<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 7, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
KMART CORPORATION
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN 38-0729500
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
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:
ERIK J. STONE JOEL S. KLAPERMAN
CYNTHIA A. MOORE SHEARMAN & STERLING
DICKINSON, WRIGHT, MOON, 599 LEXINGTON AVENUE
VAN DUSEN & FREEMAN NEW YORK, NEW YORK 10022
500 WOODWARD AVENUE, SUITE 4000
DETROIT, MICHIGAN 48226
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable following 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. [_]
----------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH SERIES OF AMOUNT OF
SECURITIES TO BE AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM REGISTRATION
REGISTERED REGISTERED OFFERING PRICE AGGREGATE OFFERING PRICE(1) FEE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pass Through Certifi-
cates................... $210,000,000 100% $210,000,000 $72,414
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for purpose of calculating the registration fee.
----------------
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 SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject To Completion)
Issued June 7, 1995
$210,000,000
Kmart Corporation
1995-K Pass Through Trusts
PASS THROUGH CERTIFICATES, 1995-K3 AND 1995-K4
----------
Each Certificate offered hereby will represent a fractional undivided
interest in one of two Kmart Corporation 1995-K Pass Through Trusts (the "Pass
Through Trusts") to be formed pursuant to two separate pass through trust
agreements between Kmart Corporation ("Kmart") and Shawmut Bank Connecticut,
National Association (the "Trustee"), as trustee of each Pass Through Trust.
The property of each Pass Through Trust will consist of mortgage notes (the
"Mortgage Notes") issued on a non-recourse basis by certain owner trustees (the
"Owner Trustees") of four separate owner trusts in connection with 18 separate
leveraged lease transactions to finance not more than 90% of the cost to each
Owner Trustee of its interest in certain land and improvements described herein
(each such interest being a "Property" and collectively, the "Properties")
which will be leased to Kmart.
The Mortgage Notes in respect of each Property will be issued in two series.
Each Pass Through Trust will purchase one series of the Mortgage Notes issued
with respect to each Property such that all of the Mortgage Notes held in each
Pass Through Trust will have an interest rate corresponding to the interest
rate applicable to the Certificates issued by such Pass Through Trust. The
maturity dates of the Mortgage Notes acquired by each Pass Through Trust will
occur on or before the final distribution date applicable to the Certificates
issued by such Pass Through Trust. The Mortgage Notes with respect to each
Property will be secured by a mortgage of the related Owner Trustee's interest
in such Property and by an assignment of certain of such Owner Trustee's rights
under the lease related thereto, including the right to receive rent and
certain other amounts payable by Kmart thereunder. Although neither the
Certificates nor the Mortgage Notes are direct obligations of, or guaranteed
by, Kmart, the amounts unconditionally payable by Kmart under each lease will
be sufficient to pay in full when due all payments required to be made on the
related Mortgage Notes held in the Pass Through Trusts.
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
2 and July 2 of each year, commencing January 2, 1996, at the rate per annum
set forth below applicable to such Pass Through Trust until the final
distribution date for such Pass Through Trust set forth below. Principal
payments on the Mortgage Notes held in Pass Through Trusts 1995-K3 and 1995-K4
will be passed through to the Certificateholders of each such Pass Through
Trust in scheduled amounts on January 2 or July 2, or both, of each year,
commencing on the initial scheduled principal distribution date, and continuing
until the final distribution date, for such Pass Through Trust set forth below.
For circumstances under which distributions to the Certificateholders may be
made prior to the applicable final distribution date, see "Description of the
Certificates--Payments and Distributions".
----------
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
PASS THROUGH PRINCIPAL INTEREST PRINCIPAL FINAL PRICE TO
CERTIFICATES AMOUNT RATE DISTRIBUTION DATE DISTRIBUTION DATE PUBLIC(1)(2)
- ------------ --------- -------- ----------------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
1995-K3 $ % 100%
1995-K4 100
</TABLE>
- -----
(1) Plus accrued interest, if any, at the applicable interest rate from ,
1995.
(2) The underwriting commission varies by Pass Through Trust and aggregates
$ , which constitutes % of the 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 Trustees). All of the proceeds from the
sale of the Certificates will be used to purchase the Mortgage Notes from
the Owner Trustees.
----------
The Certificates are offered by the Underwriters, subject to prior sale,
when, as and if accepted by the Underwriters, and subject to approval of
certain legal matters by Shearman & Sterling, counsel for the Underwriters. It
is expected that delivery of the Certificates in book-entry form will be made
on or about , 1995 through the facilities of The Depository Trust Company,
against payment therefor in immediately available funds.
----------
MORGAN STANLEY & CO. GOLDMAN, SACHS & CO.
Incorporated
June , 1995
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
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......................................................... 4
The Company................................................................ 9
Selected Financial Information............................................. 10
Use of Proceeds............................................................ 11
Structure of the Transaction............................................... 11
The Properties............................................................. 12
Diagram of Payments........................................................ 13
Description of the Certificates............................................ 14
Description of the Mortgage Notes.......................................... 26
Description of the Leases.................................................. 35
Certain Federal Income Tax Consequences.................................... 41
Certain Connecticut Taxes.................................................. 44
ERISA Considerations....................................................... 44
Underwriting............................................................... 46
Rating..................................................................... 46
Legal Opinions............................................................. 47
Experts.................................................................... 47
Appendix--Glossary of Certain Terms........................................ A-1
</TABLE>
----------------
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>
AVAILABLE INFORMATION
Kmart Corporation ("Kmart" or the "Company") is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information can be inspected and
copied at prescribed rates 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 Seven 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, the
Chicago Stock Exchange, 440 South LaSalle Street, Chicago, IL 60605 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, Shawmut Bank
Connecticut, National Association, as trustee for the holders of the
Certificates with respect to each Pass Through Trust, will provide to
participants in The Depository Trust Company certain periodic statements
concerning distributions made with respect to such Pass Through Trust. 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. Kmart's Annual Report on Form 10-K for the fiscal year ended January 25,
1995;
2. Kmart's Quarterly Report on Form 10-Q filed June 6, 1995; and
3. Kmart's Current Reports on Form 8-K filed April 11, 1995 and April 27,
1995.
All documents filed by Kmart 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 offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the date of filing of such documents.
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 herein modifies or replaces such statement. Any such
statement so modified or superseded shall not be deemed to constitute a part of
this Prospectus, except as so modified or superseded.
Kmart 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 directed to the Corporate
Reporting Department, Kmart Corporation, 3100 West Big Beaver Road, Troy, MI
48084 (telephone no. (810) 643-1093).
3
<PAGE>
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, the U.S. Virgin Islands, Guam,
Canada, the Czech Republic and Slovakia and has entered into joint ventures in
Mexico and Singapore. See "The Company".
THE OFFERING
Glossary.................. Included at the end of this Prospectus as an
Appendix is a Glossary of certain of the
significant defined terms used herein.
Pass Through Trusts....... Each of the two Kmart Corporation 1995-K Pass
Through Trusts (the "1995-K3 Trust" and the "1995-
K4 Trust", each, 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
Shawmut Bank Connecticut, National Association, as
trustee thereunder (the "Trustee"). 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 the Owner Trustees
(collectively, the "Owner Trustees") to finance
not more than 90% of the cost to the applicable
Owner Trustee of acquiring one or more of 18
Properties, which will be leased to Kmart
concurrently with the issuance of the Mortgage
Notes (collectively, the "Sale-Leaseback
Transactions"). Each Pass Through Trust will
acquire pursuant to the related Agreement those
Mortgage Notes having an interest rate
corresponding to the interest rate applicable to
the Certificates that will be issued by such Pass
Through Trust. The maturity dates of the Mortgage
Notes acquired by each Pass Through Trust will
occur on or before the final distribution date
applicable to the Certificates issued by 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 issued by such Pass Through
Trust. See "Structure of the Transaction" and
"Description of the Certificates--General".
Pass Through Certificates
Offered; Book-Entry
Registration.............. Each Certificate will represent a fractional
undivided interest in the related Pass Through
Trust. The Certificates will be issued in fully
registered form only and will be registered in the
name of Cede & Co. ("Cede"), as nominee of The
Depository Trust Company ("DTC"). No person
acquiring an interest in the Certificates will
4
<PAGE>
be entitled to receive a definitive certificate
representing such person's interest in the related
Pass Through Trust, except in the event that
definitive 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 only in integral
multiples of $1,000.
Regular Distribution
Dates..................... January 2 and July 2, commencing January 2, 1996.
Special Distribution
Dates..................... The second day of any month.
Record Dates.............. The fifteenth day preceding a Regular Distribution
Date or a Special Distribution Date.
Initial Average Life
Dates..................... The initial average life dates for Certificates
issued by the 1995-K3 Trust and the 1995-K4 Trust
are as follows:
Pass Through
Trust Date
------------ ----
1995-K3
1995-K4
The average life dates for the Certificates will
change after principal payments of the Mortgage
Notes held in the related Pass Through Trust
commence.
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 Regular Distribution Dates
referred to above, except in certain cases where
such Mortgage Notes have been redeemed or are in
default. Scheduled payments of principal and
interest on the Mortgage Notes held in each Pass
Through Trust are scheduled to be received on such
Regular Distribution Dates, and to be distributed
to the holders of Certificates evidencing
interests in such Pass Through Trust on the
corresponding Regular Distribution Dates. Payments
of principal of, premium, if any, and interest on
the Mortgage Notes held in any 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 after not less than 20 days'
notice from the Trustee to the holders of
Certificates evidencing interests in such Pass
Through Trust. For a discussion of distributions
upon an Indenture Default, see "Description of the
Certificates--Payments and Distributions".
Special Distribution Upon
Unavailability of Trust
Property.................. To the extent that any proceeds from the sale of
Certificates have not been used by the Trustee by
July , 1995 to purchase the Mortgage Notes that
are contemplated to be held in the Pass
5
<PAGE>
Through Trusts, such proceeds shall be distributed
on September 2, 1995 to the Certificateholders on
a pro rata basis, together with accrued interest
thereon, but without premium. See "Description of
the Certificates--Special Distribution Upon
Unavailability of Trust Property".
Method of Distribution.... So long as the Certificates are registered in the
name of Cede, as nominee of DTC, and are held by
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 participants in DTC ("DTC
Participants") holding positions in the
Certificates evidencing interests in such Pass
Through Trust in clearinghouse or next-day funds
and which will at the end of the month of payment
reimburse such DTC Participants for the cost of
obtaining same-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--Same Day
Settlement and Payment" and "--Book-Entry
Registration".
Interest.................. Interest will be passed through to the holders of
Certificates of each Pass Through Trust on each
January 2 and July 2, commencing January 2, 1996,
at the rate per annum indicated on the cover page
hereof for such Pass Through Trust, on the unpaid
principal of the Mortgage Notes held in such Pass
Through Trust.
Principal................. 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 and Interest Payments".
Prepayment of Mortgage
Notes at a Premium....... (a) All of the Mortgage Notes issued with respect
to any Property may under certain circumstances be
redeemed at any time at a redemption price equal
to the unpaid principal amount of the Mortgage
Notes to be redeemed plus accrued but unpaid
interest thereon (the "Redemption Price") plus, if
such redemption is made prior to the respective
dates set forth below (each, a "Premium
Termination Date"), a Make-Whole Premium, if any.
Pass Through
Trust Date
------------ ----
1995-K3
1995-K4
See "Description of the Mortgage Notes--Redemption"
for a description of the circumstances under which
such redemptions may occur and of the manner of
computing the Make-Whole Premium.
6
<PAGE>
(b) If under any Indenture an Indenture Default
arising from a Lease Event of Default shall have
occurred and be continuing for a period of 180
days or more (but less than 270 days) during which
period the Mortgage Notes outstanding under such
Indenture could, but shall not, have been
accelerated nor shall the Indenture Trustee have
given notice of its intent to accelerate such
Mortgage Notes, the applicable Owner Trustee may
elect to redeem or purchase all of such Mortgage
Notes at a price equal to the Redemption Price
plus any other amounts then due and payable with
respect to such Mortgage Notes, plus, if such
purchase is made prior to the applicable Premium
Termination Date, a Make-Whole Premium, if any.
See "Description of the Mortgage Notes--
Redemption".
Payment of Mortgage Notes
at Par................... (a) The Mortgage Notes relating to a Property will
be subject to redemption, in whole, upon the
occurrence of an Event of Loss with respect to
such Property and if Kmart has not exercised its
right of substitution, at a price equal to the
Redemption Price plus any amounts then due and
payable with respect to such Mortgage Notes, but
without premium.
(b) If under any Indenture (i) an Indenture Default
arising from a Lease Event of Default shall have
occurred and be continuing for a period of 270
days or more during which time the Mortgage Notes
outstanding under such Indenture have not been
accelerated or (ii) the Indenture Trustee shall
have given notice of its intent to accelerate such
Mortgage Notes, the related Owner Trustee may
elect to redeem or purchase all of such Mortgage
Notes at a price equal to the Redemption Price
plus any other amounts then due and payable with
respect to such Mortgage Notes, but without
premium.
See "Description of the Mortgage Notes--
Redemption".
Security.................. Mortgage Notes will initially be issued by an Owner
Trustee under a separate trust indenture, as
supplemented by a mortgage, deed of trust,
assignment of leases and rents, security
agreement, financing statement and supplemental
indenture (as so supplemented, an "Indenture")
with respect to each Property. The Mortgage Notes
issued pursuant to each Indenture will be secured
by (i) an assignment to the Indenture Trustee of
certain of the related Owner Trustee's rights
under the related Lease, including the right to
receive rentals and certain other amounts payable
thereunder by Kmart, (ii) a first mortgage lien on
the Improvements and Estate for Years (each as
hereinafter defined) acquired by such Owner
Trustee and leased to Kmart, subject to the rights
of Kmart under the related Lease, and (iii) the
related Owner Trustee's rights under the Option
(as hereinafter defined) (collectively, the
"Indenture Estate"). Upon an Indenture Default and
acceleration of the related Mortgage Notes, the
Indenture Trustee may exercise its
7
<PAGE>
rights with respect to the related Indenture
Estate for the equal and ratable benefit of the
Mortgage Notes issued under that Indenture. See
"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, the
amounts unconditionally payable by Kmart under
each Lease will be sufficient to pay in full when
due all payments required to be made on the
related Mortgage Notes. See "Description of the
Mortgage Notes--Redemption" and "--Security". None
of the Trustee, the Certificateholders or the
Indenture Trustee 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 proceeds from the sale of the Certificates will
be used to purchase the Mortgage Notes issued by
the related Owner Trustee in connection with the
financing of not more than 90% of the cost to such
Owner Trustee of acquiring each related Property.
The net proceeds to be received by Kmart from the
Sale-Leaseback Transactions will be used (i) for
general corporate purposes and (ii) in the case of
a Property to be conveyed by a developer to the
related Owner Trustee, primarily to repay loans
made to such developer, which funded the
construction and/or acquisition of such Property.
See "Structure of the Transaction" and "Use of
Proceeds".
Trustees.................. Shawmut Bank Connecticut, National Association,
will act as Trustee for the Certificates
evidencing interests in the Pass Through Trusts.
Shawmut Bank Connecticut, National Association,
will also act as Indenture Trustee under each
Indenture.
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...... The Certificates, with certain exceptions, are
eligible for purchase by employee benefit plans. A
fiduciary considering purchasing Certificates for
or on behalf of an employee benefit plan should
consider the issues discussed in "ERISA
Considerations".
8
<PAGE>
THE COMPANY
Kmart Corporation ("Kmart" or the "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 April 26, 1995, Kmart operated 2,240 Kmart discount
stores with locations in each of the 50 United States, Puerto Rico, the U.S.
Virgin Islands and Guam 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 April 26,
1995, had opened six stores, four in Mexico and two in Singapore. Kmart also
holds significant equity interests in OfficeMax, Inc. ("OfficeMax") and The
Sports Authority, Inc. ("The Sports Authority") and in substantially all of the
Meldisco subsidiaries of Melville Corporation, which operates the footwear
departments in domestic Kmart stores.
As of April 26, 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 April 26, 1995, Borders Group operated 1,144 bookstores in 50 states and the
District of Columbia. See "--Recent Developments" for a discussion of the
recent Borders Group Initial Public Offering ("IPO"). Builders Square operated
172 home improvement stores at April 26, 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 equity interest in Thrifty PayLess Holding
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 the remainder of 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 May 1995, Kmart commenced the IPO of Borders Group, Inc. The Company sold
87% of Borders Group, Inc., resulting in net proceeds of $493 million which were
received by the Company in June 1995. The funds from this transaction will be
used to pay down debt and further the Company's modernization program. Shares
representing the remaining 13% interest are subject to a 30-day option to
purchase by the underwriters at the net IPO price to cover over-allotments.
Shares with respect to which the underwriters do not exercise their over-
allotment option, if any, become available for sale by the Company commencing
November 20, 1995. It is the Company's intention to divest all of its interest
in Borders Group, Inc. within one year. The Company expects to realize a one-
time loss of approximately $185 million on the transaction and will report its
investment in Borders Group, Inc. as a discontinued operation in the future.
On June 5, 1995, the Company announced that Floyd Hall, a retailing executive
with extensive experience in the discount store and supermarket businesses, has
been named chairman, president and chief executive officer, effective
immediately. With Hall's arrival at Kmart, Donald S. Perkins has relinquished
his role as chairman but remains a member of the Company's Board of Directors
and chairman of the Board's executive/finance committee. Anthony N. Palizzi,
executive vice president and general counsel, and Ronald J. Floto, executive
vice president and president, Super Kmart Centers, who served as interim
president and chairman of the Company's management executive committee,
respectively, have resumed their previous responsibilities.
9
<PAGE>
SELECTED FINANCIAL INFORMATION
The following is a summary of certain selected consolidated financial
information of the Company. Operating results and affected ratios have been
restated to exclude discontinued operations of PACE Membership Warehouse, Inc.
and Coles Myer, Ltd. All fiscal years prior to 1994 reflect the operations of
PayLess Drug Stores Northwest, Inc., OfficeMax, Inc. and The Sports Authority,
Inc. as part of continuing operations. 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 25, 1995 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 25, 1995 (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 13 weeks ended April 26, 1995 and April 27, 1994 contains all
adjustments necessary for a fair statement of the results for the interim
periods. All adjustments were of a normal and recurring nature. Data for the
interim periods are not necessarily indicative of the results for the full
fiscal year.
<TABLE>
<CAPTION>
13 WEEKS ENDED
---------------------
APRIL 27, APRIL 26,
1990 1991 1992 1993(1) 1994 1994 1995
------- ------- ------- ------- ------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
Sales.................. $29,775 $30,934 $33,366 $36,694 $34,025 $7,216 $7,797
Cost of merchandise
sold.................. 21,809 22,622 24,516 27,520 25,992 5,384 6,064
Selling, general and
administrative
expenses.............. 6,815 7,036 7,393 8,217 7,701 1,758 1,854
Interest expense--net.. 395 396 428 495 494 125 109
Income (loss) from
continuing retail
operations before
income taxes and
equity income......... 1,024 1,157 1,321 (590) 294 9 (47)
Net income (loss) from
continuing retail
operations before
extraordinary item and
the effect of
accounting changes.... 688 778 901 (347) 260 16 (28)
Net income (loss)...... 756 859 941 (974) 296 18 (28)
Ratio of earnings from
continuing retail
operations to fixed
charges(2) 2.9 3.0 3.0 -- 1.4 --(3) --(3)
Balance Sheet (at end of
period):
Working capital........ $ 3,519 $ 4,682 $ 5,014 $ 3,793 $ 3,561 $3,712 $3,531
Merchandise
inventories........... 6,891 7,546 8,752 7,252 7,382 7,815 7,840
Total assets........... 13,899 15,999 18,931 17,504 17,029 17,963 17,312
Long-term debt......... 1,701 2,287 3,237 2,227 2,011 2,224 1,965
Capital leases......... 1,598 1,638 1,698 1,720 1,777 1,764 1,754
Shareholders' equity... 5,384 6,891 7,536 6,093 6,032 6,010 5,955
</TABLE>
- --------
(1) 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.
(2) 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 $549 million for the fiscal year ended
January 26, 1994.
(3) 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 deficiency of income from continuing retail
operations versus fixed charges was $646 million for the 52 weeks ended
April 27, 1994. The ratio computed as described in (2) above for the 52
weeks ended April 26, 1995 was 1.3.
10
<PAGE>
USE OF PROCEEDS
The Certificates are being issued in order to facilitate the financing by
each Owner Trustee of its purchase of one or more of the Properties. Proceeds
from the sale of the Certificates will be used by the Trustee to purchase the
Mortgage Notes issued by the related Owner Trustee in connection with the
financing of not more than 90% of the cost to such Owner Trustee of acquiring
each of its respective Properties. See "Structure of the Transaction".
Net proceeds of $ million to be received by Kmart 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 Trustee, net
proceeds of $ million will be used primarily to repay loans made to such
developers which funded the construction and/or acquisition of such Properties.
STRUCTURE OF THE TRANSACTION
The proceeds from the sale of the Certificates offered hereby will be used by
the Trustee on behalf of the applicable Pass Through Trust to purchase Mortgage
Notes issued by Wilmington Trust Company, acting not in its individual capacity
but solely as owner trustee (an "Owner Trustee") under four separate Owner
Trust Agreements for the benefit of the applicable institutional investor (the
"Owner Participant") to finance not more than 90% of the cost to such Owner
Trustee of acquiring (i) fee title to the buildings and improvements (the
"Improvements") comprising, and (ii) a 30-year estate for years interest in the
land (the "Estate for Years") underlying, 18 Kmart store locations.
Simultaneously with the conveyance of the Improvements and the Estate for Years
with respect to each Property to the applicable Owner Trustee, the related
remainder interest subject to the Estate for Years shall be conveyed to First
Security Bank of Utah, N.A., acting not in its individual capacity but solely
as trustee (the "Remainderman Trustee") of four separate trusts formed for the
benefit of an institutional investor (the "Remainderman Participant"). The
Remainderman Trustee will, in turn, convey to the related Owner Trustee an
option (the "Option") to purchase or ground lease the related Land upon the
expiration of the Estate for Years. The Improvements and Estate for Years with
respect to each Kmart store location are referred to herein collectively as a
"Property". Eleven Properties will be acquired by the applicable Owner Trustee
directly from Kmart and seven Properties will be acquired from independent
developers with whom Kmart has entered into contracts obligating such
developers to convey the applicable Properties. Each of the four Owner Trustees
will acquire one or more Properties (each, a "Property Group"). Any portion of
the proceeds from the sale of Certificates not used by the Trustee to purchase
Mortgage Notes on or prior to July , 1995 will be distributed on September 2,
1995 to the applicable Certificateholders, together with interest, but without
premium. See "Description of the Certificates--Special Distribution Upon
Unavailability of Trust Property".
The Mortgage Notes with respect to each Property will be issued under a
separate trust indenture between Shawmut Bank Connecticut, National
Association, as trustee thereunder (in such capacity, herein referred to as the
"Indenture Trustee"), and the related Owner Trustee (each, a "Base Indenture"),
as supplemented by a mortgage, deed of trust, assignment of leases and rents,
security agreement, financing statement and supplemental indenture between the
Indenture Trustee and such Owner Trustee (each, a "Supplemental Indenture", and
each Base Indenture, as supplemented by the related Supplemental Indenture, an
"Indenture"). With respect to each Property, the applicable Owner Participant
will provide from sources other than the Mortgage Notes not less than 10% of
the cost to the related Owner Trustee of acquiring such Property. No Owner
Participant, however, will be personally liable for any amount payable under
the related Indenture or the Mortgage Notes issued thereunder. Simultaneously
with the acquisition of each Property, the related Owner Trustee will lease
such Property to Kmart pursuant to a separate lease agreement (each, a
"Lease").
11
<PAGE>
THE PROPERTIES
The Properties consist of 18 Kmart store locations including 11 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 LOT SIZE
KMART STORE LOCATIONS (SQ. FT.) (ACRES) OPENING DATE
- --------------------- --------- -------- ------------
<S> <C> <C> <C>
Juneau, AK...................................... 124,491 10.8 4/24/94
W. Palmdale, CA................................. 115,376 9.8 11/20/94
Mountain Home, ID............................... 94,841 12.5 10/2/94
Dorchester, MA.................................. 120,204 9.1 11/15/93
Branson, MO..................................... 121,890 8.9 11/13/94
Batavia, NY..................................... 116,100 10.3 11/20/94
Waynesboro, VA.................................. 94,841 27.1 10/23/94
</TABLE>
<TABLE>
<CAPTION>
FACILITY
SIZE LOT SIZE
SUPER KMART CENTER LOCATIONS (SQ. FT.) (ACRES) OPENING DATE
- ---------------------------- --------- -------- ------------
<S> <C> <C> <C>
Anaheim Hills, CA............................... 173,364 18.0 11/20/94
La Habre, CA.................................... 172,231 17.8 11/20/94
Sanger, CA...................................... 169,986 16.8 11/20/94
Lafayette, LA................................... 194,215 20.5 7/31/94
Lincoln Park, MI................................ 193,446 18.3 10/23/94
Hattiesburg, MS................................. 169,813 22.3 6/19/94
Carson City, NV................................. 169,999 18.5 11/20/94
Winston-Salem, NC............................... 172,231 22.8 11/20/94
New Philadelphia, OH............................ 172,231 43.5 11/13/94
N. Charleston, SC............................... 172,231 19.6 11/6/94
Humble, TX...................................... 172,231 22.5 11/13/94
</TABLE>
12
<PAGE>
DIAGRAM OF PAYMENTS
The following diagram illustrates certain aspects of the payment flows among
Kmart, each Owner Trustee, each Owner Participant, the Indenture Trustee, the
Trustee and the Certificateholders.
Kmart will lease each Property from the corresponding Owner Trustee under a
separate Lease. Two Mortgage Notes will initially be issued under each
Indenture by the corresponding Owner Trustee. Rent will be payable under each
Lease to the corresponding Owner Trustee. However, as a result of the
assignment of certain of such Owner Trustee's rights under such Lease to the
Indenture Trustee, Kmart will make rental payments thereunder directly to the
Indenture Trustee. From such rental payments, the Indenture Trustee will, on
behalf of each Owner Trustee, make payments on the Mortgage Notes held in each
Pass Through Trust to the related Trustee and will remit the balance to each
respective Owner Trustee 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.
[CHART HERE]
13
<PAGE>
DESCRIPTION OF THE CERTIFICATES
The Certificates offered hereby will be issued pursuant to two separate
Agreements to be entered into between Kmart and the Trustee. 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 integral multiples of $1,000. (Agreements, Sections 2.01 and 3.01)
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 3.09) 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 3.08) The Certificates
do not represent an interest in or obligation of Kmart, the Trustee, 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.
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
14
<PAGE>
other property in each Indenture Estate securing the Mortgage Notes held in the
related Pass Through Trust, as discussed under "Description of the Mortgage
Notes--Security".
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" pursuant to Section 17A of the Exchange Act. DTC holds securities for
its participants ("DTC Participants") and facilitates 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 Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co.), banks
(including the Trustee in its individual capacity), 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 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.
DTC 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 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 Kmart nor the Trustee will have any liability for any aspect of the
records relating to 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.
15
<PAGE>
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 and the Trustee
or Kmart is unable to appoint a qualified successor, (ii) Kmart, at its option,
elects to terminate the book-entry system through DTC or (iii) after the
occurrence of an Event of Default, Certificate Owners of Certificates
evidencing fractional undivided interests aggregating not less than a majority
in interest in a Pass Through Trust advise the Trustee and DTC through DTC
Participants in writing that the continuation of a book-entry system through
DTC (or a successor thereto) is no longer in the Certificate Owners' best
interest. (Agreements, Section 3.09)
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 3.09)
Distributions of principal of, premium, if any, and interest on the
Certificates will thereafter be made by the Trustee directly in accordance with
the procedures set forth in the Agreements to each Certificateholder of record
on the Record Date. Such distributions will be made by check mailed to the
address of such holder as it appears on the register maintained by the Trustee.
The final payment on any Certificate, however, will be made only upon
presentation and surrender of such Certificate at the office or agency
specified in the notice of final distribution to Certificateholders.
(Agreements, Sections 4.02 and 11.01)
Definitive Certificates will be freely transferable and exchangeable at the
office of the Trustee upon compliance with the requirements set forth in the
related 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 3.04)
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 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 clearinghouse 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 same-day
funds on trading activity in the Certificates.
PAYMENTS AND DISTRIBUTIONS
All Scheduled Payments (as defined below) of principal 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 of payment is confirmed,
except in certain cases when some or all of such Mortgage Notes are in default.
See "--Events of Default and 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 2 and
July 2
16
<PAGE>
of each year, commencing January 2, 1996, at the applicable rate per annum for
such Pass Through Trust, until the final distribution date for such Pass
Through Trust. Payments of principal on the Mortgage Notes held in each Pass
Through Trust are scheduled to be received in specified amounts 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 2 and July 2 of each year, commencing January 2, 1996, are herein
referred to as "Regular Distribution Dates"). The Trustee of each Pass Through
Trust will distribute on each Regular Distribution Date to the holders of
Certificates evidencing interests in a Pass Through Trust all Scheduled
Payments the receipt of which is confirmed by the Trustee on such Regular
Distribution Date. 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 preceding the applicable Regular
Distribution Date, subject to certain exceptions. (Agreements, Sections 4.01
and 4.02) If a Scheduled Payment is not received by the Trustee on a Regular
Distribution Date but is received within five days thereafter, it will be
distributed on the date received to such holders of record. If it is received
after such five-day period, it will be treated as a Special Payment (as defined
below) 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 and Interest Payments".
Payments of principal, premium, if any, and interest received by the Trustee
on account of a redemption, if any, of the Mortgage Notes held in a Pass
Through Trust, 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) and any Scheduled Payments not paid within five days of a Regular
Distribution Date ("Special Payments"), will be distributed on the second 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 preceding such
Special Distribution Date. (Agreements, Section 4.02) See "Description of the
Mortgage Notes--Redemption" and "--Events of Default and Certain Rights Upon an
Event of Default".
After redemption or default in respect of some or all of the Mortgage Notes
or other Special Payment, a Certificateholder should refer to the information
with respect to the applicable Pool Balance and the Pool Factor reported
periodically by the Trustee to determine the remaining amortization of the
Mortgage Notes. See "--Pool Factors" and "--Reports to Certificateholders".
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 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.
17
<PAGE>
(Agreements, Section 4.01) 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 non-interest bearing 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 4.01) 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 4.02)
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
4.02) 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 any additional interest due to the delay. (Agreements, Section
12.10)
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 and Interest 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, plus any proceeds
from the sale of the Certificates issued by such Pass Through Trust that have
not yet been used to purchase Mortgage Notes. 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
18
<PAGE>
Date. The Pool Factor and the Pool Balance for a Pass Through Trust will be
mailed to record holders of Certificates evidencing interests in such Pass
Through Trust on each Regular Distribution Date and Special Distribution Date.
As of the date of issuance of the Certificates and assuming that all proceeds
are used to purchase Mortgage Notes on or before July , 1995, and 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>
1995-K3 TRUST 1995-K4 TRUST
REGULAR SCHEDULED PRINCIPAL 1995-K3 TRUST SCHEDULED PRINCIPAL 1995-K4 TRUST
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; and
(iii) the Pool Balance and the Pool Factor for such Pass Through Trust.
(Agreements, Section 4.03(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
19
<PAGE>
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. (Agreements,
Section 3.09)
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) and (ii)
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, and such other
items as are readily available to the Trustee and which a Certificateholder
shall reasonably request as necessary for the purpose of such
Certificateholder's preparation of its federal income tax returns. (Agreements,
Section 4.03(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 5.03)
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, prior to an Event of Default (as
defined below), 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 6.04 and 10.01)
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.
20
<PAGE>
The related Owner Trustee (except during any period during which Kmart is an
Owner Participant or otherwise controls such Owner Trustee) 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 Trustee chooses to exercise such cure right, the
Indenture Default, and consequently the Event of Default under each Agreement,
will be deemed to be cured. (Supplemental Indentures, Section 2.12(a)) See
"Description of the Mortgage Notes--Indenture Defaults, Notice and Waiver".
The Indenture Trustee's right to exercise remedies under each Indenture is
subject to certain limitations. 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
evidencing fractional undivided interests aggregating not less than a majority
in interest of such Pass Through Trust, shall vote a corresponding percentage
of such Mortgage Notes in favor of directing the Indenture Trustee 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 Trustee as to the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee or
of exercising any trust or power conferred on the Indenture Trustee under such
Indenture, provided that if an Event of Default under any Indenture shall have
occurred and be continuing, such direction by the Certificateholders shall not
obligate the Trustee to vote more than a corresponding majority of the related
Mortgage Notes in favor of directing any action by the Indenture Trustee with
respect to such Indenture Default. (Agreements, Sections 6.01 and 6.04)
Each Indenture provides that, if an Indenture Default shall occur and be
continuing thereunder, the Indenture Trustee may, or upon the instructions of
the holders of 25% 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. 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 Trustee
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 Trustee to accelerate the Mortgage Notes issued under an Indenture
or to direct the exercise of remedies by the Indenture Trustee 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. 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 Certificates
evidencing interests in the other Pass Through Trust. In addition, so long as
the same institution acts as Trustee of each Pass Through Trust, in the
absence of instructions from the Certificateholders of any such Pass Through
Trust, the Trustee for such Pass Through Trust could for the same reason be
faced with a potential conflict of interest upon an Indenture Default.
As an additional remedy, if an Indenture Default under an Indenture shall
have occurred and be continuing, each Agreement provides that 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, Sections 6.01 and 6.02) Any proceeds received by the
21
<PAGE>
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 4.02) The market for Mortgage Notes in default may
be very limited and there can be no assurance that they could be sold for a
reasonable price. If the Trustee sells any Mortgage Note 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 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 Trustee exercises its
option to redeem the outstanding Mortgage Notes issued under such Indenture as
described below under "Description of the Mortgage Notes--Redemption". The
price paid by such Owner Trustee 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 a Special Distribution Date.
Any funds representing payments received 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 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, Sections 4.01 and 4.04)
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 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 which is, or after notice or lapse of time, or both,
would become an Event of Default. (Agreements, Section 7.02)
Each Agreement contains a provision entitling the Trustee 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 7.03)
In certain cases, the holders of Certificates evidencing fractional undivided
interests aggregating not less than a majority 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 Event of Default under the related
Agreement and thereby annul any direction given by such holders to the
Indenture Trustee 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 the deposit of any Scheduled
Payment or Special Payment or in the distribution of any such payment, (ii) a
default in payment of the principal, premium, if any, or interest on any of the
Mortgage Notes held in such Pass Through Trust or (iii) 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
6.05) See "--Modifications of
22
<PAGE>
the Agreements". Each Indenture provides that, with certain exceptions, the
holders of not less than a majority in aggregate outstanding principal amount
of the Mortgage Notes issued thereunder may, on behalf of all such holders,
waive any past Indenture Default thereunder. (Base Indentures, Section 8.3) In
the event of a waiver under an Agreement as described above, the principal
amount of the Mortgage Notes issued under the applicable Indenture held in the
related Pass Through Trust shall be counted as having voted for a waiver of
such past Indenture Default. 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, among other things, (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, or (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.
(Agreements, Section 9.01)
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 a majority in interest of the Pass Through
Trust created thereby, and the consent of the related Owner Trustee (such
consent not to be unreasonably withheld), 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, except
that no such supplement may, without the consent of the holder of each
Certificate so affected, (a) reduce in any manner the amount of, or delay the
timing of, any receipt by the Trustee of payments on the Mortgage Notes held in
such Pass Through Trust, or distributions in respect of any Certificate related
to such Pass Through Trust, or make distributions payable in coin or currency
other than that provided for in such Certificates, or impair the right of any
Certificateholder of such Pass Through Trust to institute suit for the
enforcement of any such payment when due, (b) permit the disposition of any
Mortgage Note held in such Pass Through Trust, except as provided in such
Agreement, or otherwise deprive any Certificateholder of the benefit of the
ownership of the Mortgage Notes in such Pass Through Trust, (c) 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 or (d) modify certain provisions of the
Agreement regarding supplemental agreements with the consent of
Certificateholders or waiver of past defaults, except to increase any
percentage specified therein or to provide that certain other provisions cannot
be modified or waived without the consent of each Certificateholder affected
thereby. (Agreements, Section 9.02)
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, waiver or supplement under the related Indenture, any Lease or
any other related document relating to such Mortgage Notes, the Trustee shall
mail a notice of such proposed amendment, modification, waiver or supplement 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
23
<PAGE>
an Event of Default under the related Agreement shall have occurred and be
continuing, the Trustee, subject to the voting instructions referred to under
"--Event of Default and Certain Rights Upon an Event of Default", 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 10.01)
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 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)
DELAYED PURCHASE
In the event that all of the proceeds from the sale of the Certificates are
not used on the closing date of this offering to purchase the Mortgage Notes
contemplated to be held in the related Pass Through Trust, such Mortgage Notes
may be purchased by the Trustee at any time on or prior to July , 1995. In
such event, the Trustee will hold the proceeds from the sale of such
Certificates not used to purchase Mortgage Notes in an escrow account pending
the purchase of the Mortgage Notes not so purchased. Such proceeds will be
invested in Specified Investments at the direction and risk of, and for the
account of, Kmart. Earnings on Specified Investments in the escrow account for
each Pass Through Trust will be paid to Kmart periodically, and Kmart will be
responsible for any losses. (Agreements, Section 2.01(b))
On January 2, 1996, Kmart will pay to the Trustee an amount equal to the
interest that would have accrued on any Mortgage Notes purchased after the date
of the issuance of such Certificates from the date of the issuance of such
Certificates to, but excluding, the date of the purchase of such Mortgage Notes
by the Trustee. (Agreements, Section 2.01(b))
SPECIAL DISTRIBUTION UPON UNAVAILABILITY OF TRUST PROPERTY
To the extent, due to a casualty to, or other event causing the
unavailability of, a Property, that the full amount of the proceeds from the
sale of any Certificates held in the escrow account referred to above is not
used to purchase Mortgage Notes on or prior to July , 1995, an amount equal
to the unused proceeds will be distributed by the Trustee to the
Certificateholders of record of such Pass Through Trust on a pro rata basis on
September 2, 1995 together with interest thereon at a rate equal to the rate
applicable to such Certificates, but without premium, and Kmart will pay to the
Trustee on such date an amount equal to such interest. (Agreements, Section
2.01(b))
THE TRUSTEE
Shawmut Bank Connecticut, National Association, is the Trustee for each Pass
Through Trust. The Trustee and any of its affiliates may hold Certificates in
their own names. (Agreements, Section 7.05) With certain exceptions, the
Trustee makes no representations as to the validity or sufficiency of the
Agreements, the Certificates, the Mortgage Notes, the Indentures, the Leases,
the Participation Agreements or other related documents. (Agreements, Section
7.04) Shawmut Bank Connecticut, National Association, is also the Indenture
Trustee under each of the Indentures under which the Mortgage Notes with
respect to each
24
<PAGE>
Property are issued. In addition, Shawmut Bank Connecticut, National
Association, serves as owner trustee in other leveraged lease financings
involving Kmart and has customary banking relationships with Kmart.
The Trustee may resign with respect to any or all of the Pass Through Trusts
at any time, in which event Kmart 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, Kmart
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 itself and all others similarly situated, petition any court of competent
jurisdiction for the removal of such Trustee and the appointment of a successor
trustee. 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 Trustee. 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, Sections 7.09 and 7.10) Pursuant to such
resignation and successor trustee provisions, it is possible that a different
trustee could be appointed to act as the successor trustee with respect to each
Pass Through Trust. All references in this Prospectus to the Trustee are to the
trustee acting in such capacity under each of the Pass Through Trusts and
should be read to take into account the possibility that each of the Pass
Through Trusts could have a different successor trustee in the event of such a
resignation or removal.
Each Agreement provides that Kmart will pay the Trustee's fees and expenses.
Each Agreement further provides that the Trustee will be entitled to
indemnification by Kmart for, and will be held harmless against, any loss,
liability or expense incurred by the Trustee (other than through its own
willful misconduct, negligence or by reason of a breach of any of its
representations or warranties set forth in such Agreement), except to the
extent that such loss, liability or expense is for or with respect to taxes, in
which case the Trustee may be entitled to be reimbursed by the Pass Through
Trust. (Agreements, Section 7.07)
25
<PAGE>
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, the Base Indentures and the
Supplemental Indentures, the forms of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part. Unless 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. Citations to the relevant sections of the Base Indentures,
Supplemental Indentures and the Leases appear below in parentheses.
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 the
applicable Owner Trustee and the Indenture Trustee. Mortgage Notes issued
pursuant to each Indenture will be secured by, among other things, a lien on
only the Property to which such Indenture relates and will not have cross-
default or cross-collateralization provisions.
Each Owner Trustee will lease its Properties to Kmart. Kmart will be
obligated under each Lease to make or cause to be made rental and other
payments to the related Owner Trustee in amounts that will be at least
sufficient to pay when due all payments required to be made on the related
Mortgage Notes, except in certain cases of optional redemption which require
such Owner Trustee to deposit an amount sufficient to pay the Redemption Price
and Make-Whole Premium with the Indenture Trustee. (Leases, Article 3(d)) 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
Trustee thereunder). Kmart's rental obligations under each Lease will be
general obligations of Kmart. Payments under each Lease in excess of the
amounts necessary to make required payments on the related Mortgage Notes will
be paid by the Indenture Trustee to the related Owner Trustee 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. (Base Indentures, Sections 4.1 and 8.4(b)).
PRINCIPAL AND INTEREST PAYMENTS
The aggregate principal amount of the Mortgage Notes issued with respect to
each Property will not exceed 90% of the purchase price to the related Owner
Trustee of acquiring such Property.
The aggregate principal amount 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>
1995-K3 TRUST 1995-K4 TRUST
% % MORTGAGE NOTES
PROPERTY GROUP 1 MORTGAGE NOTES MORTGAGE NOTES TOTAL
- ---------------- --------------- --------------- --------------
<S> <C> <C> <C>
W. Palmdale, CA.................. $ $ $
Anaheim Hills, CA................
La Habre, CA.....................
Sanger, CA.......................
Winston-Salem, NC................
-------- -------- --------
Total.......................... $ $ $
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1995-K3 TRUST 1995-K4 TRUST
% % MORTGAGE NOTES
PROPERTY GROUP 2 MORTGAGE NOTES MORTGAGE NOTES TOTAL
- ---------------- --------------- --------------- --------------
<S> <C> <C> <C>
Lincoln Park, MI................. $ $ $
Carson City, NV..................
-------- -------- --------
Total.......................... $ $ $
======== ======== ========
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
1995-K3 TRUST 1995-K4 TRUST
% % MORTGAGE NOTES
PROPERTY GROUP 3 MORTGAGE NOTES MORTGAGE NOTES TOTAL
- ---------------- --------------- --------------- --------------
<S> <C> <C> <C>
Mountain Home, ID................ $ $ $
Dorchester, MA...................
Hattiesburg, MS..................
Branson, MO......................
Batavia, NY......................
Waynesboro, VA...................
Lafayette, LA....................
New Philadelphia, OH.............
N. Charleston, SC................
Humble, TX.......................
