in accordance with Schedule D of the Lease (as
adjusted as the case may be) over the net proceeds from such Third Party
Competitor Sale. In the event of a Tenant Competitor Sale, the Competitor
Price payable by Tenant to Landlord shall be an amount equal to Termination
Value determined as of the closing of the Tenant Competitor Sale and in
accordance with Schedule D of the Lease (as adjusted as the case may be). The
closing of any sale pursuant to a Sale Notice shall take place at the principal
office of Tenant on the next scheduled Rent Payment Date occurring at least 40
days after the date of the Sale Notice.
(f) At any closing of any sale pursuant to this Section 3,
Tenant shall pay or cause to be paid in immediately available funds to the same
account to which Basic Rent is payable (A) to Landlord, any accrued but unpaid
installments of Basic Rent (other than any portion of Basic Rent payable in
advance) and (B) to Landlord or the Person entitled thereto, any accrued but
unpaid Additional Rent that is payable under the Lease (including, but not
limited to, an amount equal to the Make-Whole Premium, if any, on the Notes).
In the case of a Third Party Competitor Sale or a Tenant Competitor Sale, the
purchaser of either the Properties or the Owner Participant Interest may elect
to take title to the
- 9 -
<PAGE> 14
Properties or to purchase the Owner Participant Interest, in each case, subject
to the lien of the Indenture or to cause the Notes to be redeemed in accordance
with Section __ of the Indenture. In the case of any Tenant Competitor Sale,
if Tenant elects to purchase the Owner Participant Interest or the Properties
subject to the lien of the Indenture, Tenant shall assume in accordance with
and subject to the terms of the Indenture (by instruments reasonably
satisfactory to Landlord and the Indenture Trustee) personal liability for the
payment of the Notes. In the event of any purchase hereunder subject to the
lien of the Indenture, an amount equal to the principal amount of the Notes
secured by such Properties then outstanding plus accrued interest thereon shall
be credited against the Competitor Price or, in the case of a sale pursuant to
section 3(c), the sale price payable hereunder. Upon receipt of the Competitor
Price, the Tenant Supplement, if any, and all such accrued but unpaid Basic
Rent and Additional Rent, Landlord shall deliver to Tenant, Third Party Buyer
or any other purchaser hereunder limited warranty deeds to the Properties and
any other instruments necessary to convey title thereto, subject only to
Permitted Liens (other than (A) those specified in clause (b) of the definition
thereof in Article [19] of the Lease and (B) any Fee Mortgage (other than the
Indenture) and any liens or encumbrances that Tenant is obligated (or which,
if filed, Tenant would be obligated) to discharge of record pursuant to Article
[19] of the Lease).
(g) Tenant shall pay all costs and expenses incident to such
conveyance, including, without limitation, recording fees, Landlord's and Owner
Participant's reasonable attorneys' fees, Landlord's and Owner Participant's
reasonable out-of-pocket expenses and all applicable transfer taxes which may
be imposed by reason of the conveyance and delivery of such deeds and other
instruments.
(h) For purposes of this Section 3, "Competitor" means any
national general merchandise retailer operating a business similar to Kmart as
of the Closing Date; provided that Owner Participant and any of its Affiliates
shall not be deemed to be a Competitor solely by reason of their ownership of
securities or other interests of any entity that is a national general
merchandise retailer so long as either (A) the consolidated sales of such
entity for its latest fiscal year were less than $100,000,000.00, (B) Owner
Participant or its Affiliates do not beneficially own in the aggregate more
than a 10% equity interest in such entity on a fully diluted basis and such
entity is not an Affiliate (other than by virtue of the rights and powers that
arise solely from the ownership of such equity interest) of Owner Participant
or any of its Affiliates or (C) the book value of the interest of Owner
Participant and its Affiliates in such entity does not exceed 1% of the
consolidated assets of Owner Participant and its Affiliates determined at the
end of its latest fiscal year.
- 10 -
<PAGE> 15
(i) Notwithstanding the foregoing provisions of this Section
3, after any sale effected in accordance with this Section 3, the transferring
Owner Participant shall not be released from any obligation arising or accruing
prior to such sale, but shall not be liable for any obligation arising or
accruing after such sale to the extent of such sale. Notwithstanding any sale
effected in accordance with this Section 3, the transferring Owner Participant
shall nevertheless be entitled to all benefits accrued and all rights vested or
arising with respect to the period prior to such sale, including, without
limitation, any right to indemnification under this Agreement or the Tax
Indemnification Agreement, to the exclusion of the transferee unless the
transferring Owner Participant shall have assigned such benefits and rights to
the transferee and provided evidence of such assignment in form and substance
satisfactory to Tenant.
4. Transfers by Remainderman. Remainderman shall not Transfer all
or any part of or interest in its interest in the Properties except pursuant to
the Tripartite Agreement or the Option Agreement.
5. Owner Participant Covenants. Each Owner Participant covenants
and agrees as follows:
(a) Negative Covenants. Without limiting the generality of
any other provision of this Agreement, Owner Participant shall not (i) Transfer
its interest in the Trust Estate or any part thereof, except as permitted by
Section 2, or (ii) create or suffer to be created, any Lessor Lien upon or
against Owner Participant's interest in the Trust Estate or any part thereof
except for any Lessor Lien in favor of the Indenture Trustee pursuant to the
Operative Documents, and except for any Lessor Lien attributable to the Owner
Participant that is being contested by Owner Participant in good faith and by
appropriate proceedings diligently conducted, so long as such proceedings do
not (A) involve any danger of the sale, forfeiture or loss of any Property or
any part thereof or interest therein, (B) interfere with the use, possession or
disposition of any Property or any part thereof or interest therein, (C)
interfere with the payment of Rent, or (D) impair the validity, perfection or
priority of the lien of the Indenture. After the termination of the Leases and
payment in full of the related Notes, Owner Participant may create, incur,
assume or suffer to exist any Lessor Liens attributable to it or any of its
Affiliates on or against Owner Participant's interest in a Property or any part
thereof or interest therein.
(b) Affirmative Covenants. Owner Participant shall hold
itself out as a legal entity separate and distinct from the Landlord, shall not
commingle its assets with those of the Landlord, shall conduct business with
Landlord only on an arm's-length basis except as may be specifically provided
in the Trust
- 11 -
<PAGE> 16
Agreements, shall maintain books and records and bank accounts separate from
the Landlord, shall file its own tax returns (except to the extent required or
permitted by law, regulation or rule), and shall not take any action that would
cause Landlord to violate its agreements under Section 3.05(b) of the
Indenture.
(c) Quiet Enjoyment. Owner Participant acknowledges and
agrees that, unless an Event of Default shall have occurred and be continuing
and the applicable Lease shall have been declared in default pursuant to
Section [21] of such Lease, Tenant shall have the exclusive rights to
possession, control, use and enjoyment of the Properties and Owner Participant
will not take any action that would interrupt or interfere with Tenant's
peaceable possession, control, use and enjoyment of any respective Property in
any manner that is not otherwise prohibited by Article [23] of such Lease.
(d) Compliance with and Amendment of Trust Agreements. Owner
Participant agrees that (i) it shall comply with all of the terms of the Trust
Agreements applicable to it and direct Owner Trustee to comply with all the
terms of the Trust Agreements applicable to Owner Trustee and (ii) prior to the
end of the Lease term, but without limiting its right to terminate the trust
created under the Trust Agreements following the discharge of the lien of the
Indenture, it shall not amend or supplement, or consent to any amendment of or
supplement to the Trust Agreements and shall not permit Owner Trustee to amend,
supplement or consent to any amendment of or supplement to, the Trust
Agreements, in each case without the prior written consent of Tenant, unless
such amendment or supplement would not adversely affect the rights or
obligations of Tenant under this Agreement, the Lease or any other Operative
Document or, so long as any of the Notes are outstanding, the validity,
perfection or priority of the Lien of the Indenture and any supplemental
indenture, or any rights of the Indenture Trustee under the Indenture or any
supplemental indenture (in which case the prior written consent of the
Indenture Trustee to such amendment or supplement also must be obtained).
6. Covenants of Tenant. Tenant covenants and agrees as follows:
(a) Chief Executive Office. Tenant shall give Landlord and
Indenture Trustee notice not less than 30 days before any relocation of its
chief executive office or principal place of business from its present
location, as identified herein, and any change in Tenant's legal structure,
corporate name or the name under which it conducts its business, which notice
shall be accompanied, to the extent required by applicable law, by original
executed UCC amendment financing statements (each in form and substance
reasonably satisfactory to Landlord and Indenture Trustee) to all UCC financing
statements filed in connection with the transactions contemplated by the
Operative Documents, and thereafter, promptly upon demand by Landlord or
Indenture Trustee, Tenant shall execute and deliver to Landlord and Indenture
Trustee
- 12 -
<PAGE> 17
such other documents (each in form and substance reasonably satisfactory to
Landlord and Indenture Trustee) as either thereof may reasonably require.
(b) UCC Statements. Upon the reasonable request of Landlord
or Indenture Trustee from time to time, Tenant shall cause appropriate UCC
protective financing statements and continuation statements with respect
thereto (each in form and substance reasonably satisfactory to Indenture
Trustee and Landlord), to be recorded and filed, as appropriate, in such manner
and in such places, and will pay all costs, charges and taxes with respect to
such recordation and filing and will comply with all applicable laws, statutes
and regulations, as may be necessary or appropriate in order to establish,
preserve and protect the interests and rights of Landlord under the Lease and
the interests and rights of Indenture Trustee under the Indenture and Other
Indenture Documents (as defined in the Indenture).
(c) Financial Statements. During the term of the Lease,
Tenant shall deliver to Landlord and Indenture Trustee within 45 days after
filing thereof, copies of each Form 10-K and Form 10-Q which the Tenant files
with the Securities and Exchange Commission; provided, that if Tenant shall no
longer be required to file such reports, it shall deliver to Landlord and
Indenture Trustee (i) annual audited financial statements prepared in
accordance with generally accepted accounting principles within 120 days after
the end of Tenant's fiscal year and (ii) unaudited financial statements within
90 days after the end of each of the first three fiscal quarters of Tenant's
fiscal year.
(d) Certificate. Tenant shall deliver to Landlord and
Indenture Trustee within 120 days after the end of each fiscal year of Tenant,
a certificate of Tenant signed by its Treasurer or Chief Financial Officer, to
the effect that such officer has reviewed or caused to be reviewed by
individuals under his supervision, this Agreement and the other Operative
Documents to which Tenant is a party and has made, or has caused to be made
under his supervision, a review of the transactions contemplated hereby and
thereby and the condition of Tenant during such preceding fiscal year, and such
review does not disclose the existence during such fiscal year nor does such
officer have knowledge of the existence as at the date of such certificate, of
any condition or event that constitutes a Default or an Event of Default or, if
such condition or event existed or exists, specifying the nature and period of
the existence thereof and any action that the Tenant has taken, is taking or
proposes to take with respect thereto.
(e) Notice of Certain Events. Tenant shall deliver to
Landlord, Remainderman, Indenture Trustee and Owner Participant, promptly upon
Tenant becoming aware of the existence thereof, notice specifying any condition
that constitutes a Default, an
- 13 -
<PAGE> 18
Event of Default or an Event of Loss. "Event of Loss" shall mean a casualty
under Article 14(e) or (f) of the Lease or a condemnation under Article 15(a)
or (b) of the Lease.
(f) Consolidation, Merger or Sale. Tenant shall not
consolidate with any Person, merge into any Person, or convey, transfer, lease
or otherwise dispose of to any Person all or substantially all of its assets in
any single transaction (or series of related transactions), unless:
(i) the surviving party shall be a corporation or
organization organized under the laws of the United States of America,
a state or commonwealth thereof or the District of Columbia and shall
have assumed each obligation, and succeeded to each right, of Tenant
under the Operative Documents to which Tenant is a party;
(ii) the surviving party, if other than Tenant,
immediately prior to such transaction, shall execute and deliver to
each of the parties hereto an agreement, in form and substance
reasonably satisfactory to each of Owner Participant and Indenture
Trustee, containing the assumption by the surviving party of each
obligation of Tenant under this Agreement and each other Operative
Document to which, immediately prior to such transaction, Tenant was a
party;
(iii) the surviving party shall have delivered to each of the
parties hereto an Officers' Certificate stating that such transaction
complies with all the terms and conditions of this Section and that
all Governmental Action, if any, required in connection with such
transaction have been obtained;
(iv) the surviving party shall represent and warrant to
the parties, and shall have delivered to each of the parties hereto an
opinion of counsel, in form and substance reasonably satisfactory to
each of Remainderman, Owner Participant and Indenture Trustee, that
(A) the surviving party is a corporation in good standing in the state
of its incorporation and is qualified to do business in each state in
which a Property is located; (B) all documents executed and delivered
by the surviving party pursuant to this Section have been duly
authorized, executed and delivered by the surviving party and
constitute the valid, legal and binding obligations of the surviving
party; and (C) all of the Operative Documents to which Tenant is a
party will, upon the consummation of such transaction, be the valid,
legal and binding obligations of the surviving party; and
(v) such transaction shall not cause any material adverse
Federal, state or local tax consequences to Landlord or Owner
Participant (other than consequences for which Owner
- 14 -
<PAGE> 19
Participant and Landlord would be indemnified by Tenant pursuant to
the terms of the Tax Indemnification Agreement, this Agreement or
another written undertaking by Tenant, if any, to indemnify Owner
Participant and Landlord).
Upon the consummation of such transaction, the surviving
party, if other than Tenant immediately prior thereto, shall succeed to, and be
substituted for, and may exercise every right and power of, Tenant immediately
prior to such transaction under each Operative Document to which Tenant was a
party immediately prior to such transaction, with the same effect as if the
surviving party had been named herein and therein, and Tenant shall have no
further obligation under this Agreement or any other Operative Document.
(g) Operating Lease. Tenant intends that each Lease be
an operating Lease under applicable state law and agrees that it shall not take
any action inconsistent with such position.
(h) Tenant Not to Claim Tax Ownership Benefits. After
the Closing Date with respect to any Property, Tenant will not claim tax
ownership benefits with respect to such Property, or any interest therein for
so long as Tenant shall not have reacquired title to such Property (it being
understood by the parties that the foregoing is not intended to prevent Tenant
from claiming tax benefits, if any, for leasehold improvements made at Tenant's
expense after the Closing Date, which tax benefits Tenant, as lessee of such
leasehold improvements, is entitled to claim under applicable tax law).
(i) No Purchase of Notes. Tenant shall not acquire any
interest in the Notes or the Certificates.
7. Landlord Covenants. Each Landlord covenants and agrees as
follows:
(a) ERISA. Each Landlord agrees that (i) it shall not
permit any ERISA Plan sponsored or maintained by Landlord, any ERISA Affiliate
or any PTE 89-88 Affiliate thereof to purchase or hold any Note or Certificate,
and (ii) neither Landlord nor any PTE 89-88 Affiliate thereof shall act in a
fiduciary capacity with respect to the purchase or holding by any ERISA Plan of
any Note or Certificate, in either case (i) or (ii) which would constitute a
non-exempt "prohibited transaction" within the meaning of ERISA Section 406 or
Code Section 4975. "ERISA Affiliate" shall mean any entity treated as a single
employer with any Person pursuant to Code Section 414(b), (c), (m) or (o);
"ERISA Plan" shall mean an employee benefit plan (or its related trust) subject
to Part 4 of Subtitle B of Title I of ERISA or a "plan" (or its related trust)
within the meaning of Code section 4975(e)(1); and "PTE 89-88
- 15 -
<PAGE> 20
Affiliate" shall mean an "affiliate" as defined in Prohibited Transaction
Exemption 89-88.
(b) Lessor Liens. Each Landlord hereby unconditionally
agrees with and for the benefit of the parties to this Agreement that Landlord
will not directly or indirectly create, incur, assume or suffer to exist any
Lessor Lien on or against any part of the Indenture Estate, except for any
Lessor Lien in favor of the Indenture Trustee pursuant to the Operative
Documents, and Landlord agrees that it will at its own cost and expense
(without right to indemnity under this Agreement) promptly take such action as
may be necessary to duly discharge and satisfy in full all such Lessor Liens.
Each Landlord hereby indemnifies and holds harmless Tenant, Remainderman, Owner
Trustee, Indenture Trustee and each Owner Participant from and against any
loss, cost or expense (including reasonable fees and expenses) which may be
suffered or incurred by any of them as the result of the failure of Landlord to
discharge and satisfy any such Lessor Liens created or incurred as a result of
any action or inaction of Landlord.
8. Covenants of Owner Trustee. Owner Trustee, in its individual
capacity solely with respect to (a) and (b) below, and otherwise in its trust
capacity, covenants and agrees as follows:
(a) Compliance with and Amendment of Trust Agreements.
(i) Owner Trustee shall comply with all of the terms of the Trust Agreements
applicable to it and (ii) prior to the end of the Lease term, it shall not
amend or supplement or consent to any amendment of or supplement to, the Trust
Agreements without the prior written consent of Tenant unless such amendment or
supplement would not adversely affect the rights or obligations of Tenant under
this Agreement, each Lease or any other Operative Document or, so long as any
of the Notes are outstanding, the validity, perfection or priority of the Lien
of the Indenture or any rights of the Indenture Trustee under the Indenture (in
which case the prior written consent of the Indenture Trustee to such amendment
or supplement also must be obtained).
(b) Lessor Liens. Owner Trustee hereby unconditionally
agrees with and for the benefit of the parties to this Agreement that Owner
Trustee will not directly or indirectly create, incur, assume or suffer to
exist any Lessor Lien attributable to Owner Trustee in its individual capacity
on or against any part of the Indenture Estate, except for any Lessor Lien in
favor of the Indenture Trustee pursuant to the Operative Documents, and Owner
Trustee in its individual capacity agrees that it will at its own cost and
expense (without right to indemnity under this Agreement) promptly take such
action as may be necessary to duly discharge and satisfy in full all such
Lessor Liens. Owner Trustee hereby indemnifies and holds harmless Tenant,
Remainderman, each Landlord, Indenture Trustee and each Owner Participant from
and against any
- 16 -
<PAGE> 21
loss, cost or expense (including reasonable fees and expenses) which may be
suffered or incurred by any of them as the result of the failure of Owner
Trustee to discharge and satisfy any such Lessor Liens created or incurred as a
result of any action or inaction of the Owner Trustee in its individual
capacity.
(c) No Unauthorized Action. Owner Trustee agreed that it
shall not take any action under any of the Trust Agreements or any other
Operative Document unless it has been authorized by the Owner Participant to do
so pursuant to the terms of the applicable Trust Agreement or pursuant to the
Owner Participant's prior written consent.
9. Covenants of Indenture Trustee. Indenture Trustee covenants
and agrees as follows:
(a) Indenture Trustee Liens. Indenture Trustee hereby
unconditionally agrees with and for the benefit of the parties to this
Agreement that Indenture Trustee will not directly or indirectly create, incur,
assume or suffer to exist any Indenture Trustee Lien on or against any part of
the Indenture Estate.
(b) Quiet Enjoyment. Notwithstanding any other provision
of the Indenture or of any other Operative Document, Indenture Trustee
warrants, covenants and agrees that, unless an Event of Default shall have
occurred and be continuing, Indenture Trustee (i) shall not name Tenant as a
party in any action or procedures to foreclose the Lien of the Indenture,
unless such joinder shall be required under applicable law, and in which case
Indenture Trustee shall not seek affirmative relief from Tenant in such action
nor shall any Lease be cut off or terminated nor Tenant's possession thereunder
be disturbed in any such action or proceeding, (ii) Tenant shall have the
exclusive rights to possession, control, use and enjoyment of the Properties
and Indenture Trustee will not take any other action that would interrupt or
interfere with Tenant's peaceable possession, control, use and enjoyment of any
respective Property in any manner, and (iii) subject to the next succeeding
sentence of this Section 8(b), Indenture Trustee will recognize each Lease and
Tenant's rights thereunder. Upon any acquisition by Indenture Trustee or any
purchaser at foreclosure or transferee pursuant to a plan of reorganization
under Chapter 11 of the Bankruptcy Code (collectively, a "Successor Landlord")
of Owner Trustee's or Landlord's interest in any Lease, such Lease shall
continue as a direct Lease between the Successor Landlord and Tenant upon all
terms, covenants and conditions set forth in such Lease, except that the
Successor Landlord shall not be (A) liable for any previous act or omission of
Landlord under such Lease, (B) subject to any offsets, claims, defenses or
counterclaims Tenant may have against Owner Trustee, (C) bound by any
prepayment of Rent not actually received by Successor Landlord or (D) bound by
any
- 17 -
<PAGE> 22
amendment to such Lease requiring Indenture Trustee's consent unless such
consent was obtained.
10. Covenants of Remainderman Participant. Remainderman
Participant covenants and agrees as follows:
(a) Remainderman's Activities and Liens. Remainderman
Participant hereby unconditionally agrees with and for the benefit of the
parties to this Agreement that Remainderman Participant will not engage in any
business other than holding the beneficial interest in the Remainderman or any
activity related thereto or directly or indirectly create, incur, assume or
suffer to exist any Remainder Purchaser Liens attributable to it on or against
any part of the Remainderman Trust Estate, the Trust Estate, the Indenture
Estate or the Properties, and the Remainderman Participant agrees that it will
at its own cost and expense (without right to indemnity under this Agreement)
promptly take such action as may be necessary to duly discharge and satisfy in
full all such Remainder Purchaser Liens. Remainderman Participant hereby
indemnifies and holds harmless Tenant, Indenture Trustee, Owner Trustee, each
Landlord and each Owner Participant from and against any loss, cost or expense
(including reasonable legal fees and expenses) which may be suffered or
incurred by any of them as the result of the failure of Remainderman
Participant to discharge and satisfy any such Remainder Purchaser Lien.
(b) Quiet Enjoyment. Remainder Participant acknowledges
and agrees that, unless an Event of Default shall have occurred and be
continuing and the Leases shall have been declared in default pursuant to
Article [21] of such Leases and the Ground Lease (as defined in the Option
Agreement) shall have been entered into, Tenant shall have the exclusive rights
to possession, control, use and enjoyment of the Properties and Remainderman
Participant will not take any action that would interrupt or interfere with
Tenant's peaceable possession, control, use and enjoyment of any respective
Property in any manner that is not otherwise prohibited by Article [23] of
such Leases.
(c) Right of First Offer. If at any time during the term
of any Lease or at a time when Landlord has rights under Ground Leases or the
Option Agreements, the Remainderman Participant desires to sell or transfer its
interest in the Remainderman, it shall first offer such interest to Landlord on
the terms and conditions set forth in Section 27.
11. Covenants of Remainderman Trustee. Remainderman Trustee in
its individual capacity covenants and agrees as follows:
(a) Remainderman's Liens. Remainderman Trustee hereby
unconditionally agrees with and for the benefit of the parties to this
Agreement that Remainderman Trustee will not directly or
- 18 -
<PAGE> 23
indirectly create, incur, assume or suffer to exist any Remainder Purchaser
Liens attributable to it in its individual capacity on or against any part of
the Trust Estate, the Indenture Estate or the Properties, and Remainderman
Trustee agrees that it will at its own cost and expense (without right to
indemnity under this Agreement) promptly take such action as may be necessary
to duly discharge and satisfy in full all such Remainder Purchaser Liens
attributable to it in its individual capacity. Remainderman Trustee hereby
indemnifies and holds harmless Tenant, Indenture Trustee, Owner Trustee, each
Landlord and each Owner Participant from and against any loss, cost or expense
(including reasonable legal fees and expenses) which may be suffered or
incurred by any of them as the result of the failure of Remainderman Trustee to
discharge and satisfy any such Remainder Purchaser Lien attributable to it in
its individual capacity.
12. Covenants of Remainderman. Remainderman, and Remainderman
Trustee and Remainderman Participant with respect to paragraph (c) below,
covenants and agrees as follows:
(a) Activities of Remainderman; Existence; Remainderman
Liens. Remainderman will engage in no activities or businesses and will not
incur any indebtedness for money borrowed, other than those contemplated under
the Remainderman Trust Agreement and other Operative Documents and will
maintain its existence as a Delaware business trust for so long as it shall
have any obligations hereunder or under any of the other Operative Documents.
Remainderman will keep the Remainderman Trust Estate free and clear of
Remainder Purchaser Liens and shall not, prior to the termination of any Lease
sell, assign, or otherwise transfer its interest in the Remainderman Trust
Estate except as contemplated by the Operative Documents.
(b) Chief Place of Business of the Remainderman Trust,
etc. Remainderman agrees that it shall not change its chief place of business,
its chief executive office or the office where it keeps its records concerning
the Remainderman Trust Estate, unless it shall have given Owner Participant and
Tenant at least 30 days' prior written notice of such change.
(c) Bankruptcy Proceedings. None of Remainderman
Participant, Remainderman Trustee nor the Remainderman shall
(i) institute, take, or cause to be taken, any action
intended to result in the institution against Remainderman of any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any federal or state
bankruptcy or similar law,
(ii) consent to, or execute any document specifically
acquiescing in the taking by Remainderman of, any action that
- 19 -
<PAGE> 24
would result in the commencement of any such proceedings against
Remainderman, or
(iii) execute any document specifically acquiescing in any
such proceedings commenced by others against Remainderman.
(d) Quiet Enjoyment. Remainderman acknowledges and
agrees that, unless an Event of Default shall have occurred and be continuing
and the Leases shall have been declared in default pursuant to Article [21] of
such Leases and the Ground Lease (as defined in the Option Agreement) shall
have been entered into, Tenant shall have the exclusive rights to possession,
control, use and enjoyment of the Properties and Remainderman will not take any
action that would interrupt or interfere with Tenant's peaceable possession,
control, use and enjoyment of any respective Property in any manner that is not
otherwise prohibited by Article [23] of such Leases.
13. Representations and Warranties.
(a) Tenant represents and warrants as of the date hereof
as follows:
(i) Due Organization, etc. Tenant is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Michigan and has the corporate power and authority to enter
into and perform its obligations under each Operative Document to
which it is a party, and it is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which
its failure to be so qualified would have a material adverse effect
upon its ability to perform its obligations under the Operative
Documents.
(ii) Authorization; No Conflict. The execution, delivery
and performance by Tenant of, the consummation by it of the
transactions provided for in, and the compliance by it with all of the
provisions of, each Operative Document to which it is a party have
been duly authorized by all necessary corporate action on its part and
neither the execution, delivery and performance thereof, nor the
consummation of the transactions contemplated thereby, nor compliance
by it with any of the terms and provisions thereof (A) requires any
approval of its stockholders, (B) requires any approval or consent of
any trustee or holders of any of its indebtedness or obligations,
except for such approvals and consents as have been duly obtained and
are in full force and effect, (C) contravenes any current Legal
Requirement applicable to or binding on it or any of the Properties,
which contravention would materially adversely affect its ability to
perform its obligations under the Operative Documents, (D) contravenes
or
- 20 -
<PAGE> 25
results in any breach of or constitutes any default under, or results
in the creation of any lien (other than Permitted Liens) upon any of
its property under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, bank loan or credit agreement,
lease, articles of incorporation, by-laws or other agreement or
instrument to which it is a party, by which it may be bound or
affected or by which any of the Properties may be affected, which
contravention, breach or default would materially adversely affect its
ability to perform its obligations under the Operative Documents, or
(E) requires any Governmental Action, except for the filings and
recordings necessary or advisable to perfect the rights of Landlord,
Remainderman and the Indenture Trustee intended to be created by the
Operative Documents and any filings that are required in the ordinary
course of business in connection with the ownership, use and operation
of the Properties. "Governmental Action" means all permits,
authorizations, registrations, consents, approvals, waivers,
exceptions, variances, orders, judgments, decrees, licenses,
exemptions, publications, filings, notices to and declarations of or
with, or required by, applicable Governmental Authorities, or required
by any Legal Requirements.
(iii) Enforceability. Assuming the due authorization,
execution and delivery by all other parties to each Operative Document
to which Tenant is a party, each such Operative Document is,
respectively, a legal, valid and binding obligation of Tenant,
enforceable against Tenant in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' or lessors'
rights and to general equity principles.
(iv) No Actions Pending. There is no action, suit or
proceeding before any court, governmental body, agency, commission or
other tribunal now pending or, to the actual knowledge of any
executive officer of Tenant having oversight of the transactions
contemplated by the Operative Documents, threatened in writing against
or affecting Tenant or the Properties or naming Tenant as a party,
that questions the validity or enforceability of this Agreement or any
other Operative Document to which Tenant is or is to become a party or
that would, if adversely determined, have a material adverse effect on
the ability of Tenant to perform its obligations under any Operative
Document.
(v) Financial Statements. The consolidated balance
sheets of Tenant and its consolidated subsidiaries as of January 26,
1994 and July 27, 1994, and the related statements of income and cash
flows of Tenant and its consolidated
- 21 -
<PAGE> 26
subsidiaries for the fiscal year ended January 26, 1994 and the six
months ended July 27, 1994, contained or incorporated by reference in
Tenant's Annual Report on Form 10-K for the fiscal year ended January
26, 1994 and Tenant's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 27, 1994, respectively, fairly present the
consolidated financial condition of Tenant and its consolidated
subsidiaries as of such dates and the result of operations of Tenant
and its consolidated subsidiaries for the periods ended on such dates,
all in accordance with generally accepted accounting principles
("GAAP") consistently applied.
(vi) No Material Adverse Change. Since October 26, 1994,
there has been no material adverse change in the financial condition
of Tenant and its subsidiaries taken as a whole, except for such
changes as have been disclosed in filings made by Tenant with the
Securities and Exchange Commission.
(vii) No Defaults. No Material Default or Event of Default
has occurred and is continuing, and no condition exists that
constitutes, or with the giving of notice or lapse of time, or both,
would constitute, an event of default by Tenant under any material
indenture, mortgage, loan agreement, lease or other agreement or
instrument to which Tenant is a party or by which it or any of its
properties may be bound. No Event of Loss has occurred and no event
or condition has occurred which would, with the passage of time or the
giving of notice, or both, constitute an Event of Loss.
(viii) ERISA. Assuming that Owner Participant is not
acquiring its interest in the Trust Estate with assets of any
"employee benefit plan" (or its related trust) as defined in Section
3(3) of ERISA or of any "plan" (or its related trust) as defined in
Section 4975(e)(1) of the Code, the execution, delivery and
performance by Tenant of this Agreement and the other Operative
Documents to which Tenant is or is to become a party will not involve
any prohibited transaction within the meaning of Section 406 of ERISA
or Section 4975 of the Code.
(ix) Compliance. After giving effect to the transactions
contemplated by the Operative Documents, including without limitation,
the due execution, delivery and recordation of the Owner Trustee
Deeds, the Remainder Purchaser Deeds and the Leases, the ownership of
the Improvements and the Estate for Years by the Landlord and the
Remainderman Interest by the Remainderman, and the use and occupancy
of the Properties by Tenant, in each case, in the operation of
Tenant's business, shall comply with applicable Legal Requirements,
including, without limitation, all applicable zoning and similar land
use laws and regulations, as of the Closing Date, except in any case
where the failure to comply would not have an adverse
- 22 -
<PAGE> 27
effect on the value or remaining useful life of the respective
Improvements except to an insignificant extent or where applicable
Legal Requirements do not require Tenant of the Properties to be in
compliance.
(x) Legal Effect. The Owner Trustee Deeds are effective,
under each state law in which the Properties are respectively located,
to convey all of Tenant's right, title and interest in the
Improvements and the Estates for Years. The Leases constitute
operating Leases under each state law in which the Properties are
respectively located.
(xi) Offer of Interest. Except as contemplated herein or
by the Indentures and Pass Through Trust Agreements, neither Tenant,
nor any person authorized by Tenant to act on its behalf, has directly
or indirectly offered to any person for sale, or solicited offers to
buy from any person or otherwise approached or negotiated with any
person, with respect to interests in all or any portion of the
Properties or any indebtedness secured by any interest in the
Properties, including any indebtedness evidenced by the Certificates
or Notes, or any securities similar to any of the foregoing, in any
case under circumstances which would subject such interest or
indebtedness to registration under the Securities Act of 1933, as
amended.
(xii) No Brokers. Tenant has dealt with no broker, finder,
advisor or other party that could claim a commission, fee or other
compensation arising out of the transactions contemplated hereby,
other than Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated.
(xiii) No Consents Required. No consent, Governmental
Approval, authorization, filing or registration (including any such
item relating to any Environmental Law as hereinafter defined) is
required to be obtained or made by Tenant in connection with the
execution, delivery and performance by Tenant of this Agreement or the
execution, delivery and performance by Tenant of the other Operative
Documents required to be made or delivered by Tenant pursuant hereto
or pursuant to the Purchase Agreement.
(xiv) No Investment Company. Tenant is not an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(xv) Chief Executive Offices. The chief executive office
(as such term is used in Article 9 of the Uniform Commercial Code) and
the principal place of business of Tenant is located in Troy,
Michigan, and the office where Tenant will keep its
- 23 -
<PAGE> 28
corporate records concerning the Leases and the Personalty is located
in Troy, Michigan.
(b) Each Owner Participant represents and warrants as of
the date hereof as follows:
(i) Due Organization, etc. Owner Participant is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite power
and authority to enter into and perform its obligations under each
Operative Document to which it is a party.
(ii) Authorization; No Conflict. The execution, delivery
and performance by Owner Participant of, the consummation by it of the
transactions provided for in, and the compliance by it with all the
provisions of, each Operative Document to which it is a party have
been duly authorized by all necessary action on its part and neither
the execution, delivery and performance thereof by the Owner
Participant, nor the consummation by it of the transactions
contemplated thereby, nor the compliance by it with any of the terms
and provisions thereof (A) requires any approval of its stockholders,
(B) requires any approval or consent of any trustee or holders of any
of its indebtedness or obligations, except for such approvals and
consents as have been duly obtained and are in full force and effect,
(C) contravenes any current Legal Requirements applicable to or
binding on it (except no representation or warranty is made as to any
Legal Requirement to which Owner Participant may be subject because of
the activities of Tenant), which contravention would materially
adversely affect its ability to perform its obligations under the
Operative Documents, (D) contravenes or results in any breach of or
constitutes any default under, or results in the creation of any lien
(other than Permitted Liens) upon any of its property under any
indenture, mortgage, chattel mortgage, deed of trust, conditional
sales contract, bank loan or credit agreement, lease, certificate of
incorporation, by-laws or other agreement or instrument to which it is
a party or by which it or its properties may be bound or affected,
which contravention, breach or default would materially adversely
affect its ability to perform its obligations under the Operative
Documents, or (E) requires any Governmental Action, except for filings
and recordings necessary or advisable to perfect the rights of
Landlord, Remainderman, Indenture Trustee and Tenant intended to be
created by the Operative Documents.
(iii) Enforceability. Assuming the due authorization,
execution and delivery by all other parties to each Operative Document
to which Owner Participant is a party, each such
- 24 -
<PAGE> 29
Operative Document is, respectively, a legal, valid and binding
obligation of Owner Participant, enforceable against Owner Participant
in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(iv) No Actions Pending. There is no action, suit or
proceeding before any court, governmental body, agency, commission or
other tribunal now pending or, to the actual knowledge of any
executive officer of Owner Participant having oversight of the
transactions contemplated by the Operative Documents, threatened
against or affecting Owner Participant or naming Owner Participant as
a party, that questions the validity or enforceability of this
Agreement or any other Operative Document to which Owner Participant
is or is to become a party or that would, if adversely determined,
have a material adverse effect on the ability of Owner Participant to
perform its obligations under any Operative Document.
(v) Institutional Investor. Owner Participant is an
"institutional investor" as defined in the Securities Act of 1933, as
amended, or the regulations promulgated thereunder, or is directly or
indirectly wholly owned by Owner Participant Parent, which is an
institutional investor. Owner Participant is acquiring its beneficial
interest in the Trust Estate for its own account for investment and
not with a view to resale or distribution thereof.
(vi) ERISA. Owner Participant is not acquiring its
interest in the Trust Estate with the assets of any "employee benefit
plan" (or its related trust) as defined in Section 3(3) of ERISA or
with the assets of any "plan" (or its related trust) as defined in
Section 4975(e)(1) of the Code.
(vii) Investment Company. Owner Participant is not an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(vii) Offer of Interest. Except as contemplated herein or by
the Indentures and Pass Through Trust Agreements, each Owner
Participant has not offered any interest in the Leases, the Notes, the
Certificates or any similar securities of Tenant or the Trust Estate
to, or solicited any offer to acquire any of the same from, any
Person, nor has it authorized any Person to take any such action.
(ix) No Brokers. Owner Participant has dealt with no
broker, finder, advisor or other party that could claim a
- 25 -
<PAGE> 30
commission, fee or other compensation arising out of the transactions
contemplated hereby.
(c) Owner Participant Parent represents and warrants as
of the date hereof as follows:
(i) Due Organization, etc. Owner Participant Parent is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite power
and authority to enter into and perform its obligations under each
Operative Document to which it is a party.
(ii) Authorization; No Conflict. The execution, delivery
and performance by Owner Participant Parent of, the consummation by it
of the transactions provided for in, and the compliance by it with all
the provisions of, each Operative Document to which it is a party have
been duly authorized by all necessary action on its part and neither
the execution, delivery and performance thereof by Owner Participant
Parent, nor the consummation by it of the transactions contemplated
thereby, nor the compliance by it with any of the terms and provisions
thereof (A) requires any approval of its stockholders, (B) requires
any approval or consent of any trustee or holders of any of its
indebtedness or obligations, except for such approvals and consents as
have been duly obtained and are in full force and effect, (C)
contravenes any current Legal Requirements applicable to or binding on
it (except no representation or warranty is made as to any Legal
Requirement to which Owner Participant Parent may be subject because
of the activities of Tenant), which contravention would materially
adversely affect its ability to perform its obligations under the
Operative Documents, (D) contravenes or results in any breach of or
constitutes any default under, or results in the creation of any lien
(other than Permitted Liens) upon any of its property under any
indenture, mortgage, chattel mortgage, deed of trust, conditional
sales contract, bank loan or credit agreement, lease, certificate of
incorporation, by-laws or other agreement or instrument to which it
is a party or by which it or its properties may be bound or affected,
which contravention, breach or default would materially adversely
affect its ability to perform its obligations under the Operative
Documents, or (E) requires any Governmental Action, except for filings
and recordings necessary or advisable to perfect the rights of
Landlord, Remainderman, Indenture Trustee and Tenant intended to be
created by the Operative Documents.
(iii) Enforceability. Assuming the due authorization,
execution and delivery by all other parties to each Operative
- 26 -
<PAGE> 31
Document to which Owner Participant Parent is a party, each such
Operative Document to which Owner Participant Parent is a party is,
respectively, a legal, valid and binding obligation of Owner
Participant Parent, enforceable against Owner Participant Parent in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(iv) No Actions Pending. There is no action, suit or
proceeding before any court, governmental body, agency, commission or
other tribunal now pending or, to the actual knowledge of any
executive officer of Owner Participant Parent having oversight of the
transactions contemplated by the Operative Documents, threatened
against or affecting Owner Participant Parent or naming Owner
Participant Parent as a party, that questions the validity or
enforceability of this Agreement or any other Operative Document to
which Owner Participant Parent is or is to become a party or that
would, if adversely determined, have a material adverse effect on the
ability of Owner Participant Parent to perform its obligations under
any Operative Document.
(v) Owner Participant Subsidiary. _____________________
is a direct, wholly-owned subsidiary of Owner Participant Parent.
(vi) Offer of Interest. Except as contemplated herein or
by the Indentures and Pass Through Trust Agreements, Owner Participant
Parent has not offered any interest in the Leases, the Notes, the
Certificates or similar securities of Tenant or the Trust Estate to,
or solicited any offer to acquire any of the same from, any Person,
nor has it authorized any Person to take any such action.
(d) Each Landlord represents and warrants as of the date
hereof as follows:
(i) Due Organization, etc. Landlord is a business trust,
duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite power and authority to
enter into and perform its obligations under the Operative Documents
to which it is a party.
(ii) Authorization; No Conflict. The execution, delivery
and performance by Landlord of, the consummation by it of the
transactions provided for in, and the compliance by it with all of the
provisions of, each Operative Document to which it is a party have
been duly authorized by all necessary action on its part and neither
the execution, delivery and performance thereof, nor the consummation
of the transactions
- 27 -
<PAGE> 32
contemplated thereby, nor compliance by it with any of the terms and
provisions thereof (A) requires any approval of its beneficial owners,
(B) requires approval or consent of any trustee or holders of any of
its indebtedness or obligations, except for such approvals and
consents as have been duly obtained and are in full force and effect,
(C) contravenes any current Legal Requirement applicable to or binding
on it, which contravention would materially adversely affect its
ability to perform its obligations under the Operative Documents, (D)
contravenes or results in any breach of or constitutes any default
under, any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement, lease,
charter, by-laws or other agreement or instrument to which it is a
party, or by which it or its properties may be bound or affected,
which contravention, breach or default would materially adversely
affect its ability to perform its obligations under the Operative
Documents or (E) requires any Governmental Action, except for (x)
filing of the certificate of trust with the Delaware Secretary of
State pursuant to the Trust Agreement, (y) filings and recordings
necessary or advisable to perfect the rights of Landlord,
Remainderman, Indenture Trustee and the Tenant intended to be created
by the Operative Documents and (z) any filings that are required in
the ordinary course of business in connection with the ownership, use
and operation of the Properties.
(iii) Enforceability. Assuming the due authorization,
execution and delivery by the other parties to each Operative Document
to which Landlord is a party, each such Operative Document is,
respectively, a legal, valid and binding obligation of Landlord,
enforceable against Landlord in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and
to general equity principles.
(iv) No Actions Pending. There is no action, suit or
proceeding before any court, governmental body, agency, commission or
other tribunal now pending or, to the actual knowledge of any
executive officer of Landlord having oversight of the transactions
contemplated by the Operative Documents, threatened in writing against
or affecting Landlord or naming Landlord as a party, that questions
the validity or enforceability of this Agreement or any other
Operative Document to which Landlord is or is to become a party or
that would, if adversely determined, have a material adverse effect on
the ability of Landlord to perform its obligations under any Operative
Document.
- 28 -
<PAGE> 33
(v) No Lessor Liens. No Lessor Lien is in existence,
except for any Lessor Lien in favor of the Indenture Trustee pursuant
to the Operative Documents. The execution, delivery and performance
by the Landlord of the Operative Documents to which it is a party (as
Landlord) will not subject the Indenture Estate, or any portion
thereof, to any Lessor Liens, except for any Lessor Lien in favor of
the Indenture Trustee pursuant to the Operative Documents.
(vi) Offer of Interest. Except as contemplated herein or
by the Indentures or Pass Through Trust Agreements, neither Landlord,
nor any person authorized by Landlord to act on its behalf, has
directly or indirectly offered to any person for sale, or solicited
offers to buy from any person or otherwise approached or negotiated
with any person, with respect to interests in all or any portion of
the Properties or any beneficial or other interest in or under the
Trust Agreements or any indebtedness secured by any interests in the
Properties, including any indebtedness evidenced by the Certificates
or Notes, or any securities similar to any of the foregoing, in any
case under circumstances which would subject such interest or
indebtedness to registration under the Securities Act of 1933, as
amended.
(vii) No Brokers. Landlord has dealt with no broker, finder,
advisor or other party that could claim a commission, fee or other
compensation arising out of the transactions contemplated hereby.
(e) Owner Trustee, in its individual capacity, represents
and warrants as of the date hereof as follows:
(i) Due Organization, etc. Corporate Owner Trustee is a
banking corporation, duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the power
and authority to enter into and perform its obligations under the
Trust Agreements and the other Operative Documents to which it is a
party.
(ii) Authorization; No Conflict. The execution, delivery
and performance by Owner Trustee of, the consummation by it of the
transactions provided for in, and the compliance by it with all of the
provisions of this Agreement and the Trust Agreements have been duly
authorized by all necessary action on its part and neither the
execution, delivery and performance thereof, nor the consummation of
the transactions contemplated thereby, nor compliance by it with any
of the terms and provisions thereof, (A) requires any approval of its
stockholders, (B) requires approval or consent of any trustee or
holders of any of its indebtedness or obligations, except for such
approvals and consents as have been duly obtained and
- 29 -
<PAGE> 34
are in full force and effect, (C) contravenes any current Legal
Requirement of the State of Delaware or the United States governing
its banking or trust powers applicable to or binding on it, which
contravention would materially adversely affect its ability to perform
its obligations under the Operative Documents, (D) contravenes or
results in any breach of or constitutes any default under, any
indenture, mortgage, chattel mortgage, deed of trust, conditional
sales contract, bank loan or credit agreement, lease, charter, by-
laws or other agreement or instrument to which it is a party, or by
which it or its properties may be bound or affected, which
contravention, breach or default would materially adversely affect its
ability to perform its obligations under the Operative Documents or
(E) requires any Governmental Action of the State of Delaware or the
United States governing its banking or trust powers.
(iii) Enforceability. Assuming the due authorization,
execution and delivery by all other parties to this Agreement and the
Trust Agreements, each of this Agreement and the Trust Agreements is,
respectively, a legal, valid and binding obligation of Owner Trustee,
enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors rights and to
general equity principles.
(iv) No Lessor Liens. No Lessor Lien attributable to
Owner Trustee in its individual capacity is in existence. The
execution, delivery and performance by Owner Trustee of the Operative
Documents to which it is a party (in its individual capacity) will not
subject the Indenture Estate, or any portion thereof, to any Lessor
Liens attributable to Owner Trustee in its individual capacity, except
for any Lessor Lien in favor of the Indenture Trustee pursuant to the
Operative Documents.
(v) Offer of Interest. Except as contemplated herein or
by the Indentures or Pass Through Trust Agreements, neither Owner
Trustee, nor any person authorized by Owner Trustee to act on its
behalf, has directly or indirectly offered to any person for sale, or
solicited offers to buy from any person or otherwise approached or
negotiated with any person, with respect to interests in all or any
portion of the Properties or any beneficial or other interest in or
under the Trust Agreements or any indebtedness secured by any
interests in the Properties, including any indebtedness evidenced by
the Certificates or Notes, or any securities similar to any of the
foregoing, in any case under circumstances which would subject such
interest or indebtedness to registration under the Securities Act of
1933, as amended.
- 30 -
<PAGE> 35
(vi) No Brokers. Owner Trustee has dealt with no broker,
finder, advisor or other party that could claim a commission, fee or
other compensation arising out of the transactions contemplated
hereby.