-------- -------- --------
Total.......................... $ $ $
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1995-K3 TRUST 1995-K4 TRUST
% % MORTGAGE NOTES
PROPERTY GROUP 4 MORTGAGE NOTES MORTGAGE NOTES TOTAL
- ---------------- --------------- --------------- --------------
<S> <C> <C> <C>
Juneau, AK....................... $ $ $
</TABLE>
The Scheduled Payments of principal of the Mortgage Notes held in the Pass
Through Trusts are as follows:
1995-K3 TRUST
% MORTGAGE NOTES
<TABLE>
<CAPTION>
TOTAL FOR TOTAL FOR TOTAL FOR TOTAL FOR
PROPERTY PROPERTY PROPERTY PROPERTY AGGREGATE
PAYMENT DATES GROUP 1 GROUP 2 GROUP 3 GROUP 4 TOTAL
- ------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ $ $ $ $
----------- ----------- ----------- ----------- -----------
Total............... $ $ $ $ $
=========== =========== =========== =========== ===========
</TABLE>
27
<PAGE>
1995-K4 TRUST
% MORTGAGE NOTES
<TABLE>
<CAPTION>
TOTAL FOR TOTAL FOR TOTAL FOR TOTAL FOR
PROPERTY PROPERTY PROPERTY PROPERTY AGGREGATE
PAYMENT DATES GROUP 1 GROUP 2 GROUP 3 GROUP 4 TOTAL
- ------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ $ $ $ $
----------- ----------- ----------- ----------- -----------
Total............... $ $ $ $ $
=========== =========== =========== =========== ===========
</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 2 and July 2 in
each year, commencing January 2, 1996. Such interest will be computed on the
basis of a 360-day year of twelve 30-day months. (Base Indentures, Section 2.7)
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 any additional interest.
(Supplemental Indentures, Section 1.6)
REDEMPTION
All of the Mortgage Notes issued with respect to any Property are subject to
redemption prior to maturity, without the consent of the Trustee, in whole at
any time at the option of the related Owner Trustee in connection with a
voluntary refunding. The Mortgage Notes issued with respect to any Property are
also subject to redemption, in whole, in the event that (a) on or after the
seventh anniversary of the commencement of the term of the related Lease, Kmart
determines that such Property is obsolete, no longer economic for Kmart's use
or surplus to Kmart's needs (the "Termination Right") and Kmart has not
elected, or has not satisfied the conditions, to assume, on a full recourse
basis, the Owner Trustee's obligations with respect to such Mortgage Notes and
has not elected to exercise its Substitution Right (as defined in "Description
of the Leases--Substitution") or (b) the related Owner Participant becomes a
competitor of Kmart (the "Competitor Option") and, as a result thereof, either
(i) the Property is sold to a third party or (ii) Kmart acquires the Property
or the Owner Participant's interest therein and either has not elected, or has
not satisfied the conditions, to assume, on a full recourse basis, the Owner
Trustee's obligations with respect to such Mortgage Notes. See "Description of
the Mortgage Notes--Assumption of Obligations by Kmart" and "Description of the
Leases--Obsolescence Termination" and "--Substitution". The price of each
Mortgage Note to be redeemed in each such case shall be equal to the unpaid
principal amount of the Mortgage Notes to be redeemed plus accrued but unpaid
interest thereon (the "Redemption Price") plus, if such redemption is made
prior to the applicable Premium Termination Date, a Make-Whole Premium, if any.
(Base Indentures, Sections 6.1 and 7.1; Leases, Articles 39 and 41;
Participation Agreements, Section 3)
The Make-Whole Premium, if any, on the Mortgage Notes will be determined by
an independent investment banking institution of national standing (the
"Investment Banker") selected by Kmart. The Investment Banker will first
determine the Treasury Rate with respect to any redemption of Mortgage Notes.
The Treasury Rate means, with respect to each Mortgage Note to be redeemed, a
per annum rate (expressed as a semiannual equivalent and as a decimal and, in
the case of United States Treasury bills, converted to a bond equivalent yield)
determined to be the per annum rate equal to the semiannual yield to maturity
of United States Treasury securities maturing on the Average Life Date (as
defined below) of such Mortgage
28
<PAGE>
Note, as determined by interpolation between the most recent weekly average
yields to maturity for two series of United States Treasury securities (A) one
maturing as close as possible to, but earlier than, the Average Life Date of
such Mortgage Note and (B) the other maturing as close as possible to, but
later than, the Average Life Date of such Mortgage Note, in each case as
published in the most recent H.15(519) (or, if a weekly average yield to
maturity for United States Treasury securities maturing on the Average Life
Date of such Mortgage Note is reported in the most recent H.15(519), as
published in H.15(519)). H.15(519) means "Statistical Release H.15(519),
Selected Interest Rates", or any successor publication, published by the Board
of Governors of the Federal Reserve System. The most recent H.15(519) means the
latest H.15(519) which is published prior to the close of business on the third
business day prior to the applicable Redemption Date. The Average Life Date for
any Mortgage Note to be redeemed shall be the date which follows the Redemption
Date, by a period equal to the Remaining Weighted Average Life of such Mortgage
Note. The Remaining Weighted Average Life of such Mortgage Note, with respect
to the redemption of such Mortgage Note, is the number of days equal to the
quotient obtained by dividing (A) the sum of the products obtained by
multiplying (1) the amount of each remaining principal payment on such Mortgage
Note by (2) the number of days from and including the Redemption Date, to but
excluding the scheduled payment date of such principal payment by (B) the
unpaid principal amount of such Mortgage Note.
To determine the Make-Whole Premium for any Mortgage Note, the Investment
Banker then will determine, as of the third business day prior to the
Redemption Date, the sum of the present values of all of the remaining
scheduled payments of principal and interest to maturity on such Mortgage Note
computed on a semiannual basis by discounting such payments (assuming a 360-day
year consisting of twelve 30-day months) using such Treasury Rate. If the sum
of these present values of the remaining payments as computed above exceeds the
aggregate unpaid principal amount of the Mortgage Note to be redeemed plus any
accrued but unpaid interest thereon, the difference will be payable as a
premium upon redemption of such Mortgage Note. If the sum is equal to or less
than such principal amount plus accrued interest, there will be no premium
payable with respect to such Mortgage Note.
The Mortgage Notes issued with respect to a Property shall, if Kmart does not
exercise its Substitution Right, be redeemed following the occurrence of an
Event of Loss with respect to such Property, at a price equal to the Redemption
Price. See "Description of the Leases--Condemnation and Casualty" and "--
Substitution". (Base Indentures, Section 6.1; Leases, Articles 39 and 41)
The Mortgage Notes issued with respect to each Property are subject to
redemption or purchase by the related Owner Trustee (except during any period
during which Kmart is an Owner Participant or otherwise controls such Owner
Trustee), in whole, but not in part, if under the related Indenture an
Indenture Default arising from a Lease Event of Default shall have occurred and
(i) the Indenture Trustee shall have given notice of its intent to accelerate
such Mortgage Notes or (ii) such Indenture Default shall have continued for a
period of 180 days or more during which such Mortgage Notes could, but shall
not, have been accelerated at a price equal to the Redemption Price plus all
other amounts then due and payable to the holders of such Mortgage Notes plus,
in the case of redemption or purchase pursuant to clause (ii), if such Lease
Event of Default shall have continued for less than 270 days and such
redemption is made prior to the applicable Premium Termination Date, a Make-
Whole Premium, if any. (Base Indentures, Section, 8.4(c))
Any redemption of the Mortgage Notes shall occur on the respective date of
redemption (the "Redemption Date") fixed in accordance with the related
Indenture. The Redemption Date shall be the date designated in the notice of
redemption given by the related Owner Trustee (or by Kmart pursuant to the
related Lease) to the Indenture Trustee. Any such notice must be given not less
than 30 days prior to the Redemption Date. (Base Indentures, Section 6.2 and
6.3)
SECURITY
Two Mortgage Notes will initially be issued under each Indenture, and will be
secured by, among other things, (i) an assignment to the Indenture Trustee of
certain of the related Owner Trustee's rights under the
29
<PAGE>
Lease with respect to the Property subject to such Indenture, including the
right to receive rentals and certain other amounts payable thereunder by Kmart
(but excluding Excepted Payments), (ii) a first mortgage lien on the
Improvements and Estate for Years acquired by such Owner Trustee and leased to
Kmart, subject to the rights of Kmart under the related Lease, and (iii) the
related Owner Trustee'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 the existence of an Indenture Default under an
Indenture will not cause 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 related Owner Trustee's Mortgage Notes will be
paid to such Owner Trustee 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 Notes in full. (Base Indentures, Sections 4.1;
Supplemental Indentures, Granting Clause and Section 2.12(b))
Unless and until an Indenture Default has occurred and is continuing and the
related Mortgage Notes have been declared due and payable, the Indenture
Trustee may not exercise any of the rights of the Owner Trustee under the
related Lease, except the right to receive payments of rentals due thereunder
(other than Excepted Payments). (Supplemental Indentures, Granting Clause)
Funds, if any, held from time to time by the Indenture Trustee 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 related thereto, will be
invested and reinvested in certain Permitted Investments selected by the
Indenture Trustee. The Indenture Trustee will not be obligated to pay the
amount of any loss resulting from any such investment directed by it. (Base
Indentures, Section 9.4)
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 Trustee under
any of the Mortgage Notes under the circumstances described under "--Assumption
of Obligations by Kmart") or the Owner Trustees. None of the Owner Trustees,
the Owner Participants or the Indenture Trustee, nor any affiliate thereof,
shall be personally liable to any holder of a Mortgage Note or to the Indenture
Trustee 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 related Indenture and the income and
proceeds received by the Indenture Trustee therefrom (including Basic Rent and
certain amounts of Additional Rent payable by Kmart under the related Lease).
(Base Indentures, Section 2.11) None of the Owner Trustees, the Owner
Participants or the Indenture Trustee shall be personally liable for or in
respect of this Prospectus.
INDENTURE DEFAULTS, NOTICE AND WAIVER
Indenture Defaults under each Indenture include: (a) the occurrence and
continuance of any Lease Event of Default under the related Lease (other than a
Lease Event of Default related to Excepted Payments), (b) failure by the
related Owner Trustee to pay when due any principal, Make-Whole Premium, if
any, or interest on any Mortgage Note issued thereunder and continuance of that
failure for 10 days, (c) failure by the related Owner Trustee to comply with
any covenant contained in such Indenture or the related Participation Agreement
(to the extent related to the Property subject to the lien of such Indenture),
which continues unremedied for a period of 30 days (or such longer period but
in no event more than 180 days) if the Owner Trustee is diligently proceeding
to correct such failure at the end of the original 30-day period and reasonably
expects to correct such failure within the additional 150-day period) after
notice to such Owner Trustee by the Indenture Trustee or to such Owner Trustee
and the Indenture Trustee by the holders of at least 25% of the outstanding
principal amount of Mortgage Notes issued under such Indenture, (d) any
representation or warranty made by the related Owner Trustee or Owner
Participant in such Indenture or the related
30
<PAGE>
Participation Agreement (to the extent related to the Property subject to the
lien of such Indenture) shall prove at any time to have been inaccurate in any
material respect as of the date made, and any material adverse impact of such
inaccuracy shall continue 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 if such Owner
Trustee or Owner Participant, as applicable, is diligently proceeding to
correct such failure at the end of the original 30-day period and reasonably
expects to correct such failure within the additional 30-day period) after
notice to such Owner Trustee by the Indenture Trustee or to such Owner Trustee
and the Indenture Trustee by the holders of at least 25% of the outstanding
principal amount of Mortgage Notes issued under such Indenture, and (e) the
occurrence of certain events of bankruptcy, reorganization or insolvency of
the related Owner Trustee. (Base Indentures, Section 8.1)
In the event Kmart fails to make any semiannual basic rental payment when
due under any Lease and such failure shall not constitute the fourth or
subsequent consecutive or the seventh or subsequent cumulative such failure,
then the related Owner Trustee or Owner Participant may furnish to the
Indenture Trustee an amount equal to but not less than all principal and
interest as shall then be due on the related Mortgage Notes, together with any
overdue interest, in which event the Indenture Trustee 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. An Owner Trustee may also cure any other default by Kmart in
the performance of its obligations under the related Lease. The cure rights
described above will not apply during any period during which Kmart is an
Owner Participant or otherwise controls the related Owner Trustee. (Base
Indentures, Section 8.4; Leases, Article 42)
Each Indenture provides that the Indenture Trustee must, within 30 days
after any event resulting in the occurrence of an Indenture Default or any
event that would, with notice or the passage of time or both, be an Indenture
Default, known by it, give notice thereof to the holders of the Mortgage Notes
issued thereunder. (Base Indentures, Section 5.10)
The holders of not less than a majority in aggregate unpaid principal amount
of the outstanding Mortgage Notes issued under any Indenture may direct the
Indenture Trustee thereunder, on behalf of all holders, to waive any past
default under such Indenture except a default in the payment of the principal,
premium, if any, or interest on or other amounts due under 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. (Base Indentures, Section 8.3)
REMEDIES
Upon the occurrence of an Indenture Default resulting from the bankruptcy,
insolvency or reorganization of the related Owner Trustee, 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. Upon the occurrence of any other Indenture Default, the Indenture
Trustee may, or when instructed by the holders of at least 25% of the
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. (Base Indentures, Section 8.2)
The holders of a majority in aggregate principal amount of outstanding
Mortgage Notes under an Indenture may rescind any declaration of acceleration
by the Indenture Trustee, whether made on its own accord or as directed by
holders of such Mortgage Notes, at any time prior to the sale of all or part
of the related Indenture Estate if (i) there has been paid or deposited with
the Indenture Trustee an amount sufficient to pay (a) all overdue installments
of interest on all such Mortgage Notes, (b) the principal of and premium,
31
<PAGE>
if any, on any Mortgage Notes that has become due otherwise than by such
declaration, and interest thereon as provided therein, and (c) to the extent
permitted by law, interest on overdue installments of interest and (ii) 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. Such rescission will be binding upon all holders of the
Mortgage Notes, but no such rescission will affect any subsequent default or
impair any right or remedy consequent thereon. (Base Indentures, Section
8.2(c))
If an Indenture Default has occurred and is continuing, the Indenture Trustee
may, and upon the written request of the holders of not less than a majority in
aggregate unpaid principal amount of the related outstanding Mortgage Notes
shall, subject to the condition described below and the related Owner Trustee's
rights to cure such Indenture Default or to redeem or purchase such Mortgage
Notes, exercise certain rights and remedies available to it under the related
Lease, such Indenture and applicable law, including the right to (a) take
possession of the related Indenture Estate, either directly or through an agent
or court appointed receiver, and exclude such Owner Trustee and Kmart, (b)
foreclose on the Indenture Estate and (c) enforce any security interests in
personal property; provided that the Indenture Trustee may not exercise any
remedy against the Indenture Estate seeking to deprive such Owner Trustee of
its interests therein unless a declaration of acceleration of such Mortgage
Notes has been delivered to such Owner Trustee and to Kmart. (Supplemental
Indentures, Section 2.1) See "Description of the Leases--Remedies".
In connection with an Indenture Default that arises solely by reason of a
Lease Event of Default, the Indenture Trustee may not foreclose the lien of
such Indenture or exercise any of its rights and remedies under the related
Indenture that would result in the exclusion of the related Owner Trustee from
the Indenture Estate or any substantial part thereof demised under the related
Lease unless (a) the Indenture Trustee shall have exercised or shall be
concurrently exercising remedies under such Lease involving termination of such
Lease or of Kmart's right to possession thereunder or (b) such Lease Event of
Default shall have continued for a period of at least 270 days and a stay
prohibiting the exercise of such remedies shall be in effect as of the
expiration of such 270-day period. (Supplemental Indentures, Section 2.1(a))
So long as no Lease Event of Default shall have occurred and be continuing,
Kmart is entitled to undisturbed possession of the Property subject to the
related Lease, even if an Indenture Default has occurred and is continuing
under the related Indenture. (Supplemental Indentures, Section 2.7) Because
each Indenture provides for certain Indenture Defaults that are not caused by a
Lease Event of Default under the related Lease, there are circumstances in
which 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.
The holders of a majority in aggregate unpaid principal amount of Mortgage
Notes outstanding under any Indenture shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Indenture Trustee or exercising any trust or power conferred on the Indenture
Trustee; provided that such direction does not conflict with applicable law or
with the rights of the Owner Trustee under such Indenture; and provided further
that the Indenture Trustee may take any other action it deems proper that is
not inconsistent with such direction. (Supplemental Indentures, Section 2.4)
If an Indenture Default under any Indenture occurs and is continuing, any
sums held or received by the Indenture Trustee (other than Excepted Payments)
may be applied to reimburse the Indenture Trustee for all amounts then due to
it under such Indenture prior to any payments to holders of the Mortgage Notes
issued under such Indenture. (Base Indentures, Section 4.3)
In the event of a bankruptcy of any Owner Participant, it is possible that,
notwithstanding that such Owner Participant's interest in each Property is
owned by the applicable Owner Trustee in trust, the related Leases, Owner
Trustee and Mortgage Notes might become affected by the bankruptcy proceedings.
In such event, payments under such Leases or on such Mortgage Notes might be
interrupted and the ability of the
32
<PAGE>
Indenture Trustee to exercise its remedies under the related Indentures might
be restricted, although the Indenture Trustee would retain its status as a
secured creditor in respect of the related Leases and Properties.
POSSIBLE RECHARACTERIZATION OF THE LEASES AS LOANS FOR CERTAIN STATE LAW
PURPOSES
For federal and state income tax and accounting purposes, it is the intention
and belief of Kmart that each leveraged lease transaction entered into by Kmart
constitutes a "true lease". In this regard, Kmart 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 entered into by Kmart was actually a loan,
and accordingly that the conveyance by Kmart to the related Owner Trustee
constitutes an equitable mortgage of the related Property. Under such
circumstances, the related Owner Trustee would be considered a secured lender
to Kmart for purposes of enforcing state law landlord remedies, and the
Indenture Trustee would be considered a lender to such Owner Trustee holding an
assignment of the security. Consequently, to enforce Kmart's payment
obligations under such Lease, the related Owner Trustee or the Indenture
Trustee would be required to comply with the procedural requirements of, and
would be subject to the legal limitations on recovery, if any, under, the laws
of the state in which the leased property is located that are applicable to a
lender seeking to recover the principal of a loan secured by real property. It
is unclear whether the mortgage interest deemed to be held by the Owner Trustee
in a recharacterized transaction would be deemed to be properly perfected and
thus enforceable against other third party creditors. If the mortgage interest
were deemed perfected, the Owner Trustee (and, by assignment, the Indenture
Trustee) would have a secured claim against Kmart. If such mortgage interest
were not deemed perfected, it could be defeated by other creditors or a trustee
in bankruptcy, in which event the Owner Trustee (and, by assignment, the
Indenture Trustee) would be limited to an unsecured claim against Kmart in an
amount at least equal to the principal of, and accrued interest on, the
outstanding related Mortgage Notes. In either event such secured or 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
The parties to the Leases, Participation Agreements, the Agreement and the
other Operative Documents (as defined in the Glossary) may grant consents
under, or modify, waive, amend or supplement certain provisions of such
Operative Documents without the consent of any holder of outstanding Mortgage
Notes, provided that no such modification, amendment, supplement, consent or
waiver shall, without the consent of the holder of each outstanding Mortgage
Note affected thereby, modify, amend or supplement, or give any consent in
respect of or waive any provision of any related Lease in any manner (i) as to
reduce the amounts payable by Kmart under the Leases, or change the time for
the payment thereof, so that such payments are less than the amounts necessary
to pay the principal of, Make-Whole Premium, if any, and interest on the
outstanding Mortgage Notes when due (whether at maturity, upon acceleration or
otherwise) or (ii) as would release Kmart from its obligation in respect of
payment of rent or any other amount payable under the Leases and intended to be
used to pay the principal of, Make-Whole Premium, if any, or interest on the
Mortgage Notes, in any manner inconsistent with clause (i) above. In addition,
without the consent of the Indenture Trustee given at the direction of the
holders of at least a majority of the outstanding related Mortgage Notes, the
Owner Trustee may not (except as it relates to certain indemnity or other
payment to the Owner Trustee or the Owner Participant) agree to any amendment
to, waiver, discharge, supplement or termination of, or grant any consent
under, certain specified provisions of such Operative Documents, including
provisions of the Leases relating to (i) the permitted uses of the Properties;
(ii) certain conditions Kmart must satisfy in order to construct improvements
to any Property; (iii) the rights of Kmart upon the occurrence of an Event of
Loss or adversely affect or delay or decrease the amount of any redemption of
the Mortgage Notes; (iv) the events constituting Lease Events of Default; or
(v) the remedies available to the Owner Trustee upon the occurrence of a Lease
Event of Default, if, in general, such amendment, waiver, discharge,
supplement, termination or consent would materially adversely affects the
rights of the holders of the Mortgage Notes. (Supplemental Indentures, Granting
Clause)
33
<PAGE>
Each Indenture contains provisions permitting the related Owner Trustee and
the Indenture Trustee, with the consent of the holders of not less than a
majority in aggregate principal amount of the related Mortgage Notes, to add,
modify or eliminate any provision of such Indenture, except that, without the
consent of the holder of each Mortgage Note outstanding under such Indenture
affected thereby, no amendment or modification of such Indenture may (a) change
the stated maturity of the principal of, or any installment of interest on, or
the dates or circumstances of payment of Make-Whole Premium, if any, on, any
Mortgage Note, or reduce the principal amount thereof or the interest thereon
or any amount payable upon the redemption thereof, or change the circumstances
for redemption or change the place of payment where, or the coin or currency in
which, any Mortgage Note or the Make-Whole Premium, if any, or the interest
thereon is payable, or impair the right to institute suit for the enforcement
of any such payment of principal or interest on or after the stated maturity
thereof (or, in the case of redemption, on or after the redemption date) or
such payment of Make-Whole Premium, if any, on or after the date such Make-
Whole Premium becomes due and payable or change the dates or the amounts of
payments to be made through installment payments; (b) permit the creation of
any lien prior to the lien of such Indenture with respect to any of the related
Indenture Estate or deprive the holder of any such Mortgage Note of the
security afforded by the lien of such Indenture except as may be required to
release property from the lien of such Indenture as expressly provided in such
Indenture; (c) terminate the related Lease, reduce the amounts payable under
such Lease or change the time for the payment thereof so that such payments are
less than the amounts necessary to pay when due the principal of, Make-Whole
Premium, if any, and interest on the outstanding Mortgage Notes; (d) reduce the
percentage in principal amount of the outstanding Mortgage Notes, the consent
of the holders of which is required for any such amendment, or the consent of
the holders of which is required for any waiver provided for in such Indenture;
or (e) modify the provisions of such Indenture governing amendments or waivers
thereunder except to increase the percentage of holders of Mortgage Notes
necessary to permit certain actions or to add provisions of such Indenture that
cannot be modified or waived without the consent of each holder of a Mortgage
Note affected thereby. (Base Indentures, Section 11.2)
Each of the Owner Trustees and the Indenture Trustee will agree in the
Participation Agreements (i) to comply with the provisions of the related
Indenture, (ii) not to waive any provision of such Indenture requiring Kmart's
consent thereunder, and (iii) not to amend, supplement, waive or otherwise
modify any provision of such 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. (Participation Agreements,
Section 17)
DISCHARGE OF LIEN
Each Indenture will cease to be of further effect when, among other things,
(a) the principal of, Make-Whole Premium, if any, and interest on all
outstanding Mortgage Notes have been paid, (b) all Mortgage Notes issued
thereunder have been delivered to the Indenture Trustee for cancellation, or
(c) (i) all Mortgage Notes issued thereunder and not theretofore delivered to
the Indenture Trustee for cancellation will mature or are to be called for
redemption such that they will be due and payable within one year, and (ii)
there shall have been irrevocably deposited with the Indenture Trustee in trust
cash in an amount that will be sufficient to pay, or direct obligations of the
United States of America maturing in such amounts and at such times as will
ensure the availability of cash sufficient to pay, when due, the principal of,
Make-Whole Premium, if any, and interest on all such Mortgage Notes. (Base
Indentures, Section 3.1)
ASSUMPTION OF OBLIGATIONS BY KMART
Upon exercise of the Termination Right or Kmart's acquisition of a Property
or the Owner Participant's interest in a Property following the exercise of the
Competitor Option, Kmart may elect to exchange the Mortgage Notes related to
such Property for secured, full recourse securities of Kmart to be issued under
a restated indenture, provided that, in addition to the satisfaction of other
conditions, prior to such assumption, Kmart shall have delivered to the
Indenture Trustee an opinion of counsel to the effect that such assumption will
not (i) cause any Pass Through Trust holding any such Mortgage Notes to become
an "investment
34
<PAGE>
company" as defined in the Investment Company Act of 1940, as amended, (ii)
cause any holder of any such Mortgage Notes to recognize income, gain or loss
for tax purposes in connection with such assumption or (iii) cause any adverse
tax consequences as to holders of the Mortgage Notes or to the
Certificateholders, and in connection therewith shall execute a restated
indenture (such restated indenture, the "Company Indenture"). See "Description
of the Leases--Obsolescence Termination" and "--The Participation Agreements".
Such Property will thereafter be subject to the lien of the Company Indenture,
and the Company Indenture will be reasonably satisfactory to the Indenture
Trustee and will incorporate certain relevant provisions of the Lease so
terminated, including (among others) provisions relating to maintenance,
possession and use of such Property, liens, insurance and events of default.
(Base Indentures, Section 7.1)
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. Citations to the relevant sections of the Leases and
Participation Agreements appear below in parentheses.
TERM AND RENT
Each Owner Trustee will lease each Property to Kmart pursuant to a Lease for
an interim term and a subsequent base term commencing January 2, 1996 which
together total 25 years. (Leases, Article 2) Rents are required to be paid by
Kmart under the Leases in immediately available funds on each January 2 and
July 2, commencing January 2, 1996 (the "Rent Payment Dates"). On each Rent
Payment Date, the aggregate amount of rents payable under each Lease will be at
least equal to the aggregate scheduled amount of principal and interest due on
the outstanding Mortgage Notes issued under the related Indenture on such date.
(Leases, Article 3(d)) Kmart's obligation to pay rent is absolute and
unconditional, and, with certain limited exceptions, payments of rent under the
Leases are to be made without notice, demand, counterclaim, setoff, deduction,
defense, abatement, or reduction. (Leases, Article 4)
NET LEASES; MAINTENANCE
The obligations of Kmart under each Lease are those of a lessee under a "net
lease". Accordingly, Kmart will be obligated under each Lease to pay the real
estate taxes attributable to the related Property as well as the Land related
thereto as well as all other costs and expenses of operating and maintaining
the related Property. (Leases, Articles 6, 9 and 11)
Each Lease requires Kmart to maintain the related 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. (Leases, Article 9)
USE; NO CONTINUOUS OPERATION
Each Property may be used for any lawful purpose; provided that no use of any
Property may be made that would: (i) be a public nuisance; (ii) cause such
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. (Leases,
Article 17)
35
<PAGE>
Kmart is not obligated under any Lease to operate a business at the related
Property, except as required by law or by other agreement binding on such
Property. (Leases, Article 5)
ALTERATIONS AND ADDITIONAL CONSTRUCTION
So long as no Material Default or Lease Event of Default (each as defined
under "--Events of Default") under a Lease shall have occurred and be
continuing, Kmart may, at its own expense, make alterations and additions to
the related Improvements and erect or construct additional buildings or
structures on the related Property ("Alterations"), provided that such
Alterations shall not diminish the fair market value or remaining useful life
of such Property or increase the risk of environmental liability with respect
to such Property and that such Property shall not, as a result of the
Alterations, 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 also have the right, with the
applicable Owner Trustee's consent, to demolish the Improvements with respect
to a particular Property in their entirety, which consent shall not be
unreasonably withheld if such Improvements are replaced within 18 months with a
building of at least equivalent fair market value and remaining useful life and
that at the time of such demolition (i) the long-term senior unsecured debt
securities of Kmart shall be rated investment grade by at least two nationally
recognized statistical rating organizations and (ii) Kmart shall then meet the
Net Worth Standard (as defined in "--Insurance"). All Alterations shall be and
remain the property of the related Owner Trustee subject to all of the terms
and provisions of the related Lease. (Leases, 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. (Leases, Article 27)
Each Owner Trustee 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 the usefulness of
such Property for the purposes contemplated and permitted by the related Lease,
or reduce the fair market value or remaining useful life of such Property and
shall not cause such Property to be characterized as "limited use property" for
certain federal income tax purposes. (Leases, Article 13)
LIENS
Under each Lease, Kmart, as lessee, covenants that it shall not, during the
term of such Lease, directly or indirectly create, incur, assume, suffer or
permit any lien or encumbrance 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 the term of such Lease, other than certain
permitted liens. 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 Trustee any lien that is not a
permitted lien. (Leases, Article 19)
ASSIGNMENT OR SUBLEASING
Under each Lease, upon the satisfaction of certain conditions and so long as
no Lease Event of Default or Material Default thereunder shall have occurred
and be continuing, Kmart may assign its right, title and interest to and under
such Lease to any person, provided that any assignment shall be expressly
subordinate to the related Lease. Notwithstanding any such assignment, Kmart
will remain primarily liable for the performance of its obligations under such
Lease. (Leases, Article 17)
With respect to each Property, upon the satisfaction of certain conditions
and so long as no Lease Event of Default or Material Default with respect
thereto shall have occurred and be continuing, Kmart has the right to sublease
all or any portion of such Property to any person, provided that any sublease
shall be expressly subordinate to the related Lease. No sublease may extend
beyond the end of the term of the applicable Lease. Notwithstanding any such
sublease, Kmart will remain primarily liable for the performance of its
obligations under the related Lease. (Leases, Article 17)
36
<PAGE>
INSURANCE
Under each Lease, Kmart is required, at its own cost and expense, to carry
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,
and such additional coverages as may be required under any of the Operative
Documents. In no event shall the deductible amount under such casualty
insurance policies exceed $250,000. In any event, Kmart shall maintain
insurance on the Properties as maintained by Kmart with respect to similar
properties owned or leased by Kmart and located in the general geographic area
where the related Property is located. Notwithstanding the foregoing, Kmart may
elect to self-insure any Property against casualty, workers' compensation and
liability risks; provided that Kmart maintains a consolidated tangible net
worth of at least $1,000,000,000 calculated in accordance with generally
accepted accounting principles, subject to certain adjustments (the "Net Worth
Standard"). (Leases, Articles 7 and 14)
CONDEMNATION AND CASUALTY
In the event of a total or substantial casualty to the Improvements
comprising a portion of any Property, Kmart may elect to terminate the related
Lease. In the event of a permanent or temporary condemnation of a Property or
such portion thereof that either, in Kmart's judgement, renders the Property
unsuitable for its intended use or materially impairs the points of ingress and
egress to the Property (any such event, or any total or substantial casualty
described in the preceding sentence, an "Event of Loss"), Kmart is obligated to
terminate the related Lease. If Kmart elects or is obligated to terminate the
related Lease, it shall be obligated to make a rejectable offer to purchase the
related Property for an amount at least equal to the outstanding principal and
accrued but unpaid interest on the related Mortgage Notes. The applicable Owner
Trustee may not reject such offer unless it deposits with the Indenture Trustee
amounts sufficient to pay the outstanding principal of the related Mortgage
Notes. (Leases, Articles 14, 15 and 40)
If following a casualty or condemnation to any Property, Kmart does not or is
not entitled to terminate the related Lease, Kmart will be obligated to restore
such Property at its own expense as nearly as practicable to the condition that
existed immediately prior to such casualty or condemnation. Kmart is obligated
to complete such restoration prior to the expiration of the term of the related
Lease or as soon as possible following the termination of such 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. (Leases, Articles 14, 15 and
16)
OBSOLESCENCE TERMINATION
At any time following the seventh anniversary of the commencement of the
interim term of the Lease and provided that no Lease Event of Default or
Material Default has occurred and is continuing, Kmart may terminate any Lease
if it determines that the related Property has become obsolete, is no longer
economic for Kmart's use or surplus to Kmart's needs. In such event, such
Property may be (i) transferred to Kmart for an amount sufficient to redeem the
related Mortgage Notes (including the Make-Whole Premium, if any, thereon),
(ii) sold to a third party, with any difference between the amount specified in
clause (i) and the net
37
<PAGE>
sale price being paid by Kmart or (iii) retained by the related Owner Trustee,
provided that such Owner Trustee shall not be entitled to retain the Property
unless it deposits with the Indenture Trustee cash or cash equivalents in an
amount sufficient for the redemption of the related Mortgage Notes (exclusive
of accrued interest thereon and the Make-Whole Premium, if any) which amounts
will be paid by Kmart on the applicable redemption date). The foregoing
notwithstanding, under certain circumstances, Kmart may elect to exchange the
related Mortgage Notes for secured, full recourse securities of Kmart to be
issued under a restated indenture upon the exercise of the Termination Right
with respect to such Property and the transfer of such Property to Kmart, in
which case such Mortgage Notes would not be redeemed. See "Description of the
Mortgage Notes--Assumption of Obligations by Kmart". (Base Indentures, Section
7.1; Leases, Article 39) Kmart may also elect under certain circumstances to
substitute another property for the Property subject to the related Lease.
(Leases, Article 41) See "--Substitution".
EVENTS OF DEFAULT
Events of default under each Lease ("Lease Events of Default") include the
following:
(i)the failure by Kmart to pay any installment of Basic Rent or any
amount of Additional Rent constituting Termination Value or amounts in
respect of the Make-Whole Premium, if any, within five days after the same
is due if the Owner Trustee has given Kmart notice of such due date before
such due date, or within ten days of the due date if the Owner Trustee
does not deliver such notice;
(ii)the failure by Kmart to make any payment constituting Additional
Rent (other than amounts of Additional Rent described in clause (i) above)
within 15 days after notice to Kmart of non-payment;
(iii)the failure by Kmart to maintain insurance as required by the Lease
or any other Operative Document;
(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 such 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; and 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 such 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 related Owner Trustee or Owner Participant and such falseness or
incorrectness is material to such Owner Trustee or Owner Participant and
continues to be material, and shall not have been cured within 30 days
after receipt of written notice by Kmart from such Owner Trustee, 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 include an event of
the type described in clause (i) or (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.
(Leases, Article 20)
38
<PAGE>
REMEDIES
If a Lease Event of Default has occurred and is continuing with respect to any
Lease, the related Owner Trustee may declare such Lease to be in default. Except
as provided below, and to the extent permitted by law, the related Owner Trustee
may at any time thereafter exercise one or more of the remedies set forth in the
Lease, including the right to terminate such Lease and repossess and use or
relet the related Property, to sell such Property or any part thereof, together
with any interest of such Owner Trustee in such Property free and clear of
Kmart's rights, and so long as such Property has not been sold, to require Kmart
to pay as liquidated damages, certain unpaid rent plus any one of the following
sums: (a) the difference between a stipulated termination value identified in
the related Lease (the "Termination Value") and the present value of the fair
market rental value of such Property, for the remainder of the term of such
Lease, such present value to be computed using a per annum rate equal to the
weighted average rate of interest per annum borne by the related Mortgage Notes
as of the closing date (the "Debt Rate"), discounted semiannually from the dates
such rent would be paid; (b) the difference between the present value computed
using a per annum rate equal to the Debt Rate of all rents, discounted
semiannually, for the remainder of the base or applicable renewal term of the
Lease (the "Discounted Basic Rents") and the present value computed using a per
annum rate equal to the Debt Rate of the fair market rental value of such
Property for the remainder of such term, discounted semiannually; (c) an amount
equal to such Property, the Discounted Basic Rents and the Termination Value; or
(d) the Termination Value of such Property and the fair market sales value of
such Property. If such Property has been sold, Kmart would be required to pay
the difference, if any, between the sale proceeds and Termination Value.
(Leases, Article 21) The Indenture Trustee, as assignee of the related Owner
Trustee under the related Indenture, may exercise the remedies of such Owner
Trustee under the related Lease.
SUBSTITUTION
Under each Lease, so long as no Lease Event of Default or Material Default
shall have occurred and be continuing, Kmart may substitute another property
(the "Substitute Property") for the related Property (the "Substitution Right"),
either following an Event of Loss or, in the event that Kmart becomes obligated
to purchase such Property, following exercise by Kmart of the Termination Right.
Kmart may not substitute a Substitute Property for the related Property unless
it satisfies certain conditions with respect to the Substitute Property,
including but not limited to, (i) the fair market value and useful life of the
Substitute Property are not less than the fair market value and useful life of
the Property immediately prior to the event which gave rise to the substitution,
(ii) Kmart shall deliver an environmental assessment report, survey and title
search report, each of which shall be satisfactory to the Owner Trustee and the
Indenture Trustee and (iii) the substitution shall not reduce the amount or
timing of any rents due under such Lease. Kmart shall not be entitled to
substitute a Property unless (i) the long-term senior unsecured debt securities
of Kmart shall then be rated investment grade by at least two nationally
recognized statistical ratings organizations, and (ii) Kmart shall then meet the
Net Worth Standard. (Leases, Article 41)
THE PARTICIPATION AGREEMENTS
Kmart is required to indemnify each Owner Participant, each Owner Trustee,
the Indenture Trustee, the Remainderman Participant, the Remainderman Trustee
and the Trustee for certain losses and claims and for certain other matters.
(Participation Agreements, Section 23) Subject to certain restrictions, each
Owner Participant may transfer its interest in the Properties. (Participation
Agreements, Section 2)
If any Owner Participant becomes a competitor of Kmart during the term of the
related Leases, Kmart may exercise the Competitor Option (provided that no
Lease Event of Default or Material Default has occurred and is continuing under
such Leases) in which event such Owner Participant will have the right for a
90-day 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 90-day period, the related Mortgage Notes will not
be redeemed. If a transfer by such Owner Participant does not occur during the
90-day period, (i) the
39
<PAGE>
related Properties may be (a) transferred to Kmart for an amount equal to the
Redemption Price, plus, if such transfer is made prior to the applicable
Premium Termination Date, a Make-Whole Premium, if any, plus any other amounts
that Kmart owes to such Owner Participant and Owner Trustee or (b) sold to a
third party, with the excess of the Redemption Price, plus, if such transfer is
made prior to the applicable Premium Termination Date, a Make-Whole Premium, if
any, plus any other amounts that Kmart owes to such Owner Participant and Owner
Trustee over the net sale price being contributed by Kmart; or (ii) the Owner
Participant's interest in the related Properties may be (a) transferred to a
third party, in which case the related Mortgage Notes will not be redeemed, or
(b) transferred to Kmart for an amount equal to the Redemption Price, plus, if
such transfer is made prior to the applicable Premium Termination Date, a Make-
Whole Premium, if any, plus any other amounts that Kmart owes to the related
Owner Participant and Owner Trustee. Under certain conditions Kmart may elect
to purchase the related Properties or the related Owner Participant's interest
therein subject to the lien of the Indenture, and assume, in accordance with
and subject to the terms of the Indenture, personal liability for the payment
of the related Mortgage Notes and in such event such Mortgage Notes will not be
redeemed. (Base Indentures, Section 6.1; Participation Agreements, Section 3)
CONSEQUENCES OF KMART'S BANKRUPTCY
If Kmart were to become a debtor in a bankruptcy proceeding under the
Bankruptcy Code, Kmart or its bankruptcy trustee could seek to reject any or
all of the Leases. If the bankruptcy court treated any Lease as a true lease
and approved the rejection of such Lease, such rejection would constitute a
breach of such Lease and, as provided in applicable non-bankruptcy law, deprive
Kmart of the use and possession of the related Property. If any Lease were
rejected, rental payments thereunder would terminate, thereby leaving the
related Owner Trustee (and by virtue of the assignment effected by the
Indentures, the Indenture Trustee) without regular rent payments and with a
claim for damages as a source of payment of amounts due under the Mortgage
Notes issued in respect of the Property leased pursuant to the rejected Lease.
Under section 502(b)(6) of the Bankruptcy Code, a claim by a lessor for damages
resulting from the rejection by a debtor of a lease of real property is limited
to an amount equal to the rent reserved under the lease, without acceleration,
for the greater of one year or 15 percent (but not more than three years) of
the remaining term of the lease, plus rent already due but unpaid. There can be
no assurance that any such claim for damages would be sufficient to provide for
the repayment of the Mortgage Notes issued under the Indenture related to such
Lease. Regardless of any limitation of damages pursuant to section 502(b)(6) of
the Bankruptcy Code, the Indenture Trustee under the related Indenture could
also seek to foreclose upon its lien and security interest in the related
Property under applicable state law, which lien and security interest would not
be affected by rejection of the related Lease, and apply the proceeds of any
foreclosure sale to any amounts unpaid with respect to the related Mortgage
Notes.
40
<PAGE>
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 1, 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 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
41
<PAGE>
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 Regulations not yet
issued. Until such Treasury Regulations are issued, the Conference Report
indicates that holders of installment obligations
42
<PAGE>
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.
43
<PAGE>
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 CONNECTICUT TAXES
The Trustee is a national banking association with its principal corporate
trust office in Hartford, Connecticut. Shipman & Goodwin, special counsel to
the Trustee, has advised Kmart that, in its opinion, prior to a default and
under currently applicable law, assuming that the Pass Through Trusts will not
be taxable as corporations but, rather, will be treated as investment trusts
which are classified as grantor trusts under subpart E, Part I of Subchapter J
of the Code, (i) the Pass Through Trusts will not be subject to any tax
(including, without limitation, net or gross income, tangible or intangible
property, net worth, capital, franchise or doing business tax), fee or other
governmental charge under the laws of the State of Connecticut or any political
subdivision thereof and (ii) Certificateholders who are not residents of or
otherwise subject to tax in Connecticut will not be subject to any tax
(including, without limitation, net or gross income, tangible or intangible
property, net worth, capital, franchise or doing business tax), fee or other
governmental charge under the laws of the State of Connecticut or any political
subdivision thereof solely as a result of purchasing, holding (including
receiving payments with respect to) or selling a Certificate. 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 the Pass
Through Trusts could result in a reduction in the amounts available for
distribution to the Certificateholders. In general, should a Certificateholder
or the Pass Through Trusts 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.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Code impose 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 or Section 4975 of the Code.
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
Trustees (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 Pass Through
Trusts under the Plan Assets Regulation (as described below). 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 Pass Through Trusts.
44
<PAGE>
The U.S. Department of Labor ("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. If the assets of the Pass Through Trusts were deemed to
constitute assets of the Plans holding Certificates, the persons providing
services with respect to the assets of the Pass Through Trusts may be subject
to the fiduciary responsibility provisions of Title I of ERISA, and
transactions involving such Pass Through Trust assets may be subject to the
prohibited transaction provisions of ERISA and Section 4975 of the Code.
Transactions involving the assets of the Pass Through Trusts, as well as
purchases and sales of the Certificates, however, may be exempt from the
prohibited transaction restrictions of ERISA and the Code under administrative
exemptions issued by the DOL or statutory exemptions. Among the administrative
class and statutory exemptions that may be available 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, which exempts certain transactions between bank collective
investment funds and parties in interest; PTE 90-1, 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 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.
45
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), Kmart has agreed to cause
the Trustee to sell to Morgan Stanley & Co. Incorporated and Goldman, Sachs &
Co. (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>
PERCENTAGE OF TOTAL AGGREGATE
AGGREGATE PRINCIPAL PRINCIPAL AMOUNT
UNDERWRITER AMOUNT OF EACH SERIES OF CERTIFICATES
----------- ---------------------- ----------------
<S> <C> <C>
Morgan Stanley & Co. Incorporat-
ed.............................. % $
Goldman, Sachs & Co.............
-------- --------
Total......................... $
======== ========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to pay for and accept delivery of the Certificates are subject to the approval
of certain legal matters by their counsel and certain other conditions. The
Underwriters are obligated to take and pay for all of the Certificates to be
purchased by them if any are taken.
The Underwriters initially propose to offer all or part of the Certificates
directly to the public at the public offering price per Certificate designation
set forth on the cover page hereof and part to certain dealers at a price which
represents a concession not in excess of the percentage set forth below of the
public offering price of the Certificates. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of the percentage set forth
below of the public offering price of the Certificates to certain other
dealers. After the initial public offering, the public offering prices and such
concessions and discounts may be changed.
<TABLE>
<CAPTION>
PASS THROUGH
CERTIFICATES CONCESSION REALLOWANCE
DESIGNATION TO DEALERS CONCESSION
------------ ----------- -----------
<S> <C> <C>
1995-K3......................................... % %
1995-K4......................................... % %
</TABLE>
All secondary trading on the Certificates will settle in immediately
available funds. See "Description of the Certificates--Same-Day Settlement and
Payment".
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Company does not intend to apply for listing of the Certificates on a
national securities exchange, but has been advised by the Underwriters that
they presently intend to make a market in the Certificates, as permitted by
applicable laws and regulations. The Underwriters are not obligated, however,
to make a market in the Certificates and any such market making may be
discontinued at any time at the sole discretion of the Underwriters.
Accordingly, no assurance can be given as to the liquidity of, or trading
markets for, the Certificates.
RATING
It is a condition to the issuance of the Certificates that they be rated at
least BBB by S&P and Baal by Moody's. 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.
46
<PAGE>
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.
LEGAL OPINIONS
The validity of the Certificates offered hereby will be passed upon for Kmart
by Dickinson, Wright, Moon, Van Dusen & Freeman, Detroit, Michigan, and for the
Underwriters by Shearman & Sterling, New York, New York. Both Dickinson,
Wright, Moon, Van Dusen & Freeman and Shearman & Sterling will rely on the
opinion of Shipman & Goodwin, special counsel for Shawmut Bank Connecticut,
National Association, as Trustee, as to certain matters relating to the
authorization, execution and delivery of the Certificates by, and the valid and
binding effect thereof on, such Trustee.
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 25, 1995, 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.
47
<PAGE>
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
Agreements are qualified in their entirety by reference to the definitions of
such terms contained therein.
"Additional Rent" means, generally, all amounts payable under a Lease other
than the basic semiannual rental payments.
"Agreement" means each of the two separate Pass Through Trust Agreements
between Kmart and the Trustee, pursuant to which the Pass Through Trusts will
be formed.
"Bankruptcy Code" means the United States Bankruptcy Code of 1978, as
amended.
"Base Indenture" means, with respect to each Property, the trust indenture
between the related Owner Trustee and the Indenture Trustee.
"Business Day" means any day other than Saturday or Sunday or other day on
which banking institutions in the States of New York, Michigan, or the States
in which the principal offices of the Trustee, Owner Trustee or Indenture
Trustee 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 Trustee for each Pass Through Trust 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.
"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.
"Estate for Years" shall have the meaning described under "Structure of the
Transaction".
"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.
"Event of Loss" means, for any Property, any casualty or condemnation
requiring Kmart to make a purchase offer as described in "Description of the
Leases--Condemnation and Casualty".
A-1
<PAGE>
"Excepted Payments" means rights of each Owner Trustee and Owner Participant
relating to indemnification by Kmart of the Owner Trustees or Owner Participants
for certain matters, insurance proceeds payable to the Owner Trustee or to the
Owner Participants under certain insurance maintained by or for the benefit of
the Owner Trustees or the Owner Participants, any amount payable to the Owner
Participant as the purchase price for the interests conveyed in connection with
Kmart's exercise of the Competitor Option and certain reimbursement payments
made by Kmart to the Owner Trustee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Improvements" shall have the meaning described in "Structure of the
Transaction".
"Indenture" means, with respect to each Property, the related Base Indenture,
as supplemented by the related Supplemental Indenture, 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 Estate" means, with respect to each Indenture, (i) the assignment
of certain rights of the related Owner Trustee's rights as lessor under the
related Lease, including the right to receive base rentals and certain other
payments from Kmart (excluding Excepted Payments), (ii) a first mortgage lien
on the Improvements and Estate for Years acquired by the related Owner Trustee,
subject to the rights of Kmart under the related Lease, and (iii) the
assignment of such Owner Trustee's rights under the Option.
"Indenture Trustee" means collectively, Shawmut Bank Connecticut, National
Association, a national banking association, in its capacity as an Indenture
Trustee under each Indenture, and its successors and assigns thereunder, and
Kathy A. Larimore, in her capacity as an Indenture Trustee under each
Indenture, and her 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.
"Initial Scheduled Principal Distribution Date" means, with respect to each
Pass Through Trust, the date when the first scheduled payment of principal on
the Mortgage Notes held in such Pass Through Trust is to be received by the
Trustee, as specified on the front cover page of this Prospectus.
"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 Trustee,
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 described under "Description of
the Mortgage Notes--Redemption".
"Material Default" shall have the meaning described under "Description of the
Leases--Events of Default".
"Mortgage Notes" means any of the Mortgage Notes (including any Mortgage
Notes issued in exchange, replacement or substitution therefor) issued pursuant
to any Indenture.
A-2
<PAGE>
"Operative Documents" means, with respect to each Property, the related
Lease, Indenture, Participation Agreement, Option Agreement, Tripartite
Agreement, Owner Trust Agreement and Mortgage Notes, the Purchase Agreement,
the Certificates and certain related instruments and documents contemplated by
the foregoing documents, insofar as such agreements, instruments and documents
are applicable to such Property.
"Option" shall have the meaning described under "Structure of the
Transaction".
"Owner Participant" means one or more institutional investors for whose
benefit the related Owner Trustee owns the related Properties leased to Kmart
pursuant to the Leases, and its permitted successors and assigns.
"Owner Trustees" means collectively, Wilmington Trust Company, a Delaware
banking corporation, in its capacity as Owner Trustee under the Owner Trust
Agreements, and its successors and assigns thereunder, and William J. Wade, in
his capacity as additional trustee under certain of the Owner Trust Agreements,
and his successors and assigns.
"Owner Trust Agreement" means each of the four Owner Trust Agreements,
between the related Owner Participant and the Owner Trustee, as supplemented
and amended.
"Participation Agreement" means each of the four Participation Agreements,
among Kmart, the related Owner Trustees, the related Owner Participant, the
related Remainderman Participant, the related Remainder Trustee, the Indenture
Trustee and the Trustee.
"Pass Through Trust" means Pass Through Trust 1995-K3 or Pass Through Trust
1995-K4, 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, plus any proceeds from the sale of the Certificates issued
by such Pass Through Trust that have not yet been used to purchase Mortgage
Notes. 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" shall have the meaning described under "Structure of the
Transaction".
"Property Group" shall have the meaning described under "Structure of the
Transaction".
"Purchase Agreement" means the Agreement for Sale of Real Estate among Kmart,
the Owner Trustees and the Remainderman Trustees with respect to the sale of
the Properties and the remainder interests.
"Regular Distribution Date" means, for each Pass Through Trust, January 2 and
July 2 of each year, commencing January 2, 1996.
"Remainderman Participant" means one or more institutional investors for
whose benefit the related Remainderman Trustee owns the remainder interest in
the related Land, and its permitted successors and assigns.
"Remainder Trust Agreement" means each of the four Remainder Trust Agreements
between the related Remainderman Participant and the Remainderman Trustee, as
supplemented and amended.
"Remainderman Trustee" means collectively, First Security Bank of Utah, N.A.,
a national banking association, in its capacity as Remainderman Trustee, and
its successors and assigns thereunder, and Val T. Orton, in his capacity as
additional trustee under certain of the Remainder Trust Agreements, and his
successors and assigns.
A-3
<PAGE>
"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 second day of a month.
"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, 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 Trustee of
such Mortgage Notes or payments received on account of the sale of such
Mortgage Notes by the Trustee) and any Scheduled Payments not paid within five
days of a Regular Distribution Date.
"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.
"Specified Investments" means (i) direct obligations of the United States of
America and agencies thereof for which the full faith and credit of the United
States is pledged, (ii) obligations fully guaranteed by the United States of
America, (iii) certificates of deposit issued by, or bankers' acceptances of,
or time deposits with, any bank, trust company or national banking association
incorporated or doing business under the laws of the United States of America
or one of the states thereof having combined capital and surplus and retained
earnings of at least $500,000,000 (including any Indenture Trustee or Owner
Trustee if such conditions are met), (iv) commercial paper of companies, banks,
trust companies or national banking associations incorporated or doing business
under the laws of the United States of America or one of the States thereof and
in each case having a rating assigned to such commercial paper by Standard &
Poor's Ratings Group or Moody's Investors Service, Inc. (or, if neither such
organization shall rate such commercial paper at any time, by any nationally
recognized rating organization in the United States of America) equal to the
highest rating assigned by such organization, and (v) repurchase agreements
with any financial institution having a combined capital and surplus of at
least $750,000,000 fully collateralized by obligations of the type described in
clauses (i) through (iv) above; provided that, if all of the above investments
are unavailable, the entire amount to be invested may be used to purchase
Federal Funds from an entity described in clause (iii) above; and provided
further that no investment shall be eligible as a "Specified Investment" unless
the final maturity or date of return of such investment occurs no later than
the earlier of (x) 91 days from the date of purchase thereof and (y) the next
succeeding Regular Distribution Date.
"Store" means the buildings, structures, alterations, modifications and other
additions to and changes in such buildings and site improvements located on the
Land.
"Supplemental Indenture" means, with respect to each Property, the mortgage,
deed of trust, assignment of leases and rents, security agreement, financing
statement and first supplemental indenture to the related Base Indenture and
pursuant to which the Mortgage Notes to be held in the Pass Through Trusts will
be issued.
"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 Shawmut Bank Connecticut, National Association, a national
banking association, in its capacity as trustee under each Pass Through Trust
Agreement, and its successors and assigns thereunder.
A-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the Registrant's expenses in connection with
the issuance and distribution of the securities being registered, other than
underwriting discounts and commissions. All amounts are estimated except the
Securities and Exchange Commission registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........... $ 72,414
Printing fee.................................................. 80,000
Blue sky fees and expenses.................................... 25,000
Accounting fees............................................... 30,000
Rating agency fees............................................ 185,000
Legal fees.................................................... 2,000,000
Trustees' fees and expenses................................... 45,000
Miscellaneous................................................. 37,586
----------
Total....................................................... $2,475,000
==========
</TABLE>
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.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
1 Form of Underwriting Agreement.
4.1 Form of Pass Through Trust Agreement.
4.2(a) Form of Trust Indenture+
4.2(b) Form of Mortgage, Deed of Trust, Assignment of Leases and Rents,
Security Agreement, Financing Statement and First Supplemental
Indenture .+
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(b).
4.5 Form of Participation Agreement.++
4.6 Form of Lease.+
5.1 Opinion of Dickinson, Wright, Moon, Van Dusen & Freeman, counsel for
the Company.
5.2 Opinion of Shipman & Goodwin, counsel for the Trustee.
8.1 Opinion of Dickinson, Wright, Moon, Van Dusen & Freeman, counsel for
the Company, as to tax matters.
8.2 Opinion of Shipman & Goodwin, counsel for the Trustee, 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 Shipman & Goodwin--included in Exhibit 5.2 and Exhibit 8.2.
24 Power of Attorney--included on page II-4.
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939
of Shawmut Bank Connecticut, National Association.
</TABLE>
- --------
+ A separate Base Indenture, Supplemental Indenture and Lease will be entered
into with respect to each Property.
++A separate Participation Agreement will be entered into with respect to each
Property Group.
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 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.
II-2
<PAGE>
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 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.
II-3
<PAGE>
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 Registration Statement
or amendment thereto to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Troy, State of Michigan on June 7, 1995.
KMART CORPORATION
By /s/ Floyd Hall
---------------------------
FLOYD HALL
Chairman of the Board,
President and Chief
Executive Officer
POWER OF ATTORNEY
KNOWN ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Anthony N. Palizzi or Nancie W. LaDuke, or
either of them, his true and lawful attorneys-in-fact and agents, 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 the attorneys-in-fact and
agents, and each of them, 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 attorneys-in-fact and
agents, or any of them, or their 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 Registration
Statement or amendment thereto has been signed below by the following persons
in the capacities indicated on June 7, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE SIGNATURE TITLE
- --------- ----- --------- -----
<S> <C> <C> <C>
/s/ Floyd Hall Chairman of the Board, /s/ Joseph P. Flannery Director
- --------------------------- President and Chief ----------------------
(FLOYD HALL) Executive Officer (Principal (JOSEPH P. FLANNERY)
Executive Officer)
/s/ Thomas F. Murasky Executive Vice President /s/ David B. Harper Director
- --------------------------- (Principal Financial and ----------------------
(THOMAS F. MURASKY) Accounting Officer) (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/ Richard G. Cline Director /s/ Donald S. Perkins Director
- --------------------------- ----------------------
(RICHARD G. CLINE) (DONALD S. PERKINS)
/s/ Willie D. Davis Director /s/ Lawrence Perlman Director
- --------------------------- ----------------------
(WILLIE D. DAVIS) (LAWRENCE PERLMAN)
/s/ Enrique C. Falla Director /s/ Gloria M. Shatto Director
- --------------------------- ----------------------
(ENRIQUE C. FALLA) (GLORIA M. SHATTO)
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
EXHIBITS DESCRIPTION SEQUENTIAL
-------- ----------- PAGE NUMBER
<C> <S> <C>
1 Form of Underwriting Agreement.
4.1 Form of Pass Through Trust Agreement.
4.2(a) Form of Trust Indenture.+
4.2(b) Form of Mortgage, Deed of Trust, Assignment of Leases
and Rents, Security Agreement, Financing Statement and
First Supplemental Indenture.+
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(b).
4.5 Form of Participation Agreement.++
4.6 Form of Lease.+
5.1 Opinion of Dickinson, Wright, Moon, Van Dusen &
Freeman, counsel for the Company.
5.2 Opinion of Shipman & Goodwin, counsel for the Trustee.
8.1 Opinion of Dickinson, Wright, Moon, Van Dusen &
Freeman, counsel for the Company, as to tax matters.
8.2 Opinion of Shipman & Goodwin, counsel for the Trustee,
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 Shipman & Goodwin--included in Exhibit 5.2
and Exhibit 8.2.
24 Power of Attorney--included on page II-4.
25.1 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of Shawmut Bank Connecticut,
National Association.
</TABLE>
- --------
+ A separate Base Indenture, Supplemental Indenture and Lease will be entered
into with respect to each Property.
++A separate Participation Agreement will be entered into with respect to each
Property Group.
<PAGE>
GRAPHICS APPENDIX LIST
PAGE WHERE
GRAPHIC
APPEARS DESCRIPTION OF GRAPHIC OR CROSS REFERENCE
- --------------------------------------------------------------------------------
13 Box diagram showing: Lease Rental Payments Assigned
by Owner Trustee flowing from Kmart Corporation to
the Indenture Trustee*; Mortgage Note Payments
flowing from the Indenture Trustee to the Pass
Through Trustee for each of the 1995-K3 and 1995-K4
Trusts, with Certificate Distributions in respect of
the Certificates issued by each such Trust being
made to the respective Certificateholders; and the
Indenture Trustee distributing Excess Payments** to
the Owner Trustee, who in turn distributes such
Excess Payments** to the respective Owner
Participant.
* Each Property will be owned by a single Owner
Trustee and will be subject to a separate Lease and
separate Indenture.
** Excess payments flow to the related Owner Trustee
and then to the respective Owner Participant.
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 1
$________________________
KMART CORPORATION
PASS THROUGH CERTIFICATES, 1995-K3 AND 1995-K4
UNDERWRITING AGREEMENT
June __, 1995
<PAGE>
UNDERWRITING AGREEMENT
June __, 1995
Morgan Stanley & Co. Incorporated
Goldman Sachs & Co.
c/o Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, New York 10020
Dear Sirs:
Kmart Corporation, a Michigan corporation (the "Company"), proposes
that Shawmut Bank Connecticut, National Association, a national banking
association, as trustee (the "Pass Through Trustee") under each of the two
separate Pass Through Trust Agreements, each dated as of June __, 1995 (each, a
"Pass Through Trust Agreement" and, collectively, the "Pass Through Trust
Agreements"), between the Company and the Pass Through Trustee, issue and sell
$___________ aggregate principal amount of Pass Through Certificates, 1995-K3
and 1995-K4 (collectively, the "Certificates"), consisting of the principal
amount of Certificates with the interest rates and final distribution dates set
forth on Schedule A hereto, to the several underwriters named in Schedule A
hereto (the "Underwriters"), on the terms and conditions stated herein and in
Schedule A hereto.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (File No. 33-______),
including a prospectus, relating to the Certificates. The registration
statement as amended at the time it becomes effective, including the information
(if any) deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended
(the "Securities Act"), is hereinafter referred to as the Registration
Statement; the prospectus in the form first used to confirm sales of
Certificates is hereinafter referred to as the Prospectus. As used herein, the
terms "Registration Statement", "Prospectus", and "preliminary prospectus" shall
include documents incorporated by reference therein.
As used in this Agreement, capitalized terms not otherwise defined
shall have the meanings specified in the Pass Through Trust Agreements, or, if
not so defined therein, the meanings specified in each of the 18 Indentures
referred to in such Pass Through Trust Agreements.
<PAGE>
2
1. Representations and Warranties. The Company represents and
------------------------------
warrants to each of the Underwriters that:
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act, and has prepared and filed on such Form S-3 with the
Commission the Registration Statement on such Form; the Registration
Statement has become effective; no stop order suspending the effectiveness
of the Registration Statement is in effect; and no proceedings for such
purpose are pending before or, to the Company's knowledge, threatened by
the Commission.
(b) (i) Each part of the Registration Statement, when such part
became effective, did not contain and each such part, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii)
the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the
Securities Act and the applicable rules and regulations of the Commission
thereunder and (iii) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, except that the representations and warranties set
forth in this Section 1(b) do not apply (A) to statements or omissions in
the Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein or (B) to that part of
the Registration Statement that constitutes the Statement of Eligibility
(Form T-1) under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), of the Pass Through Trustee.
(c) Each document filed or to be filed pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by
reference in the Prospectus (the "Incorporated Documents") when filed with
the Commission complied or will comply in all material respects with the
Exchange Act and the applicable rules and regulations thereunder.
(d) (i) The financial statements included in the Incorporated
Documents present fairly the consolidated financial position of the Company
and its subsidiaries taken as a whole as of the dates indicated and the
consolidated results of operations, cash flows and changes in financial
position for the periods specified (subject to year-end adjustments in the
case of financial statements included in the Company's reports on Form 10-
Q); except as otherwise stated in the Incorporated Documents, such
financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis; and the
supporting schedules for
<PAGE>
3
the Company and its subsidiaries taken as a whole present fairly the
information required to be stated therein, (ii) the summary of financial
data included in the Prospectus presents fairly the information shown
therein and has been compiled on a basis consistent in all material
respects with that of the audited consolidated financial statements
included in the Incorporated Documents and (iii) the accountants who
certified the consolidated financial statements and supporting schedules
included in the Incorporated Documents are independent public accountants
as required by the Exchange Act and the rules and regulations promulgated
thereunder.
(e) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(f) Each subsidiary of the Company, if any, which is a "significant
subsidiary" (as defined in Rule 1-02 of Regulation S-X under the Act and
herein, a "Material Subsidiary") has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation.
(g) This Agreement has been duly authorized, executed and delivered by
the Company.
(h) The execution and delivery by the Company of this Agreement, each
of the Operative Documents to which the Company is, or is to be, a party,
the consummation by the Company of the transactions herein and therein
contemplated, and the compliance by the Company with the terms hereof and
thereof do not and will not conflict with, or result in a breach of, any of
the terms or provisions of, or constitute a default under, the Articles of
Incorporation or By-Laws, as amended, of the Company or any material
indenture, mortgage, or other agreement or instrument to which the Company
or any of its subsidiaries is a party or by which any of their respective
properties is bound, except for such conflicts, breaches or defaults that
individually or in the aggregate do not and would not have a material
adverse effect on the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect") or any applicable law, rule, regulation,
judgment, order or decree of any government, governmental instrumentality
or court, domestic or foreign, having jurisdiction over the Company or any
of its subsidiaries or any of their respective properties except such
violations that individually or in the aggregate do not and would not have
a Material Adverse Effect; and no consent, approval, authorization, order
or license of,
<PAGE>
4
or filing with or notice to, any government, governmental instrumentality,
regulatory body or authority or court, domestic or foreign, is required for
the valid authorization, issuance and delivery of the Certificates [and the
Notes], the valid authorization, execution, delivery and performance by the
Company of this Agreement and each of the Operative Documents to which the
Company is, or is to be, a party, or the consummation by the Company of the
transactions contemplated by this Agreement and each of the Operative
Documents to which the Company is, or is to be, a party, except such as are
required by the Operative Documents, the Securities Act, the Trust
Indenture Act and the securities or Blue Sky laws of the various states.
(i) Each of the Operative Documents to which the Company is, or is to
be, a party, has been duly authorized by the Company and, when duly
executed and delivered by the Company, will constitute a valid and binding
obligation of the Company, enforceable in accordance with its terms, except
as (i) the enforceability thereof may be limited by bankruptcy, insolvency
or similar laws affecting creditors' rights generally, (ii) the
availability of equitable remedies may be limited by equitable principles
of general applicability and (iii) in the case of the Leases, the
enforceability thereof may be limited by applicable law which may affect
the remedies provided therein, which laws, however, do not make such
remedies inadequate for the practical realization of the rights and
benefits intended to be provided thereby. Each of the Pass Through Trust
Agreements as executed is substantially in the form filed as an exhibit to
the Registration Statement and has been duly qualified under the Trust
Indenture Act. Each of the Operative Documents to which the Company is, or
is to be, a party will conform in all material respects to the descriptions
thereof in the Prospectus.
(j) [The Certificates have been duly authorized and,] when duly
executed and authenticated by the Pass Through Trustee in accordance with
the terms of the respective Pass Through Trust Agreement and this
Agreement, will be duly issued under such Pass Through Trust Agreement and,
when delivered to and paid for by the Underwriter in accordance with the
terms of this Agreement, will constitute valid and binding obligations of
the Pass Through Trustee, enforceable in accordance with its terms, except
as (i) the enforceability thereof may be limited by bankruptcy, insolvency
or similar laws affecting creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable principles
of general applicability; and the holders thereof will be entitled to the
benefits of the Pass Through Trust Agreement pursuant to which the
Certificates are to be issued.
(k) [The Notes to be issued under each related Supplemental Indenture,
when duly executed and delivered by the related Owner Trustee and duly
authenticated by the Indenture Trustee in accordance with the terms of such
<PAGE>
5
Supplemental Indenture, will be duly issued under such Supplemental
Indenture and will constitute valid and binding obligations of such Owner
Trustee, enforceable in accordance with its terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability; and the holders thereof will be
entitled to the benefits of the Indenture and the related Supplemental
Indenture.]
(l) There has not occurred 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 the condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus.
(m) There are no legal or governmental proceedings pending or, to the
Company's knowledge, threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the Company or
any of its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or any
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or filed as
required.
(n) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed with
the Securities Act and the applicable rules and regulations of the
Commission thereunder.
(o) 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 of 1940, as amended.
2. Purchase and Delivery. The Company hereby agrees to cause the
---------------------
Pass Through Trustee to sell to the several Underwriters, and the Underwriters,
upon the basis of the representations and warranties herein contained, but
subject to the conditions hereinafter stated, agree, severally and not jointly,
to purchase from the Pass Through Trustee the respective principal amounts of
Certificates set forth in Schedule A hereto at 100% of their respective amounts
- -- the purchase price -- plus accrued interest, if any, from June __, 1995 to
the date of payment and delivery.
3. Public Offering. The Company is advised by you that the
---------------
Underwriters propose to make a public offering of their respective portions of
the Certificates as soon after
<PAGE>
6
the Registration Statement and this Agreement have become effective as in your
judgment is advisable. The Company is further advised by you that the
Certificates are to be offered to the public initially at 100% of their
principal amount -- the public offering price -- plus accrued interest, if any.
The Certificates may be offered to certain dealers selected by you at
concessions not in excess of the concessions set forth in the Prospectus, and
that any Underwriter may allow, and such dealers may reallow, concessions, not
in excess of the concessions set forth in the Prospectus, to any Underwriter or
to certain other dealers.
As compensation to the Underwriters for their commitments and
obligations hereunder in respect of the Certificates, including their respective
undertakings to offer the Certificates for sale to the public, the Company will
pay to the Underwriters an amount equal to $____________________, which
constitutes ____% of the aggregate principal amount of the Certificates
purchased by each Underwriter. Such payment shall be made simultaneously with,
and is conditioned upon, the payment by the Underwriters to the Pass Through
Trustee of the purchase price of the Certificates as specified in Section 4
hereof. Payment of such compensation shall be made by Federal funds check or
other immediately available funds to the order of Morgan Stanley & Co.
Incorporated.
4. Payment for the Certificates. Payment for the Certificates shall
----------------------------
be made by wire transfer payable to the order of the Pass Through Trustee in
immediately available funds at the office of Shawmut Bank Connecticut, National
Association, 777 Main Street, Hartford, Connecticut 06115 on _______, 1995 or at
such other time on the same or such other date, not later than
_________________, 1995, as shall be designated in writing by you and the
Company. The time and date of such payment are hereinafter referred to as the
"Closing Date".
Payment for the Certificates shall be made against delivery to you for
the respective accounts of the several Underwriters of the Certificates
registered in such names and in such denominations as you shall request in
writing not later than two full business days prior to the date of delivery,
with any transfer taxes payable in connection with the transfer of the
Certificates to the Underwriters duly paid. Each such Certificate shall be
available for inspection by the Underwriters in New York, New York, not later
than 1:00 p.m. on the Business Day two Business Days prior to the Closing Date.
5. Conditions to Closing. The several obligations of the
---------------------
Underwriters hereunder are subject to the accuracy of the representations and
warranties on the part of the Company herein, to the accuracy of the statements
of the Company's officers made in each certificate furnished pursuant to the
provisions hereof, to the performance and observance by the Company of all
covenants and agreements herein contained on its part to be performed and
observed and to the following additional conditions precedent:
<PAGE>
7
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date,
(i) no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted or, to the Company's
knowledge, threatened by the Commission;
(ii) there shall not have been any downgrading, nor any notice
given of any intended or potential downgrading, in the rating accorded
any of the Company's securities by any "nationally recognized
statistical rating organization", as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act;
(iii) there shall not have occurred any change in the condition,
financial or otherwise, or in the earnings, business or operations, of
the Company and its subsidiaries, taken as a whole, from that set
forth in the Prospectus that, in your reasonable judgment, is material
and adverse and that makes it, in your reasonable judgment,
impracticable to market the Certificates on the terms and in the
manner contemplated in the Prospectus; and
(iv) there shall not have occurred any (A) suspension or material
limitation of trading generally on or by, as the case may be, the New
York Stock Exchange or the American Stock Exchange, (B) suspension of
trading of any securities of the Company on any exchange or in any
over-the-counter market, (C) declaration of a general moratorium on
commercial banking activities in New York by either Federal or New
York State authorities or (D) any outbreak or escalation of
hostilities or any change in financial markets or any calamity or
crisis that, in your reasonable judgment, is material and adverse and,
in the case of any of the events described in clauses (iv)(A) through
(D), such event, singly or together with any other such event, makes
it, in your reasonable judgment, impracticable to market the
Certificates on the terms and in the manner contemplated by the
Prospectus.
(b) The Underwriters shall have received on the Closing Date, a
certificate of the Company, signed by the Chairman of the Board, the
President or any Vice President of the Company, dated as of the Closing
Date, to the effect that the signers of such certificate have examined the
Registration Statement, the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the date of
<PAGE>
8
such certificate, and the Company has complied with all the agreements
and satisfied all the conditions on its part to be performed or
satisfied at or prior to the date of such certificate;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose has been instituted or, to the Company's knowledge,
threatened; and
(iii) there has been no change in the condition, financial or
otherwise, or in the earnings, business or operations, of the Company
and its subsidiaries, taken as a whole, from that set forth in the
Prospectus that is material and adverse.
(c) You shall have received on the Closing Date an opinion of A.N.
Palizzi, General Counsel for the Company, dated the Closing Date to the
effect that:
(i) the Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except
to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(ii) each of the Material Subsidiaries of the Company has been
duly incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation;
(iii) this Agreement has been duly authorized, executed and
delivered by the Company;
(iv) the execution and delivery by the Company of this Agreement,
the Pass Through Trust Agreements, and the performance by the Company
of its obligations under this Agreement and the Pass Through Trust
Agreements, will not contravene any provision of (a) applicable law,
(b) the articles of incorporation or by-laws of the Company, (c) to
the best of such counsel's knowledge, any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or,
(d) to the best of such counsel's knowledge, any judgment, order or
decree of any governmental
<PAGE>
9
body, agency or court having jurisdiction over the Company or any
subsidiary, except, in the case of clause (a), (c) and (d), such
contraventions that individually or in the aggregate do not and would
not have a Material Adverse Effect; and
(v) after due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is a party or to which any of the properties
of the Company or any of its subsidiaries is subject that are required
to be described in the Registration Statement or the Prospectus and
are not so described or of any statutes, regulations, contracts or
other documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(d) You shall have received on the Closing Date an opinion of
Dickinson, Wright, Moon, Van Dusen & Freeman, counsel for the Company,
dated the Closing Date, to the effect that:
(i) [the Certificates have been duly authorized and,] when
executed, authenticated and issued in accordance with the provisions
of the respective Pass Through Trust Agreement and delivered to and
paid for by the Underwriter in accordance with the terms of this
Agreement, will be entitled to the benefits of their respective Pass
Through Trust Agreement and will be valid and binding obligations of
the Pass Through Trustee, enforceable in accordance with their terms;
and the holders of the Certificates are entitled to the benefits of
the Pass Through Trust Agreement pursuant to which the Certificates
are issued;
(ii) each of the Pass Through Trust Agreements has been duly
qualified under the Trust Indenture Act and has been duly authorized,
executed and delivered by the Company and is a valid and binding
agreement of the Company, enforceable against it in accordance with
its terms except as the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally, 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 or
reasonableness and good faith in the exercise of rights and remedies;
<PAGE>
10
(iii) Each of the Operative Documents to which the Company is,
or is to be, a party, has been duly authorized by the Company and,
when duly executed and delivered by the Company, will constitute a
valid and binding obligation of the Company, enforceable in accordance
with its terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally, (ii) the availability of equitable remedies may be
limited by equitable principles of general applicability and (iii) in
the case of the Leases, the enforceability thereof may be limited by
applicable law which may affect the remedies provided therein, which
laws, however, do not make such remedies inadequate for the practical
realization of the rights and benefits intended to be provided
thereby.
(iv) no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement and
the Pass Through Trust Agreements, except such as may be required by
the terms of the Operative Documents, the Securities Act, the Trust
Indenture Act and the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Certificates;
(iv) each of the Operative Documents conforms in all material
respects to the description thereof contained in the Prospectus; and
the description of the Certificates conforms in all material respects
to the rights set forth in the instruments defining the same;
(v) the statements (1) in the Prospectus under the captions (a)
"Description of the Mortgage Notes", (b) "Description of the
Certificates", insofar as they purport to constitute a summary of the
terms of the Certificates, (c) "Description of the Leases" and (d)
"Underwriting", insofar as they purport to describe the provisions of
this Agreement and (2) in the Registration Statement under Item 15, in
the cases set forth in (1)(a) and (2), insofar as such statements
constitute summaries of the legal matters, documents and proceedings
referred to therein, and insofar as they relate to statements of law
or legal conclusions, are correct in all material respects;
(vi) such counsel has reviewed the statements set forth in the
Prospectus under the captions "Certain Federal Income Tax
Consequences" and "ERISA Considerations" and is of the opinion that,
insofar as such statements constitute summary descriptions of certain
matters of law or legal conclusions with respect thereto, are correct
in all material respects;
<PAGE>
11
(vii) 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 of 1940, as amended;
(viii) such counsel (1) is of the opinion that the Registration
Statement and Prospectus (except for financial statements and
schedules included therein as to which such counsel need not express
any opinion) comply as to form in all material respects with the
Securities Act and the rules and regulations of the Commission
thereunder, (2) believes that (except for financial statements and
schedules as to which such counsel need not express any belief and
except for that part of the Registration Statement that constitutes
the Form T-1 heretofore referred to) the Registration Statement and
the prospectus included therein at the time the Registration Statement
became effective did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (3)
believes that (except for financial statements and schedules as to
which such counsel need not express any belief) the Prospectus as of
its issue date and as of the Closing Date did not and does not contain
any untrue statement of a material fact or did not and does not omit
to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and
(ix) each of the Incorporated Documents (except for financial
statements and schedules as to which such counsel need not express any
opinion) complied when so filed as to form in all material respects
with the Exchange Act and the applicable rules and regulations of the
Commission thereunder.
(e) You shall have received on the Closing Date an opinion of Shearman
& Sterling, special counsel for the Underwriters, dated the Closing Date,
covering the matters referred to in subparagraph (iii) of paragraph (c) and
subparagraphs, (i), (ii), (vi) (but only as to the statements in the
Prospectus under "Description of the Certificates", "Description of the
Mortgage Notes", "Description of the Leases" and "Underwriting"), and (ix)
of paragraph (d) above.
With respect to subparagraphs (viii) and (ix) of paragraph (d) above,
Dickinson, Wright, Moon, Van Dusen & Freeman may state that their opinion and
belief are based upon their participation in the preparation of the Registration
Statement and Prospectus and any amendments or supplements thereto and the
Incorporated Documents and review and discussion of the contents thereof, but
are without independent check or verification except as specified. With respect
to subparagraph (viii) of paragraph (d) above, Shearman & Sterling may state
that their opinion and belief are based upon their participation in the
preparation of
<PAGE>
12
the Registration Statement and Prospectus and any amendments or supplements
thereto (other than the Incorporated Documents) and review and discussion of the
contents thereof (including the Incorporated Documents), but are without
independent check or verification except as specified.
The opinion of Dickinson, Wright, Moon, Van Dusen & Freeman described
in paragraph (d) above shall be rendered to you at the request of the Company
and shall so state therein.
(f) You shall have received on the Closing Date an opinion, in form
and substance satisfactory to you and to your counsel, of Shipman &
Goodwin, counsel for Shawmut Bank Connecticut, National Association, dated
the Closing Date, to the effect that:
(i) the Pass Through Trustee is a national banking association
duly organized and validly existing in good standing under the laws of
the United States, and has the full corporate power, authority and
legal right under the laws of the United States pertaining to its
banking, trust and fiduciary powers to execute and deliver each of the
Operative Documents to which the Pass Through Trustee is a party, and
to perform its obligations under such Operative Documents and to
consummate the transactions contemplated by the Operative Documents to
which the Pass Through Trustee is a party and each such agreement
constitutes a valid and binding obligation of the Pass Through
Trustee, enforceable against the Pass Through Trustee in accordance
with its terms; and the Certificates have been validly issued and are
entitled to the benefits of the respective Pass Through Trust
Agreements;
(ii) each of the Operative Documents to which the Pass Through
Trustee is a party has been duly authorized, executed and/or
authenticated, as the case may be, and delivered by the Pass Through
Trustee;
(iii) the execution and delivery by the Pass Through Trustee of
each of the Operative Documents to which the Pass Through Trustee is a
party, and the performance by the Pass Through Trustee of its
obligations under each of the Operative Documents to which the Pass
Through Trustee is a party, do not and will not contravene any
provision of the Articles of Association or by-laws of the Pass
Through Trustee and do not and will not contravene, result in a
violation or breach of, or constitute a default under, any law, rule
or regulation of the State of Connecticut or any United States
governmental authority or agency regulating the banking, trust or
fiduciary powers of the Pass Through Trustee;
<PAGE>
13
(iv) neither the consent, approval, authorization or order of,
qualification or filing with, or notice to, nor the taking of any
other action in respect of, any governmental body or agency of the
State of Connecticut or the United States regulating the banking,
trust or fiduciary powers of the Pass Through Trustee is required for
the execution and delivery by the Pass Through Trustee of each of the
Operative Documents to which the Pass Through Trustee is a party, or
for the performance by the Pass Through Trustee of its obligations
under each of the Operative Documents to which the Pass Through
Trustee is a party; and
(v) the statements in the Registration Statement and the
Prospectus under the heading "Certain Connecticut Taxes", to the
extent that they constitute matters of law or legal conclusions with
respect thereto, regarding taxation by the State of Connecticut have
been prepared or reviewed by such counsel and are correct in all
material respects.
(g) You shall have received, on each of the date hereof and the
Closing Date, a letter dated the date hereof or the Closing Date, as the
case may be, in form and substance satisfactory to you, from Price
Waterhouse, LLP, independent public accountants for the Company, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements
and certain financial information contained in of incorporated by reference
into the Registration Statement and the Prospectus.
(h) You shall have received (i) a signed opinion of Hodgson, Russ,
Andrews, Woods & Goodyear as to, among other things, the legal, valid and
binding nature of each Original Indenture and the enforceability thereof,
and (ii) a signed copy of each of the other opinions to be provided to the
Indenture Trustee pursuant to
<PAGE>
14
Section 4 of the Participation Agreements, in each case addressed to you
and dated as of the Closing Date.
(i) The Company shall have furnished to you and to your counsel, in
form and substance satisfactory to such counsel, such other documents,
certificates and opinions as such counsel may reasonably request in order
to evidence the accuracy and completeness of any of the representations,
warranties or statements, the performance of any covenant by the Company
theretofore to be performed, or the compliance with any of the conditions
herein contained.
(j) The Certificates shall have been rated not less than BBB by
Standard & Poor's Ratings Group and Baa1 by Moody's Investors Service.
6. Covenants of the Company. In further consideration of the
------------------------
agreements of the Underwriters herein contained, the Company covenants as
follows:
(a) To furnish to you, without charge, two signed copies of the
Registration Statement (including exhibits thereto and documents
incorporated by reference) and for delivery to each other Underwriter two
conformed copies of the Registration Statement (without exhibits) and,
during the period mentioned in paragraph (c) below, as many copies of the
Prospectus, any documents incorporated therein by reference, and any
supplements and amendments thereto or to the Registration Statement as you
may reasonably request. The terms "supplement" and "amendment" or "amend"
as used in this Agreement shall include all documents subsequently filed by
the Company with the Commission pursuant to the Exchange Act that are
deemed to be incorporated by reference in the Prospectus.
(b) Before amending or supplementing the Registration Statement or the
Prospectus, to furnish to you a copy of each such proposed amendment or
supplement for your review; provided, however, that the foregoing
-------- -------
requirement shall not apply to any of the Company's periodic filings with
the Commission required to be filed pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, copies of which filings the Company will upon
request cause to be delivered to the Underwriters promptly after being
filed with the Commission; and not to file any such proposed amendment or
supplement to which you or your counsel reasonably object.
(c) If, during such period after the first date of the public offering
of the Certificates as in the opinion of your counsel the Prospectus is
required by law to be delivered in connection with sales by an Underwriter
or dealer, any event shall occur or condition exist as a result of which it
is necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances when the Prospectus
is delivered to a purchaser, not misleading, or if, in the opinion
<PAGE>
15
of your counsel, it is necessary to amend or supplement the Prospectus to
comply with law, forthwith to prepare, file with the Commission and
furnish, at its own expense, to the Underwriters and to the dealers (whose
names and addresses you will furnish to the Company) to which Certificates
may have been sold by you on behalf of the Underwriters and to any other
dealers upon request, either amendments or supplements to the Prospectus so
that the statements in the Prospectus as so amended or supplemented will
not, in the light of the circumstances when the Prospectus is delivered to
a purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.
(d) To endeavor to qualify the Certificates for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request, to endeavor to maintain such qualification for as long
as the laws of such jurisdictions so require and to notify the Underwriters
of any termination of such qualifications; provided, however, that the
-------- -------
Company shall not be obligated to so qualify the Certificates if such
qualification requires it to file any general consent to service of process
or to qualify as a foreign corporation in any jurisdiction in which it is
not so qualified.
(e) To make generally available to the Company's security holders and
to you upon request as soon as practicable an earning statement covering
the twelve-month beginning on the first day of the first full fiscal
quarter after the date hereof, which earning statement shall satisfy the
provisions of Section 11(a) of the Securities Act and the rules and
regulations thereunder.
(f) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise dispose of any debt securities of the Company or warrants to
purchase debt securities of the Company substantially similar to the
Certificates (other than the Certificates) without your prior written
consent.
(g) Whether or not any sale of the Certificates is consummated, to
pay, or cause the Owner Trustees to pay, the following expenses incident to
this Agreement and the Pass Through Trust Agreements: (i) the preparation,
printing and distribution of this Agreement, the Registration Statement,
the preliminary prospectus, the Prospectus and all amendments and
supplements thereto and each of the Operative Documents, (ii) the
preparation, issuance and delivery of the Certificates, (iii) the fees and
disbursements of the Company's counsel and accountants, (iv) the
qualification of the Certificates under securities laws in accordance with
the provisions of Section 6(d), including filing fees and the reasonable
fees and disbursements of the Underwriters' counsel in connection therewith
and in connection with the preparation of any Blue Sky Memorandum, (v) the
reasonable fees and expenses of the Pass
<PAGE>
16
Through Trustee, the Owner Trustees and the Indenture Trustee and the
reasonable fees and disbursements of counsel for the Pass Through Trustee,
the Owner Trustees and the Indenture Trustee, (vi) the reasonable fees and
expenses of all counsel retained to serve as local counsel in connection
with the transactions contemplated in the Operative Documents, (vii)
certain fees and disbursements of your counsel as heretofore agreed and
(viii) any fees charged by rating agencies for the rating of the
Certificates.
(h) The Company, during the period when a prospectus relating to the
Certificates is required to be delivered under the Securities Act (in the
opinion of your counsel), will file promptly all documents required to be
filed with the Commission pursuant to Section 13 or 14 of the Exchange Act.
7. Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless each Underwriter and each person, if any, who
controls each Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including, without limitation, the
reasonable fees and expenses of counsel in connection with any governmental or
regulatory investigation or proceeding) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, or the Prospectus as originally filed or any
amendment or supplement thereof, or caused by any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the Company
-------- -------
will not be liable (i) in any case to the extent that such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon or in conformity with
information relating to any Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use therein or (ii) 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
Certificates 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 to 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 Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement
<PAGE>
17
and each person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Company to such Underwriter, but only
with reference to information relating to such Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use in the
Registration Statement, the Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either paragraph (a) or (b) above, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing of the institution
of such proceeding and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
It is understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of parties indemnified pursuant to paragraph (a)
above, such separate firm shall be designated in writing by Morgan Stanley & Co.
Incorporated and, in the case of parties indemnified pursuant to paragraph (b)
above, such firm shall be designated in writing by the Company. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the third sentence of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and
<PAGE>
18
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraph (a) or (b) of
this Section 7 is unavailable to an indemnified party or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Certificates or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and of the Underwriters on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, 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 hand
in connection with the offering of the Certificates shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
Certificates (before deducting expenses) received by the Company bear to the
total commissions received by the Underwriters in respect thereof. The relative
fault of the Company on the one hand and of the Underwriters on the other hand
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 or by
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 7 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 that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the
Certificates underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages that 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
<PAGE>
19
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the total commissions received by each Underwriter
pursuant to this Agreement and not joint. The remedies provided for in this
Section 7 are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 7 and the representations and warranties of the Company contained in
this Agreement shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of any Underwriter or any person controlling any Underwriter or by or on
behalf of the Company, its officers or directors or any person controlling the
Company and (iii) acceptance of and payment for any of the Certificates.