(f) The Corporate Indenture Trustee, in its individual
capacity, represents and warrants as of the date hereof as follows:
(i) Due Organization, etc. Corporate Indenture Trustee
is a New York banking corporation duly organized, validly existing and
in good standing under the laws of the State of New York and has the
corporate power and authority to enter into and perform its
obligations under the Operative Documents to which it is a party.
(ii) Authorization; No Conflict. The execution, delivery
and performance by Indenture Trustee of, the consummation by it of the
transactions provided for in, and the compliance by it with all of the
provisions of, each Operative Document to which it is a party have
been duly authorized by all necessary action on its part and neither
the execution, delivery and performance thereof, nor the consummation
of the transactions contemplated thereby, nor compliance by it with
any of the terms and provisions thereof (A) contravenes any current
Legal Requirement of the United States or the State of New York
governing its banking and trust powers applicable to or binding on it,
which contravention would materially adversely affect its ability to
perform its obligations under the Operative Documents, or (B) requires
any Governmental Action of the United States or the State of New York
governing its banking and trust powers, except for filings and
recordings necessary or advisable to perfect the rights of the
Landlord, Indenture Trustee and the Tenant intended to be created by
the Operative Documents.
(iii) Enforceability. Assuming the due authorization,
execution and delivery by the other parties to each Operative Document
to which Indenture Trustee is a party, each such Operative Document
is, respectively, a legal, valid and binding obligation of Indenture
Trustee, enforceable against it in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights
and to general equity principles.
(iv) No Actions Pending. There is no action, suit or
proceeding before any court, governmental body, agency, commission or
other tribunal now pending or, to Indenture Trustee's actual
knowledge, threatened in writing against or affecting Indenture
Trustee or naming Indenture Trustee as a party, that questions the
validity or enforceability of this
- 31 -
<PAGE> 36
Agreement or any other Operative Document to which Indenture Trustee
is or is to become a party or that would, if adversely determined,
have a material adverse effect on the ability of Indenture Trustee to
perform its obligations under any Operative Document to which it is a
party.
(v) No Indenture Trustee's Liens. No Lien attributable
to Indenture Trustee in its individual capacity (as described in
Section 9.17 of the Indenture and herein "Indenture Trustee Liens") is
in existence. The execution, delivery and performance by Indenture
Trustee of the Operative Documents to which it is a party will not
subject the Indenture Estate, or any portion thereof, to any Indenture
Trustee Liens.
(vi) Offer of Interest. Except as contemplated herein or
by the Indentures or Pass Through Trust Agreements, neither Indenture
Trustee, nor any person authorized by Indenture Trustee to act on its
behalf, has directly or indirectly offered to any person for sale, or
solicited offers to buy from any person or otherwise approached or
negotiated with any person, with respect to interests in all or any
portion of the Properties or any beneficial or other interest in or
under the Trust Agreements or any indebtedness secured by any
interests in the Properties, including any indebtedness evidenced by
the Certificates or Notes, or any securities similar to any of the
foregoing, in any case under circumstances which would subject such
interest or indebtedness to registration under the Securities Act of
1933, as amended.
(vii) No Brokers. Indenture Trustee has dealt with no
broker, finder, advisor or other party that could claim a commission,
fee or other compensation arising out of the transactions contemplated
hereby.
(g) Remainderman represents and warrants as of the date
hereof as follows:
(i) Due Organization, etc. Remainderman is a business
trust duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite power and
authority to enter into and perform its obligations under each
Operative Document to which it is a party.
(ii) Authorization; No Conflict. The execution, delivery
and performance by Remainderman of, the consummation by it of the
transactions provided for in, and the compliance by it with all the
provisions of, each Operative Document to which it is a party have
been duly authorized by all necessary action on its part and neither
the execution, delivery and performance thereof, nor the consummation
of the transactions contemplated thereby, nor the compliance by it
with any of the
- 32 -
<PAGE> 37
terms and provisions thereof (A) requires any approval of its
beneficial owners, (B) requires any approval or consent of any trustee
or holders of any of its indebtedness or obligations, except for such
approvals and consents as have been duly obtained and are in full
force and effect, (C) contravenes any current Legal Requirements
applicable to or binding on it, which contravention would materially
adversely affect its ability to perform its obligations under the
Operative Documents, (D) contravenes or results in any breach of or
constitutes any default under, or results in the creation of any lien
(other than Permitted Liens) upon any of its property under any
indenture, mortgage, chattel mortgage, deed of trust, conditional
sales contract, bank loan or credit agreement, lease, charter, by-
laws or other agreement or instrument to which it is a party or by
which it or its properties may be bound or affected, which
contravention, breach or default would materially adversely affect its
ability to perform its obligations under the Operative Documents, or
(E) requires any Governmental Action, except for (x) filing of the
certificate of trust with the Delaware Secretary of State pursuant to
the Remainderman Trust Agreement and (y) filings and recordings
necessary or advisable to perfect the rights of the Landlord,
Indenture Trustee and the Tenant intended to be created by the
Operative Documents.
(iii) Enforceability. Assuming the due authorization,
execution and delivery by all other parties to each Operative Document
to which Remainderman is a party, each such Operative Document is,
respectively, a legal, valid and binding obligation of Remainderman,
enforceable against Remainderman in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights
and to general equity principles.
(iv) No Actions Pending. There is no action, suit or
proceeding before any court, governmental body, agency, commission or
other tribunal now pending or, to the actual knowledge of any
executive officer of Remainderman having oversight of the transactions
contemplated by the Operative Documents, threatened against or
affecting Remainderman or naming Remainderman as a party, that
questions the validity or enforceability of this Agreement or any
other Operative Document to which Remainderman is or is to become a
party or that would, if adversely determined, have a material adverse
effect on the ability of Remainderman to perform its obligations under
any Operative Document.
(v) No Remainderman's Liens. No Remainder Purchaser Lien
attributable to Remainderman is in existence. The
- 33 -
<PAGE> 38
execution, delivery and performance by Remainderman of the Operative
Documents to which it is or is to become a party will not subject the
Trust Estate, the Indenture Estate, the Properties or any portion of
any thereof to any Remainder Purchaser Liens.
(vi) Offer of Interest. Except as contemplated herein or
by the Indentures or Pass Through Trust Agreements, neither
Remainderman, nor any person authorized by Remainderman to act on its
behalf, has directly or indirectly offered to any person for sale, or
solicited offers to buy from any person or otherwise approached or
negotiated with any person, with respect to interests in all or any
portion of the Properties or any beneficial or other interest in or
under the Remainderman Trust Agreement or any indebtedness secured by
any interests in the Properties, including any indebtedness evidenced
by the Certificates or Notes, or any securities similar to any of the
foregoing, in any case under circumstances which would subject such
interest or indebtedness to registration under the Securities Act of
1933, as amended.
(vii) No Brokers. Remainderman has dealt with no broker,
finder, advisor or other party that could claim a commission, fee or
other compensation arising out of the transactions contemplated
hereby.
(h) Remainderman Participant represents and warrants as
of the date hereof as follows:
(i) Due Organization, etc. Remainderman Participant is a
limited partnership duly organized, validly existing and in good
standing under the laws of the State of Connecticut and has all
requisite power and authority to enter into and perform its
obligations under each Operative Document to which it is a party.
(ii) Authorization; No Conflict. The execution, delivery
and performance by Remainderman Participant of, the consummation by it
of the transactions provided for in, and the compliance by it with all
the provisions of, each Operative Document to which it is a party have
been duly authorized by all necessary action on its part and neither
the execution, delivery and performance thereof, nor the consummation
of the transactions contemplated thereby, nor the compliance by it
with any of the terms and provisions thereof (A) requires any approval
of its partners, (B) requires any approval or consent of any trustee
or holders of any of its indebtedness or obligations, except for such
approvals and consents as have been duly obtained and are in full
force and effect, (C) contravenes any current Legal Requirements
- 34 -
<PAGE> 39
applicable to or binding on it, which contravention would materially
adversely affect its ability to perform its obligations under the
Operative Documents, (D) contravenes or results in any breach of or
constitutes any default under, or results in the creation of any lien
(other than Permitted Liens) upon any of its property under any
indenture, mortgage, chattel mortgage, deed of trust, conditional
sales contract, bank loan or credit agreement, lease, certificate of
incorporation, by-laws or other agreement or instrument to which it is
a party or by which it or its properties may be bound or affected,
which contravention, breach or default would materially adversely
affect its ability to perform its obligations under the Operative
Documents, or (E) requires any Governmental Action, except for filings
and recordings necessary or advisable to perfect the rights of the
Landlord, Remainderman, Indenture Trustee and the Tenant intended to
be created by the Operative Documents.
(iii) Enforceability. Assuming the due authorization,
execution and delivery by all other parties to each Operative Document
to which Remainderman Participant is a party, each such Operative
Document is, respectively, a legal, valid and binding obligation of
Remainderman Participant, enforceable against Remainderman Participant
in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(iv) No Actions Pending. There is no action, suit or
proceeding before any court, governmental body, agency, commission or
other tribunal now pending or, to the actual knowledge of any
executive officer of Remainderman Participant having oversight of the
transactions contemplated by the Operative Documents, threatened
against or affecting Remainderman Participant or naming Remainderman
Participant as a party, that questions the validity or enforceability
of this Agreement or any other Operative Document to which
Remainderman Participant is or is to become a party or that would, if
adversely determined, have a material adverse effect on the ability of
Remainderman Participant to perform its obligations under any
Operative Document.
(v) Offer of Interest. Except as contemplated herein or
by the Indentures and Pass Through Trust Agreements, neither the
Remainderman Participant, nor any person authorized by Remainderman
Participant to act on its behalf, has directly or indirectly offered
to any person for sale or solicited offers to buy from any person or
otherwise approached or negotiated with any person with respect to
interests in all or any portion of the Properties or any beneficial or
other interest in or under the Remainderman Trust Agreement or any
- 35 -
<PAGE> 40
indebtedness secured by any interests in the Properties, including any
indebtedness evidenced by the Certificates or Notes, or any securities
similar to any of the foregoing, in any case under circumstances which
would subject such interest or indebtedness to registration under the
Securities Act of 1933, as amended.
(vi) No Brokers. Remainderman Participant has dealt with
no broker, finder, advisor or other party that could claim a
commission, fee or other compensation arising out of the transactions
contemplated hereby.
(vii) No Remainderman Lien. No Remainder Purchaser Lien
attributable to Remainderman Participant is in existence. The
execution, delivery and performance by Remainderman Participant of the
Operative Documents to which it is a party will not subject the Trust
Estate, the Indenture Estate, any of the Properties or any portion of
any thereof to any Remainder Purchase Lien.
(i) Remainderman Trustee, in its individual capacity,
represents and warrants as of the date hereof as follows:
(i) Due Organization, etc. Remainderman Trustee is a
banking corporation, duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the power
and authority to enter into and perform its obligations under the
Operative Documents to which it is a party.
(ii) Authorization; No Conflict. The execution, delivery
and performance by Remainderman Trustee of, the consummation by it of
the transactions provided for in, and the compliance by it with all of
the provisions of this Agreement and the Remainderman Trust Agreement
have been duly authorized by all necessary action on its part and
neither the execution, delivery and performance thereof, nor the
consummation of the transactions contemplated thereby, nor compliance
by it with any of the terms and provisions thereof, (A) requires any
approval of its stockholders, (B) requires approval or consent of any
trustee or holders of any of its indebtedness or obligations, except
for such approvals and consents as have been duly obtained and are in
full force and effect, (C) contravenes any current Legal Requirement
of the State of Delaware or the United States governing its banking or
trust powers applicable to or binding on it, which contravention would
materially adversely affect its ability to perform its obligations
under the Operative Documents, (D) contravenes or results in any
breach of or constitutes any default under, any indenture, mortgage,
chattel mortgage, deed of trust, conditional sales contract, bank loan
or credit agreement,
- 36 -
<PAGE> 41
lease, charter, by-laws or other agreement or instrument to which it
is a party, or by which it or its properties may be bound or affected,
which contravention, breach or default would materially adversely
affect its ability to perform its obligations under the Operative
Documents or (E) requires any Governmental Action of the State of
Delaware or the United States governing its banking or trust powers.
(iii) Enforceability. Assuming the due authorization,
execution and delivery by all other parties to this Agreement and the
Remainderman Trust Agreement, each of this Agreement and the
Remainderman Trust Agreement is, respectively, a legal, valid and
binding obligation of Remainderman Trustee, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors rights and to general equity
principles.
(iv) No Remainderman Liens. No Remainder Purchaser Lien
attributable to Remainderman Trustee in its individual capacity is in
existence. The execution, delivery and performance by Remainderman
Trustee of the Operative Documents to which it is a party (in its
individual capacity) will not subject the Indenture Estate, or any
portion thereof, to any Remainder Purchaser Liens attributable to
Remainderman Trustee in its individual capacity.
(v) Offer of Interest. Except as contemplated herein or
by the Indentures or Pass Through Trust Agreements, neither
Remainderman Trustee, nor any person authorized by Remainderman
Trustee to act on its behalf, has directly or indirectly offered to
any person for sale, or solicited offers to buy from any person or
otherwise approached or negotiated with any person, with respect to
interests in all or any portion of the Properties or any beneficial or
other interest in or under the Remainderman Trust Agreement or any
indebtedness secured by any interests in the Properties, including any
indebtedness evidenced by the Certificates or Notes, or any securities
similar to any of the foregoing, in any case under circumstances which
would subject such interest or indebtedness to registration under the
Securities Act of 1933, as amended.
(vi) No Brokers. Remainderman Trustee has dealt with no
broker, finder, advisor or other party that could claim a commission,
fee or other compensation arising out of the transactions contemplated
hereby.
14. Notices. Any notice, demand, request, approval, revocation,
confirmation, election, consent, waiver or other communication hereunder (a
"notice") must be in writing and must be
- 37 -
<PAGE> 42
given by hand delivery or by a nationally recognized overnight courier or by
mailing the same by registered or certified mail, return receipt requested,
addressed to the respective parties at their addresses above set forth. Copies
of all notices to Landlord hereunder shall be sent to Owner Participant at its
address set forth above. Any party may designate by notice, in writing given
in the manner herein specified, a new or other address to which a notice shall
thereafter be so given. All notices shall be deemed given when delivered by
hand, or five Business Days after being sent by registered or certified mail,
or on the next Business Day when sent by overnight courier. The inability to
make delivery because of changed address of which no notice was given, or
rejection or refusal to accept any notice offered for delivery shall be deemed
to be receipt of the notice as of the date of attempted delivery.
15. Severability: Binding Effect.
(a) Each provision of this Agreement shall be separate
and independent and the breach of any such provision by any party hereto shall
not discharge or relieve any other party from any of such other party's
obligations hereunder. Each provision of this Agreement shall be valid and
shall be enforceable to the extent not prohibited by law. If any provision
hereof or the application thereof to any Person or circumstance shall to any
extent be determined by competent authority to be invalid or unenforceable in
any jurisdiction, the remaining provisions hereof, or the application of such
provision to Persons or circumstances other than those as to which it is
invalid or unenforceable in such jurisdiction, shall not be affected thereby,
and any such invalidation or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
(b) Except as otherwise expressly provided herein, all
provisions contained in this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the successors, legal representatives and
permitted assigns of the parties hereto to the same extent as if each such
successor, legal representative and permitted assign were named as a party
hereto. All references herein to any party shall include such party and its
successors, legal representatives, and permitted assigns.
(c) The provisions of this Agreement may not be waived,
modified or terminated except by a writing signed by the party to be charged.
(d) This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York (other than the conflict
of laws rules thereof), except to the extent that the
- 38 -
<PAGE> 43
jurisdiction in which a given Property is located requires that the laws of
that jurisdiction be applied to this Agreement, in which case and to such
extent, this Agreement shall be governed by and construed in accordance with
the laws of such jurisdiction.
(e) If any right or option provided in this Agreement
would, in the absence of the limitation imposed by this sentence, be invalid or
unenforceable as being in violation of the rule against perpetuities or any
other rule of law relating to the vesting of an interest in or the suspension
of the power of alienation of property, then such right or option shall be
exercisable only during the period which shall end 21 years after the date of
death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador to the Court of St. James, alive on the date of the execution,
acknowledgment and delivery of this Agreement.
(f) Notwithstanding anything to the contrary contained in
this Agreement, no default by Owner Participant or Landlord hereunder shall in
any way adversely affect the rights accorded to the Indenture Trustee pursuant
to Article 49 of the Lease.
16. Indenture. Each of Landlord and Indenture Trustee agrees, for
the benefit of Tenant and Owner Participant, (i) to comply with the provisions
of the Indenture, (ii) not to waive any provision of the Indenture requiring
Tenant's consent thereunder, and (iii) not to amend, supplement, waive or
otherwise modify any provision of the Indenture in such a manner as to
adversely affect the rights or increase the obligations of any such party
without the prior written consent of such party.
17. Payment of Expenses. Tenant covenants and agrees that, unless
payment thereof is governed by a specific provision of an Operative Document,
it shall pay all reasonable out-of-pocket expenses, including reasonable
attorneys' fees, incurred by each Owner Participant, each Landlord, Owner
Trustee (and any co-trustee or separate trustee), Remainderman Trustee (and any
co-trustee or separate trustee), Remainderman Participant, Remainderman or
Indenture Trustee in connection with (i) the enforcement of any rights of such
parties under any of the Operative Documents, (ii) the entering into or giving
or withholding of any proposed amendment, modification, supplement, waiver,
termination, approval or consent requested by Tenant or (iii) any Event of Loss
or any redemption, prepayment, refinancing or assumption of the Notes by
Tenant, at Tenant's request or attributable to the events specified in Section
3 of this Agreement or Articles [9, 10, 13, 14, 15, 21, 39, 40 and 41] of each
Lease, as the case may be; provided, however, that Tenant shall not be
obligated to pay any such expenses to the extent that they relate to or arise
out of any of the circumstances described in Section 22(b) below with respect
to such party.
- 39 -
<PAGE> 44
18. Termination or Revocation of Trust Under Trust Agreements.
Without prejudice to any right under the Trust Agreements of the Owner Trustees
(in their individual capacities) under the Trust Agreements to resign, or of
Owner Participant under the Trust Agreements to remove the Owner Trustees (in
their individual capacities), subject in each case to the requirement that such
resignation shall not be effective unless and until a successor trustee shall
have been appointed and shall have accepted such appointment, each of Owner
Participant and Owner Trustees hereby irrevocably and unconditionally agrees
with Tenant and Indenture Trustee not to terminate or revoke the trust created
by the Trust Agreements prior to the termination of the Indenture except as
permitted by Article VIII of the Trust Agreement.
19. Exchange of Obligations of Landlord by the Tenant. (a) Upon
the conditions and as more fully provided in Section 3.08 of the Indenture,
each of Owner Trustee, Landlord, Owner Participant, Remainderman, Remainderman
Participant, Remainderman Trustee and Indenture Trustee agree that if any Lease
is terminated pursuant to Article [39] thereof, Tenant may elect to exchange
new unsecured or secured, as the case may be, full recourse securities of
Tenant for the related Notes by giving notice of such exchange to each such
party and each such party will execute and deliver appropriate documentation
(i) releasing Owner Trustee and the affected Owner Participant from all
obligations with respect to such Notes and the Properties, or obligations under
such Notes and the related supplemental indentures; (ii) to the extent provided
in the Indenture, releasing the security interest in the Properties; and (iii)
taking all such other actions as are reasonably necessary to permit such
exchange by Tenant and that do not materially adversely affect Remainderman,
Owner Trustee or Owner Participant. As a condition to the exchange of
securities under this Section 19 and Section 3.08 of the Indenture, Tenant
shall deliver an Officer's Certificate to Owner Participant stating that the
exchange complies with applicable Legal Requirements including, but not limited
to, applicable securities laws.
(b) Attached as Exhibit B is the form of the "Company
Indenture" referenced in Section 3.08 of the Indenture.
20. Interim Interest Payments. Each Landlord hereby agrees with
Tenant, and only with Tenant, and not for the benefit of any other party to
this Agreement, that so long as no Material Default or Event of Default shall
have occurred and be continuing, it will pay or cause to be paid to the
Indenture Trustee sufficient funds to effect the payment of the amount of
interest due on the Notes on [INSERT DATES], such payment to be made on or
before 11:00 a.m., New York time, on such date and to be applied by the
Indenture Trustee to the payment of interest due and payable on the Notes on
such dates pursuant to the provisions of the Indenture. Each Owner Participant
agrees to give Tenant notice by 11:00 a.m. on [INSERT
- 40 -
<PAGE> 45
DATES] if Landlord has failed to make the payment due on such dates. Each
Owner Participant hereby agrees with Tenant and only with Tenant, and not for
the benefit of any other party to this Agreement, to the terms and conditions
set forth in Article 3(b) of the Leases.
21. Basic Rental Adjustments After Closing.
(a) If (i) there shall be a material tax law change
(including a change in Code or applicable regulations) enacted or promulated
prior to Closing or if a material tax law change shall have been proposed the
relevant provisions of which have been specifically identified in a notice
delivered by Owner Participant to Tenant prior to Closing and the identified
provisions or provisions substantially comparable to such provisions are
enacted or promulated in final form after Closing, or (ii) there shall be a
refinancing of the Notes in accordance with the Indentures, primary term Basic
Rent and Termination Value under the Lease for the affected Property or
Properties will be adjusted up or down ("Rental Adjustment"). Any Rental
Adjustment shall be subject to Section 3(d) of the Lease.
(b) Any Rental Adjustment shall be based on the same
calculation methods and Pricing Assumptions (as defined in the Purchase
Agreement) (including the income tax assumptions) as were used initially by
Landlord and Tenant in determining Basic Rent and Termination Value for such
Property (except and only to the extent any such assumption is required to be
changed by virtue of the event giving rise to the Rental Adjustment, any event
giving rise to any prior adjustments or any tax indemnity payments by Tenant).
Any such adjustment (i) shall preserve Owner Participant's Economics (as
hereinafter defined) that would have been realized had the event causing the
Rental Adjustment not occurred, and to the greatest extent possible, shall
minimize average annual Basic Rent payments and preserve Tenant's off- balance
sheet treatment and (ii) shall (A) satisfy the cash flow and profits tests of
Revenue Procedures 75-21, 1975-1 C.B. 715 and 75-28, 1975-1 C.B. 752 and any
successor or supplemental procedure or provision relating thereto and (B) be
made in a manner designed to comply with Section 467 of the Code and any
successor or supplemental provisions of federal tax law and any regulations
thereunder. All such adjustments shall be submitted by Owner Participant to
Tenant promptly after the event causing such adjustment.
(c) When any Rental Adjustment required to be made
pursuant hereto is submitted to Tenant, Owner Participant shall confirm in a
writing, executed by one of its authorized officers to Tenant and Indenture
Trustee that the assumptions, methods and computations employed in the
applicable initial calculations of Basic Rent and Termination Value for such
Property were used in calculating such adjustment and that such adjustment was
made in compliance with the applicable provisions of this Section. If
requested by Tenant, such determination shall be verified by an
- 41 -
<PAGE> 46
independent and nationally recognized accounting firm agreed upon by Tenant and
Owner Participant and which is not then engaged by either of them as its
auditor, which review and verification shall determine whether Owner
Participant's computations are mathematically accurate and are properly based
on the methodology and assumptions required hereunder. If such accounting firm
determines that Owner Participant's Rental Adjustments are incorrect, then such
accounting firm shall determine the correct adjustments, and such determination
shall be final and binding in the absence of manifest error. The cost of any
such determination by such accounting firm shall be borne by Tenant unless the
determination results in a reduction in the present value of the Basic Rent
(discounted semiannually at seven and one-half percent (7-1/2%)) by ten basis
points or more from the amount proposed by Owner Participant, in which case the
costs of determination shall be borne by Owner Participant. Owner Participant
shall make available to such accounting firm on a satisfactory confidential
basis such information as may be required by them to verify and determine the
computations pursuant hereto provided, however, in no event shall Owner
Participant be required to disclose its tax returns to Tenant or any other
Person in connection with such verification procedure or otherwise. Tenant and
Owner Participant agree that the sole responsibility of the independent
accounting firm shall be to verify and determine the calculation of a Rental
Adjustment hereunder and that matters of interpretation of this Agreement, the
Leases or any other Operative Document are outside the scope of the independent
accounting firm's responsibility.
(d) "Owner Participant's Economics" shall mean Owner
Participant's nominal after-tax yield, total after-tax cash flow and total FASB
after-tax lease income for the first five years utilizing the multiple
investment sinking fund method of analysis computed on the basis of the same
methodology and assumptions as were utilized in Owner Participant's original
calculation of Basic Rent and Termination Value.
22. General Indemnity. (a) Tenant agrees, whether or not any of
the transactions contemplated by this Agreement, the Purchase Agreement,
Leases, Trust Agreements and Indentures and the other Operative Documents
("Sale and Leaseback Documents") shall be consummated, to assume liability for,
and to indemnify, protect, defend, save, make whole and keep harmless each
Indemnitee on an After-Tax Basis, from and against any and all Claims that may
be imposed on, incurred by or asserted against any Indemnitee, whether or not
such Indemnitee shall also be indemnified as to any such Claim by any other
Person and whether or not such Claim arises or accrues prior to the date of
this Agreement in any way relating to or arising out of:
(i) (without regard to any representation or warranty by
Tenant that may have been qualified by the phrase "to the best
- 42 -
<PAGE> 47
knowledge of Kmart" or words of similar import) any of the Properties
or the ownership, operation, possession, use, improvement, rental,
leasing, subleasing, financing pursuant to the Indentures, storage,
preparation, installation, inspection, transfer of title, sale, return
or other application or disposition, reconveyance, repair or
maintenance, subdivision, delivery, non-delivery, construction,
design, purchase, acceptance, rejection, modification, substitution or
condition of all or any part of any interest in any Property, or the
granting of easements, licenses, or any similar rights with respect
to, or any dedication, condemnation, or taking of or with respect to,
all or any part of, or interest in any Property or any Lease
(including any property substituted for any such Property pursuant to
the Lease relating to such substituted property) including, without
limitation, (x) claims or penalties arising from any products
liability, negligence, statutory liability or violation of law or in
tort (strict, absolute or otherwise), or (y) latent or other defects,
whether or not discoverable;
(ii) a Release, a violation of or non-compliance with any
Environmental Law, any Hazardous Material, any Environmental Claim,
or any other loss of or damage or injury to any property, Person or
the environment (including, without limitation air, water vapor,
surface water, ground water, drinking water, land (including surface
and subsurface), plant, aquatic and animal life) relating to or
arising in connection with any Property (including without limitation,
any Property for which a substitution is made under Article 41 of the
Lease), any Lease or Tenant (including, without limitation, all costs
and expenses associated with remediation, response, removal,
containment, restoration, corrective action, financial assurance,
environmental liens, natural resource damages and the protection of
wildlife, aquatic species, vegetation, flora and fauna, and any
mitigative action required under applicable Environmental Laws);
(iii) any of the Operative Documents or any transactions
contemplated thereby or by the Underwriting Agreement;
(iv) any (A) breach by Tenant of any of its
representations or warranties set forth in the Operative Documents,
(B) failure by Tenant (or any permitted lessee) to perform or observe
any covenant or agreement to be performed by it under any of the
Operative Documents or (C) untrue statement of a material fact
contained in any registration statement or any prospectus delivered in
connection with the transactions contemplated by the Operative
Documents or any omission to state therein a material fact required to
be
- 43 -
<PAGE> 48
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;
(v) with respect to Owner Participant Parent and Owner
Participant only, the application of Part 4 and 5 of Subtitle B of
Title I of ERISA as a result of the sale of the Certificates or Notes
in accordance with the Operative Documents; or
(iv) the offer, sale, purchase, holding or delivery of the
Notes or Certificates or any other securities issued in connection
with the Operative Documents.
(b) Tenant shall not be required to indemnify an
Indemnitee under this Section 22 for any of the following:
(i) with respect to an Indemnitee,
(A) any Claim attributable to the gross negligence
or willful misconduct of such Indemnitee;
(B) any Claim attributable to a transfer by such
Indemnitee of any Property or any interest therein, or, with respect
to Owner Participant, any transfer of its Owner Participant Interest,
other than (x) any transfer of a Property or any interest therein
while a Material Default or Event of Default shall have occurred and
be continuing under any Lease, or (y) any Claim attributable to a
transfer of any Property or any interest therein under Articles [14,
15, 21, 39, 40 or 41] of the Lease or Section 3 of this Agreement;
(ii) any fee, cost or expense expressly provided under the
Operative Documents to be paid or borne by an Indemnitee to the extent
that such Indemnitee shall have expressly agreed in the Operative
Documents to bear such fee, cost or expense without right of
reimbursement or indemnity under the Operative Documents;
(iii) any Claim in respect of any Indemnified Taxes or
Indemnified Assessments, other than any payment necessary to make
payments under this Section 22 on an After-Tax Basis (it being
understood that Section 23 hereof, Article 6 of the Leases and the Tax
Indemnification Agreement exclusively provide for Tenant's liability
with respect to such Taxes);
(iv) any Claim to the extent attributable solely to acts,
events or circumstances which first occur after the later of (A) the
expiration or earlier termination of the applicable Lease and the
repayment of the applicable Notes in whole and
- 44 -
<PAGE> 49
(B) Tenant's actual surrender or return of possession of the
applicable Property in accordance with the applicable Lease;
(v) any Claim attributable to a breach by any Indemnitee
of its representations or warranties set forth in the Operative
Documents to which it is a party or from a violation of laws by such
Indemnitee, unless such breach or violation is attributable to any
act, omission, breach, violation or misrepresentation of a Person
other than such Indemnitee;
(vi) the failure of such Indemnitee to perform or observe
any covenant, agreement or condition on its part (including, without
limitation, the obligation to remove Lessor Liens, Remainder Purchaser
Liens, or Indenture Trustee Liens) required to be performed or
observed in this Agreement or any of the other Operative Documents;
(vii) the offer, sale or disposition by or on behalf or for
the account of such Indemnitee of any Notes or Certificates or any
similar interest (other than each Owner Participant, Owner Trustee and
each Landlord);
(viii) a failure on the part of such Indemnitee to distribute
in accordance with the Indenture, any supplemental indenture, or the
Trust Agreements, as the case may be, any amounts received and
distributable by it thereunder;
(ix) the authorization or giving or withholding of any
amendment, modification, supplement, waiver, termination, approval or
consent with respect to this Agreement or any of the other Operative
Documents other than such as have been consented to or requested by
Tenant and other than such as occur while an Event of Default has
occurred and is continuing and that are not given or entered into in
violation of any of the Operative Documents (other than to the extent
that such actions violate the provisions of the Operative Documents
requiring the consent of Tenant);
(x) any amount constituting an amount payable by Landlord
under the Indenture or the Notes resulting from an Indenture Event of
Default or Indenture Default that does not also constitute an Event of
Default; and
(xi) any Claim that constitutes or arises from any
Indemnitee's exercise of its contest rights with respect to a
Permitted Lien attributable to such Indemnitee.
(c) With respect to any amount that Tenant is requested
by an Indemnitee to pay by reason of this Section 22, such Indemnitee shall, if
so requested by Tenant, at Tenant's expense,
- 45 -
<PAGE> 50
submit such information or additional information and/or documentation to
Tenant as Tenant may reasonably request properly to substantiate the requested
payment.
(d) In case any action, suit or proceeding shall be
brought against any Indemnitee for which such Indemnitee is entitled to
indemnification under this Section 22, such Indemnitee shall promptly notify
Tenant of the commencement thereof (but the failure to do so shall not relieve
Tenant of its obligation to indemnify such Indemnitee except to the extent that
Tenant is prejudiced as a result of such failure). Tenant shall have the right
to investigate, and the right in its sole discretion to defend or compromise,
any Claim for which indemnification is sought under this Section 22, and at
Tenant's expense, each Indemnitee shall cooperate with all reasonable requests
of Tenant in connection therewith; provided that Tenant shall not be entitled
to assume and control the defense of any such action, suit or proceeding if, in
the reasonable opinion of such Indemnitee, such defense or compromise involves
the potential imposition of criminal liability on such Indemnitee or a conflict
of interest between such Indemnitee and Tenant. Where Tenant undertakes the
defense of an Indemnitee with respect to a Claim, no additional legal fees or
expenses of such Indemnitee in connection with the defense of such Claim shall
be indemnified hereunder unless such fees or expenses were incurred at the
request of Tenant. An Indemnitee shall be entitled, at its own expense, acting
through counsel acceptable to Tenant, to participate in any action, suit or
proceeding the defense of which has been assumed by Tenant pursuant to the
preceding provisions, provided, that such party's participation does not, in
the opinion of independent counsel to Tenant, interfere with such control; and
such participation shall not constitute a waiver of the indemnification
provided in this Section 22. Notwithstanding anything to the contrary
contained herein, Tenant shall not under any circumstances be liable for the
fees and expenses of more than one counsel for each of (i) the Owner
Participants, the Landlords and the Owner Trustee (and their respective
successors and permitted assigns, agents and servants), and (ii) the Indenture
Trustee and the Pass Through Trustee (and their respective successors and
permitted assigns, agents and servants).
(e) Notwithstanding anything in this Section to the
contrary, in any action, suit or proceeding to which any Indemnitee is a party,
Tenant shall not enter into any settlement or other compromise with respect to
any Claim without the prior written consent of the Indemnitee, which consent
shall not be unreasonably withheld, unless Tenant acknowledges in writing
reasonably satisfactory to such Indemnitee such Indemnitee's right to full
indemnification under this Section 22 with respect to such Claim; provided,
however, that such acknowledgment shall not preclude Tenant from raising a
defense to liability under this Section 22 if
- 46 -
<PAGE> 51
a court of competent jurisdiction has rendered a decision that the cause of the
Claim is not one for which Tenant is responsible to pay an indemnity to such
Indemnitee under this Agreement. Unless a Material Default shall have occurred
and be continuing under any Lease, no Indemnitee shall enter into any
settlement or other compromise with respect to any Claim which it asserts is
entitled to be indemnified under this Section 22 without the prior written
consent of Tenant, which consent shall not be unreasonably withheld, unless
such Indemnitee waives its right to be indemnified under this Section 22 with
respect to such Claim.
(f) Upon payment in full of any Claim by Tenant pursuant
to this Section 22 to or on behalf of an Indemnitee, Tenant, without any
further action, shall be subrogated to the indemnified Claim and any and all
claims that such Indemnitee may have relating thereto (other than claims in
respect of insurance policies maintained by such Indemnitee at its own
expense), and such Indemnitee shall execute such instruments of assignment and
conveyance, evidence of claims and payment and such other documents,
instruments and agreements as may be reasonably necessary to preserve any such
claims and otherwise cooperate with Tenant and give such further assurances as
are reasonably necessary or advisable to enable Tenant to pursue such claims.
(g) Nothing in this Section 22 shall (i) be construed as
a guaranty by Tenant of any residual value in any Property or as a guaranty of
any of the Notes or the Certificates to be issued pursuant to the Pass Through
Trust Agreements or (ii) modify or limit the rights and obligations under any
Operative Document with respect to any party hereto as to any Claim covered
hereby.
(h) For purposes of this Section 22, the following terms
shall have the meanings ascribed to them below.
"After-Tax Basis" shall have meaning set forth in
Section 23(h) except that for purposes of this Section the term Tax Indemnitee
shall be deemed to mean an Indemnitee as defined herein.
"Claims" shall mean liabilities, obligations,
damages, losses, penalties, fines, claims (including, without limitation,
Environmental Claims), actions, suits, judgments, administrative or judicial
orders, settlements, utility charges, costs, expenses and disbursements
(including, without limitation, reasonable legal fees and expenses and costs of
investigation) of any kind and nature whatsoever, whether or not subject to
litigation.
"Environmental Claims" shall mean any and all
administrative, regulatory or judicial actions or causes of action, suits,
obligations, liabilities, losses, proceedings, decrees, judgments, penalties,
fees, orders, directives, (including any
- 47 -
<PAGE> 52
obligations involving liability in tort, strict, absolute or otherwise), liens,
notices of noncompliance or violation, and legal fees or costs of investigation
or proceedings, relating in any way to any Environmental Law or arising from
the presence or Release (or alleged presence or Release) into the environment
of any Hazardous Materials (hereinafter "Claims") including, without
limitation, and regardless of the merit of such Claim, any and all Claims by
any governmental or regulatory authority or by any third party for enforcement,
cleanup, removal, containment, restoration, corrective action, response,
remedial or other actions or damages, contribution, indemnification, cost
recovery, compensation or injunctive relief pursuant to any Environmental Law
or any alleged injury or threat of injury to human health, safety, the
environment or natural resources.
"Environmental Law(s)" shall mean all federal, state,
and local laws, ordinances, rules, regulations, requirements, permits,
licenses, authorizations, approvals, criteria, guidelines, and judicial and
administrative orders, decrees, or judgments, now or hereafter in effect, and
in each case as amended, and any judicial or administrative interpretation
thereof, relating to the regulation and protection of human health, safety, the
environment and natural resources including, without limitation, laws (and all
other items recited above) relating to emissions, discharges, releases,
threatened releases or remediation of, or any other response action related to,
Hazardous Materials (as herein defined) or otherwise relating to the
generation, use, treatment, storage, recycling, disposal, transport, or
handling of or exposure to Hazardous Materials. Environmental Laws include but
are not limited to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 ("CERCLA"); the Resource Conservation and Recovery Act
("RCRA"); the Federal Insecticide, Fungicide, and Rodenticide Act; the Toxic
Substances Control Act; the Clean Air Act; the Federal Water Pollution Control
Act; the Oil Pollution Act of 1990, the Endangered Species Act; the National
Environmental Policy Act; the Hazardous Materials Transportation Act; the
Occupational Safety and Health Act; and the Safe Drinking Water Act; each as
amended from time to time, and each of their state and local counterparts or
equivalents.
"Hazardous Material(s)" shall mean (i) "hazardous
substances," as defined by CERCLA, as amended from time to time and any
regulations promulgated thereunder; (ii) "hazardous wastes," as defined by
RCRA, as amended from time to time and any regulations promulgated thereunder;
(iii) any pollutant or contaminant or hazardous, restricted, dangerous or toxic
chemicals, materials, wastes or substances within the meaning of any
Environmental Law; (iv) any chemical, material, substance, or waste, the
presence, use, generation, treatment, release, emission, discharge, transport,
storage, or disposal of which is now or hereafter prohibited, limited or
regulated by any Environmental Law or
- 48 -
<PAGE> 53
governmental authority; (v) any substance, material, product, chemical,
derivative, compound, mixture, mineral, waste, gas, medical waste, contaminant
or pollutant which would require investigation, response or remediation as a
result of any public or private action brought pursuant to any Environmental
Law; (vi) any radioactive material, asbestos in any form or condition,
petroleum or petroleum products, flammable explosives, urea formaldehyde foam
insulation, polychlorinated biphenyls, and radon gas.
"Indemnitee" shall mean each Owner Participant, Owner
Participant Parent, each Landlord, each Trust Estate, Remainderman Participant,
Remainderman, Remainderman Trustee (in its individual capacity and as trustee
under the Remainderman Trust Agreement), Indenture Trustee (in its individual
capacity and as trustee under each of the Indentures) and Corporate Owner
Trustee and Individual Owner Trustee (each in its individual capacity and as
trustee under the Trust Agreements together with any co-trustees permitted
under such Trust Agreements) and each of their respective Affiliates, permitted
successors, assigns, and transferees, servants, employees, agents,
shareholders, partners, directors and officers.
"Release" shall mean the release, deposit, disposal
or leak of any Hazardous Material into, upon or under any land, water or air,
or otherwise into the environment in violation of Environmental Laws, including
without limitation by means of burial, disposal, discharge, emission,
injection, spillage, leakage, seepage, leaching, dumping, pumping, pouring,
escaping, emptying, placement and the like.
23. General Tax Indemnity.
(a) Notwithstanding Section 23(b), whether or not any of
the transactions contemplated hereby or by any of the Operative Documents shall
be consummated, Tenant shall pay and discharge, and shall indemnify and hold
harmless, on an After-Tax Basis, each Tax Indemnitee with respect to all
Indemnified Taxes.
(b) Notwithstanding Section 23(a), Tenant shall not be
required to pay, reimburse or indemnify any Tax Indemnitee for or with respect
to:
(i) any Excluded Tax (irrespective of whether absent this
subsection (b) such Tax might otherwise be an Indemnified Tax),
provided however, that this clause (i) shall not apply, in the case of
any Owner Participant Tax Indemnitee, to (A) any net income tax
imposed by the state of Ohio arising in connection with or
attributable to any Original Property or part thereof that is located
therein or any Substitute Property that is located in Ohio and
replaces an Original Property that is located in Ohio; (B) any Tax
that is or is in
- 49 -
<PAGE> 54
the nature of franchise Tax imposed by any state or local government
in the United States or any political subdivision or taxing authority
thereof or therein where any of the Original Properties or any part
thereof is located or any Substitute Property that replaces an
Original Property and that is located in the same state in which the
Original Property that it replaces is located; provided, further, that
the total amount of all such incremental franchise Taxes and Ohio
state income Tax paid (in each case, excluding any interest,
penalties, fines and additions to Tax thereon or thereto), reimbursed
or indemnified by Tenant under this clause (i) (A) and (B) to all
Owner Participant Tax Indemnities discounted to the Closing Date on an
annual basis at 10 percent shall not exceed $575,000; provided,
however, (1) if a Substitute Property is located in the same state as
an Original Property it replaces, the opinion required for purposes of
paragraph (b) of Article 41 of the Lease shall not take into account
for purposes of considering whether or not such substitution will
result in any material incremental adverse Tax consequences the fact
that the Owner Trustee and the Owner Participant may be entitled to
indemnification with respect to either any incremental increase in
Ohio state income Tax with respect to such Ohio Substitute Property
pursuant to subsection (i)(A) or with respect to any incremental
increase in any Tax that is or is in the nature of a franchise Tax
with respect to any other such Substitute Property pursuant to
subsection (i)(B); and, (2) if a Substitute Property replaces an
Original Property that is located in Texas, Ohio or New York and such
Substitute Property is located in a state that is different from the
state in which the Original Property is located, the Tax Cap shall be
decreased by the amount specified in Schedule ___ hereto for such
Original Property for the year in which such substitution occurs; and
(C) any net income Tax and any Tax that is or is in the nature of a
franchise Tax in each case imposed by any state or local government in
the United States or any political subdivision or taxing authority
thereof or therein where any Substitute Property or any part thereof
is located if (x) such Substitute Property replaces an Original
Property and is located in a state other than the state in which the
Original Property that it replaces is located or (y) such Substitute
Property replaces any Substitute Property.
(ii) any Indemnified Tax imposed upon the sale or transfer by
any Tax Indemnitee of all or a part of any Property or interest in the
Lease or the Remainder Interest except for: (A) a sale and transfer
pursuant to Tenant's Purchase Offer or otherwise to Tenant as set
forth in Articles 14, 15, or 40 of the relevant Lease or any sale to a
third party under Article [39] of the relevant Lease; (B) any
disposition or transfer resulting in connection with Articles
- 50 -
<PAGE> 55
[9, 10, 13, 21 or 41] of the relevant Lease; (C) a transfer in
connection with an Event of Default under the applicable Lease; and
(D) any disposition or transfer resulting in connection with Section 3
of this Agreement;
(iii) any Indemnified Tax imposed or levied on or assessed
against any income or any business activity of a Tax Indemnitee solely
to the extent such Indemnified Tax would have been imposed or levied
in the absence of the transactions contemplated by the Operative
Documents (including any intangibles tax imposed with respect to any
debt or investment paper of any Tax Indemnitee that is unrelated to
the transactions contemplated by the Operative Documents or the Owner
Participant's Financing);
(iv) any Indemnified Tax imposed on a Tax Indemnitee resulting
from the willful misconduct or gross negligence of such Tax Indemnitee
or any breach by such Tax Indemnitee of any of its representations,
warranties or covenants in the Operative Documents to which it is a
party unless such breach or violation results from Tenant's acts,
omissions or misrepresentations;
(v) with respect to any Indemnified Tax, any interest,
penalties, fines or additions to tax imposed on or payable by a Tax
Indemnitee resulting from the failure of such Tax Indemnitee to file
any return or report in a procedurally proper and in a timely manner
pursuant to its obligations under Section 23 hereof except to the
extent such failure is caused by the failure of the Tenant to fulfill
its obligations, if any, hereunder with respect to such return or
report;
(vi) any Indemnified Tax imposed on or payable by a Tax
Indemnitee that would not have been imposed but for any failure of
such Tax Indemnitee to comply with: (A) certification, information,
documentation, reporting or other similar requirements (each a
"Requirement") concerning nationality, residence, identity or
connection with the jurisdiction imposing such Indemnified Taxes, if
such compliance is required by statute or regulation of the
jurisdiction imposing such Indemnified Taxes as a precondition to
relief or exemption from such Indemnified Taxes and such Tax
Indemnitee was eligible to comply with such Requirement; provided that
this clause (A) shall not apply to any Owner Participant Tax
Indemnitee; or (B) any other Requirements under the tax laws or
regulations of the jurisdiction imposing such Indemnified Taxes that
would establish entitlement to otherwise applicable relief or
exemption from such Taxes if such compliance by such Tax Indemnitee
was timely requested by the Tenant in writing and such Tax Indemnitee
was eligible to
- 51 -
<PAGE> 56
comply with such Requirement; provided, however, that in no event
shall any Tax Indemnitee be required to take any action hereunder
which, in its sole discretion, exercised in good faith, would have any
unindemnified adverse consequence to it and provided however, that if
in the opinion of such Tax Indemnitee it would be so affected, such
Tax Indemnitee shall provide to Tenant a written statement
articulating the reasons for the Tax Indemnitee's failure to comply
with the requested action and the estimated cost to Tax Indemnitee of
the unindemnified adverse consequence to be relied upon and provided
further that Tax Indemnitee shall undertake such compliance requested
by Tenant pursuant to this subsection if Tenant shall so elect and
provide such Tax Indemnitee at Tenant's election with either (x) a
cash payment in the full amount of the estimated cost as set forth in
the Tax Indemnitee's written statement or (y) such alternative means
of full indemnification as may be agreed upon by the parties
negotiating in good faith indemnification for the unindemnified
adverse consequences relating thereto;
(vii) with respect to any Property, any Indemnified Tax to
the extent attributable to acts, events or circumstances which occur
after the later of (A) the expiration or earlier termination of the
applicable Lease with respect to such Property and (y) the Tenant's
actual surrender or return of possession of such Property in
accordance with the applicable Lease; provided that this clause (viii)
shall not apply to Indemnified Taxes attributable to or arising from
any act, event or circumstance occurring on or before the later to
occur of (x) and (y) or relating to payments due pursuant to the
Operative Documents; or
(viii) any Indemnified Tax expressly included in the
Transaction Expenses to be paid by the Owner Participant (so long as
any such Taxes paid to Tenant are paid by Tenant to the appropriate
taxing authority) or provided under the Operative Documents to be
borne by any party other than Tenant or an Owner Participant Tax
Indemnitee.
(c) Notwithstanding any other provision of this Section
23 to the contrary, (i) the Tenant will indemnify, on an After-Tax Basis, each
Trust, each Owner Trustee (individually and as Owner Trustee), each Owner
Participant and each of their respective permitted assigns, successors, or
transferees (and any affiliate of any of the foregoing) for any obligation with
respect to United States federal withholding taxes imposed on or payable by any
Trust, any Owner Trustee (individually and as Owner Trustee) any Owner
Participant or any of their respective permitted assigns, successors, or
transferees (or any affiliate of any of the foregoing) (x) with respect to the
Owner Participant's Financing (or any debt permitted to be issued to refinance
or refund such
- 52 -
<PAGE> 57
Owner Participant's Financing, or (y) as a result of a claim by the Internal
Revenue Service asserted against any Trust, any Owner Trustee (individually and
as Owner Trustee) or any Owner Participant or any of their respective permitted
assigns, successors, or transferees (or any affiliate of any of the foregoing)
with respect to the Owner Participant's Financing.
(d) (i) If any written claim shall be made against any Tax
Indemnitee or if any proceeding shall be commenced against any Tax Indemnitee
(including a written notice of such proceeding) for any Indemnified Taxes as to
which the Tenant may have any payment, discharge or indemnity obligation
pursuant to this Section 23, such Tax Indemnitee shall promptly notify the
Tenant in writing and shall not take any action with respect to such claim,
proceeding or Indemnified Tax without the written consent of the Tenant (which
consent shall not be unreasonably withheld or delayed) for 60 days after the
receipt of such notice by the Tenant; provided, however, that, in the case of
any such claim or proceeding or Indemnified Tax, if such Tax Indemnitee shall
be required by applicable Laws to take action prior to the end of such 60-day
period, such Tax Indemnitee shall in such notice to the Tenant, so inform the
Tenant, and such Tax Indemnitee shall not take any action with respect to such
claim, proceeding or Indemnified Tax without the written consent of Tenant
(which consent shall not be unreasonably withheld or delayed) for 10 days after
the receipt of such notice by the Tenant unless the Tax Indemnitee shall be
required by applicable Laws to take action prior to the end of such 10-day
period, in which case the Tax Indemnitee may take any action with respect to
such claim, proceeding or Indemnified Tax prior to the end of such 10-day
period, provided such Tax Indemnitee has not, at the time of taking such
action, received a written request contemplated by Section 23(d)(ii) below.
(ii) If requested by the Tenant within 60 days (or such
shorter period as specified in Section 23(d) (i) above), after receipt
by the Tenant of the required notice with respect to the claim or
proceeding that is the subject of such notice; or, in the case of any
claim or proceeding with respect to which Tenant (as opposed to the
Tax Indemnitee) receives notice, upon the request of the Tenant, the
applicable Tax Indemnitee either: (A) in the case of a claim or
proceeding or Indemnified Tax which may be contested in the name of
the Tenant or of any Tax Indemnitee other than an Owner Participant
Tax Indemnitee and independently (without joinder, contribution or
otherwise) from any claim, proceeding or Indemnified Tax that is not
subject to indemnification by the Tenant, shall permit the Tenant to,
or, in the case of any claim or proceeding, may request the Tenant to,
or (B) in the case of a claim, proceeding or Indemnified Tax which
must be contested in the name of an Owner Participant Tax Indemnitee,
but which may be contested independently (without joinder,
- 53 -
<PAGE> 58
contribution or otherwise) from any claim, proceeding or Tax that is
not subject to indemnification by the Tenant may, upon prior written
consent of the applicable Owner Participant Tax Indemnitee which
consent shall be in its sole discretion exercised in good faith,
permit Tenant to (so long as, in the good faith judgment of such Owner
Participant Tax Indemnitee, there is no reasonable possibility that
the Tenant's direction of such contest could have any adverse impact
on the financial or public relation interests of such Owner
Participant Tax Indemnitee, in which case, such Owner Participant Tax
Indemnitee may assert or reassert control of the Contest; provided,
however, the foregoing right to assert or reassert control shall not
apply to any ad valorem real estate or personal property Tax contest)
(any contest of any claim, proceeding or Indemnified Tax ("Contest")
described in the foregoing clauses (i) or (ii) (for so long as the
Tenant controls the Contest) being hereinafter referred to as a
"Tenant-Controlled Contest"), or (iii) in the case of a Contest which
is not a Tenant-Controlled Contest, shall itself, contest in good
faith (including, without limitation, by pursuit of appeals and
administrative procedures), the validity, applicability or amount of
Taxes at issue in such claim or proceeding.
(iii) No matter who is in control, a Contest at the election
of the Controlling Party (as defined herein) may include, without
limitation, a challenge to the validity, applicability or amount of
any Indemnified Tax by:
(A) resisting payment thereof;
(B) not paying the same except under protest
(which protest must be pursued using reasonable efforts in
appropriate administrative and/or judicial proceedings) if
protest shall be necessary and proper; or,
(C) if payment shall be made, using reasonable
efforts to obtain a refund thereof in appropriate
administrative and/or judicial proceedings,
(it being understood that Tenant may appeal or require the Tax Indemnitee to
appeal to any appropriate administrative or judicial appeal body; provided,
however that no appeal shall be permitted or required hereunder to the United
States Supreme Court with respect to any Contest in which the Tax Indemnitee is
an Owner Participant Tax Indemnitee).
(iv) In the case of any Contest with respect to which the
Tax Indemnitee is an Owner Participant Tax Indemnitee, in no event
shall any such Contest be required or permitted unless,
- 54 -
<PAGE> 59
(A) in the case of any such Contest (1) which must be
contested in the name of the Tax Indemnitee or (2) which is
contested by the Tax Indemnitee in the name of the Tenant, the
amount at issue (taking into account all similar and logically
related claims with respect to the transactions contemplated
by the Operative Documents to the extent relating to the
Property with respect to which the claim was made or the
proceeding was commenced that have been or could be raised in
an audit by the taxing authority in question for any other
taxable period with respect to which an assessment of a tax
deficiency is not barred by a statute of limitations,
including, without limitation, such claims that may arise in
future periods) exceeds $25,000;
(B) Tenant shall have agreed in writing to pay the
applicable Tax Indemnitee and shall pay on an After-Tax Basis
as incurred all reasonable out-of-pocket costs and expenses
that such Tax Indemnitee shall incur in connection with the
contest of such claim (including, without limitation, all
reasonable costs, expenses, legal and accounting fees and
disbursements);
(C) the applicable Tax Indemnitee shall have determined
in its sole discretion exercised in good faith that the action
to be taken will not result in any material danger of sale,
forfeiture or loss of any Property or Remainder Interest with
respect to which the claim was made or the proceeding was
commenced or any other Property or Remainder Interest located
within the same taxing jurisdiction or state as the taxing
authority with respect to which the requested action is to be
taken or any part thereof or interest therein or the creation
of any Lien on any Property or Remainder Interest with respect
to which the claim was made or the proceeding was commenced or
any other Property or Remainder Interest located within the
same taxing jurisdiction or state as the taxing authority with
respect to which the requested action is to be taken or any
part thereof or interest therein other than any Permitted
Liens and that there is no risk of criminal liability that may
be imposed on or with respect to such Tax Indemnitee;
(D) if such contest is to be effected by payment of the
claim, Tenant shall advance the amount thereof plus, as applicable,
interest, penalties and additions to tax with respect thereto to the
applicable Tax Indemnitee on an interest-free basis (at no additional
net after-tax cost to such Tax Indemnitee but taking into account any
net tax savings associated with such advance);
- 55 -
<PAGE> 60
(E) no Material Default or Event of Default shall have
occurred and be continuing under the applicable Lease; and,
(F) in the case of a Contest which must be contested in
the name of the Tax Indemnitee or which is contested by the Tax
Indemnitee in the name of the Tenant, (1) prior to initiating the
Contest the Tenant shall have furnished the Tax Indemnitee with an
opinion of Tenant's Tax Counsel, which opinion shall be furnished
solely at the Tenant's expense, to the effect that a Reasonable Basis
exists for such Contest; and, (2) prior to the appeal of any adverse
judicial determination, Tenant shall have furnished the Tax Indemnitee
with an opinion of Tenant's Tax Counsel, which opinion shall be
furnished solely at the Tenant's expense, to the effect that there is
a Reasonable Basis for concluding that there will be a reversal or
other substantial favorable modification of such determination on
appeal;
(G) After the completion of an administrative proceeding
of first instance and prior to any administrative appeal, the Tenant
shall have acknowledged in writing its obligation to indemnify the
applicable Tax Indemnitee for the Indemnified Tax pursuant to this
Section 23 in the event the contest is unsuccessful (in whole or in
part) or shall, in good faith, have notified such Tax Indemnitee of
the reasons the Tenant is not or may not be liable for the Indemnified
Tax if the Contest is unsuccessful (in whole or in part).
Notwithstanding the foregoing, the Tenant shall have acknowledged in
writing its obligation to indemnify (in whole or in part) the Tax
indemnitee for any Indemnified Tax pursuant to this Section 23 in the
event that the Contest is unsuccessful (in whole or in part) prior to
any petition or complaint to a court. Any such acknowledgement shall
not preclude Tenant from raising a defense to liability under this
Section 23 if a court of competent and proper jurisdiction has
rendered a decision that the cause of the claim is not one for which
Tenant is responsible to pay an indemnity hereunder; and
(H) if the subject matter of the claim, proceeding or
Indemnified Tax shall be of a continuing nature and shall have
previously been the subject of an adverse final determination
hereunder after exercise by the Tenant of its rights pursuant to this
Section 23, the Tenant shall have delivered to such Tax Indemnitee at
Tenant's expense an opinion of Tenant's Tax Counsel to the effect that
as a result of a change in law or fact it is more likely than not that
the Tax Indemnitee will prevail in the contest of such claim.
(v) The Tenant shall conduct any Tenant-Controlled
Contest and the relevant Tax Indemnitee shall control any
- 56 -
<PAGE> 61
Contest other than a Tenant-Controlled Contest. The party conducting
the Contest ("Controlling Party") shall consult in good faith with the
other party ("Noncontrolling party") and its counsel with respect to
such Contest but the decisions regarding what actions to be taken
shall be made by the Controlling Party in its sole judgment (exercised
in good faith). In addition, the Controlling Party shall keep the
Noncontrolling Party reasonably informed as to the progress of the
Contest, and shall provide the Noncontrolling Party with a copy of (or
appropriate excerpts from) any reports or claims issued by the
relevant auditing agents or taxing authority to the Controlling Party
or any affiliate thereof, in connection with such claim, proceeding,
Indemnified Tax or Contest.
(vii) Except as provided in the next sentence of this Section
23(d)(vii), no Tax Indemnitee shall settle any Contest hereunder
without the consent of Tenant, which consent shall not be unreasonably
withheld. Notwithstanding anything contained in this Section 23, a
Tax Indemnitee shall not be required to contest any claim or permit
the Tenant to contest any claim and may settle any Contest without the
consent of the Tenant if such Tax Indemnitee: (A) shall waive its
right to payment, discharge and indemnity under this Section 23 and,
if applicable, any corresponding claim under Article 6 of the Lease
with respect to such Indemnified Tax (and any claim made by the
claiming taxing authority or any other taxing authority with respect
to the same or any other taxable periods that are based, in whole or
in part, upon the resolution of such claim) and (B) shall pay to the
Tenant any amount previously paid or advanced by the Tenant pursuant
to this Section 23 with respect to such claim for such Indemnified Tax
or the contest of such Indemnified Tax other than the costs and
expenses of the contest of such claim paid by the Tenant in accordance
with clause (B) of Section 23 (d)(v).
(vii) If any Tax Indemnitee shall receive a refund of all or
part of any Indemnified Taxes paid, reimbursed or advanced by the
Tenant with respect to any Contest under this Section 23, then,
provided no Material Default or Event of Default shall have occurred
and be continuing, such Tax Indemnitee shall pay to the Tenant within
60 days of such receipt an amount equal to the lesser of: (A) the
amount of such refund of such Indemnified Taxes plus or minus any net
tax benefit or cost (taking into account any Indemnified Taxes
incurred by such Tax Indemnitee by reason of the receipt or accrual of
such refund) realized by such Tax Indemnitee as a result of any
payment made pursuant to this sentence (including this clause (A)),
and (B) the amount of such Indemnified Taxes paid, reimbursed or
advanced by the Tenant to the Tax Indemnitee, it being intended that
such Tax Indemnitee shall retain a net tax benefit pursuant to this
- 57 -
<PAGE> 62
Section 23 only if the Tenant shall first have been reimbursed for all
Indemnified Taxes it paid to such Tax Indemnitee pursuant to this
Section. If, in addition to such refund, such Tax Indemnitee shall
receive an amount representing interest on the amount of such refund,
such Tax Indemnitee shall pay the Tenant within 60 days of receipt,
that portion of such interest that shall be fairly attributable to
Indemnified Taxes paid, reimbursed or advanced by the Tenant prior to
the receipt of such refund. Any subsequent denial, loss, repayment or
recapture of such refund will be treated as an Indemnified Tax for
which the Tenant is responsible hereunder subject to the Tenant's
right to contest such denial, loss, repayment or recapture under, and
in accordance with, Section 23(a) as though it were a new claim,
proceeding or Indemnified Tax hereunder.
(e) (i) Any amount payable by the Tenant to a Tax Indemnitee
pursuant to this Section 23 shall be paid within 60 days after receipt by the
Tenant of a written demand there for from such Tax Indemnitee accompanied by a
written statement describing in reasonable detail the amount so payable, but
(except as provided in Article 6 of the Lease) shall in no event be payable
before the date such Indemnified Tax is due. Any payments made pursuant to
this Section 23 shall be made directly to the Tax Indemnitee entitled thereto
or the Tenant, as the case may be, in immediately payable funds at such bank or
to such account as specified by the payee in written directions to the payor,
or, if no such direction shall have been given, by check of the payor payable
to the order of the payee and mailed to the payee by certified mail, postage
prepaid at its address as set forth in this Agreement or as provided to the
payor from time to time in writing. Any Indemnified Taxes indemnified
hereunder shall be payable by the Tenant, to the extent allowed, directly to
the appropriate taxing authority on or before the time, and in the manner,
prescribed by applicable Laws, without the necessity of any prior demand by a
Tax Indemnitee.
(ii) In the event the Tenant fails to make any payment
required under this Section 23, and the Tax Indemnitee makes a payment
with respect to any such Indemnified Taxes that are due and payable at
the time of such payment (other than with funds advanced to the Tax
Indemnitee on an interest-free basis by the Tenant pursuant to this
Section 23) the Tenant shall pay to the Tax Indemnitee interest on the
amount of such payment at the Default Rate (as defined in Article
1(b)(ii) of the Lease) from (A) the date of payment by the Tax
Indemnitee if it notifies the Tenant that such payment has been made
within 5 days of making such payment, or (B) from the date the Tax
Indemnitee notifies the Tenant of such payment in all other cases, in
either case to the date of payment by the Tenant to the Tax Indemnitee
hereunder. Any
- 58 -
<PAGE> 63
amount payable under this Section 23 that is not paid when due shall
bear interest at the Default Rate (as defined in Article 1(b)(ii) of
the Lease) from and including the due date thereof to but excluding
the date of payment thereof.
(iii) Any amount payable to Tenant pursuant to this Section
23 shall not be paid or retained by Tenant if at the time of such
payment or retention a Material Default or Event of Default shall have
occurred and be continuing. At such time as there shall not be
continuing any such Material Default or Event of Default such payment
shall be paid to Tenant to the extent not previously paid to Tenant.
(f) With respect to any report, return or statement (a
"Filing") required to be filed with respect to any Indemnified Tax that is
subject to reimbursement or indemnification under this Section 23:
(i) Seller shall promptly notify the appropriate Tax
Indemnitee in writing of any Filing (other than a Filing which relates
to a Tax described in Section 23(b)(i)(A), (B) or (C)) required to be
made by any Tax Indemnitee that (x) Seller has knowledge of; (y)
Seller should have knowledge of based on either the Transaction
Documents or the responsibilities which are customary for an operator,
user or lessee (in a triple net lease) of similar property. Upon
receipt of such notice, the recipient Tax Indemnitee shall promptly
notify the Seller in a writing satisfying the requirements of
subsection (ii) whether it will make such Filing or requests the
Seller to make such Filing.
(ii) if permitted by applicable Laws to do so, the Tenant
shall timely file or cause to be filed such Filing with respect to
such Indemnified Tax (except for any such Filing that a Tax Indemnitee
has notified Tenant in writing that such Tax Indemnitee intends to
file) and will (if ownership of a Property or any part thereof or
interest therein is required to be shown on such Filing) show the
ownership of the Property in the name of the Owner Trustee and send a
copy of such Filing to the appropriate Tax Indemnitee; provided,
however, that such Tax Indemnitee shall have furnished the Tenant, at
the Tenant's written request, with such information, not within the
control of the Tenant, as is in such Tax Indemnitee's control or is
reasonably available to such Tax Indemnitee and necessary to file such
Filing; provided, further, however, Tenant shall pay all out-of-pocket
expenses of the Tax Indemnitee in connection therewith.
(iii) if the Tenant is not permitted by applicable Laws to
file any Filing contemplated by subsection (ii), the Tenant will
promptly notify the appropriate Tax Indemnitee of such
- 59 -
<PAGE> 64
requirement in writing and prepare and deliver to the appropriate Tax
Indemnitee a proposed form of such Filing within a reasonable time,
and in all events at least 15 days prior to the time such Filing is
required to be filed.
(iv) in the case of any Filing contemplated by subsection
(ii) either required to reflect items in addition to Indemnified Taxes
imposed on or indemnified against by the Tenant under this Section 23
or which the Tax Indemnitee has notified the Tenant in writing that it
will prepare and file, Tenant shall at its expense, upon the written
request of such Tax Indemnitee, provide such Tax Indemnitee with such
information as is within Tenant's reasonable control or access.
(v) Tenant shall hold each Tax Indemnitee harmless from and
against any liabilities, including, but not limited to penalties,
additions to tax, fines and interest, arising out of any insufficiency
or inaccuracy in any Filing contemplated by subsection (ii), if such
insufficiency or inaccuracy is attributable to Tenant.
(g) With respect to any Indemnified Tax which is subject
to reimbursement or indemnification under Section 23 hereof,
(i) Any payment or indemnity to or for the benefit of any
Tax Indemnitee shall (A) reflect the current combined net savings
actually realized by such Tax Indemnitee resulting from the current
deduction of such Indemnified Tax and (B) include, after taking into
account the savings described in clause (A), the amount necessary to
hold such Tax Indemnitee harmless on an After-Tax Basis.
(ii) If, by reason of any Indemnified Tax payment, discharge
or indemnity made to or for the account of a Tax Indemnitee by or on
behalf of the Tenant pursuant to this Section 23 (or the circumstances
or event giving rise thereto), such Tax Indemnitee actually realizes a
net tax benefit, refund, saving, deduction or credit against Taxes not
indemnified by the Tenant under any Operative Document, which benefit,
refund, saving, deduction or credit was not previously taken into
account in computing such payment, and provided no Material Default or
Event of Default under the applicable Lease has occurred and is
continuing, such Tax Indemnitee shall promptly pay to Tenant an amount
equal to the sum of: (A) the actual net reduction in Taxes, if any,
realized by such Tax Indemnitee which is attributable to such net tax
benefit, refund, saving, deduction or credit; and, (B) the actual net
reduction in any Taxes, if any, realized by such Tax Indemnitee as the
result of any payment made by such Tax Indemnitee pursuant to this
sentence.
- 60 -
<PAGE> 65
(iii) Notwithstanding the foregoing subsection (ii), no Tax
Indemnitee shall be required to make any payment to the Tenant
pursuant to this Section 23(g) to the extent such payment would
exceed, in the aggregate at any time of: (A) the amount of all prior
payments made by or on behalf of Tenant to such Tax Indemnitee of the
Indemnified Tax giving rise to such tax savings less, (B) the amount
of all prior payments made by the Tax Indemnitee to Tenant hereunder
of tax savings in respect of such Indemnified Tax pursuant to this
Section 23(g), but any such excess shall reduce pro tanto any amount
that the Tenant is subsequently obligated to pay such Indemnified
Party pursuant to this Section 23 with respect to such Indemnified
Tax.
(iv) If any amount otherwise payable to the Tenant is not
payable by reason of the occurrence and continuation of a Material
Default or an Event of Default under the applicable Lease, such amount
shall be payable when such Material Default or Event of Default is no
longer continuing.
(v) The disallowance or reduction of any tax benefit, refund,
savings, deduction or credit with respect to which a Tax Indemnitee
has made a payment to the Tenant under this Section 23 or which was
taken into account in calculating any such payment under this Section
23 shall be treated as an Indemnified Tax for which the Tenant is
obligated to pay, reimburse or indemnify such Tax Indemnitee hereunder
subject to the Tenant's rights to contest such Indemnified Tax under,
and in accordance with, Section 23(d) as through it were a new claim
or proceeding hereunder.
(h) For purposes of this Section 23, the following terms
shall have the meanings ascribed to them below:
"Affiliated Group" shall mean an affiliated group of corporations,
within the meaning of Section 1504 of the Code, filing or which will file a
consolidated Federal income tax return.
"After-Tax Basis" shall mean (i) with respect to any payment to be
received by Tax Indemnitee, the amount of such payment supplemented by a
further payment or payments so that, after deducting from such aggregate
payments the amount of all Taxes (net of any actual current credits, deductions
or other tax benefits arising from the payment by the Tax Indemnitee of any
amount, including Taxes, for which the payment to be received is made) actually
imposed currently on the Tax Indemnitee by any Governmental Authority or taxing
authority with respect to such payments, the balance of such payment shall be
equal to the original payment to be received and (ii) with respect to any such
payment to be made by the Tax Indemnitee; the amount of such payment to be made
by the Tax Indemnitee; the amount of such
- 61 -
<PAGE> 66
payment supplemented by a further payment or payments so that, after increasing
such payment by the amount of any current credits or other tax benefits
realized by the Tax Indemnitee under the laws of any Governmental Authority or
taxing authority resulting from the making of such payments that net amount of
such payment (net of such credits or benefits) shall be equal to the original
payment to be made; provided, however, for the purposes of this definition, it
shall be assumed that for the Owner Participant as a Tax Indemnitee (or any
Affiliate thereof) Federal, state and local income taxes are payable at the
highest marginal Federal, state and local statutory income tax rates applicable
to corporations from time to time.
"Excluded Taxes" shall mean any and all federal, state or municipal
net income Tax, or any net profit, capital gains, excess profits, alternative
minimum, accumulated earnings or personal holding company Taxes, and any
inheritance, estate, succession, gift, or franchise Tax (regardless how named
or denominated) except for:
(i) any such Tax which is in direct substitution (which
direct substitution is documented by published administrative
regulation, fiat or other official ruling, notice or release of any
kind and/or in a statutory enactment or legislative history thereof by
the state or political subdivision or other taxing authority which
enacted and/or levied any such Tax) for any Indemnified Tax which
Tenant is obligated to pay, reimburse or indemnify a Tax Indemnitee
under this Agreement;
(ii) any Tax which is, or is in the nature of, a real
property franchise charge, or a sales, use, rental, property, value
added, stamp, license or transfer tax; and
(iii) any Tax which is indemnified as necessary to make any
payments hereunder on an After-Tax Basis.
"Final Determination" shall mean:
(i) a decision, judgment, decree or other order by any court
of competent jurisdiction, which decision, judgment, decree or other
order has become final after all appeals allowable by law and the
applicable Operative Documents have been exhausted by either party to
the action or the time for filing such appeals has expired or in any
case where judicial review shall at the time be unavailable because
the proposed adjustment involves a decrease in net operating loss
carryforwards or business credit carryforwards, a decision, judgment,
decree or other order of an administrative official or agency of
competent jurisdiction which decision, judgment, decree or other order
has become final (i.e., where, all
- 62 -
<PAGE> 67
administrative appeals have been exhausted by all parties thereto);
(ii) a closing agreement entered into under (x) Section
7121 of the Code or any other settlement agreement entered into in
connection with an administrative or judicial proceeding and (y) with
the consent of Kmart;
(iii) the expiration of the time for instituting suit with
respect to the claimed deficiency; or
(iv) the expiration of the time for instituting a claim
for refund, or if such a claim was filed, the expiration of the time
for instituting suit with respect thereto.
"Indemnified Taxes" shall mean any and all Taxes levied, assessed or
imposed on or with respect to a Tax Indemnitee, the Tenant, any Tenant, the
Owner Participant's Financing (including without limitation, the Notes, the
Pass Through Certificates and any amounts and expenses payable thereunder), the
Properties or any part thereof or interest therein or any addition, alteration,
modification or improvement thereto, any Remainder Interest, or the Rent
payable under any Lease including, without limitation, taxes or such other
amounts that are or are in the nature of sales, use, rental, value added,
filing, recording and transfer taxes, and any and all water, sewer or other
such charges, excises, levies, fees, licenses, duties, withholdings, permits,
inspections, real property franchise charges and other governmental charges of
every character (in each case, regardless how named or denominated) or any
excise taxes, charges or penalties imposed on any Tax Indemnitee under Section
4975 of the Code or Section 502 (i) or (1) of ERISA which, may be levied,
assessed or imposed on or in connection with or with respect to:
(i) any Property, any part thereof or any estate, right,
title or interest therein, or any construction, preparation,
installation, inspection, delivery, non-delivery, acceptance,
rejection, purchase, ownership, condition, maintenance, repair,
storage, substitution, return, occupancy, operation, leasing,
subleasing, use or possession of, or sales from, or other activity
conducted on any Property or any part thereof, or any transfer,
mortgaging, pledging, financing of any Property or any part thereof or
any addition, alteration, modification or improvement of or to the
Property or any such part thereof,
(ii) any Remainder Interest, or any part thereof or
interest therein,
- 63 -
<PAGE> 68
(iii) any Lease, or any other Operative Document (including in
each case any amendment, supplement, waiver or consent thereto),
(iv) the Owner Participant's Financing (including without
limitation, the Notes, the Pass Through Certificates and any payments
and expenses thereunder),
(v) the Rents, or receipts arising from or received with
respect to the Properties or any part thereof or any interest therein
or any applications or permitted dispositions thereof,
(vi) otherwise with respect to or in connection with the
transactions contemplated by the Operative Documents.
It is the parties' intention that, Indemnified Taxes shall include,
without limitation, (i) any and all Property Assessments; and, (ii) all Taxes
that are specifically carved out of the exclusions provided in Section 23(b)
herein.
"Original Property" shall mean any Property purchased by the Owner
Trustee and leased to Kmart on the Closing Date.
"Owner Participant Tax Indemnitee" shall mean each of the Owner
Participants, the Owner Trustees, the Trusts, and each of their respective
affiliates, successors, permitted assigns and permitted transferees.
"Property Assessments" shall have the meaning set forth in Section
6(a) of the Lease.
"Reasonable Basis" for a position shall exist if tax counsel may
properly advise reporting such position on a tax return in accordance with
Formal Opinion 85-352 issued by the Standing Committee on Ethics and
Professional Responsibility of the American Bar Association.
"Regulations" shall mean the income tax regulations issued, published
or promulgated from time to time under and pursuant to the Code.
"Tenant's Tax Counsel" shall mean nationally recognized independent
tax counsel selected by Kmart and reasonably acceptable to the Owner
Participant. Kmart shall notify the Owner Participant of its selection
(including the name of the person to contact at such counsel) whenever
requested by the Owner Participant or whenever Tax Counsel is required to be
designated under this Agreement.
- 64 -
<PAGE> 69
"Substitute Property" shall mean any property which is substituted for
any other Property in accordance with Article 41 of the Lease.
"Taxes" shall mean all taxes, levies, charges, licenses, fees,
imposts, duties, withholdings, liabilities, costs, expenses or assessments of
the United States of America or any state or political subdivision or taxing
authority thereof or therein (including any interest, penalties, fines and
additions to tax thereon or thereto), which are levied, assessed or imposed.
"Tax Indemnitee" shall mean the Owner Participants, each of the Owner
Trustees (in their individual capacity and as trustees under the Trust
Agreements) and any successor trustees thereto or co-trustees permitted under
the applicable trust agreement, each of the Remainderman Trustees (in their
individual capacity and as trustees under the Remainderman Trust Agreement) and
any successor trustees thereto or co-trustees permitted under the applicable
trust agreement, the Remainder Purchaser, the Trusts, the Remainderman Trust,
the Indenture Trustees (in their individual capacity and as trustees under each
Indenture for the benefit of the holders of the Notes), the Indenture Estates,
and the respective affiliates, successors, permitted assigns, permitted
transferees, servants, employees, agents, shareholders, directors and officers
of each of the foregoing.
24. Trustee Liability. It is expressly understood and agreed by
the parties hereto that:
(a) Owner Trustee Liability. (i) This Agreement is
executed and delivered by Corporate Owner Trustee and Individual Owner Trustee,
not individually or personally, but solely as owner trustees on behalf of
Landlord, in the exercise of the powers and authority conferred and vested in
them as the owner trustees under the Trust Agreements, (ii) each of the
representations, warranties, undertakings, covenants and agreements herein made
by Landlord (other than those made by Owner Trustee in its individual capacity)
are made and intended not as personal representations, warranties,
undertakings, covenants and agreements by the Owner Trustees but are made and
intended for the purpose of binding only the Trust Estate created by the Trust
Agreements, (iii) nothing herein contained shall be construed as creating any
liability on the Owner Trustees, individually or personally, to perform any
covenant either expressed or implied contained herein, all such liability, if
any, being expressly waived by the other parties to this Agreement and by any
Person claiming by, through or under any such party and (iv) under no
circumstances (except in respect of those
- 65 -
<PAGE> 70
representations, warranties, undertakings, covenants and agreements made by
Owner Trustee in its individual capacity) shall the Owner Trustees be
personally liable for the payment of any indebtedness or expenses of the Owner
Trustees or Landlord under this Agreement or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by the Owner Trustees or Landlord under this Agreement; provided,
however, that Owner Trustee in its individual capacity shall be liable in its
individual capacity (A) for its own willful misconduct or gross negligence, and
to each Owner Participant for the breach of its obligations to each Owner
Participant in respect of the related Trust Agreement and Trust Estate, (B) for
any Tax based on or measured by any fees, commission or compensation received
by it for acting as trustee in connection with any of the transactions
contemplated by the Operative Documents, or (C) in respect of the
representations, warranties and covenants of Owner Trustee made in its
individual capacity as expressly set forth herein or in any other Operative
Document to which it is a party.
Neither any of the Owner Participants nor the Owner
Participant Parent shall have any obligation to any of the other parties hereto
with respect to the transactions contemplated by the Operative Documents except
those obligations of each Owner Participant and the Owner Participant Parent
expressly set forth in the Operative Documents to which it is a party or except
as set forth in the instruments delivered in connection therewith to which it
is a party, and each of the Owner Participants and the Owner Participant Parent
shall not be personally liable for performance by any other party hereto of
such other party's obligations under the Operative Documents. Notwithstanding
the foregoing provisions of this Section 24(a), nothing herein shall be deemed
to prevent any party hereto from having recourse to and seeking enforcement
against the Trust Estate for performance and observance of covenants,
agreements and conditions required to be performed or observed by Owner Trustee
or any Owner Participant in this Agreement and the other Operative Documents.
(b) Remainderman Trustee Liability. (i) This Agreement
is executed and delivered on behalf of Remainderman by Remainderman Trustee not
in its individual capacity but solely as trustee under the Remainderman Trust
Agreement, in the exercise of the powers and authority conferred and vested in
it under the Remainderman Trust Agreement, (ii) each of the representations,
warranties, undertakings, covenants and agreements herein made by Remainderman
Trustee (other than those made by Remainderman Trustee in its individual
capacity) are made and intended not as personal representations, warranties,
undertakings, covenants and agreements by Remainderman Trustee but are made and
intended for the purpose of binding only the Remainderman, and (iii) under no
circumstances (except in respect of those representations, warranties,
undertakings, covenants and agreements made by Remainderman Trustee in its
individual capacity) shall Remainderman Trustee be
-66-
<PAGE> 71
personally liable for the payment of any indebtedness or expenses of
Remainderman or be liable for the breach or failure of any obligation,
representation, warranty, undertaking or covenant made or undertaken by
Remainderman under this Agreement or the other Operative Documents; provided,
that this Section 24(b) shall not limit the ability of any Person to look to
the Remainderman Trust Estate for satisfaction of such liability or
responsibility, to the extent provided in the Operative Documents.
(c) Indenture Trustee Liability. (i) Except as expressly
provided otherwise herein, this Agreement is executed and delivered by
Corporate Indenture Trustee not individually or personally but solely as
Indenture Trustee in the exercise of the powers and authority conferred and
vested in it as Indenture Trustee, (ii) each of the representations,
warranties, undertakings, covenants and agreements herein made by Indenture
Trustee (other than those made by Corporate Indenture Trustee in its individual
capacity) are made and intended not as personal representations, warranties,
undertakings, covenants and agreements by the Indenture Trustee but are made
and intended for the purpose of binding only the Indenture Estate, (iii) except
as expressly provided otherwise herein, nothing herein contained shall be
construed as creating any liability on the Indenture Trustee, individually or
personally, to perform any covenant of Indenture Trustee either expressed or
implied contained herein, and (iv) under no circumstances (except in respect of
those representations, warranties, undertakings, covenants and agreements made
by Corporate Indenture Trustee in its individual capacity) shall Indenture
Trustee be personally liable for the payment of any indebtedness or expenses of
Indenture Trustee solely in its capacity as Indenture Trustee or be liable for
the breach or failure of any obligation, representation, warranty or covenant
made or undertaken by Indenture Trustee under this Agreement or the other
Operative Documents.
25. Extent of Interest of Noteholders. No Noteholder shall have
any further interest in, or other right with respect to the Indenture Estate
when and if the principal of, Premium, if any, and interest on all Notes held
by such Noteholder and all other sums payable to such Noteholder or the
Indenture Trustee under the Indenture and such Notes shall have been paid in
full. The Pass Through Trustee and, by its acceptance of a Note, any other
Noteholder agrees that they will look solely to the income and proceeds from
the Indenture Estate to the extent available for the distribution to such
Noteholders as provided for in Section 2.05 of the Indenture and that none of
the Owner Participants, Owner Participant Parent, any Landlord, or Owner
Trustee shall be directly or indirectly personally liable to the Pass Through
Trustee or any other Noteholder for any amount payable under the Notes, the
Indenture or hereunder.
-67-
<PAGE> 72
26. No Merger of Title. Except as provided in the Indenture, the
remainderman interest, estate for years interest and leasehold estate with
respect to each Property, shall not merge but shall always be kept separate and
distinct, notwithstanding the union of such estates or any part thereof in
Landlord, Tenant, Remainderman or any other party, whether by purchase or
otherwise.
27. Remainderman Participant's Grant of Right of First Offer. (a)
If at any time during the term of any Lease or during the term of any Ground
Lease, Remainderman Participant (i) desires to sell or assign all or part of
its rights in Remainderman or (ii) receives an unsolicited offer to purchase
all or part of its rights in Remainderman, Remainderman Participant shall, as a
condition of such sale or assignment, first offer all or such part of its
rights in Remainderman (the "Offered Interest") to Landlord at a purchase price
and on such other terms and conditions as Remainderman Participant would accept
from another Person. Landlord may within thirty (30) days of receipt of such
offer, elect to purchase the Offered Interest, whereupon Landlord shall be
bound to purchase from Remainderman Participant, and Remainderman Participant
shall be bound to sell to Landlord, the Offered Interest on such terms and
conditions. If Landlord does not accept such offer, Remainderman Participant,
subject to the provisions of this Section 27, may sell or assign its rights in
the Offered Interest to another Person for a period of up to eighteen (18)
months from the end of such thirty (30) day period on terms and conditions that
are no less favorable to Remainderman Participant than the terms and conditions
offered to Landlord (it being understood that a "no less favorable" purchase
price for the Offered Interest is any purchase price that exceeds 96% of the
purchase price originally offered to Landlord). If Landlord does not accept
such offer and Remainderman Participant during such eighteen (18) month period
desires to sell or assign the Offered Interest to another Person on terms and
conditions less favorable (as defined in the preceding sentence) to
Remainderman Participant than those offered to Landlord, then Remainderman
Participant shall notify Landlord of such proposed sale or assignment and
Landlord shall have the right within thirty (30) days of receipt thereof to
purchase Remainderman Participant's rights in the Offered Interest on terms and
conditions no less favorable to Remainderman Participant than the terms and
conditions offered to such other Person (it being understood that a "no less
favorable" purchase price for the Offered Interest is any purchase price that
exceeds 96% of the purchase price originally offered to Landlord). If Landlord
does not notify Remainderman Participant of its election to purchase the
Offered Interest within such thirty (30) days, Remainderman Participant may
thereafter complete the proposed sale or assignment of its rights in the
Offered Interest to such other Person for such terms without any further
obligation to Landlord under this Section 27.
-68-
<PAGE> 73
(b) Purchase and Transfer. If Landlord shall have
exercised any of its purchase rights in Section 27(a), Landlord shall pay for
and purchase the Offered Interest on the terms and conditions required by
Section 27(a) and Remainderman Participant shall transfer to Landlord, without
recourse or warranty, but free and clear of all Remainder Purchaser Liens all
Remainderman Participant's right, title and interest in the Offered Interest.
28. Counterparts. This Agreement may be executed in multiple
counterparts, each of which, when so executed and delivered, shall constitute
an original, fully enforceable counterpart for all purposes, but all of which
shall together constitute one and the same instrument.
29. Further Assurances. Each party hereto shall cause to be
promptly and duly taken, executed, acknowledged and delivered all such further
acts, documents and assurances as each other party hereto from time to time may
reasonably request in order to carry out more effectively the intent and
purposes of this Agreement and the other Operative Documents and the
transactions contemplated hereby and thereby.
30. Survival of Agreement. (a) The representations, warranties,
covenants, indemnities and agreements of the parties provided for in this
Agreement shall survive the occurrence of the transactions contemplated by this
Agreement and the other Operative Documents, subject to and in accordance with,
the terms of the Operative Documents, and shall not be affected by any
investigation made by any party hereto and the fact that any such party may
waive compliance with any of the other provisions of this Agreement.
(b) The indemnities contained in Sections 22 and 23 shall
survive the expiration or earlier termination of the Lease.
31. Environmental Reports. Owner Participant, Landlord and
Remainderman hereby acknowledge and agree that the Environmental Reports (as
defined in the Purchase Agreement) are to be used solely for the purposes of
evaluating the purchase of the Properties by them and may not be disclosed or
delivered by them to any person or entity other than (i) their respective
directors, officers, employees, agents, representatives, permitted transferees
and permitted assignees who must be advised of such information for the purpose
of evaluating the purchase of the Properties (collectively, "Advisors"), (ii)
any parties that will constitute lenders or investors with respect to the
financing of the transactions contemplated hereby, whether such investors act
as lenders or as equity participants including, without limitation, the
Indenture Trustee, the Pass Through Trustees and the Underwriter (as defined in
the Purchase Agreement) and their respective counsel, directors, officers,
employees, agents and representatives (collectively, "Investors"), and (iii) to
the extent required by any court, tribunal or Governmental Authority or
-69-
<PAGE> 74
as otherwise required by law, regulation or Environmental Law. The Advisors
and Investors will be informed of the confidential nature of the Environmental
Reports and will be directed by Owner Participant, Landlord and Remainderman to
treat the information confidentially.
32. Headings. The division of this Agreement into sections, the
provision of a table of contents and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
33. No Waiver; Remedies Cumulative. No failure to exercise and no
delay in exercising on the part of any party to this Agreement of any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude any
other or further exercise thereof, or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement are cumulative
and not exclusive of any rights or remedies provided by law.
34. Intent of Parties. Landlord and Tenant intend that each of
the Leases be operating leases under applicable state law.
35. Method of Payment. All amounts due from Landlord under the
Indenture or the Notes that are required to be paid to the Indenture Trustee by
any other party hereunder or under any of the other Operative Documents shall
be paid to the Indenture Trustee in U.S. dollars in immediately available
funds no later than 12:00 p.m. (New York City time) on the date such payment
shall be due and payable to an account in the United States designated by
Corporate Indenture Trustee. Except as otherwise provided in any Operative
Document or as agreed to by the affected parties, all other amounts required to
be paid by any party to any other party hereunder or under any of the other
Operative Documents shall be paid in U.S. dollars in immediately available
funds no later than 3:00 p.m., local time at the place of receipt, on the date
such payment shall be due and payable and shall be paid to such Person as shall
be entitled to receive such payment at such address as such Person may specify
by notice to the parties hereto. If the date on which any payment is due and
payable is not a Business Day, such payment shall be made as aforesaid on the
next succeeding Business Day, with the same force and effect as if made on the
nominal due date.
IN WITNESS WHEREOF, the parties hereto have hereby executed this
Agreement as of the date first written above.
-70-
<PAGE> 75
KMART CORPORATION
By:_____________________________
Its:______________________
[OWNER PARTICIPANT]
By:_____________________________
Its:______________________
[OWNER PARTICIPANT PARENT]
By:_____________________________
Its:______________________
REAL ESTATE FINANCE TRUST 1995-K-3,
REAL ESTATE FINANCE TRUST
1995-K-4, REAL ESTATE FINANCE
TRUST 1995-K-5, REAL ESTATE
FINANCE TRUST 1995-K-6, REAL
ESTATE FINANCE TRUST
1995-K-7, REAL ESTATE FINANCE
TRUST 1995-K-8, REAL ESTATE
FINANCE TRUST 1995- K-9, REAL
ESTATE FINANCE TRUST
1995-K-10, REAL ESTATE
FINANCE TRUST 1995-K-12, REAL
ESTATE FINANCE TRUST
REAL ESTATE
FINANCE TRUST 1995-K-15, REAL
ESTATE FINANCE TRUST
1995-K-16, REAL ESTATE
FINANCE TRUST 1995-K-17, REAL
ESTATE FINANCE TRUST
1995-K-18, REAL ESTATE
FINANCE TRUST 1995-K-19, and
REAL ESTATE FINANCE TRUST
1995-K-20, Delaware business
trusts created under the
Trust Agreements
-71-
<PAGE> 76
By: WILMINGTON TRUST COMPANY,
acting in its individual
capacity solely for the
purposes of the
representations set forth in
Section 13(e) and otherwise
not in its individual
capacity but solely as
trustee for the trusts
created under the Trust
Agreements
By:_____________________________
Its:______________________
By: WILLIAM J. WADE, acting in his
individual capacity solely
for the purposes of the
representations set forth in
Section 13(e) and otherwise
not in his individual
capacity but solely as
trustee for Real Estate
Finance Trust 1995-K-4,
1995-K-15 and 1995-K-17
________________________________
THE BANK OF NEW YORK, acting solely as
trustee under 16 instruments
captioned "Indenture,
Mortgage and Deed of Trust,
Assignment of Rents and
Security Agreement," dated as
of the date hereof
By:_____________________________
Its:______________________
-72-
<PAGE> 77
TODD N. NIEMY
_______________________________,
acting solely as trustee under 16
instruments captioned
"Indenture, Mortgage and Deed
of Trust, Assignment of Rents
and Security Agreement,"
dated as of the date hereof
________________________________
REMAINDERMART LIMITED
PARTNERSHIP
By:_____________________________
Its:______________________
THE REMAINDERMART TRUST, a Delaware
business trust created under
the Remainderman Trust
Agreement
By: WILMINGTON TRUST COMPANY,
acting in its individual
capacity solely for the
purposes of the
representations set forth in
Section 13(i) and otherwise
not in its individual
capacity but solely as
trustee for the trust created
under the Remainderman Trust
Agreement
By:_____________________________
Its:______________________
-73-
<PAGE> 78
EXHIBIT A
---------
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
[Intentionally Omitted]
<PAGE> 79
EXHIBIT B
---------
FORM OF COMPANY INDENTURE
[Intentionally Omitted]
<PAGE> 1
EXHIBIT 4.6
FORM OF LEASE
KMART CORPORATION,
Tenant,
and
[insert trust name], a Delaware Business
(Trust created under a Trust Agreement
between _______________________, solely as Owner
Trustee and ______________, a __________________,
as Owner Participant)
- -or-
[insert Trustee name], solely as Owner
Trustee under Trust Agreement with ___________, a ___________
as Owner participant
Landlord.