8. Termination. This Agreement shall be subject to termination, by
-----------
notice given by you to the Company, if after the execution and delivery of this
Agreement and prior to the Closing Date (i) there has been any material adverse
change in the condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, (ii) there has
occurred any outbreak or escalation of hostilities or other calamity or crises
the effect of which on the financial markets of the United States is such as to
make it, in your judgment, impracticable to market the Certificates, (iii)
trading in securities generally on the New York Stock Exchange has been
suspended or materially limited or if a general moratorium on commercial banking
activities has been declared by either Federal or New York State authorities or
(iv) there has been any downgrading, or any notice given of any intended or
potential downgrading, in the rating accorded any of the Company's securities by
any "nationally recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
9. Default by One of the Underwriters. If either Underwriter shall
----------------------------------
fail on the Closing Date to purchase the Certificates which it is obligated to
purchase hereunder (the "Defaulted Certificates"), you shall have the right, but
not the obligation, within 24 hours thereafter to make arrangements for the non-
defaulting Underwriter (the "Non-Defaulting
<PAGE>
20
Underwriter") to purchase all, but not less than all, of the Defaulted
Certificates upon the terms herein set forth; if, however, the Non-Defaulting
Underwriter shall have not completed such arrangements within such 24-hour
period, then this Agreement shall terminate without liability on the part of the
Non-Defaulting Underwriter.
10. Headings. The headings of the sections of this Agreement have
--------
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
11. Miscellaneous. This Agreement may be signed in two or more
-------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York.
<PAGE>
21
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between you and the Company in
accordance with its terms.
Very truly yours,
KMART CORPORATION
By____________________________
Name:
Title:
Accepted, _____________________, 1995
Morgan Stanley & Co.
Incorporated
Goldman, Sachs & Co.
By Morgan Stanley & Co.
Incorporated
By_______________________________
Name:
Title:
<PAGE>
SCHEDULE A
Dated: June __, 1995
KMART CORPORATION
Aggregate
Pass Through Certificates Principal Interest Final
Designation Amount Rate Distribution Date
- ------------------------- --------- -------- -----------------
1995-K3
1995-K4
Underwriters: Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Underwriting fees, discounts, commissions or other compensation: $
Closing date, time and location: June __, 1995 at 10:00 a.m., New York City
time at the offices of Dewey Ballantine, 1301 6th Avenue, New York, New York
10019
Location for checking Certificates: Shearman & Sterling, 599 Lexington Avenue,
New York, New York 10022
<PAGE>
EXHIBIT 4.1
6/7/95
KMART CORPORATION
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
as Trustee
- --------------------------------------------------------------------------------
PASS THROUGH TRUST AGREEMENT
Dated as of ____________, 1995
- --------------------------------------------------------------------------------
$___________
Kmart Corporation
1995-K Pass Through Trust
______% Pass Through Certificates,
1995-K[3][4]
<PAGE>
Reconciliation and tie between Pass Through Trust Agreement dated as of
____________, 1995 and the Trust Indenture Act of 1939. This reconciliation does
not constitute part of the Pass Through Trust Agreement.
<TABLE>
<CAPTION>
TRUST INDENTURE ACT OF PASS THROUGH TRUST
1939 SECTION AGREEMENT SECTION
- ---------------------- --------------------------
<S> <C>
310 (a) (1) 7.08
(a) (2) 7.08
312 (a) 3.09; 8.01; 8.02
313 (a) 8.03
314 (a) 8.04 (1) - (4)
(b) 8.04 (5)
(c) (1) 1.02
(c) (2) 1.02
(e) 1.02
315 (b) 7.02
316 (a) (last sentence) 1.01
(a) (1) (A) 6.04
(a) (1) (B) 6.05
(b) 6.07
(c) 1.04 (d)
317 (a) (1) 6.03
(b) 7.13
318 (a) 12.06
</TABLE>
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
DEFINITIONS
Section 1.01. Definitions .......................................... PTA-2
Section 1.02. Compliance Certificates and Opinions ................. PTA-10
Section 1.03. Form of Documents Delivered to Trustee ............... PTA-11
Section 1.04. Acts of Holders ...................................... PTA-11
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF NOTES
Section 2.01. Issuance of Certificates; Acquisition of Notes ....... PTA-13
Section 2.02. Acceptance by Trustee ................................ PTA-15
Section 2.03. Limitation of Powers ................................. PTA-15
ARTICLE III
THE CERTIFICATES
Section 3.01. Form, Denomination and Execution of Certificates ..... PTA-15
Section 3.02. Authentication of Certificates ....................... PTA-16
Section 3.03. Temporary Certificates ............................... PTA-16
Section 3.04. Registration of Transfer and Exchange of Certificates. PTA-17
Section 3.05. Mutilated, Destroyed, Lost or Stolen Certificates .... PTA-18
Section 3.06. Persons Deemed Owners ................................ PTA-18
Section 3.07. Cancellation ......................................... PTA-18
Section 3.08. Limitation of Liability for Payments ................. PTA-18
Section 3.09. Book-Entry and Definitive Certificates ............... PTA-19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Section 4.01. Certificate Account and Special Payments Account...... PTA-21
Section 4.02. Distributions from Certificate Account and Special
Payments Account ................................... PTA-21
Section 4.03. Statements to Certificateholders ..................... PTA-23
Section 4.04. Investment of Special Payment Moneys ................. PTA-23
ARTICLE V
THE COMPANY
Section 5.01. Maintenance of Corporate Existence ................... PTA-24
Section 5.02. Consolidation, Merger or Sale of Assets Permitted .... PTA-24
Section 5.03. Annual Statements as to Compliance by the Company .... PTA-24
ARTICLE VI
DEFAULT
Section 6.01. Events of Default .................................... PTA-25
Section 6.02. Incidents of Sale of Notes ........................... PTA-26
Section 6.03. Judicial Proceedings Instituted by Trustee ........... PTA-26
Section 6.04. Control by Certificateholders ........................ PTA-27
Section 6.05. Waiver of Past Defaults .............................. PTA-27
Section 6.06. Undertaking to Pay Court Costs ....................... PTA-28
Section 6.07. Right of Certificateholders to Receive Payments Not
to Be Impaired ..................................... PTA-28
Section 6.08. Certificateholders May Not Bring Suit Except Under
Certain Conditions ................................. PTA-29
Section 6.09. Remedies Cumulative .................................. PTA-29
</TABLE>
<PAGE>
ARTICLE VII
THE TRUSTEE
<TABLE>
<CAPTION>
Page
------
<S> <C> <C>
Section 7.01. Certain Duties and Responsibilities....................... PTA-30
Section 7.02. Notice of Defaults........................................ PTA-30
Section 7.03. Certain Rights of Trustee................................. PTA-30
Section 7.04. Not Responsible for Recitals or Issuance of Certificates.. PTA-32
Section 7.05. May Hold Certificates..................................... PTA-32
Section 7.06. Money Held in Trust....................................... PTA-32
Section 7.07. Compensation and Reimbursement............................ PTA-33
Section 7.08. Corporate Trustee Required; Eligibility................... PTA-34
Section 7.09. Resignation and Removal; Appointment of Successor......... PTA-34
Section 7.10. Acceptance of Appointment by Successor.................... PTA-36
Section 7.11. Merger, Conversion, Consolidation or Succession to
Business.............................................. PTA-36
Section 7.12. Maintenance of Agencies................................... PTA-37
Section 7.13. Money for Certificate Payments to Be Held in Trust........ PTA-38
Section 7.14. Ownership and Registration of Notes, Permitted Investments
and Specified Investments in Trustee's Name........... PTA-39
Section 7.15. Representations and Warranties of Trustee................. PTA-39
Section 7.16. Withholding Taxes; Information Reporting.................. PTA-40
Section 7.17. Trustee's Liens........................................... PTA-40
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
Section 8.01. The Company to Furnish Trustee with Names and Addresses of
Certificateholders.................................... PTA-41
Section 8.02. Preservation of Information; Communications to
Certificateholders.................................... PTA-41
Section 8.03. Reports by Trustee........................................ PTA-42
Section 8.04. Reports by the Company.................................... PTA-42
</TABLE>
iii
<PAGE>
ARTICLE IX
SUPPLEMENTAL TRUST AGREEMENTS
Page
------
Section 9.01. Supplemental Trust Agreements Without Consent of
Certificateholders.................................. PTA-43
Section 9.02. Supplemental Trust Agreements with Consent of
Certificatehoders................................... PTA-44
Section 9.03. Documents Affecting Immunity or Indemnity.............. PTA-45
Section 9.04. Execution of Supplemental Trust Agreements............. PTA-45
Section 9.05. Effect of Supplemental Agreements...................... PTA-45
Section 9.06. Conformity with Trust Indenture Act.................... PTA-45
Section 9.07. Reference in Certificates to Supplemental Agreements... PTA-45
ARTICLE X
AMENDMENTS TO INDENTURES AND NOTE DOCUMENTS
Section 10.01. Amendments and Supplements to Indentures and Other
Note Documents...................................... PTA-46
ARTICLE XI
TERMINATION OF TRUST
Section 11.01. Termination of the Trust............................... PTA-46
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Limitation on Rights of certificateholders............. PTA-47
Section 12.02. Certificates Nonassessable and Fully Paid.............. PTA-48
Section 12.03. Notices................................................ PTA-48
Section 12.04. Governing Law.......................................... PTA-48
Section 12.05. Severability of Provisions............................. PTA-48
Section 12.06. Trust Indenture Act Controls........................... PTA-49
Section 12.07. Effect of Headings and Table of Contents............... PTA-49
iv
<PAGE>
Page
------
Section 12.08. Successors and Assigns................................ PTA-49
Section 12.09. Benefits of Trust Agreement........................... PTA-49
Section 12.10. Legal Holidays........................................ PTA-49
Section 12.11. Counterparts.......................................... PTA-49
Exhibit A Form of Certificate
Exhibit B Form of Letter of Representations
Schedule I Description of Notes to be Purchased
v
<PAGE>
This PASS THROUGH TRUST AGREEMENT, dated as of _______ __, 1995, is made with
respect to the formation of the Kmart Corporation 1995-K Pass Through Trust,
between KMART CORPORATION, a Michigan corporation (the "Company"), and SHAWMUT
BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, as
trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Trustee, upon the execution and delivery of this Trust Agreement,
hereby declares the creation of this Trust for the benefit of the
Certificateholders, and the initial Certificateholders as the grantors of the
Trust and by their respective acceptances of the Certificates join in the
creation of this Trust with the Trustee;
WHEREAS, the Certificates will evidence Fractional Undivided Interests in this
Trust, and will have no rights, benefits or interest in respect of any other
separate trust or the property held therein;
WHEREAS, pursuant to the terms and conditions of this Trust Agreement and each
of the Participation Agreements to be entered into by the Trustee simultaneously
with the execution and delivery of this Trust Agreement, the Trustee on behalf
of the Trust shall purchase the Notes of the same tenor as the Certificates to
be issued in respect of the Trust and shall hold such Notes in trust for the
benefit of the Certificateholders;
WHEREAS, to facilitate the sale of the Notes to the Trustee and the purchase
of such Notes by the Trustee, the Company has duly authorized the execution and
delivery of this Trust Agreement as the "issuer", as such term is defined in and
solely for the purposes of the Securities Act of 1933, as amended, of the
Certificates to be issued in respect of the Trust and as the "obligor", as such
term is defined in and solely for the purposes of the Trust Indenture Act, with
respect to all such Certificates, and is undertaking to perform certain
administrative and ministerial duties hereunder and is also undertaking to pay
the fees and expenses of the Trustee; and
WHEREAS, this Trust 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;
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
and of other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:
<PAGE>
PTA-2
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. For all purposes of this Trust Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(1) the terms used herein that are defined in this Article have the
meanings assigned to them in this Article, and include the plural as well
as the singular;
(2) all other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to
them therein;
(3) all references in this Trust Agreement to designated "Articles",
"Sections" and other subdivisions are to the designated Articles, Sections
and other subdivisions of this Trust Agreement; and
(4) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Trust Agreement as a whole and not to any particular
Article, Section or other subdivision.
Act: When used with respect to any Holder, has the meaning specified in
Section 1.04.
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 the 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.
Agreement for Sale of Real Estate: Means the Agreement for Sale of Real
Estate dated as of June , 1995 among the Company, the Owner Trustees and
the remainder trustees identified in the Participation Agreements.
Authorized Agent: Means any Paying Agent or Registrar.
Book-Entry Certificates: Means a beneficial interest in the Certificates,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 3.09.
<PAGE>
PTA-3
Business Day: Means any day other than a Saturday, a Sunday, or a day on
which banking institutions in New York, New York, Troy, Michigan, and the
city and state in which the Trustee or any Indenture Trustee maintains its
Corporate Trust Office are authorized or obligated by law, regulation,
executive order, or governmental decree to be closed.
Certificate: Means any one of the certificates executed and authenticated
by the Trustee, substantially in the form of Exhibit A hereto.
Certificate Account: Means the account or accounts created and maintained
pursuant to Section 4.01(a).
Certificateholder or Holder: Means the Person in whose name a Certificate
is registered in the Register.
Certificate Owner: Means, for purposes of Section 3.09, the Person who owns
a Book-Entry Certificate.
Clearing Agency: Means an organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934.
Clearing Agency Participant: Means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency
effects, directly or indirectly, book-entry transfers and pledges of
securities deposited with the Clearing Agency.
Commission: Means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934.
Company: Means Kmart Corporation, a Michigan corporation, or its successor
in interest pursuant to Section 5.02 or any other obligor with respect to
the Certificates (within the meaning of the Trust Indenture Act).
Corporate Trust Office: With respect to the Trustee and any Indenture
Trustee, means the office of such trustee in the city in which at any
particular time its corporate trust business shall be principally
administered.
Cut-off Date: Means July __, 1995.
Debt Closing Date: Means the date on which the Certificates are issued and
the proceeds thereof are deposited with the Trustee.
<PAGE>
PTA-4
Definitive Certificates: Has the meaning specified in Section 3.09.
Direction: Has the meaning specified in Section 1.04(c).
Distribution Date: With respect to distributions of Scheduled Payments,
means each January 2 and July 2, until payment of all the Scheduled
Payments to be made under the Notes has been made, commencing January 2,
1996.
Escrow Account: Has the meaning specified in Section 2.01(b).
Escrowed Funds: Has the meaning specified in Section 2.01(b).
Event of Default: Means an event described in Section 6.01.
Fractional Undivided Interest: Means the fractional undivided interest in
the Trust that is evidenced by a Certificate.
Holder: See Certificateholder.
Indenture: Means any of the trust indentures between the related Owner
Trustee and the Indenture Trustee, as supplemented by the related mortgage,
deed of trust, assignment of leases and rents, security agreement,
financing statement and supplemental indenture, each dated as of the date
hereof, and as each such Indenture may hereafter be amended or supplemented
in accordance with its respective terms; and Indentures means all of such
Indentures.
Indenture Default: With respect to any Indenture, means any Indenture Event
of Default (as such term is defined in such Indenture).
Indenture Trustee: Means collectively, Shawmut Bank Connecticut, National
Association, in its capacity as an indenture trustee under each of the
Indentures, and its successors and assigns thereunder, and Kathy A.
Larimore, in her capacity as an Indenture Trustee under each of the
Indentures, and her successors and assigns thereunder; and Indenture
Trustees means all of the Indenture Trustees under the Indentures.
Lease: Means any Lease between an Owner Trustee, as the lessor, and the
Company, as the lessee, referred to in an Indenture; as each such Lease may
be amended or supplemented in accordance with its respective terms; and
Leases means all of such Leases.
<PAGE>
PTA-5
Letter of Representations: Means the agreement among the Company, the
Trustee and the initial Clearing Agency, dated June , 1995,
substantially in the form attached hereto as Exhibit B.
Note: Means any one of the Notes (as defined in the applicable Indenture)
described on Schedule I attached hereto, including any Note (as so defined)
issued under the applicable Indenture in replacement or substitution therefor,
held by the Trustee.
Note Documents: Means, with respect to any Note, the Agreement for Sale of
Real Estate (to the extent it relates to such Note), the applicable Indenture,
the related Participation Agreement (to the extent it relates to such Note)
and the Lease.
Note Purchase Agreement: Means any note purchase, participation or similar
agreement, including each Participation Agreement, referred to in an
Indenture providing for, among other things, the purchase of Notes by the
Trustee; and Note Purchase Agreements means all such agreements.
Officer's Certificate: Means, (i) with respect to the Company, a
certificate signed by the Chairman, the Vice Chairman, the President, any
Executive Vice President or any Senior Vice President or any Vice President
of such company signing alone, (ii) with respect to any other corporation,
a certificate signed by the Chairman, the Vice Chairman, the President, any
Executive Vice President or any Senior Vice President of such corporation
signing alone, or any Vice President signing together with the Treasurer,
any Assistant Treasurer, the Controller or the Secretary, and (iii) with
respect to an Owner Trustee or an Indenture Trustee, as the case may be, a
certificate signed by a Responsible Officer of such Owner Trustee or
Indenture Trustee and delivered to the Trustee.
Opinion of Counsel: Means an opinion in writing, signed by legal counsel,
who (a) in the case of counsel for the Company may be (i) the senior
attorney employed by the Company or (ii) such other counsel designated by
the Company and reasonably acceptable to the Trustee and (b) in the case of
any Owner Trustee or any Indenture Trustee, such counsel as may be
designated by any of them whether or not such counsel is an employee of any
of them, and who shall be reasonably acceptable to the Trustee.
Outstanding: When used with respect to Certificates, means, as of the date
of determination, all Certificates theretofore authenticated and delivered
under this Trust Agreement, except:
<PAGE>
PTA-6
(i) Certificates theretofore cancelled by the Registrar or delivered to the
Trustee or the Registrar for cancellation;
(ii) Certificates for which money in the full amount has been theretofore
deposited with the Trustee or any Paying Agent in trust for the Holders of
such Certificates as provided in Section 4.01 pending distribution of such
money to the Certificateholders pursuant to the final distribution payment to
be made pursuant to Section 11.01 hereof; and
(iii) Certificates in exchange for or in lieu of which other Certificates
have been authenticated and delivered pursuant to this Trust Agreement.
Owner Participant: Means each Owner Participant identified in the
Participation Agreements and its permitted successors or assigns.
Owner Trustee: Means, with respect to any Note, the Owner Trustee, if any, as
referred to in the Indenture pursuant to which such Note is issued, not in its
individual capacity but solely as trustee, and any permitted successors or
assigns of such Owner Trustee; Owner Trustees means all of the Owner Trustees
party to any of the respective Indentures.
Participation Agreement: Means any one of the four Participation Agreements,
each dated as of the date hereof and to which the Trustee is a party as each
Participation Agreement may be amended or supplemented in accordance with its
terms; and Participation Agreements means all of such Participation Agreements.
Paying Agent: Means the paying agent maintained and appointed pursuant to
Section 7.12.
Permitted Investments: Means obligations of the United States of America for
the payment of which the full faith and credit of the United States of America
is pledged, maturing in not more than 60 days or such lesser time as is
necessary for payment of any Special Payments on a Special Distribution Date
known at the time such obligation is purchased.
Person: Means any person, including any individual, corporation, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization, or government or any agency or political subdivision thereof.
Pool Balance: Means, as of any date, the aggregate unpaid principal amount of
the Notes on such date plus the amount of the principal payments on the Notes
held
<PAGE>
PTA-7
by the Trustee and not yet distributed plus any Escrowed Funds held in the
Escrow Account. The Pool Balance as of any Distribution Date or Special
Distribution Date shall be computed after giving effect to the payment of
principal, if any, on the Notes and distribution thereof to be made on that
date.
Pool Factor: Means, as of any date, the quotient (rounded to the seventh
decimal place) computed by dividing (i) the Pool Balance on such date by (ii)
the aggregate original principal amount of the Certificates. The Pool Factor, as
of any Distribution Date or Special Distribution Date, shall be computed after
giving effect to the payment of principal, if any, on the Notes and distribution
thereof to be made on that date.
Postponed Notes: Means the Notes to be held in the Trust as to which a
Postponement Notice shall have been delivered pursuant to Section 2.01(b).
Postponement Notice: When used with respect to the Trust or the Certificates,
means a certificate of the Company signed by an officer of the Company (1)
requesting that the Trustee temporarily postpone purchase of the related Notes
to a date later than the Debt Closing Date, (2) identifying the amount of the
purchase price of each such Note and the aggregate purchase price of all such
Notes, (3) setting forth the reasons for such postponement and (4) with respect
to each such Note, either (a) setting or resetting a new Transfer Date (which
shall be on or prior to the Cut-off Date) for payment by the Trustee of such
purchase price and issuance of the related Note, or (b) indicating that such new
Transfer Date (which shall be on or prior to the Cut-off Date) will be set by
subsequent written notice not less than one Business Day prior to such new
Transfer Date.
Record Date: Means (i) for Scheduled Payments to be distributed on any
Distribution Date, other than the final distribution, the day (whether or not a
Business Day) which is 15 days preceding such Distribution Date and (ii) for
Special Payments to be distributed on any Special Distribution Date, other than
the final distribution, the day (whether or not a Business Day) which is 15 days
preceding such Special Distribution Date.
Register and Registrar: Means the register maintained and the registrar
appointed pursuant to Sections 3.04 and 7.12.
Request: Means a request by the Company setting forth the subject matter
of the request accompanied by an Officer's Certificate and an Opinion of
Counsel as provided in Section 1.02.
<PAGE>
PTA-8
Responsible Officer: When used with respect to the initial Trustee or any
initial Indenture Trustee or the Owner Trustee, means any officer in the
Corporate Trust Office; when used with respect to any successor Trustee,
successor Indenture Trustee or any Owner Trustee, means the chairman or vice-
chairman of the board of directors or trustees, the chairman or vice-chairman of
the executive or standing committee of the board of directors or trustees, the
president, the chairman of the committee on trust matters, any vice-president,
any second vice-president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer or assistant trust officer, the comptroller or any assistant
comptroller; and, when used with respect to any Trustee, any Indenture Trustee
or any Owner Trustee, also means any other officer of the Trustee, such Owner
Trustee or such Indenture Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
Scheduled Payment: With respect to a Distribution Date, means any payment
(other than a Special Payment) of principal of or interest on a Note, due from
the relevant Owner Trustee which issued such Note, which payment represents the
payment of principal at the stated maturity of, or the scheduled repayment of
principal of, such Note, or the payment of regularly scheduled interest accrued
on such Note.
Securities Exchange Act of 1934: Means the Securities Exchange Act of 1934, as
amended from time to time.
Site: Means the Landlord Interest (as defined in the Indentures) leased to the
Company and securing one or more Notes.
Special Distribution Date: Means (i) with respect to the prepayment or
purchase of any Notes, the second day of the month on which such prepayment or
purchase is scheduled to occur pursuant to the terms of the applicable Indenture
and (ii) with respect to any Special Payment relating to any Note other than as
described in clause (i) of the definition of Special Payments, the earliest
second day of a month for which it is practicable for the Trustee to give notice
pursuant to Section 4.02(c) 20 days prior thereto.
Special Payment: With respect to any Note, means (i) any payment of principal
of, premium, if any, and interest on such Note resulting from the prepayment or
purchase of such Note pursuant to Section 6.1 or Section 8.4, as the case may
be, of the applicable Indenture, (ii) any payment of principal of and interest
(including any interest accruing upon default) on, or any other amount in
respect of, such Note upon an Indenture Default in respect thereof or upon the
exercise of
<PAGE>
PTA-9
remedies under the Indenture relating to such Note, (iii) the amounts required
to be distributed pursuant to the last paragraph of Section 2.01(b), (iv) the
amounts required to be distributed by the penultimate paragraph of Section
2.01(b), (v) any Scheduled Payment or any Special Payment referred to in clause
(i) of this definition which is not in fact paid within five days of the
Distribution Date or Special Distribution Date applicable thereto, or (vi) any
proceeds from the sale of any Note by the Trustee pursuant to Article VI hereof;
and Special Payments means all of such Special Payments.
Special Payments Account: Means the account or accounts created and maintained
pursuant to Section 4.01(b).
Specified Investments: Means (i) direct obligations of the United States of
America and agencies thereof for which the full faith and credit of the United
States of America is pledged, (ii) obligations fully guaranteed by the United
States of America, (iii) certificates of deposit issued by, or bankers'
acceptances of, or time deposits with, any bank, trust company or national
banking association incorporated or doing business under the laws of the United
States of America or one of the states thereof having combined capital and
surplus and retained earnings of at least $500,000,000 (including any Indenture
Trustee or Owner Trustee if such conditions are met), (iv) commercial paper of
companies, banks, trust companies or national banking associations incorporated
or doing business under the laws of the United States of America or one of the
States thereof and in each case having a rating assigned to such commercial
paper by Standard & Poor's Ratings Group or Moody's Investors' Service, Inc.
(or, if neither such organization shall rate such commercial paper at any time,
by any nationally recognized rating organization in the United States of
America) equal to the highest rating assigned by such organization, and (v)
repurchase agreements with any financial institution having a combined capital
and surplus of at least $750,000,000 fully collateralized by obligations of the
type described in clauses (i) through (iv) above; provided that if all of the
above investments are unavailable, the entire amount to be invested may be used
to purchase Federal Funds from an entity described in (iii) above; and provided
further that no investment shall be eligible as a "Specified Investment" unless
the final maturity or date of return of such investment occurs no later than the
earlier of (x) 91 days from the date of purchase thereof and (y) the next
succeeding Distribution Date.
Transfer Date: Has the meaning assigned to the term "Closing Date" in any
Indenture.
Trust: Means the trust created by this Trust Agreement, the estate of which
consists of the Trust Property.
<PAGE>
PTA-10
Trust Agreement: Means this Pass Through Trust Agreement as the same may be
modified, supplemented or amended from time to time in accordance with the
provisions hereof.
Trustee: Means the institution executing this Trust Agreement as Trustee, or
its successor in interest, and any successor trustee appointed as provided
herein.
Trust Indenture Act: Means the Trust Indenture Act of 1939, as in force at the
date as of which this Trust Agreement was executed; 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 such amendment, the Trust
Indenture Act of 1939 as so amended.
Trust Property: Means the Notes held as the property of the Trust created
hereby and all monies at any time paid thereon and all monies due and to become
due thereunder, funds from time to time deposited in the Escrow Account, the
Certificate Account and the Special Payments Account and any proceeds from the
sale by the Trustee pursuant to Article VI hereof of any Note.
Section 1.02. Compliance Certificates and Opinions. Upon any application or
request by the Company, any Owner Trustee or any Indenture Trustee to the
Trustee to take any action under any provision of this Trust Agreement, the
Company, such Owner Trustee or such Indenture Trustee, as the case may be,
shall furnish to the Trustee an Officer's Certificate stating that, in the
opinion of the signer, all conditions precedent, if any, provided for in this
Trust Agreement 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, 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 Trust Agreement 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 Trust Agreement 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;
<PAGE>
PTA-11
(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, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 1.03. Form of Documents Delivered to Trustee. 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 Opinion of Counsel stated to be based on the opinion of other counsel
shall be accompanied by a copy of such other opinion.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Trust Agreement, they may, but need not, be consolidated
and form one instrument.
Section 1.04. Acts of Holders. (a) Any direction, consent, waiver or other
action provided by this Trust Agreement 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 Trustee and,
where it is hereby expressly required, to the Company or any Indenture Trustee.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Trust Agreement and conclusive in favor of the Trustee, the Company and any
Indenture Trustee, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument or
writing may be proved by the certificate of any notary public or other officer
of any jurisdiction authorized to take acknowledgments of deeds or administer
oaths that the Person executing such instrument acknowledged to him the
execution thereof, or by an affidavit of a witness to such execution sworn to
before any such notary or such other officer and where such execution is by an
officer of a corporation or association or a member of a
<PAGE>
PTA-12
partnership, on behalf of such corporation, association or partnership, 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 Person executing the same, may also be proved in any
other reasonable manner which the Trustee deems sufficient.
(c) In determining whether the Holders of the requisite Fractional Undivided
Interests of Certificates Outstanding have given any direction, consent or
waiver (a "Direction") under this Trust Agreement, Certificates owned by the
Company, any Owner Trustee, any Owner Participant or any Affiliate of any such
Person shall be disregarded and deemed not to be Outstanding under this Trust
Agreement for purposes of any such determination. In determining whether the
Trustee shall be protected in relying upon any such Direction, only
Certificates which a Responsible Officer of the Trustee knows to be so owned
shall be so disregarded. Notwithstanding the foregoing, (i) if any such Person
owns 100% of the Certificates Outstanding, such Certificates shall not be so
disregarded as aforesaid and (ii) if any amount of Certificates so owned by any
such Person has been pledged in good faith, such Certificates shall not be
disregarded as aforesaid if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Certificates and
that the pledgee is not the Company, any Owner Trustee, any Owner Participant
or any Affiliate of any such Persons.
(d) The Company may at its option by delivery of an Officer's Certificate to
the Trustee set a record date to determine the Certificateholders entitled to
give any consent, request, demand, authorization, direction, notice, waiver or
other Act. Notwithstanding Section 316(c) of the Trust Indenture Act, such
record date shall be the record date specified in such Officer's Certificate
which shall be a date not more than 30 days prior to the first solicitation of
Certificateholders in connection therewith. If such a record date is fixed,
such consent, request, demand, authorization, direction, notice, waiver or
other Act may be given before or after such record date, but only the
Certificateholders of record at the close of business on such record date shall
be deemed to be Certificateholders for the purposes of determining whether
Certificateholders of the requisite proportion of Outstanding Certificates have
authorized or agreed or consented to such consent, request, demand,
authorization, direction, notice, waiver or other Act, and for that purpose the
Outstanding Certificates shall be computed as of such record date; provided
that no such consent, request, demand, authorization, direction, notice, waiver
or other Act by the Certificateholders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Trust Agreement not later than one year after such record date.
(e) Any direction, consent, waiver or other action by the Holder of any
Certificate shall bind the Holder of every Certificate issued upon the transfer
thereof or in
<PAGE>
PTA-13
exchange therefor or in lieu thereof, whether or not notation of such action is
made upon such Certificate.
(f) Except as otherwise provided in Section 1.04(c), Certificates owned by or
pledged to any Person shall have an equal and proportionate benefit under the
provisions of this Trust Agreement, without preference, priority, or
distinction as among all of the Certificates.
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF NOTES
Section 2.01. Issuance of Certificates; Acquisition of Notes. (a) The Trustee,
simultaneously with the execution and delivery of this Trust Agreement, shall
also execute and deliver the Note Purchase Agreements, in the form delivered to
the Trustee on or prior to the date of the execution and delivery hereof. Upon
request of the Company and the satisfaction of the closing conditions with
respect to the occurrence of the Debt Closing Date specified in the Note
Purchase Agreements on such Debt Closing Date the Trustee shall execute, deliver
and authenticate Certificates equaling in the aggregate the total aggregate
principal amount of the Notes expected to be purchased by the Trustee pursuant
to the Note Purchase Agreements, and evidencing the entire ownership of the
Trust. The Trustee shall issue and sell such Certificates on the Debt Closing
Date, in authorized denominations and in such Fractional Undivided Interests, so
as to result in the receipt of consideration in an amount equal to the aggregate
principal amount of such Notes and, concurrently therewith, the Trustee shall
purchase, pursuant to the terms and conditions of the Note Purchase Agreements,
the Notes (except Postponed Notes, if any) at a purchase price equal to the
amount of such consideration so received. Except as provided in Sections 3.04
and 3.05 hereof, the Trustee shall not execute or deliver Certificates in excess
of the aggregate amount specified in this paragraph. The provisions of this
Subsection (a) are subject to the provisions of Subsection (b) below.
(b) If on or prior to the Debt Closing Date the Company shall deliver to the
Trustee a Postponement Notice, the Trustee shall postpone the purchase of the
related Postponed Notes and shall deposit into an escrow account (the "Escrow
Account") to be maintained as a part of the Trust an amount equal to the
purchase price of such Postponed Notes (the "Escrowed Funds"). The Escrowed
Funds so deposited shall be invested by the Trustee at the direction and risk
of, and for the benefit of, the Company in Specified Investments (i) maturing no
later than any scheduled Transfer Date or (ii) if no such Transfer Date has been
scheduled, maturing on the next Business Day, or (iii) if the Company has given
notice to the Trustee that any Postponed Notes will not be issued, with respect
to the
<PAGE>
PTA-14
portion of the Escrowed Funds relating to such Postponed Notes, maturing on the
next applicable Special Distribution Date, if such investments are reasonably
available for purchase. The Trustee shall make withdrawals from the Escrow
Account only as provided in this Trust Agreement.
Upon request of the Company on one or more occasions and the satisfaction of
the closing conditions specified in the Note Purchase Agreements on or prior to
the Cut-off Date, the Trustee shall purchase the Postponed Notes with the
Escrowed Funds. The purchase price shall equal the principal amount of such
Postponed Notes.
The Trustee shall hold all such Specified Investments until the maturity
thereof and will not sell or otherwise transfer such Specified Investments. If
Specified Investments held in the Escrow Account mature prior to the Transfer
Date, any proceeds received on the maturity of such Specified Investments
(other than any earnings thereon) shall be reinvested by the Trustee at the
direction and risk of, and for the benefit of, the Company in Specified
Investments maturing as provided in the second preceding paragraph.
Any earnings on Specified Investments received from time to time by the
Trustee shall be promptly distributed to the Company. The Company shall pay to
the Trustee for deposit to the Escrow Account an amount equal to any losses on
such Specified Investments as incurred. On the initial Distribution Date, the
Company will pay (in immediately available funds) to the Trustee an amount
equal to the interest that would have accrued on any Postponed Notes purchased
after the Debt Closing Date if such Postponed Notes had been purchased on the
Debt Closing Date, from the Debt Closing Date to, but not including, the date
of the purchase of such Postponed Notes by the Trustee.
If the Company notifies the Trustee prior to the Cut-off Date that any of the
Postponed Notes will not be issued on or prior to the Cut-off Date for any
reason, on September 2, 1995 (i) the Company shall pay to the Trustee for
deposit in the Special Payments Account, in immediately available funds, an
amount equal to the interest that would have accrued on the Postponed Notes
designated in such notice at a rate equal to the interest rate applicable to
the Certificates from the Debt Closing Date to, but not including, such Special
Distribution Date and (ii) the Trustee shall transfer an amount equal to that
amount of Escrowed Funds that would have been used to purchase the Postponed
Notes designated in such notice and the amount paid by the Company pursuant to
the immediately preceding clause (i) to the Special Payments Account for
distribution as a Special Payment in accordance with the provisions hereof.
If, on the Cut-off Date, an amount equal to less than all of the Escrowed
Funds (other than Escrowed Funds referred to in the immediately preceding
paragraph) has been used to purchase Postponed Notes, on the Special
Distribution Date next following such
<PAGE>
PTA-15
Cut-off Date by more than 20 days (i) the Company shall pay to the Trustee for
deposit in the Special Payments Account, in immediately available funds, an
amount equal to the interest that would have accrued on such Postponed Notes
contemplated to be purchased with such unused Escrowed Funds (other than
Escrowed Funds referred to in the immediately preceding paragraph) but not so
purchased at a rate equal to the interest rate applicable to the Certificates
from the Debt Closing Date to, but not including, such Special Distribution
Date and (ii) the Trustee shall transfer such unused Escrowed Funds and the
amount paid by the Company pursuant to the immediately preceding clause (i) to
such Special Payments Account for distribution as a Special Payment in
accordance with the provisions hereof.
Section 2.02. Acceptance by Trustee. Subject to the terms of Article VII of
this Trust Agreement, the Trustee, upon the execution and delivery of this
Trust Agreement, shall acknowledge its acceptance of all right, title, and
interest in and to the Notes acquired pursuant to Section 2.01 hereof and the
Note Purchase Agreements and shall declare that the Trustee holds and will hold
such right, title, and interest, together with all other property constituting
the Trust Property, for the benefit of all present and future
Certificateholders, upon the trusts herein set forth. By its payment for and
acceptance of each Certificate issued to it hereunder, each initial
Certificateholder as grantor of the Trust shall thereby join in the creation
and declaration of the Trust.
Section 2.03. Limitation of Powers. The Trust shall be constituted solely for
the purpose of making the investment in the Notes and, except as set forth
herein, the Trustee shall not be authorized or empowered to acquire any other
investments or engage in any other activities and, in particular, the Trustee
shall not be authorized or empowered to do anything that would cause the Trust
to fail to qualify as a "grantor trust" for federal income tax purposes
(including, as subject to this restriction, acquiring any Site by bidding the
Notes or otherwise, or taking any action with respect to any such Site once
acquired).
ARTICLE III
THE CERTIFICATES
Section 3.01. Form, Denomination and Execution of Certificates. The
Certificates shall be in registered form without coupons and shall be
substantially in the form attached hereto as Exhibit A, with such omissions,
variations and insertions as are permitted by this Trust Agreement, and may
have such letters, numbers or other marks of identification and such legends or
endorsements printed, lithographed or engraved thereon, as may be required to
comply with the rules of any Clearing Agency or any securities exchange on
which the Certificates may be listed or to conform to any usage in respect
thereof, or as may, consistently herewith, be prescribed by the Trustee or by
the officer executing such
<PAGE>
PTA-16
Certificates, such determination by said officer to be evidenced by his signing
the Certificates.
Except as otherwise provided in Section 3.09, the Definitive Certificates
shall be printed, lithographed or engraved or produced by any combination of
these methods or may be produced in any other manner permitted by the rules of
any Clearing Agency or any securities exchange on which the Certificates may be
listed, all as determined by the officer executing such Certificates, as
evidenced by his execution of such Certificates.
The Certificates shall be issued in minimum denominations of $1,000 or
integral multiples thereof.
The Certificates shall be executed on behalf of the Trustee by manual or
facsimile signature of a Responsible Officer of the Trustee. Certificates
bearing the manual or facsimile signature of an individual who was, at the time
when such signature was affixed, authorized to sign on behalf of the Trustee
shall be valid and binding obligations of the Trustee, notwithstanding that
such individual has ceased to be so authorized prior to the authentication and
delivery of such Certificates or did not hold such office at the date of such
Certificates. No Certificate shall be entitled to any benefit under this Trust
Agreement, or be valid for any purposes, unless there appears on such
Certificate a certificate of authentication substantially in the form set forth
in Exhibit A hereto executed by the Trustee by manual signature, and such
certificate upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
Section 3.02. Authentication of Certificates. The Trustee on the Debt Closing
Date shall cause to be authenticated and delivered, simultaneously with the
sale, assignment, and transfer to the Trustee of the Notes and/or the deposit
of the Escrowed Funds in the Escrow Account pursuant to Section 2.01 hereof,
Certificates in authorized denominations equaling in the aggregate the
aggregate principal amount of the Notes expected to be purchased by the Trustee
pursuant to the Note Purchase Agreements, and evidencing the entire ownership
of the Trust.
Section 3.03. Temporary Certificates. Pending the preparation of definitive
Certificates, the Trustee may execute, authenticate and deliver temporary
Certificates which are printed, lithographed, typewritten, or otherwise
produced, in any denomination, containing substantially the same terms and
provisions as set forth in Exhibit A, except for such appropriate insertions,
omissions, substitutions and other variations relating to their temporary
nature as the officer executing such temporary Certificates may determine, as
evidenced by his execution of such temporary Certificates.
<PAGE>
PTA-17
If temporary Certificates are issued, the Trustee will cause definitive
Certificates to be prepared without unreasonable delay. After the preparation
of definitive Certificates, the temporary Certificates shall be exchangeable
for definitive Certificates upon surrender of the temporary Certificates at the
Corporate Trust Office of the Trustee, or at the office or agency of the
Trustee maintained in accordance with Section 7.12, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary
Certificates, the Trustee shall execute, authenticate and deliver in exchange
therefor definitive Certificates of authorized denominations of a like
aggregate Fractional Undivided Interest. Until so exchanged, such temporary
Certificates shall in all respects be entitled to the same benefits under this
Trust Agreement as definitive Certificates.
Section 3.04. Registration of Transfer and Exchange of Certificates. The
Trustee shall cause to be kept at the office or agency to be maintained by it
in accordance with the provisions of Section 7.12 a register (the "Register")
in which, subject to such reasonable regulations as it may prescribe, the
Trustee shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Trustee shall initially be
the registrar (the "Registrar") for the purpose of registering Certificates and
transfers and exchanges of Certificates as herein provided.
Upon surrender for registration of transfer of any Certificate at the
Corporate Trust Office or such other office or agency, the Trustee shall
execute, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of a like
aggregate Fractional Undivided Interest.
At the option of a Certificateholder, Certificates may be exchanged for other
Certificates of authorized denominations of a like aggregate Fractional
Undivided Interest, upon surrender of the Certificates to be exchanged at any
such office or agency. Whenever any Certificates are so surrendered for
exchange, the Trustee shall execute, authenticate and deliver the Certificates
that the Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for registration of transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Registrar duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made to a Certificateholder for any registration
of transfer or exchange of Certificates, but the Trustee shall require payment
of a sum sufficient to cover any tax or governmental charge that may be imposed
in connection with any transfer or exchange of Certificates.
All Certificates surrendered for registration of transfer and exchange shall
be cancelled and subsequently destroyed by the Trustee.
<PAGE>
PTA-18
Section 3.05. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any
mutilated Certificate is surrendered to the Registrar, or the Registrar
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate and (b) there is delivered to the Registrar and the Trustee such
security, indemnity or bond, as may be required by them to save each of them
harmless, then, in the absence of notice to the Registrar or the Trustee that
such Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Fractional Undivided Interest with the same final Distribution Date. In
connection with the issuance of any new Certificate under this Section 3.05,
the Trustee shall require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee and the Registrar)
connected therewith. Any duplicate Certificate issued pursuant to this Section
3.05 shall constitute conclusive evidence of the appropriate Fractional
Undivided Interest in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Certificate shall be found at any time.
Section 3.06. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Trustee, the Registrar, and any
Paying Agent of the Trustee may treat the person in whose name any Certificate
is registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 4.02 and for all other purposes whatsoever,
and neither the Trustee, the Registrar, nor any Paying Agent of the Trustee
shall be affected by any notice to the contrary.
Section 3.07. Cancellation. All Certificates surrendered for payment or
transfer or exchange shall, if surrendered to any Person party hereto other
than the Registrar, be delivered by such Person to the Registrar for
cancellation. No Certificates shall be authenticated in lieu of or in exchange
for any Certificates cancelled as provided in this Section 3.07, except as
expressly permitted by this Trust Agreement. All cancelled Certificates held by
the Registrar shall be destroyed and a certification of their destruction
delivered to the Trustee.
Section 3.08. Limitation of Liability for Payments. All payments or
distributions made to Certificateholders under this Trust Agreement shall be
made only from the Trust Property and only to the extent that the Trustee shall
have sufficient income or proceeds from the Trust Property to make such
payments in accordance with the terms of Article IV of this Trust Agreement.
Each Holder of a Certificate, by its acceptance of such Certificate, agrees
that it will look solely to the income and proceeds from the Trust Property to
the extent available for distribution to the Holder thereof as provided in this
Trust Agreement. The Trustee shall not be personally liable to any
Certificateholder for any amounts payable under this Trust Agreement except as
expressly provided herein.
<PAGE>
PTA-19
Section 3.09. Book-Entry and Definitive Certificates. (a) The Certificates
may be issued in the form of one or more typewritten Certificates representing
the Book-Entry Certificates, to be delivered to The Depository Trust Company,
the initial Clearing Agency, by, or on behalf of, the Company. In such case,
the Certificates delivered to The Depository Trust Company shall initially be
registered on the Register in the name of CEDE & Co., the nominee of the
initial Clearing Agency, and no Certificate Owner will thereafter receive a
definitive certificate representing such Certificate Owner's interest in the
Certificates, except as provided above and in subsection (d) below. Unless and
until definitive, fully registered Certificates (the "Definitive Certificates")
have been issued to the Certificate Owners pursuant to subsection (d) below:
(i) the provisions of this Section 3.09 shall be in full force and
effect;
(ii) the Company, the Paying Agent, the Registrar and the Trustee may
deal with the Clearing Agency for all purposes (including the making of
distributions on the Certificates) as the authorized representative of the
Certificate Owners;
(iii) to the extent that the provisions of this Section 3.09 conflict
with any other provisions of this Trust Agreement, the provisions of this
Section 3.09 shall control;
(iv) the rights of Certificate Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency
Participants. Until Definitive Certificates are issued pursuant to
subsection (d) below, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and transmit
distributions of principal and interest and premium, if any, on the
Certificates to such Clearing Agency Participants; and
(v) whenever this Trust Agreement requires or permits actions to be taken
based upon instructions or directions of the Certificateholders evidencing a
specified percentage of the Fractional Undivided Interest, the Clearing Agency
shall be deemed to represent such percentage only to the extent that it has
received instructions to such effect from Beneficial Owners and/or Clearing
Agency Participants owning or representing, respectively, such required
percentage of the beneficial interest in Certificates and has delivered such
instructions to the Trustee. The Trustee shall have no obligation to determine
whether the Clearing Agency has in fact received any such instructions.