LEASE
________________________________________
Kmart Store No.: ____
Location: _______________________
Owner Trust No.: _______________
Dated as of April __, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C> <C>
1. DEMISED PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. BASIC AND ADDITIONAL RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. NET LEASE; NON-TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. NO CONTINUOUS OPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. REAL ESTATE TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7. LIABILITY INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8. OPTIONS TO EXTEND LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9. REPAIRS AND MAINTENANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10. ALTERATIONS AND ADDITIONAL CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . 21
11. UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12. GOVERNMENTAL REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
13. LANDLORD TO GRANT EASEMENTS, DEDICATIONS, ETC. . . . . . . . . . . . . . . . . . . 24
14. INSURANCE; DAMAGE TO DEMISED PREMISES . . . . . . . . . . . . . . . . . . . . . . 25
15. EMINENT DOMAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
16. INSURANCE PROCEEDS, CLAIMS SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . 30
17. USE, ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . . . . . . 33
18. SIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
19. LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
20. TENANT DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
21. LANDLORD REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
22. INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
23. COVENANT OF QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
24. LANDLORD EXCULPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C> <C>
25. REMEDIES CUMULATIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
26. ESTOPPEL LETTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
27. CONDITION OF PREMISES AT TERMINATION . . . . . . . . . . . . . . . . . . . 43
28. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
29. NOTICE OF ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . 46
30. ENTRY BY LANDLORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
31. CAPTIONS AND DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 46
32. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . 47
33. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
34. INDEPENDENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 47
35. CHOICE OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
36. WAIVER AND MODIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 47
37. MEMORANDUM OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
38. HAZARDOUS MATERIALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
39. ECONOMIC ABANDONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
40. TENANT'S PURCHASE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . 51
41. PROPERTY SUBSTITUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 52
42. LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT . . . . . . . . . . . . . . . . 54
43. NO MERGER OF TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
44. OWNERSHIP OF THE LEASED PROPERTY . . . . . . . . . . . . . . . . . . . . . 55
45. PROCEDURE FOR APPRAISALS . . . . . . . . . . . . . . . . . . . . . . . . . 55
46. SURVIVAL OF TENANT'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 56
47. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
48. LIABILITIES OF LANDLORD . . . . . . . . . . . . . . . . . . . . . . . . . 57
49. NOTE INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
(ii)
<PAGE> 4
SCHEDULES AND EXHIBITS
Exhibit A Legal Description
Exhibit B Depiction of Site
Exhibit C Rents and Rent Payment Dates
Exhibit C-1 Landlord's Debt
Exhibit C-2 Rental Adjustment Certificate
Exhibit D Termination Value
Exhibit E Form of Estoppel Letter
(iii)
<PAGE> 5
LEASE
THIS LEASE made and entered into as of this ______ day of April__,
1995, between Real Estate Finance Trust K-_____, a Delaware Business Trust
created under a Trust Agreement dated _______ (as it may be amended from time
to time, the "Trust Agreement") between _____________________________________,
a __________________________, not in its individual capacity, except as
expressly set forth herein, but solely as Owner Trustee ("Owner Trustee"),
_________________________________, a __________________________ (insert Trustee
name) and __________________________, a ______________________________, as
Owner Participant (the "Owner Participant") having its principal office at
_________________________________________________________ ("Landlord"), and
KMART CORPORATION, a Michigan corporation having its principal office at 3100
West Big Beaver Road, Troy, Michigan 48084 ("Tenant" as tenant hereunder, and
"Kmart" in its individual capacity).
RECITALS:
A. By Agreement for Sale of Real Estate of even date herewith
("Purchase Agreement"), Tenant has sold to Landlord an Estate for Years
interest in Land (as hereinafter defined) and a fee interest in the site and
building improvements and certain personalty thereon, and has sold to
______________________, a ________________________ ("Remainder Purchaser") a
remainder interest in such Land (the "Remainder Interest");
B. Tenant desires and Landlord has agreed to lease back the
Demised Premises (as hereinafter defined) to Tenant on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the rents, covenants and
conditions herein set forth, Landlord and Tenant do hereby covenant, promise
and agree as follows:
<PAGE> 6
1. Demised Premises.
(a) Landlord demises unto Tenant and Tenant does lease
from Landlord for the Lease Term all of Landlord's right, title and interest in
the following property: the land as legally described in Exhibit A, attached
hereto and made a part hereof, and situated in the City of _______________,
County of _______________, State of ________________ and depicted on Exhibit B
attached hereto and made a part hereof ("Land"), the building (designated
Kmart), personalty and all site improvements now or hereafter constructed or
located thereon, together with all licenses, rights, privileges and easements
appurtenant thereto. (The Land and such building, personalty and site
improvements being collectively referred to as the "Demised Premises").
(b) Tenant hereby acknowledges and agrees that the
Demised Premises are let by Landlord in an "as is" condition without any
warranty, express or implied, of habitability or fitness for any particular
purpose and without representation or warranty with regard to any latent or
patent faults or defects therein or as to the value or operation thereof.
2. Term.
The interim term of this Lease ("Interim Term") shall commence
on the date hereof and shall terminate on ______________, 199__ and the base
term of this Lease ("Base Term") shall commence on _______________, 199__ and
terminate on ________________, 20__; provided, however, the Lease Term may be
extended as provided in Article 8 hereof. The phrase "Lease Term," as used in
this Lease, shall be the Interim Term and Base Term of this Lease together with
any extension thereof pursuant to Article 8.
3. Basic and Additional Rent.
(a) Tenant shall pay by wire transfer of funds to
Landlord or its designee, at such place as Landlord shall designate in writing
from time to time, (i) rent during the Interim Term ("Interim Rent") in such
amounts and semiannually on such dates ("Interim Rent Payment Dates") as set
forth in Exhibit C attached hereto and made a part hereof; and (ii) rent,
payable in advance or arrears, as applicable, during the Base Term and during
any extended term pursuant to Article 8 ("Basic Rent") in such amounts and
semiannually on such dates ("Rent Payment Dates") as set forth in Exhibit C.
No Basic Rent shall be due and payable during the Interim Term. Tenant shall
also pay during the Lease Term all amounts of Additional Rent as and when due.
Basic Rent and Additional Rent are referred to herein collectively as "Rent."
"Additional Rent" shall mean: (i) all other monetary
obligations of Tenant hereunder or under any of the other Operative Documents
(as hereinafter defined) of any nature or type
2
<PAGE> 7
whatsoever, including but not limited to payment of taxes, insurance, expenses
for repairs, maintenance and replacements and an amount equal to any Make-Whole
Premium (each as hereinafter defined) expressly required to be paid under this
Lease, and Special Additional Rent (as hereinafter defined), (ii) Landlord's
(and Tenant's) share of expenses under the REA (as hereinafter defined), (iii)
Trustee Expenses (as defined below), (iv) amounts due and payable by Tenant
under that certain Participation Agreement ("Participation Agreement") and that
certain Tax Indemnification Agreement ("Tax Indemnification Agreement"), each
of even date herewith (collectively, "Indemnification Agreements"), (v) excess
condemnation proceeds or excess insurance proceeds applied under Articles 15(d)
or 16(c) as the case may be to prepay the Notes and (vi) any amounts payable by
Tenant to the Remainder Purchaser pursuant to Article 8(a)(ii) hereof.
Notwithstanding the foregoing sentence, to the extent that any amounts relate
solely to a property or properties other than the Demised Premises, such
amounts shall not be treated as Additional Rent hereunder.
"Trustee Expenses" shall mean (i) the ordinary and
extraordinary fees and expenses of ___________ as the Owner Trustee under the
Trust Agreement and as Remainderman Trustee ("Remainderman Trustee") under that
certain Trust Agreement dated March 15, 1995 with Remainder Purchaser
("Remainderman Trust Agreement"), but not including fees and expenses incurred
as a result of Owner Participant's, Owner Trustee's, Remainderman or
Remainderman Trustee's breach of their obligations under the Operative
Documents (as defined in the Purchase Agreement), except to the extent caused
by Tenant's default hereunder or under any other Operative Document; (ii) the
ordinary and extraordinary fees and expenses of __________________________, as
trustee ("Indenture Trustee") under that certain Indenture, Mortgage and Deed
of Trust, Assignment of Rents and Security Agreement with Landlord of even date
herewith ("Note Indenture"), but excluding any principal, interest, prepayment
premium or penalties on Landlord's indebtedness evidenced by the Note Indenture
("Landlord's Debt" or "Notes") and excluding any expenses arising out of or in
connection with an Indenture Event of Default (as defined in the Note
Indenture) which is not an Event of Default under this Lease; and (iii) the
ordinary and extraordinary fees and expenses of each of the Pass Through
Trustees (being herein collectively referred to as the "Pass Through Trustee")
under those certain separate Pass Through Trust Agreements 1995-K-[1/2] of even
date herewith (collectively referred to as the "Pass Through Trust Agreement")
with Tenant, but excluding any principal, interest, prepayment premiums or
penalties on the Pass Through Certificates issued under the Pass Through Trust
Agreement except as provided in the Pass Through Trust Agreement.
(b) Tenant shall pay, as Additional Rent (the "Special
Additional Rent"), on [INSERT DATE], an amount equal to the Interim Rent due on
any Interim Payment Date unless the Indenture Trustee
3
<PAGE> 8
shall have received such payment from the Owner Trustee on such due date,
sufficient for payment in full of the amounts then due and owing on the Notes
in accordance with Section 20 of the Participation Agreement. So long as no
Material Default or Event of Default (as each are hereinafter defined) has
occurred and is continuing and in the event Tenant pays Special Additional Rent
pursuant to this paragraph and is not promptly reimbursed therefor by the Owner
Participant after demand for such reimbursement, Tenant shall be entitled to
offset and deduct (without duplication) against each succeeding payment or
portion thereof (other than as limited by the proviso to this sentence) due
from Tenant to Landlord in respect of Rent, Termination Value or any other
amount due hereunder or under any other Operative Document to the Owner
Participant (either directly or through Landlord) (in the order in which the
same become due), until Tenant has been fully reimbursed for such payment of
Special Additional Rent plus interest on the unreimbursed portion thereof at
the Default Rate (as defined in Article 3(c)(ii) hereof), and in each case,
such offset shall be deemed to constitute a reduction in the amount of such
Special Additional Rent so payable. No such offset or aggregate combined
effect of separate offsets shall reduce the amount of any installment of Basic
Rent to an amount insufficient, together with all other amounts payable
simultaneously by Tenant, to pay in full the payments then required to be made
on the account of the principal amount of and any interest on the Notes then
outstanding and the Additional Rent described in clauses (i), (ii), (iii), (v)
and (vi) of the definition thereof.
(c) In the event any Rent payable to Landlord is not
received by Landlord on the due date therefor, a late charge shall be incurred
and shall be paid as Additional Rent hereunder on the amount due from the due
date therefor to the date of payment thereof in an amount equal to (i) one
percent (1%) above the weighted average annual coupon rate of interest on such
portion of Rent equal to the then due principal, interest and premium thereon
on the Notes and (ii) in the case of such portion of Rent not described in
clause (i), interest on any other Rent not paid when due at a rate per annum
equal to the rate of interest publicly announced by Citibank, N.A., in New
York, New York from time to time at its "prime rate" for United States dollar
loans plus two percent (2%) but not to exceed in any event the maximum rate of
interest payable under applicable law. If such bank shall no longer exist, or
shall no longer publicly announce a "prime rate", then the parties shall
designate a substitute banking institution of equivalent recognition and
standing of such bank as of the date hereof to determine the "prime rate".
Such charges at such rates are referred to herein collectively as the "Default
Rate."
(d) Tenant covenants to Landlord and Indenture Trustee
that (i) as of the date hereof and as of the date of each Rental Adjustment (as
referenced below) during the Base Term, each installment of Interim Rent and
Basic Rent as of the due date of
4
<PAGE> 9
such installment as set forth on Exhibit C hereto is, and shall be, at least
equal to the amount of principal and interest on the Landlord's Debt as set
forth on Exhibit C-1 required to be paid by Landlord under the Note Indenture
(as in effect on the date hereof) on the corresponding due date of such
installment of Interim Rent and Basic Rent; and (ii) as of the date hereof, the
date of each Rental Adjustment (as referenced below) and the date of each
Termination Value (as defined on Exhibit D attached hereto) adjustment pursuant
to Article 15(d), during the Base Term the sum of all Interim Rent and Basic
Rent payable in arrears on such date together with each Termination Value set
forth on Exhibit D hereto is, and shall be, sufficient to enable Landlord to
pay in full, as of the date of payment thereof, the aggregate unpaid principal
of the outstanding Landlord's Debt required to be paid by Landlord as of such
date under the Note Indenture (as in effect on the date hereof or as may be
subsequently amended with Tenant's consent), together with all unpaid interest
thereon accrued to such date.
(e) In the event that a Rental Adjustment shall be
required pursuant to and in accordance with Section 21 of the Participation
Agreement, Landlord and Tenant shall execute and deliver (i) to each other and
to Indenture Trustee a supplement to the Lease, to reflect such adjustment,
provided that such adjustment shall be effective for all purposes of this Lease
regardless of whether such supplement is actually executed and delivered, and
(ii) to Indenture Trustee, a certificate substantially in the form of Exhibit
C-2 hereto. "Rental Adjustment" shall have the meaning set forth in Section 21
of the Participation Agreement and shall include adjustment of Termination
Values pursuant to such Section.
4. Net Lease; Non-Termination.
(a) Tenant acknowledges and agrees that this Lease is an
absolute net lease. All monetary obligations under this Lease, including, but
not limited to, payment of all Rent shall be absolutely and unconditionally
paid by Tenant without notice, demand, setoff, counterclaim, abatement,
deduction or defense (except as provided in Article 3(b) hereof with respect to
Special Additional Rent). Tenant shall have no right to terminate this Lease
(except as expressly provided in Articles 14, 15 and 39 hereof) nor shall
Tenant be entitled to any abatement or reduction of Rent hereunder (except to
the extent this Lease is terminated as expressly provided in Articles 14, 15
and 39 hereof), nor shall the obligations of Tenant under this Lease be
affected, by reason of: (i) any damage to or destruction of all or any part of
the Demised Premises from whatever cause, (ii) the taking of the Demised
Premises or any portion thereof by eminent domain or other taking by a party
empowered with the authority of eminent domain, (iii) the prohibition,
limitation or restriction of Tenant's use of all or any part of the Demised
Premises, or any interference with such use, (iv) any default on the part of
Landlord under this Lease, (v)
5
<PAGE> 10
any eviction by a holder of paramount title or otherwise, (vi) any purported
merger of estates resulting from Tenant's acquisition or ownership of all or
any part of the Demised Premises otherwise than as expressly provided herein,
or (vii) any other cause whether similar or dissimilar to the foregoing, any
present or future law to the contrary notwithstanding.
(b) Tenant agrees that it will remain obligated under
this Lease in accordance with its terms, and that it will not take any action
to terminate, rescind or void this Lease, notwithstanding (i) the bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation,
dissolution or winding-up or other proceeding affecting Landlord or its
successors in interest, or (ii) any action with respect to this Lease which may
be taken by any trustee or receiver of Landlord or its successor in interest or
by any court in any such proceeding.
5. No Continuous Operation.
Nothing contained in this Lease shall be construed to be a
covenant or other obligation on the part of Tenant, either express or implied,
to operate a business at the Demised Premises, except as the same may be
required by Laws or by any agreement Tenant is required to comply with pursuant
to Article 9(b) hereof. Notwithstanding the cessation of business operations
at the Demised Premises, Tenant shall continue to perform and observe all of
its obligations under this Lease and shall, unless Tenant is entitled and has
elected to self-insure, shall maintain insurance coverage with respect to the
Demised Premises in accordance with the requirements of this Lease.
6. Real Estate Taxes.
(a) Tenant shall pay and discharge all ad valorem real
estate taxes or other taxes in the nature thereof and all assessments, general
or specific (regardless how named or denominated), levied or imposed against or
with respect to (i) the Demised Premises or any part thereof or interest
therein or any addition, alteration, modification or improvement thereto, (ii)
the Remainder Interest, (iii) the Rent, or (iv) Landlord's interest in this
Lease or in the Demised Premises, including, in each case, any interest,
penalties and additions to tax relating to such taxes or assessments
(collectively referred to as "Property Assessments") at any time prior to,
during or with respect to any period ending on or prior to, or resulting from
or attributable in any respect to acts or events occurring on or prior to or
relating to payments made by Tenant under the Operative Documents at any time
prior to or after, the later of (x) the expiration or earlier termination of
the Lease and (y) Tenant's actual return of possession of the Demised Premises
in accordance with this Lease.
6
<PAGE> 11
(b) Tenant shall also pay and discharge all taxes,
levies, charges, licenses, fees, imposts, duties, withholdings, liabilities,
costs, expenses or assessments of the United States of America or any state or
political subdivision or taxing authority thereof or therein (including any
interest, penalties and additions to tax thereon or thereto), which are levied,
assessed or imposed on or with respect to Landlord, Tenant, the Demised
Premises or any part thereof or interest therein or any addition, alteration,
modification or improvements thereto, the Remainder Interest or the Rent
payable hereunder including, without limitation, taxes or such other amounts
that are or are in the nature of sales, use, rental, value added, filing,
recording and transfer taxes, and any and all water, sewer or other such
charges, excises, levies, fees, licenses, duties, withholdings, permits,
inspections, real property franchise charges and other governmental charges of
every character (in each case, regardless how named or denominated) which, at
any time prior to, during or with respect to any period ending on or prior to,
or resulting from or attributable in any respect to acts or events occurring on
or prior to or relating to payments made by the Tenant under the Operative
Documents at any time prior to or after, the later of (x) the expiration or
earlier termination of the Lease and (y) the Tenant's actual return of
possession of the Demised Premises in accordance with this Lease, may be
levied, assessed or imposed on or in connection with or with respect to (i) the
Demised Premises, or any estate, right, title or interest therein, or any
construction, preparation, installation, inspection, delivery, non-delivery,
acceptance, rejection, purchase, ownership, condition, maintenance, repair,
storage, abandonment, retirement, substitution, transfer, occupancy, operation,
leasing, subleasing, use or possession of, or sales from, or other activity
conducted on the Demised Premises, any part thereof or any addition,
alteration, modification or improvement thereto, (ii) the Remainder Interest,
(iii) this Lease, (iv) the Rent or receipts or earnings arising from or
received by a party entitled to the benefits of this Article 6 with respect to
the Demised Premises or any part thereof or any interest therein or any
dispositions thereof, (v) any other amount paid or payable pursuant to the
Lease or any document, amendment, supplement, waiver or consent relating
thereto or (vi) otherwise with respect to or in connection with the
transactions contemplated by this Lease or the Operative Documents. Any such
taxes, levies, charges, assessments or other amounts payable by Tenant
hereunder together with Property Assessments payable by Tenant hereunder shall
be referred to as "Assessments" for all purposes of this Lease.
(c) Nothing in paragraphs (a) and (b) shall require
Tenant to pay or reimburse Landlord for the payment of (w) any federal, state
or municipal net income tax (including any interest, penalties and additions to
tax thereon or thereto), or any net profit, inheritance, estate, succession,
gift, or franchise tax (regardless how named or denominated) except for any
such tax (i) which is in Direct Substitution (which Direct Substitution is
7
<PAGE> 12
documented by published administrative regulation, fiat or other official
ruling, notice or release of any kind and/or in a statutory enactment or
legislative history thereof by the state or political subdivision which enacted
and/or levied any such tax) for any Assessment which Tenant is obligated to pay
under this Lease, (ii) which is, or is in the nature of, a real property
franchise charge, or a sales, use, rental, property, value added, transfer,
stamp or license tax, (iii) which is necessary to make any payments hereunder
on an After-Tax Basis (as defined in the Participation Agreement), (x) any
transfer tax imposed upon the sale of all or a part of the Demised Premises by
Landlord except for (i) a sale and transfer pursuant to Tenant's Purchase Offer
set forth or in Articles 14, 15 or 40 hereof or any sale to a third party under
Article 39, hereof, (ii) any disposition or transfer resulting in connection
with Articles 9, 10, 13, 21 or 41 hereof, and (iii) a transfer in connection
with an Event of Default hereunder, (y) any tax, assessment, charge or levy
imposed or levied upon or assessed against any property, any income or any
business activity of Landlord, Remainder Purchaser or Remainder Participant
solely to the extent such tax, assessment, charge or levy would have been
imposed or levied on Landlord, Remainder Purchaser or Remainder Participant in
the absence of the transactions contemplated by the Operative Documents
(including any intangibles tax imposed with respect to any debt or investment
paper that is unrelated to the transactions contemplated by the Operative
Documents, the Notes or the Pass Through Certificates or (z) with respect to
Landlord, Remainder Purchaser or Remainder Participant any tax resulting from
the willful misconduct (including tax fraud) or gross negligence of Landlord,
Remainder Purchaser or Remainder Participant.
(d) The date of levy of all Assessments shall be deemed
to be the earlier of the due date for such Assessment or the date specified by
each applicable taxing jurisdiction on which such taxes shall become a lien on
the Demised Premises. Tenant's liability and obligation hereunder to pay such
Assessments shall be fully accrued, fixed and final on the date of levy thereof
subject to the rights to contest any such Assessments provided in this Article
6. In the event any such Assessments shall under law be payable to the
applicable taxing authority in a lump sum or on an installment basis, so long
as no Material Default or Event of Default shall have occurred and be
continuing, Tenant shall have the sole right to elect the basis of legal
payment. If Tenant shall elect to pay such Assessments on the installment
basis, then Tenant shall pay those installments which relate to Assessments
payable by Tenant hereunder directly to the applicable taxing authority.
During the continuance of an Event of Default hereunder, Tenant shall provide
Landlord with evidence of payment of any Assessment, the non-payment of which
could result in a Lien.
(e) (1) If any written claim shall be made against
Landlord, Remainder Purchaser or Remainder Participant or if any proceeding
shall be commenced against Landlord, Remainder Purchaser
8
<PAGE> 13
or Remainder Participant (including a written notice of such proceeding) for
any Assessments as to which Tenant may be obligated pursuant to this Article 6,
Landlord (or if applicable Remainder Purchaser or Remainder Participant) shall
promptly notify Tenant in writing and shall not take any action with respect to
such claim, proceeding or Assessments without the written consent of Tenant,
which consent shall not be unreasonably withheld or delayed, for 60 days after
the receipt of such notice by Tenant; provided, however, that, in the case of
any such claim, proceeding or Assessment, if Landlord shall be required by law
or regulation to take action prior to the end of such 60-day period, Landlord
shall in such notice to Tenant, so inform Tenant, and Landlord shall not take
any action with respect to such claim, proceeding or Assessment without the
written consent of Tenant, which consent shall not be unreasonably withheld or
delayed, for 10 days after the receipt of such notice by Tenant unless Landlord
shall be required by law or regulation to take action prior to the end of such
10-day period, in which case Landlord may take any action with respect to such
claim, proceeding or Assessment prior to the end of such 10-day period,
provided Landlord has not, at the time of taking such action, received a
written request contemplated by 6(e)(2), below.
(2) If requested by Tenant within 60 days or such
shorter period as specified in 6(e)(1) above, after receipt by Tenant of the
required notice with respect to the claim or proceeding that is the subject of
such notice, or, in the case of any claim or proceeding with respect to which
Tenant, Remainder Purchaser or Remainder Participant (as opposed to Landlord)
receives notice, upon the request of Tenant, Landlord (or if applicable
Remainder Purchaser or Remainder Participant) either (i) in the case of an
Assessment which may be contested in the name of Tenant, Remainder Purchaser or
Remainder Participant and independently (without joinder, contribution or
otherwise) from any claim, proceeding or Assessment that is not subject to
indemnification by Tenant, shall permit the Tenant to control or, in the case
of any claim, proceeding or Assessment, may request the Tenant to control, or
(ii) in the case of a claim, proceeding or Assessment which must be contested
in the name of Landlord, but which may be contested independently (without
joinder, contribution or otherwise) from any claim, proceeding or Assessment
that is not subject to indemnification by Tenant, may, upon prior written
consent by Landlord which consent shall be in its sole discretion, exercised in
good faith, permit Tenant to control (so long as, in the good faith judgment of
Owner Participant, there is no reasonable possibility that the Tenant's
direction of such contest could have any adverse impact on the financial or
public relations interests of Landlord or Owner Participant, in which case,
Landlord may assert or reassert control of the contest; provided, however, the
foregoing right to assert or reassert control shall not apply to any ad valorem
real estate or personal property tax contest) (any contest of any claim,
proceeding or Assessment ("Contest") described in the foregoing clauses (i) or
(ii) and for so long as
9
<PAGE> 14
Tenant controls the Contest being hereinafter referred to as a
"Tenant-Controlled Contest,") or (iii) in the case of an Assessment the Contest
of which is not a Tenant-Controlled Contest, shall itself, contest in good
faith (including, without limitation, by pursuit of appeals and administrative
procedures) the validity, applicability or amount of such Assessments.
(3) No matter who is in control, a Contest, at
the election of the Controlling Party (as defined herein), may include, without
limitation, a challenge to the validity, applicability or amount of such
Assessment by:
(i) resisting payment thereof;
(ii) not paying the same except under
protest (which protest must be pursued using reasonable efforts in
appropriate administrative and/or judicial proceedings) if protest
shall be necessary and proper; or
(iii) if payment shall be made, using
reasonable efforts to obtain a refund thereof in appropriate administrative
and/or judicial proceedings
(it being understood that Tenant may appeal or require Landlord to appeal to
any appropriate administrative or judicial appeal body; provided, however, that
no appeal shall be permitted or required hereunder to the United States Supreme
Court.)
(4) In no event shall such Contest be required or
permitted unless:
(i) in the case of a contest (A) which
must be contested in the name of Landlord or (B) which is contested by
Landlord in the name of Tenant, the amount at issue (taking into
account all similar and logically related claims with respect to the
transactions contemplated by the Operative Documents to the extent
relating to the Demised Premises that have been or could be raised in
an audit by the taxing authority in question for any other taxable
period with respect to which an assessment of a tax deficiency is not
barred by a statute of limitations, including, without limitation,
such claims that may arise in future periods) exceeds $25,000;
(ii) Tenant shall have agreed in
writing to pay Landlord (or, if applicable Remainder Purchaser) and
shall pay on an After-Tax Basis (as defined in the Participation
Agreement) as incurred all reasonable out-of-pocket costs and
expenses Owner Participant and Landlord shall incur in connection with
the contest of such claim (including, without limitation, all
reasonable
10
<PAGE> 15
costs, expenses, legal and accounting fees and disbursements);
(iii) Landlord shall have determined in
its sole discretion, exercised in good faith, that the action to be
taken will not result in any material danger of sale, forfeiture or
loss of any of the Demised Premises, the Remainder Interest or any
part thereof or interest therein or the creation of any lien on any of
the Demised Premises, the Remainder Interest or any part thereof or
interest therein, other than any Permitted Liens and that there is no
risk of criminal liability that may be imposed on or with respect to
Landlord, Owner Participant, or, if applicable Remainder Purchaser and
Remainderman Participant;
(iv) if such Contest is to be effected
by payment of the claim, Tenant shall advance the amount thereof plus,
as applicable, interest, penalties and additions to tax with respect
thereto on an interest-free basis (at no additional net after-tax cost
to Landlord but taking into account any net tax savings associated
with such advance);
(v) no Material Default or Event of
Default shall have occurred and be continuing;
(vi) in the case of a Contest which
must be contested in the name of Landlord or which is contested by
Landlord in the name of Tenant, (A) prior to initiating the Contest,
Tenant shall have furnished Landlord with an opinion of independent
tax counsel selected by the Tenant and reasonably acceptable to
Landlord ("Tax Counsel"), which opinion shall be furnished solely at
Tenant's expense, to the effect that a Reasonable Basis (as defined in
the Participation Agreement) exists for such Contest and (B) prior to
the appeal of any adverse judicial determination, Tenant shall have
furnished Landlord with an opinion of Tax Counsel, which opinion shall
be furnished solely at Tenant's expense, to the effect that there is a
Reasonable Basis for concluding that there will be a reversal or other
substantial favorable modification of such determination on appeal;
and
(vii) After the completion of an
administrative proceeding of first instance and prior to any
administrative appeal, Tenant shall have acknowledged in writing its
obligation unconditionally to indemnify Landlord (and if applicable
Remainder Purchaser) for the Assessment hereunder in the event the
Contest is unsuccessful (in whole or in part) or shall, in good
11
<PAGE> 16
faith, have notified Landlord of the reasons Tenant is not or may not
be liable for the Assessment if the Contest is unsuccessful (in whole
or in part). Notwithstanding the foregoing, Tenant shall have
acknowledged in writing its obligation to indemnify (in whole or in
part) Landlord (and if applicable Remainder Purchaser) for the
Assessment hereunder in the event that the Contest is unsuccessful (in
whole or in part) prior to any petition or complaint to a court. Any
such acknowledgment hereunder shall not preclude Tenant from raising a
defense to liability under this Article 6 if a court of competent and
proper jurisdiction has rendered a decision that the cause of the
claim is not one for which Tenant is responsible to pay an Assessment
hereunder or an indemnity under Section 22 of the Participation
Agreement.
(5) In no event shall Landlord be required to
contest any claim, proceeding or Assessment if the subject matter of such
claim, proceeding or Assessment shall be of a continuing nature and shall have
previously been the subject of an adverse final determination hereunder or
under the Participation Agreement after exercise by Tenant of its rights
pursuant to this Article 6 or under the Participation Agreement, unless Tenant
shall have delivered to Landlord at Tenant's expense an opinion of Tax Counsel
to the effect that as a result of a change in law or fact it is more likely
than not that Landlord will prevail in the contest of such claim.
(6) Tenant shall conduct any Tenant-Controlled
Contest and Landlord shall control any Contest other than a Tenant-Controlled
Contest. The party conducting the Contest ("Controlling Party") shall consult
in good faith with the other party ("Noncontrolling Party") and its counsel
with respect to such Contest but the decisions regarding what actions to be
taken shall be made by the Controlling Party in its sole judgment (exercised in
good faith). In addition, the Controlling Party shall keep the Noncontrolling
Party reasonably informed as to the progress of the Contest, and shall provide
the Noncontrolling Party with a copy of (or appropriate excerpts from) any
reports or claims issued by the relevant auditing agents or taxing authority to
the Controlling Party or any affiliate thereof, in connection with such claim,
proceeding or Assessment and/or the contest thereof.
(7) Except as provided in the next sentence
hereof, Landlord shall not settle any Contest hereunder without the consent of
Tenant, which consent shall not be unreasonably withheld. Notwithstanding
anything contained in this Article 6, Landlord shall not be required to contest
any claim or permit Tenant to contest any claim and may settle any Contest
without the consent of Tenant if Landlord (i) shall waive its right to
reimbursement or indemnity under this Article 6 and under the Participation
12
<PAGE> 17
Agreement or otherwise with respect to such claim for such claim, proceeding or
Assessment (and any claim made by the claiming taxing authority or any other
taxing authority with respect to the same or any other taxable periods that are
based, in whole or in part, upon the resolution of such claim), and (ii) shall
pay to Tenant any amount previously paid or advanced by Tenant pursuant to this
Article 6 or under the Participation Agreement with respect to such claim for
such Assessment or the contest of such Assessment other than the costs and
expenses of the contest of such claim paid or reimbursed by Tenant in
accordance with Article 6(e)(4) (ii) hereof or Section 21(c)(4)(ii) of the
Participation Agreement.
(f) (1) Any amount payable by Tenant to Landlord (or
if applicable Remainder Purchaser) pursuant to this Article 6 shall be paid
within 30 days after receipt by Tenant of a written demand therefor from
Landlord or Remainder Purchaser accompanied by a written statement describing
in reasonable detail the amount so payable, but (except as provided in this
Article 6) shall in no event be payable before the date such Assessment is due.
Any payments made pursuant to this Article 6 shall be made directly to Landlord
or Remainder Purchaser or to Tenant, as the case may be, in immediately payable
funds at such bank or to such account as specified by the payee in written
directions to the payor, or, if no such direction shall have been given, by
check of the payor payable to the order of the payee and mailed to the payee by
certified mail, postage prepaid at its address as set forth herein, or in the
Purchase Agreement or as provided to the payor from time to time in writing.
Any Assessments which are the obligation of Tenant hereunder shall be payable
by Tenant, to the extent allowed, directly to the appropriate taxing authority
on or before the time, and in the manner, prescribed by applicable Laws without
the necessity of any prior demand by Landlord.
(2) In the event Tenant fails to make any payment
required under this Article 6, and Landlord makes a payment with respect to any
such Assessments that are due and payable at the time of such payment (other
than with funds advanced to Landlord on an interest-free basis by Tenant
pursuant to this Article 6) Tenant shall pay to Landlord interest on the amount
of such payment at the Default Rate (as defined in Article 1(b)(ii)) from (A)
the date of payment by Landlord if it notifies Tenant that such payment has
been made within 5 days of making such payment, or (B) from the date Landlord
notifies Tenant of such payment in all other cases, in either case to the date
of payment by Tenant to Landlord hereunder. Any amount payable under this
Article 6 that is not paid when due shall bear interest at the Default Rate (as
defined in Article 1(b)(ii)).
(3) Any amount payable to Tenant pursuant to this
Article 6 shall not be paid or retained by Tenant if at the time of such
payment or retention a Material Default or Event of Default shall have occurred
and be continuing. At such time as there shall
13
<PAGE> 18
not be continuing any such Material Default or Event of Default, such amounts
shall be paid to Tenant to the extent not previously paid to Tenant.
(g) If any report, return or statement ("Filing") is
required to be filed with respect to any Assessment that is subject to
reimbursement or indemnification under this Article 6 or otherwise, Tenant
shall promptly notify Landlord of such requirement in writing and, if permitted
by applicable Laws and regulations to do so, Tenant shall timely file or cause
to be filed such Filing with respect to such Assessment (except for any such
Filing that Landlord has notified Tenant in writing that Landlord intends to
file) and will (if ownership of the Demised Premises or any part thereof or
interest therein is required to be shown on such Filing) show the ownership of
the Demised Premises in the name of Landlord and send a copy of such Filing to
Landlord; provided, however, that Landlord, at Tenant's written request, shall
have furnished Tenant with such information, not within the control of Tenant,
as is in Landlord's control or is reasonably available to Landlord and
necessary to file such Filing; provided, however, Tenant shall pay all
out-of-pocket expenses of Landlord and Owner Participant in connection
therewith. If Tenant is not permitted by applicable Laws to file any such
Filing, Tenant will promptly notify Landlord of such requirement in writing and
prepare and deliver to Landlord a proposed form of such Filing within a
reasonable time, and in all events at least 15 days prior to the time such
Filing is required to be filed. In the case of any Filing either required to
reflect items in addition to Assessments imposed on Tenant under this Article 6
(or indemnified against by Kmart under Section 22 of the Participation
Agreement) or which Landlord has notified Tenant in writing that it will
prepare and file, Tenant shall, at its expense, upon the written request of
Landlord, provide Landlord with such information as is within Tenant's
reasonable control or access. Tenant shall hold Landlord harmless from and
against any liabilities, including, but not limited to penalties, additions to
tax, fines and interest, arising out of any insufficiency or inaccuracy in any
such Filing, if such insufficiency or inaccuracy and is attributable to Tenant.
(h) Tenant's obligations provided for in this Article 6
shall be those of a primary obligor whether or not Landlord (and if applicable
Remainder Purchaser) may also be indemnified with respect to the same matter
under the terms of the Purchase Agreement, the Trust Agreement, the
Participation Agreement or any other document or instrument and Landlord may in
seeking reimbursement or indemnification from Tenant proceed directly against
Tenant without seeking to enforce any other right of indemnification (it being
agreed that the foregoing is not intended to grant Landlord and Remainder
Purchaser any right to any double recovery or double indemnity with respect to
any claim, proceeding or Assessment hereunder of amounts for which Landlord and
Remainder Purchaser has received under such other document or instrument (and
14
<PAGE> 19
is entitled to retain full indemnification)). If Tenant shall have fully
reimbursed or indemnified Landlord and Remainder Purchaser, then Tenant shall
be subrogated to the rights of Landlord and Remainder Purchaser with respect to
any such reimbursed or indemnified claim. Tenant further acknowledges and
agrees that nothing contained herein is intended to reduce or impair any rights
of Landlord and Remainder Purchaser or any other Tax Indemnitee (as defined in
the Participation Agreement) or any obligations of Tenant under Section 21 of
the Participation Agreement (including, without limitation, Tenant's
obligations with respect to contest preconditions).
(i) If Landlord (or if applicable Remainder Purchaser)
shall receive a refund of all or part of any Assessments paid, reimbursed or
advanced by Tenant with respect to any Contest under this Article 6, then,
provided no Material Default or Event of Default shall have occurred and be
continuing, Landlord (or if applicable Remainder Purchaser) shall pay to Tenant
within 30 days of such receipt an amount equal to the lesser of (A) the amount
of such refund of such Assessment plus or minus any net tax benefit or cost
(taking into account any Assessments incurred by Landlord (or if applicable
Remainder Purchaser) by reason of the receipt or accrual of such refund)
realized by Landlord (or if applicable Remainder Purchaser) as a result of any
payment made pursuant to this sentence (including this clause (A)), and (B) the
amount of such Assessment paid, reimbursed or advanced by Tenant to Landlord
or Remainder Purchaser), it being intended that Landlord (or if applicable
Remainder Purchaser) shall retain a net tax benefit pursuant to this Article 6
only if Tenant shall first have been reimbursed for all Assessments it paid to
Landlord and Remainder Purchaser, respectively, pursuant to this Article 6.
If, in addition to such refund, Landlord (or if applicable Remainder Purchaser)
shall receive an amount representing interest on the amount of such refund,
Landlord (or if applicable Remainder Purchaser) shall pay Tenant within 30 days
of receipt, that portion of such interest that shall be fairly attributable to
Assessments paid, reimbursed or advanced by Tenant prior to the receipt of such
refund. Any subsequent denial, loss, repayment or recapture of such refund
will be treated as an Assessment for which the Tenant is responsible hereunder
subject to Tenant's rights to contest such denial, loss, repayment or
recapture under, and in accordance with, Article 6(e) as though it were a new
claim, proceeding or Assessment hereunder.
(j) Any payment or indemnity to or for the benefit of
Landlord with respect to any Assessment which is subject to payment and
indemnification under this Article 6 shall (A) reflect the current combined net
savings actually realized by Landlord (or if applicable Remainder Purchaser)
resulting from the current deduction of such indemnified Assessment and (B)
include, after taking into account the savings described in clause (A), the
amount necessary to hold Landlord (or if applicable Remainder Purchaser)
15
<PAGE> 20
harmless on an After-Tax Basis (as defined in the Participation Agreement).
If, by reason of any Assessment payment made to or for the account of Landlord
(or if applicable Remainder Purchaser) by or on behalf of Tenant pursuant to
this Article 6 (or the circumstances or event giving rise thereto), Landlord or
Remainder Purchaser actually realizes a net tax benefit, refund, saving,
deduction or credit against Assessments not indemnified by Tenant under any
Operative Document, which benefit, refund, saving, deduction or credit was not
previously taken into account in computing such payment, provided no Material
Default or Event of Default has occurred and is continuing, Landlord (or if
applicable Remainder Purchaser) shall promptly pay to Tenant an amount equal to
the sum of (I) the actual net reduction in Assessments, if any, realized by
Landlord (or if applicable Remainder Purchaser) which is attributable to such
net tax benefit, refund, saving, deduction or credit and (II) the actual net
reduction in Assessments, if any, realized by Landlord as the result of any
payment made by Landlord (or if applicable Remainder Purchaser) pursuant to
this sentence. Notwithstanding the foregoing, Landlord (or if applicable
Remainder Purchaser) shall not be required to make any payment to Tenant
pursuant to this Article 6 to the extent such payment would exceed, in the
aggregate at any time, the amount of all prior payments made by or on behalf of
Tenant to Landlord (or if applicable Remainder Purchaser) of the Assessment
giving rise to such tax savings less the amount of all prior payments made by
Landlord (or if applicable Remainder Purchaser) to Tenant of tax savings in
respect of such Assessment pursuant to this Article 6, but any such excess
shall reduce pro tanto any amount that Tenant is subsequently obligated to pay
Landlord pursuant to this Article 6 with respect to such Assessment. If any
amount otherwise payable to Tenant is not payable by reason of the occurrence
and continuation of a Material Default or an Event of Default, such amount
shall be payable when such Material Default or Event of Default is no longer
continuing. The disallowance or reduction of any tax benefit, refund, savings,
deduction or credit with respect to which Landlord (or if applicable Remainder
Purchaser) has made a payment to Tenant under this Article 6 or which was taken
into account in calculating any such payment under this Article 6 shall be
treated as an Assessment as to which Tenant is obligated to pay or reimburse
Landlord hereunder subject to Tenant's rights to contest such Assessment under,
and in accordance with, Article 6(e) as though it were a new claim, proceeding
or Assessment hereunder.
7. Liability Insurance.
(a) During the Lease Term, Tenant at its sole expense
shall keep Landlord, the Owner Participant, Landlord's mortgagees, Landlord's
ground lessor, if any, Remainder Purchaser, Remainderman Participant and Tenant
insured, under an insurance policy of comprehensive general liability with
broad form (including contractual liability) coverage on an occurrence form
basis, against liabilities of any nature or type whatsoever, to the extent
16
<PAGE> 21
such coverage is available, for damage to persons or property including loss of
life sustained by any person or persons within or arising out of the Demised
Premises, including parking areas, sidewalks and driveways (hereinafter
referred to as "Common Areas"), whether caused by Landlord's or Tenant's
negligence or otherwise, in a policy or policies with minimum coverage of Five
Million and No/100 Dollars ($5,000,000.00) with respect to injury to any one
person and Five Million and No/100 Dollars ($5,000,000.00) with respect to any
one accident or disaster, and Five Million and No/100 Dollars ($5,000,000.00)
with respect to damage to property, or such greater amount as may be
consistent, in Tenant's reasonable judgment, with commercially prudent
practice.
(b) All policies of insurance shall be issued by an
insurance company licensed to do business in the state where the Demised
Premises are located, rated in the Best's Insurance Guide as not less than an
A+ "rating classification," and with a VII "financial size category," or
better, or a comparable rating by any successor agency. All such policies
shall bear endorsements to the effect that Landlord, the Owner Participant,
Landlord's mortgagee, ground lessor, if any, Remainder Purchaser, Remainderman
Participant and Tenant are named as additional insureds as their interests may
appear and that all such parties shall be notified not less than thirty (30)
days in advance of any termination, expiration, modification or cancellation
thereof. Said policy or policies shall expressly provide that it or they are
primary insurance and not excess over or contributory with any valid, existing
or applicable insurance in effect for or on behalf of Landlord or any other
additional insured.
While the Note Indenture remains in full force and effect and to the
extent such rating agency is providing a rating for the Pass Through
Certificates, all insurance companies providing such insurance shall have a
Standard & Poors Rating Group ("Standard & Poors") claims paying ability rating
of at least BBB-, a Moody's Investors Services, Inc. ("Moody's") claims paying
ability of Baa and a Duff and Phelps Credit Rating Co. claims paying ability
rating of A, as the case may be.
Copies of such policies, so endorsed, or certificates
evidencing the existence thereof, shall be promptly delivered to Landlord,
Owner Participant, Landlord's mortgagee, and/or ground lessor, if any,
Remainder Purchaser and Remainderman Participant prior to the commencement date
of this Lease and at least thirty (30) days prior to the expiration of any
policy. In the event Tenant fails to effect or maintain such insurance,
Landlord may obtain such insurance and Tenant shall reimburse Landlord for the
cost thereof with interest at the Default Rate from the date incurred by
Landlord.
(c) Tenant also agrees to maintain and keep in force,
during the term hereof pursuant to its excess liability insurance coverage,
statutory worker's compensation insurance coverage meeting all state and local
requirements, including insurance for
17
<PAGE> 22
employer's liability with limits of no less than Five Million and No/100
Dollars ($5,000,000.00).
(d) Notwithstanding the foregoing, Tenant shall be
entitled to self-insure the aforesaid insurance obligations (including its
workers' compensation insurance to the extent permitted by law) at any time
that Kmart has and maintains a consolidated tangible net worth of at least
Seven Hundred Fifty Million and No/100 Dollars ($750,000,000.00) calculated in
accordance with generally accepted accounting principles ("Net Worth
Standard"). Tenant shall at all times maintain in effect such insurance
coverages as provided in this Article 7 as to the Demised Premises as
maintained by Kmart with respect to similar properties owned or leased by Kmart
and located in the state and general geographic area where the Demised Premises
is located.
8. Options to Extend Lease.
(a) Provided that no Material Default or Event of Default
(each as defined in Article 20 hereof) hereunder has occurred and is
continuing, upon expiration of the Base Term Tenant shall have six (6)
successive options to extend the Lease Term for an additional period of five
(5) years on each such option, such extended term(s) to begin respectively upon
the expiration of the prior term(s). The same terms and conditions as herein
set forth shall apply to each such extended term except that (i) Basic Rent for
each such extended term shall be equal to eighty percent (80%) of the average
annual Basic Rent paid during the Base Term (the "Average Basic Rent") as set
forth on Exhibit C attached hereto (inclusive of any Rental Adjustments made
pursuant to Article 3(d) hereof), adjusted as provided in clause (ii) of this
Article 8(a), and (ii) on account of payments due to the Remainder Purchaser
(the "Ground Rent") during the extended terms pursuant of the ground lease of
the Demised Premises ("Ground Lease") entered into between Remainder Purchaser,
as ground lessor, and Landlord, as ground lessee, Tenant shall pay, as
Additional Rent, the amount of One and no/100 Dollars ($1.00) per year during
the first extended term, and for each such extended term thereafter, Tenant
shall pay the Ground Rent directly to Remainder Purchaser as ground lessor, and
the Basic Rent payable to Lessor for each such extended term shall be reduced
by an amount equal to fifty percent (50%) of the Ground Rent, provided, that if
fifty percent (50%) of the Ground Rent is an amount which is greater than ten
percent (10%) of the Average Basic Rent (inclusive of any Rental Adjustment
made pursuant to Article 3(d) hereof), the Basic Rent payable to Lessor for
each such extended term shall be further reduced by an amount equal to the
excess of fifty percent (50%) of the Ground Rent over ten percent (10%) of the
Average Basic Rent (as so adjusted). Basic Rent and Additional Rent as set
forth in the preceding sentence during each such extended term, calculated as
set forth in this clause (a), shall be payable semiannually in arrears in equal
installments on each _________ and ____________, and Tenant's
18
<PAGE> 23
portion of Ground Rent payable pursuant to this clause (a) shall be payable by
Tenant directly to Remainder Purchaser. Termination Value during each extended
term shall be that in effect on the last day of the Base Term. If Tenant shall
elect to exercise the aforesaid options, the aforesaid options, it shall do so
by notice in writing and otherwise in accordance with the requirements of
Article 28 hereof given to Landlord not less than nine (9) months prior to the
expiration of the Base Term of this Lease or of the Lease Term as extended.
The Tenant shall notify Landlord not less than twelve (12) months prior to such
expiration of its intention to extend or not to extend the Lease Term, provided
such notice shall not be binding on Tenant and Tenant's failure to give such
notice shall not be a default under this Lease. If Tenant shall fail to
exercise an option to extend the term of this Lease, this Lease shall expire
upon the expiration of the then current term and Tenant shall not have any
further option to extend the Lease Term.
Notwithstanding the foregoing, (i) Tenant shall not
have the right to extend the term of the Lease beyond the Base Term unless it
shall have exercised its initial option to extend the Base Term for five (5)
years for not less than twenty-five percent (25%) of the leases for Properties
originally covered by the Purchase Agreement and in effect on the date such
option is exercised ("Leases" for purposes of this paragraph) and (ii) if
Tenant has exercised its initial option to extend the Base Term for more than
twenty-five percent (25%) of such Leases but less than fifty percent (50%) of
such Leases, the Basic Rent for each extended term shall be one hundred percent
(100%) of the Average Basic Rent (inclusive of any Rental Adjustment made
pursuant to Article 3(d) hereof) payable as set forth above. If the product of
the calculation under (i) or (ii) above is a fraction, the fraction shall be
rounded up to the next whole number.
(b) Provided that no Material Default or Event of Default
hereunder has occurred and is continuing, prior to the expiration of the last
extended term provided for in paragraph (a) above, Tenant may, at its expense,
obtain an appraisal in accordance with the next succeeding sentence to
determine the end of the extended term uninflated fair market value and
remaining economic life of the building, site improvements and personalty.
Based upon the determination of remaining economic life and uninflated residual
value, Tenant shall be granted a number of additional successive five (5) year
extended terms (or such shorter period as is appropriate in the case of the
last such extended term) up to the maximum number of years (not to exceed
twenty (20) years) (taking into account the Tenant's right to extend the Lease
under paragraph (c) below) (i) which, taken together with the Interim Term and
Base Term and all prior extended terms provided for in paragraph (a) above,
does not exceed eighty percent (80%) of the sum of the remaining economic life
of the building, site improvements and personalty and the prior number of years
of the
19
<PAGE> 24
Lease Term (including the Interim Term, Base Term and all extended terms
provided for in paragraph (a) above) and (ii) at the end of which the remaining
fair market value (without taking into account inflation or deflation, but
taking into account any costs to the Landlord to obtain possession of such
property) of the building, site improvements and personalty equals or exceeds
twenty percent (20%) of Owner Participant's Purchase Price applicable thereto
as set forth in Schedule C of the Purchase Agreement. Such appraisal shall be
completed prior to the sixth (6th) month after Tenant's notice of its intent to
exercise an option to extend. Basic Rent for each of the first two additional
extended terms pursuant to this paragraph (b) shall equal the Basic Rent
payable during the last year of the Base Term. Basic Rent for each of the
remaining additional extended terms shall be fair market value rent.
Termination Value for each of the additional renewal terms pursuant to this
paragraph (b) shall be that in effect on the last day of the Base Term.
(c) In the event Tenant has elected not to renew the
Lease upon the expiration of the Base Term or any renewal term, Tenant shall
have the one-time option to extend the last term of this Lease for such period
of time as shall cause the last day of the last term of this Lease to be the
January 31 next succeeding the date upon which the term of this Lease would
expire but for the exercise of this option. This option shall be deemed to
have been exercised by Tenant unless Landlord shall have received notice from
Tenant to the contrary not less than six (6) months prior to the expiration of
the last term of this Lease. Basic Rent during this additional option period
shall be the same rental payable under the terms of this Lease during the
immediately preceding term except that Basic Rent shall be prorated upon a
daily basis for the additional period.
9. Repairs and Maintenance.
(a) Tenant shall make and pay for all maintenance,
replacement, alteration and repair of the Demised Premises on a timely basis
whether foreseeable or not foreseeable, including, without limitation, roof
repair and replacement, necessary to keep all of the Demised Premises, both
structural and non-structural portions, in a good state of repair and
tenantable condition, ordinary wear and tear excepted, consistent with the
standard of maintenance employed by Tenant as of the date of this Lease with
respect to similar properties owned or leased by Kmart and located in the
general geographic area where the Demised Premises is located, applicable Laws,
Environmental Laws (as defined in Article 12), standards of health and safety
required by applicable public authorities and private insurers, and in keeping
with the objective of preserving the fair market value and useful life of the
Demised Premises.
20
<PAGE> 25
Tenant shall pay for all of the costs of maintaining the
Common Areas (as defined in Article 7(a) hereof) and common facilities located
on the Demised Premises, including, but not limited to, the following: All
amounts paid for (1) cleaning and re-striping the parking areas, sidewalks and
driveways; (2) repairing, maintaining and replacing paved areas; (3)
maintaining, repairing and replacing planted or landscaped areas; (4) lighting
of parking lot including repair, replacements and maintenance of bulbs and
lighting standards within said Common Areas and lighting fixtures affixed to
any building; (5) paying all wages and salaries of persons directly and
actually performing services described herein; (6) removing rubbish; and (7)
removing of ice, snow and mud.
(b) During the Lease Term, notwithstanding that title to
the Demised Premises has been transferred to Landlord and Remainder Purchaser,
Tenant acknowledges and agrees that, in addition to Tenant's obligations under
this Lease, Tenant shall comply with all of the terms and conditions of,
perform all obligations of the owner of the Demised Premises and pay all
expenses which the owner of the Demised Premises shall be required to pay in
accordance with (i) all of the Permitted Exceptions as defined in the Purchase
Agreement, including without limitation that [insert reference to applicable
easement or operating agreements] (the "REA") and (ii) the Permitted Liens
defined in Article 19(f) hereof. Without limiting the foregoing, in the event
the responsible party fails to perform its obligations under the REA with
respect to the Common Areas, Tenant shall perform such obligations and shall
charge the responsible party with the obligations thereunder.
Tenant agrees to provide notice to the responsible parties
under the REA such that the responsible parties shall also notify Landlord of
any event which triggers an obligation to provide Tenant with notice under the
terms of the REA.
Tenant shall be entitled to retain any and all sums paid to it
as result of performing the duties and obligations of the responsible party
under the REA. Tenant's obligations under this Article 9(b) shall extend to
any amendments or modifications of the REA, but only to the extent Tenant has
consented to such amendments or modifications.
(c) Tenant shall have no right to offset against any
amounts otherwise owing under this Lease any payments made by Tenant under the
provisions of Paragraphs (a) and (b) above. Tenant shall not agree to any
amendment to the REA without the written consent of Landlord and the Indenture
Trustee if such amendment could have a material adverse effect on the Demised
Premises or Landlord's interest therein. Tenant shall provide Landlord with a
copy of all amendments or supplements to the REA promptly following execution
thereof.
21
<PAGE> 26
10. Alterations and Additional Construction.
(a) Provided no Material Default or Event of Default
hereunder has occurred and is continuing and subject to any applicable
restrictions under the REA, Tenant may, at its own expense, from time to time
make such alterations and additions, structural or otherwise, in and to the
building constituting a part of the Demised Premises as it may deem necessary
or suitable and erect or construct additional buildings or structures on and
within any portion of the Demised Premises; provided, however, that Tenant
shall not have the right to make any such alterations, additions, or erect or
construct additional buildings or additional structures which would other than
to an insignificant extent diminish the fair market value or remaining useful
life of the Demised Premises or cause the Demised Premises to be characterized
as limited use property (as described in Section 4.09 of Revenue Procedure
75-28 or Revenue Procedure 76-30); and provided further that Tenant shall
provide written notice to Landlord together with its drawings and
specifications for structural alterations, additions or additional buildings or
structures and certify that: (i) the new structures shall be built under the
supervision of a certified architect, (ii) the structural integrity of the
existing buildings will not be impaired by such work, (iii) Tenant is complying
with all applicable Laws and the requirements of the Permitted Exceptions as
defined in the Purchase Agreement, (iv) Tenant has obtained any licenses or
permits required, copies of which shall be delivered to Landlord upon request,
and (v) such structural alterations, additions or additional buildings or
structures will not encroach upon any adjacent premises and shall be diligently
pursued and completed prior to expiration of the Lease Term. Tenant shall be
entitled to proceed with such structural alterations, additions or additional
buildings or structures unless Landlord shall have notified Tenant within
fifteen (15) days after its receipt of Tenant's notice that, in Landlord's
reasonable opinion, such structural alterations, additions or additional
buildings or structures would other than to an insignificant extent diminish
the fair market value, or remaining useful life of the Demised Premises or
cause the Demised Premises to be characterized as limited use property (as
described in Section 4.09 of Revenue Procedure 75-28 or Revenue Procedure
76-30). In the event of a dispute with regard to the diminution of fair market
value or remaining useful life, an appraisal shall be performed in accordance
with the procedures of Article 45 hereof, and the result of the appraisal as to
the expected diminution, if any, of fair market value or remaining useful life
shall be binding upon the parties. The term "structural alterations," as used
herein, shall not include moving of non-load bearing partitions, minor plumbing
and electrical work, or modification and rearrangement of Tenant's fixtures or
other minor changes of a similar nature. Landlord, at Tenant's cost, shall
cooperate with Tenant in securing building and other permits or authorizations
required from time to time for any work permitted hereunder or installations by
Tenant.
22
<PAGE> 27
(b) The provisions of this Lease shall apply to and shall
govern Tenant's rights and obligations with respect to all such alterations,
additions, additional buildings or structures and the same shall be considered
part of the Demised Premises. All Assessments levied thereon shall be paid by
Tenant as provided in this Lease. Tenant shall be required to maintain
liability and property insurance on said additional improvements (or to
self-insure to the extent permitted hereunder) in the same manner as is
required in this Lease. In the event Tenant constructs any such additions or
additional buildings or structures, Landlord shall not be obligated to furnish
additional parking areas in substitution of areas thereby built over.
(c) In connection with any alterations, additions or
erection of additional improvements, Tenant shall perform, diligently pursue
and complete all work in a first class workmanlike manner in compliance with
applicable Laws, free of liens except for Permitted Liens. Tenant shall
maintain at all times during construction all risk builders insurance and
comprehensive general liability insurance naming Landlord, Remainder Purchaser
and Landlord's mortgagee as additional insureds.
Tenant shall be entitled to self-insure with respect to the
insurance required by the immediately preceding paragraph during such time that
Kmart meets the Net Worth Standard.
(d) All alterations, additions or additional buildings or
structures made or erected by Tenant on the Demised Premises shall without
further act become the property of Landlord (except for the assignment of
Condemnation proceeds expressly provided herein in the second paragraph of
Article 15(d)) and Landlord shall not be required to compensate Tenant
therefor; provided, however, Tenant may claim all tax benefits and incidents
attendant thereto as lessee thereof which Tenant is entitled to claim under
applicable tax law. Tenant will execute any necessary deed or bill of sale
required to convey title thereto to Landlord.
11. Utilities.
Tenant shall pay all charges for all utilities (including,
without limitation, gas, water, oil, sewage, telephone and electricity)
furnished to the Demised Premises during the Lease Term. Tenant acknowledges
and agrees that it shall obtain and use its reasonable efforts to maintain
service with respect to all such utilities at the Demised Premises.
12. Governmental Regulations.
(a) Tenant shall observe and comply (other than to an
insignificant extent) in all respects with all requirements of laws, rules,
codes, orders and regulations of the federal, state
23
<PAGE> 28
and municipal governments or other duly constituted public or quasi-public
authority applicable to the Demised Premises, including, but not limited to,
all Environmental Laws (as defined below) and the Americans With Disabilities
Act ("ADA"), as amended from time to time, together with all regulations
promulgated thereunder (collectively, "Laws"). Tenant shall make all
alterations or changes to the Demised Premises, subject to Article 10 hereof,
as may be required from time to time to comply with applicable Laws. Such
alterations or changes shall be made in compliance with and shall be governed
by Article 10(b), (c) and (d) and title thereto shall immediately vest in
Landlord.
(b) Tenant shall also comply (other than to an
insignificant extent) in all respects with all Environmental Laws now or
hereafter applicable to the Demised Premises, or the use, modification,
maintenance or operation thereof, and shall have sole responsibility for the
expenses, including legal and other professional fees and expenses and costs of
investigation associated with such compliance, including compliance with any
such Environmental Law directed to Landlord or Owner Participant or Remainder
Purchaser or to which Landlord or Owner Participant or Remainder Purchaser may
become subject with respect to the Demised Premises. For purposes of this
Lease, Environmental Laws shall mean all federal, state, and local laws,
ordinances, rules, regulations, requirements, permits, authorizations,
licenses, approvals, criteria, guidelines, and judicial and administrative
orders, decrees, or judgments, now or hereafter in effect, and in each case as
amended, and any judicial or administrative interpretation thereof, relating to
the regulation and protection of human health, safety, the environment and
natural resources including, without limitation, laws (and all other items
recited above) relating to emissions, discharges, releases, threatened releases
or remediation of, or any other response action related to, Hazardous Materials
(as defined in Article 38) or otherwise relating to the generation, use,
treatment, storage, recycling, disposal, transport, or handling of or exposure
to Hazardous Materials. Environmental Laws include but are not limited to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
("CERCLA"); the Resource Conservation and Recovery Act ("RCRA"); the Federal
Insecticide, Fungicide, and Rodenticide Act; the Toxic Substances Control Act;
the Clean Air Act; the Federal Water Pollution Control Act; the Oil Pollution
Act of 1990; the Endangered Species Act; the National Environmental Policy Act;
the Hazardous Materials Transportation Act; the Occupational Safety and Health
Act; and the Safe Drinking Water Act; each as amended from time to time, and
each of their state and local counterparts or equivalents.
For purposes of this Lease, "Environmental Claims" shall mean
any and all administrative, regulatory or judicial actions or causes of action,
suits, obligations, liabilities, losses, proceedings, decrees, judgments,
penalties, fees, demands, demand
24
<PAGE> 29
letters, orders, directives, claims (including any claims involving liability
in tort, strict, absolute or otherwise), liens, notices of non- compliance or
violation, and legal fees or costs of investigations or proceedings, relating
in any way to any Environmental Law or arising from the presence or release (or
alleged presence or release) into the environment of any Hazardous Materials
(as defined in Article 38) (hereinafter "Claims") including, without
limitation, and regardless of the merit of such Claim, any and all Claims by
any governmental or regulatory authority or by any third party for enforcement,
cleanup, removal, containment, restoration, corrective action, response,
remedial or other actions or damages, contribution, indemnification, cost
recovery, compensation or injunctive relief pursuant to any Environmental Law
or any alleged injury or threat of injury to human health, safety, the
environment or natural resources.
13. Landlord to Grant Easements, Dedications, Etc.
Provided that no Material Default or Event of Default
hereunder has occurred and is continuing and subject to the proviso contained
in this sentence and the provisions of the succeeding sentence, Landlord does
hereby (and shall by a separate instrument if requested by Tenant, from time to
time, upon thirty (30) days' prior written notice to Landlord at Tenant's cost
and expense) irrevocably make, name, constitute and appoint Tenant the true and
lawful agent and attorney-in-fact, coupled with an interest, of Landlord during
the term of this Lease, with full power and authority to do and perform the
following acts, at no cost to Landlord: (i) grant easements and other rights
in the nature of easements, (ii) release existing easements or other rights in
the nature of easements which are for the benefit of the Demised Premises,
(iii) dedicate or transfer unimproved portions of the Demised Premises for
road, highway or other public purposes, (iv) execute petitions to have the
Demised Premises annexed to any municipal corporation or utility district, (v)
execute amendments to any covenants and restrictions affecting the Demised
Premises, and Landlord shall execute and deliver to any person any instrument
appropriate to confirm or effect such grants, releases, dedications and
transfers to the extent of its interest in the Demised Premises (or execute
such instrument in its own name); provided, however, that the rights granted to
Tenant pursuant to the provisions of this paragraph (and the obligation of
Landlord to execute such instrument) are subject to thirty (30) days' prior
written notice to Landlord and Remainder Purchaser which notice shall include
(x) a certificate of an authorized officer of Tenant (A) describing such grant,
release, dedication, transfer, petition or amendment, (B) stating that such
grant, release, dedication, transfer, petition or amendment is not detrimental
to the proper conduct of the business of Tenant on the Demised Premises and
does not, other than to an insignificant extent, impair the usefulness of the
Demised Premises for the purposes contemplated and permitted hereby, or reduce
the fair market value or remaining useful life of
25
<PAGE> 30
the Demised Premises, or impair the Landlord's, Owner Participant's or
Remainder Purchaser's or any of their respective assignees interest in the
Demised Premises, or cause the Demised Premises to be characterized as limited
use property (as described in Section 4.09 of the Revenue Procedure 75-28 or
Revenue Procedure 76-30, and (C), the consideration, if any, being paid for
such grant, release, dedication, transfer, petition or amendment and (y) duly
authorized and binding unconditional undertakings of Tenant that it will remain
obligated hereunder to the same extent as if such grant, release, dedication,
transfer, petition or amendment had not been made (including, without
limitation, the obligation to pay all Rent in accordance with the terms
hereof), and that Tenant will perform all obligations of Landlord and Remainder
Purchaser under such instrument. In the case of those grants, releases,
dedications, transfers or amendments referred to in subparagraphs (i), (iii)
and (v) of the preceding sentence, the prior written approval of Landlord shall
be required (which approval shall not be unreasonably withheld or delayed),
provided if Tenant requests such approval in writing and Landlord has not
approved or disapproved the same within thirty (30) days of such request, it
shall be deemed approved, and provided further, if such grants, releases,
dedications, transfers or amendments do not by their respective terms extend
beyond the expiration or earlier termination of this Lease, the approval of
Landlord shall not be required. The consideration, if any, received by
Landlord or Tenant for such grant, release, dedication, transfer, petition or
amendment shall be applied pursuant to Article 15, as if such consideration
were net proceeds from an event of Condemnation. Tenant hereby accepts said
agency and power of attorney and agrees and consents to its terms, conditions
and provisions.
14. Insurance; Damage to Demised Premises.
(a) From and after the commencement of the Lease Term,
Tenant shall insure the buildings and improvements on the Demised Premises,
including Tenant's buildings, against damage or destruction by fire and other
casualties under a policy of insurance including broad form, extended coverage
all risk endorsements, including but not limited to fire, theft, flood, water
damage, collapse, windstorm, hail, boiler & machinery (if objects exist),
lightning, explosion, falling objects (i.e. aircraft), back-up & seepage of
sewers and drains, and business interruption to the extent maintained by Tenant
with respect to similar properties owned or leased by Tenant and located in the
state and general geographic area where the Demised Premises is located. Such
endorsements shall be subject to annual review by Landlord to identify
additional coverages payable by Tenant made necessary by market conditions or
made available by insurers of similar improvements for risks now or hereafter
deemed commercially reasonable to insure. Said insurance shall be in an amount
equal to not less than one hundred percent (100%) of the full insurable
replacement value of the Demised Premises (except for a Fifty
26
<PAGE> 31
Million and No/100 Dollars ($50,000,000) per occurrence/aggregate sublimit for
flood damage). At any time during the term of this Lease that Tenant is not
self-insuring pursuant to the terms of this Article, Tenant shall obtain at its
sole cost and expense and deliver to Landlord every three (3) years during the
Lease Term an independent appraiser's or engineer's certification of the full
replacement cost of the Demised Premises. In no event shall the deductible
amount under such policies of insurance exceed Two Hundred Fifty Thousand and
No/100 Dollars ($250,000.00) in the aggregate.
(b) Landlord and Landlord's mortgagee (including the
Indenture Trustee) shall be named as loss payees and additional insureds
thereunder. All required insurance policies shall bear endorsements to the
effect that Landlord and Landlord's mortgagee and ground lessor (if any) shall
be notified not less than thirty (30) days in advance of modification or
cancellation thereof and that Tenant has waived any right of recovery from
Landlord. Such policies shall contain no condition to disbursement of proceeds
based on actual restoration of the Demised Premises and shall provide that such
insurance is primary insurance and not excess over or contributory with any
valid, existing or applicable insurance in effect for or on behalf of Landlord.
Copies of such insurance policies or certificates evidencing the existence
thereof so endorsed, or a certificate of self-insurance evidencing Tenant's
election to self-insure such obligations, shall be promptly delivered to
Landlord prior to commencement of the Lease Term and at least thirty (30) days
prior to the expiration of any policy. Any policy of insurance shall be issued
by an insurance company licensed to do business in the state where the Demised
Premises are located rated in the Best's Insurance Guide as not less than an A+
"rating classification" and with a VII "financial size category," or better or
rated by a successor agency at comparable ratings. At any time during the term
of this Lease that either respective rating shall fall below A+ or VII (or such
comparable ratings of any successor agency), Tenant shall obtain insurance from
a replacement insurer carrying an A+ and VII rating or comparable rating.
While the Note Indenture remains in full force and effect and to the
extent such rating agency is providing a rating for the Pass Through
Certificates, all insurance companies providing such insurance shall have a
Standard & Poors claims paying ability rating of at least BBB-, a Moody's
claims paying ability rating of at least Baa and a Duff and Phelps Credit
Rating Co. claims paying ability rating of A.
(c) Notwithstanding the foregoing, Tenant shall be
entitled to self-insure its aforesaid insurance obligations at any time that
Tenant meets the Net Worth Standard.
(d) Irrespective of the cause thereof, Landlord shall not
be liable for any loss or damage to the Demised Premises
27
<PAGE> 32
resulting from fire, explosion or any other casualty. In the event of Tenant's
failure to obtain or maintain the insurance called for under this Lease,
Landlord shall have the right, together with Landlord's remedies set forth
herein, to obtain the policies of insurance required under this Lease and to
bill Tenant for the premium payments therefor, together with interest at the
Default Rate. Landlord shall have no obligation to maintain insurance of any
nature or type whatsoever on the Land described in Exhibit A, any improvements
thereon owned by Landlord or Tenant or the Demised Premises and neither Tenant
nor Tenant's insurer shall have any rights to direct actions or subrogation
against any policy of insurance obtained by Landlord.
(e) In the event that, at any time during the Lease Term,
the building and/or site improvements included in the Demised Premises shall be
damaged or destroyed (partially or totally) by fire, the elements or any other
casualty (including, without limitation, erosion caused by the encroachment of
any river or stream onto the Land), whether insured or not, Tenant shall
without abatement of Rent, at its expense, promptly and with due diligence
repair, rebuild and restore the same as nearly as practicable to the condition
existing just prior to such damage or destruction consistent with the
maintenance and repair obligations of Tenant in Article 10 of this Lease.
Provided that no Material Default or Event of Default has occurred and is
continuing, at any time that Tenant or Kmart meets the Net Worth Standard or in
the event of a loss below Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00), insurance proceeds from insurance maintained pursuant to the
requirements of this Lease shall be released to Tenant for restoration and
repair; otherwise the Indenture Trustee shall have the right to receive any
insurance settlement fund in escrow subject to disbursement pursuant to the
terms set forth in Article 16 hereof. Tenant shall complete such restoration
prior to the expiration of the current term of this Lease, but if additional
time is required to complete such work and Tenant otherwise does not extend the
term of this Lease as provided in Article 8 hereof, Tenant shall use diligent
and reasonable effort to complete such work as soon as possible following the
termination of this Lease and pay to Landlord daily rent at the rate referred
to in Article 8(c).
(f) Notwithstanding the foregoing paragraph, in the event
of a substantial or total casualty of the land, such building or improvements,
Tenant may give written notice to Landlord and Remainder Purchaser within
thirty (30) days after such damage or destruction of its intention to
terminate this Lease and Tenant shall simultaneously make and deliver to
Landlord and Remainder Purchaser Tenant's Purchase Offer in accordance with
Article 40 hereof. In the event Landlord rejects Tenant's Purchase Offer
pursuant to Article 40, an amount equal to all proceeds of insurance or
self-insurance, as the case may be, shall be paid to Landlord on the Purchase
Offer Termination Date together with the
28
<PAGE> 33
amount of any deductible under any such insurance and together with all other
amounts specified in Article 40(c). In the event Landlord accepts Tenant's
Purchase Offer, all such insurance proceeds shall be paid to Tenant on the
Purchase Offer Termination Date.
15. Eminent Domain.
(a) In the event of (i) a permanent Condemnation (as
defined below) of all of the Demised Premises, (ii) a temporary Condemnation of
all or any portion of the Demised Premises, or a permanent Condemnation of any
substantial portion of the Demised Premises (which, in either case, is
sufficient in Tenant's judgment to render the Demised Premises unsuitable for
the use and occupancy of Tenant), or (iii) a Condemnation of the points of
ingress-egress to public roadways such that they shall be materially impaired
(with no reasonable replacement points of ingress-egress provided so as to
render the Demised Premises unsuitable for its intended use), Tenant shall
deliver to Landlord Tenant's Purchase Offer in accordance with Article 40
hereof within thirty (30) days (or, with respect to a Condemnation of less than
all the Demised Premises, ninety (90) days) after the entry of a final order of
taking. In the event Landlord rejects Tenant's Purchase Offer pursuant to
Article 40 and provided that the parties have satisfied their obligations under
Article 40, the Condemnation proceeds shall be paid to Landlord on the Purchase
Offer Termination Date, together with all other amounts specified in Article
40(c) (except as otherwise provided in paragraph (d) below). In the event
Landlord accepts Tenant's Purchase Offer pursuant to Article 40 and provided
that the parties have satisfied their obligations under Article 40, Landlord
shall assign the Condemnation proceeds to Tenant on the Purchase Offer
Termination Date.
For purposes hereof, a "Condemnation" shall mean a
condemnation, confiscation, seizure, requisition or other taking or sale of the
use or occupancy of, or title to the Demised Premises pursuant to the power of
eminent domain or through a deed in lieu of condemnation.
(b) In the event of a taking of any portion of the
Demised Premises constituting less than a substantial portion, this Lease shall
continue as to that portion of the Demised Premises which shall not have been
taken with no abatement of Basic Rent, in which event Tenant shall promptly and
with due diligence restore the Demised Premises to as nearly as practicable the
condition which existed just prior to such taking, consistent with the
maintenance and repair obligations of Tenant under Article 9 hereof. Provided
that no Material Default or Event of Default has occurred and is continuing, at
any time that Tenant or Kmart meets the Net Worth Standard or in the event of
an award of less than Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) the portion
29
<PAGE> 34
of the Condemnation award not in excess of the cost of such restoration shall
be released to Tenant for restoration; otherwise the Indenture Trustee (or
Landlord if the Indenture has been discharged as to the Demised Premises) shall
take possession of such award to disburse payment to Tenant pursuant to the
terms set forth in Article 16 hereof. Tenant shall complete such restoration
prior to the expiration of the current term of this Lease, but if additional
time is required to complete such work and Tenant otherwise does not extend the
term of this Lease as provided in Article 8 hereof, Tenant shall use diligent
and reasonable effort to complete such work as soon as possible following the
termination of this Lease and pay to Landlord daily rent at the rate specified
in Article 8(c) hereof.
(c) Without limiting the foregoing, in the event a
portion of the Land shall be subject to a permanent Condemnation by public or
quasi-public authority, Tenant shall make reasonable efforts to substitute
equivalent and similarly improved lands contiguous to and properly integrated
with the remainder of the site depicted on Exhibit B. Any substitute land
together with the remaining Demised Premises shall meet the standards set forth
in Article 41 hereof. Tenant shall be entitled to receive the Condemnation
award to the extent required to acquire substitute land subject to the rights
of Landlord's mortgagee as above stated. Any such land acquired by Tenant
shall be part of the Demised Premises subject to this Lease, and an Estate for
Years interest therein (or, after the Base Term, a ground lease interest) shall
vest in Landlord subject to this Lease, and a remainder interest herein (or,
after the Base Term, fee title subject to this Lease and to a ground lease)
shall vest in Remainder Purchaser. Tenant shall take all actions necessary to
vest title to such land in Landlord.
If Tenant shall be unable to substitute such lands and if one
or more Condemnations shall in total deprive Tenant of any substantial portion
of the Demised Premises which is sufficient in Tenant's judgment to render the
remaining portion thereof unsuitable for the use or occupancy of Tenant, then,
in such event, subsection (a) of this Article 15 above shall apply.
(d) Tenant's obligation to restore the Demised Premises
in the event of a partial taking is not conditioned upon the adequacy of the
Condemnation proceeds to complete such restoration. In the event of an
inadequate award, the amount of such award held by the Indenture Trustee shall
be disbursed pro rata until completion of restoration pursuant to the terms set
forth in Article 16 hereof. Tenant shall fund the deficits in the pro rata
progress payments disbursed by the Indenture Trustee in accordance with Article
16 hereof. In the event the Condemnation proceeds exceed the actual cost of
restoration, the Proceeds Trustee shall have the right to retain the excess
proceeds (other than any excess proceeds allocable to the Remainder Purchaser),
as Additional Rent,
30
<PAGE> 35
and apply the same in accordance with the Note Indenture and any such excess
proceeds which are not retained by the Proceeds Trustee shall be paid to
Landlord in accordance with Section 4 of the Tripartite Agreement, or, if
Landlord's Debt is no longer outstanding, such excess proceeds shall be paid to
Landlord in accordance with Section 4 of the Tripartite Agreement. To the
extent applied in respect of Landlord's Debt, Termination Values hereunder
shall be correspondingly reduced by an amount equal to such excess proceeds;
provided that no adjustment shall be required hereunder unless such excess
proceeds exceed One Hundred Thousand and No/100 Dollars ($100,000).
In the event that at the time of any Condemnation of the
buildings on the Demised Premises, Tenant shall not have fully amortized
expenditures which it may have made on account of any improvements, alterations
or changes to such buildings after the date hereof or if Tenant shall have
suffered a loss of business, so long as no Material Default or Event of Default
is continuing, Landlord shall assign to Tenant that portion of any award
payable as a result of such taking as shall be expressly attributed by the
terms of such award (i) to such loss of business or (ii) to the unamortized
portion of Tenant's expenditures; provided that in no event shall the award
otherwise payable to Landlord be diminished in any manner by an amount
allocated to Tenant.
16. Insurance Proceeds, Claims Settlement.
(a) In the event of loss or damage to the Demised
Premises, Tenant shall promptly notify Landlord thereof in writing and shall
prepare and present timely claims (unless Tenant is at the time self-insuring
the risk for which such claim would be presented) to the appropriate insurers
on behalf of Tenant, Landlord and Landlord's mortgagee. Tenant shall adjust
and settle such non-self-insured claim, provided that if Tenant has failed to
settle such claims within three (3) years of the event of loss or damage, then
Landlord and/or its mortgagee shall have the right to adjust and settle such
claims. At any time (i) Tenant or Kmart does not meet the Net Worth Standard
and the claim for damage to the Demised Premises involves net proceeds of more
than Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00), or (ii) a
Material Default or Event of Default has occurred and is continuing, no
settlement shall be made without Landlord's consent, which will not be
unreasonably withheld or delayed, and Landlord and its mortgagee shall be
entitled to participate in the adjustment process.
(b) In the event the net proceeds of any such claim are
not in excess of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00),
and provided further that no Material Default or Event of Default hereunder has
occurred and is continuing, such proceeds shall be payable to Tenant. In the
event the net proceeds are in excess of Two Hundred Fifty Thousand and No/100
Dollars ($250,000.00) and Tenant or Kmart does not meet the Net Worth
31
<PAGE> 36
Standard, or a Material Default or Event of Default hereunder has occurred and
is continuing, such sum shall be paid to Indenture Trustee, or at such time as
Landlord's Debt is no longer outstanding, to such other person mutually
agreeable to Landlord and Tenant (herein called the "Proceeds Trustee") as
trustee for Landlord and Tenant and disbursed in the manner hereinafter
provided. Insurance proceeds shall be deposited in an interest bearing account
and shall be distributed to Tenant upon progress of completion of restoration,
repair, replacement or rebuilding, provided no Material Default or Event of
Default has occurred and is continuing hereunder. Insurance proceeds shall be
disbursed to Tenant by the Proceeds Trustee upon receipt by Landlord and
Proceeds Trustee of the following:
(1) A certificate signed by Tenant, dated not
more than thirty (30) days prior to the application for such
disbursement, setting forth in substance the following:
(i) that the sum then requested to be
disbursed either has been paid by Tenant or is justly due to
contractors, subcontractors, materialmen, engineers,
architects or other persons who have rendered and furnished
certain labor and materials for the work; giving a brief
description of such services and materials and the principal
subdivisions or categories thereof and the amounts so paid or
due to each of said persons in respect thereof, and stating
the progress of the work up to the date of said certificate;
(ii) that the sum then requested to be
disbursed, plus all sums previously disbursed, does not exceed
the cost of the work as actually accomplished up to the date
of such certificate;
(iii) that except for the amounts, if
any, stated in said certificate pursuant to the foregoing
clause (i) of this paragraph to be due for services or
materials, there is no outstanding indebtedness known to the
person signing the certificate, after due inquiry, which is
then due and payable for work, labor, services and materials
in connection with the work, which, if unpaid, might become
the basis of a vendor's, mechanic's, laborer's, materialman's
statutory or similar lien upon Tenant's leasehold estate or
Tenant's or Landlord's interest in the Demised Premises or any
part thereof;
32
<PAGE> 37
(iv) that all materials and all
property described in the certificate are free and clear of
all liens and encumbrances except for Permitted Liens (as
hereinafter defined); and
(v) that the amount remaining in the
possession of the Proceeds Trustee after disbursement of the
sum then requested at least equals the estimated unpaid costs
to complete work (and if insufficient funds remain, Tenant
shall deposit additional funds with the Proceeds Trustee
sufficient to enable Tenant to make the foregoing
certification).
(2) Evidence reasonably satisfactory to the
Proceeds Trustee and Landlord showing that there has not been filed
with respect to Tenant's leasehold estate or Tenant's or Landlord's
interest in the Demised Premises or any part thereof any vendor's,
mechanic's, laborer's or materialmen's statutory or similar lien which
has not been discharged of record other than Permitted Liens, except
such as will be discharged upon payment of the amount then requested
to be disbursed, or affirmative title insurance coverage over such
liens.
(3) Lien waivers from each person entitled to a
mechanics' or materialman's lien against the Premises by reason of
such work, or affirmative title insurance over all such inchoate
liens.
Upon compliance with the foregoing provisions, the Proceeds
Trustee shall, out of the deposited sums, disburse to the persons
named in the certificate the respective amounts stated in said
certificate to be due to them and/or shall disburse to Tenant the
amount stated in said certificate to have been paid by Tenant.
(c) At any time after the completion in full of the work,
provided that no Event of Default hereunder shall have occurred and then be
continuing, the whole balance of the deposited sums not theretofore disbursed
pursuant to the foregoing provisions of this Article 16 shall be disbursed to
or upon the order of Tenant, upon receipt by the Proceeds Trustee of (1) a
certificate signed by Tenant, dated not more than thirty (30) days prior to the
application of such disbursement, setting forth in substance the following to
the best knowledge of Tenant, after due inquiry, (i) that the work has been
completed in full in compliance with this Lease; (ii) that all amounts which
Tenant is or may be entitled to have disbursed under the foregoing provisions
of this Article 16 on account of services rendered or materials furnished in
connection with the work have been disbursed under said provisions, and (iii)
33
<PAGE> 38
that all amounts for whose payment Tenant is or may become liable in respect of
the work have been paid in full except to the extent, if any, of any retainage
and which retainage shall be applied to the final payments of the amounts due,
(2) a copy of the final plans and specifications of the improvements on the
Demised Premises, which plans and specifications shall be delivered to
Landlord, (3) an official search or a certificate of a title company reasonably
satisfactory to the Proceeds Trustee showing that there has not been filed with
respect to Tenant's leasehold estate or Tenant's or Landlord's interest in the
Demised Premises or any part thereof, any vendor's, mechanic's, laborer's or
materialmen's statutory or similar lien or other than Permitted Liens which
have not been discharged of record or for which affirmative insurance has not
been provided, and (4) a final certificate of occupancy or equivalent
governmental approval.
Any insurance proceeds remaining after completion of the
reconstruction as specified shall be paid to Tenant so long as no Material
Default or Event of Default has occurred and is continuing. If the conditions
for the release of money to Tenant are not met after a period of three (3)
years after the date of completion of reconstruction (such three-year period to
be extended by the length of any delay caused by reasons beyond the control of
Tenant), any funds held by the Proceeds Trustee shall be disbursed to the
Indenture Trustee as Additional Rent to be used for the pro rata prepayment of
the Notes pursuant to the Note Indenture, or to Landlord if the Indenture has
been discharged as to the Demised Premises.
17. Use, Assignment and Subletting.
The Demised Premises may be used for any lawful purposes
except that no use may be made (whether by Tenant or any assignee or subtenant
of Tenant or otherwise) which: (i) is a public nuisance, (ii) causes the
Demised Premises to become "tax-exempt use property" within the meaning of
Section 168(h) of the Internal Revenue Code, as amended, or any successor
statute thereto ("Code") or "tax-exempt bond financed property" within the
meaning of Section 168 (g)(5) of the Code, (iii) would void any certificate of
occupancy required for the Demised Premises, (iv) makes it commercially
unreasonable to obtain, or results in the cancellation of policies of, the
insurance required by this Lease, or (v) increases the risk of environmental
liability to Landlord; provided, however, (but without limiting Tenant's
obligations under Articles 12 and 38) that any retail or office use shall not
be deemed to increase the risk of environmental liability for purposes of this
provision.
Tenant may assign this Lease or sublet the whole or any part
of the Demised Premises provided (i) no Material Default or Event of Default
hereunder has occurred and is continuing, (ii) that such assignment or sublease
shall be expressly subject and
34
<PAGE> 39
subordinate to this Lease in a manner reasonably satisfactory to Landlord, and
(iii) that Kmart shall remain fully and primarily liable for the performance of
Tenant's obligations hereunder and in respect of any of its obligations under
any of the other Operative Documents. Tenant's liability hereunder shall
continue notwithstanding the rejection of this Lease or any sublease of this
Lease pursuant to Section 365 of Title 11 of the United States Code or any
similar law relating to bankruptcy, insolvency, reorganization or the rights of
creditors, which arises subsequent to such assignment. In the event Tenant
assigns this Lease and it shall thereafter be rejected in a bankruptcy or
similar proceeding affecting such assignee, a new lease identical to this Lease
shall be deemed reinstituted as between Landlord and the Kmart without further
act of either party. Nothing herein shall be construed to permit Tenant to
mortgage, pledge, hypothecate or encumber in any manner or nature whatsoever
Tenant's interest under this Lease in whole or in part. Tenant shall provide
notice to Landlord of such assignment or sublease within fifteen (15) days
prior to the effective date thereof.
Prior to the date of this Lease, Tenant, as the owner or lessee of the
Demised Premises may have entered into leases and/or vendor licenses with other
retail and service operators for space within the building, which leases and
licenses may be terminated by Tenant as set forth therein. Landlord and Tenant
agree that (a) such leases have been assigned to Landlord and shall be deemed
subleases of this Lease, but Tenant shall perform all of the obligations of the
landlord under such leases and provided that no Event of Default hereunder has
occurred and is continuing, Tenant shall be entitled to retain all benefits,
entitlements, rent and other sums paid by the tenants under said leases, and
(b) the licenses are the exclusive right and obligation of Tenant and Tenant
shall be entitled to retain all benefits, entitlements, rent and other sums
paid by the licensees thereunder. Tenant shall not amend any existing lease
or license in any manner which would limit Tenant's rights to terminate the
interests granted thereby.
18. Signs.
(a) The Demised Premises shall be referred to only by
such designation as Tenant may indicate. Landlord expressly recognizes that
the service mark and trademark "Kmart" is the valid and exclusive property of
Tenant, and Landlord agrees that it shall not either during the term of this
Lease or thereafter directly or indirectly contest the validity of said mark
"Kmart," or any of Tenant's registrations pertaining thereto in the United
States or elsewhere, nor adopt or use said mark or any term, word, mark or
designation which is in any aspect similar to the mark of Tenant. Landlord
further agrees that it will not at any time do or cause to be done any act or
thing directly or indirectly, contesting or in any way impairing or tending to
impair any part of Tenant's right, title and interest in the aforesaid mark,
and Landlord shall not in
35
<PAGE> 40
any manner represent that it has an ownership interest in the aforesaid mark or
registrations therefor, and specifically acknowledges that any use thereof
pursuant to this Lease shall not create in Landlord any right, title or
interest in the aforesaid mark.
(b) Tenant shall have the option to erect, subject to
applicable Laws and matters of title to which this Lease is subordinate, and at
its sole cost and expense, upon any portion of the Demised Premises signs of
such height and other dimensions, bearing such legend or inscription as Tenant
shall determine. Tenant shall have the option to utilize the lighting
standards in the parking lot for advertising purposes by attaching, or causing
to be attached, signs advertising any and all products and services as Tenant
shall elect provided same are in compliance with all applicable Laws. Provided
no Event of Default hereunder has occurred and is continuing, Tenant shall be
entitled to remove any signs, billboards or posters to which it has not
consented in writing and to prohibit the same to be displayed on any portion of
the Demised Premises.
19. Liens.
Tenant covenants and agrees that it shall not, during the
Lease Term, directly or indirectly create, incur, assume, suffer or permit any
lien on or with respect to the Demised Premises or any part thereof, any Rent,
title thereto or interest therein except for Permitted Liens (as herein
defined). Tenant shall promptly, but no later than thirty (30) days after the
attachment thereof, at its own expense, discharge or eliminate or bond in a
manner satisfactory to Landlord any such lien. In the event such lien is not
so discharged, eliminated or bonded, Landlord may, but shall not be obligated
to, pay and discharge the same and relieve the Demised Premises therefrom, and
Tenant agrees to repay and reimburse Landlord upon demand for the amount so
paid by Landlord together with interest thereon at the Default Rate.
"Permitted Liens" shall mean (a) the respective rights and
interests of Tenant, Landlord, Owner Participant, Remainder Purchaser,
Indenture Trustee, and Pass Through Trustee as provided in the Operative
Documents; (b) Lessor Liens and Remainder Purchaser Liens; (c) liens for taxes
and assessments that either are not yet due and payable or are being contested
in good faith and by appropriate proceedings diligently conducted, so long as
such proceedings do not (i) subject the Demised Premises or interest therein to
imminent risk of foreclosure, forfeiture or loss or result in the sale of the
Demised Premises or interest therein, (ii) interfere other than to an
insignificant extent with the use, possession or disposition of the Demised
Premises or any interest therein, (iii) interfere with the payment of Rent or
(iv) involve any risk of loss of the priority of the lien of the Note
Indenture; (d) materialmen's, mechanics', workers', repairmen's,
36
<PAGE> 41
employees' or other like liens arising prior to or after the date hereof in the
ordinary course of business for amounts either not yet due or being contested
in good faith and by appropriate proceedings so long as such proceedings shall
not involve any risk of the sale, forfeiture or loss of any part of the Demised
Premises, the Trust Estate, title thereto or any interest therein and shall not
materially interfere with the use, occupancy or disposition of the Demised
Premises or the Trust Estate or interfere with the payment of Rent or involve
any risk of loss of the priority of the lien of the Note Indenture; (e) liens
arising after the date hereof out of judgments or awards with respect to which
at the time an appeal or proceeding for review is being prosecuted diligently
and in good faith and which either have been bonded to the satisfaction of
Landlord and Indenture Trustee or the enforcement of which has been
continuously stayed pending such appeal or review; (f) easements,
rights-of-way, reservations, servitudes and rights of others against the Land
which (i) are defined as Permitted Exceptions in the Purchase Agreement or (ii)
are granted pursuant to the specific provisions of the Lease; and (g)
assignments, leases and subleases expressly permitted by the Operative
Documents.
Tenant represents and warrants that the Permitted Liens
affecting title to the Demised Premises at the time of the execution of the
Indenture do not adversely affect the use, leasing and operation of the Demised
Premises as contemplated on the date of the Indenture and do not affect
Tenant's ability to pay Basic Rent, Special Additional Rent or Additional Rent
when due hereunder.
For purposes of this Lease, "Lessor Liens" shall mean liens on
or against the Property, the Lease, the Trust Estate (as defined in the
Purchase Agreement) or any payment of Rent (a) which result from any act of, or
any claim against, Landlord (in its individual capacity or in its trust
capacity) or Owner Participant unrelated to the transactions contemplated by
the Purchase Agreement, or (b) which result from any violation by Landlord (in
its individual capacity or in its trust capacity) or Owner Participant of any
of the terms of the Operative Documents, or (c) which result from liens in
favor of any taxing authority by reason of any Tax owed by Landlord (in its
individual capacity or in its trust capacity) or Owner Participant, the payment
of which is not the obligation of Tenant or Kmart under the Operative
Documents.
For purposes of this Lease, "Remainder Purchaser Liens" shall
mean Liens on or against the Property, the Lease or any payment of Rent (a)
which result from any act of, or any claim against, Remainder Purchaser
unrelated to the transactions contemplated by the Purchase Agreement or which
result from any violation by Remainder Purchaser of any of the terms of the
Operative Documents or (b) which result from Liens in favor of any taxing
authority by reason of any Tax owed by Remainder Purchaser,
37
<PAGE> 42
the payment of which is not the obligation of Tenant or Kmart under the
Operative Documents.
20. Tenant Defaults.
The following shall constitute an Event of Default by Tenant
under this Lease (whatever the reason for such event and whether it shall be
voluntary or involuntary, or come about or be effected by operation of law, or
be pursuant to or in compliance with any applicable Law or Governmental
Action), and any such event shall continue to be an Event of Default if and for
so long as it shall not have been remedied, cured or waived (each, herein
referred to as an "Event of Default"): (i) failure to pay any installment of
Basic Rent within five (5) days after notice to Tenant and Kmart the same is
due; (ii) failure to make any payment constituting Additional Rent within
fifteen (15) days after notice of non-payment to Tenant and Kmart; (iii)
failure to maintain any insurance required to be maintained hereunder, (iv)
Tenant's failure to perform any of its other covenants or obligations under
this Lease or Kmart's failure to perform any of its covenants or obligations
under any of the other Operative Documents (other than the Tax Indemnification
Agreement) within thirty (30) days after notice thereof to Tenant and Kmart
provided that any non-monetary default that is curable but is not susceptible
to a cure within thirty (30) days shall not be deemed a default if a cure is
commenced within thirty (30) days after such notice and is diligently pursued
thereafter; provided further that in no event shall such cure period for a
non-monetary default exceed one hundred and eighty (180) days or the expiration
of the Lease Term, whichever shall first occur; (v) Kmart shall commence a
voluntary case or proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter
in effect, or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of Kmart, or Kmart shall consent to any
such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall make
a general assignment for the benefit of creditors; or an involuntary case or
other proceeding shall be commenced against Kmart seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official and such involuntary case or other proceeding shall remain
undismissed or unstayed for a period of ninety (90) consecutive days; and (vi)
any representation or warranty by Tenant or Kmart in this Lease or any of the
other Operative Documents (other than the Tax Indemnification Agreement) to or
in any document or certificate expressly required to be delivered pursuant
hereto or thereto which shall have been false or incorrect when made in any
respect material to Landlord, Owner Participant or any of their respective
assignees, and such falseness or incorrectness is material to
38
<PAGE> 43
Landlord, Owner Participant or any of their respective assignees, and continues
to be material and which shall not have been cured within thirty (30) days
after receipt of written notice by Tenant and Kmart from Landlord, unless the
default is curable and Tenant or Kmart shall be diligently proceeding to
correct such failure; provided that in no event shall such cure period extend
beyond sixty (60) days from the date of such notice or the expiration of the
Lease Term, whichever shall first occur.