(b) Whenever notice or other communication to the Certificateholders is
required under this Trust Agreement, unless and until Definitive Certificates
shall have been issued pursuant to subsection (d) below, the Trustee shall give
all such notices and
<PAGE>
PTA-20
communications specified herein to be given to Certificateholders to the
Clearing Agency and/or the Clearing Agency Participants, and shall make
available additional copies as requested by such Clearing Agency Participants.
(c) Unless and until Definitive Certificates are issued pursuant to
subsection (d) below, as of the Record Date prior to each applicable Regular
Distribution Date and Special Distribution Date, the Trustee will request from
the Clearing Agency a securities position listing setting forth the names of
all Clearing Agency Participants reflected on the Clearing Agency's books as
holding interests in the Certificates on such Record Date. The Trustee shall
mail to each such Clearing Agency Participant the statements described in
Section 4.03 hereof.
(d) If (i) the Company advises the Trustee in writing that the Clearing
Agency is no longer willing or able to properly discharge its responsibilities
and the Trustee or the Company is unable to locate a qualified successor, (ii)
the Company at its option, advises the Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (iii) after the
occurrence and during the continuance of an Event of Default, Certificate
Owners of Book-Entry Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust, by Act of said
Holders delivered to the Company and the Trustee, advise the Trustee and the
Clearing Agency through the Clearing Agency Participants in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the Certificate Owners, then the Trustee shall notify all
Certificate Owners, through the Clearing Agency, of the occurrence of any such
event and of the availability of Definitive Certificates to Certificate Owners
requesting the same. Upon surrender to the Trustee of all the Certificates by
the Clearing Agency, accompanied by registration instructions from the Clearing
Agency for registration of Definitive Certificates in the names of Certificate
Owners, the Trustee shall issue the Definitive Certificates and deliver such
Definitive Certificates in accordance with the instructions of the Clearing
Agency. Neither the Company, the Registrar nor the Trustee shall be liable for
any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Definitive Certificates, the Trustee shall recognize each Person in whose name
the Definitive Certificates are registered in the Register as a
Certificateholder hereunder. Neither the Company nor the Trustee shall be
liable if the Trustee or the Company is unable to locate a qualified successor
Clearing Agency.
(e) The Trustee shall enter into the Letter of Representations and fulfill
its responsibilities thereunder.
<PAGE>
PTA-21
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Section 4.01. Certificate Account and Special Payments Account. (a) The
Trustee shall establish and maintain on behalf of the Certificateholders the
Certificate Account with the Trustee as one or more non-interest-bearing
accounts. The Trustee shall hold the Certificate Account in trust for the
benefit of the Certificateholders, and shall make or permit withdrawals
therefrom only as provided in this Trust Agreement. On each day when a
Scheduled Payment is made under any Indenture to the Trustee, as holder of the
Notes issued under such Indenture, the Trustee upon receipt shall immediately
deposit the aggregate amount of such Scheduled Payment in the Certificate
Account.
(b) The Trustee shall establish and maintain on behalf of the
Certificateholders the Special Payments Account with the Trustee as one or more
accounts, which shall be non-interest-bearing except as provided in Section
4.04. The Trustee shall hold the Special Payments Account in trust for the
benefit of the Certificateholders, and shall make or permit withdrawals
therefrom only as provided in this Trust Agreement. On each day when a Special
Payment (other than a Special Payment that represents the proceeds of any sale
pursuant to Article VI hereof by the Trustee of a Note) is made under any
Indenture to the Trustee, as holder of the Notes issued under such Indenture,
the Trustee upon receipt shall immediately deposit the aggregate amounts of
such Special Payments in the Special Payments Account. Upon the sale of any
Note by the Trustee pursuant to Article VI hereof and the realization of any
proceeds thereof, the Trustee shall deposit the aggregate amount of such
proceeds as a Special Payment in the Special Payments Account.
(c) The Trustee shall present to the Indenture Trustee to which a Note
relates such Note on the date of its stated final maturity, or in the case of
any Note which is to be prepaid in whole pursuant to the relevant Indenture, on
the applicable prepayment date under such Indenture.
Section 4.02. Distributions from Certificate Account and Special Payments
Account. (a) On each Distribution Date or as soon thereafter as the Trustee has
confirmed receipt of the payment of the Scheduled Payments due on the Notes on
such date, the Trustee shall distribute out of the Certificate Account the
entire amount deposited therein pursuant to Section 4.01(a). There shall be so
distributed to each Certificateholder of record on the Record Date with respect
to such Distribution Date (other than as provided in Section 11.01 concerning
the final distribution) by check mailed to such Certificateholder at the
address appearing in the Register such Certificateholder's pro rata share
(based on the aggregate
<PAGE>
PTA-22
Fractional Undivided Interests held by such Certificateholder) of the aggregate
amount in the Certificate Account.
(b) On each Special Distribution Date with respect to any Special Payment or
as soon thereafter as the Trustee has confirmed receipt of the Special Payments
due on the Notes or realized upon the sale of any Note, the Trustee shall
distribute out of the Special Payments Account the entire amount deposited
therein pursuant to Section 4.01(b) of such Special Payment. There shall be so
distributed to each Certificateholder of record on the Record Date with respect
to such Special Distribution Date (other than as provided in Section 11.01
concerning the final distribution) by check mailed to such Certificateholder at
the address appearing in the Register such Certificateholder's pro rata share
(based on the aggregate Fractional Undivided Interests held by such
Certificateholder) of the aggregate amount in the Special Payments Account on
account of such Special Payment.
(c) The Trustee shall at the expense of the Company cause notice of each
Special Payment to be mailed to each Holder of a Certificate at his address as
it appears in the Register. In the event of prepayment of Notes, such notice
shall be mailed not less than 20 days prior to the date any such Special
Payment is scheduled to be distributed. In the case of any other Special
Payments, such notice shall be mailed as soon as practicable after the Trustee
has confirmed that it has received funds for such Special Payment. Notices
mailed by the Trustee 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 face amount of
Certificates and the amount thereof constituting principal, premium, if
any, and interest,
(iii) the reason for the Special Payment, and
(iv) if the Special Distribution Date is the same date as a Distribution
Date, the total amount to be received on such date for each $1,000 face
amount of Certificates.
If the amount of premium, if any, payable upon the prepayment of a Note has not
been calculated at the time that the Trustee mails notice of a 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.
<PAGE>
PTA-23
If any prepayment of the Notes held in the Trust is cancelled, the Trustee,
as soon as possible after learning thereof, shall cause notice thereof to be
mailed to each Certificateholder at its address as it appears on the Register.
Section 4.03. Statements to Certificateholders. (a) On each Distribution Date
and Special Distribution Date, the Trustee will include with each distribution
to Certificateholders a statement, giving effect to such distribution to be
made on such Distribution Date, as the case may be, setting forth the following
information (per $1,000 face amount of Certificates 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; and
(iii) the Pool Balance and the Pool Factor.
(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 Trustee shall furnish
to each Person who at any time during such calendar year was a
Certificateholder of record a statement containing the sum of the amounts
determined pursuant to clauses (a)(i) and (a)(ii) with respect to the 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 year, and such other items as are readily available to the Trustee and
which a Certificateholder shall reasonably request as necessary for the purpose
of such Certificateholder's preparation of its federal income tax returns.
Section 4.04. Investment of Special Payment Moneys. Any money received by the
Trustee pursuant to Section 4.01(b) representing a Special Payment which is not
to be promptly distributed shall, to the extent practicable, be invested in
Permitted Investments by the Trustee pending distribution of such Special
Payment pursuant to Section 4.02. Any investment made pursuant to this Section
4.04 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 4.02 on the applicable Special Distribution Date and the Trustee
shall hold any such Permitted Investments until maturity. The Trustee shall
have no liability with respect to any investment made pursuant to this Section
4.04, other than by reason of the willful misconduct or negligence of the
Trustee. All income and earnings from such investments shall be distributed on
such Special Distribution Date as part of such Special Payment.
<PAGE>
PTA-24
ARTICLE V
THE COMPANY
Section 5.01. Maintenance of Corporate Existence. The Company, at its own
cost and expense, will do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence, rights and
franchises, except as otherwise specifically permitted in Section 5.02;
provided, however, that the Company shall not be required to preserve any right
or franchise if the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the
loss thereof is not prejudicial in any material respect to the
Certificateholders.
Section 5.02. Consolidation, Merger or Sale of Assets Permitted. (a) The
Company shall not consolidate with or merge into any other corporation or
convey, transfer or lease or otherwise dispose of all or substantially all of
its assets to any Person unless the successor corporation (if other than the
Company) shall be a corporation organized and existing under the laws of the
United States of America or a State thereof or the District of Columbia, and
such corporation shall expressly assume the due and punctual performance and
observance of all of the covenants and conditions of this Trust Agreement to be
performed by the Company by supplemental agreement given by such successor
corporation to the Trustee.
(b) Upon any such consolidation or merger, conveyance, transfer or lease or
other disposition and upon any such assumption by the successor corporation,
such successor corporation shall succeed to, and be substituted for, and may
exercise every right and power of, the Company hereunder, with the same effect
as if it had been named herein as the party of the first part. No such
consolidation or merger, conveyance, transfer or lease shall have the effect of
releasing the Company or any successor corporation which shall theretofore have
become such from its liability hereunder.
(c) The Trustee, subject to the provisions of Sections 7.01 and 7.02, may
receive an Officer's Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale or conveyance, and any such
assumption, complies with the provisions of this Section 5.02.
Section 5.03. Annual Statements as to Compliance by the Company. The Company
covenants and agrees to deliver to the Trustee on or before a date not more
than 120 days after the end of each fiscal year of the Company ending after the
date hereof, an Officers' Certificate stating as to the officer signing such
certificate, whether or not, to the best of such officer's knowledge, the
Company is not in default in the performance and observance of any of the
terms, provisions and conditions hereof and, if the Company shall
<PAGE>
PTA-25
be in default, specifying all such defaults and the nature thereof of which
such officer may have knowledge, and the actions proposed to be undertaken by
the Company with respect thereto.
ARTICLE VI
DEFAULT
Section 6.01. Events of Default. If any Indenture Default under any Indenture
(an "Event of Default") shall occur and be continuing, then, and in each and
every case, so long as such Event of Default shall be continuing, the Trustee
may vote all of the Notes held in the Trust to which such Event of Default
relates, and upon the direction of the Holders of Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
in the Trust, the Trustee shall vote a corresponding majority of such Notes in
favor of directing the Indenture Trustee to which such Event of Default relates
to declare the unpaid principal amount of the Notes then outstanding to which
such Event of Default relates and accrued interest thereon to be due and
payable under, and in accordance with the provisions of, the relevant
Indenture. In addition, if an Indenture Default shall have occurred and be
continuing under any Indenture, the Trustee may in accordance with the relevant
Indenture vote the Notes held in the Trust to which such Event of Default
relates to direct the Indenture Trustee regarding the exercise of remedies
provided in Article VIII of such Indenture.
In addition, after an Event of Default shall have occurred and be continuing
with respect to any Notes, the Trustee may in its discretion, and upon the
direction of the Certificateholders evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust shall, by such
officer or agent as it may appoint, sell, convey, transfer and deliver such
Note or Notes, without recourse to or warranty by the Trustee or any
Certificateholder, to any Person. In any such case, the Trustee shall sell,
assign, contract to sell or otherwise dispose of and deliver such Note or Notes
in one or more parcels at public or private sale or sales, at any location or
locations at the option of the 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. If the Trustee so decides or is required to sell or
otherwise dispose of any Note pursuant to this Section 6.01, the Trustee shall
take such of the actions described above as it may reasonably deem most
effectual to complete the sale or other disposition of such Note, so as to
provide for the payment in full of all amounts due on the Certificates. The
Trustee shall give notice to the Company promptly after any such sale.
Notwithstanding the foregoing, any action taken by the Trustee under this
Section 6.01 shall not, in the reasonable judgment of the Trustee, be adverse
to the best interests of the Certificateholders.
<PAGE>
PTA-26
Section 6.02. Incidents of Sale of Notes. Upon any sale of all or any part of
the Notes made either under the power of sale given under this Trust Agreement
or otherwise for the enforcement of this Trust Agreement, the following shall
be applicable:
(1) Certificateholders and Trustee May Purchase Notes. Any
Certificateholder, the Trustee in its individual or any other capacity or
any other Person may bid for and purchase any of the Notes, and upon
compliance with the terms of sale, may hold, retain, possess and dispose of
such Notes in their or its or his own absolute right without further
accountability.
(2) Receipt of Trustee Shall Discharge Purchaser. The receipt of the
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 his 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
Trustee upon any sale made either under the power of sale given by this
Trust Agreement or otherwise for the enforcement of this Trust Agreement
shall be applied, first, to the payment of all costs and expenses,
including all sums paid and advanced by the Trustee hereunder and the
reasonable compensation, expenses and disbursements of the Trustee, its
agents and counsel, incurred in connection with that collection, and
secondly, shall be applied as provided in Section 4.02.
Section 6.03. Judicial Proceedings Instituted by Trustee. (a) Trustee May
Bring Suit. If there shall be a failure to make payment of the principal of,
premium, if any, or interest on any Note, then the Trustee, in its own name, and
as trustee of an express trust, as holder of such Notes, shall be, to the extent
permitted by and in accordance with the terms of the Note Documents, entitled
and empowered to institute any suits, actions or proceedings at law, in equity
or otherwise, for the collection of the sums so due and unpaid on such Notes and
may prosecute any such claim or proceeding to judgment or final decree with
respect to the whole amount of any such sums so due and unpaid.
(b) Trustee May File Proofs of Claim; Appointment of Trustee as Attorney-in-
Fact in Judicial Proceedings. The Trustee in its own name, or as trustee of an
express trust, or as attorney-in-fact for the Certificateholders, or in any one
or more of such capacities (irrespective of whether distributions on the
Certificates shall then be due and payable, or the payment of the principal on
the Notes shall then be due and payable, as therein expressed or by declaration
or otherwise and irrespective of whether the Trustee shall
<PAGE>
PTA-27
have made any demand to the relevant Indenture Trustee for the payment of
overdue principal, premium (if any) or interest on the Notes), shall be
entitled and empowered to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and of the Certificateholders allowed in any receivership, insolvency,
bankruptcy, liquidation, readjustment, reorganization or any other judicial
proceedings relative to the Company, the relevant Owner Trustee, the relevant
Owner Participant or their respective creditors or property. Any receiver,
assignee, trustee, liquidator, sequestrator (or similar official) in any such
judicial proceeding is hereby authorized by each Certificateholder to make
payments in respect of such claim to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Certificateholders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel. Nothing contained in this Trust Agreement shall be
deemed to give to the Trustee any right to accept or consent to any plan of
reorganization or otherwise by action of any character in any such proceeding
to waive or change in any way any right of any Certificateholder.
Section 6.04. Control by Certificateholders. The Certificateholders
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest in the Trust shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee under this Trust
Agreement, including any right of the Trustee as holder of the Notes, provided
that
(1) such direction shall not be in conflict with any rule of law or with
this Trust Agreement and may not involve the Trustee in personal liability
or expense,
(2) the Trustee shall not determine that the action so directed would be
unduly prejudicial to the Certificateholders not taking part in such
direction,
(3) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(4) if an Indenture Default under any Indenture shall have occurred and
be continuing, such direction shall not obligate the Trustee to vote more
than a corresponding majority of the related Notes held by the Trust in
favor of directing any action by the Indenture Trustee with respect to such
Indenture Default.
Section 6.05. Waiver of Past Defaults. The Certificateholders evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
in the Trust may on behalf of the Certificateholders of all the Certificates
waive any past Event of Default
<PAGE>
PTA-28
hereunder and its consequences or may instruct the Trustee to waive any past
default under any Indenture or this Agreement and its consequences, except a
default
(1) in the deposit of any Scheduled Payment or Special Payment under
Section 4.01 or in the distribution of any payment under Section 4.02 on
the Certificates, or
(2) in the payment of the principal of (premium, if any) or interest on
any Notes, or
(3) in respect of a covenant or provision hereof which under Article IX
hereof cannot be modified or amended without the consent of the
Certificateholder of each Outstanding Certificate affected.
Upon any such waiver, such default shall cease to exist with respect to this
Trust Agreement, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Trust Agreement and any direction
given by the Trustee on behalf of such holders to an Indenture Trustee shall be
annulled with respect thereto; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon. Upon any such waiver, the Trustee shall vote the Notes issued under
the relevant Indenture to waive the corresponding Indenture Default.
Section 6.06. Undertaking to Pay Court Costs. All parties to this Trust
Agreement, and each Certificateholder by his acceptance of a Certificate, shall
be deemed to have agreed that any court may in its discretion require, in any
suit, action or proceeding for the enforcement of any right or remedy under
this Trust Agreement, or in any suit, action or proceeding against the Trustee
for any action taken or omitted by it as Trustee hereunder, the filing by any
party litigant in such suit, action or proceeding of an undertaking to pay the
costs of such suit, action or proceeding, and that such court may, in its
discretion, assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, action or proceeding, having due
regard to the merits and good faith of the claims or defenses made by such
party litigant; provided, however, that the provisions of this Section 6.06
shall not apply to (a) any suit, action or proceeding instituted by any
Certificateholder or group of Certificateholders evidencing Fractional
Undivided Interests aggregating more than 10% of the Trust, (b) any suit,
action or proceeding instituted by any Certificateholder for the enforcement of
the distribution of payments pursuant to Section 4.02 hereof on or after the
respective due dates expressed herein or (c) any suit, action or proceeding
instituted by the Trustee.
Section 6.07. Right of Certificateholders to Receive Payments Not to Be
Impaired. Anything in this Trust Agreement to the contrary notwithstanding,
including without limitation Section 6.08 hereof, the right of any
Certificateholder to receive
<PAGE>
PTA-29
distributions of payments required pursuant to Section 4.02 hereof on the
Certificates when due, or to institute suit for the enforcement of any such
payment on or after the applicable Distribution Date or Special Distribution
Date, shall not be impaired or affected without the consent of such
Certificateholder.
Section 6.08. Certificateholders May Not Bring Suit Except Under Certain
Conditions. A Certificateholder shall not have the right to institute any suit,
action or proceeding at law or in equity or otherwise with respect to this
Trust Agreement, for the appointment of a receiver or for the enforcement of
any other remedy under this Trust Agreement, unless:
(1) such Certificateholder previously shall have given written notice to
the Trustee of a continuing Event of Default;
(2) the Certificateholders evidencing Fractional Undivided Interests
aggregating not less than 25% of the Trust shall have requested the Trustee
in writing to institute such action, suit or proceeding and shall have
offered to the Trustee indemnity as provided in Section 7.03(e);
(3) the Trustee shall have refused or neglected to institute any such
action, suit or proceeding for 60 days after receipt of such notice,
request and offer of indemnity; and
(4) no direction inconsistent with such written request has been given to
the Trustee during such 60-day period by the Certificateholders evidencing
Fractional Undivided Interests aggregating not less than a majority in
interest in the Trust.
It is understood and intended that no one or more of the Certificateholders
shall have any right in any manner whatever hereunder or under the Certificates
to (i) surrender, impair, waive, affect, disturb or prejudice any property in
the Trust Property or the lien of any Indenture on any property subject
thereto, or the rights of the Certificateholders or the holders of the Notes,
(ii) obtain or seek to obtain priority over or preference to any other such
Holder or (iii) enforce any right under this Trust Agreement, except in the
manner herein provided and for the equal, ratable and common benefit of all the
Certificateholders subject to the provisions of this Trust Agreement.
Section 6.09. Remedies Cumulative. Every remedy given hereunder to the
Trustee or to any of the Certificateholders shall not be exclusive of any other
remedy or remedies, and every such remedy shall be cumulative and in addition
to every other remedy given hereunder or now or hereafter given by statute,
law, equity or otherwise.
<PAGE>
PTA-30
ARTICLE VII
THE TRUSTEE
Section 7.01. Certain Duties and Responsibilities. No provision of this Trust
Agreement shall be construed to relieve the Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(a) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer of the Trustee, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts;
(b) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of
the Certificateholders evidencing Fractional Undivided Interests aggregating
not less than a majority in interest in the Trust relating to the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under
this Trust Agreement; and
(c) no provision of this Trust Agreement shall require the Trustee to expend
or risk its own funds in the performance of any of its duties hereunder, or in
the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk is not reasonably assured to it.
Section 7.02. Notice of Defaults. As promptly as practicable after, and in
any event within 90 days after, the occurrence of any default (as such term is
defined below) hereunder, the Trustee shall transmit by mail to the Company,
the Owner Trustees and the Indenture Trustees in accordance with Section 12.03
and to all Certificateholders, as their names and addresses appear in the
Register, notice of such default hereunder known to the Trustee, unless such
default shall have been cured or waived; provided, however, that, except in the
case of a default in the payment of the principal of (or premium, if any) or
interest on any Note, the 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 Trustee in good faith
determines that the withholding of such notice is in the interests of the
Certificateholders. For the purpose of this Section, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default.
Section 7.03. Certain Rights of Trustee. Except as otherwise provided in
Section 7.01:
<PAGE>
PTA-31
(a) the Trustee may rely and shall be protected in acting or refraining from
acting in reliance upon any resolution, Officer's Certificate, other
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture 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 or direction of the Company mentioned herein shall be
sufficiently evidenced by a Request;
(c) whenever in the administration of this Trust Agreement the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, or where information is required
or necessary to be furnished by the Company in order for the Trustee to act,
the Trustee (unless other evidence be herein specifically prescribed) shall
not be liable for any action it takes or omits to take in good faith in
reliance upon an Officer's Certificate of the Company, any Owner Trustee or
any Indenture Trustee;
(d) the Trustee may consult with counsel and the advice of such counsel or
any Opinion of Counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Trust Agreement at the request or direction of
any of the Certificateholders pursuant to this Trust Agreement, unless such
Certificateholders shall have offered to the Trustee security or indemnity
reasonably satisfactory to the Trustee against the cost, expenses and
liabilities which might be incurred by it in compliance with such request or
direction;
(f) the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, Officer's Certificate, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture or other paper or document but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, the reasonable expenses of which shall be paid by
the Company or, if paid by the Trustee, shall be reimbursed by the Company;
(g) the Trustee may execute any of the trusts or powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys and
the Trustee shall not be responsible for any misconduct or negligence on the
part of any agent or attorney appointed with due care by it hereunder;
<PAGE>
PTA-32
(h) the Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants, conditions, or agreements on the
part of the Company, except as otherwise set forth herein, but the Trustee may
require of the Company full information and advice as to the performance of
the covenants, conditions and agreements contained herein and shall be
entitled in connection therewith to examine the books, records and premises of
the Company;
(i) the permissive rights of the Trustee to do things enumerated in this
Trust Agreement shall not be construed as a duty and the Trustee shall not be
answerable for other than its negligence or willful default;
(j) except for a default of which a Responsible Officer of the Trustee has
"actual knowledge" and which event, with the giving of notice or the passage
of time or both, would constitute an Event of Default under this Trust
Agreement, the Trustee shall not be deemed to have notice of any default or
event unless specifically notified in writing of such event by the Company,
the Indenture Trustee or the Holder of any Certificate Outstanding; as used
herein, the term "actual knowledge" means the actual fact or statement of
knowing, without any duty to make any investigation with regard thereto; and
(k) the Trustee shall not be required to give any note or surety in respect
of the execution of the said trusts and powers or otherwise in respect of the
premises.
Section 7.04. Not Responsible for Recitals or Issuance of Certificates. The
recitals contained herein and in the Certificates, except the certificates of
authentication, shall not be taken as the statements of the Trustee, and the
Trustee assumes no responsibility for their correctness. Subject to Section
7.15, the Trustee makes no representations as to the validity or sufficiency of
this Trust Agreement, the Note Documents, any Indenture, the Notes or the
Certificates, except that the Trustee hereby represents and warrants that this
Trust Agreement has been, and each Certificate will be, executed and delivered
by one of its officers who is duly authorized to execute and deliver such
document on its behalf.
Section 7.05. May Hold Certificates. The Trustee, any Paying Agent, Registrar
or any other agent, in their respective individual or any other capacity, may
become the owner or pledgee of Certificates and may otherwise deal with the
Company, the Owner Trustees or the Indenture Trustees with the same rights it
would have if it were not Trustee, Paying Agent, Registrar or such other agent.
Section 7.06. Money Held in Trust. Subject to Sections 4.04 and 11.01, all
monies received by the Trustee or the Paying Agent shall, until used or applied
as provided herein, be held in trust hereunder for the purposes for which they
were received and shall be segregated from other funds and not co-mingled with
the funds of any other Person except to
<PAGE>
PTA-33
the extent required herein or by law. Subject to Section 4.04, neither the
Trustee nor the Paying Agent shall have any liability for interest upon any
such moneys except as provided for herein.
Section 7.07. Compensation and Reimbursement. The Company agrees:
(1) to pay, or cause to be paid, to the Trustee from time to time the
compensation set forth in the schedule agreed to by the Trustee and the
Company for all services rendered by it hereunder (which compensation shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse, or cause
to be reimbursed, the Trustee upon its request for all advances and
reasonable out-of-pocket expenses and disbursements incurred or made by the
Trustee in accordance with any provision of this Trust Agreement (including
the reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as
may be attributable to its negligence or willful misconduct or as may be
incurred due to the Trustee's breach of its representations and warranties
set forth in Section 7.15;
(3) to indemnify, or cause to be indemnified, the Trustee for, and to
hold it harmless against, any loss, liability or expense (other than for or
with respect to any tax) incurred without negligence or willful misconduct,
on its part, arising out of or in connection with the acceptance or
administration of this Trust, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except for any such
loss, liability or expense incurred by reason of the Trustee's breach of
its representations and warranties set forth in Section 7.15. The Trustee
shall notify the Company promptly of any claim for which it may seek
indemnity. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel with the
consent of the Company and the Company will pay the reasonable fees and
expenses of such counsel. The Company need not pay for any settlement made
without its consent; and
(4) to indemnify, or cause to be indemnified, the Trustee, solely in its
individual capacity for, and to hold it harmless against, any tax (other
than for or with respect to any tax referred to in the next paragraph,
provided that no indemnification shall be available with respect to any tax
attributable to the Trustee's compensation for serving as such) incurred
without negligence or willful misconduct on its part, arising out of or in
connection with the acceptance or administration of this Trust, including
any costs and expenses incurred in contesting the imposition of any such
tax. The Trustee, in its individual capacity, shall notify the Company
promptly of
<PAGE>
PTA-34
any tax for which it may seek indemnity. The Company shall have the right
to defend against the imposition of such tax and the Trustee, in its
individual capacity, shall cooperate in any such defense. The Trustee, in
its individual capacity, may have separate counsel with the consent of the
Company and the Company will pay the reasonable fees and expenses of such
counsel. The Company need not pay for any taxes paid, in settlement or
otherwise, without its consent.
The Trustee shall be entitled to reimbursement from, and shall have a lien
prior to the Certificates upon, all property and funds held or collected by the
Trustee in its capacity as Trustee for all amounts owed to it under this Trust
Agreement, including its right to reimbursement for advances and for payment of
all fees and expenses, and for any tax incurred without negligence or willful
misconduct on its part, arising out of or in connection with the acceptance or
administration of this Trust (other than any tax attributable to the Trustee's
compensation for serving as such), including any costs and expenses incurred in
contesting the imposition of any such tax. If the Trustee reimburses itself for
any such tax, it will within 30 days mail a brief report setting forth the
circumstances thereof to all Certificateholders as their names and addresses
appear in the Register.
As security for the performance of the obligations of the Company under this
Section, the Trustee shall have a lien prior to the Certificates upon all
property and funds held or collected by the Trustee in its capacity as Trustee.
Section 7.08. Corporate Trustee Required; Eligibility. There shall at all
times be a 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
Territory or of the District of Columbia, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus of at
least $75,000,000, and subject to supervision or examination by Federal, State,
Territorial 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 7.08, 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 Trustee shall cease
to be eligible in accordance with the provisions of this Section 7.08, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article VII.
Section 7.09. Resignation and Removal; Appointment of Successor. (a) No
resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article VII shall become effective until the acceptance of
appointment by the successor Trustee under Section 7.10.
<PAGE>
PTA-35
(b) The Trustee may resign at any time by giving written notice thereof to
the Company, the Authorized Agents, the Owner Trustees and the Indenture
Trustees. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Company, the Owner Trustees and the Trustee within 30
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of the Holders holding
Certificates evidencing Fractional Undivided Interests aggregating not less
than a majority in interest in the Trust delivered to the Trustee and to the
Company, the Owner Trustees and the Indenture Trustees.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 310 of the Trust
Indenture Act after written request therefor by the Company or by any
Certificateholder who has been a bona fide Certificateholder for at least
six months; or
(2) the Trustee shall cease to be eligible under Section 7.08 and shall
fail to resign after written request therefor by the Company or by any such
Certificateholder; or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation;
then, in any case, (i) the Company may remove the Trustee or (ii) subject to
Section 6.06, any Certificateholder who has been a bona fide Holder of a
Certificate for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If a Responsible Officer of the Trustee shall obtain actual knowledge of
an Avoidable Tax (as hereinafter defined) which has been or is likely to be
asserted, the Trustee shall promptly notify the Company and the Owner Trustees
thereof and shall, within 30 days of such notification, resign hereunder unless
within such 30-day period the Trustee shall have received notice that the
Company or the Owner Trustees have agreed to pay such tax. The Company shall
promptly appoint a successor Trustee in a jurisdiction where there are no
Avoidable Taxes. As used herein an Avoidable Tax means a state or local tax:
(i) upon (w) the Trust, (x) the Trust Property, (y) Holders of the Certificates
or (z) the Trustee for which the Trustee is entitled to seek reimbursement from
the Trust Property, and (ii) which would be avoided if the Trustee were located
in another state, or jurisdiction
<PAGE>
PTA-36
within a state, within the United States. A tax shall not be an Avoidable Tax
if the Company or the Owner Trustees shall agree to pay, and shall pay, such
tax.
(f) If the Trustee shall resign, be removed or become incapable of acting, or
if a vacancy shall occur in the office of the Trustee for any cause, the
Company shall promptly appoint a successor Trustee. If, within one year after
such resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee shall be appointed by Act of the Holders holding Certificates
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest in the Trust delivered to the Company, the Owner Trustees, the
Indenture Trustees and the retiring Trustee, the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become the successor
Trustee and supersede the successor Trustee appointed as provided above. If no
successor Trustee shall have been so appointed as provided above and accepted
appointment in the manner hereinafter provided, any Certificateholder who has
been a bona fide Holder of a Certificate for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(g) The successor Trustee shall give notice of the resignation and removal of
the Trustee and appointment of the successor Trustee by mailing written notice
of such event by first-class mail, postage prepaid, to the Holders of
Certificates as their names and addresses appear in the Register. Each notice
shall include the name of such successor Trustee and the address of its
Corporate Trust Office.
Section 7.10. Acceptance of Appointment by Successor. Every successor Trustee
appointed hereunder shall execute, acknowledge and deliver to the Company and
to the retiring Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Trustee; but, on request of the Company or the successor Trustee, such retiring
Trustee shall execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder, subject nevertheless to its
lien, if any, provided for in Section 7.07. Upon request of any such successor
Trustee, the Company, the retiring Trustee and such successor Trustee shall
execute and deliver any and all instruments containing such provisions as shall
be necessary or desirable to transfer and confirm to, and for more fully and
certainly vesting in, such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time of such
acceptance such successor Trustee shall be qualified and eligible under this
Article VII.
<PAGE>
PTA-37
Section 7.11. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article VII, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Certificates shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Certificates so authenticated with the same
effect as if such successor Trustee had itself authenticated such Certificates.
Section 7.12. Maintenance of Agencies. (a) There shall at all times be
maintained in the Borough of Manhattan, The City of New York, an office or
agency where Certificates may be presented or surrendered for registration of
transfer or for exchange, and for payment thereof and where notices and demands
to or upon the Trustee in respect of the Certificates or of this Trust
Agreement may be served. Such office or agency shall be initially at Shawmut
Trust Company, c/o First Chicago Trust Company, 14 Wall Street, 8th Floor,
Window #2, New York, New York 10005. Written notice of the location of each
such other office or agency and of any change of location thereof shall be
given by the Trustee to the Company, the Owner Trustees, the Indenture Trustees
and the Certificateholders. In the event that no such office or agency shall be
maintained or no such notice of location or of change of location shall be
given, presentations and demands may be made and notices may be served at the
Corporate Trust Office of the Trustee.
(b) There shall at all times be a Registrar and a Paying Agent hereunder.
Each such Authorized Agent shall be a bank or trust company, shall be a
corporation organized and doing business under the laws of the United States or
any state, with a combined capital and surplus of at least $75,000,000, and
shall be authorized under such laws to exercise corporate trust powers, subject
to supervision by Federal or state authorities. The Trustee shall initially be
the Paying Agent and, as provided in Section 3.04, Registrar hereunder. Each
Registrar shall furnish to the Trustee, at stated intervals of not more than
six months, and at such other times as the Trustee may request in writing, a
copy of the Register maintained by such Registrar.
(c) Any corporation into which any Authorized Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authorized Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authorized Agent, shall be the successor of such Authorized Agent
hereunder, if such successor corporation is otherwise
<PAGE>
PTA-38
eligible under this Section 7.12, without the execution or filing of any paper
or any further act on the part of the parties hereto or such Authorized Agent
or such successor corporation.
(d) Any Authorized Agent may at any time resign by giving written notice of
resignation to the Trustee, the Company, the Owner Trustees and the Indenture
Trustees. The Company may, and at the request of the Trustee shall, at any time
terminate the agency of any Authorized Agent by giving written notice of
termination to such Authorized Agent and to the Trustee. Upon the resignation
or termination of an Authorized Agent or in case at any time any such
Authorized Agent shall cease to be eligible under this Section 7.12 (when, in
either case, no other Authorized Agent performing the functions of such
Authorized Agent shall have been appointed), the Company shall promptly appoint
one or more qualified successor Authorized Agents, reasonably satisfactory to
the Trustee, to perform the functions of the Authorized Agent which has
resigned or whose agency has been terminated or who shall have ceased to be
eligible under this Section 7.12. The Company shall give written notice of any
such appointment made by it to the Trustee, the Owner Trustees and the
Indenture Trustees; and in each case the Trustee shall mail notice of such
appointment to all Holders as their names and addresses appear on the Register.
(e) The Company agrees to pay, or cause to be paid, from time to time to each
Authorized Agent the compensation as set forth in the schedule agreed to by
each Authorized Agent and the Company for its services and to reimburse it for
its reasonable expenses.
Section 7.13. Money for Certificate Payments to Be Held in Trust. All moneys
deposited with any Paying Agent for the purpose of any payment on Certificates
shall be deposited and held in trust for the benefit of the Holders of the
Certificates entitled to such payment, subject to the provisions of this
Section 7.13. Moneys so deposited and held in trust shall constitute a separate
trust fund for the benefit of the Holders of the Certificates with respect to
which such money was deposited.
The Trustee will cause each Paying Agent other than the Trustee to execute
and deliver to it an instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of this Section 7.13, that such Paying Agent
will:
(1) hold all sums held by it for payments on Certificates in trust for
the benefit of the Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by any obligor upon the
Certificates in the making of any such payment; and
<PAGE>
PTA-39
(3) at any time during the continuance of any such default, upon the written
request of the Trustee, forthwith pay to the Trustee all sums so held in trust
by such Paying Agent.
The Trustee may at any time, for the purpose of obtaining the satisfaction and
discharge of this Trust Agreement or for any other purpose, direct any Paying
Agent to pay to the Trustee all sums held in trust by such Paying Agent, such
sums to be held by the Trustee upon the same trusts as those upon which such
sums were held by such Paying Agent; and, upon such payment by any Paying Agent
to the Trustee, such Paying Agent shall be released from all further liability
with respect to such money.
Section 7.14. Ownership and Registration of Notes, Permitted Investments and
Specified Investments in Trustee's Name. The Trustee agrees that all Notes,
Permitted Investments, if any, and Specified Investments, if any, shall be
issued in the name of the Trustee or its nominee and held by the Trustee or, if
not so held, the Trustee or its nominee shall be reflected as the owner of such
Notes, Permitted Investments or Specified Investments, as the case may be, in
the register of the issuer of such Notes, Permitted Investments or Specified
Investments. In no event shall the Trustee invest in, or hold, Notes, Permitted
Investments or Specified Investments in a manner that would cause the Trustee
not to have the ownership interest in such Notes, Permitted Investments or
Specified Investments under the applicable provisions of the Uniform Commercial
Code in effect where the Trustee holds such Notes, Permitted Investments or
Specified Investments, or other applicable law then in effect.
Section 7.15. Representations and Warranties of Trustee. The Trustee hereby
represents and warrants that:
(i) the Trustee is a national banking association duly organized, validly
existing, and in good standing under the laws of the United States;
(ii) the Trustee has full power, authority and legal right to execute,
deliver, and perform this Trust Agreement and the Participation Agreements and
has taken all necessary action to authorize the execution, delivery, and
performance by it of this Trust Agreement and the Participation Agreements;
(iii) the execution, delivery and performance by the Trustee of this Trust
Agreement and the Participation Agreements (a) will not violate any provision
of any law or regulation of the United States or the State of Connecticut
governing the banking and trust powers of the Trustee or any order, writ,
judgment or decree of any court, arbitrator, or governmental authority
applicable to the Trustee and any of its assets, (b) will not violate any
provision of the articles of association or by-laws of the Trustee, or (c)
will not violate any provision of, or constitute, with or without
<PAGE>
PTA-40
notice or lapse of time, a default under, or result in the creation or
imposition of any lien on any properties included in the Trust Property
pursuant to the provisions of, any mortgage, indenture, contract, agreement or
other undertaking to which it is a party, which violation, default or lien
could reasonably be expected to have an adverse effect on the Trustee's
performance or ability to perform its duties hereunder or thereunder or on the
transactions contemplated herein or therein;
(iv) the execution, delivery and performance by the Trustee of this Trust
Agreement and the Participation Agreements will not require the authorization,
consent, or approval of, the giving of notice to, the filing or registration
with, or the taking of any other action in respect of, any governmental
authority or agency of the State of Connecticut or the United States of
America regulating the banking and corporate trust activities of the Trustee;
and
(v) this Trust Agreement and the Participation Agreements have been duly
executed and delivered by the Trustee and constitute the legal, valid, and
binding agreements of the Trustee, enforceable in accordance with their
respective terms, provided that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the rights of creditors generally and general principles of equity.
Section 7.16. Withholding Taxes; Information Reporting. The Trustee, as
trustee of a grantor trust, shall exclude and withhold from each distribution of
principal, premium, if any, and interest and other amounts due hereunder or
under the Certificates any and all withholding taxes applicable thereto as
required by law, except to the extent a Certificateholder has furnished
satisfactory evidence to the Trustee of any exemption from or reduction in
withholding claimed by such Certificateholder. The Trustee agrees to act as such
withholding agent and, in connection therewith, whenever any present or future
taxes or similar charges are required to be withheld with respect to any amounts
payable in respect of the Certificates, to withhold such amounts and timely pay
the same to the appropriate authority in the name of and on behalf of the
Holders, that it will file any necessary withholding tax returns or statements
when due, and that, as promptly as possible after the payment thereof, it will
deliver to each Holder appropriate documentation showing the payment thereof,
together with such additional documentary evidence as such Holders may
reasonably request from time to time. The Trustee agrees to file any other
information or report as it may be required to file under United States law.
Section 7.17. Trustee's Liens. The Trustee, in its individual capacity, agrees
that it will at its own cost and expense promptly take any action as may be
necessary to duly discharge and satisfy in full any mortgage, pledge, lien,
charge, encumbrance, security interest or claim ("Trustee's Liens") on or with
respect to the Trust Property which is either (i) attributable to the Trustee in
its individual capacity and which is unrelated to the
<PAGE>
PTA-41
transactions contemplated by this Trust Agreement, the Note Purchase Agreements
or the Note Documents, or (ii) which is attributable to the Trustee as trustee
hereunder or in its individual capacity and which arises out of acts or
omissions which are not related to or connected with the administration of this
Trust or any other transaction contemplated by the Note Documents or prohibited
by this Trust Agreement.
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
Section 8.01. The Company to Furnish Trustee with Names and Addresses of
Certificateholders. The Company will furnish to the Trustee within 15 days
after each Record Date with respect to a Scheduled Payment, and at such other
times as the Trustee may request in writing, within 30 days after receipt by
the Company of any such request, a list, in such form as the Trustee may
reasonably require, of all information in the possession or control of the
Company as to the names and addresses of the Certificateholders, in each case
as of a date not more than 15 days prior to the time such list is furnished;
provided, however, that so long as the Trustee is the sole Registrar, no such
list need be furnished; and provided further, however, that no such list need
be furnished for so long as a copy of the Register is being furnished to the
Trustee pursuant to Section 7.12(b).
Section 8.02. Preservation of Information; Communications to
Certificateholders. (a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders of Certificates
contained in the most recent list furnished to the Trustee as provided in
Section 7.12(b) or Section 8.01, as the case may be, and the names and
addresses of Holders of Certificates received by the Trustee in its capacity as
Registrar, if so acting. The Trustee may destroy any list furnished to it as
provided in Section 7.12(b) or Section 8.01, as the case may be, upon receipt
of a new list so furnished.
(b) If three or more Certificateholders (such Holders hereinafter referred to
as "applicants") apply in writing to the Trustee, and furnish to the Trustee
reasonable proof that each such applicant has owned a Certificate for a period
of at least six months preceding the date of such application, and such
application states that the applicants desire to communicate with other
Certificateholders with respect to their rights under this Trust Agreement or
under the Certificates and is accompanied by a copy of the form of proxy or
other communication which such applicants propose to transmit, then the Trustee
shall, within five Business Days after the receipt of such application, at its
election, either
(i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with Section 8.02(a), or
<PAGE>
PTA-42
(ii) inform such applicants as to the approximate number of Holders of
Certificates whose names and addresses appear in the information preserved
at the time by the Trustee in accordance with Section 8.02(a), and as to
the approximate cost of mailing to such Certificateholders the form of
proxy or other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Certificateholder whose name and address appear in the information
preserved at the time by the Trustee in accordance with Section 8.02(a), a copy
of the form of proxy or other communication which is specified in such request,
with reasonable promptness after a tender to the Trustee of the material to be
mailed and of payment, or provision for the payment, of the reasonable expenses
of mailing, unless within five days after such tender, the Trustee shall mail
to such applicants, together with a copy of the material to be mailed, a
written statement to the effect that, in the opinion of the Trustee, such
mailing would be contrary to the best interests of the Holders or would be in
violation of applicable law. Such written statement shall specify the basis of
such opinion. If the applicants shall obtain a court order, after notice to the
Trustee and opportunity for hearing, so directing the Trustee, the Trustee
shall mail copies of such material to all such Certificateholders with
reasonable promptness after the entry of such order and the renewal of the
applicants' tender.