For purposes of this Lease, a "Material Default" shall mean an
event of the type specified under clauses (i) or (v) in the foregoing paragraph
which with the passage of time or the giving of notice, or both, would become
an Event of Default.
Notwithstanding anything stated herein to the contrary, to the
extent any failure by Tenant or Kmart to perform any covenant or obligation or
breach of a representation or warranty relates not to the Demised Premises but
solely to a property or properties other than the Demised Premises, it shall
not give rise to an Event of Default hereunder.
21. Landlord Remedies.
If an Event of Default has occurred and is continuing beyond
any applicable cure periods, Landlord at its option may, by notice to Tenant,
declare this Lease to be in default, and at any time thereafter following the
expiration of the applicable cure period (unless all Events of Default shall
have been remedied, cured or waived), or if there shall exist an Event of
Default described in Section 20(v) hereof, Landlord may, to the extent
permitted by applicable law, exercise one or more of the following remedies,
except as hereinbelow expressly otherwise set forth, as Landlord in its sole
discretion may elect:
(a) Re-enter the Demised Premises without terminating the
Lease and remove Tenant from possession of the Demised Premises and all of
Tenant's property therefrom at Tenant's expense, and Tenant shall remain liable
for the equivalent of the amount of Rent reserved for the balance of the Lease
Term less the avails of reletting by Landlord, if any, after deducting
therefrom the reasonable cost of arrears, alterations necessary to prepare for
reletting and for leasing commissions payable in procuring the substitute
lease.
(b) Landlord may sell the Demised Premises or any part
thereof, together with any interest of Landlord under the Deed (subject to the
rights of the Remainderman), at public or private sale, conducted in accordance
with applicable Law, as Landlord may determine, free and clear of any rights
of Tenant therein and without any duty to account to Tenant with respect to
such sale or for the proceeds thereof (except to the extent required by clause
(d) below if Landlord shall elect to exercise its rights
39
<PAGE> 44
thereunder), in which event Tenant's obligation to pay Basic Rent with respect
to the Demised Premises or the part thereof that has been sold, as the case may
be, for periods commencing after the date of such sale shall terminate (except
to the extent that Basic Rent is to be included in computations under clause
(d) below if Landlord shall elect to exercise its rights thereunder).
(c) Landlord may terminate Tenant's right to possession
of the Demised Premises by any lawful means, in which case this Lease and the
Lease Term shall terminate and Tenant shall immediately surrender possession of
the Demised Premises to Landlord. In addition, and regardless of whether
Landlord shall elect to terminate Tenant's right to possession, Landlord shall
be entitled to recover from Tenant: the sum of (A)(I) if the Final Payment Date
(as defined below) is a Rent Payment Date, all accrued and unpaid Basic Rent
payable in arrears and due and unpaid as of the Final Payment Date or (II) if
the Final Payment Date is not a Rent Payment Date, the arrears Basic Rent
accrued as of such Final Payment Date (it being understood, in the case of
clauses (I) and (II) above, that Tenant shall pay when due any Basic Rent in
arrears due on a Rent Payment Date which occurs on or after the Event of
Default but prior to the Final Payment Date), plus (B) all Additional Rent due
and payable, plus (C) all other amounts due on Landlord's Debt as of the Final
Payment Date which shall not be covered by payments made pursuant to clauses
(A) or (B) above, plus the amount pursuant to Article 21(d) hereof.
(d) Unless Landlord shall have sold the Demised Premises
pursuant to clause (b) above, Landlord may, whether or not Landlord shall have
exercised or shall thereafter at any time exercise its rights under clause (a),
(c) or (e) of this Article 21(d), by written notice to Tenant specifying a date
("Final Payment Date") not earlier than ten (10) days after the date of such
notice, demand that Tenant pay to Landlord, and Tenant shall pay to Landlord,
on the Final Payment Date, (A) as liquidated damages for loss of a bargain and
not as a penalty (the parties agreeing that Landlord's actual damages would be
difficult to predict and the liquidated damages amounts below represent a
reasonable approximation of such amount) (in lieu of Rent due after the Final
Payment Date) and (B) in the case of a payment pursuant to Article 21(d)(iv),
as consideration for the obligation to transfer the Demised Premises to Tenant
and to surrender the Estate for Years interest, any unpaid Rent due as of the
Final Payment Date, plus whichever one of the following amounts Landlord, in
its sole discretion, shall specify in such notice (together with interest on
such amount at the Default Rate from the Final Payment Date specified in such
notice to the date of actual payment):
(i) an amount equal to the excess, if
any, of the Termination Value for the Demised Premises
computed as of the Final Payment Date, over the fair market
sales value
40
<PAGE> 45
of the Demised Premises as of the Final Payment Date (such
fair market sales value to be determined by mutual agreement
of Landlord and Tenant or, if they cannot agree within ten
(10) days after such notice, by an appraisal); or
(ii) an amount equal to the excess, if
any, of the Termination Value for the Demised Premises
computed as of the Final Payment Date over the present value
of the fair market rental value for the Demised Premises for
the balance of the Lease Term discounted semiannually at a
_____ percent (__%) annual interest rate (such fair market
rental value to be determined by mutual agreement of Landlord
and Tenant or, if they cannot agree within ten (10) days of
such notice, by an appraisal); or
(iii) an amount equal to the excess of
(A) the present value as of the Final Payment Date of all
installments of Basic Rent through the end of the Base Term or
the then applicable renewal term, discounted semiannually at a
_____ percent (__%) annual interest rate over (B) the present
value as of such Final Payment Date of the fair market rental
value of the Demised Premises (such fair market rental value
to be determined by mutual agreement of Landlord and Tenant
or, if they cannot agree within ten (10) days of such notice,
by an appraisal) through the end of the Base Term or the then
applicable renewal term, discounted semiannually at a ______
percent (__%) annual interest rate; or
(iv) an amount equal to the greater of
(A) Termination Value determined as of the Final Payment Date,
(B) the discounted Basic Rent computed as of the Final Payment
Date as set forth in clause (iii) of this Article and (C) the
fair market sales value computed as of the Final Payment Date
as set forth in clause (d)(i) of this Article.
Upon payment of the amounts set forth in Article 21(c) hereof and Article
21(d)(iv), and any other amounts payable by Tenant under the Operative
Documents, Landlord shall convey to Tenant all of Landlord's right, title and
interest in and to the Demised Premises, without recourse or warranty, subject
to all matters of record other than Lessor Liens.
41
<PAGE> 46
(e) If Landlord shall have sold the Demised Premises or
any part thereof pursuant to clause (b) of this Article 21, Landlord, if it
shall so elect by notice to Tenant, may demand that Tenant pay to Landlord,
and Tenant shall pay to Landlord, on the date of such sale, as liquidated
damages for loss of bargain and not as a penalty (in lieu of Basic Rent due for
periods commencing after the next Rent Payment Date following the date of such
sale), any unpaid Rent due as of the next Rent Payment Date following the date
of such sale, plus the amount of any deficiency between the Sale Proceeds (as
defined below) and Termination Value, computed as of such Rent Payment Date,
together with interest at the Default Rate, on the amount of such Rent and such
deficiency from the date of such sale until the date of actual payment. "Sale
Proceeds" shall mean, with respect to any sale of any Demised Premises or any
part thereof by Landlord, the gross proceeds of such sale paid in cash, less
all reasonable costs and expenses incurred by Landlord, the Indenture Trustee,
the Remainder Purchaser and/or the Owner Participant in connection therewith.
(f) In the event that Landlord rescinds or terminates
this Lease, (i) no reletting, reentry or taking of possession of the Demised
Premises by Landlord will be construed as an election on Landlord's part to
terminate this Lease unless a written notice of such intention is given to
Tenant, (ii) notwithstanding any reletting, reentry, or taking of possession,
Landlord may at any time thereafter elect to terminate this Lease for a
continuing Event of Default and (iii) no act or thing done by Landlord or any
of its agents, representatives or employees shall be deemed an acceptance of a
surrender of the Demised Premises, and no agreement accepting a surrender of
the Demised Premises shall be valid unless the same be made in writing and be
executed by Landlord.
(g) Landlord may, as a matter of right and without notice
to Tenant or anyone claiming under Tenant, apply to any court having
jurisdiction to appoint a receiver or receivers of the Demised Premises, and
Tenant hereby irrevocably consents to such appointment and waives notice of any
application therefor. Any such receiver or receivers shall have all the usual
powers and duties of receivers in like or similar cases, including, without
limitation, the right to collect rents, and the rights to perform any acts
which it deems necessary or desirable to preserve the value, marketability or
rentability of the Demised Premises, or part thereof or interest therein.
(h) Landlord may (A) demand that Tenant, at Tenant's
expense, return possession of the Demised Premises promptly to Landlord in the
manner and condition required by, and otherwise in accordance with provisions
of, Article 27, and (B) without prejudice to any other remedy Landlord may have
for possession (to the exclusion of Tenant) of the Demised Premises and expel
or remove Tenant and any other Person who may be occupying the Demised Premises
or any part thereof, all without liability to Landlord,
42
<PAGE> 47
except for Landlord's gross negligence or willful misconduct, for or by reason
of such entry or taking of possession, whether for the restoration of damage to
property caused by such taking or otherwise.
22. Intentionally deleted.
23. Covenant of Quiet Enjoyment.
Landlord covenants that it and any person rightfully claiming
by, through or under Landlord, shall not interfere with Tenant's quiet
enjoyment and use of the Demised Premises and all rights, easements,
appurtenances and privileges belonging or in any way appertaining thereto
during the Lease Term, provided that no Event of Default shall have occurred
and be continuing.
24. Landlord Exculpation.
Anything to the contrary in this Lease notwithstanding, the
covenants contained in this Lease to be performed by Landlord shall not be
binding personally, but instead said covenants are made for the purpose of
binding only all of Landlord's right, title and interest in and to the Demised
Premises and the Option Agreement (as defined in the Purchase Agreement) with
respect to the Land and Landlord shall have no liability under this Lease in
excess of, and Tenant shall have no recourse against Landlord except with
respect to, Landlord's interest in the Demised Premises and the Option
Agreement.
25. Remedies Cumulative.
To the extent permitted by, and subject to the mandatory
requirements of, applicable Laws, each and every right, power and remedy herein
specifically given to Landlord or otherwise in this Lease shall be cumulative
and shall be in addition to every other right, power and remedy herein
specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time and as often and
in such order as may be deemed expedient by Landlord. No delay or omission by
Landlord in the exercise of any right, power or remedy or in the pursuit of any
remedy shall impair any such right, power or remedy or be construed to be a
waiver of any default on the part of Tenant or to be an acquiescence therein.
Landlord's consent to any request made by Tenant shall not be deemed to
constitute or preclude the necessity for obtaining Landlord's consent, in the
future, to all similar requests. No waiver by Landlord of any default shall in
any way be, or be construed to be, a waiver of any future or subsequent
default.
26. Estoppel Letters.
43
<PAGE> 48
Tenant will execute, acknowledge and deliver to Landlord,
within fifteen (15) days of a good faith request by Landlord and Landlord will
execute, acknowledge and deliver to Tenant, within fifteen (15) days of a good
faith request by Tenant a certificate in the form attached hereto as Exhibit E
and incorporated by reference herein executed by an authorized officer of
Tenant or Landlord, certifying (a) that this Lease is unmodified and in full
force and effect (or, if there have been modifications, that this Lease is in
full force and effect, as modified, and stating the modifications); (b) that
Tenant has accepted possession of the Demised Premises and the date on which
the Lease Term commenced and will expire; (c) as to the amount of any prepaid
Rent or any credit due to Tenant hereunder; and (d) as to whether, to the best
of such party's knowledge, information and belief, the requesting party is then
in default in performing any of its obligations hereunder (and, if so,
specifying the nature of each such default); and (e) as to any other fact or
condition reasonably requested by the requesting party.
27. Condition of Premises at Termination.
(a) Unless the Demised Premises have been purchased by
Tenant pursuant to Articles 14, 15, 21, or 39, at the expiration or earlier
termination of the Lease Term Tenant shall surrender the Demised Premises to
Landlord or its designee, together with all alterations, additions and
improvements then existing thereon, in good order and condition except for
ordinary wear and tear consistent with the provisions of Articles 9 and 19
hereof and free and clear of all liens or encumbrances of any type whatsoever,
except for Permitted Liens of the type specified in clauses (a), (b), (e) of
the definition thereof (but only if such liens do not impair or restrict the
use or sale of the Demised Premises and are satisfactory to Landlord, in its
reasonable discretion) and (f) of the definition of "Permitted Liens" in
Article 19 hereof, and such other liens or encumbrances for which Tenant has
provided assurance of full payment or complete discharge and adequate assurance
that such lien will not impair the fair market value of the Demised Premises to
Landlord or its designee to Landlord's and such designee's satisfaction. All
furniture and trade fixtures installed in said buildings at the expense of
Tenant or other occupant shall remain the property of Tenant or such other
occupant and shall be removed by Tenant at its expense prior to the expiration
or earlier termination of the Lease; provided, however, Tenant shall, at any
time and from time to time during the Lease Term, have the option to relinquish
its property rights with respect to such trade fixtures, which option shall be
exercised by notice of such relinquishment to Landlord, and from and after the
exercise of said option the property specified in said notice shall be the
property of Landlord.
(b) With respect to environmental matters, not more than
one hundred eighty (180) days nor less than sixty (60) days prior
44
<PAGE> 49
to the expiration or upon the earlier termination of the Lease Term (except
where Tenant is purchasing the Demised Premises hereunder) Tenant shall, at its
sole cost and expense, provide to Landlord and Remainder Purchaser an
environmental site assessment report performed by a reputable environmental
consultant selected by Tenant and satisfactory to Landlord and Remainder
Purchaser, in their reasonable discretion, which reveals no evidence that
Hazardous Materials (as defined in Article 38) have been generated, produced,
manufactured, processed, distributed, maintained, used, handled, treated,
managed, stored, contained, recycled, transported, released, emitted,
discharged, deposited or disposed of on, in, to or from the Demised Premises
other than in compliance with applicable Environmental Laws. If such is not
the case, the report shall set forth recommendations for such additional
investigation or remedial or other response action relating to the Demised
Premises as may be deemed necessary or advisable by the consultant. If any
reporting requirements must be complied with under applicable Environmental
Laws with respect to the Demised Premises, then it shall be the sole
responsibility and cost of Tenant to comply with these requirements. In the
event the report recommends any investigation or remedial or other response
action, it shall be Tenant's obligation, at Tenant's sole cost and expense, to
timely develop and implement in compliance with all relevant Environmental Laws
such remedial action plan. If it is required by applicable Environmental Laws,
such remedial action plan shall be submitted by Tenant to the appropriate
governmental agency for review and approval. Any investigation,
recommendations for remedial or other response, or remedial action plan shall
include, but shall not be limited to, plans for full response, remediation,
cleanup, removal, containment, restoration or other corrective action, and the
protection, or mitigative action associated, as appropriate, with the
protection of natural resources including wildlife, aquatic species, and
vegetation associated with the Demised Premises, as required by applicable
Environmental Laws.
28. Notices.
Notices required under this Lease shall be in writing and
shall be deemed to be properly served on receipt thereof if sent by certified
or registered mail to Remainder Purchaser at the notice address set forth in
the Purchase Agreement and to Landlord at the following address (include fax
and telephone number):
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Telephone No. (302) 651-8681
Telecopy No. (302) 651-8882
Attn: Corporate Trust Administration
45
<PAGE> 50
or to Tenant at the following address (include fax and telephone number):
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Attn: Vice President - Real Estate
Telephone No. (810) 637-8950
Telecopy No. (810) 643-2689
with a copy to:
Erik J. Stone, Esq.
Dickinson, Wright, Moon, Van Dusen & Freeman
525 North Woodward Avenue
Bloomfield Hills, Michigan 48304
Telephone No. (810) 433-7236
Telecopy No. (810) 433-7274
or to any subsequent address which Tenant or Landlord shall designate for such
purpose in writing in accordance with this Article. Notices sent by overnight
delivery or by hand delivery shall be deemed received upon delivery. Notices
sent by facsimile machine shall be deemed received one (1) day after facsimile
transmission provided that telephonic confirmation is received of the
transmission.
29. Notice of Environmental Matters.
Tenant shall provide Landlord and Remainder Purchaser with
prompt written notice of any pending Environmental Claim in connection with the
Demised Premises. Tenant also shall provide Landlord and Remainder Purchaser
with prompt written notice of any threatened Environmental Claim in connection
with the Demised Premises made by a reputable environmental group. All such
notices shall describe in detail the nature of the Environmental Claim and
Tenant's response thereto. In addition, Tenant shall promptly provide to
Landlord and Remainder Purchaser copies of all written communications with any
governmental authority relating to any Environmental Law in connection with the
Demised Premises. Tenant shall promptly provide such reasonably detailed
reports of any such Environmental Claims as may be reasonably requested by
Landlord or Remainder Purchaser.
Tenant shall provide Landlord with prompt written notification
of any known (i) violation or non-compliance with any applicable Environmental
Law with respect to the Demised Premises, and (ii) release of Hazardous
Materials on, in, at or from the Demised Premises which is required to be
reported to any governmental agency pursuant to applicable Environmental Laws.
Tenant shall also promptly provide Landlord and Remainder Purchaser with copies
of all correspondence, reports and other documentation
46
<PAGE> 51
relating to such violation or release and Tenant's remedial or response action.
30. Entry by Landlord.
From time to time during the term of this Lease, Landlord and
Remainder Purchaser shall have the right during normal business hours after
twenty-four (24) hours' notice to Tenant or without notice in the event of
emergency or if an Event of Default shall have occurred and is continuing to
enter the Demised Premises for the purpose of: (i) inspecting the condition of
the Demised Premises, (ii) showing the Demised Premises to prospective
purchasers or mortgagees, (iii) inspecting for compliance with such matters as
Tenant is obligated for (including compliance with Environmental Laws), (iv)
advertising the Demised Premises for rent or sale during the final year of the
Base Term or any renewal term or in accordance with Article 21. Landlord
acknowledges and agrees that Landlord will not interfere with the conduct of
Tenant's business to the extent reasonably practicable in re-entering the
Demised Premises for the purposes set forth herein, provided, if an Event of
Default has occurred and is continuing, Landlord shall be entitled to exercise
the remedies upon default herein provided for.
31. Captions and Definitions.
Captions of Articles of this Lease are solely for convenience
of reference and shall not in any way limit or amplify the terms and provisions
thereof. The necessary grammatical changes which shall be required to make the
provision of this Lease apply (a) in the plural sense if there shall be more
than one Landlord, and (b) to any landlord which shall be either a corporation,
an association, a partnership, or an individual, male or female, shall in all
instances be assumed as though in each case fully expressed.
32. Successors and Assigns.
The conditions, covenants and agreements contained in this
Lease shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, executors, administrators, successors and assigns. All
covenants and agreements of this Lease shall run with the Land.
33. Severability.
If any one or more of the provisions contained herein shall
for any reason be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality, unenforceability shall not affect any other
provision of this Lease, but this Lease shall be construed as if such invalid,
illegal or unenforceable provision had not been contained herein.
47
<PAGE> 52
34. Independent Covenants.
The covenants of Landlord and Tenant herein are independent
and several covenants and the performance of any covenant is not conditioned
upon the performance or compliance with any other covenant of this Lease.
35. Choice of Law.
This Lease shall be construed and enforced in accordance with
the laws of the state where the Demised Premises are located without regard to
provisions governing conflict of laws. The language in all parts of this Lease
shall in all cases be construed as a whole according to its fair meaning and
not strictly for or against either Landlord or Tenant.
36. Waiver and Modifications.
The failure of either party to insist in any one or more
instances upon the strict performance of any one or more of the agreements,
terms, covenants, conditions or obligations of this Lease, or to exercise any
rights, remedy or election herein contained, shall not be construed as a waiver
or relinquishment for the future of the performance of such agreements, terms,
covenants, conditions or obligations of this Lease or of the right to exercise
such right, remedy or election, but the same shall continue and remain in full
force and effect with respect to any subsequent breach, act or omission. This
Lease may be changed or amended only by a writing signed by the party against
whom enforcement thereof is sought.
37. Memorandum of Lease.
The parties hereto have simultaneously with the execution and
delivery of this Lease executed and delivered a memorandum of Lease in form and
content mutually agreeable to Landlord and Tenant which Tenant shall at its
sole expense cause to be recorded.
38. Hazardous Materials.
For purposes of this Lease, Hazardous Materials are defined as
(i) "hazardous substances," as defined by CERCLA, as amended from time to time
and any regulations promulgated thereunder; (ii) "hazardous wastes," as defined
by RCRA, as amended from time to time and any regulations promulgated
thereunder; (iii) any pollutant or contaminant or hazardous, restricted,
dangerous or toxic chemicals, materials, wastes or substances within the
meaning of any Environmental Law; (iv) any chemical, material, substance, or
waste, the presence, use, generation, treatment, release, emission, discharge,
transport, storage, or disposal of which is now or hereafter prohibited,
limited or regulated by any Environmental Law; (v) any substance, material,
product, chemical,
48
<PAGE> 53
derivative, compound, mixture, mineral, waste, gas, medical waste, contaminant
or pollutant which would require investigation, response or remediation as a
result of any public or private action brought pursuant to any Environmental
Law; and (vi) any radioactive material, asbestos in any form or condition,
petroleum or petroleum products, flammable explosives, urea formaldehyde foam
insulation, polychlorinated biphenyls, and radon gas.
Tenant agrees that it shall not cause or permit any Hazardous
Material to exist on or be brought upon, generated, produced, manufactured,
processed, distributed, maintained, handled, treated, managed, contained,
recycled, transported, deposited, used, stored, released, disposed of, emitted
or discharged from, at, on or to the Demised Premises during the term of this
Lease except in compliance with applicable Environmental Laws.
Tenant shall assume any and all costs and expenses incurred in
connection with, and shall promptly and diligently undertake, any investigation
of site conditions or any clean up, response, remedial, removal, containment,
corrective action or restoration work required pursuant to any applicable
Environmental Law or by any federal, state or local government or political
subdivision thereto arising before or during the Lease Term because of
Hazardous Material present in, on, under or at the soil, surface water, ground
water, sediment, air or any other media associated with the Demised Premises.
Without limiting the foregoing, if the presence of any Hazardous Material at
the Demised Premises results in contamination of the Demised Premises, Tenant
shall promptly take all actions at its sole expense as are necessary to return
the Demised Premises to the condition existing prior to the introduction of
any such Hazardous Material to the Demised Premises, provided, however, that in
the event the Demised Premises are contaminated by a release from a source not
upon the Demised Premises, Tenant shall not be obligated promptly to undertake
any remedial action, unless otherwise required to do so pursuant to applicable
Environmental Laws or by any governmental agency with jurisdiction. Without
limiting Tenant's obligations hereunder, Tenant may seek environmental response
costs from any third party not a party to this Lease or the Purchase Agreement
(and not related to any party to this Lease or the Purchase Agreement), and
Landlord shall cooperate, at Tenant's expense, to a reasonable extent in any
such effort.
39. Economic Abandonment.
(a) Notwithstanding anything contained in this Lease to
the contrary, Landlord and Tenant acknowledge that it is possible that, during
the Base Term of this Lease, due to changes in the conduct of Tenant's business
or other factors, the Demised Premises may become obsolete or may no longer be
economic for Tenant's use or surplus to the Tenant's needs. Therefore, on any
Rent Payment
49
<PAGE> 54
Date on and after the 5th anniversary of the commencement of the Lease Term and
before the expiration of the Base Term upon determination by Tenant in good
faith that the Demised Premises are obsolete or are no longer economic because
of reasons as stated hereinabove or surplus to the Tenant needs, provided no
Material Default or Event of Default has occurred and is continuing, Tenant
may, by providing at least twelve (12) months and not more than eighteen (18)
months notice to Landlord and Remainder Purchaser ("Notice of Termination"),
terminate this Lease on the Rent Payment Date specified in such notice
("Termination Date"). Such notice (which for purposes of the Note Indenture
will be a "Redemption Notice") may be revoked by Tenant on not more than one
occasion during the Lease Term provided such revocation shall have been made
not less than ninety (90) days prior to the Termination Date and provided
further that Landlord shall not have accepted Tenant's request to terminate the
Lease and to return the Demised Premises to Landlord by delivering written
notice of acceptance to Tenant within one hundred (100) days after its receipt
of Notice of Termination ("Landlord's Acceptance"). No purported Landlord's
Acceptance shall be valid unless accompanied by the Indenture Trustee's written
confirmation of receipt of deposited funds pursuant to Section 6.06 of the
Indenture. Tenant's Notice of Termination shall be accompanied by a
certificate, signed and sworn to by a duly authorized and acting Senior
Financial Officer of Tenant, stating that Tenant has made the determination
that the Demised Premises are obsolete or are no longer economic for Tenant's
use or surplus to the Tenant's needs and reciting the reasons for such
determination.
(b) If Landlord's Acceptance has not been made, Tenant,
as non-exclusive agent for Landlord, shall use its reasonable efforts at its
own expense on behalf of Landlord to obtain cash bids for the purchase of all
of Landlord's right, title and interest in the Demised Premises from persons
other than Tenant or any of its affiliates. Landlord shall also have the right
to obtain cash bids for the purchase thereof, either directly or through
Landlord's agents. Tenant shall certify to Landlord in writing the amount and
terms of each bid received by Tenant and the name and address of the person
submitting a bid.
(c) If Landlord's Acceptance has not been made, on the
Termination Date Landlord shall (subject to Tenant's receipt in immediately
available funds of the net sales price on such date for the benefit of Landlord
and Tenant's payment of all additional payments specified in clauses (A), (B),
(C), (D) and (E) below), without recourse or warranty, sell all of its right,
title and interest in the Demised Premises to the bidder which shall have
submitted the highest all cash bid prior to such date. On the Termination
Date, the total sales price realized at such sale net of all expenses incurred
by Landlord shall be paid to Tenant and Tenant shall pay to Landlord (or, in
the case of Additional Rent, to Landlord or the person entitled thereto) the
sum of (A) the
50
<PAGE> 55
Termination Value of the Demised Premises determined as of the Termination
Date, plus (B) the excess, if any, of the net sales price of the Demised
Premises over such Termination Value, plus (C) all Basic Rent due and unpaid to
and including the Termination Date (other than any portion of Basic Rent
payable in advance on the Termination Date), plus (D) all Additional Rent owing
by Tenant to and including the Termination Date, plus (E) an amount equal to
the Make-Whole Premium, if any, on Landlord's Debt, and any additional amounts
necessary to pay Landlord's Debt in full.
(d) In the event Landlord's Acceptance has been made, on
the Termination Date Tenant shall pay to Landlord solely the amounts set forth
in clauses (C), (D) and (E) of the preceding paragraph. Upon receipt by
Landlord of such amounts and upon compliance by Tenant with Article 27 hereof,
this Lease shall terminate.
Landlord shall use its best efforts to determine any
non-compliance with Article 27 hereof and shall give notice of any such
non-compliance within thirty (30) days after Landlord's Acceptance. Any such
notice or any failure to give such notice shall not impair Landlord's right to
give Tenant further notices of non-compliance with Article 27 until the Lease
terminates in accordance with the immediately preceding paragraph.
(e) If Landlord's Acceptance has not been made and a sale
shall not have occurred as of the Termination Date, Landlord shall have the
option of either (i) transferring the Demised Premises on the Termination Date
without recourse or warranty to Tenant in which event Tenant shall pay to
Landlord (or, in the case of Additional Rent, to Landlord or the person
entitled thereto) the amounts set forth in clauses (C), (D) and (E) of
paragraph (c) above together with the higher of the (x) then fair market sales
value of the Demised Premises as agreed to by the parties or as determined by
an appraisal reasonably satisfactory to Landlord and Tenant obtained at
Landlord's sole cost and expense, to be performed in accordance with Article 45
hereof, or (y) Termination Value of the Demised Premises determined as of the
Termination Date, or (ii) retaining the Demised Premises on the Termination
Date, in which case Tenant shall pay to Landlord on such date solely the
amounts set forth in clauses (C), (D) and (E) of paragraph (c) above, provided
that Landlord may not exercise the option described in clause (ii) unless it
shall have deposited funds with the Indenture Trustee pursuant to Section 6.06
of the Indenture. Upon receipt by Landlord of such amounts and upon compliance
by Tenant with Article 27 hereof, this Lease shall terminate. In the event
Landlord elects to transfer the Demised Premises to Tenant on the Termination
Date, it shall transfer all of its right, title and interest in the Demised
Premises in an "as is" condition without warranty, except that the Demised
Premises shall be free and clear of Lessor Liens.
51
<PAGE> 56
Notwithstanding the foregoing, if Tenant shall elect
to exchange full recourse securities for the Notes pursuant to Section 19 of
the Participation Agreement, the amount payable to Landlord pursuant to clause
(e)(i) above shall be reduced by an amount equal to the unpaid principal
balance of such Notes.
(f) Landlord shall be under no duty to solicit bids, or
to inquire into the efforts of Tenant to obtain bids or otherwise to take any
action in connection with any sale hereunder other than to sell the Demised
Premises to the highest independent third party bidder in accordance with the
terms hereof. In the event that Tenant terminates this Lease under this
Article 39, the Tenant covenants that it shall not use the Demised Premises for
any purpose.
40. Tenant's Purchase Offer.
(a) At any time that a Tenant's Purchase Offer shall have
been made pursuant to Articles 14 or 15 of this Lease, Landlord shall notify
Tenant within sixty (60) days of Tenant's Purchase Offer whether Landlord
accepts or rejects such offer. Failure by Landlord to notify Tenant of
Landlord's election within such sixty (60) day period shall be deemed
acceptance of Tenant's Purchase Offer. No purported rejection of such offer
shall be valid unless accompanied by the Indenture Trustee's confirmation of
receipt of deposited funds pursuant to Section 6.06 of the Indenture.
(b) In the event Landlord accepts Tenant's Purchase Offer
and subject to the satisfaction of the conditions set forth in this Article 40,
the Lease shall terminate on the next scheduled Rent Payment Date occurring not
less than one-hundred (100) days from the date of Tenant's Purchase Offer
("Purchase Offer Termination Date"). On the Purchase Offer Termination Date,
Tenant shall pay to Landlord (or in the case of Additional Rent to Landlord or
the person entitled thereto) an amount equal to the sum of (A) the Termination
Value of the Demised Premises determined as of the Purchase Offer Termination
Date, (B) all Basic Rent due and unpaid to and including the Purchase Offer
Termination Date (other than any portion of Basic Rent payable in advance on
the Purchase Offer Termination Date), plus (C) all Additional Rent owing by
Tenant to and including the Purchase Offer Termination Date (other than any
portion payable in advance on the Purchase Offer Termination Date). In
addition, any Basic Rent paid in advance and not yet accrued as of the Purchase
Offer Termination Date shall be refunded to Tenant on such date.
On the Purchase Offer Termination Date, and subject to the
receipt by Landlord of the amounts specified in the preceding paragraph,
Landlord shall convey all of its right, title and interest in and to the
Demised Premises by limited warranty deed in
52
<PAGE> 57
an "as is" condition without warranty, except that the Demised Premises shall
be free and clear of Lessor Liens.
Tenant shall pay, on an After-Tax Basis (as defined in the
Participation Agreement), all costs and expenses incurred in connection with
the sale of the Demised Premises to Tenant pursuant to Tenant's Purchase Offer,
including, without limitation, real estate transfer taxes. In addition, in the
event of a sale pursuant to Article 39 hereof, Tenant shall also pay an amount
equal to the Make-Whole Premium, if any, as defined in the Note Indenture.
(c) In the event Landlord rejects Tenant's Purchase
Offer, on the Purchase Offer Termination Date Tenant shall pay to Landlord (or
in the case of Additional Rent to Landlord or the person entitled thereto) an
amount equal to the sum of clauses (B) and (C) of the second sentence of
paragraph (b) above and the Lease shall thereupon terminate. Any Rent and
other charges paid in advance and not yet accrued as of the Purchase Offer
Termination Date shall be refunded to Tenant on such date.
41. Property Substitution.
(a) Provided no Material Default or Event of Default has
occurred and is continuing, at any time Tenant shall be entitled or required to
acquire the Demised Premises pursuant to Articles 14, 15 or 39 hereunder,
Tenant shall be entitled in lieu thereof to substitute a retail store (the
"substituted property") for the Demised Premises provided that (i) the fair
market value of the substitute property and the respective interests therein of
Landlord and Remainder Purchaser as determined by appraisal procedures set
forth in Article 45 hereof shall be not less than the fair market value of the
Demised Premises and the respective interests therein of Landlord and Remainder
Purchaser immediately prior to the event which gave rise to the substitution;
(ii) the useful life of the substitute property as determined by appraisal
procedures set forth in Article 45 hereof shall be not less than the useful
life of the Demised Premises immediately prior to the event which gave rise to
the substitution; (iii) the representations and warranties of Kmart made with
respect to the Demised Premises shall be remade and true with respect to the
substitute property on the effective date of substitution; and (iv) an
environmental due diligence report, survey and title report, each in form and
substance satisfactory to Landlord, Remainder Purchaser and Indenture Trustee,
concerning the land and property to be substituted, shall have been provided in
sufficient time for appropriate review by Landlord, Remainder Purchaser and
Indenture Trustee prior to the effective date of such substitution. In the
event a Phase I environmental due diligence report recommends further
environmental analysis in connection with the substitute property, Tenant shall
determine in its sole discretion whether to undertake such further analysis or
to substitute another retail
53
<PAGE> 58
store for the Demised Premises, pursuant to the terms of this paragraph.
(b) On the substitution date, the substitute property
will be subjected to the terms and conditions of this Lease and Landlord (and
Remainder Purchaser) shall convey all of its right, title and interest in and
to the Demised Premises to Tenant by deed in an "as is" condition, except that
it shall be free and clear of Lessor Liens, upon delivery by Tenant to Landlord
and Remainder Purchaser, as applicable, of all of the following:
(i) those documents with respect to the
substitute property which are set forth in Sections 7A (1),
(2), (3), (4), (9), (10), (11) and (12) of the Purchase
Agreement.
(ii) an amendment to this Lease and any memorandum
thereof duly executed and acknowledged in form and substance
reasonably satisfactory to Landlord and Tenant to replace the
description of the Land with the description of all land
included in the substitute property for the then-remaining
term of the Lease (including all options under Article 8
hereof) and make such other changes herein as may be
reasonably necessary or appropriate under the circumstances;
provided, however, that in no event shall the Basic Rent be
reduced, deferred or abated, but shall be equal to the Basic
Rent which would otherwise have been payable under this Lease
on each subsequent Rent Payment Date;
(iii) a copy of a final as-built ALTA survey of
the substitute property, dated a recent date, reasonably
satisfactory in form and substance to Landlord and Remainder
Purchaser and meeting the survey requirements for the Demised
Premises set forth in the Purchase Agreement;
(iv) a supplement to the Note Indenture
substituting the substitute property for these Demised
Premises, in proper form for recording;
(v) counterparts of ALTA owner's policies
insuring the interests of Landlord and Remainder Purchaser and
loan policy of title insurance (or such other form of loan
policy as may be prescribed by statute in a particular state)
covering the substitute property (or the valid, binding,
unconditional commitment therefor), dated the substitution
date, in form and substance reasonably satisfactory to
Landlord, Remainder Purchaser and Indenture Trustee in the
amount of (i) the outstanding principal balance of the related
Mortgage Notes with respect to the loan policy and (ii) the
54
<PAGE> 59
respective fair market sales value of the substitute property
with respect to the owner's policies insuring the interests of
Landlord and Remainder Purchaser, issued to them by a title
insurance company reasonably satisfactory to Indenture
Trustee, Landlord and Remainder Purchaser and;
(vi) certificates of insurance, if any, required
with respect to the substitute property pursuant to Articles 7
and 14 hereof;
(vii) a copy of the appraisal required hereunder;
(viii) a certificate of an officer of Kmart setting
forth, with respect to the substituted property, the
representations and warranties made by Kmart in Section 5A
(other than 5A(8)) of the Purchase Agreement with respect to
the Demised Premises; provided that, if such Demised Premises
was a Developer Property (as defined in the Purchase
Agreement) and substituted property is to be conveyed by
Kmart, the representations and warranties to be contained in
such certificate with respect to the substitute property shall
be made without the knowledge qualifications made by Kmart
with respect to such Demised Premises; provided, further that,
if such Demised Premises was a Kmart Property (as defined in
the Purchase Agreement) and the substituted property is to be
conveyed by a third party at Kmart's direction, the
representations and warranties to be contained in such
certificate with respect to the substitute property may be
made with the knowledge qualifications made by Kmart in the
Purchase Agreement with respect to the Developer Properties;
and
(ix) an amendment to the Option Agreement, if
applicable, and to the Tripartite Agreement substituting the
substitute property for the Demised Premises;
(x) evidence that Tenant has paid or will pay
when invoiced, as applicable, any and all transfer taxes,
recording fees, mortgage recording taxes, intangible taxes and
similar charges with respect to the substitution, together
with the reasonable costs and expenses (including reasonable
attorneys' fees) incurred by Landlord, the Indenture Trustee
and Remainder Purchaser in connection with the substitution;
and
(xi) such other certificates, documents, opinions
of counsel, surveys, certified copies of duly adopted
resolutions of the respective boards of directors of Landlord,
Remainder Purchaser and Tenant authorizing the substitution of
the substitute property and the documents
55
<PAGE> 60
executed in connection therewith, and any other instruments as
may be reasonably required by either of them.
Notwithstanding the foregoing the Tenant shall not be
permitted to exercise its substitution rights (i) unless the long-term senior
debt securities of Kmart shall have been rated in one of the generic rating
categories that signifies "investment grade" by the Approved Rating Agencies
(as defined below), and (ii) if within sixty (60) days of receipt by Landlord
of a written notice setting forth in reasonable detail all of the material
terms and conditions of, together with all other material information and
documentation relating to, the substitution and the substitute property, the
Owner Participant shall have delivered to the Tenant an opinion of independent
tax counsel selected by the Owner Participant and reasonably acceptable to the
Tenant that there is a reasonable basis to believe that the substitution could
result in material adverse tax consequences to the Landlord, the Owner
Participant or with respect to the transactions contemplated by the Operative
Documents which are not indemnified by the Tenant pursuant to the Operative
Documents unless the Tenant shall agree either to restructure the substitution
transaction in a form and manner which in the opinion of Owner Participant and
its tax counsel would eliminate the risk of any material adverse tax
consequences to Landlord, Owner Participant or with respect to the transactions
contemplated by the Operative Documents or to indemnify the Landlord and the
Owner Participant for such adverse tax consequences in a form and manner
satisfactory to the Owner Participant. As used herein "Approved Rating
Agencies" shall mean Standard & Poor's and Moody's; but if one of them is no
longer in existence, "Approved Rating Agencies" shall mean the other one of
them and one nationally recognized statistical rating organization that is
providing a rating for the Pass Through Certificate; but if both Standard &
Poor's and Moody's are no longer in existence, "Approved Rating Agencies" shall
mean at least two nationally recognized statistical rating organizations which
are providing a rating for the Pass Through Certificate.
42. Landlord's Right to Cure Tenant's Default.
If Tenant shall be in default of any of its obligations (after
applicable notice and cure periods) under this Lease, Landlord, without waiving
or releasing any obligation or default, may (but shall be under no obligation
to) at any time thereafter make such payment or perform such act for the
account and at the expense of Tenant, and may enter upon the Demised Premises
for such purpose and take all such action thereon as, in Landlord's opinion,
may be necessary or appropriate therefor. No such entry shall be deemed an
eviction of Tenant. All sums so paid by Landlord and all costs and expenses
(including, without limitation, attorneys' fees and expenses) so incurred,
together with a late charge thereon (to the extent permitted by law) at the
Default Rate (or at the maximum
56
<PAGE> 61
rate permitted by law, whichever is the lesser) from the date on which such
sums or expenses are paid or incurred by Landlord, shall be paid by Tenant to
Landlord on demand.
43. No Merger of Title.
There shall be no merger of this Lease or of the leasehold
estate created hereby by reason of the fact that the same person, firm,
corporation or other entity may acquire, own or hold, directly or indirectly,
(a) this Lease or the leasehold estate created hereby or any interest in this
Lease or such leasehold estate and (b) the fee estate in the Demised Premises
or any interest therein.
44. Ownership of the Leased Property.
Tenant acknowledges that the Demised Premises are the property
of Landlord and that Tenant has only the right to the possession and use of the
Demised Premises upon the terms and conditions of this Lease.
45. Procedure for Appraisals.
In each instance under this Lease where an appraisal shall be
required (except with respect to an appraisal required by Article 22), such
appraisal shall be conducted as follows:
(a) The party desiring such appraisal shall give notice
to that effect to the other party, specifying therein the name and address of
the person designated to act as appraiser on its behalf. Within fifteen (15)
days after the service of such notice, the other party shall give notice to the
first party specifying the name and address of the person designated to act as
appraiser on its behalf. If such party fails to notify the other party of the
appointment of its appraiser within or by the time above specified, the
designated appraiser shall be the sole appraiser and the determination of such
appraiser shall be binding upon the parties.
(b) The appraisers so chosen shall meet within ten (10)
days after the second appraiser is appointed and if within thirty (30) days of
such first meeting the two appraisers agree on the value which they have been
appointed to determine, such agreed upon value shall be the appraised value for
the purposes for which the appraisal was required. If within thirty (30) days
after such first meeting the two appraisers shall be unable to agree upon such
valuation within fifteen (15) days thereafter they shall appoint a third
appraiser who shall be competent and impartial. Within thirty (30) days after
the appointment of such third appraiser, the third appraiser shall deliver its
appraisal. With respect to the three appraisals, the appraisal most different
from the average of the other two shall be discarded and such average shall be
binding on Landlord and Tenant; provided that if the highest appraisal and the
57
<PAGE> 62
lowest appraisal are equidistant from the third appraisal, the third appraisal
shall be binding on Landlord and Tenant.
(c) In the event the two appraisers are unable to agree
upon the appointment of a third appraiser within fifteen (15) days after their
being unable to agree upon a valuation, such third appraiser shall be selected
by the parties themselves if they can agree thereon within a further period of
fifteen (15) days. If the parties do not so agree, then either party may apply
to a court in the county where the Demised Premises is located for the
appointment of such appraiser, and such party shall not raise any question as
to the court's full power and jurisdiction to entertain the application and
make the appointment.
(d) Any appraiser appointed pursuant to this Article
shall be an appraiser who is a member of the American Institute of Real Estate
Appraisers (or a successor organization), and shall have been doing business as
such for a period of at least ten (10) years before the date of his
appointment. All appraisers chosen or appointed pursuant to this Article shall
be sworn fairly and impartially to perform their duties as such appraiser. In
the event of the failure, refusal or inability of any appraiser to act, his
successor shall be appointed within ten (10) days by the party who originally
appointed him or in the event such party shall fail so to appoint such
successor, or in the case of the third appraiser, his successor shall be
appointed as provided in paragraph (a) above.
(e) Unless otherwise expressly provided herein, each
party shall pay the fees and expenses of its respective appraiser and both
shall share the fees and expenses of the third appraiser, if any. Each party
shall be responsible for the fees and expenses of its own attorneys and other
representatives. Photocopies of the reports of all appraisers shall be
provided to all the parties. In rendering their decision, the appraisers shall
have no power to modify or reform any of the provisions of this Lease.
(f) In the event of an appraisal under Article 21,
Landlord shall appoint an appraiser who meets the requirements of subparagraph
(d) above.
46. Survival of Tenant's Obligations.
No termination of this Lease shall relieve Tenant or Kmart of
any of its liabilities and obligations hereunder arising, occurring or relating
to the period occurring prior to such termination. In addition, the Tenant's
obligations under Article 6 shall survive the termination of, and the payment
in full by the Tenant of all of its other payment obligations under, the Lease.
58
<PAGE> 63
47. Counterparts.
This Lease may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
48. Liabilities of Landlord.
Landlord is entering into this Lease solely in its capacity as
owner trustee under the Trust Agreement and not in its individual capacity, and
in no event whatsoever shall [Owner Trustee] (or any entity acting as successor
trustee, co-trustee or separate trustee under the Trust Agreement) be liable in
its individual capacity on, or for any loss in respect of, any of Landlord's
statements, representations, warranties, agreements or obligations (except
those explicitly entered into in its individual capacity) hereunder or under
any of the other Operative Documents, or any other document executed by
Landlord in connection herewith for any reason whatsoever, all as to which the
parties agree to look solely to the Trust Estate (as defined in the Purchase
Agreement).