(c) Every Holder of Certificates, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee shall
be held accountable by reason of the disclosure of any such information as to
the names and addresses of the Holders in accordance with Section 8.02(b),
regardless of the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any material
pursuant to a request made under Section 8.02(b).
Section 8.03. Reports by Trustee. Within 60 days after May 15 of each year
commencing with the first full year following the issuance of the Certificates,
the Trustee shall transmit to the Certificateholders, as provided in Section
313(c) of the Trust Indenture Act, a brief report dated as of such May 15, if
required by Section 313(a) of the Trust Indenture Act.
Section 8.04. Reports by the Company. The Company shall:
(1) file with the 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 Section 15(d) of the Securities
Exchange Act of 1934; or, if the
<PAGE>
PTA-43
Company is not required to file information, documents or reports pursuant
to either of said Sections, then it will file with the 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 Securities Exchange Act of 1934 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;
(2) file with the Trustee and the Commission, in accordance with the
rules and regulations prescribed 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 Trust
Agreement, as may be required by such rules and regulations, including, in
the case of annual reports, if required by such rules and regulations,
certificates or opinions of independent public accountants, confirming to
the requirements of Section 1.02;
(3) transmit to all Certificateholders, in the manner and to the extent
provided in 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 (1) and (2) of this Section 8.04 as may be required
by rules and regulations prescribed by the Commission;
(4) furnish to the Trustee, not less often than annually, a brief
certificate from the principal executive officer, principal financial
officer or principal accounting officer as to his or her knowledge of the
Company's compliance with all conditions and covenants under this Trust
Agreement. For purposes of this paragraph (4), such compliance shall be
determined without regard to any period of grace or requirement of notice
provided under this Trust Agreement; and
(5) furnish to the Trustee such opinions as may be required by Section
314(b) of the Trust Indenture Act.
ARTICLE IX
SUPPLEMENTAL TRUST AGREEMENTS
Section 9.01. Supplemental Trust Agreements Without Consent of
Certificateholders. Without the consent of the Holder of any Certificates, the
Company may, and the Trustee (subject to Section 9.03) shall, at any time and
from time to time enter into one or more agreements supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:
<PAGE>
PTA-44
(1) to evidence the succession of another corporation to the Company, and
the assumption by any such successor of the covenants of the Company herein
contained; or
(2) to add to the covenants of the Company, for the benefit of the
Holders of the Certificates, or to surrender any right or power herein
conferred upon the Company; or
(3) to cure any ambiguity, to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein or
to make any other provisions with respect to matters or questions arising
under this Trust Agreement; provided that any such action shall not
adversely affect the interests of the Holders of the Certificates; or
(4) to modify, eliminate or add to the provisions of this Trust Agreement
to such extent as shall be necessary to qualify this Trust Agreement
(including any supplemental agreement) under the Trust Indenture Act, or
under any similar Federal statute hereafter enacted, and to add to this
Trust 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 at the date as of
which this instrument was executed or any corresponding provision in any
similar Federal statute hereafter enacted.
Section 9.02. Supplemental Trust Agreements with Consent of
Certificateholders. With the consent of the Holders of Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
in the Trust, by Act of said Holders delivered to the Company and the Trustee,
the Company may (with the consent of the Owner Trustees, such consent not to be
unreasonably withheld), and the Trustee (subject to Section 9.03) shall, enter
into an agreement or agreements supplemental hereto for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions of this Trust Agreement or of modifying in any manner the rights and
obligations of the Holders of the Certificates under this Trust Agreement;
provided, however, that no such supplemental agreement shall, without the
consent of the Holder of each Outstanding Certificate affected thereby:
(1) reduce in any manner the amount of, or delay the timing of any
receipt by the Trustee of, payments on the Notes or distributions that are
required to be made herein on any Certificate, or change any date of
payment on any Certificate, or change the place of payment where, or the
coin or currency in which, any Certificate is payable, or impair the right
to institute suit for the enforcement of any such payment or distribution
on or after the Distribution Date or Special Distribution Date applicable
thereto; or
<PAGE>
PTA-45
(2) permit the disposition of any Note in the Trust Property except as
permitted by this Trust Agreement, or otherwise deprive any
Certificateholder of the benefit of the ownership of the Notes in the
Trust; or
(3) reduce the percentage of the aggregate Fractional Undivided Interests
of the Trust which is required for any such supplemental agreement, or
reduce such percentage required for any waiver (of compliance with certain
provisions of this Trust Agreement or certain defaults hereunder and their
consequences) provided for in this Trust Agreement; or
(4) modify any of the provisions of this Section or Section 6.05, except
to increase any such percentage or to provide that certain other provisions
of this Trust Agreement cannot be modified or waived without the consent of
the Holder of each Certificate affected thereby.
It shall not be necessary for any Act of Certificateholders under this
Section to approve the particular form of any proposed supplemental agreement,
but it shall be sufficient if such Act shall approve the substance thereof.
Section 9.03. Documents Affecting Immunity or Indemnity. If in the opinion of
the Trustee any document required to be executed by it pursuant to the terms of
Section 9.01 or 9.02 affects any interest, right, duty, immunity or indemnity
in favor of the Trustee under this Trust Agreement, the Trustee may in its
discretion decline to execute such document.
Section 9.04. Execution of Supplemental Trust Agreements. In executing or
accepting the additional trusts created by, any supplemental agreement
permitted by this Article IX or the modifications thereby of the trusts created
by this Trust Agreement, the Trustee shall be entitled to receive, and (subject
to Section 7.01) shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental agreement is authorized
or permitted by this Trust Agreement.
Section 9.05. Effect of Supplemental Agreements. Upon the execution of any
supplemental agreement under this Article IX, this Trust Agreement shall be
modified in accordance therewith, and such supplemental agreement shall form a
part of this Trust Agreement for all purposes; and every Holder of Certificates
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
Section 9.06. Conformity with Trust Indenture Act. Every supplemental
agreement executed pursuant to this Article shall conform to the requirements
of the Trust Indenture Act as then in effect.
<PAGE>
PTA-46
Section 9.07. Reference in Certificates to Supplemental Agreements.
Certificates authenticated and delivered after the execution of any
supplemental agreement pursuant to this Article IX may bear a notation in form
approved by the Trustee as to any matter provided for in such supplemental
agreement; and, in such case, suitable notation may be made upon Outstanding
Certificates after proper presentation and demand.
ARTICLE X
AMENDMENTS TO INDENTURES AND NOTE DOCUMENTS
Section 10.01. Amendments and Supplements to Indentures and Other Note
Documents. In the event that the Trustee, as holder of any Note in trust for
the benefit of the Certificateholders, receives a request for a consent to any
amendment, modification, waiver or supplement under any Indenture or other Note
Document or any Note Purchase Agreement, the Trustee shall forthwith send a
notice of such proposed amendment, modification, waiver or supplement, to each
Certificateholder registered on the Register as of such date. The Trustee shall
request from the Certificateholders Directions as to (i) whether or not to
direct such Indenture Trustee to take or refrain from taking any action which a
holder of such Note has the option to direct, (ii) whether or not to give or
execute any waivers, consents, amendments, modifications or supplements as a
holder of such Note and (iii) how to vote any Note if a vote has been called
for with respect thereto. Provided such a request for Certificateholder
Direction shall have been made, in directing any action or casting any vote or
giving any consent as the holder of any Note, the Trustee shall act, vote or
consent with respect to such Note in the same proportion as the Certificates
were actually voted or not voted by Acts of Holders delivered to the Trustee
prior to two Business Days before the Trustee directs such action or casts such
vote or gives such consent. Notwithstanding the foregoing, but subject to
Section 6.04, in the case that an Event of Default hereunder shall have
occurred and be continuing, the Trustee may, but shall not be obligated to, in
its own discretion and at its own direction, consent and notify the relevant
Indenture Trustee of such consent to any amendment, modification, waiver or
supplement under any Indenture or other Note Document or any Note Purchase
Agreement.
ARTICLE XI
TERMINATION OF TRUST
Section 11.01. Termination of the Trust. The respective obligations and
responsibilities of the Company and the Trustee created hereby and the Trust
created hereby shall terminate upon the distribution to all Certificateholders
of all amounts required to be distributed to them pursuant to this Trust
Agreement and the disposition of all property held
<PAGE>
PTA-47
as part of the Trust Property; provided, however, that in no event shall the
trust created hereby continue beyond the expiration of 21 years from the death
of the last survivor of the descendants of George Bush, former President of the
United States, living on the date of this Trust Agreement.
Notice of any termination, specifying the Distribution Date (or Special
Distribution Date, as the case may be) upon which the Certificateholders may
surrender their Certificates to the Trustee for payment of the final
distribution and cancellation, shall be mailed promptly by the Trustee to
Certificateholders not earlier than the 60th day and not later than the 20th
day next preceding such final distribution specifying (A) the Distribution Date
(or Special Distribution Date, as the case may be) upon which final payment of
the Certificates will be made upon presentation and surrender of Certificates
at the office or agency of the Trustee therein specified, (B) the amount of any
such final payment, and (C) that the Record Date otherwise applicable to such
Distribution Date (or Special Distribution Date, as the case may be) is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee therein specified. The
Trustee shall give such notice to the Registrar at the time such notice is
given to Certificateholders. Upon presentation and surrender of the
Certificates, the Trustee shall cause to be distributed to Certificateholders
amounts distributable on such Distribution Date or Special Distribution Date,
as the case may be, pursuant to Section 4.02.
In the event that all of the Certificateholders shall not surrender their
Certificates for cancellation within six months after the date specified in the
above-mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. In the
event that any money held by the Trustee for the payment of distributions on
the Certificates shall remain unclaimed for two years (or such lesser time as
the Trustee shall be satisfied, after 60 days' notice from the Company, is one
month prior to the escheat period provided under applicable law) after the
final distribution date with respect thereto, the Trustee shall pay to each
Indenture Trustee the appropriate amount of money relating to such Indenture
Trustee and shall give written notice thereof to the Owner Trustees and the
Company.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this Trust
Agreement or the 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
<PAGE>
PTA-48
winding up of the Trust, nor otherwise affect the rights, obligations, and
liabilities of the parties hereto or any of them.
Section 12.02. Certificates Nonassessable and Fully Paid. Certificateholders
shall not be personally liable for obligations of the Trust, the Fractional
Undivided Interests represented by the Certificates shall be nonassessable for
any losses or expenses of the Trust or for any reason whatsoever, and
Certificates upon authentication thereof by the Trustee pursuant to Section
3.02 are 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 Trust
established hereunder, or the obligations of the parties hereto, nor shall
anything set forth herein, or contained in the terms of the Certificates, be
construed so as to constitute the Certificateholders from time to time as
partners or members of an association.
Section 12.03. Notices. All demands, notices, and communications hereunder
shall be in writing, personally delivered or mailed by certified mail-return
receipt requested, and shall be deemed to have been duly given upon receipt, in
the case of the Company, at the following address: Kmart Corporation, 3100 West
Big Beaver Road, Troy, Michigan 48084, Attention: Vice President--Real Estate,
and, in the case of the Trustee, at the following address: Shawmut Bank
Connecticut, National Association, 777 Main Street, Hartford, Connecticut
06115, Attention: Corporate Trust Administration, or, in each case, at such
other address as shall be designated by such party in a written notice to the
other parties. Any notice required or permitted to be given to a
Certificateholder hereunder shall be mailed by first-class mail, postage
prepaid, at the address of such Holder as shown in the Register. Any notice so
mailed within the time prescribed in this Trust Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice. If the Company mails a notice or communication to the
Certificateholders, it shall mail a copy to the Trustee and to the Paying Agent
at the same time. Notwithstanding the foregoing, all communications or notices
to the Trustee shall be deemed to be given only when received by a Responsible
Officer of the Trustee.
Section 12.04. Governing Law. THIS TRUST AGREEMENT HAS BEEN DELIVERED IN THE
STATE OF NEW YORK AND THE CERTIFICATES SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 12.05. Severability of Provisions. If any one or more of the
covenants, agreements, provisions, or terms of this Trust Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Trust Agreement and shall in no way
affect the validity or enforceability of the other
<PAGE>
PTA-49
provisions of this Trust Agreement or the Trust, or of the Certificates or the
rights of the Holders thereof.
Section 12.06. Trust Indenture Act Controls. This Trust Agreement is subject
to the provisions of the Trust Indenture Act and shall, to the extent
applicable, be governed by such provisions.
Section 12.07. 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 12.08. Successors and Assigns. All covenants, agreements,
representations and warranties in this Trust Agreement by the Trustee and the
Company shall bind and, to the extent permitted hereby, shall inure to the
benefit of and be enforceable by their respective successors and assigns,
whether so expressed or not.
Section 12.09. Benefits of Trust Agreement. Nothing in this Trust Agreement
or in the Certificates, express or implied, shall give to any Person, other
than the parties hereto and their successors hereunder, and the Holders of
Certificates, any benefit or any legal or equitable right, remedy or claim
under this Trust Agreement.
Section 12.10. Legal Holidays. In any case where any Distribution Date or
Special Distribution Date relating to any Certificate shall not be a Business
Day, then (notwithstanding any other provision of this Trust Agreement) payment
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 such Distribution Date or
Special Distribution Date, and no interest shall accrue during the intervening
period.
Section 12.11. Counterparts. For the purpose of facilitating the execution of
this Trust Agreement and for other purposes, this Trust Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
<PAGE>
PTA-50
IN WITNESS WHEREOF, the Company and the Trustee have caused this Trust
Agreement to be duly executed by their respective officers and their respective
seals, duly attested, to be hereunto affixed, all as of the day and year first
above written.
KMART CORPORATION
By___________________________________
Name:
Title:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Trustee
[SEAL]
Attest:
By___________________________________
Name:
Title:
_____________________________________
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF CERTIFICATE
*Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Issuer 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.
KMART CORPORATION
1995-___ PASS THROUGH TRUST
______% Pass Through
Certificate, Series 1995-___
CUSIP ________________
Final Distribution Date: _______________, ______
evidencing a fractional undivided interest in a trust,
the property of which includes certain
notes, each secured by a Site
leased to Kmart Corporation.
Certificate
No. ________ $____________ Fractional Undivided Interest
representing ___________ of the Trust per $1,000 face
amount
__________________
*This legend to appear on Book-Entry Certificates to be deposited with The
Depository Trust Company.
<PAGE>
2
THIS CERTIFIES THAT CEDE & CO., for value received, is the registered owner of
a $__________ (______________ dollars) Fractional Undivided Interest in the
Kmart Corporation 1995-___ Pass Through Trust (the "Trust") created by Shawmut
Bank Connecticut, National Association, as trustee (the "Trustee"), pursuant to
a Pass Through Trust Agreement dated as of ______________, 1995 (the
"Agreement") between the 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 Agreement. This Certificate is one of the duly authorized
Certificates designated as "________% Pass Through Certificates, Series
1995-___" (herein called the "Certificates"). This Certificate is issued
under and is subject to the terms, provisions, and conditions of the Agreement,
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound. The property of the Trust (the
"Trust Property") includes certain Notes (the "Notes"). Each issue of Notes is
secured by a security interest in a Site owned by or leased to the Company.
Subject to and in accordance with the terms of the Agreement, from funds then
available to the Trustee, there will be distributed on each __________ and
__________ (a "Distribution Date"), commencing _______________, to the Person
in whose name this Certificate is registered at the close of business on the
day of the month which is 15 days preceding the Distribution Date, an amount in
respect of the Scheduled Payments on the Notes due on such Distribution Date,
the receipt of which has been confirmed by the Trustee, equal to the product
of the percentage interest in the Trust evidenced by this Certificate and an
amount equal to the sum of such Scheduled Payments. Subject to and in
accordance with the terms of the Agreement, in the event that Special Payments
on the Notes are received by the Trustee, from funds then available to the
Trustee, there shall be distributed on the applicable Special Distribution
Date, to the Person in whose name this Certificate is registered at the close
of business on the day of the month which is 15 days preceding the Special
Distribution Date, an amount in respect of such Special Payments on the Notes,
the receipt of which has been confirmed by the Trustee, equal to the product of
the percentage interest in the Trust evidenced by this Certificate and an
amount equal to the sum of such Special Payments so received. If a Distribution
Date or Special Distribution Date is not a Business Day, distribution shall be
made on the immediately following Business Day. The Special Distribution Date
shall be the ________ day of the month determined as provided in the Agreement.
The Trustee shall mail notice of each Special Payment and the Special
Distribution Date therefor to the Holders of the Certificates.
Distributions on this Certificate will be made by the Trustee by check mailed
to the Person entitled thereto, without the presentation or surrender of this
Certificate or the making of any notation hereon. Except as otherwise provided
in the Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after notice mailed by the Trustee
<PAGE>
3
of the pendency of such distribution and only upon presentation and surrender
of this Certificate at the office or agency of the Trustee specified in such
notice.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
Reference is hereby made to the further provisions of this 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.
Unless the certificate of authentication hereon has been executed by the
Trustee,a by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
<PAGE>
4
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
KMART CORPORATION
1995-___ PASS THROUGH TRUST
By: SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Trustee
By: _________________________
Name:
Title:
<PAGE>
5
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
Dated:
This is one of the Certificates referred
to in the within-mentioned Agreement.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Trustee
By: __________________________________
Authorized Officer
<PAGE>
6
[Reverse of Certificate]
The Certificates do not represent a direct obligation of, or an obligation
guaranteed by, or an interest in, the Company or the Trustee or any affiliate
thereof. The Certificates are limited in right of payment, all as more
specifically set forth on the face hereof and in the Agreement. All payments or
distributions made to Certificateholders under the Agreement shall be made only
from the Trust Property and only to the extent that the Trustee shall have
sufficient income or proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each Holder of this 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 Holder as provided in the Agreement. This Certificate does not purport to
summarize the Agreement and reference is made to the Agreement for information
with respect to the interests, rights, benefits, obligations, proceeds, and
duties evidenced hereby. A copy of the Agreement may be examined during normal
business hours at the principal office of the Trustee, and at such other
places, if any, designated by the Trustee, by any Certificateholder upon
request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any
time by the Company and the Trustee with the consent of the Holders of
Certificates evidencing Fractional Undivided Interests aggregating not less
than a majority in interest in the Trust. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any 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 Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registrable in the Register upon
surrender of this Certificate for registration of transfer at the offices or
agencies maintained by the Trustee in its capacity as Registrar, or by any
successor Registrar, in the Borough of Manhattan,a the City of New York, duly
endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Registrar duly executed by the Holder
hereof or such Holder's attorney duly authorized in writing, and thereupon one
or more new Certificates of authorized denominations evidencing the same
aggregate Fractional Undivided Interest in the Trust will be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in minimum denominations of $1,000 Fractional Undivided Interest and
integral multiples thereof. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of authorized denominations evidencing
<PAGE>
7
the same aggregate Fractional Undivided Interest in the Trust, as requested by
the Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee shall require payment of a sum sufficient to cover
any tax or governmental charge payable in connection therewith.
The Trustee, the Registrar, and any agent of the Trustee or the Registrar may
treat the person in whose name this Certificate is registered as the owner
hereof for all purposes, and neither the Trustee, the Registrar, nor any such
agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the Trust
created thereby shall terminate upon the distribution to Certificateholders of
all amounts required to be distributed to them pursuant to the Agreement and
the disposition of all property held as part of the Trust Property.
<PAGE>
EXHIBIT B
FORM OF
LETTER OF REPRESENTATIONS
<PAGE>
SCHEDULE I
Description of Notes to Be Purchased:
<TABLE>
<CAPTION>
Principal Amount Maturity Dates
<S> <C> <C>
1995-K
</TABLE>
<PAGE>
EXHIBIT 4.2(a)
TRUST INDENTURE
dated as of June __, 1995
between
WILMINGTON TRUST COMPANY,
a Delaware banking corporation, and
WILLIAM J. WADE, an individual,
not in their individual capacities except as expressly
stated herein, but solely as the Owner Trustee
under the Trust Agreement (1995-*) dated as of June __, 1995
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
a national banking association,
and KATHY A. LARIMORE, an individual,
not in their individual capacities but
as the Indenture Trustee
Leveraged Lease of the Store
located at:
___________________
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
RECITALS................................................................ 1
ARTICLE 1
PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1 Definitions................................................ 2
SECTION 1.2 Compliance Certificates and Opinions....................... 2
SECTION 1.3 Form of Documents Delivered to the Indenture Trustee....... 2
SECTION 1.4 Acts of Noteholders; Record Dates.......................... 3
SECTION 1.5 Requests, Etc., to the Indenture Trustee, Tenant, the Owner
Trustee and the Owner Participant.................................. 4
SECTION 1.6 Notices to Noteholders; Waiver............................. 6
SECTION 1.7 Effect of Headings and Table of Contents................... 6
SECTION 1.8 Successors and Assigns..................................... 6
SECTION 1.9 Separability Clause........................................ 6
SECTION 1.10 Benefits of Indenture...................................... 6
SECTION 1.11 GOVERNING LAW.............................................. 7
SECTION 1.12 Legal Holidays............................................. 7
SECTION 1.13 No Recourse Against Others................................. 7
ARTICLE 2
THE NOTES
SECTION 2.1 Issuable in Series; Designations........................... 7
SECTION 2.2 Form and Denomination...................................... 7
SECTION 2.3 Execution of Notes......................................... 8
SECTION 2.4 Temporary Notes............................................ 8
SECTION 2.5 Registration, Registration of Transfer and Exchange........ 9
SECTION 2.6 Mutilated, Destroyed, Lost and Stolen Notes................ 10
SECTION 2.7 Payment of Interest and Principal.......................... 10
SECTION 2.8 Persons Deemed Holders..................................... 12
SECTION 2.9 Cancellation............................................... 12
SECTION 2.10 Authentication, Execution, Delivery and Dating of Notes.... 12
SECTION 2.11 Source of Payments; Rights and Liabilities of the Owner
Trustee; the Owner Participant Not Liable.......................... 12
SECTION 2.12 Series of Notes............................................ 14
SECTION 2.13 Legends.................................................... 15
<PAGE>
ii
ARTICLE 3
SATISFACTION AND DISCHARGE
SECTION 3.1 Satisfaction and Discharge of Indenture.................... 15
SECTION 3.2 Application of Deposited Money............................. 17
SECTION 3.3 Release of Lien on the Property............................ 17
ARTICLE 4
RECEIPT, DISTRIBUTION AND APPLICATION OF
INCOME AND PROCEEDS FROM THE INDENTURE ESTATE
SECTION 4.1 Basic Rent; Interest on Overdue Installments
of Basic Rent...................................................... 19
SECTION 4.2 Amount Received as Result of Event of
Loss or Exercise of Option to Terminate............................ 21
SECTION 4.3 Amounts Received After, or Held at
Time of, Indenture Event of Default................................ 21
SECTION 4.4 Amounts Received for Which Provision
Is Made in an Operative Document................................... 22
SECTION 4.5 Amounts Received for Which No Provision Is Made............ 22
SECTION 4.6 Payments to the Owner Trustee.............................. 23
SECTION 4.7 Excepted Payments.......................................... 23
ARTICLE 5
COVENANTS
SECTION 5.1 Payment of Principal, the Make-Whole
Premium, If Any, and Interest...................................... 23
SECTION 5.2 Money for Note Payments to Be Held in Trust................ 23
SECTION 5.3 Maintenance of Office or Agency............................ 24
SECTION 5.4 Title; Further Assurances; Recording....................... 24
SECTION 5.5 Termination of Trust Agreement and Transfer of Interest.... 25
SECTION 5.6 Notice of Default.......................................... 25
SECTION 5.7 Discharge of Liens; Etc. .................................. 25
SECTION 5.8 Notice of Remedial Action.................................. 26
SECTION 5.9 Paying Agents.............................................. 26
SECTION 5.10 Notice..................................................... 26
ARTICLE 6
<PAGE>
iii
REDEMPTION OF NOTES
SECTION 6.1 Applicability of Article................................... 27
SECTION 6.2 Notice to the Indenture Trustee of Redemption.............. 28
SECTION 6.3 Notice of Redemption....................................... 28
SECTION 6.4 Deposit of Redemption Price; Credit with Respect to
Surrender of Notes................................................. 29
SECTION 6.5 Notes Payable on Redemption Date........................... 30
ARTICLE 7
EXCHANGE OF NOTES
SECTION 7.1 Exchange of Obligations of the Owner Trustee for
Secured Obligations of Tenant...................................... 31
ARTICLE 8
INDENTURE EVENTS OF DEFAULT; REMEDIES
SECTION 8.1 Indenture Events of Default................................ 33
SECTION 8.2 Acceleration upon Notice; Rescission....................... 35
SECTION 8.3 Waiver of Past Defaults.................................... 36
SECTION 8.4 Note Purchase.............................................. 36
ARTICLE 9
THE INDENTURE TRUSTEE
SECTION 9.1 Certain Rights and Duties of the Indenture Trustee......... 37
SECTION 9.2 Not Responsible for Recitals or Issuance of Notes.......... 40
SECTION 9.3 The Indenture Trustee and Authorized Agents May Hold Notes. 40
SECTION 9.4 Funds May Be Held by the Indenture Trustee or Paying Agent;
Investments........................................................ 40
SECTION 9.5 Compensation, Reimbursement and Indemnification............ 41
SECTION 9.6 Corporate Indenture Trustee Required; Eligibility.......... 42
SECTION 9.7 Resignation and Removal; Appointment of Successor.......... 42
SECTION 9.8 Acceptance of Appointment by Successor..................... 44
SECTION 9.9 Merger, Conversion, Consolidation or Succession to
Business........................................................... 44
SECTION 9.10 Maintenance of Agencies.................................... 44
SECTION 9.11 Co-Indenture Trustee or Separate Trustee................... 47
SECTION 9.12 Withholding Taxes.......................................... 48
<PAGE>
iv
ARTICLE 10
NOTEHOLDERS' LISTS
SECTION 10.1 List of Names and Addresses of Noteholders................ 49
ARTICLE 11
SUPPLEMENTAL INDENTURES
SECTION 11.1 Supplemental Indentures Without Consent of Noteholders.... 49
SECTION 11.2 Amendments with Consent of Noteholders.................... 51
SECTION 11.3 Execution of Supplemental Indentures...................... 52
SECTION 11.4 Effect of Supplemental Indentures......................... 52
SECTION 11.5 Reference Notes to Supplemental Indentures................ 53
ARTICLE 12
MISCELLANEOUS PROVISIONS
SECTION 12.1 Execution in Counterparts................................. 53
SECTION 12.2 Tenant Not Liable......................................... 53
SECTION 12.3 Limitation of Liability................................... 53
ARTICLE 13
REFINANCING
SECTION 13.1 Refinancing .............................................. 54
<PAGE>
TRUST INDENTURE (this "Indenture"), dated as of June __, 1995, between:
---------
WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its
individual capacity, except as expressly provided herein, but solely as
owner trustee (together with its permitted successors and assigns, the
"Corporate Owner Trustee") having an address at 1100 North Market Street,
------------------------
Rodney Square North, Wilmington, Delaware 19890-0001 and WILLIAM J. WADE,
not in his individual capacity, except as expressly provided herein, but
solely as owner trustee (together with his permitted successors and
assigns, the "Individual Owner Trustee"; together with the Corporate Owner
------------------------
Trustee, the "Owner Trustee", as trustees under that certain Trust
-------------
Agreement (1995-*), dated as of June __, 1995 (the "Trust Agreement")),
---------------
having an address c/o the Corporate Owner Trustee,
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States of
America, not in its individual capacity, except as expressly provided
herein, but solely as trustee hereunder (together with its permitted
successors and assigns, the "Corporate Indenture Trustee"), having an
---------------------------
address at 777 Main Street, Hartford, Connecticut 06115, and KATHY A.
LARIMORE, an individual having an address at 777 Main Street, Hartford,
Connecticut 06115, not in her individual capacity, except as expressly
provided herein, but solely as trustee hereunder (together with her
permitted successors and assigns, the "Co-Indenture Trustee"; together with
--------------------
the Corporate Indenture Trustee, the "Indenture Trustee"), having an
-----------------
address c/o the Corporate Indenture Trustee.
RECITALS:
--------
A. The Owner Participant and the Owner Trustee have entered into the
Trust Agreement whereby, among other things, the Owner Trustee has declared a
certain trust for the use and benefit of the Owner Participant, subject,
however, to the lien and security interest of the First Supplemental Indenture
and the Owner Trustee is authorized and directed to execute and deliver this
Indenture;
B. The Owner Trustee has authorized the Notes, issuable in one or more
series as may be set forth in a Supplemental Indenture hereto in accordance with
the terms of this Indenture; and to secure the Notes and to provide for the
authentication and delivery thereof by Indenture Trustee, the Owner Trustee has
duly authorized the execution and delivery of this Indenture;
C. The Owner Trustee is the owner of the Landlord Interest and shall,
concurrently with the execution of this Indenture, lease the Property to Tenant
pursuant to the Lease; and
<PAGE>
2
D. The Lease has been executed and delivered contemporaneously herewith
and a memorandum in respect of the Lease will be recorded with the registry
where the Deed to the Property was recorded.
NOW, THEREFORE, THIS INDENTURE WITNESSETH that in consideration of the
premises and all the covenants, agreements and provisions contained herein, in
the Notes and in any Supplemental Indenture entered into from time to time in
accordance with the terms of this Indenture, in each case for the uses and
purposes and subject to the terms and provisions hereof:
IT IS HEREBY COVENANTED AND AGREED that all the Notes are to be issued and
delivered, and that all property, rights and privileges subject or to become
subject hereto are to be held subject to the further covenants, conditions, uses
and trusts herein set forth, and the Owner Trustee, intending to be legally
bound hereby, hereby covenants and agrees with the Indenture Trustee for itself
and for the equal and proportionate benefit and security of the Noteholders of
the Outstanding Notes from time to time, and the Indenture Trustee agrees to
accept the trusts and duties herein set forth, as follows:
ARTICLE 1
PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1 Definitions. Unless the context shall otherwise require,
-----------
each of the capitalized terms used in this Indenture and not otherwise defined
in this Indenture shall have the meaning assigned to it in Appendix A, and the
rules of usage set forth in Appendix A shall apply thereto. As used in this
Indenture, the term "parties" means, collectively, the Owner Trustee and the
-------
Indenture Trustee. Unless otherwise indicated, references in this Indenture to
articles, sections, paragraphs, clauses, appendices, schedules and exhibits are
to the same contained in or attached to this Indenture.
SECTION 1.2 Compliance Certificates and Opinions. Every request or
------------------------------------
application by the Owner Trustee for action by the Indenture Trustee shall,
except with respect to requests for the delivery of documentation, be
accompanied by an Officers' Certificate of the Owner Trustee stating that, to
the best knowledge of the Person making such certificate, the conditions
precedent, if any, to such action provided for in this Indenture have been
complied with.
SECTION 1.3 Form of Documents Delivered to the Indenture Trustee. 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, only
<PAGE>
3
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 Owner Trustee may be based,
insofar as it relates to legal matters, upon an Opinion of Counsel, unless such
officer actually knows that such opinion with respect to the matters upon which
such certificate or opinion is based is erroneous. Any such opinion may be
based, insofar as it relates to factual matters, upon a certificate or opinion
of, or representations by, an officer or officers of the Owner Trustee stating
that the information with respect to such factual matters is in possession of
the Owner Trustee, unless such counsel actually knows that the certificate or
opinion or representations with respect to such matters are erroneous.
Any Opinion of Counsel stated to be based on the opinion of other counsel
shall be accompanied by a copy of such other opinion.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4 Acts of Noteholders; Record Dates.
---------------------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor, signed by such Noteholders 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 Indenture Trustee and, where it is hereby expressly required,
to the Owner Trustee and Tenant. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Noteholders signing such instrument or instruments. Proof of
---
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and, subject to Section 9.1,
conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in
the manner provided in this Section 1.4.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved (1) by the certificate of any notary public
or other officer of any jurisdiction authorized to take acknowledgments of deeds
or administer oaths that the Person executing such instrument acknowledged to
him the execution thereof; (2) by a notarized affidavit of a witness to such
execution; or (3) by having the signature guaranteed by an "eligible guarantor
institution", as that term is defined in Rule 17Ad-15 under the Securities
Exchange Act. The fact and date of the execution of any such instrument or
<PAGE>
4
writing, or the authority of the Person executing the same, may also be proved
in any such manner which the Indenture Trustee deems sufficient, and where such
execution is by an officer of a corporation or association or a member of a
partnership on behalf of such corporation, association or partnership, such
certificate or affidavit shall also constitute sufficient proof of his
authority.
(c) The ownership of Notes shall be proved by the Note Register.
(d) The Owner Trustee may fix any date as the record date for the
purpose of determining the Noteholders entitled to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action, or to
vote on any action, authorized or permitted to be given or taken by Noteholders,
which date shall be no more than 60 days before the first solicitation of a
Noteholder made by any Person with respect to any such action. If not set by
the Owner Trustee prior to the first solicitation of a Noteholder made by any
Person with respect to any such action or, in the case of any such vote, prior
to such vote, the record date for any such action or vote shall be the 30th day
(or, if later, the date of the most recent list of Noteholders required to be
provided pursuant to Section 10.1) prior to the first solicitation or vote, as
the case may be. With regard to any record date, only the Noteholders on such
date (or their duly designated proxies) shall be entitled to give or take, or
vote on, the relevant action.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other action by any Noteholder shall bind every other holder of a Note
issued upon the transfer thereof or in exchange therefor or in lieu thereof,
whether or not notation of such action is made upon such Note.
(f) Without limiting the foregoing, a Noteholder entitled hereunder to
give or take any such action with regard to any particular Note may do so with
regard to all or any part of the principal amount of such Note or by one or more
duly appointed agents each of which may do so pursuant to such appointment with
regard to all or any different part of such principal amount.
SECTION 1.5 Requests, Etc., to the Indenture Trustee, Tenant, the Owner
-----------------------------------------------------------
Trustee and the Owner Participant. Any request, demand, authorization,
- ---------------------------------
direction, notice, consent, waiver or Act of Noteholders or other document
provided for or permitted by this Indenture to be made upon, given or furnished
to, or filed with the following Persons, shall be sufficient if in writing and
delivered in person or by courier or mailed by certified or registered mail,
return receipt requested, or transmitted by means of telecopy or other wire
transmission (with request for assurance of receipt in a manner typical with
respect to communications of that type), and shall be deemed given upon receipt
(or refusal of delivery by the addressee) thereof, to:
<PAGE>
5
(1) the Indenture Trustee, at
777 Main Street
Hartford, Connecticut 06115
Fax: (203) 986-7920
Attn.: Corporate Trust Administration;
(2) the Owner Trustee, at
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Fax: (302) 651-8882
Attention: Corporate Trust Administration
(3) Tenant, at
3100 West Big Beaver Road
Troy, Michigan 48084
Fax: (810) 643-2689
Attn.: Vice President - Real Estate;
with a copy to:
Erik J. Stone, Esq.
Dickinson, Wright, Moon, Van Dusen & Freeman
525 North Woodward Avenue
Bloomfield Hills, Michigan 48304
Fax: (810) 433-7274; or
(4) the Owner Participant, at
---------------------------
---------------------------
---------------------------
---------------------------
or to any of the above Persons at any other address or telecopy number
subsequently furnished in writing by it in accordance with this Section 1.5 to
each of the other Persons listed above.
<PAGE>
6
Whenever the Owner Trustee shall deliver any notice, report, certificate,
opinion or other document to the Indenture Trustee, it shall immediately send
copies thereof to each of the other parties named above, and whenever the
Indenture Trustee shall send any notice, report, certificate, opinion or other
document to the Owner Trustee, it shall simultaneously send copies thereof to
each of the other parties named above.
SECTION 1.6 Notices to Noteholders; Waiver. Where this Indenture provides
------------------------------
for notice to Noteholders of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed, first-
class postage prepaid, to each Noteholder, at such Person's address as it
appears in the Note Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice. 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 Noteholders shall be filed with the Indenture Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In any case where notice to Noteholders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Noteholder shall affect the sufficiency of such notice with respect
to other Noteholders, and any notice which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given.
SECTION 1.7 Effect of Headings and Table of Contents. The Article and
----------------------------------------
Section headings herein and the Table of Contents are for convenience of
reference only and shall not affect the construction hereof.
SECTION 1.8 Successors and Assigns. All covenants, agreements,
----------------------
representations and warranties in this Indenture by the Indenture Trustee and
the Owner Trustee shall bind and, to the extent permitted hereby, shall inure to
the benefit of and be enforceable by their respective successors and assigns,
whether so expressed or not.
SECTION 1.9 Separability Clause. In case any provision in this Indenture
-------------------
or in the 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 1.10 Benefits of Indenture. Nothing in this Indenture or in the
---------------------
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors and assigns hereunder, the Owner Participant and its
successors and permitted assigns and the Noteholders, any benefit or any legal
or equitable right, remedy or claim under this Indenture.
<PAGE>
7
SECTION 1.11 GOVERNING LAW. THIS INDENTURE SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 1.12 Legal Holidays. In any case where any Installment Payment
--------------
Date, Interest Payment Date or Redemption Date or the Stated Maturity of any
Note, or any date on which any Defaulted Installment or Defaulted Interest is
proposed to be paid, shall not be a Business Day, then (notwithstanding any
other provision of this Indenture) payment of interest or principal, and the
Make-Whole Premium, if any, need not be made on such date, and if not made on
such date shall instead be made on the next succeeding Business Day with the
same force and effect as if made on the Installment Payment Date, Interest
Payment Date or Redemption Date or at the Stated Maturity of such Note, or on
the date on which the Defaulted Interest is proposed to be paid, and, provided
that such payment is so made on such next succeeding Business Day, no interest
shall accrue for the period from and after such Installment Payment Date,
Interest Payment Date, Redemption Date or Stated Maturity, or date for the
payment of any Defaulted Installment or Defaulted Interest, as the case may be,
to and including such next succeeding Business Day.
SECTION 1.13 No Recourse Against Others. No director, officer, employee
--------------------------
or stockholder, as such, of the Remainderman Participant, the Remainderman
Trustee, the Owner Trustee or the Owner Participant, as the case may be, or any
Affiliate of the foregoing shall have any liability for any obligations of the
Owner Trustee under this Indenture or for any claim based on, or in respect of
or by reason of such obligations or their creation. Each Noteholder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Notes.
ARTICLE 2
THE NOTES
SECTION 2.1 Issuable in Series; Designations. The Notes shall be issuable
--------------------------------
hereunder in one or more series and with such designations as are specified in a
Supplemental Indenture, including as contemplated by Section 2.12. The
aggregate principal amount of the Notes which may be Outstanding at any one time
shall not exceed $________.
SECTION 2.2 Form and Denomination. The form of the Notes of any series
---------------------
shall be established by or pursuant to the authority granted in the Supplemental
Indenture creating such series. The Notes of any series shall be numbered,
lettered or otherwise distinguished in such manner or in accordance with such
plans as the officers of the Owner Trustee executing the same may determine with
the approval of the Indenture Trustee.
<PAGE>
8
Any Notes of any series may be issued with appropriate insertions,
omissions, substitutions or 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 market in
which the Notes of such series are admitted to trading, or to conform to general
usage.
The Notes of each series shall be issued only in registered form in the
denomination of $1,000 or integral multiples thereof, unless otherwise provided
in the Supplemental Indenture creating such series.
SECTION 2.3 Execution of Notes. The Notes shall be executed on behalf of
------------------
the Owner Trustee by any of its Authorized Officers and attested by any of its
Authorized Officers but the same officer shall not execute and attest the same
Note. The signature of any of such Authorized Officers on the Notes may be
manual or facsimile.
Notes bearing the manual or facsimile signatures of individuals who were at
any time the proper officers of the Owner Trustee shall bind the Owner Trustee,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of execution of this Indenture.
SECTION 2.4 Temporary Notes. Pending the preparation of definitive Notes,
---------------
the Owner Trustee may execute, and, upon the written order of the Owner Trustee
signed by a Responsible Officer, the Indenture Trustee shall authenticate and
deliver, temporary Notes which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any denomination, substantially of the
tenor of the definitive Notes in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as may be
appropriate for temporary Notes, all as may be determined by the officers
executing such Notes with the concurrence of the Indenture Trustee.
If temporary Notes of any series are issued, definitive Notes of such
series will be prepared without unreasonable delay. After the preparation of
definitive Notes, the temporary Notes held by any Noteholder shall be
exchangeable for definitive Notes upon surrender of the temporary Notes at any
office or agency to be maintained for such purpose pursuant to Section 5.3,
without charge to such Noteholder. Upon surrender or cancellation of any one or
more temporary Notes, the Owner Trustee shall execute and the Indenture Trustee
shall authenticate and deliver in exchange therefor a like aggregate principal
amount of definitive Notes of the same series with the same interest rate,
Installment Payment Dates and Stated Maturity in authorized denominations.
Until so exchanged the temporary Notes shall in all respects be entitled to the
same security and benefits under this Indenture as definitive Notes.
<PAGE>
9
SECTION 2.5 Registration, Registration of Transfer and Exchange. The
---------------------------------------------------
Indenture Trustee, on behalf of the Owner Trustee, shall keep and make available
to the Owner Trustee upon its request, at the designated office of the
Registrar, a register in which, subject to such reasonable regulations as the
Indenture Trustee may prescribe, the Indenture Trustee shall provide for the
registration of Notes (including any temporary Notes) and of transfers and
exchanges of Notes. This register is herein sometimes referred to as the "Note
----
Register."
- --------
Upon surrender for registration of transfer of any Note at the designated
office of the Registrar, or at any office or agency maintained for such purpose
pursuant to Section 5.3, the Owner Trustee shall execute and register, and the
Indenture Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Notes of the same series with the
same interest rate, Interest Payment Dates, Installment Payment Dates and Stated
Maturity as the Notes so to be transferred for a like aggregate principal
amount, in any authorized denominations and bearing numbers not
contemporaneously outstanding.
At the option of any Noteholder, Notes may be exchanged for an equal
aggregate principal amount of Notes of the same series with the same interest
rate, Interest Payment Dates, Installment Payment Dates and Stated Maturity as
the Notes so to be exchanged and in any authorized denominations, upon surrender
of the Notes to be exchanged at such designated office, or at any other office
or agency maintained for such purpose pursuant to Section 5.3. Whenever any
Notes are so surrendered for exchange, the Owner Trustee shall execute, and the
Indenture Trustee shall authenticate and deliver, the Notes which the Noteholder
making the exchange is entitled to receive.
All Notes issued upon registration of transfer or exchange of Notes shall
be the valid obligations of the Owner Trustee, evidencing the same debt, and
entitled to the same security and benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed, by the Noteholder
thereof or its attorney thereunto duly authorized in writing.
Unless otherwise provided as a term of a series of Notes, no service charge
shall be required of any Noteholder with respect to any transfer or exchange of
Notes, but the Registrar may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Notes, other than exchanges pursuant to
Section 2.4 or 11.5 not involving any transfer.
<PAGE>
10
The Owner Trustee shall not be required to issue and the Registrar shall
not be required to (i) register the transfer of or exchange any Note of any
series during a period beginning at the opening of business 15 days before the
date of the first mailing of a notice of redemption of Notes of such series and
ending at the close of business on the day of first mailing of such notice, (ii)
register the transfer of or exchange any Note selected for redemption in whole
or in part except the unredeemed portion of any Note selected for redemption in
part or (iii) register the transfer or exchange of any Note during a period
beginning at the opening of business 15 days before an Installment Payment Date
or Interest Payment Date and ending at the close of business on such Installment
Payment Date or Interest Payment Date.