49. Note Indenture.
In order to secure the Notes, Landlord provides in the Note
Indenture, among other things, for the assignment (to the extent provided
therein) by Landlord to Indenture Trustee of its right, title and interest to
this Lease. Tenant hereby:
(1) consents to such assignment pursuant to the
terms of the Note Indenture;
(2) covenants to pay directly to Indenture
Trustee (or, after receipt of notice from Indenture Trustee stating
that the Note Indenture has been satisfied and discharged, to
Landlord) Basic Rent and Additional Rent due to Landlord hereunder or
under any other Operative Document which shall be required to be paid
to Indenture Trustee pursuant to the Note Indenture or any other
Operative Document;
(3) agrees that the right of Indenture Trustee
to such payments hereunder shall be absolute and unconditional and
shall not be affected by any circumstances whatsoever; and
(4) agrees that until release of the Note
Indenture as to the Property, except with respect to Excepted Rights
and Payments, (p) the Indenture Trustee shall have such right to
enforce the provisions of this Lease as is provided in the Note
Indenture; (q) Landlord
59
<PAGE> 64
shall not, for any reason, seek to recover from the Indenture Trustee
any moneys paid to the Indenture Trustee by virtue of the Note
Indenture; (r) all sums payable to the Indenture Trustee pursuant to
the Note Indenture shall be paid by bank wire transfer in such manner
that on the date on which sums are due and payable, as of 12:00 noon
(New York City time), or such earlier date or time as may be necessary
to ensure timely payments on the Certificates, the Indenture Trustee
shall be in actual receipt of immediately available funds; (s) Tenant
shall deliver to the Indenture Trustee duplicate originals of all
notices and other instruments which Tenant may deliver pursuant to
this Lease (and no payment of such sums or delivery of such notices or
other instruments by Tenant shall be of any force or effect unless,
with respect to payments, paid in accordance with written directions
from Indenture Trustee and, with respect to notices, delivered to
Landlord and the Indenture Trustee as provided above); (t) Tenant
shall not pay any Basic Rent or Additional Rent payable to Landlord
more than ten (10) days prior to such payment's scheduled due date
under this Lease; (u) while the Note Indenture remains in full force
and effect, any notice, approval, estoppel, consent or other delivery
purportedly delivered or given (or deemed delivered or given) by or on
behalf of Landlord to Tenant pursuant to this Lease shall be of no
force or effect unless in writing and executed also by the Indenture
Trustee; (v) Tenant shall not enter into any agreement subordinating
or (except as expressly permitted by the terms of this Lease as in
effect on the date hereof) terminating this Lease without the prior
written consent of the Indenture Trustee, and any such attempted
subordination or termination without such consent shall be void, and,
except as otherwise provided in Section [12.07] of the Note Indenture
and except with respect to Excepted Rights and Payments, Tenant shall
not enter into any amendment or modification of this Lease without the
prior written consent of the Indenture Trustee, and any such attempted
amendment or modification without such consent shall be void; (w) if
this Lease shall be amended, it shall continue to be subject to the
provisions of the Note Indenture without the necessity of any further
act by Landlord, Tenant or the Indenture Trustee; (x) Tenant shall not
take any action to terminate, rescind or avoid this Lease,
notwithstanding, to the fullest extent permitted by law, the
bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution or other proceeding affecting Landlord or any
assignee of Landlord and notwithstanding any action with respect to
this Lease which may be taken by an assignee, trustee or receiver of
Landlord or of any such assignee or by any court in any
60
<PAGE> 65
such proceedings; (y) if Tenant shall purchase Landlord's
interest in the Property pursuant to the terms of this Lease, Tenant
shall accept an instrument conveying such interest which is executed
and delivered by the Indenture Trustee, pursuant to its power of
attorney by Landlord contained in Section 16.01 of the Note Indenture;
and (z) in the event of a foreclosure under the Note Indenture by the
Indenture Trustee, or conveyance in lieu thereof, Tenant shall attorn
hereunder to the purchaser at foreclosure or recipient of a conveyance
in lieu thereof, as applicable, and notwithstanding anything herein
that may be construed to the contrary, if the Notes are deemed
canceled, paid or otherwise satisfied (in whole or in part) by reason
of such foreclosure or conveyance in lieu thereof, then provisions of
this Lease relating to Tenant's obligations with respect to amounts
payable to Landlord in excess of amounts payable under the Note
Indenture shall continue unaffected and shall be construed for all
purposes as if the Notes and the Note Indenture were still in full
force and effect and that payments made hereunder by Tenant were
applied to the reduction of the indebtedness evidenced by the Notes in
the manner and at the times provided for in the Note Indenture. The
Indenture Trustee is an express third party beneficiary of the
agreements contained in this Article.
Tenant, at Tenant's expense, shall cause the Note Indenture, a
memorandum of this Lease and all necessary financing statements and
continuation statements under the Uniform Commercial Code (including,
without limitation, financing statements with respect to fixtures
included within the building) to be recorded, registered and filed
from time to time in such manner and in such places as may be required
by law and shall take all such other actions as may be required in
order to make effective, perfect and maintain perfection of the
rights, liens and security interests intended to be created in
connection with this Lease and the Note Indenture, in each case,
promptly after the execution and delivery thereof.
61
<PAGE> 66
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WITNESSES: "LANDLORD"
[OWNER TRUSTEE], a national banking
association, not in its
individual capacity, except
as expressly stated herein,
but solely as Owner Trustee
aforesaid
____________________________ By:_________________________________
____________________________ Its:_____________________________
"TENANT"
KMART CORPORATION,
a Michigan corporation
____________________________ By:_________________________________
M. L. Skiles
____________________________ Its: Senior Vice President
62
<PAGE> 67
ACKNOWLEDGEMENTS
STATE OF MICHIGAN )
) SS
COUNTY OF ________ )
The foregoing instrument was acknowledged before me this ____ day of
_______________, 1994 by ______________________________, the
_________________________ of ___________________________ a national banking
association, not in its individual capacity, except as expressly stated herein,
but solely as Owner Trustee under Trust Agreement aforesaid of even date
herewith, on behalf of said association.
____________________________________
Notary Public, ______________ County
State of Michigan
My Commission Expires:
STATE OF MICHIGAN )
) SS
COUNTY OF ________ )
The foregoing instrument was acknowledged before me this ____ day of
______________________, 1994 by M. L. Skiles, the Senior Vice President of
KMART CORPORATION, a Michigan corporation, on behalf of the Corporation.
____________________________________
Notary Public, ______________ County
State of Michigan
My Commission Expires:
63
<PAGE> 68
EXHIBIT A
Legal Description
[Exhibit A Intentionally Omitted]
64
<PAGE> 69
EXHIBIT B
Depiction of Site
[Exhibit B Intentionally Omitted]
65
<PAGE> 70
EXHIBIT C
Rents and Rent Payment Dates
[Exhibit C Intentionally Omitted]
66
<PAGE> 71
EXHIBIT C-1
Landlord's Debt
[Exhibit C-1 Intentionally Omitted]
67
<PAGE> 72
EXHIBIT C-2
Rental Adjustment Certificate
[Exhibit C-2 Intentionally Omitted]
68
<PAGE> 73
EXHIBIT D
Termination Value
[Exhibit D Intentionally Omitted]
69
<PAGE> 74
EXHIBIT E
Form of Estoppel Letter
[Exhibit E Intentionally Omitted]
70
<PAGE> 1
EXHIBIT 5.1
[DICKINSON LETTERHEAD]
April 3, 1995
Board of Directors
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Ladies and Gentlemen:
We have acted as special counsel to Kmart Corporation, a Michigan
corporation (the "Company"), in connection with the proposed offer and sale by
means of an underwritten public offering of up to $155,000,000 of pass through
certificates (the "Pass Through Certificates") evidencing interests in two
separate pass through trusts (the "Pass Through Trusts") formed pursuant to two
separate pass through trust agreements (the "Pass Through Trust Agreements"),
between The Bank of New York Trust Company of Florida, National Association, as
Pass Through Trustee under Pass Through Trust Agreement 1995-K-1, and The Bank
of New York Trust Company of California, as Pass Through Trustee under Pass
Through Trust Agreement 1995-K-2 (hereinafter The Bank of New York Trust Company
of Florida, National Association and The Bank of New York Trust Company of
California are referred to individually as the "Pass Through Trustee" and
collectively as the "Pass Through Trustees"), and the Company, as contemplated
in the Company's Registration Statement on Form S-3 (Registration No. 33-56465)
as filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended. The trust property of each Pass Through Trust will consist of
mortgage notes (the "Mortgage Notes") issued as non-recourse obligations of
separate owner trusts (the "Owner Trusts") to finance the sale-leaseback
transactions involving 16 of the Company's retail stores, each acquired by one
of the Owner Trusts and leased by that Owner Trust to the Company. Each Mortgage
Note will be issued under an indenture, mortgage and deed of trust, assignment
of rents and security agreement (an "Indenture"), by and between the related
Owner Trust and The Bank of New York and Todd N. Niemy, acting solely as
indenture trustees. You have requested our opinion regarding the legality of the
Pass Through Certificates.
We have examined such statutes, regulations, agreements, documents and
certificates of public officials and corporate officers as we deemed necessary
for the purpose of this opinion. In rendering this opinion, we have assumed that
each of the Company and the Pass Through Trustee will have duly authorized,
executed and delivered the respective Pass Through Trust Agreement, that at the
time of such authorization, execution and delivery, each of the Company and such
Pass Through Trustee will have had the full power, authority and legal right to
have done so, and that the Underwriting Agreement to be entered into by the
Company and Goldman, Sachs & Co. relating to the Pass Through Certificates (the
"Underwriting Agreement") will have been duly authorized, executed and
delivered. With respect to matters which are governed by the laws of the State
of New York, we have relied upon the opinion of even date herewith of Sullivan &
Cromwell.
Based on the foregoing and upon such legal considerations as we deem
relevant, we are of the opinion that (i) each Pass Through Trust Agreement, when
duly executed and delivered, will
<PAGE> 2
Board of Directors
April 3, 1995
Page Two
constitute the valid and binding agreement of the Company and the respective
Pass Through Trustee, and (ii) each of the Pass Through Certificates, when duly
executed, issued, delivered and authenticated in accordance with the terms of
the Pass Through Trust Agreement under which it is issued and sold in accordance
with the terms set forth in the Underwriting Agreement, will be the valid and
binding obligation of the respective Pass Through Trustee, and the holder
thereof will be entitled to the benefits provided by the Pass Through Trust
Agreement under which such Pass Through Certificate is issued.
We are members of the Michigan Bar and, for purposes of this opinion, do
not hold ourselves out as experts on, nor are we, in rendering our opinion
herein, passing on any matter of the laws of any jurisdiction other than the
federal laws of the United States and the laws of the State of Michigan.
The undersigned consents to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Validity of the Certificates".
Very truly yours,
[SIG.]
DICKINSON, WRIGHT, MOON,
VAN DUSEN & FREEMAN
<PAGE> 1
EXHIBIT 8.1
[LETTERHEAD]
April 3, 1995
Board of Directors
Kmart Corporation
3100 Big Beaver Road
Troy, Michigan 48084
Ladies and Gentlemen:
We have acted as special counsel to Kmart Corporation, a Michigan
corporation (the "Company"), with respect to certain tax matters in connection
with the proposed offer and sale by means of an underwritten public offering of
up to $155,000,000 of pass through certificates (the "Pass Through
Certificates") as contemplated in the Company's Registration Statement on Form
S-3 (Registration No. 33-56465) as filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. You have requested our
opinion regarding certain tax matters relating to the sale of the Pass Through
Certificates as described in the Registration Statement.
We are of the opinion that the discussion in the Prospectus constituting
part of the Registration Statement under the caption "Certain Federal Income Tax
Consequences," insofar as it relates to statements of law or legal conclusions,
is correct in all material respects.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to our firm under "Certain Federal Income Tax
Consequences" in the Prospectus constituting part of the Registration Statement.
Very truly yours,
[SIG]
DICKINSON, WRIGHT, MOON,
VAN DUSEN & FREEMAN
<PAGE> 1
EXHIBIT 8.2
[SQUIRE, SANDERS & DEMPSEY LETTERHEAD]
April 3, 1995
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, New York 10020
Re: Kmart Corporation Pass Through Trusts
Pass Through Certificates 1995-K-1
Ladies and Gentlemen:
We have acted as Florida counsel to The Bank of New York Trust Company
of Florida, National Association, a national banking association, as trustee
(the "1995-K-1 Pass Through Trustee"), in connection with its execution and
delivery of a Pass Through Trust Agreement 1995-K-1 (the "1995-K-1 Pass Through
Agreement") between the 1995-K-1 Pass Through Trustee and Kmart Corporation
(the "Company"), pursuant to which the Kmart Corporation Pass Through Trusts
Pass Through Certificates 1995-K-1 (the "1995-K-1 Pass Through Certificates")
will be issued and sold. Capitalized terms used herein and not otherwise
defined shall have the same meanings set forth in the 1995-K-1 Pass Through
Agreement.
We have examined the 1995-K-1 Pass Through Agreement and such other
documents, records and matters of law as we have deemed necessary for purposes
of this opinion, and based thereupon, but subject to the qualifications and
assumptions expressed herein, we are of the opinion that, (a) assuming that the
pass through trust created pursuant to the 1995-K-1 Pass Through Agreement (the
"1995-K-1 Pass Through Trust") will not be taxable as a corporation, but,
rather, will be treated as an investment trust and will be classified as a
grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue
Code of 1986, as amended, there are no fees, taxes or other charges payable
(except taxes imposed on fees payable to the 1995-K-1
<PAGE> 2
[SQUIRE, SANDERS & DEMPSEY LETTERHEAD]
Kmart Corporation
Goldman, Sachs & Co. and
Morgan Stanley & Co. Inc.
April 3, 1995
Page 2
Pass Through Trustee and occupational license taxes imposed on the 1995-K-1
Pass Through Trustee for conducting its trust business in the City of
Jacksonville) to the State of Florida or the consolidated City of
Jacksonville/Duval County in connection with the execution, delivery and
performance of the 1995-K-1 Pass Through Agreement or the purchase, holding or
sale of the 1995-K-1 Pass Through Certificates which would not have been
imposed if the 1995-K-1 Pass Through Trustee had not had its principal place of
business in or performed its duties under the 1995-K-1 Pass Through Agreement
in the City of Jacksonville, Florida, and (b) none of the 1995-K-1 Pass Through
Trustee, the 1995-K-1 Pass Through Trust or the holders of 1995-K-1 Pass
Through Certificates will be subject to any fee, tax or other charge under the
laws of the State of Florida or the consolidated City of Jacksonville/Duval
County on, based on or measured by, directly or indirectly, any payments on the
1995-K-1 Pass Through Certificates or the gross receipts, net or gross income,
tangible or intangible property, net worth or capital of the 1995-K-1 Pass
Through Trust which would not have been imposed if the 1995-K-1 Pass Through
Trustee had not had its principal place of business in or performed its duties
under the 1995-K-1 Pass Through Agreement in the City of Jacksonville, Florida.
The foregoing opinions are subject to the following assumptions and
qualifications:
A. The opinions expressed herein are limited to the present
laws of the State of Florida and the consolidated City of
Jacksonville/Duval County and judicial and administrative
interpretations thereunder. Such authorities are subject to change,
which may be prospective or retroactive. We can provide no assurance as
to the effect of any such change on the conclusions reached in our
opinion. Further, we express no opinion with respect to the laws of any
other jurisdiction or the effect thereof on the opinions expressed
herein. In addition, we express no opinion as to whether any particular
Certificateholder may be subject to any fee, tax or other charge under
the laws of the State of Florida, the City of Jacksonville or the
County of Duval because of such holder's individual circumstances.
Certificateholders should consult their own tax advisors in determining
the tax consequences to them of the purchase, ownership and disposition
of Certificates.
B. Our opinion is based on the assumption that the
description of the facts relating to 1995-K-1 Pass Through Certificates
set forth in the Registration Statement referenced in the final
paragraph of this opinion letter is accurate and complete, that the
1995-K-1 Pass Through Agreement will be duly executed and delivered by
each of the parties thereto in the form of such agreement we have
reviewed and that the 1995-K-1 Pass Through Trust will be operated in a
manner consistent with the 1995-K-1 Pass Through Agreement and related
documents we have reviewed. A change in such facts, terms of the
1995-K-1 Pass Through Agreement or method of operation could adversely
affect our opinion.
<PAGE> 3
[SQUIRE, SANDERS & DEMPSEY LETTERHEAD]
Kmart Corporation
Goldman, Sachs & Co. and
Morgan Stanley & Co. Inc.
April 3, 1995
Page 3
C. No opinion is expressed herein on the accuracy,
completeness or sufficiency of the Prospectus and the Registration
Statement referenced in the final paragraph of this opinion letter or
other offering material relating to the 1995-K-1 Pass Through
Certificates.
D. The opinions expressed herein are provided solely for your
benefit, with the understanding that we are not hereby assuming any
professional responsibility to any other person or entity whatsoever.
Without our prior written consent, the opinions expressed herein may
not be quoted in whole or in part or otherwise referred to in any legal
opinion, document or other report, except as provided in the following
paragraph, and may not be relied upon by any other person or entity
whatsoever.
We hereby consent to the filing of this opinion as Exhibit 8.2 to
Registration Statement No. 33-56465 on Form S-3 filed by the Company to effect
registration of the 1995-K-1 Pass Through Certificates under the Securities Act
of 1993, as amended, and to the reference to us under the caption "Certain
Taxes" in the Prospectus constituting a part of such Registration Statement.
Very truly yours,
SQUIRE, SANDERS & DEMPSEY
/s/ SQUIRE, SANDERS & DEMPSEY
<PAGE> 1
EXHIBIT 8.3
[JONES, DAY, REAVIS & POGUE LETTERHEAD]
April 3, 1995
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, New York 10020
Re: Kmart Corporation Pass Through Trusts
Pass Through Certificates 1995-K-2
Ladies and Gentlemen:
We have acted as California counsel to The Bank of New York Trust Company
of California, a California corporation, as trustee (the "1995-K-2 Pass Through
Trustee"), in connection with its execution and delivery of that certain Pass
Through Trust Agreement 1995-K-2 (the "1995-K-2 Pass Through Agreement")
between the 1995-K-2 Pass Through Trustee and Kmart Corporation (the
"Company"), pursuant to which the Kmart Corporation Pass Through Trusts Pass
Through Certificates 1995-K-2 (the "1995-K-2 Pass Through Certificates) will be
issued and sold. Capitalized terms used herein and not otherwise defined shall
have the same meanings set forth in the 1995-K-2 Pass Through Agreement.
We have examined the 1995-K-2 Pass Through Agreement and such other
documents, records and matters of law as we have deemed necessary for purposes
of this opinion, and based thereupon, but subject to the qualifications and
assumptions expressed herein, we are of the opinion that, assuming that the
pass through trust created pursuant to the 1995-K-2 Pass Through Agreement (the
"1995-K-2 Pass Through Trust") will not be taxable as a corporation, but,
rather, will be treated as an investment trust and will be classified as a
grantor trust under subpart E, Part I of Subchapter J of the Internal Revenue
Code of 1986, as
<PAGE> 2
JONES, DAY, REAVIS & POGUE
Kmart Corporation,
Goldman, Sachs & Co. and
Morgan Stanley & Co. Inc.
April 3, 1995
Page 2
amended, (a) there are no fees, taxes or other charges payable (except taxes
imposed on fees payable to the 1995-K-2 Pass Through Trustee and utility user
taxes imposed on the 1995-K-2 Pass Through Trustee for conducting its trust
business in the City of Los Angeles) to the State of California, the City of
Los Angeles or the County of Los Angeles in connection with the execution,
delivery and performance of the 1995-K-2 Pass Through Agreement or the
purchase, holding or sale of the 1995-K-2 Pass Through Certificates which would
not have been imposed if the 1995-K-2 Pass Through Trustee had not had its
principal place of business in or performed its duties under the 1995-K-2 Pass
Through Agreement in the City of Los Angeles, California, and (b) none of the
1995-K-2 Pass Through Trustee, the 1995-K-2 Pass Through Trust or the holders
of 1995-K-2 Pass Through Certificates will be subject to any fee, tax or other
charge under the laws of the State of California, the City of Los Angeles or
the County of Los Angeles on, based on or measured by, directly or indirectly,
any payments on the 1995-K-2 Pass Through Certificates or the gross receipts,
net or gross income, tangible or intangible property, net worth or capital of
the 1995-K-2 Pass Through Trust which would not have been imposed if the
1995-K-2 Pass Through Trustee had not had its principal place of business in or
performed its duties under the 1995-K-2 Pass Through Agreement in the City of
Los Angeles, California.
The foregoing opinions are subject to the following assumptions and
qualifications:
A. The opinions expressed herein are limited to the present laws of
the State of California, the City of Los Angeles and the County of Los
Angeles and judicial and administrative interpretations thereunder. Such
authorities are subject to change, which may be prospective or retroactive.
We can provide no assurance as to the effect of any such change on the
conclusions reached in our opinion. Further, we express no opinion with
respect to the laws of any other jurisdiction or the effect thereof on the
opinions expressed herein. In addition, we express no opinion as to
whether any particular Certificateholder may be subject to any fee, tax or
other charge under the laws of the State of California, the City of Los
Angeles or the County of Los Angeles because of such holder's individual
circumstances. Certificateholders should consult their own tax advisors in
determining the tax consequences to them of the purchase, ownership and
disposition of Certificates.
<PAGE> 3
JONES, DAY, REAVIS & POGUE
Kmart Corporation,
Goldman, Sachs & Co. and
Morgan Stanley & Co. Inc.
April 3, 1995
Page 3
B. We note that judicial decisions and administrative rulings
of the California Franchise Tax Board ("FTB") generally indicate that
the characterization of a transaction for tax purposes depends upon
the facts and circumstances of each case. No ruling has been
requested from the FTB concerning the 1995-K-2 Pass Through Trust.
Opinions of counsel are not binding on the FTB, and the FTB may assert
positions contrary to those stated in our Opinion.
C. Further, our opinion is based on the assumption that the
description of the facts relating to 1995-K-2 Pass Through
Certificates set forth in the Registration Statement referenced
in the final paragraph of this opinion letter is accurate and complete,
that the 1995-K-2 Pass Through Agreement will be duly executed and
delivered by each of the parties thereto in the form of such agreement
we have reviewed and that the 1995-K-2 Pass Through Trust will be
operated in a manner consistent with the 1995-K-2 Pass Through
Agreement and related documents we have reviewed. A change in such
facts, terms of the 1995-K-2 Pass Through Agreement or method of
operation could adversely affect our opinion.
D. No opinion is expressed herein on the accuracy,
completeness or sufficiency of the Prospectus and the Registration
Statement referenced in the final paragraph of this opinion
letter or other offering material relating to the 1995-K-2 Pass Through
Certificates.
E. The opinions expressed herein are provided solely for your
benefit, with the understanding that we are not hereby assuming any
professional responsibility to any other person or entity whatsoever.
Without our prior written consent, the opinions expressed herein may
not be quoted in whole or in part or otherwise referred to in any legal
opinion, document or other report, except as provided in the following
paragraph, and may not be relied upon by any other person or entity
whatsoever.
We hereby consent to the filing of this opinion as Exhibit 8.3
to Registration Statement No. 33-56465 on Form S-3 filed by the Company to
effect registration of the 1995-K-2 Pass Through Certificates under the
Securities Act of 1933, as
<PAGE> 4
JONES, DAY, REAVIS & POGUE
Kmart Corporation,
Goldman, Sachs & Co. and
Morgan Stanley & Co. Inc.
April 3, 1995
Page 4
amended, and to the reference to us under the caption "Certain Taxes" in the
Prospectus constituting a part of such Registration Statement.
Very truly yours,
/s/ JONES, DAY, REAVIS & POGUE
Jones, Day, Reavis & Pogue
<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, October 26, October 27,
(Millions) 1992 1993 1994 1994 1993
----------- ------------ ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Pre-tax income from continuing
operations (1) $1,189 $1,327 $(550) $ (759) $1,197
Equity income of unconsolidated affiliated
retail companies that exceeds distributions (26) (12) (20) (39) (19)
Fixed charges per below 582 664 763 776 722
Less interest capitalized during the period (10) (14) (11) (11) (14)
------ ------ ----- ------ ------
Earnings from continuing operations 1,735 1,965 182 (33) 1,886
====== ====== ===== ====== ======
Fixed Charges:
Interest expense 398 442 490 504 500
Rent expense - portion of operating rentals
representative of the interest factor 172 206 260 260 206
Other 12 16 13 12 16
------ ------ ----- ------ ------
582 664 763 776 722
====== ====== ===== ====== ======
Ratio of earnings to fixed charges (2) 3.0 3.0 N/A N/A $ 2.61
====== ====== ===== ====== ======
</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 $809
million for the 52 weeks ended October 26, 1994.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of Amendment No. 1 to this 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.
[SIG]
Price Waterhouse LLP
Detroit, Michigan 48243
March 31, 1995
<PAGE> 1
EXHIBIT 25.1
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a Trustee Pursuant to
Section 305(b) [_]
THE BANK OF NEW YORK TRUST COMPANY OF FLORIDA,
NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
59-2283428
(Jurisdiction of incorporation (I.R.S. employer
or organization if not identification number)
a U.S. national bank)
701 Brickell Avenue
Miami, Florida 33131
(Address of principal executive offices) (Zip code)
Jacqueline R. McSwiggan
Office of the Secretary, The Bank of New York
48 Wall Street, New York, NY 10286
(212) 495-1727
(Name, address and telephone number of agent for service)
____________________________________
KMART CORPORATION
(Exact name of obligor as specified in its charter)
Michigan 38-0729500
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
3100 West Big Beaver Road
Troy, Michigan 48084
(Address of principal executive offices) (Zip code)
____________________________________
Pass Through Certificates
(Title of indenture securities)
==============================================================================
<PAGE> 2
1. GENERAL INFORMATION.
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
Name Address
---- -------
Comptroller of the Currency Washington, D.C. 20219
Federal Reserve Bank of Atlanta Atlanta, GA 30303
Board of Governors of the Washington, D.C. 20551
Federal Reserve System
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
None. (See Note on page 2)
16. LIST OF EXHIBITS.
1. Amended and Restated Articles of Association of the Trustee.
2.1 Copy of Certificate of the Comptroller of the Currency, dated
June 20, 1983, authorizing the Trustee to commence the
business of banking as a National Banking Association.
2.2 Copy of letter from the Comptroller of the Currency, dated
November 6, 1989, certifying the merger of Irving Trust
Company Florida with and into the Trustee under the charter of
the Trustee and authorizing the relocation of the Trustee's
head office.
3. Copy of Certificate of the Comptroller of the Currency, dated
June 20, 1983, authorizing the Trustee to act in all fiduciary
capacities permitted by the statutes of the United States.
4. Copy of By-Laws of the Trustee.
6. Consent of the Trustee required by Section 321(b) of the Act.
7. Copy of latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
<PAGE> 3
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
2
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York Trust Company of Florida, National Association, a national association
organized and existing under the laws of the United States of America, has duly
caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Jacksonville, and
State of Florida, on the 13th day of March, 1995.
THE BANK OF NEW YORK TRUST COMPANY
OF FLORIDA, NATIONAL ASSOCIATION
By: /s/Martin P. Henry
----------------------
Name: Martin P. Henry
Title: Vice President
3
<PAGE> 5
EXHIBIT 1
AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
THE BANK OF NEW YORK
TRUST COMPANY OF FLORIDA, NATIONAL ASSOCIATION
For the purpose of organizing an association to carry on the business of
banking of a national association, the undersigned do enter the following
Amended and Restated Articles of Association:
FIRST. The title of this association shall be The Bank of New York
Trust Company of Florida, National Association (the "Association").
SECOND. The main office of the Association shall be in the City of
Miami, County of Dade, State of Florida. The general business of the
Association shall be conducted at its main office and its branches.
THIRD. The Board of Directors of the Association shall consist of not
less than five nor more than twenty-five persons, the exact number to be fixed
and determined from time to time by resolution of a majority of the full Board
of Directors or by resolution of the shareholders at any annual or special
meeting thereof. Each director, during the full term of his directorship,
shall own a minimum of $1,000 par value of the capital stock of the
Association, or an equivalent interest, as determined by the Comptroller of the
Currency, in any Company which controls the Association within the meaning of
the applicable laws of the United States. Any vacancy in the Board of
Directors may be filled by action of the Board of Directors.
FOURTH. There shall be an annual meeting of the shareholders the
purposes of which shall be the election of directors and the transaction of
whatever other business may be brought before said meeting. It shall be held
at the main office or other convenient place as the Board of Directors may
designate, on the day of each year specified therefor in the By-laws, but if no
election is held on such day, it may be held on any subsequent day according to
such lawful rules as may be prescribed by the Board of Directors.
Nominations for election to the Board of Directors may be made by the
Board of Directors or by any shareholder of any outstanding class of capital
stock of the Association entitled
<PAGE> 6
- 2 -
to vote for the election of directors. Nominations, other than those made by
or on behalf of the existing management of the Association, shall be made in
writing and shall be delivered or mailed to the President of the Association
and to the Comptroller of the Currency, Washington, D.C., not less than 14 days
nor more than 50 days prior to any meeting of shareholders called for the
election of directors; provided, however, that if less than 21 days' notice of
the meeting is given to shareholders, such nomination shall be mailed or
delivered to the President of the Association and to the Comptroller of the
Currency not later than the close of business on the seventh day following the
day on which the notice of meeting was mailed. Such notification shall contain
the following information to the extent known to the notifying shareholder: (a)
the name and address of each proposed nominee; (b) the principal occupation of
each proposed nominee, (c) the total number of shares of capital stock of the
Association that will be voted for each proposed nominee; (d) the name and
residence address of the notifying shareholder; and (e) the number of shares of
capital stock of the Association owned by the notifying shareholder.
Nominations not made in accordance herewith may, in his discretion, be
disregarded by the chairman of the meeting, and upon the chairman's
instructions, the vote tellers may disregard all votes cast for each such
nominee.
FIFTH. The authorized amount of capital stock of the Association
shall be 15,000 shares of common stock of a par value of FIFTY DOLLARS ($50)
each, but said capital stock may be increased or decreased from time to time,
in accordance with the provisions of the laws of the United States.
No holder of shares of any class of the capital stock of the
Association shall have any pre-emptive or preferential right of subscription to
any shares of any class of capital stock of the Association, whether now or
hereafter authorized, or to any obligations convertible into stock of the
Association, issued, or sold, nor any right of subscription to any thereof
other than such, if any, as the Board of Directors in its discretion may from
time to time determine and at such price as the Board of Directors may from
time to time fix.
The Association, at any time and from time to time, may authorize and
issue debt obligations, whether or not subordinated, without the approval of
the shareholders.
SIXTH. The Board of Directors shall appoint one of its members
President of the Association, who shall be Chairman of the Board, unless the
Board appoints another director to be Chairman. The Board of Directors shall
have the power to appoint one or more Vice Presidents; and to appoint a
Secretary and such other officers and employees as may be required to transact
the business of the Association.
<PAGE> 7
- 3 -
The Board of Directors shall have the power to define the duties of
the officers and employees of the Association; to fix the salaries to be paid
to them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all By-laws that it may be lawful for them to make;
and in general to do and perform all acts that it may be legal for a Board of
Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any authorized branch location within the limits
of Miami, Florida upon written notice to the Comptroller of the Currency, or
with a vote of the shareholders owning two-thirds of the capital stock of the
Association and upon receipt of a certificate of approval from the Comptroller
of the Currency, to any other location within or outside the limits of Miami,
Florida, but not more than 30 miles beyond such limits; and shall have the
power to establish or change the location of any branch or branches of the
Association to any other location, without the approval of the shareholders but
subject to the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of the Association shall continue
until terminated in accordance with the laws of the United States.
NINTH. The Board of Directors of the Association, or any three or
more shareholders owning, in the aggregate, not less than 25 percent of the
stock of the Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place, and purpose of every annual and special meeting of the
shareholders shall be given by first-class mail, postage prepaid, mailed at
least ten days prior to the date of such meeting to each shareholder of record
at his address as shown upon the books of the Association.
TENTH. Any person, his heirs, executors, or administrators, may be
indemnified or reimbursed by the Association for reasonable expenses actually
incurred in connection with any action, suit or proceeding, civil or criminal,
to which he or they shall be made a party by reason of being or having been a
director, officer, or employee of the Association or of any firm, corporation,
or organization which he or they served in any such capacity at the request of
the Association; provided, however that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding as to
which he or they shall finally be adjudged to have been guilty of or liable for
gross
<PAGE> 8
- 4 -
negligence, willful misconduct or criminal acts in the performance of his
duties for the Association; and provided further, that no person shall be so
indemnified or reimbursed in relation to any matter in such action, suit, or
proceeding which has been made the subject of a compromise settlement except
with the approval of a court of competent jurisdiction, or the holders of
record of a majority of the outstanding shares of the Association, or the Board
of Directors, acting by vote of directors not parties to the same or
substantially the same action, suit, or proceeding constituting a majority of
the whole number of directors. The foregoing right of indemnification or
reimbursement shall not be exclusive of other rights to which such person, his
heirs, executors, or administrators, may be entitled as a matter of law.
The Association may, upon the affirmative vote of a majority of its
Board of Directors, purchase insurance for the purpose of indemnifying its
directors, officers and other employees to the extent that such indemnification
is allowed in the preceding paragraph. Such insurance may, but need not, be
for the benefit of all directors, officers, or employees.
ELEVENTH. These Articles of Association may be amended at any regular
or special meeting of the shareholders by the affirmative vote of the holders
of a majority of the stock of the Association, unless the vote of the holders
of a greater amount of stock is required by law, and in that case by the vote
of the holders of such greater amount.
IN WITNESS WHEREOF, we have signed this Amended and Restated Articles
of Association this 18th day of January, 1985.
THE BANK OF NEW YORK
COMPANY, INC.
By: /s/ Robert J. Goebert
----------------------
Robert J. Goebert
Secretary
<PAGE> 9
EXHIBIT 2.1
Comptroller of the Currency
TREASURY DEPARTMENT OF THE UNITED STATES
Washington, D.C.
WHEREAS, satisfactory evidence has been presented to the Comptroller
of the Currency that "THE BANK OF NEW YORK TRUST COMPANY OF FLORIDA, NATIONAL
ASSOCIATION" located in MIAMI, State of FLORIDA, has complied with all
provisions of the statutes of the United States required to be complied with
before being authorized to commence the business of banking as a National
Banking Association;
NOW, THEREFORE, I hereby certify that the above-named association is
authorized to commence the business of banking as a National Banking
Association.
IN TESTIMONY WHEREOF, witness my signature and
seal of office this 20TH day of JUNE, 1983.
/s/C. T. Conover
Charter No. 17871.
Comptroller of the Currency
<PAGE> 10
EXHIBIT 2.2
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
Southeastern District
Marquis One Tower, Suite 600
245 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303
November 6, 1989
Ms. Margaret A. Murphy-Anderson
Associate Counsel
The Bank of New York
One Wall Street
New York, New York 10286
Re: 89-SE-02-024 - The Bank of New York Trust Company of Florida, National
Association, Miami, Florida
Dear Ms. Murphy-Anderson:
This letter is the official certification of the Comptroller of the Currency
for the merger of Irving Trust Company Florida, Miami, Florida (Certificate No.
26957) with and into The Bank of New York Trust Company of Florida, National
Association, Miami, Florida (Charter No. 17871), and effective as of November
6, 1989 under the charter of The Bank of New York Trust Company of Florida,
National Association, and under the title of "The Bank of New York Trust
Company of Florida, National Association".
This letter is also the official certification of the Comptroller of the
Currency allowing The Bank of New York Trust Company of Florida, National
Association, Charter No. 17871, the receiving institution, to relocate its head
office from 800 Brickell Avenue, Miami, Florida to 701 Brickell Avenue, Miami,
Florida, which is the present head office of Irving Trust Company Florida,
Miami, Florida.
The shareholders' meetings of the respective banks may be finally adjourned.
Very truly yours,
/s/Vernon E. Fasbender
- ----------------------
Vernon E. Fasbender, Director for Analysis
Charter No. 17871
<PAGE> 11
EXHIBIT 3
Comptroller of the Currency
TREASURY DEPARTMENT OF THE UNITED STATES
Washington, D.C.
WHEREAS, THE BANK OF NEW YORK TRUST COMPANY OF FLORIDA, NATIONAL
ASSOCIATION, located in Miami, State of Florida, being a National Banking
Association, organized under the statutes of the United States, has made
application for authority to act as fiduciary
AND WHEREAS, applicable provisions of the statutes of the United
States authorize the grant of such authority;
NOW THEREFORE, I hereby certify that the necessary approval has been
given and that the said association is authorized to act in all fiduciary
capacities permitted by such statutes.
IN TESTIMONY WHEREOF, witness my
signature and seal of Office this
twentieth day of June, 1983.
/s/C. T. Conover
[SEAL]
Comptroller of the Currency
Charter No. 17871
<PAGE> 12
EXHIBIT 4
Amended and restated at
Board of Directors Meeting
June 18, 1992
Further Amended
January 21, 1994
BY-LAWS
OF
THE BANK OF NEW YORK TRUST COMPANY OF FLORIDA, N.A.
ARTICLE I
Offices
Section 1.1 The principal office of the Association shall be
located in the City of Miami, County of Dade, State of Florida.
Section 1.2 The Association may also have offices at such other
places either within or without the State of Florida as the Board of Directors
may from time to time determine, or the business of the Association may
require.
ARTICLE II
Meetings of Shareholders
Section 2.1 Annual Meeting. The regular annual meeting of the
shareholders, for the election of directors and transaction of whatever other
business as may properly come before the meeting shall be held on January 15th
of each year or, in case the date for the annual meeting shall fall on a public
holiday, such meeting shall be held on the next succeeding business day either
within or without the State of Florida as may be determined by the Board of
Directors.
Notice of such meeting shall me mailed, postage prepaid, at least ten
days prior to the date thereof, addressed to each shareholder at the address
appearing on the books of the Association.
<PAGE> 13
- 2 -
Section 2.2. Action of Shareholders Without a Meeting. Any action
required to be taken at a meeting of the Shareholders or any action which may
be taken at a meeting of the Shareholders may be taken without a meeting if a
consent in writing setting forth the action so to be taken is signed by a
majority of all shares held and entitled to vote, and is filed in the minutes
of the proceedings of the Association. Such consent shall have the same effect
as a unanimous vote of the shareholders.
Section 2.3. Special Meetings. Except as otherwise specifically
provided by statute, special meetings of the shareholders may be called for any
purpose at any time by the Board of Directors or the holders of a majority of
all shares entitled to vote. Every such special meeting, unless otherwise
provided by law, shall be called by mailing a notice, postage prepaid, not less
than ten days prior to the date fixed for such meeting, to each shareholder of
record entitled to vote.
Section 2.4. Proxies. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this Association shall act as proxy. Proxies shall be valid only for one
meeting, to be specified therein, and any adjournments of such meeting.
Proxies shall be dated and filed with the records of the meeting.
Section 2.5. Quorum. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held, as
<PAGE> 14
- 3 -
adjourned, without further notice. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
ARTICLE III
Directors
Section 3.1. Board of Directors. The Board of Directors
(hereinafter referred to as the "Board"), shall have the power to manage and
administer the business and affairs of the Association. Except as expressly
limited by law, all corporate powers of the Association shall be vested in and
may be exercised by said Board.
Section 3.2. Number. The Board shall consist of not less than
five nor more than twenty-five persons, the exact number within such minimum
and maximum limits to be fixed and determined from time to time by resolution
of a majority of the full Board or by resolution of the shareholders at any
meeting thereof; provided, however, that a majority of the full Board of
Directors may not increase the number of directors to a number which: (i)
exceeds by more than two the number of directors last elected by shareholders
where such number was fifteen or less, and (ii) to a number which exceeds by
more than four the number of directors last elected by shareholders where such
number was sixteen or more, but in no event shall the number of directors
exceed twenty-five.
<PAGE> 15
- 4 -
Section 3.3. Term of Office. Directors shall hold office until
the next annual meeting of shareholders and until their successors are duly
elected and qualified.
Section 3.4. Organization Meeting. The Secretary, upon
determining the result of any election, shall notify the directors-elect of
their election and request that the Board convene for the purpose of organizing
the new Board and electing officers of the Association for the succeeding year.
Such meeting shall be held on the day of the election or as soon thereafter as
practicable, and, in any event, within thirty days thereof. If, at the time
fixed for such meeting, there shall not be a quorum present, the directors
present may adjourn the meeting, from time to time, until a quorum is obtained.
Section 3.5. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places either within or without the State of
Florida and at such times as the Board may from time to time determine. Each
member of the Board shall be given notice stating the time and place by
telephone, letter, or in person.
Section 3.6. Special Meetings. Special meetings of the Board may
be called by the Chairman of the Association, or, upon the written request of
any two directors or by the President. Each member of the Board shall be given
notice stating the time and place, by telephone, letter, or in person. Special
meetings may be held either within or without the State of Florida as
determined by the Board.
<PAGE> 16
- 5 -
Section 3.7. Quorum. A majority of the directors shall constitute
a quorum at any meeting, except when otherwise provided by law; but a lesser
number may adjourn any meeting, from time to time, and the meeting may be held,
as adjourned, without further notice. Except as otherwise required by law, the
Articles of Association, or these By-laws, the vote of a majority of the
directors present at a meeting at the time of such vote, if a quorum is
present, shall be the act of the Board.
Section 3.8. Removal. Any one or more of the directors may be
removed for cause by action of the Board. Any or all of the directors may be
removed with or without cause by vote of the shareholders.
Section 3.9. Vacancies. When any vacancy occurs among the
directors, the remaining members of the Board, in accordance with the laws of
the United States, may appoint a director to fill such vacancy at any Regular
Meeting of the Board, at any Special Meeting of the Board or by Unanimous
Written Consent of the remaining members of the Board.
Section 3.10. Compensation. Members of the Board, except members
who are officers of the Association or any of its affiliates, shall be entitled
to receive such compensation and such fees for attendance as the Board shall
fix from time to time.
Section 3.11. Telephonic Participation. Directors may participate
in a meeting of the Board or any committee designated by the Board by means of
a conference telephone or similar communications equipment by means of which
all persons
<PAGE> 17
- 6 -
participating in the meeting can hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.
Section 3.12. Action Without a Meeting. Any action required to be
taken at a meeting of the Board or any action which may be taken at a meeting
of the Board or a committee thereof, may be taken without a meeting if a
consent in writing, setting forth the action so to be taken, signed by all of
the Directors, or all the members of the committee, as the case may be, is
filed in the minutes of the proceedings of the Board or of the committee. Such
consent shall have the same effect as a unanimous vote.
ARTICLE IV
Officers and Employees
Section 4.1. Chairman. The Board of directors shall appoint one
of its members to be Chairman of the Board. Such person shall preside at all
meetings of the Board of Directors; shall have general executive powers, as
well as specific powers conferred by these By-laws; shall, in the absence of
the Chief Executive Officer, perform all the duties of the Chief Executive
Officer; and shall also have and may exercise such further powers and duties as
from time to time may be conferred upon or assigned by the Board.
Section 4.2. Chief Executive Officer. The Board of Directors
shall appoint one of its members to be Chief Executive Officer of the
Association. The Chief Executive Officer shall
<PAGE> 18
- 7 -
supervise the carrying out of the policies adopted or approved by the Board;
shall be the senior and principal executive officer of the Association; shall
have general executive powers, as well as the specific powers conferred by
these By-laws; shall, in the absence of the Chairman, perform all the duties of
the Chairman; and shall also have and may exercise such further powers and
duties as from time to time may be conferred upon or assigned by the Board.
Section 4.3. President. The Board shall appoint one of its
members to be President of the Association. In the absence of the Chairman and
the Chief Executive Officer, the President shall preside at any meeting of the
Board. Subject to the senior executive powers of the Chief Executive Officer,
the President shall have general executive powers, and shall have and may
exercise any and all other powers and duties pertaining by law, regulation, or
practice, to the office of President, or imposed by these By-laws. The
President shall have and may exercise such further powers and duties as from
time to time may be conferred or assigned by the Board.
Section 4.4. Vice President. The Board may appoint one or more
Senior Vice Presidents and one or more Vice Presidents. Each Senior Vice
President or Vice President shall have such powers and duties as may be
assigned by the Board. One Senior Vice President shall be designated by the
Board, in the absence of the President, to perform all the duties of the
President.
<PAGE> 19
- 8 -
Section 4.5. Secretary. The Board shall appoint a person who
shall be Secretary of the Board and of the Association, and shall keep accurate
minutes of all meetings. The Secretary shall attend to the giving of all
notices required by these By-laws to be given; shall be custodian of the
corporate seal, records, documents and papers of the Association; shall provide
for the keeping of proper records of all transactions of the Association; shall
have and may exercise any and all other powers and duties pertaining by law,
regulation or practice, or imposed by these By-laws; and shall also perform
such other duties as may be assigned from time to time by the Board.
Section 4.6. Assistant Secretary. The Assistant Secretary or, if
there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
Section 4.7. Treasurer and Comptroller. The Board may appoint a
Treasurer and Comptroller, which offices may be filled by one person. The
Treasurer and Comptroller shall be responsible for the financial management and
reporting for the Association.
Section 4.8. Auditor. The Board may appoint an Auditor. The
Auditor shall be responsible for the auditing of the activities of the
Association.
<PAGE> 20
- 9 -
Section 4.9. Other Officers. The Board or the Chairman may
appoint one or more Assistant Vice Presidents, one or more Assistant
Secretaries or Assistant Treasurers and such other officers and
Attorneys-in-fact as from time to time may appear to the Board to be required
or desirable to transact the business of the Association. Such officers shall
respectively exercise such powers and perform such duties as pertain to their
several offices, or as may be conferred upon, or assigned to, them by the
Board, the Chairman of the Board, or the President. Any two or more offices
may be held by the same person.
Section 4.10. Tenure of Office. The President and all other
officers shall hold office for the current year for which the Board was
elected, unless they shall resign, become disqualified, or be removed; and any
vacancy occurring in the offices of the Chief Executive Officer or the
President shall be filled promptly by the Board.
ARTICLE V
Signing Authority
Section 5.1. Senior Signing Powers. The Chief Executive Officer
or the President are authorized to accept, endorse, execute or sign any
document, instrument or paper in the name of, or on behalf of, the Association
in its own right or in any fiduciary, representative or agency capacity and,
when required, to affix the seal of the Association thereto. In such instances
as in the judgment of the Chief Executive Officer or the President it may be
proper and desirable that either officer
<PAGE> 21
- 10 -
may authorize in writing any other officer to have the powers set forth in this
section applicable only to the performance or discharge of the duties of such
officer within his or her particular division or function. Any officer of the
Association authorized in or pursuant to Section 5.2 to have the powers set
forth therein, other than the officer signing pursuant to this Section 5.1, is
authorized to attest to the seal of the Association on any documents requiring
such seal.
Section 5.2. General Signing Powers. All acceptances;
authentications; bills of exchange; bills of lading; bills receivable;
certificates of deposit; certifications required for transfers and deliveries
of securities; certifications; checks; disclosure notices required by law;
documents required in connection with any Individual Retirement Account or
Keogh Plan or similar plan; drafts; endorsements; guarantees of signatures to
assignments of stock, bonds or other instruments; letters of credit; notes;
documents of any type required for the prosecution or defense of judicial,
regulatory or administrative proceedings; orders for the payment of money;
other instruments obligating the Association for the payment of money;
purchasing, investing in, selling, transferring, exchanging or otherwise
disposing of, and generally dealing in foreign currencies and in or with any
and all forms of securities, including but not limited to options and futures
thereon; receipts; and all accounts, petitions, schedules and verifications,
may be accepted, endorsed or signed in the name of, or on behalf of, the
Association in its own right or in any fiduciary, representative or agency
capacity by the Chief
<PAGE> 22
- 11 -
Executive Officer or the President. In such instances as in the judgment of
the Chief Executive Officer or the President, it may be proper and desirable
that either officer may authorize in writing any other officer, employee or
individual to have the powers set forth in this section applicable only to the
performance or discharge of the duties of such officer, employee or individual
within his or her division or function.
Section 5.3. Rescission of Signing Powers. Any signing authority
authorized by the Chief Executive Officer or the President may be rescinded at
any time by any one of said officers and any signing power authorized in or
pursuant to Section 5.1 or 5.2 shall terminate without necessity of further
action when the officer or employee having such power leaves the employ of the
Association.