SECTION 2.6 Mutilated, Destroyed, Lost and Stolen Notes. Upon receipt by
-------------------------------------------
the Owner Trustee and the Indenture Trustee of evidence satisfactory to them of
the theft, loss, destruction or mutilation of any Outstanding Note, and (in the
case of any such theft, loss or destruction) of indemnity satisfactory to them,
and upon payment, if the Owner Trustee or the Indenture Trustee shall require
it, of a reasonable charge and upon reimbursement to the Owner Trustee and the
Indenture Trustee of all reasonable expenses incident thereto, and upon
surrender and cancellation of such Note, if mutilated, the Owner Trustee may
execute, and the Indenture Trustee shall thereupon authenticate and deliver, a
new Note of like tenor and of the same series with the same interest rate,
Interest Payment Dates,Installment Payment Dates and Stated Maturity in lieu of
such stolen, lost, destroyed or mutilated Note, or if any such Note shall have
matured or be about to mature, instead of issuing a substituted Note the Owner
Trustee may pay the same without surrender thereof. Any indemnity bond shall
name as obligees the Owner Trustee, the Indenture Trustee and, if requested by
the Owner Trustee, any Paying Agent. Any duplicate Note issued pursuant to this
Section 2.6 shall constitute an original additional contractual obligation of
the Owner Trustee entitled to all of the benefits of this Indenture whether or
not the mutilated, destroyed, lost or stolen Note shall be found at any time.
SECTION 2.7 Payment of Interest and Principal. The Person in whose name
---------------------------------
any Note is registered at the close of business on any Record Date with respect
to the immediately succeeding Installment Payment Date or Interest Payment Date,
as the case may be, of such Note shall be entitled to receive the Installment
Payment Amount, if any, or interest payable on such Installment Payment Date or
Interest Payment Date notwithstanding any registration of transfer or exchange
of such Note subsequent to such Record Date and on or prior to such Installment
Payment Date or Interest Payment Date, except if and to the extent the Owner
Trustee shall default in the payment of such Installment Payment Amount or the
interest due on such Installment Payment Date or Interest Payment Date, as
applicable, in which case such defaulted installment ("Defaulted Installment")
---------------------
or defaulted interest (the "Defaulted Interest") shall be paid to the Persons in
------------------
whose names Outstanding Notes of the applicable series are registered at the
close of business on a subsequent Record Date (which shall be not less than 10
Business Days prior to the date of payment of such Defaulted
<PAGE>
11
Installment or Defaulted Interest) established by notice given by mail by the
Indenture Trustee to the Noteholders of such series not less than 15 days
preceding such subsequent Record Date after receipt of an amount of money at
least equal to the aggregate amount proposed to be paid in respect of such
Defaulted Installment or Defaulted Interest or arrangements satisfactory to the
Indenture Trustee have been made for such payment. The term "Record Date" as
-----------
used with respect to any given series of Notes and any Installment Payment Date
or Interest Payment Date, except a date for payment of any Defaulted Installment
or Defaulted Interest, shall mean the date specified as such in the Supplemental
Indenture providing for the creation of such series.
Unless otherwise provided with respect to a particular series of Notes,
interest on the Notes shall be calculated on the basis of a 360-day year
consisting of 12 30-day months.
Subject to Article 6, the principal of any particular series of Notes may
be payable either in full at Stated Maturity or in installments on such dates
and in such amounts as provided by the Supplemental Indenture providing for the
creation of such series. Except as otherwise provided in the Supplemental
Indenture with respect to a series of Notes, principal of the Notes payable at
Stated Maturity shall be payable to the Noteholders of such Notes upon
presentation and surrender of such Notes at the office or agency for the payment
of Notes maintained for such purpose pursuant to Section 5.3. Except as
otherwise provided in the applicable Supplemental Indenture with respect to a
series of Notes, interest or installments of principal other than installments
due at maturity on the Notes shall be paid on the applicable Interest Payment
Date or Installment Payment Date by wire transfer of immediately available
funds to the Paying Agent and mailed to the registered addresses of the
Noteholders as they shall appear on the Note Register as of the Record Date
preceding such Installment Payment Date. Payment as aforesaid shall be made in
such coin or currency of the United States of America as, at the respective
times of payment, shall be legal tender for the payment of public and private
debts.
Notwithstanding the foregoing provisions of this Section 2.7, the Owner
Trustee 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 Notes in respect of which
installments of principal or interest is in default may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the Owner
Trustee to the Indenture Trustee of the proposed payment pursuant to this
paragraph, such manner of payment shall be deemed practicable by the Indenture
Trustee.
Subject to the foregoing provisions of this Section 2.7, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in replacement of any other Note shall carry the rights to interest
accrued and unpaid, and to accrue interest, which were carried by such other
Note, and each such Note shall bear interest from whatever date shall
<PAGE>
12
be necessary so that neither gain nor loss in interest shall result from such
registration of transfer, exchange or replacement.
SECTION 2.8 Persons Deemed Holders. Prior to due presentment for
----------------------
registration of transfer, the Person in whose name any Note is registered on the
Note Register shall be deemed to be the absolute holder of such Note for the
purpose of receiving payment of principal (including, subject to the provisions
of Section 2.7 regarding the applicable record dates, Installment Payment
Amounts) of, the Make-Whole Premium, if any, and (subject to Section 2.7)
interest on such Note and for all other purposes whatsoever, whether or not such
Note be overdue, regardless of any notice to anyone to the contrary.
SECTION 2.9 Cancellation. All Notes surrendered for payment, redemption
------------
or registration of transfer or exchange shall, if surrendered to any Person
other than the Indenture Trustee, be delivered to the Indenture Trustee for
cancellation. The Owner Trustee may at any time deliver to the Indenture
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Owner Trustee may have acquired in any manner whatsoever,
and all Notes so delivered shall be promptly canceled by the Indenture Trustee.
No Notes shall be authenticated in lieu of or in exchange for any Notes canceled
as provided in this Section 2.9, except as expressly permitted by this
Indenture. All canceled Notes held by the Indenture Trustee shall be destroyed
and certification of their destruction delivered to the Owner Trustee unless, by
a Request of the Owner Trustee, the Owner Trustee otherwise directs.
SECTION 2.10 Authentication, Execution, Delivery and Dating of Notes.
-------------------------------------------------------
From time to time after the execution and delivery of this Indenture, series of
Notes may be issued pursuant to Section 2.12. Unless otherwise specifically
provided with respect to a series of Notes, Notes shall be dated as of the date
of their authentication. No Note shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Note a certificate of authentication in the form provided for in the
Supplemental Indenture creating the Notes of such series, executed by the
Indenture Trustee by the manual or facsimile signature of one of its authorized
officers or signatories, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
SECTION 2.11 Source of Payments; Rights and Liabilities of the Owner
-------------------------------------------------------
Trustee; the Owner Participant Not Liable. (a) All payments of principal of,
- -----------------------------------------
the Make-Whole Premium, if any, and interest on the Notes, and any other amounts
due with respect to the Notes, shall be made only from assets subject to or
intended to be subject to the lien of the Supplemental Indenture pursuant to
which such Notes were issued, the income and proceeds received by the Indenture
Trustee therefrom and all payments of principal, the Make-Whole Premium, if any,
and interest, and any other amounts due with respect to the Notes, shall be made
in accordance with the terms of Section 2.7 and Article 4. The Indenture
Trustee agrees, and
<PAGE>
13
each Noteholder, by its acceptance of a Note, shall be deemed to agree, (i) that
they will look solely to the assets subject to or intended to be subject to the
lien of the Supplemental Indenture pursuant to which such Notes were issued, the
income and proceeds received by the Indenture Trustee therefrom to the extent
available for distribution to such Noteholder as herein provided and (ii) that
neither the Owner Participant nor, except as otherwise expressly provided
herein, the Owner Trustee in its individual capacity is liable to any Noteholder
or to the Indenture Trustee for any amounts payable under any Note, such
Supplemental Indenture or this Indenture.
(b) Anything herein to the contrary notwithstanding, except as set
forth in the following proviso: (i) all and each of the representations,
warranties, covenants and agreements herein made on the part of the Owner
Trustee are made and intended not as personal representations, warranties,
covenants and agreements by the Owner Trustee in its individual capacity or for
the purpose or with the intention of binding it personally but are made and
intended for the purpose of binding only the Indenture Estate, and this
Indenture and the Notes are executed and delivered by the Owner Trustee solely
in the exercise of the powers expressly conferred upon it as trustee under the
Trust Agreement; and (ii) no personal liability or responsibility is assumed
hereunder or under the Notes by or shall at any time be enforceable against the
Owner Trustee in its individual capacity or the Owner Participant on account of
any representation, warranty, covenant or agreement hereunder of the Owner
Trustee, either express or implied, all such personal liability, if any, being
expressly waived by the Indenture Trustee and (by its acceptance of a Note)
deemed to have been waived by each Noteholder and by all Persons claiming by,
through or under such Noteholder; provided, however, that (A) the Corporate
-------- -------
Owner Trustee in its individual capacity shall be liable hereunder (1) for the
performance of its agreements made in such capacity under Section 8 of the
Participation Agreement, (2) in the case of the inaccuracy of any representation
or warranty on the part of the Corporate Owner Trustee made in its individual
capacity under Section 14(d) of the Participation Agreement and (3) for its own
willful misconduct or gross negligence; and (B) the Individual Owner Trustee, if
any, in his individual capacity shall be liable hereunder (1) for the
performance of his agreements made in such capacity under Section 8 of the
Participation Agreement, (2) in the case of the inaccuracy of any representation
or warranty on the part of the Individual Owner Trustee made in his individual
capacity under Section 14(e) of the Participation Agreement and (3) for his own
willful misconduct or gross negligence. If a successor Owner Trustee is
appointed in accordance with the terms of the Trust Agreement, such successor
Owner Trustee shall, without any further act, succeed to all the rights, duties,
immunities and obligations hereunder, and its predecessor Owner Trustee in its
individual capacity and as the Owner Trustee shall be released from all further
duties and obligations hereunder and under each other Operative Document,
without prejudice to any claims against such predecessor Owner Trustee in its
individual capacity or as the Owner Trustee for any default by such predecessor
Owner Trustee in its individual capacity or as the Owner Trustee, respectively,
in the performance of its obligations hereunder and under the other Operative
Documents to
<PAGE>
14
which it is a party prior to such appointment or for any inaccuracies in
warranties, willful misconduct or gross negligence during the term of such
predecessor Owner Trustee.
SECTION 2.12 Series of Notes. (a) Subject to the satisfaction or waiver
---------------
of the requirements of Section 4(a) of the Participation Agreement and Section 7
of the Purchase Agreement, the Owner Trustee shall have the right to issue Notes
to provide a portion of the Owner Trustee Purchase Price. The terms,
conditions, designations and maximum aggregate principal amount of each series
of such Notes (to the extent not inconsistent with this Indenture) shall be set
forth in a Supplemental Indenture which shall be executed by the Owner Trustee
and the Indenture Trustee; provided that (i) no Make-Whole Premium or penalty
--------
shall be payable as a result of (A) the redemption of such Notes occurring as a
result of an Event of Loss or (B) the payment of such Notes after the
acceleration of such Notes in connection with the occurrence of an Indenture
Event of Default and (ii) the Interest Payment Dates, the Installment Payment
Dates and the Record Dates for all Notes shall not differ. The Indenture
Trustee shall authenticate and deliver all such Notes in accordance with the
provisions of such Supplemental Indenture upon receipt by the Indenture Trustee
of the following documents:
(A) a copy of such Supplemental Indenture and the certificates
representing such Notes together with a Request of the Owner Trustee that
the Indenture Trustee execute such Supplemental Indenture and authenticate
such Notes;
(B) an Officers' Certificate of each of Tenant and the Owner
Trustee stating that each of the requirements for, and conditions precedent
to, the issuance of such Notes under this Indenture and such Supplemental
Indenture has been satisfied or waived; and
(C) such additional information, documents, certificates and
opinions as shall be reasonably requested by the Indenture Trustee.
(b) The Owner Trustee shall also have the right to issue Notes in
accordance with Section 13.1. The terms, conditions and designations of such
Notes (to the extent not inconsistent with this Indenture) shall be set forth in
a Supplemental Indenture which shall be executed by the Owner Trustee and the
Indenture Trustee. The Indenture Trustee shall authenticate and deliver all
such Notes in accordance with the provisions of such Supplemental Indenture upon
receipt by the Indenture Trustee of the following documents:
(A) a copy of such Supplemental Indenture and the certificates
representing such Notes together with a Request of the Owner Trustee that
the Indenture Trustee execute such Supplemental Indenture and authenticate
such Notes;
<PAGE>
15
(B) an Officers' Certificate of the Owner Trustee stating that
each of the requirements for, and conditions precedent to, the issuance of
such Notes under this Indenture and such Supplemental Indenture has been
satisfied or waived; and
(C) such additional information, documents, certificates and
opinions as shall be reasonably requested by the Indenture Trustee.
SECTION 2.13 Legends. Unless sold pursuant to an effective registration
-------
statement under the Securities Act, all Notes issued hereunder shall bear the
following legend:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
ARTICLE 3
SATISFACTION AND DISCHARGE
SECTION 3.1 Satisfaction and Discharge of Indenture. If at any time (a)
---------------------------------------
the principal of, the Make-Whole Premium, if any, and interest on all of the
Notes Outstanding hereunder shall have been paid, (b) all of the Notes
theretofore authenticated (other than any such Notes which shall have been
replaced or paid as provided in Section 2.6) shall have been delivered to the
Indenture Trustee for cancellation or (c) (i) all Notes not theretofore
delivered to the 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 Trustee for the giving
of notice of redemption by the Indenture Trustee in the name and at the expense
of the Owner Trustee, and (ii) there shall have been irrevocably deposited with
the Indenture Trustee as trust funds (A) cash (other than moneys repaid by the
Indenture Trustee or any Paying Agent to the Owner Trustee in accordance with
Section 5.2) sufficient to pay, or (B) direct obligations of the United States
of America, backed by its full faith and credit and maturing as to principal and
interest in such amounts and at such times as will ensure the availability of
cash sufficient to pay, on each Installment Payment Date and upon the Stated
Maturity of each Outstanding Note or upon redemption thereof pursuant to this
Indenture (the Owner Trustee hereby agreeing that it will in such case deliver
to the Indenture Trustee, at the time such cash or obligations are deposited, a
Request of the Owner Trustee irrevocably specifying any such Redemption Date or
Dates), and (without duplication) on each Interest Payment Date, the full amount
of the principal of, the Make-Whole Premium, if any, and interest on all
Outstanding Notes on the date of such deposit and if all other sums payable
hereunder and under such Notes to the Noteholders shall have
<PAGE>
16
been paid (or held by the Indenture Trustee for payment in the case of
unsurrendered Notes or interest checks not cashed), then the terms and
conditions set forth in this Indenture shall no longer apply to such Notes
(except, in the case of clause (c), as to (i) rights of registration of transfer
and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Notes,
(iii) rights of Noteholders to receive payments of principal of, the Make-Whole
Premium, if any, and interest on the Outstanding Notes on each Installment
Payment Date or Interest Payment Date, as the case may be, and upon the Stated
Maturity thereof or upon such Redemption Date or Dates, as the case may be (but
not upon acceleration (but including the right to receive installments of
principal)), (iv) rights, obligations and immunities of the Indenture Trustee
hereunder, (v) rights of Noteholders under this Article 3 and (vi) the right, in
the case of Outstanding Notes for which a Redemption Date has not been
specified, of the Owner Trustee to redeem such Notes pursuant to Article 6), and
the Indenture Trustee, upon a Request of the Owner Trustee and at the cost and
expense of the Owner Trustee and upon delivery to the Indenture Trustee of an
Officers' Certificate of the Owner Trustee and an Opinion of Counsel for the
Owner Trustee, each stating that all conditions precedent to the satisfaction
and discharge of this Indenture, with respect to such Notes, have been complied
with, shall execute proper instruments acknowledging that, except with respect
to the cash and direct obligations deposited with the Indenture Trustee and
except as otherwise provided in this Article 3, (y) the terms and conditions set
forth in this Indenture shall no longer apply to such Notes and (z) the lien of
the Supplemental Indenture which created the applicable series of Notes is
released with respect to the Indenture Estate. Concurrently with the deposit
specified in clause (c) in the first sentence of this Section 3.1, there shall
be delivered to the Indenture Trustee an Opinion of Counsel furnished by counsel
reasonably satisfactory to the Indenture Trustee and in form and substance
reasonably satisfactory to the Indenture Trustee, to the effect that (i) the
Holders of such Notes (and, so long as any Pass Through Certificates remain
outstanding, the holders of such Pass Through Certificates) will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and such defeasance and will be subject to federal income tax of the same
amounts and in the same manner and at the same times, as would have been the
case if such deposit and defeasance had not occurred and (ii) such defeasance
will not result in the trust arising from such deposit constituting an
investment company under the Investment Company Act of 1940, as amended.
If the lien of the applicable Supplemental Indenture is released with
respect to any Notes that will not become due and payable at Maturity or upon
redemption (pursuant to a notice of redemption duly given to the Noteholders)
within 60 days from the date of deposit pursuant to this Section 3.1, the
Indenture Trustee shall, as soon as practicable after the date of such deposit,
mail notice by first-class mail, postage prepaid, to such Noteholders at their
last addresses as they shall appear upon the Note Register, stating that the
deposit required by this Section 3.1 has been made with the Indenture Trustee
and that such Notes are no longer entitled to the benefits of this Indenture
except with respect to the cash and direct obligations deposited with the
Indenture Trustee and except as otherwise provided in this
<PAGE>
17
Article 3 and stating the Maturity or Redemption Date or Dates upon which moneys
are to be available for the payment of the principal of, the Make-Whole Premium,
if any, and interest on such Notes.
SECTION 3.2 Application of Deposited Money. All moneys and obligations
------------------------------
deposited with the Indenture Trustee pursuant to Section 3.1 shall be held in
trust and applied by it in accordance with the provisions of this Indenture to
the payment of all sums due or to become due for principal and the Make-Whole
Premium, if any, and interest on the particular Notes for the payment or
redemption of which such moneys and obligations have been deposited with the
Indenture Trustee; provided, however, that, in the case of Notes for which a
-------- -------
Redemption Date was not specified at the time of deposit of moneys and
obligations and which are subsequently called for redemption pursuant to Article
6, upon payment by the Owner Trustee to the Paying Agent of an amount of money
sufficient to pay the Redemption Price of all the Notes which are to be redeemed
on the Redemption Date, the moneys and obligations originally deposited with the
Indenture Trustee in respect of such Notes shall be released to the Owner
Trustee. The Indenture Trustee and any Paying Agent shall, upon the Request of
the Owner Trustee, promptly, and in any event within 5 days after delivery of
such Request, pay or return to the Owner Trustee any cash or direct obligations
of the United States of America held by them at any time that are not required
for the payment of the amounts described above for which cash or direct
obligations of the United States of America have been deposited pursuant to
clause (c) of Section 3.1.
SECTION 3.3 Release of Lien on the Property. (a) Upon any of:
-------------------------------
(i) the occurrence of an Event of Loss and either (A) payment in full
of the principal of and interest on all of the Notes Outstanding or (B) the
valid election by Tenant to substitute a property for the Property in accordance
with Article 41 of the Lease and the satisfaction by Tenant of all of the
conditions and requirements of such substitution pursuant to such Article 41 and
Section 3.3(b) hereof;
(ii) the termination of the Lease pursuant to Article 39 thereof and
either (A) the payment in full of the principal of, the Make-Whole Premium, if
any, and interest on all of the Notes Outstanding or (B) the valid election by
Tenant to substitute a property for the Property in accordance with Article 41
of the Lease and the satisfaction by Tenant of all of the conditions and
requirements of such substitution pursuant to such Article 41 and Section 3.3(b)
hereof;
(iii) any optional or mandatory redemption or purchase pursuant to
Section 6.1(b)(iii), Section 6.1(b)(v) or Section 6.1(b)(vi) and the payment in
full of the principal of, the Make-Whole Premium, if any, and interest on all of
the Notes Outstanding; or
<PAGE>
18
(iv) defeasance in accordance with Section 3.1 hereof;
the Indenture Trustee shall execute proper instruments of reconveyance with
respect to, in the case of (i)(B) or (ii)(B) above, the Landlord Interest, or,
in the case of (i)(A), (ii)(A), (iii) or (iv) above, the Indenture Estate, and
shall release the lien of the Supplemental Indenture pursuant to which such
Notes were issued, but only upon receipt by the Indenture Trustee of all of the
following:
(1) A Request from Tenant and the Owner Trustee;
(2) An Officers' Certificate from Tenant and the Owner Trustee, dated
not more than five days prior to the application for such reconveyance or
release, stating in substance that the Landlord Interest or the Indenture
Estate, as the case may be, is required or permitted to be so sold,
disposed of, reconveyed or released pursuant to the provisions hereof and,
in the case of (i) or (ii) above, the Lease, and that all conditions
precedent herein and, in the case of (i) or (ii) above, in the Lease,
provided for relating to such release have been complied with;
(3) An Opinion of Counsel delivered by Tenant to the Indenture Trustee
and the Owner Trustee stating that the certificates, opinions and other
instruments which have been or are therewith delivered to and deposited
with the Indenture Trustee by Tenant conform to the requirements hereof and
the Lease; and
(4) In the event of the valid election by Tenant to substitute a
property for the Property in accordance with Article 41 of the Lease, a
favorable Opinion of Counsel delivered by Tenant to the Indenture Trustee
and the Owner Trustee as to the validity and perfection of the mortgage and
security interest in the substitute property upon effecting the filing and
recordation of the Supplemental Indenture that subjects the substitute
property to the lien of such Supplemental Indenture.
(b) In the event of the substitution of the Property as contemplated
by Article 41 of the Lease and Section 3.3(a) hereof, the Owner Trustee and the
Indenture Trustee agree for the benefit of the Holders, subject to fulfillment
of the conditions precedent and compliance by Tenant with the conditions set
forth in Section 3.3(a) hereof and Article 41 of the Lease, at the expense of
Tenant, to execute, deliver and cause to be recorded in the appropriate land
records a duplicate original of this Indenture and any applicable Supplemental
Indentures, subjecting the substitute property to the lien of such Supplemental
Indentures.
(c) Upon any release provided for under this Section 3.3, the
Indenture Trustee shall execute and deliver to the Owner Trustee an instrument
releasing the lien in and to the Landlord Interest or Indenture Estate, as the
case may be, and shall execute for recording in public offices, at the expense
of Tenant, such instruments in writing as the
<PAGE>
19
Owner Trustee or Tenant shall reasonably request and as shall be reasonably
acceptable to the Indenture Trustee in order to make clear upon public records
that such lien has been released under the laws of the applicable jurisdiction.
The Owner Trustee hereby waives and releases any and all rights, now existing or
hereafter acquired, to any penalties, forfeit or damages from or against the
Indenture Trustee for failure to execute and deliver any document in connection
with such release or to file any certificate in compliance with any law or
statute requiring the filing of the same in connection with such release, except
for failure by the Indenture Trustee to execute and deliver any document or to
file any certificate as may be specifically requested in writing by the Owner
Trustee.
(d) In no event shall any purchaser or purchasers in good faith of
any property purported to be released hereunder be bound to ascertain the
authority of the Indenture Trustee to execute a release, or to inquire as to any
facts required by the provisions hereof for the exercise of such authority, or
to see to the application of the purchase moneys.
ARTICLE 4
RECEIPT, DISTRIBUTION AND APPLICATION OF
INCOME AND PROCEEDS FROM THE INDENTURE ESTATE
SECTION 4.1 Basic Rent; Interest on Overdue Installments of Basic Rent.
----------------------------------------------------------
(a) Except as otherwise provided in Section 4.3 or 4.7, each installment of
Basic Rent, any payment of Special Additional Rent and any payment of Additional
Rent under the Lease representing interest on overdue installments of Basic Rent
or Special Additional Rent or in respect of interest due under Section 2.7 shall
be promptly distributed by the Indenture Trustee on the date such payment is due
under the Lease (or as soon thereafter as such payment shall be received by the
Indenture Trustee) in respect of the Notes in the following order of priority:
first, so much of such aggregate amount as shall be required to pay in
-----
full the principal of, the Make-Whole Premium, if any, and interest then
due on all Outstanding Notes shall be distributed to the Persons entitled
thereto and in case such aggregate amount shall be insufficient to pay in
full the whole amount so due and unpaid, then to the payment of such
principal, Make-Whole Premium, if any, and interest, without any preference
or priority of one such Note over another, ratably according to the
aggregate amount then due for principal, Make-Whole Premium, if any, and
interest at the date of payment; and
<PAGE>
20
second, the balance, if any, of such installment or payment remaining
------
thereafter shall be distributed to the Owner Trustee for distribution
pursuant to the Trust Agreement or as the Owner Trustee may direct.
Subject to Sections 4.2, 4.3 and 4.7, if, as a result of any failure by Tenant
to pay in full any installment of Basic Rent or Additional Rent when due (or
within any applicable period of grace) or for any other reason, there shall not
have been distributed pursuant to this Section 4.1 on any date (or within any
applicable period of grace) the full amount then distributable pursuant to
clause "first" of this Section 4.1, the Indenture Trustee shall distribute other
-----
payments of the character referred to in Section 4.4 or 4.5 then held by it or
thereafter received by it, except as otherwise provided in Section 4.3, to the
Noteholders to the extent necessary to make all the distributions then due
pursuant to clause "first" of this Section 4.1(a); provided, however, that, to
----- -------- -------
the extent any distribution is made from such amounts held pursuant to Section
4.4 or 4.5 and the payment of Basic Rent or Additional Rent in respect of which
such distribution was made, is subsequently made, such payment of Basic Rent or
Additional Rent, unless an Indenture Event of Default shall have occurred and be
continuing, shall be applied to the purpose for which such amount held pursuant
to Section 4.4 or 4.5 had been held, subject, in all cases, to the provisions of
Sections 4.4 and 4.5. The portion of each such installment or payment made to
the Indenture Trustee that is to be distributed by the Indenture Trustee in
payment of the Notes shall be applied in accordance with this Section 4.1(a).
Any payment received by the Indenture Trustee pursuant to the first sentence of
Section 2.12(a)(i) of the First Supplemental Indenture shall be distributed to
the Noteholders in the order of priority set forth in clause "first" of the
-----
preceding paragraph.
(b) Subject to Sections 4.2, 4.3 and 4.7, if, at the time of receipt by the
Indenture Trustee of any installment of Basic Rent (whether or not then overdue)
or Additional Rent of the kind described in Articles 3(b) and 3(c) of the Lease,
there shall have occurred and be continuing an Indenture Event of Default, then
the Indenture Trustee shall retain such payments (to the extent the Indenture
Trustee is not then required to distribute such amount pursuant to clause
"first" of Section 4.1(a)) as part of the Indenture Estate and shall not
-----
distribute any such payments pursuant to clause "second" of Section 4.1(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 8.1(a),
the date of the occurrence of such Indenture Event of Default (after giving
effect to the grace period set forth in Section 8.1(a)) or (b) in the case of
any other Indenture Event of Default, the date on which the Owner Trustee shall
have received notice of such Indenture Event of Default (after giving effect to
any applicable grace period), in which case such retained payment shall be
distributed pursuant to clause "second" of Section 4.1(a), (ii) such time as the
------
Notes shall have been declared, or shall have become, due and payable pursuant
to Section 8.2, in which case such retained payment shall be distributed
pursuant to Section 4.3 and (iii) such time as such Indenture Event of Default
shall no longer be continuing or shall have been cured or waived, in which case
such
<PAGE>
21
retained payment shall be distributed pursuant to clause "second" of Section
------
4.1(a); provided, however, that following an Indenture Event of Default and the
-------- -------
lapse of 180 days during which period the Indenture Trustee failed to accelerate
the Notes, such Indenture Event of Default shall not thereafter be the basis of
a retention of any Basic Rent or Additional Rent payment hereunder.
SECTION 4.2 Amount Received as Result of Event of Loss or Exercise of
---------------------------------------------------------
Option to Terminate.
- -------------------
(a) Except as otherwise provided in Sections 4.3 and 4.7, if an Event of
Loss shall occur, any amounts payable by Tenant under Article 40 of the Lease
received by the Indenture Trustee in respect of such Event of Loss shall be
distributed on the date of receipt as provided in Section 4.3 in respect of the
Notes (except that payments and other amounts shall be distributed under clause
"second" thereof first and under clause "first" thereof second).
------ -----
(b) If Tenant shall exercise its option to terminate the Lease pursuant to
Article 39 thereof and Tenant shall not have exchanged the Notes pursuant to
Section 7.1 hereof, then (to the extent that there shall have been paid or
provision made for payment of the amounts due on the Notes on the Termination
Date) there shall be redeemed on the Termination Date the unpaid principal
amount of all Notes, together with the Make-Whole Premium, if any, and all
accrued but unpaid interest thereon to the Termination Date. Except as
otherwise provided in Section 4.3 or 4.7, any payments received and amounts
realized by the Indenture Trustee upon exercise of Tenant's option to terminate
the Lease pursuant to Article 39 thereof shall in each case be distributed on
the Termination Date as provided in Section 4.3 (except that payments and other
amounts shall be distributed under clause "second" thereof first and under
------
clause "first" thereof second).
-----
SECTION 4.3 Amounts Received After, or Held at Time of, Indenture Event of
--------------------------------------------------------------
Default. Except as otherwise provided in Section 4.7, all payments received and
- -------
amounts held or realized by the Indenture Trustee (including any amounts
realized by the Indenture Trustee from the exercise of any remedies pursuant to
the Lease, Article 8 hereof or any Supplemental Indenture) after an Indenture
Event of Default shall have occurred and be continuing, as well as all payments
thereafter received or amounts then held by the Indenture Trustee as part of the
Indenture Estate, shall be distributed by the Indenture Trustee in respect of
the Notes in the following order of priority:
first, so much of such payments or amounts as shall be required to pay
-----
the Indenture Trustee all amounts then due to it pursuant to Article 9
hereof shall be applied to pay the Indenture Trustee such amounts;
<PAGE>
22
second, so much of such payments or amounts remaining as shall be
------
required to pay in full the principal of, the Make-Whole Premium, if any,
and accrued and unpaid interest on the Outstanding Notes to the date of
distribution shall be applied ratably to the payment of such principal, the
Make-Whole Premium, if any, and interest; and in case such aggregate amount
shall be insufficient to pay in full the whole amount so due and unpaid,
then to the payment of such principal, the Make-Whole Premium, if any, and
interest without priority of one over another, ratably according to the
aggregate unpaid principal, the Make-Whole Premium, if any, and interest on
all Notes held by each such Noteholder bears to the aggregate unpaid
principal, the Make-Whole Premium, if any, and interest thereon to the date
of distribution; and
third, the balance, if any, of such payments or amounts remaining
-----
shall be distributed to the Owner Trustee for distribution pursuant to the
Trust Agreement or as the Owner Trustee may direct.
SECTION 4.4 Amounts Received for Which Provision Is Made in an Operative
------------------------------------------------------------
Document. Except as otherwise provided in Section 4.1, 4.2 or 4.3, any payments
- --------
received by the Indenture Trustee in respect of the Indenture Estate for which
provision as to the application thereof is made in an Operative Document shall
be applied forthwith to the purpose for which such payment was made in
accordance with the terms of such Operative Document. Notwithstanding the
foregoing, any payments received by the Indenture Trustee (i) from insurers
(other than with respect to self-insurance or policy deductibles) with respect
to damage or destruction by fire, the elements or any other casualty and as to
which Tenant is repairing, rebuilding or restoring pursuant to Article 14(g) of
the Lease or (ii) from the applicable condemning authority with respect to a
condemnation, confiscation, seizure, requisition or other taking with respect to
which Tenant is repairing, rebuilding or restoring the Improvements pursuant to
Article 15(b) of the Lease shall, to the extent provided in Article 14(g) or
15(b) of the Lease, as applicable, and until the requirements of Articles 16(b)
and (c) of the Lease have been satisfied, be held by the Indenture Trustee as a
part of the Indenture Estate as security for the obligations of the Owner
Trustee under this Indenture and the Notes, but during the period of repair,
rebuilding or restoration shall be released to Tenant, or to its order, from
time to time if and to the extent required by Articles 14(g), 15(b) or 16(b) of
the Lease, as the case may be, and, after completion in full thereof, shall be
released as contemplated in Article 16(c) of the Lease.
SECTION 4.5 Amounts Received for Which No Provision Is Made. Except as
-----------------------------------------------
otherwise provided in Section 4.1, 4.2, 4.3 or 4.7 hereof, any payments received
and any amounts realized by the Indenture Trustee in respect of the Indenture
Estate for which no provision as to the application thereof is made in an
Operative Document or elsewhere in this Article 4 shall be held by the Indenture
Trustee as part of the Indenture Estate, and, to the extent the same are
received or realized at any time after payment in full of the principal of,
<PAGE>
23
the Make-Whole Premium, if any, and interest on all the Notes and all other
amounts owing to the Noteholders hereunder and under the Notes, such payments
and amounts, together with any other amounts remaining as part of the Indenture
Estate after payment in full of the principal of, the Make-Whole Premium, if
any, and interest on all the Notes and all other amounts owing to the
Noteholders hereunder and under the Notes shall be distributed by the Indenture
Trustee in the order of priority set forth in clause "second" of Section 4.1(a)
------
hereof.
SECTION 4.6 Payments to the Owner Trustee. Unless otherwise directed by
-----------------------------
the Owner Trustee, all payments to be made to the Owner Trustee hereunder shall
be made to the Owner Trustee by wire transfer of immediately available funds as
soon as practicable but in any event prior to 2:00 p.m., New York City time, on
the date of receipt (except that such payment may be made on the next succeeding
Business Day if the Indenture Trustee has received such funds on or after
[12]:00 p.m., New York City time, on such date of receipt or if such date of
receipt is not a Business Day), to such account at such bank or trust company as
the Owner Trustee shall from time to time designate in writing to the Indenture
Trustee.
SECTION 4.7 Excepted Payments. Anything in this Article 4 or elsewhere in
-----------------
this Indenture to the contrary notwithstanding, any Excepted Payment received at
any time by the Indenture Trustee shall be distributed as promptly as
practicable to the Person entitled to receive such Excepted Payment.
ARTICLE 5
COVENANTS
SECTION 5.1 Payment of Principal, the Make-Whole Premium, If Any, and
---------------------------------------------------------
Interest. Subject to Section 2.11, the Owner Trustee will duly and punctually
- --------
pay the principal of, the Make-Whole Premium, if any, and interest and any other
amounts due under the Notes, hereunder and under any Supplemental Indenture in
accordance with, and subject to, the terms of such Notes, this Indenture and any
such Supplemental Indenture.
SECTION 5.2 Money for Note Payments to Be Held in Trust. All moneys
-------------------------------------------
deposited with the Indenture Trustee or with any Paying Agent for the purpose of
paying the principal of, the Make-Whole Premium, if any, or interest on any
Notes shall be deposited and held in trust for the benefit of the Noteholders
entitled to such principal, the Make-Whole Premium, if any, or interest, subject
to the provisions of this Section 5.2. Moneys so deposited and held in trust
shall not be a part of the Indenture Estate but shall constitute a separate
trust fund for the benefit of the Noteholders.
<PAGE>
24
The Owner Trustee may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
direct any Paying Agent to pay, to the Indenture Trustee all sums held in a
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same terms as those upon which such sums were held by such Paying Agent,
and, upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Any money deposited with the Indenture Trustee or any Paying Agent in trust
for the payment of the principal of, the Make-Whole Premium, if any, or interest
on any Note and remaining unclaimed for two years and 11 months after such
principal, the Make-Whole Premium, if any, or interest has become due and
payable shall be paid to the Owner Trustee; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look solely to the Owner Trustee
to the extent such moneys shall have been paid to the Owner Trustee for payment
thereof, and all liability of the Indenture Trustee or such Paying Agent with
respect to such trust money shall thereupon cease; provided, however, that the
-------- -------
Indenture Trustee or such Paying Agent, before being required to make any such
payment, may, at the expense of the Owner Trustee, cause to be mailed to each
such Noteholder notice that such money remains unclaimed and that, after a date
specified therein, which date shall not be less than 30 days from the date of
such mailing, any unclaimed balance of such money then remaining will be paid to
the Owner Trustee.
SECTION 5.3 Maintenance of Office or Agency. The Indenture Trustee, on
-------------------------------
behalf of the Owner Trustee, will maintain an office or agency where Notes may
be presented or surrendered for payment, where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of Notes and this Indenture may be served. The
Indenture Trustee will give prompt written notice to the Owner Trustee of the
location, and of any change in the location, of each such office or agency. If
at any time the Indenture Trustee shall fail to maintain any such office or
agency or the Indenture Trustee shall fail to furnish the Owner Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Indenture Trustee Office.
SECTION 5.4 Title; Further Assurances; Recording. THE OWNER TRUSTEE, IN
------------------------------------
ITS INDIVIDUAL CAPACITY AND AS THE OWNER TRUSTEE, MAKES (a) NO REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE, COMPLIANCE WITH
SPECIFICATIONS, CONDITION, DESIGN, OPERATION, MERCHANTABILITY, ABSENCE OF LATENT
DEFECTS, FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT OR FITNESS FOR USE OF THE
PROPERTIES (OR ANY PART THEREOF) OR ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE LANDLORD INTERESTS (OR ANY
PART THEREOF), except that the Owner Trustee in its individual capacity
represents and warrants that on the Closing Date, the Indenture Estate
<PAGE>
25
shall be free of any Owner Trustee Liens and (b) 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, to
the extent that any such statement in any Operative Document was or is expressly
made by the Owner Trustee in its individual capacity, and except that the Owner
Trustee hereby represents and warrants in its individual capacity that it has
the requisite corporate power and authority to execute and deliver the Operative
Documents and Notes to which it is a party and that such Operative Documents,
and Notes, upon execution and delivery, have been or will be, duly executed and
delivered by one or more of the Authorized Officers of the Owner Trustee and
that its performance of all transactions contemplated herein or therein have
been duly authorized by all necessary corporate action.
SECTION 5.5 Termination of Trust Agreement and Transfer of Interest.
-------------------------------------------------------
Unless the Notes and all other sums payable hereunder have been exchanged in
accordance with Section 7.1, the Owner Trustee shall not act to terminate or
permit the termination of the Trust Agreement or the trust thereunder before the
date that the Notes and all other sums payable hereunder to the Noteholders have
been paid in full in accordance with Section 3.1. Any such termination of the
Trust Agreement or the trust thereunder made prior to the date the Notes and all
other sums due hereunder to the Noteholders have been paid in full in accordance
with Section 3.1 shall be null and void as of the date of such termination.
Except as contemplated by the Operative Documents, without the prior written
consent of the Indenture Trustee, the Owner Trustee shall not transfer any
interest in the Landlord Interests, either legal or equitable, unless the
transferee is Tenant and all Outstanding Notes have been exchanged in accordance
with Section 7.1 or all Outstanding Notes have been redeemed in accordance with
this Indenture and all other sums payable hereunder and thereunder have been
paid.
SECTION 5.6 Notice of Default. The Owner Trustee will deliver to the
-----------------
Indenture Trustee and Tenant, promptly after an Authorized Officer has obtained
actual knowledge thereof, written notice of any Indenture Event of Default and
any event which with the giving of notice or lapse of time, or both, would
become an Indenture Event of Default.
SECTION 5.7 Discharge of Liens; Etc.
-----------------------
(a) The Owner Trustee, in its individual capacity, agrees that it
shall not, directly or indirectly, create, incur or suffer to exist any Owner
Trustee Liens, and will, at its own cost and expense, promptly take such action
as may be necessary duly to discharge any such Owner Trustee Liens. The Owner
Trustee agrees that it shall not, directly or indirectly, incur or suffer to
exist any Liens attributable to it in its fiduciary capacity and will promptly
take such action as may be necessary to discharge any such Liens.
<PAGE>
26
(b) Except as expressly permitted by the terms of the Operative
Documents, the Owner Trustee will not contract for, create, incur, assume or
suffer to exist any debt, and will not guarantee (directly or indirectly or by
an instrument having the effect of assuring another's payment or performance of
any obligation or capability of so doing, or otherwise), endorse (other than
endorsements for collection in the ordinary course of business) or otherwise be
or become contingently liable, directly or indirectly, in respect of the debt of
any other Person.
(c) The Owner Trustee will not enter into any business or activity
other than the business of owning the Landlord Interest and the other properties
owned by the Owner Trustee under the Trust Agreement and the leasing of such
properties to Tenant and the carrying out of the transactions contemplated by
the Operative Documents and other activities necessary or appropriate to the
maintenance of its existence and the performance of its obligations under the
Operative Documents.
SECTION 5.8 Notice of Remedial Action. The Owner Trustee shall furnish
-------------------------
the Indenture Trustee with prior written notice of any remedy to be undertaken
by it pursuant to Article 21 of the Lease.
SECTION 5.9 Paying Agents. In the event that the Indenture Trustee shall
-------------
elect to appoint a paying agent (the "Paying Agent"), it will cause the Paying
------------
Agent to execute and deliver an instrument in which the Paying Agent shall agree
with the Indenture Trustee, subject to the provisions of this Section:
(a) that it will hold all sums received by it as such agent for the
payment of the principal of, and interest and Make-Whole Premium, if any,
with respect to each series of Notes (whether such sums have been paid to
it by the Indenture Trustee or the Owner Trustee) in trust for the benefit
of the Holder of such series of Notes; and
(b) that it will give the Indenture Trustee notice of any failure by
the Owner Trustee to make any payment of the principal of or Make-Whole
Premium, if any, or interest on any series of Notes when the same shall be
due and payable.
Anything in this Section 5.9 to the contrary notwithstanding, the
agreements to hold sums in trust as provided in this Section 5.9 are subject to
the provisions of Section 5.2. The initial Paying Agent shall be the Indenture
Trustee.
SECTION 5.10 Notice. In the event an Authorized Officer of the
------
Indenture Trustee shall obtain actual knowledge of an Indenture Default or
Indenture Event of Default, the Indenture Trustee shall give prompt notice
thereof (but in any event within 10 days of the obtaining of such knowledge) to
each Noteholder affected thereby.
<PAGE>
27
ARTICLE 6
REDEMPTION OF NOTES
SECTION 6.1 Applicability of Article.
------------------------
(a) Any redemption of Notes, as required by any provision of this
Indenture, shall be made in accordance with, and only to the extent permitted
by, such provision and this Article 6.
(b) (i) Upon the occurrence of a Casualty or Condemnation, unless Tenant
has also elected to substitute a property for the Property in accordance
with Article 41 of the Lease, each Outstanding Note shall be redeemed in
whole at a Redemption Price equal to the aggregate unpaid outstanding
principal amount thereof, without the Make-Whole Premium, together with
accrued and unpaid interest thereon, to but excluding the applicable
Redemption Date. The Redemption Date for Notes to be redeemed pursuant to
this Section 6.1(b)(i) shall be the Purchase Offer Termination Date
determined pursuant to Article 40 of the Lease.
(ii) Upon termination of the Lease pursuant to Article 39 thereof and
if Tenant has not elected to cause the Notes to be exchanged pursuant to
Section 20 of the Participation Agreement and Section 7.1 hereof, or has
not satisfied the conditions of such exchange pursuant to Section 7.1,
then, unless, in the circumstances described in Article 39(e) of the Lease,
Tenant has also elected to substitute a property for the Property in
accordance with Article 41 of the Lease, each Outstanding Note shall be
redeemed in whole at a Redemption Price equal to the aggregate unpaid
outstanding principal amount thereof, plus the Make-Whole Premium, if any,
together with accrued but unpaid interest thereon, to but excluding the
applicable Redemption Date. The Redemption Date for Notes to be redeemed
pursuant to this clause (ii) shall be the Termination Date.