ARTICLE VI
Trust Administration and Investment
Section 6.1. Trust Investment Committee. The Board shall appoint
a Trust Investment Committee of not less than three and not more than seven
members, who shall be capable and experienced officers or directors of the
Association. All investments of funds held in a fiduciary capacity shall be
made, retained or disposed of only with the approval of the Trust Investment
Committee; and the Committee shall keep minutes of all its meetings, showing
the disposition of all matters considered and passed upon by it. The Committee
shall, promptly after the
<PAGE> 23
- 12 -
acceptance of an account for which the Association has investment
responsibilities, review the assets thereof to determine the advisability of
retaining or disposing of such assets. The Committee shall conduct a similar
review at least once during each calendar year thereafter and within fifteen
months of the last such review. A report of all such reviews, together with
the action taken as a result thereof, shall be noted in the minutes of the
Committee.
Section 6.2. Trust Audit Committee. The Board shall appoint a
committee of not less than two Directors, exclusive of any active officer of
the Association, which shall, at least once during each calendar year and
within fifteen months of the last such audit, make suitable audits of the
fiduciary activities of the Association or cause suitable audits to be made by
auditors responsible only to the Board, and at such time shall ascertain
whether the fiduciary activities of the Association have been administered in
accordance with law, Part 9 of the Regulations of the Comptroller of the
Currency and sound fiduciary principles.
Section 6.3. Committees of the Board. In addition to the
Committees designated under Article VI of the By-laws, the Board may appoint,
from time to time, from its own members, other committees of one or more
persons, for such purposes and with such powers as the Board may determine.
Section 6.4. Trust Records. Files shall be maintained which
contain all fiduciary records necessary to assure that the fiduciary
responsibilities of the Association have been properly undertaken and
discharged.
<PAGE> 24
- 13 -
Section 6.5. Trust Investments. Funds held in a fiduciary
capacity shall be invested in accordance with the instrument establishing the
fiduciary relationship and local law. Where such instrument does not specify
the character and class of investments to be made and does not vest in the
Association a discretion in the matter, funds held pursuant to such instrument
shall be invested in investments in which corporate fiduciaries may invest
under local law.
ARTICLE VII
Stock and Stock Certificates
Section 7.1. Transfer. Shares of stock shall be transferable on
the books of the Association, and a transfer book shall be kept in which all
transfers of stock shall be recorded. Every person becoming a shareholder by
such transfer shall, in proportion to his shares, succeed to all rights of the
prior holder of such shares.
Section 7.2. Stock Certificates. Certificates of stock shall bear
the signature of the Chairman of the Board or the President (which may be
engraved, printed or impressed), and shall be signed manually or by facsimile
process by the Secretary, Assistant Secretary, or any other officer appointed
by the Board of Directors for that purpose, to be known as an Authorized
Officer, and the seal of the Association shall be engraved thereon. Each
certificate shall recite on its face that
<PAGE> 25
- 14 -
the stock represented thereby is transferable only upon the books of the
Association properly endorsed.
ARTICLE VIII
Corporate Seal
Section 8.1. The Chairman, the Chief Executive Officer, the
President, the Secretary or any Assistant Secretary, or other officers
thereunto designated by the Board, shall have authority to affix the corporate
seal to any document requiring such seal, and to attest the same.
ARTICLE IX
Miscellaneous
Section 9.1. Fiscal Year. The fiscal year of the Association
shall be the calendar year.
Section 9.2. Records. The Articles of Association, the By-laws
and the proceedings of all meetings of the shareholders, the Board and standing
committees of the Board, shall be recorded in appropriate minute books provided
for the purpose. The minutes of each meeting shall be signed by the Secretary
or Assistant Secretary or other officer appointed to act as Secretary of the
meeting.
Section 9.3. Inspection of By-laws. A copy of the By-laws, with
all amendments thereto, shall at all times be kept in a convenient place at the
Principal Office of the Association,
<PAGE> 26
- 15 -
and shall be open for inspection to all shareholders during banking hours.
Section 9.4. Amendments. The By-laws may be amended, altered or
repealed, at any meeting of the Board, by a vote of a majority of the total
number of the Directors.
<PAGE> 27
EXHIBIT 6
Before the
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned consents that reports of examinations by Federal,
State, Territorial, or District authorities, including but not limited to the
Treasury Department, the Comptroller of the Currency, the Board of Governors of
the Federal Reserve System, the Federal Reserve Banks, and the Federal Deposit
Insurance Corporation, may be furnished by such authorities to the Securities
and Exchange Commission upon request therefor.
Dated: March 13, 1995
THE BANK OF NEW YORK TRUST COMPANY
OF FLORIDA, NATIONAL ASSOCIATION
By:/s/ Martin P. Henry
----------------------
Name: Martin P. Henry
Title: Vice President
<PAGE> 28
EXHIBIT 7
- -----------------------------------------------------------------
REPORT OF CONDITION
Consolidating domestic subsidiaries of the
BNY TRUST CO. OF FLORIDA of MIAMI
in the state of Florida, at the close of business on December 31, 1994,
published in response to call made by
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
Statement of Resources and Liabilities
<S> <C> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency
and coin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,925
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,999
Securities:
Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,394
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . . 0
Loans and lease financing receivables:
Loans and leases, net of unearned
income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 . . . . . .
LESS: Allowance for loan and lease losses . . . . . . . . . . . . . . . . . . 0 . . . . . .
LESS: Allocated transfer risk reserve . . . . . . . . . . . . . . . . . . . . 0 . . . . . .
Loans and leases, net of unearned income,
allowance, and reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . . . . . 303
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Investments in unconsolidated subsidiaries and
associated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Customers' liability to this bank on acceptances
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 754
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,462
Losses deferred pursuant to 12 U.S.C. 1823(j) . . . . . . . . . . . . . . . . . . . . . . 0
Total assets and losses deferred pursuant to
12 U.S.C. 1823(j) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,462
Continued
</TABLE>
FDIC 8040/54C (3-90)
<PAGE> 29
- -------------------------------------------------------------------------------
BNY TRUST CO. OF FLORIDA
REPORT OF CONDITION (Continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
<S> <C> <C>
LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,443
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . 2,443 . . . . . .
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . 0 . . . . . .
Federal funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . 0
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . 0
Trading liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money:
With original maturity of one year or less . . . . . . . . . . . . . . . . . . . . . 0
With original maturity of more than one year . . . . . . . . . . . . . . . . . . . . 0
Mortgage indebtedness and obligations under
capitalized leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Bank's liability on acceptances executed
and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,799
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,242
Limited-life preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,150
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . . . 5,320
Net unrealized holding gains (losses) on available-
for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,220
Losses deferred pursuant to 12 U.S.C. 1823(j) . . . . . . . . . . . . . . . . . . . . . . 0
Total equity capital and losses deferred pursuant to
12 U.S.C. 1823(j) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,220
Total liabilities, limited-life preferred stock,
equity capital, and losses deferred pursuant to
12 U.S.C. 1823(j) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,462
</TABLE>
We, the undersigned directors, attest to the correctness of this
statement of resources and liabilities. We declare that it has been examined
by us, and to the best of our knowledge and belief has been prepared in
conformance with the instructions and is true and correct.
/s/Richard G. Jackson
----------------------
Richard G. Jackson
/s/Nicholas G. English
----------------------
Nicholas G. English
/s/Karen B. Shupenko
----------------------
Karen B. Shupenko
I, of the above-named bank do
hereby declare that this Report of Condition is true to the best of my
knowledge and belief.
/s/Robert E. Keilman
--------------------
Signature
<PAGE> 1
EXHIBIT 25.2
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a Trustee Pursuant to
Section 305(b) [_]
THE BANK OF NEW YORK TRUST COMPANY OF CALIFORNIA
(Exact name of trustee as specified in its charter)
California 95-3571558
(Jurisdiction of incorporation (I.R.S. employer
or organization if not identification number)
a U.S. national bank)
700 South Flower Street
Los Angeles, California 90017
(Address of principal executive offices) (Zip code)
Jacqueline R. McSwiggan
Office of the Secretary, The Bank of New York
48 Wall Street, New York, NY 10286
(212) 495-1727
(Name, address and telephone number of agent for service)
____________________________________
KMART CORPORATION
(Exact name of obligor as specified in its charter)
Michigan 38-0729500
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
3100 West Big Beaver Road
Troy, Michigan 48084
(Address of principal executive offices) (Zip code)
____________________________________
Pass Through Certificates
(Title of indenture securities)
==============================================================================
<PAGE> 2
1. GENERAL INFORMATION.
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
Name Address
---- -------
Federal Deposit Insurance 25 Ecker Street
Corporation San Francisco, CA 94105
State Banking Department 111 Pine Street, Suite 1100
San Francisco, CA 94111
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
None. (See Note on page 3)
16. LIST OF EXHIBITS.
1.1 Articles of Incorporation of Security Trust Company, as filed
in the office of the Secretary of State of the State of
California on November 13, 1980 and filed in the office of the
Superintendent of Banks, State of California on November 17,
1980.
1.2 Certificate of Amendment of Articles of Incorporation
(changing the name of the Trustee from Security Trust Company
to Bradford Trust Company of California), as filed in the
office of the Secretary of State of the State of California on
January 7, 1985.
1.3 Certificate of Amendment of Articles of Incorporation
(changing the name of the Trustee from Bradford Trust Company
of California to FIDATA Trust Company California), as filed in
the office of the Secretary of State of the State of
California on April 11, 1985.
1.4 Certificate of Amendment of Articles of Incorporation
(changing the name of the Trustee from FIDATA Trust Company
California to Wall Street Trust Company California), as filed
in the office of the Secretary of State of the State of
California on February 5, 1986.
1.5 Certificate of Amendment of Articles of Incorporation
(changing the name of the Trustee from Wall Street Trust
Company California to The Bank of New York Trust Company of
California), as filed in the office of the Secretary of State
of the State of California on April 15, 1988.
<PAGE> 3
3. Copy of Certificate of the State Banking Department, State of
California, dated January 24, 1994, authorizing the Trustee to
transact a commercial banking business and to engage in the
trust business at 700 South Flower Street, Los Angeles,
California.
4. Copy of By-Laws of the Trustee.
6. Consent of the Trustee required by Section 321(b) of the Act.
7. Copy of latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
2
<PAGE> 4
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
3
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York Trust Company of California, a corporation organized and existing under
the laws of the State of California, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Los Angeles, and State of California, on the
13th day of March, 1995.
THE BANK OF NEW YORK TRUST COMPANY
OF CALIFORNIA
By: /s/William F. Chambers
---------------------------
Name: William F. Chambers
Title: Assistant Vice President
4
<PAGE> 6
EXHIBIT 1.1
APPROVED
NOV 11 1980
Richard M. Dominguez
Superintendent of Banks
State of California
By /s/Alida R. Buchanan
Alida R. Buchanan
Counsel
ENDORSED
FILED
In the office of the Secretary of State
of the State of California
NOV 13 1980
MARCH FONG EU, Secretary of State
Leslie Glenn
Deputy
ARTICLES OF INCORPORATION
OF
SECURITY TRUST COMPANY
One: The name of the corporation is Security Trust Company.
Two: The purpose of the corporation is to engage in
commercial banking business and trust business and any other lawful activities
which are not, by applicable laws or regulations, prohibited to a commercial
bank authorized to engage in trust business; provided, however, that this
corporation shall not engage in the business of making commercial loans, nor
shall this corporation engage in the business of accepting deposits except for
deposits related to the securities clearance business of this corporation and
its affiliates, this corporation's business as acting as trustee or agent in
connection with individual retirement accounts or retirement, profit sharing or
other plans for corporations, partnerships or other business associations, or
other trust businesses in which this corporation may engage and except for
deposits from banks, trust companies or other companies affiliated with this
corporation.
Three: The name of the corporation's initial agent for
service of process is C T Corporation System, a corporation incorporated under
the laws of Delaware.
Four: The total number of shares which the corporation is
authorized to issue is one thousand (1,000).
<PAGE> 7
The shares of the corporation are subject to assessment by the corporation upon
order of the Superintendent of Banks of the State of California for the purpose
of correcting an impairment of contributed capital in the manner and to the
extent provided in Division 1 of the California Financial Code.
Five: No amendment to these Articles of Incorporation shall
become effective unless the certificate of amendment or other instrument
setting forth such amendment is filed with the Secretary of State with the
approval of the Superintendent of Banks of the State of California endorsed
thereon. Promptly after the amendment becomes effective, a copy of such
certificate of amendment or other instrument certified by the Secretary of
State shall be filed with the Superintendent of Banks.
IN WITNESS WHEREOF, the undersigned has executed these
Articles of Incorporation this 3rd day of November, 1980.
/s/Rodney R. Peck
--------------------
Rodney R. Peck
Incorporator
Rodney R. Peck declares that he is the person who executed the
foregoing Articles of Incorporation and that said instrument is his act and
deed.
/s/Rodney R. Peck
--------------------
<PAGE> 8
FILED
NOV 17 1980
Richard M. Dominguez
Superintendent of Banks
State of California
By /s/Alida R. Buchanan
Alida R. Buchanan
Counsel
STATE OF CALIFORNIA
OFFICE OF THE SECRETARY OF STATE
I, MARCH FONG EU, Secretary of State of the State of California hereby
certify:
That the annexed transcript has been compared with the record on file
in this office, of which it purports to be a copy, and that same is full, true
and correct.
IN WITNESS WHEREOF, I execute
this certificate and affix the Great
Seal of the State of California this
NOV 13 1980
[SEAL] /s/March Fong Eu
Secretary of State
<PAGE> 9
EXHIBIT 1.2
ENDORSED
APPROVED
JAN 3 - 1985
LOUIS CARTER
Superintendent of Banks
State of California
By /s/George W. Wright
ENDORSED
FILED
In the office of the Secretary of State
JAN 7 - 1985
MARCH FONG EU, Secretary of State
By JAMES E. HARRIS
Deputy
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
WILLIAM P. LYONS, JR. and WILLIAM J. WINKELMANN certify that:
1. They are the President and the Assistant Secretary,
respectively, of Security Trust Company, a California corporation.
2. Article One of the Articles of Incorporation of Security Trust
Company is amended to read as follows:
"One: The name of the corporation is Bradford Trust Company of
California."
3. The foregoing amendment of Articles of Incorporation has been
duly approved by the Board of Directors.
4. The foregoing amendment of Articles of Incorporation has been
duly approved by unanimous written consent of Security Trust Company's sole
shareholder pursuant to Section 603 of the California General Corporation Law.
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of our own knowledge.
Dated: December 10, 1984.
/s/Bill Lyons
-------------------------
President
/s/William J. Winkelmann
-------------------------
Assistant Secretary
<PAGE> 10
EXHIBIT 1.3
ENDORSED
APPROVED
APR 4 - 1985
LOUIS CARTER
Superintendent of Banks
State of California
By /s/George W. Wright
ENDORSED
FILED
In the office of the Secretary of State
APR 11 1985
MARCH FONG EU, Secretary of State
By JAMES E. HARRIS
Deputy
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
WILLIAM P. LYONS, JR. and WILLIAM J. WINKELMANN certify that:
1. They are the President and the Assistant Secretary,
respectively, of Bradford Trust Company of California, a California
corporation.
2. Article One of the Articles of Incorporation of Bradford Trust
Company of California is amended to read as follows:
"One: The name of the corporation is FIDATA Trust Company California."
3. The foregoing amendment of Articles of Incorporation has been
duly approved by the Board of Directors.
4. The foregoing amendment of Articles of Incorporation has been
duly approved by unanimous written consent of Bradford Trust Company of
California's sole shareholder pursuant to Section 603 of the California General
Corporation Law.
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of our own knowledge.
Dated: 2-20-85.
/s/Bill Lyons
------------------------
President
/s/William J. Winkelmann
------------------------
Assistant Secretary
<PAGE> 11
EXHIBIT 1.4
ENDORSED
APPROVED
FEB 3 - 1986
LOUIS CARTER
Superintendent of Banks
State of California
By /s/Diana H. Ashima
Counsel
ENDORSED
FILED
In the office of the Secretary of State
of the State of California
FEB 5 1986
MARCH FONG EU, Secretary of State
By JAMES E. HARRIS
Deputy
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
WILLIAM P. LYONS, JR., and WILLIAM J. WINKELMANN certify that:
1. They are the President and the Assistant Secretary,
respectively, of Fidata Trust Company California, a California corporation.
2. Article One of the Articles of Incorporation of Fidata Trust
Company California is amended to read as follows:
"One: The name of the corporation is Wall Street Trust Company
California."
3. The foregoing amendment of the Articles of Incorporation has
been duly approved by the Board of Directors.
4. The foregoing amendment of the Articles of Incorporation has
been duly approved by unanimous written consent of Fidata Trust Company
California's sole shareholder pursuant to section 603 of the California General
Corporation Law.
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of our own knowledge.
Dated: 2/3/86, at Los Angeles, California
/s/Bill Lyons
------------------------
President
/s/William J. Winkelmann
------------------------
Assistant Secretary
<PAGE> 12
EXHIBIT 1.5
ENDORSED
APPROVED
APR 12 1988
HOWARD GOULD
Superintendent of Banks
State of California
By /s/Joy Pepperman
Joy Pepperman
Counsel
ENDORSED
FILED
In the office of the Secretary of State
of the State of California
APR 15 1988
MARCH FONG EU, Secretary of State
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
WILLIAM P. LYONS, JR., and JACQUELINE R. MC SWIGGAN certify that:
1. They are the President and Secretary, respectively, of Wall
Street Trust Company California, a California corporation.
2. Article One of the Articles of Incorporation of Wall Street
Trust Company California is amended to read as follows:
"One: The name of the corporation is The Bank of New York Trust
Company of California."
3. The foregoing amendment of the Articles of Incorporation has
been duly approved by unanimous written consent of the Board of Directors of
Wall Street Trust Company California pursuant to section 307(b) of the
California General Corporation Law.
4. The foregoing amendment of the Articles of Incorporation has
been duly approved by written consent of the sole shareholder of Wall Street
Trust Company California pursuant to section 603 of the California General
Corporation Law.
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of our own knowledge.
Dated: February 26, 1988, at Los Angeles, California.
/s/Bill Lyons
---------------------------
President
Dated: February 22, 1988, at New York, New York.
/s/Jacqueline R. McSwiggan
---------------------------
Secretary
<PAGE> 13
EXHIBIT 3
No. 1321
STATE OF CALIFORNIA
STATE BANKING DEPARTMENT
WHEREAS, after due examination it appears that
THE BANK OF NEW YORK TRUST COMPANY OF CALIFORNIA
having its principal place of business in
THE CITY OF LOS ANGELES County of LOS ANGELES, State of California, has
complied with all the provisions of the Banking Law of the State of California,
and with all other necessary requirements of law relating thereto;
NOW, THEREFORE, I, the undersigned, Superintendent of Banks of the
State of California, do certify that said bank is qualified and is hereby
authorized to transact a COMMERCIAL banking business AND TO ENGAGE IN THE TRUST
BUSINESS at 700 SOUTH FLOWER STREET in THE CITY OF LOS ANGELES County of LOS
ANGELES State of California
[SEAL] IN TESTIMONY WHEREOF witness my hand and Seal this 24TH
day of JANUARY 1994 at San Francisco, California.
/s/J E Gilleran
Superintendent of Banks
State of California
<PAGE> 14
EXHIBIT 4
B Y - L A W S
of
THE BANK OF NEW YORK TRUST COMPANY OF CALIFORNIA
ARTICLE I
Head Office
Section 1. The head office for the transaction of
the business of the corporation is hereby fixed and located at
700 South Flower Street, 2nd fl., Los Angeles, California.
AMENDED The board of directors may change said head office from one
12/1/93 location to another with the written approval of the
Superintendent of Banks of the State of California.
Section 2. The board of directors may establish
and maintain one or more branch offices within the State of
California when authorized by the Superintendent of Banks of
the State of California.
ARTICLE II
Meetings of Shareholders
Section 1. All meetings of the shareholders shall
be held at any place within or without the State of California
which may be designated either by the board of directors or by
the written consent of all shareholders entitled to vote
thereat and not present at the meeting given either before or
after the meeting and filed with the secretary of the
corporation. In the absence of any such designation,
<PAGE> 15
2
shareholders' meetings shall be held at the head office of the
corporation.
Section 2. The annual meeting of the shareholders
of the corporation shall be held on the second Tuesday of
March of each year, at 10:00 A.M. of said day; provided,
however, that should said day fall upon a legal holiday, then
any such annual meeting of the shareholders shall be held at
the same time and place on the next business day thereafter
ensuing which is not a legal holiday. At such meeting,
directors shall be elected and any other proper business may
be transacted which is within the powers of the shareholders.
Written notice of each annual meeting shall be given to each
shareholder entitled to vote either personally or by
first-class mail or other means of written communication
(which includes, without limitation and wherever used in these
by-laws, telegraphic and facsimile communication), charges
prepaid, addressed to each shareholder at the address
appearing on the books of the corporation, or given by the
shareholder to the corporation for the purpose of notice. If
any notice or report addressed to the shareholder at the
address of such shareholder appearing on the books of the
corporation is returned to the corporation by the United
States Postal Service marked to indicate that the United
States Postal Service is unable to deliver the notice or
report to the shareholder at such address, all future notices
or reports shall be deemed to have been duly given without
further mailing
<PAGE> 16
3
if the same shall be available for the shareholder upon
written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from
the date of the giving of the notice or report to all other
shareholders. If no address of a shareholder appears on the
books of the corporation or is given by the shareholder to the
corporation, notice is duly given to him if sent by mail or
other means of written communication addressed to the place
where the principal executive office of the corporation is
located or if published at least once in a newspaper of
general circulation in the county in which said principal
executive office is located.
All such notices shall be given to each shareholder
entitled thereto not less than ten (10) days nor more than
sixty (60) days before each annual meeting. Any such notice
shall be deemed to have been given at the time when delivered
personally or deposited in the United States mail or delivered
to a common carrier for transmission to the recipient or
actually transmitted by the person giving the notice by
electronic means to the recipient or sent by other means of
written communication.
Such notices shall state:
(a) the place, date and hour of the meeting;
(b) those matters which the board, at the time of
the mailing of the notice, intends to present
for action by the shareholders;
<PAGE> 17
4
(c) if directors are to be elected, the names of
nominees intended at the time of the notice to
be presented by management for election;
(d) such other matters, if any, as may be
expressly required by statute.
Section 3. Special meetings of the shareholders
for the purpose of taking any action permitted to be taken by
the shareholders under the California General Corporation Law,
the California Banking Law and the articles of incorporation
of this corporation, may be called by the chairman of the
board or the president, or any vice president or by the board
of directors, or by the holders of shares entitled to cast not
less than ten per cent (10%) of the votes at the meeting.
Except in special cases where other express provision is made
by statute, notice of such special meetings shall be given in
the same manner and contain the same statements as required
for annual meetings of shareholders. Notice of any special
meeting shall also specify the general nature of the business
to be transacted, and no other business may be transacted at
such meeting.
Section 4. The presence in person or by proxy of
the holders of a majority of the shares entitled to vote at
any meeting shall constitute a quorum for the transaction of
business. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to transact
<PAGE> 18
5
business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a
majority of the shares required to constitute a quorum. In
the absence of a quorum, any meeting of shareholders may be
adjourned from time to time by the vote of a majority of the
shares represented either in person or by proxy, but no other
business may be transacted except as provided in the preceding
sentence.
Section 5. The affirmative vote of a majority of
the shares represented and voting at a duly held meeting at
which a quorum is present (which shares voting affirmatively
shall constitute at least a majority of the required quorum)
shall be the act of the shareholders except as may otherwise
be provided by (i) Section 4 of this Article II, (ii) the
cumulative voting provisions for the election of directors as
stated in this Section below, and (iii) the California General
Corporation Law, the California Banking Law or the articles of
incorporation of this corporation. Subject to the
requirements of the next sentence, every shareholder entitled
to vote at any election for directors may cumulate his votes
and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of votes
to which his shares are normally entitled, or distribute his
votes on the same principle among as many candidates as he
shall think fit.
<PAGE> 19
6
No shareholder shall be entitled to cumulate votes unless such
candidate or candidates' names have been placed in nomination
prior to the voting and the shareholder has given notice at
the meeting prior to the voting of the shareholder's intention
to cumulate his votes. If any one shareholder has given such
notice, all shareholders may cumulate their votes for
candidates in nomination. The candidates receiving the
highest number of votes of shares entitled to be voted for
them, up to the number of directors to be elected, shall be
elected.
Section 6. Any action which, under any provision
of the laws of the State of California, may be taken at a
meeting of the shareholders, may be taken without a meeting if
authorized by a writing signed by persons entitled to vote a
majority of the shares of the corporation, and filed with the
secretary of the corporation.
Section 7. Every person entitled to vote or
execute consents shall have the right to do so either in
person or by one or more agents authorized by a written proxy
executed by such person or his duly authorized agent and filed
with the secretary. Proxies shall be valid and shall be
exercised in accordance with the General Corporation Law,
Section 705 or successor section thereto.
ARTICLE III
Board of Directors
Section 1. Subject to the provisions of the
General Corporation Law, the California Banking Law and any
limitations
<PAGE> 20
7
in the articles of incorporation and these by-laws as to
action to be authorized or approved by the shareholders, the
business and affairs of the corporation shall be managed and
all corporate powers shall be exercised by or under the
direction of the board of directors.
Section 2. The authorized number of directors
shall not be less than five (5) nor more than nine (9). The
exact authorized number of directors shall be fixed from time
to time, within the limits specified in this Section by the
board of directors, or by a by-law or amendment thereof duly
adopted by the vote of a majority of the shares represented
and voting at a duly held meeting at which a quorum is present
(which shares voting affirmatively also constitute at least a
majority of the required quorum) or by the written consent of
the holders of a majority of the outstanding shares entitled
to vote, until changed by a duly adopted amendment to the
articles of incorporation or by an amendment to this by-law
adopted by approval of the outstanding shares. No amendment
shall be adopted reducing the minimum authorized number of
directors to a number less than five (5).
Subject to the foregoing provisions for changing the
authorized number of directors, the authorized number of
directors of this corporation shall be six (6).
Section 3. The directors shall be elected at each
annual meeting of shareholders, but if any such annual meeting
<PAGE> 21
8
is not held or the directors are not elected thereat, the
directors may be elected at any special meeting of
shareholders held for that purpose or by written consent.
Each director, including a director elected to fill a vacancy,
shall hold office until his successor is elected, except as
otherwise provided by statute.
Section 4. Each director upon taking office,
after the corporation's receipt of a Certificate of Authority
to transact business as a bank from the Superintendent of
Banks of the State of California, shall make an oath or
affirmation as required by Section 682 of the California
Financial Code or successor section thereto, and each such
oath, subscribed by the director and certified by the officer
before whom it is taken, shall be immediately filed with the
Superintendent of Banks of the State of California.
Section 5. Vacancies in the board of directors,
except for a vacancy created by the removal of a director, may
be filled by a majority of the directors then in office,
whether or not less than a quorum, or by a sole remaining
director.
ARTICLE IV
Meetings of Directors
Section 1. The board of directors may fix by
AMENDED resolution the time and place for the regular quarterly
8/21/86 meeting of the board without other notice than such
resolution. Notice
<PAGE> 22
9
of any change in the time or place of the regular quarterly
meeting shall be given to all of the directors in the same
manner as notice for special meetings of the board of
directors. Immediately following each annual meeting of the
shareholders there shall be a regular meeting of the board of
directors of the corporation at the place of said annual
meeting or at such other place as shall have been designated
by the board of directors for the purpose of organization,
election of officers and the transaction of other business.
Notice of regular meetings of the directors is hereby
dispensed with and no notice whatever of any such meeting need
be given, provided that notice of any change in the time or
place of regular meetings shall be given to all of the
directors in the same manner as notice for special meetings of
the board of directors. Each regular meeting of the directors
shall be held within the State of California. Any regular
meeting or special meeting is valid wherever held if held upon
written consent of all members of the board given either
before or after the meeting and filed with the Secretary of
the Corporation.
Section 2. Special meetings of the board of
directors may be held at any place which has been designated
in the notice of the meeting, or, if not designated in the
AMENDED notice of the meeting, or, if there is no notice, at the head
8/21/86 office of the corporation. Special meetings of the board of
directors for any purpose or purposes may be called at any
time by the
<PAGE> 23
10
chairman of the board or president or by any two directors.
Notice of the time and place of special meetings shall be
delivered personally or by telephone to each director, or sent
by first-class mail or telegram or facsimile transmission,
charges prepaid, addressed to him at his address as it appears
upon the records of the corporation or, if it is not so shown
on the records and is not readily ascertainable, at the place
at which the meetings of the directors are regularly held. In
case such notice is mailed, it shall be deposited in the
United States mail at least four (4) business days prior to
the time of the holding of the meeting. In case such notice
is telegraphed or sent by facsimile transmission, it shall be
delivered to a common carrier for transmission to the director
or actually transmitted by the person giving the notice by
electronic means to the director at least twenty-four (24)
hours prior to the time of the holding of the meeting. In
case such notice is delivered personally or by telephone as
above provided, it shall be so delivered at least twenty-four
(24) hours prior to the time of the holding of the meeting.
Any notice given personally or by telephone may be
communicated to either the director or to a person at the
office of the director whom the person giving the notice has
reason to believe will promptly communicate it to the
director. Such deposit in the mail, delivery to a common
carrier, transmission by electronic means or delivery,
personally or by telephone, as
<PAGE> 24
11
above provided, shall be due, legal and personal notice
to such directors. The notice need not specify the place of
the meeting if the meeting is to be held at the head office of
the corporation, and need not specify the purpose of the
meeting.
Each special meeting of the directors shall be held
within the State of California unless all directors have given
their written consent to the holding of the special meeting
outside the State, either before or after the meeting, and
each such consent has been filed with the Secretary.
RE-NUMBERED Section 3. Presence of a majority of the
8/21/86 authorized number of directors at a meeting of the board of
directors constitutes a quorum for the transaction of
business, except as hereinafter provided. Every act or
decision done or made by a majority of the directors present
at a meeting duly held at which a quorum is present shall be
regarded as the act of the board of directors, subject to the
provisions of Sections 310, 311 and 317 of the California
General Corporation Law. Members of the board may participate
in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating
in such meeting can hear one another. A meeting at which a
quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, provided that any
action taken is approved by at least a majority of the
required quorum for such meeting. A majority of the directors
present, whether or not a quorum is
<PAGE> 25
12
present, may adjourn any meeting to another time and place.
If the meeting is adjourned for more than twenty-four (24)
hours, notice of any adjournment to another time or place
shall be given prior to the time of the adjourned meeting to
the directors who were not present at the time of the
adjournment.
RE-NUMBERED Section 4. Notice of a meeting need not be given
8/21/86 to any director who signs a waiver of notice or consent to
holding the meeting or an approval of the minutes thereof,
whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director. All such
waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the
meeting.
RE-NUMBERED Section 5. Any action required or permitted to be
8/21/86 taken by the board of directors may be taken without a meeting
if all members of the board shall individually or collectively
consent in writing to such action. Such written consent or
consents shall be filed with the minutes of the proceedings of
the board. Such action by written consent shall have the same
force and effect as a unanimous vote of such directors.
RE-NUMBERED Section 6. The provisions of this Article IV shall
8/21/86 also apply, with necessary changes in points of detail, to
committees of the board of directors, if any, and to actions
by such committees (except that regular meetings of committees
shall be established by the committee and except that special
<PAGE> 26
13
meetings of a committee may also be called at any time by any
two members of the committee), unless otherwise provided by
these by-laws or by the resolution of the board of directors
designating such committees. For such purpose, references to
"the board" or "the board of directors" shall be deemed to
refer to each such committee and references to "directors" or
"members of the board" shall be deemed to refer to members of
the committee. Committees of the board of directors which
have the authority of the board may be designated, and shall
be subject to the limitations on their authority, as provided
in Section 311 of the California General Corporation Law or
successor section thereto. The appointment of members or
alternate members of such a committee requires the vote of a
majority of the authorized number of directors.
RE-NUMBERED Section 7. Directors and members of committees
8/21/86 may receive such compensation, if any, for their services, and
such reimbursement for expenses, as may be fixed or determined
by resolution of the board.
ARTICLE V
Officers
Section 1. The officers of the corporation shall
be a chairman of the board or a president, or both, an
AMENDED auditor, a secretary, and a treasurer, who shall also be the
8/21/86 chief financial officer of the corporation. The corporation
may also have, at the discretion of the board of directors,
one or more
<PAGE> 27
14
vice chairmen of the board, one or more senior executive vice
presidents, one or more executive vice presidents, one or more
senior vice presidents, one or more vice presidents, one or
more assistant vice presidents, one or more deputy
secretaries, one or more assistant treasurers, a comptroller,
one or more deputy comptrollers, a cashier, one or more
assistant cashiers, one or more trust officers, one or more
assistant trust officers, and such other officers as may be
designated from time to time by the board of directors. Any
number of offices may be held by the same person. The
officers shall be elected by the board of directors and shall
hold office at the pleasure of such board.
Chairman of the Board
Section 2. The chairman of the board shall, if
present, preside at all meetings of the board of directors and
of the shareholders and exercise and perform such other powers
and duties as may be from time to time assigned to him by the
board of directors or prescribed by the by-laws. The chairman
of the board shall, in addition, be the general manager and
chief executive officer of the corporation and shall, subject
to the control of the board of directors, have general
supervision, direction and control of the business and
officers of the corporation.
President
Section 3. In the absence or disability or
refusal to act, of the chairman of the board, the president
shall perform
<PAGE> 28
15
all of the duties of the chairman and when so acting shall
have all the powers of and be subject to all the restrictions
upon the chairman. The president shall have such further
powers and shall perform such further duties as may be
prescribed for him by the board of directors.
Vice Presidents
Section 4. In the absence or disability or
refusal to act of the chairman of the board, or the president,
the vice presidents in order of their rank as fixed by the
board of directors, or, if not ranked, the vice president
designated by the president or the board of directors, shall
perform all of the duties of the chairman and when so acting
shall have all the powers of and be subject to all the
restrictions upon the chairman. The vice presidents shall
have such other powers and perform such other duties as from
time to time may be prescribed for them, respectively, by the
board of directors or the by-laws.
Secretary
Section 5. The secretary shall keep or cause to
be kept at the head office of the corporation or such other
place as the board of directors may order, a book of minutes
of all proceedings of the shareholders, the board of directors
and committees of the board, with the time and place of
holding, whether regular or special, and if special how
authorized, the notice thereof given, the names of those
present at directors'
<PAGE> 29
16
and committee meetings, and the number of shares present or
represented at shareholders' meetings. The secretary shall
keep or cause to be kept at the head office a record of
shareholders or a duplicate record of shareholders showing the
names of the shareholders and their addresses, the number of
shares and classes of shares held by each, the number and date
of certificates issued for the same and the number and date of
cancellation of every certificate surrendered for
cancellation. The secretary or an assistant secretary, or, if
they are absent or unable or refuse to act, any other officer
of the corporation, shall give or cause to be given notice of
all the meetings of the shareholders, the board of directors
and committees of the board required by the by-laws or by law
to be given, and he shall keep the seal of the corporation, if
any, in safe custody and shall have such other powers and
perform such other duties as may be prescribed by the board of
directors or by the by-laws.
Section 6. It shall be the duty of the assistant
secretaries to assist the secretary in the performance of his
duties and generally to perform such other duties as may be
delegated to them by the board of directors.
Section 7. The treasurer shall be the chief
financial officer of the corporation and shall keep and
maintain, or cause to be kept and maintained, adequate and
correct books and records of account of the corporation. He
shall receive and
<PAGE> 30
17
deposit all moneys and other valuables belonging to the
corporation in the name and to the credit of the corporation
and shall disburse the same only in such manner as the board
of directors or the appropriate officers of the corporation
may from time to time determine, shall render to the president
and the board of directors, whenever they request it, an
account of all his transactions as treasurer and of the
financial condition of the corporation, and shall perform such
further duties as the board of directors may require.
Section 8. It shall be the duty of the assistant
treasurers to assist the treasurer in the performance of his
duties and generally to perform such other duties as may be
delegated to them by the board of directors.
Section 9. Any officer may be removed, either
with or without cause, by the board of directors, at any
regular or special meeting thereof, or by any officer upon
whom such power of removal may be conferred by the board of
directors. Any officer may resign at any time by giving
written notice to the board of directors, the president, or
the secretary. Resignations shall take effect at the date of
receipt of notice thereof, or at any later time specified
therein; and, unless otherwise specified therein, the
acceptance of a resignation shall not be necessary to make it
effective.
Section 10. A vacancy in any office because of
death, resignation, removal, disqualification, or any other
cause
<PAGE> 31
18
shall be filled in the manner prescribed in the by-laws for
regular appointments to that office.
ARTICLE VI
Annual Report
Section 1. So long as the corporation shall have
fewer than one hundred (100) shareholders of record
(determined as provided in Section 605 of the California
General Corporation Law), the requirement of Section 1501 of
said law that an annual report be sent to the shareholders is
expressly waived.
ARTICLE VII
As Amended Signing Authorities
June 1, 1987
Section 1. Real property owned by the Corporation
in its own right shall not be deeded, conveyed, mortgaged,
assigned or transferred except when duly authorized by a
resolution of the Board of Directors. The Board of Directors
may from time to time authorize officers to deed, convey,
mortgage, assign or transfer real property owned by the
Corporation in its own right with such maximum values as the
Board of Directors may fix in its authorizing resolution.
Section 2. Subject to the exception provided in
Section 1 of this Article, the Chairman, the President, any
Vice Chairman of the Board of Directors, any Senior Executive
Vice President, any Executive Vice President or any Senior
Vice President is authorized to accept, endorse, execute or
sign any document, instrument or paper in the name of, or on
behalf of,
<PAGE> 32
19
the Corporation in its own right or in any fiduciary,
representative or agency capacity and, when required, to affix
the seal of the Corporation thereto. In such instances as in
the judgment of the Chairman, the President, any Vice Chairman
of the Board of Directors, any Senior Executive Vice President
or any Executive Vice President may be proper and desirable,
any one of said officers may authorize in writing any other
officer to have the powers set forth in this section
applicable only to the performance or discharge of the duties
of such officer within his or her particular division or
function. Any officer of the Corporation authorized in or
pursuant to Section 3 of this Article to have the powers set
forth therein, other than the officer signing pursuant to this
Section 2 of this Article, is authorized to attest to the seal
of the Corporation on any documents requiring such seal.
Section 3. All acceptances; authentications;
bills of exchange; bills of lading; bills receivable;
certificates of deposit; certifications required for transfers
and deliveries of securities; certifications; checks;
disclosure notices required by law; documents required in
connection with any Individual Retirement Account or Keogh
Plan or similar plan; drafts; endorsements; guarantees of
signatures to assignments of stock, bonds or other
instruments; letters of credit; notes; documents of any type
required for the prosecution or defense of judicial,
regulatory or administrative proceedings; orders for the
payment of money; other instruments obligating the Corporation
for the payment of money; purchasing, investing in,
<PAGE> 33
20
selling, transferring, exchanging or otherwise disposing of,
and generally dealing in foreign currencies and in or with any
and all forms of securities, including but not limited to
options and futures thereon; receipts; and all accounts,
petitions, schedules and verifications, may be accepted,
endorsed or signed in the name of, or on behalf of, the
Corporation in its own right or in any fiduciary,
representative or agency capacity by the Chairman, the
President, any Vice Chairman of the Board of Directors, any
Senior Executive Vice President, any Executive Vice President
or any Senior Vice President. In such instances as in the
judgment of the Chairman, the President, any Vice Chairman of
the Board of Directors, any Senior Executive Vice President or
any Executive Vice President may be proper and desirable, any
one of said officers may authorize in writing any other
officer, employee or individual to have the powers set forth
in this section applicable only to the performance or
discharge of the duties of such officer, employee or
individual within his or her division or function.
Section 4. The Auditor or any officer designated
by the Auditor is authorized to certify in the name of, or on
behalf of the Corporation, in its own right or in a fiduciary
or representative capacity, as to the accuracy and
completeness of any account, schedule of assets, or other
document, instrument or paper requiring such certification.
<PAGE> 34
21
Section 5. Any signing authority authorized by
the Chairman, the President, any Vice Chairman of the Board of
Directors, any Senior Executive Vice President or any
Executive Vice President may be rescinded at any time by any
one of said officers and any signing power authorized in or
pursuant to Sections 1, 2 or 3 of this Article shall terminate
without necessity of further action when the officer or
employee having such power leaves the employ of the
Corporation.
RE-NUMBERED ARTICLE VIII
8/21/86
Amendments
Section 1. New by-laws may be adopted or these
by-laws may be amended or repealed by the affirmative vote or
written consent of a majority of the outstanding shares
entitled to vote, except as otherwise provided by law or by
the articles of incorporation or these by-laws.
Section 2. Subject to the right of shareholders
as provided in Section 1 of this Article to adopt, amend or
repeal by-laws, and except as otherwise provided by law or by
the articles of incorporation, by-laws, other than a by-law or
amendment thereof changing the maximum or minimum number of
directors, may be adopted, amended or repealed by the board of
directors.
Section 3. Any amendment to these by-laws shall
become effective only when approved by the Superintendent of
Banks of the State of California and when a copy thereof,
certified by the secretary of this corporation has been filed
with the Superintendent.
<PAGE> 35
EXHIBIT 6
Before the
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned consents that reports of examinations by Federal,
State, Territorial, or District authorities, including but not limited to the
Treasury Department, the Comptroller of the Currency, the Board of Governors of
the Federal Reserve System, the Federal Reserve Banks, and the Federal Deposit
Insurance Corporation, may be furnished by such authorities to the Securities
and Exchange Commission upon request therefor.
Dated: March 13, 1995
THE BANK OF NEW YORK TRUST COMPANY
OF CALIFORNIA
By:/s/William F. Chambers
----------------------------
Name:
Title:
<PAGE> 36
EXHIBIT 7
Consolidated Report of Condition of
"THE BANK OF NEW YORK TRUST COMPANY OF CALIF."
- ----------------------------------------------
(Legal title of bank)
of Los Angeles, Los Angeles,
- ----------------------------
(City) (County)
and Domestic _____________________ Subsidiaries
at the close of business on 12-31, 1994. State Bank No. 1321
<TABLE>
<CAPTION>
ASSETS Dollar Amounts in Thousands
<S> <C> <C> <C>
1. Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . 195 1.
2. a. Securities, held-to-maturity . . . . . . . . . . . . . . . . . . 2,228 2a.
b. Securities, available for sale . . . . . . . . . . . . . . . . . 0 2b.
3. Trading account securities . . . . . . . . . . . . . . . . . . . . 0 3.
4. Federal funds sold and securities purchased under
agreements to resell in domestic offices . . . . . . . . . . 23,280 4.
5. a. Loans, Total (excluding unearned income) . . . . . . . . . . . . 0 5a.
b. Less: Allowance for possible loan losses . . . . . . . . . . . . 0 5b.
c. Loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 5c.
6. Bank premises, F.F.& E. (including $0 capitalized leases) . . . . . 214 6.
7. Real estate owned other than bank premises . . . . . . . . . . . . 0 7.
8. Investments in unconsolidated subsidiaries and
associated companies . . . . . . . . . . . . . . . . . . . . 0 8.
9. Customers' liability to this bank on acceptances
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . 0 9.
10. Other assets (including $0 intangible) . . . . . . . . . . . . . . 1,338 10.
------
11. TOTAL ASSETS (sum of items 1 thru 10) . . . . . . . . . . . . . . . 27,255 11.
======
LIABILITIES
12. a. TOTAL DEPOSIT IN DOMESTIC OFFICES . . . . . . . . . . . . . . . 3,536 12a.
(1) Total demand deposits . . . . . . . . . . . . . . . . . 881 (1)
(2) Total time and savings deposits . . . . . . . . . . . . 2,655 (2)
b. TOTAL DEPOSITS IN FOREIGN OFFICES . . . . . . . . . . . . . . . 0 12b.
c. TOTAL DEPOSITS IN DOMESTIC AND FOREIGN
OFFICES (sum of items 13a & b) . . . . . . . . . . . . . 3,536 12c.
13. Federal funds purchased and securities sold under
agreements to repurchase in domestic offices . . . . . . . . 0 13.
14. Other liabilities for borrowed money, including
note balances of U.S. Treasury . . . . . . . . . . . . . . . 0 14.
15. Mortgage indebtedness (including $0 capital leases) . . . . . . . 0 15.
16. Acceptances executed by or for account of this
bank and outstanding . . . . . . . . . . . . . . . . . . . . 0 16.
17. Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 3,785 17.
------
18. TOTAL LIABILITIES (excluding subordinated notes
and debentures . . . . . . . . . . . . . . . . . . . . . . . 7,321 18.
======
19. Subordinated notes and debentures . . . . . . . . . . . . . . . . 0 19.
SHAREHOLDER'S EQUITY
20. Preferred stock
a. No. shares outstanding 0 Amount . . . . . . . . . . . . . 0 20.
21. Common stock
a. No. shares authorized 1,000 21a.
b. No. shares outstanding 1,000 Amount . . . . . . . . . . . . . 1,000 21b.
22. Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,074 22.
23. TOTAL CONTRIBUTED CAPITAL (sum of items 21, 22 & 23) . . . . . . . 14,074 23.
24. a. Undivided profits and capital reserves . . . . . . . . . . . . 5,860 24a.
b. Net unrealized gain (loss) on available for sale securities . . 0 24b.
25. Cumulative foreign currency translation adjustment . . . . . . . . 0 25.
26. TOTAL SHAREHOLDER'S EQUITY (sum of items 23, 24 & 25) . . . . . . 19,934 26.
------
27. TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY . . . . . . . . . . . . 27,255 27.
======
MEMORANDUM: AMOUNT OUTSTANDING AS OF REPORT DATE
Standby letters of credit . . . . . . . . . . . . . . . . . . . . 0
</TABLE>
The undersigned,
James L. Birdwell, President and William J. Winkelmann, Vice Pres.
---------------------------- ----------------------------------
(Name and Title) (Name and Title)
<PAGE> 37
of the above-named bank, each declares for himself alone and not for the other:
I have personal knowledge of the matters contained in this report and I believe
that each statement in said report is true. Each of the undersigned, for
himself alone and not for the other, certifies under penalty of perjury that
the foregoing is true and correct.
Executed on 1-25-95, at Los Angeles, California
------- -----------
(Date) (County)
/s/James L. Birdwell /s/William J. Winkelmann
- ----------------------- ----------------------------
(Signature) (Signature)