(iii) Upon the sale of (A) the Landlord Interest or the Owner
Participant Interest to Tenant pursuant to Section 3 of the Participation
Agreement and if Tenant has not elected to cause the Notes to be exchanged
pursuant to Section 20 of the Participation Agreement and Section 7.1
hereof or has not satisfied the conditions to such exchange, or (B) the
Landlord Interest to a Third Party Buyer pursuant to Section 3 of the
Participation Agreement, then, in any such case, each Outstanding Note
shall be redeemed in whole at a Redemption Price equal to the aggregate
unpaid outstanding principal amount thereof, plus the Make-Whole Premium,
if any, together with accrued but unpaid interest thereon, to but excluding
the applicable Redemption Date, which shall be the date upon which the sale
of the Landlord Interest or the
<PAGE>
28
Owner Participant Interest, as the case may be, is completed pursuant to,
and in accordance with, Section 3 of the Participation Agreement.
(iv) In the event of a refinancing in accordance with Section 13.1,
each Outstanding Note shall be redeemed in whole at a Redemption Price
equal to the aggregate unpaid principal amount thereof, plus the Make-Whole
Premium, if any, together with accrued but unpaid interest thereon, to but
excluding the Redemption Date.
(v) In the event of an election by the Owner Trustee in accordance
with Section 8.4(c), each Outstanding Note shall be redeemed in whole at a
Redemption Price determined in accordance with Section 8.4(c).
(vi) The Notes of any series are also subject to redemption to the
extent and under the circumstances, if any, set forth in the Supplemental
Indenture pursuant to which such Notes were issued.
(c) Upon the giving of the notice of redemption contemplated by
Section 6.3, and subject to Section 6.4, the principal amount of the Notes to be
redeemed, the Make-Whole Premium, if any, and interest thereon to the Redemption
Date specified in such notice shall become due and payable on such Redemption
Date as provided in Section 6.5.
SECTION 6.2 Notice to the Indenture Trustee of Redemption. In case of any
---------------------------------------------
election by the Owner Trustee to redeem any Notes, the Owner Trustee shall, at
least 30 days prior to the scheduled Redemption Date (unless a shorter notice
shall be satisfactory to the Indenture Trustee), notify the Indenture Trustee in
writing of such Redemption Date and of the series, the principal amount and
Stated Maturity of Notes to be redeemed.
SECTION 6.3 Notice of Redemption. Notice of redemption of Notes shall be
--------------------
given by the Indenture Trustee by first-class mail, postage prepaid, mailed not
less than 25 days prior to the Redemption Date, to each Holder of a Note to be
redeemed, at its address appearing on the Note Register and to the parties named
in Section 1.5; provided, however, that in the event of a redemption pursuant to
-------- -------
Section 6.1(b)(ii), the Indenture Trustee shall not give such notice until such
time as Tenant shall no longer have any right to revoke its notice to terminate
the Lease under Article 39 thereof.
Unless otherwise provided as to a particular series of Notes, all notices
of redemption shall state:
(a) the Redemption Date;
<PAGE>
29
(b) the Redemption Price;
(c) any condition to such redemption including, without limitation, that,
if applicable, such redemption is subject to the provisions set forth in
Section 6.4(c);
(d) that on the Redemption Date, and upon the satisfaction of each such
condition, the Notes or portions thereof to be redeemed shall cease to bear
interest; and
(e) the place where such Notes are to be surrendered for payment of the
Redemption Price.
Notice of redemption of Notes to be redeemed shall be given by the
Indenture Trustee in the name of the Owner Trustee.
SECTION 6.4 Deposit of Redemption Price; Credit with Respect to Surrender
-------------------------------------------------------------
of Notes.
- --------
(a) Except as provided in paragraphs (b) and (c) of this Section 6.4, on or
prior to any Redemption Date, the Owner Trustee shall deposit, or cause to be
deposited, with the Indenture Trustee an amount of money sufficient to pay the
Redemption Price of all the Notes which are to be redeemed on that date. Upon
receipt of such funds, the Indenture Trustee shall promptly deliver written
confirmation of such receipt to the Owner Trustee and Tenant.
(b) In the event of any redemption resulting from (i) the rejection of a
Tenant's Purchase Offer pursuant to Article 40 of the Lease or (ii) a Landlord's
Acceptance pursuant to Article 39 of the Lease, the Owner Trustee, no later than
thirty-five (35) days prior to the Purchase Offer Termination Date or
Termination Date, as the case may be, shall deposit with the Indenture Trustee
an amount equal to the principal balance of the Outstanding Notes which are to
be redeemed on that date. Upon receipt of such funds, the Indenture Trustee
shall promptly deliver written confirmation of such receipt to the Owner Trustee
and Tenant. If, following such deposit, Tenant shall default in its obligations
under the Lease to pay to the Indenture Trustee on the applicable Redemption
Date an amount equal to the Make-Whole Premium, if any, and accrued interest on
the Notes to be redeemed plus any other amounts due to the Indenture Trustee
pursuant to this Indenture and the other Operative Documents in connection with
such redemption, then the Indenture Trustee shall return such deposit to the
Owner Trustee; provided, however, that (A) such return of the deposit shall in
-------- -------
no way waive, impair or otherwise adversely affect the rights of the Owner
Trustee and the Indenture Trustee under the Lease in connection with such
default by Tenant and (B) the Indenture Trustee shall not release the lien of
the Supplemental Indenture pursuant to which such Notes were issued with respect
to any portion of the Indenture Estate unless all amounts
<PAGE>
30
due to the Indenture Trustee pursuant to this Indenture and the other Operative
Documents in connection with such redemption have been received.
(c) Any redemption notice with respect to an optional redemption of the
Notes pursuant to Section 6.1(b)(v) or 6.1(b)(vi) and to which moneys sufficient
to pay the principal of, the Make-Whole Premium, if any, and interest on such
Notes on the Redemption Date of such Notes shall not have been deposited with
the Indenture Trustee, shall state, and it shall be the case that, unless, upon
the giving of such notice, such Notes shall be deemed to have been paid pursuant
to Section 3.1, such redemption shall be conditional upon the receipt by the
Indenture Trustee (on or prior to the Redemption Date) of moneys in immediately
available funds sufficient to pay the principal of, the Make-Whole Premium, if
any, and interest on such Notes to be redeemed, and that if such moneys shall
not have been so received, such notice of redemption shall be of no force and
effect, and the Owner Trustee shall not be required to redeem such Notes. In
the event that such notice of redemption contains such a condition and such
moneys are not so received, the redemption shall not be made and the Indenture
Trustee shall, on the next Business Day after the date fixed for such
redemption, give notice, in the manner in which the notice of redemption was
given, that such moneys were not so received.
SECTION 6.5 Notes Payable on Redemption Date. Notice of redemption having
--------------------------------
been given as aforesaid, the Notes so to be redeemed shall, on the Redemption
Date, except as provided in Section 6.4(c), become due and payable at the
designated corporate trust office of the Paying Agent at the Redemption Price
therein specified, and from and after such date (unless there shall be a default
in the payment of the Redemption Price), such Notes shall cease to bear
interest. Upon surrender of such Notes for redemption in accordance with such
notice, such Notes shall be paid at the Redemption Price, exclusive, however, of
installments of interest maturing on or prior to the Redemption Date payment of
which shall have been made or duly provided for to the Noteholders registered as
such on the relevant Record Dates, or otherwise, according to the terms and the
provisions of Section 2.7.
Except as provided in Section 6.4(c), if any Note called for redemption
shall not be so paid upon surrender thereof for redemption because the Indenture
Trustee shall not have received pursuant to Section 6.4 an amount of money
sufficient to pay the Redemption Price for such Note, the principal and the
Make-Whole Premium, if any, and (to the extent permitted by Applicable Law) any
accrued interest thereon shall, until paid, continue to bear interest from the
Redemption Date at the rate borne by the Note in respect of overdue payments.
<PAGE>
31
ARTICLE 7
EXCHANGE OF NOTES
SECTION 7.1 Exchange of Obligations of the Owner Trustee for Secured
--------------------------------------------------------
Obligations of Tenant. Upon (i) the termination of the Lease pursuant to
- ---------------------
Article 39 thereof and Tenant and Landlord have failed to sell the Landlord
Interest and Landlord shall have accepted Tenant's Purchase Offer or (ii) the
sale of the Landlord Interest or the Owner Participant Interest to Tenant
pursuant to Section 3 of the Participation Agreement, Tenant may, pursuant to
Section 20 of the Participation Agreement and subject to the satisfaction of the
conditions set forth in (a) through (h) below, satisfy all of the rights and
obligations of the Owner Trustee under this Indenture in respect of the Notes by
exchanging the Notes for secured, full recourse securities of Tenant to be
issued under a restated indenture, as described below. Such new or restated
securities will be issued on the Termination Date (such date is referred to
in this Article 7 as the "Exchange Date"). The following shall be conditions to
-------------
the issuance of any new securities in exchange for the Notes:
(a) Tenant shall have paid all amounts of Rent then due and owing and
any other amounts due to the Owner Participant and the Owner Trustee under the
Lease and the other Operative Documents through the Exchange Date;
(b) The securities issued in exchange for the Notes shall be issued in
the same aggregate principal amount as the Notes then Outstanding after giving
effect to all payments of Rent being made in connection with such exchange, bear
the same interest rate, be payable in installments in the same manner, if
applicable, have the same Stated Maturity, Interest Payment Dates and
Installment Payment Dates and otherwise have substantially the same terms as the
Notes;
(c) The new or restated securities shall be issued under an indenture
reasonably satisfactory to the Indenture Trustee and Tenant amending and
restating this Indenture pursuant to which:
(i) Tenant shall assume all of the liabilities and obligations of the
Owner Trustee under this Indenture with respect to the Notes on a full
recourse basis;
(ii) Tenant shall reaffirm the liens and security interests granted
pursuant to the First Supplemental Indenture with respect to the Indenture
Estate;
(iii) Tenant shall warrant and covenant to defend its title to the
Indenture Estate and the validity, perfection and priority of the lien of
such restated indenture;
<PAGE>
32
(iv) Tenant shall warrant and covenant to use, possess, occupy,
maintain and repair the Property in accordance with the provisions of the
Lease; to not directly or indirectly create, incur, assume, permit or
suffer to exist any Liens with respect to the Indenture Estate other than
Permitted Liens; and to maintain insurance coverage as required by the
provisions of Article 14 of the Lease;
(v) additional Indenture Events of Default shall be added to Section
8.1 for failure by Tenant to comply in any material respect with any
covenant contained in such Indenture;
(vi) Section 8.4 hereof and any provision of the applicable
Supplemental Indenture limiting the Indenture Trustee's exercise of
remedies to a period when the Indenture Trustee is already or concurrently
exercising remedies under the Lease shall be deemed deleted and of no
further force or effect; and
(vii) such restated indenture shall also contain or delete such other
terms, covenants and conditions as may be reasonably requested by the
Indenture Trustee; provided, that the obligations of Tenant in respect of
-------- ----
such new or remaining terms, covenants and conditions are substantially
equivalent to the obligations of Tenant under the Operative Documents.
(d) Tenant shall have delivered to the Indenture Trustee an Officers'
Certificate, dated the Exchange Date, stating that Tenant has paid to the Owner
Trustee and the Owner Participant all amounts required to be paid to the Owner
Trustee and the Owner Participant pursuant to the Operative Documents in
connection with such exchange;
(e) The Indenture Trustee shall have received an Opinion of Counsel
for Tenant that the exchange complies in all material respects with applicable
securities laws;
(f) The Indenture Trustee shall have received, on or prior to the
Exchange Date, evidence of all corporate action referred to in the Opinion or
Opinions of Counsel referred to below;
(g) The Indenture Trustee and the Owner Trustee shall have received an
Opinion or Opinions of Counsel for Tenant, dated the Exchange Date, which,
subject to customary qualifications, shall be to the effect that, after giving
effect to the restated indenture:
(i) such indenture constitutes the legal, valid and binding
obligation of Tenant, enforceable against Tenant 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
<PAGE>
33
principles of equity, and except as limited by applicable laws which may
affect the remedies provided for in this Indenture;
(ii) if any Pass Through Trust holds any Notes, the exchange will
not cause, nor can it be reasonably foreseen to cause, any such Pass
Through Trust to become an "investment company," as defined in the
Investment Company Act of 1940, as amended;
(iii) (A) no Noteholder will be required to recognize income,
gain or loss for tax purposes in connection with such exchange; and (B)
such exchange will not cause any adverse tax consequences to the holders of
the Notes (or, so long as any Pass Through Certificates remain outstanding,
to the holders of such Pass Through Certificates); and
(iv) to such other effect as shall be customary in opinions
delivered to such persons in connection with the issuance of similar
secured debt securities; and
(h) No Lien other than Permitted Liens shall exist on the Indenture
Estate and, so long as any Pass Through Certificates remain outstanding, the
Indenture Trustee shall have received a supplemental title insurance policy or
endorsement to the then existing policy, in either case, evidencing that the
condition of the first clause of this Section 7.1(h) has been met.
If all of the foregoing conditions are satisfied, then, automatically and
without the requirement of further action by any Person, effective as of the
Exchange Date, the Owner Trustee shall be released from all of its obligations
under this Indenture in respect of the exchanged Notes or otherwise (other than
any obligations or liabilities of the Owner Trustee in its individual capacity
incurred on or prior to the Exchange Date or arising out of or based upon events
occurring on or prior to the Exchange Date, which obligations and liabilities
shall remain the sole responsibility of the Owner Trustee). Any Notes that are
not actually surrendered and cancelled shall be deemed to have been so
surrendered and cancelled and exchanged for the new securities issued in
accordance with this Section 7.1.
ARTICLE 8
INDENTURE EVENTS OF DEFAULT; REMEDIES
SECTION 8.1 Indenture Events of Default. The term "Indenture Event of
--------------------------- ------------------
Default" shall mean any one or more of the following events:
- -------
<PAGE>
34
(a) the failure of the Owner Trustee to pay when due any payment of
principal of, the Make-Whole Premium, if any, or interest on any Note, and such
failure shall have continued unremedied for 10 days;
(b) an Event of Default (other than any such Event of Default arising by
reason of nonpayment of, or failure to perform with respect to, any Excepted
Payment when due);
(c) any failure by the Owner Trustee, in its individual capacity or as the
Owner Trustee, to comply with any covenant contained in Section 8 of the
Participation Agreement (other than failures that solely affect or pertain to
properties of the Owner Trustee not comprising a portion of the Indenture
Estate), or Section 5.5 or 5.7 hereof, which failure is not remedied within a
period of 30 days after notice has been given to the Owner Trustee by the
Indenture Trustee or by Holders of at least 25% of the principal amount of the
Notes Outstanding; provided, however, that the Owner Trustee shall be given an
-------- -------
additional 150 days to correct such failure if the Owner Trustee is diligently
proceeding to correct such failure at the end of the original 30 day period and
reasonably expects to correct such failure with such additional 150 day period;
(d) any representation or warranty made by the Owner Trustee, in its
individual capacity or as the Owner Trustee, in Section 14(d) of the
Participation Agreement or by the Owner Participant in Section 14(b) of the
Participation Agreement shall prove at any time to have been inaccurate in any
material respect as of the date made (other than inaccuracies solely affecting
or pertaining to properties of the Owner Trustee not comprising a portion of the
Indenture Estate) and any material adverse impact of such inaccuracy shall
continue unremedied for a period of 30 days after there has been given to the
Owner Trustee or the Owner Participant, as the case may be, by registered or
certified mail, a written notice specifying such incorrectness and requiring it
to be remedied and stating that such notice is a "Notice of Default" by the
Indenture Trustee or by the Holders of 25% of the principal amount of the Notes
Outstanding; provided, however, that the Owner Trustee or the Owner Participant,
-------- -------
as the case may be, shall be given an additional 30 days to correct such
inaccuracy if such inaccuracy is curable but is not reasonably susceptible of
cure within 30 days and the Owner Trustee or the Owner Participant, as the case
may be, diligently proceeds to correct such inaccuracy;
(e) the Owner Trustee shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself 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 of it or any substantial part of its
property, or it shall consent to any such relief or to the appointment of or
taking of possession by any such official in any involuntary case or other
proceeding commenced against it, or it shall make a general assignment for the
benefit of creditors; or
<PAGE>
35
(f) a decree or order for relief shall be entered by a court having
jurisdiction over the Owner Trustee in any involuntary case under any
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a trustee, receiver, liquidator, custodian or other similar official
of the Owner Trustee, its interest in the Indenture Estate or any substantial
part of the Owner Trustee's property, or ordering the winding-up or liquidation
of the Owner Trustee or its affairs, and such decree or order shall remain
undismissed or unstayed for a period of 60 consecutive days.
SECTION 8.2 Acceleration upon Notice; Rescission.
------------------------------------
(a) Subject to Section 8.2(b), during the continuance of any Indenture
Event of Default and subject to the provisions of Section 8.4 hereof and Section
2.12 of the First Supplemental Indenture, the Indenture Trustee, in its
discretion may (or when so directed by the Holders of 25% of the principal
amount of the Notes Outstanding shall) or the Holders of 25% of the principal
amount of the Notes Outstanding may, in any such case, by notice in writing to
Tenant and the Owner Trustee (and to the Indenture Trustee if given by
Noteholders), declare the principal of all the Outstanding Notes and the
interest accrued thereon to be due and payable immediately, and thereupon the
same shall become immediately due and payable without the Make-Whole Premium.
Upon any exercise of remedies by the Owner Trustee under the circumstances and
as permitted by subparagraph (cc) of the Granting Clause that results in the
termination of the Lease, acceleration of Rent due thereunder or a demand under
Article 21(d) of the Lease, then, in such case, the Indenture Trustee shall be
deemed to have declared the principal of all Outstanding Notes to be due and
payable without the Make-Whole Premium upon the receipt by the Indenture Trustee
of any payments pursuant to such provisions.
(b) If (i) an Indenture Event of Default referred to in Section 8.1(e) or
(f) shall have occurred, (ii) an Event of Default referred to in Article 20(v)
of the Lease shall have occurred and be continuing at the time the 270-day
period referred to in Section 2.1 of the First Supplemental Indenture expires or
(iii) the Landlord Interests are sold or otherwise transferred to any Person
other than as expressly provided in Section 2(d) of the Participation Agreement,
then, and in every such case, the unpaid principal of the Outstanding Notes,
together with interest accrued but unpaid thereon without the Make-Whole
Premium, and all other amounts due hereunder shall immediately and without
further act become due and payable, without presentment, demand, protest or
notice, all of which are hereby waived.
(c) At any time after such acceleration and before any sale of the
Indenture Estate as relating to any series of Notes, or any part thereof, shall
have been made pursuant to any sale as hereinafter in this Article 8 provided, a
Majority in Interest of Noteholders by Directive delivered to Tenant, the Owner
Trustee, the Owner Participant and the Indenture Trustee, may rescind and annul
such declaration and its consequences if (i) there shall have been paid to or
deposited with the Indenture Trustee a sum sufficient to pay (A) all overdue
<PAGE>
36
installments of interest on all Notes, (B) the principal of and the Make-Whole
Premium, if any, on any Notes which have become due otherwise than by such
acceleration and interest thereon at the respective rates provided in the Notes
for late payments of principal or the Make-Whole Premium and (C) to the extent
that payment of such interest is lawful, interest upon overdue installments of
interest at the respective rates provided in the Notes for late payments of
interest; and (ii) all Indenture Events of Default, other than the non-payment
of the principal of Notes which have become due solely by such acceleration,
have been cured or waived as provided in Section 8.3. No such rescission shall
affect any subsequent Indenture Event of Default or impair any right consequent
thereon.
SECTION 8.3 Waiver of Past Defaults. Upon receipt of a Directive from a
-----------------------
Majority in Interest of Noteholders, the Indenture Trustee shall waive any past
Indenture Default and its consequences and upon any such waiver such Indenture
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 Indenture
Default or impair any right consequent thereon; provided, however, that, in the
-------- -------
absence of written instructions from the Noteholders of all Notes then
Outstanding, the Indenture Trustee shall not waive any Indenture Default in the
payment of the principal of, the Make-Whole Premium, if any, or interest on, or
other amounts due under, any Note then Outstanding, or in respect of a covenant
or provision hereof that, under Article 11, cannot be modified or amended
without the consent of each Noteholder.
SECTION 8.4 Note Purchase.
-------------
(a) INTENTIONALLY DELETED.
(b) INTENTIONALLY DELETED.
(c) In the event that at any time one or more Indenture Events of Default
caused by an Event of Default shall have occurred and (i) any such Indenture
Event of Default shall have continued for a period of 180 days or more during
which time the Notes shall not have been accelerated pursuant to Section 8.2,
(ii) the Indenture Trustee shall have given 15 days written notice to the Owner
Trustee of the Indenture Trustee's intent to accelerate the Notes pursuant to
Section 8.2(a) (which notice the Indenture Trustee hereby agrees to give prior
to any such acceleration) or (iii) the Notes shall have been accelerated
pursuant to Section 8.2(b), the Owner Trustee may, at its option, give at least
25 days' notice to the Indenture Trustee that the Owner Trustee will purchase or
redeem, on the date specified in such notice, all of the Outstanding Notes in
accordance with this Section 8.4(c), and concurrently with the delivery of such
notice, deposit with the Indenture Trustee, whether or not such Indenture Event
of Default is then continuing, the purchase or redemption price of such
Outstanding Notes, which purchase or redemption price shall be equal to the sum
of (A) the aggregate unpaid principal amount of any unpaid Notes then
Outstanding, plus
<PAGE>
37
(B) accrued but unpaid interest thereon to the date of such purchase or
redemption (as well as any interest on overdue principal) plus (C) any other
amounts then due and payable to each Noteholder hereunder, plus (D) in the event
that the Owner Trustee delivers such notice to the Indenture Trustee prior to
the earliest of (1) the giving by the Indenture Trustee of the notice described
in clause (ii) of this Section 8.4(c), (2) acceleration of the Notes pursuant to
Section 8.2(b) or (3) 270 days from the Event of Default that caused such
Indenture Event of Default, the Make-Whole Premium with respect to such Notes.
Upon payment to the Indenture Trustee of such amounts, the Indenture Trustee
will terminate any foreclosure proceedings then in progress and each Noteholder
will be deemed to sell, assign, transfer and convey to the Owner Trustee
(without recourse or warranty of any kind other than of title to the Notes so
conveyed) all of the right, title and interest of such Noteholder in and to the
Indenture Estate, this Indenture, and all Notes held by such Noteholder. On and
after the date of payment of such amount to the Indenture Trustee, the Indenture
Trustee shall no longer treat the former Noteholders as the "Noteholders,"
except for purposes of the Noteholder's right to receive their respective
portions of the amounts paid to the Indenture Trustee as aforesaid, and on such
date the Note Registrar shall register the transfer of ownership of the Notes
into the name of the Owner Trustee or its designee.
(d) The provisions of this Section 8.4 shall not apply during any
period when Tenant is either an Owner Participant or otherwise controls the
Owner Trustee.
ARTICLE 9
THE INDENTURE TRUSTEE
SECTION 9.1 Certain Rights and Duties of the Indenture Trustee.
--------------------------------------------------
(a) The Indenture Trustee may rely and shall be protected in acting or
refraining from acting in reliance upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture 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 or direction of the Owner Trustee mentioned herein
shall be sufficiently evidenced by a Request of the Owner Trustee or an
Officers' Certificate of the Owner Trustee.
(c) Whenever in the administration of this Indenture, the Indenture
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder the Indenture Trustee (unless
other evidence be herein
<PAGE>
38
specifically prescribed) may, in the absence of bad faith on its part, rely upon
an Officers' Certificate of the Owner Trustee.
(d) The Indenture Trustee may consult with counsel and the advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(e) The Indenture Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Noteholders pursuant to this Indenture, unless such
Noteholders shall have offered to the Indenture Trustee reasonable security or
indemnity (including, without limitation, the advancement of monies for out-of-
pocket costs) against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
(f) The Indenture 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, direction, consent, order, bond,
debenture or other paper or document; but the Indenture Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Indenture Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
relevant books, records and premises of the Owner Trustee, personally or by
agent or attorney.
(g) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or indirectly or by or
through agents or attorneys and the Indenture Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney appointed
with due care by it.
(h) The Indenture Trustee shall not be personally liable for debts,
contracts, liabilities or damages (collectively, "Liabilities") incurred in the
-----------
management or operation of the Indenture Estate, except such Liabilities which
result from its own willful misconduct (including, without limitation, willful
breach of contract) or gross negligence, or, in the case of the holding or
transfer of funds, negligence.
(i) For all purposes of this Indenture, in the absence of actual
knowledge of an Authorized Officer of the Indenture Trustee, the Indenture
Trustee shall not be deemed to have knowledge of an Indenture Default (except
the failure of Tenant to pay any installment of Basic Rent when the same shall
become due) unless notified in writing by any Noteholder, the Owner Participant,
the Owner Trustee or Tenant.
<PAGE>
39
(j) Except during the continuance of an Indenture Event of Default or
an Event of Default of which the Indenture Trustee has knowledge:
(i) The Indenture Trustee need perform only those duties that are
specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Indenture
Trustee.
(ii) In the absence of bad faith on its part, the Indenture Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein and the genuineness of all
such writings, upon certificates or opinions furnished to the Indenture
Trustee and substantially conforming to the requirements of this Indenture.
However, the Indenture Trustee shall examine these certificates and
opinions to determine whether or not they substantially conform to the
requirements of this Indenture.
(k) If an Indenture Event of Default has occurred and is continuing,
the Indenture Trustee shall exercise its rights and powers under 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.
(l) No provision of this Indenture shall be construed to relieve the
Indenture Trustee from liability for its own negligent action, its own negligent
failure to act or its willful misconduct except that:
(i) this clause (1) shall not be construed to limit the
provisions of clause (j);
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by an Authorized Officer of the Indenture
Trustee, unless it shall be proved that the actions of such Authorized
Officer were negligent with respect to ascertaining pertinent facts;
(iii) the Indenture Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in accordance
with the direction of a Majority in Interest of Noteholders relating to the
time, method and place of conducting any proceedings for any remedy
available to the Indenture Trustee, or exercising any trust or power
conferred upon the Indenture Trustee, under this Indenture; and
(iv) no provision of this Indenture shall require the Indenture
Trustee (A) to do anything contrary to law or to the provisions of any
Operative Document to which it is a party, (B) to expend or risk its own
funds or otherwise incur any
<PAGE>
40
financial liability in the performance of any of its duties hereunder, or
in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it or (C) to
execute any document or take any action that it shall reasonably determine,
or shall have been advised by counsel, is likely to result in personal
liability on the part of the Indenture Trustee, unless it shall be
indemnified to its satisfaction.
SECTION 9.2 Not Responsible for Recitals or Issuance of Notes. The
-------------------------------------------------
recitals contained herein, and in the Notes, except the Indenture Trustee's
certificates of authentication, shall not be taken as the statements of the
Indenture Trustee, and the Indenture Trustee assumes no responsibility for their
correctness. The Indenture Trustee makes no representations as to the validity
or sufficiency of this Indenture, the Indenture Estate or the Notes, except that
the Indenture Trustee in its individual capacity hereby represents and warrants
that this Indenture has been executed and delivered by one of its officers who
is duly authorized to execute and deliver such document on its behalf and that
it has power to perform hereunder.
SECTION 9.3 The Indenture Trustee and Authorized Agents May Hold Notes.
----------------------------------------------------------
The Indenture Trustee, any Paying Agent, Registrar or any other agent of the
Indenture Trustee, in its individual or any other capacity, may become the owner
or pledgee of Notes and may otherwise deal with the Owner Trustee and Tenant
with the same rights it would have if it were not the Indenture Trustee, Paying
Agent, Registrar or such other agent.
SECTION 9.4 Funds May Be Held by the Indenture Trustee or Paying Agent;
-----------------------------------------------------------
Investments.
- -----------
(a) Subject to Section 5.2 and subsection (b) of this Section 9.4, any
moneys held by the Indenture Trustee or the Paying Agent hereunder as part of
the Indenture Estate may until paid out by the Indenture Trustee or the Paying
Agent as herein provided, be carried by the Indenture Trustee or the Paying
Agent on deposit with itself, and neither the Indenture Trustee nor the Paying
Agent shall have any liability for interest upon any such moneys except as
otherwise agreed in writing with the Owner Trustee or Tenant.
(b) At any time and from time to time (subject to Section 3.1), the
Indenture Trustee shall, provided no Event of Default or Material Default has
occurred and is continuing, at the proper and timely request (given directly by
Tenant to the Indenture Trustee) of Tenant acting as the agent of the Owner
Trustee, invest and reinvest in Permitted Investments as specified in such
request any moneys at the time on deposit with the Indenture Trustee as part of
the Indenture Estate, together with any income and gains from the investment and
reinvestment thereof, and sell any Permitted Investments, in either case,
including accrued interest, as are set forth in such Request, and such Permitted
Investments
<PAGE>
41
shall be held by the Indenture Trustee until so sold in trust as part of the
Indenture Estate; provided that Tenant, on behalf of the Owner Trustee, as agent
--------
of the Owner Trustee, shall upon demand pay to the Indenture Trustee the amount
of any loss realized upon maturity, sale or other disposition of any such
Permitted Investment and, so long as no Event of Default shall have occurred and
be continuing, be entitled to receive from the Indenture Trustee, and the
Indenture Trustee, on behalf of the Owner Trustee, shall promptly pay to Tenant
any profit, income, interest, dividend or gain realized upon maturity, sale or
other disposition of any Permitted Investment. If any Event of Default shall
have occurred and be continuing, any net income, profit, interest, dividend or
gain realized upon maturity, sale or other disposition of any Permitted
Investment shall be held as part of the Indenture Estate and shall be applied by
the Indenture Trustee at the same time, on the same conditions and in the same
manner as the amounts in respect of which such income, profit, interest,
dividend or gain was realized are required to be held. The Indenture Trustee
shall not be responsible for any losses on any investments or sales of Permitted
Investments made pursuant to the procedure specified in this Section.
SECTION 9.5 Compensation, Reimbursement and Indemnification.
-----------------------------------------------
(a) It is understood that the Owner Trustee or, to the extent so
provided, Tenant, shall pay all Transaction Expenses in the amounts and manner
set forth in Section 32 of the Participation Agreement and that the Owner
Trustee shall be entitled to receive Additional Rent from Tenant to pay the
reasonable on-going fees and expenses of the Indenture Trustee (including
reasonable legal fees) incurred in connection with the performance of the
Indenture Trustee's duties under this Indenture and the other Operative
Documents. To the extent that the Owner Trustee and Tenant do not fulfill their
respective obligations with respect to the compensation and reimbursement of the
Indenture Trustee, the Indenture Trustee shall have, and the Owner Trustee
hereby grants to the Indenture Trustee, a lien on the Indenture Estate with
respect to the Landlord Interest, second only to the lien created by this
Indenture in favor of the Noteholders, to secure the payment of such
compensation and expense reimbursement to the Indenture Trustee.
(b) The Owner Trustee hereby agrees to indemnify, or cause to be
indemnified, each of the Indenture Trustee, in its individual capacity, any
predecessor Indenture Trustee and any Authorized Agent for, and to hold it
harmless against, any loss, liability or expense incurred without gross
negligence, willful misconduct or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trusts created hereunder
or the performance of its duties hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder but only to the extent
such loss, liability or expense is indemnified by Tenant pursuant to Sections 23
and 24 of the Participation Agreement and only if Tenant has failed to pay such
loss, liability or expense. To the extent that the Owner Trustee does not
fulfill its obligations set forth in the preceding sentence with respect to the
<PAGE>
42
indemnification of the Indenture Trustee, the Indenture Trustee shall have, and
the Owner Trustee hereby grants to the Indenture Trustee, a lien on the
Indenture Estate with respect to the Landlord Interest, second only to the lien
created by this Indenture in favor of the Noteholders, to secure the payment of
such compensation and expense reimbursement to the Indenture Trustee.
SECTION 9.6 Corporate Indenture Trustee Required; Eligibility. There
-------------------------------------------------
shall at all times be an Indenture Trustee hereunder, which shall be a Person
that has a combined capital and surplus of at least $100,000,000, and is subject
to supervision or examination by Federal or State authority. If such Person
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 9.6, the combined capital and surplus of such Person
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. The Owner Trustee may not, nor may any
Person directly or indirectly controlling, controlled by, or under common
control with the Owner Trustee, serve as the Indenture Trustee. If at any time
the Indenture Trustee shall cease to be eligible in accordance with the
provisions of this Section 9.6, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article.
SECTION 9.7 Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the 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 9.8.
(b) The Indenture Trustee may resign at any time by giving written
notice thereof to the Owner Trustee and Tenant. If an instrument of acceptance
by a successor Indenture Trustee shall not have been delivered to the Owner
Trustee, Tenant and the Indenture Trustee within 30 days after the giving of
such notice of resignation, the resigning Indenture Trustee may petition any
court of competent jurisdiction for the appointment of a successor Indenture
Trustee or any Noteholder who has been a Noteholder for at least six months may,
subject to the provisions of Sections 2.5 and 2.6 of the First Supplemental
Indenture, on behalf of himself and all others similarly situated, petition any
such court for the appointment of a successor Indenture Trustee. Such court may
thereupon after such notice, if any, as it may deem proper and prescribe,
appoint a successor Indenture Trustee.
(c) The Indenture Trustee may be removed at any time by a Directive
delivered to the Indenture Trustee, the Owner Trustee and Tenant.
<PAGE>
43
(d) If at any time:
(i) the Indenture Trustee shall cease to be eligible under
Section 9.6 and shall fail to resign after written request therefor by the
Owner Trustee or by such Noteholder, or
(ii) the Indenture Trustee shall become incapable of acting or
shall be adjudged a bankrupt or a insolvent, or a receiver of the Indenture
Trustee or of its property shall be appointed, or any public officer shall
take charge or control of the Indenture Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (A) the Owner Trustee, acting after consultation with
Tenant, may remove the Indenture Trustee or (B) subject to Sections 2.5 and 2.6
of the First Supplemental Indenture, unless the Indenture Trustee's duty to
resign is stayed as provided in the Trust Indenture Act, any Noteholder who has
been a bona fide Noteholder 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 Indenture Trustee and the appointment of a successor
Indenture Trustee. Such court may thereupon after such notice, if any, as it
may deem proper, remove the Indenture Trustee and appoint a successor Indenture
Trustee.
(e) If the Indenture Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Indenture
Trustee for any cause, the Owner Trustee, acting after consultation with Tenant,
shall promptly appoint a successor Indenture Trustee. If, within one year after
such resignation, removal or incapability, or the occurrence of such vacancy, a
successor Indenture Trustee shall be appointed pursuant to a Directive of a
majority in principal amount of the Outstanding Notes delivered to the Owner
Trustee, Tenant 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 Trustee. If no successor Indenture Trustee shall
have been so appointed by the Owner Trustee (acting after consultation with
Tenant) or the Noteholders and accepted appointment in the manner provided in
Section 9.8, any Noteholder who has been a bona fide Noteholder for at least six
---- ----
months may, subject to the provisions of Sections 2.5 and 2.6 of the First
Supplemental Indenture, on behalf of himself and all other similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Indenture Trustee. Such court may thereupon after such notice, if any, as it
may deem proper, appoint a successor Indenture Trustee.
(f) The Owner Trustee shall give notice of each resignation and each
removal of the 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 Noteholders
<PAGE>
44
as their names and addresses appear in the Note Register. Each notice shall
include the name of the successor Indenture Trustee and the address of the
Indenture Trustee Office.
SECTION 9.8 Acceptance of Appointment by Successor. Every successor
--------------------------------------
Indenture Trustee appointed hereunder shall execute, acknowledge and deliver to
the Owner Trustee, Tenant 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 rights, powers, trusts and duties of the retiring Indenture Trustee; but
on request of the Owner Trustee or the successor Indenture Trustee, such
retiring Indenture Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Indenture Trustee all the
rights, powers and trusts of the retiring Indenture Trustee, and it shall duly
assign, transfer and deliver to such successor Indenture Trustee all property
and money held by such retiring Indenture Trustee hereunder, subject
nevertheless to its lien, if any, provided for in Section 9.5. Upon request of
any such successor Indenture Trustee, the Owner Trustee shall execute any and
all instruments for more fully and certainly vesting in and confirming to such
successor Indenture Trustee all such 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 qualified and
eligible under this Article.
SECTION 9.9 Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any corporation into which the 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 Indenture Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Indenture Trustee, shall be the successor of the Indenture
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 Notes shall
have been authenticated, but not delivered, by the Indenture Trustee then in
office, any successor by merger, conversion or consolidation to such
authenticating Indenture Trustee may adopt such authentication and deliver the
Notes so authenticated with the same effect as if such successor Indenture
Trustee had itself authenticated such Notes.
SECTION 9.10 Maintenance of Agencies.
-----------------------
(a) Any Paying Agent (other than the Indenture Trustee) from time to
time appointed hereunder shall execute and deliver to the Indenture Trustee an
instrument in which said Paying Agent shall agree with the Indenture Trustee,
subject to the provisions of this section, that such Paying Agent will:
<PAGE>
45
(i) hold all sums held by it for the payment of principal of,
the Make-Whole Premium, if any, and interest on Notes in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(ii) give the Indenture Trustee within five days thereafter
notice of any default in the making of any payment of principal, the Make-
Whole Premium, if any, or interest on the Notes; and
(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent.
Notwithstanding any other provision of this Indenture, any payment required to
be made to or received or held by the Indenture Trustee may, to the extent
authorized by written instructions of the Indenture Trustee, be made to or
received or held by a Paying Agent for the account of the Indenture Trustee.
(b) From time to time the Indenture Trustee for the Notes of any
series may, subject to its sole discretion, appoint one or more Authenticating
Agents with respect to the Notes of such series, with power to act on the
Indenture Trustee's behalf and subject to its discretion in the authentication
and delivery of the Notes of such series in connection with transfers and
exchanges under Sections 2.4, 2.5, 2.10 and 6.6 as fully to all intents and
purposes as though such Authenticating Agent had been expressly authorized by
those Sections of the Indenture to authenticate and deliver the Notes of such
series. For all purposes of the Indenture, the authentication and delivery of
Notes of such series by an Authenticating Agent for such Notes pursuant to this
Section 9.10 shall be deemed to be authentication and delivery of such Notes "by
the Indenture Trustee." Any such Authenticating Agent shall at all times be a
Person that is eligible to act as an Indenture Trustee hereunder pursuant to the
provisions of Section 9.6. If at any time an Authenticating Agent shall cease
to be so eligible in accordance with the provisions of Section 9.6, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section 9.10.
(c) If an appointment of an Authenticating Agent with respect to one
or more series of Notes is made pursuant to this Section 9.10, the Notes may
have endorsed thereon, in addition to the Indenture Trustee's certification of
authentication, an alternate certificate of authentication in the following
form:
<PAGE>
46
CERTIFICATE OF AUTHENTICATION
This is one of the ______________________ Notes, Series ___, Due
___________, described in the within-mentioned Supplemental Indenture.
Shawmut Bank Connecticut, National Association
as the Indenture Trustee
By_______________________________
As Authenticating Agent
By_____________________________
As Authorized Officer
(d) Any corporation into which any Authorized Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authorized Agent shall
be a party, or any corporation succeeding to the corporate trust business of any
Authorized Agent shall be the successor of such Authorized Agent hereunder, if
such successor corporation is otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the parties
hereto or such Authorized Agent or such successor corporation.
(e) Any Authorized Agent may at any time resign by giving written
notice of resignation to the Indenture Trustee and the Owner Trustee. The Owner
Trustee may, and at the request of the Indenture Trustee shall, at any time,
terminate the agency of any Authorized Agent by giving written notice of
termination to such Authorized Agent and to the Indenture Trustee. Upon the
resignation or termination of an Authorized Agent or in case at any time any
such Authorized Agent shall cease to be eligible under this Section (which, in
either case, no other Authorized Agent performing the functions of such
Authorized Agent shall have been appointed), the Owner Trustee shall promptly
appoint one or more qualified successor Authorized Agents approved by the
Indenture Trustee and the Owner Trustee to perform the functions of the
Authorized Agent who has resigned or whose agency has been terminated or who
shall have ceased to be eligible under this Section. The Indenture Trustee
shall give written notice of any such appointment to all Noteholders as their
names and addresses appear on the Note Register.
<PAGE>
47
SECTION 9.11 Co-Indenture Trustee or Separate Trustee.
----------------------------------------
(a) If at any time or times it shall be necessary or prudent in order
to conform to any law of any jurisdiction in which property shall be held
subject to the lien of a Supplemental Indenture, or the Indenture Trustee shall
be advised by counsel, satisfactory to it, that it is necessary, prudent or
convenient in the interest of the Noteholders, or upon receipt of a Directive,
the Indenture Trustee and the Owner Trustee shall execute and deliver all
instruments and agreements necessary or proper to constitute another bank or
trust company or one or more Persons approved by the Indenture Trustee either to
act as co-trustee or co-trustees of all or any part of the Indenture Estate
jointly with the Indenture Trustee originally named herein or any successor or
successors, or to act as separate trustee or trustees of all or any such
property. In the event the Owner Trustee shall have not joined in the
execution of such instruments and agreements within 10 days after the receipt of
a written request from the Indenture Trustee to do so, or in case an Indenture
Event of Default shall have occurred and be continuing, the Indenture Trustee
may act under the foregoing provisions of this Section without the concurrence
of the Owner Trustee upon giving written notice to the Owner Trustee of the name
and address of such proposed additional trustee; and the Owner Trustee hereby
appoints the Indenture Trustee its agent and attorney to act for it under the
foregoing provisions of this Section in either of such contingencies; provided,
--------
however, that within 90 days following any appointment of an additional trustee
- -------
without the concurrence of the Owner Trustee, the Owner Trustee may, after
consultation with Tenant, if there shall not have occurred and be continuing an
Indenture Event of Default, remove such additional trustee by written notice to
the Indenture Trustee, the additional trustee and Tenant.
(b) Every additional trustee hereunder shall, to the extent permitted
by law, be appointed and act, and such additional trustee and its successors
shall act, subject to the following provisions and conditions, namely:
(i) the Notes shall be authenticated and delivered, and all powers,
duties, obligations and rights conferred upon the Indenture Trustee in
respect of the custody, control and management of moneys, papers or
securities, shall be exercised, solely by the Indenture Trustee;
(ii) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and exercised
or performed by the Indenture Trustee and such additional 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
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 such additional trustee or trustees;
<PAGE>
48
(iii) no power given hereby to, or which it is provided hereby may be
exercised by, any such additional trustee or trustees, shall be exercised
hereunder by such additional trustee or trustees, except jointly with, or
with the consent in writing of, the Indenture Trustee, anything herein
contained to the contrary notwithstanding;
(iv) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(v) after consultation with Tenant, the Owner Trustee and the
Indenture Trustee, at any time by an instrument in writing, executed by
them jointly, may remove any such additional trustee, and in that case, by
an instrument in writing executed by them jointly, may appoint a successor
or successors to such additional trustee or trustees, as the case may be,
anything herein contained to the contrary notwithstanding. In the event
that the Owner Trustee shall not have joined in the execution of any such
instrument within 10 days after the receipt of a written request from the
Indenture Trustee to do so, the Indenture Trustee shall have the power to
remove any such additional trustee and to appoint a successor additional
trustee without the concurrence of the Owner Trustee; and the Owner Trustee
hereby appoints the Indenture Trustee, its agent and attorney to act for it
in such connection in such contingency; provided, however, that, if there
-------- -------
shall not have occurred and be continuing an Indenture Event of Default,
within 90 days following any appointment of a successor additional trustee
without the concurrence of the Owner Trustee, the Owner Trustee may, after
consultation with Tenant, remove such successor additional trustee by
written notice to the Indenture Trustee and the successor additional
trustee. In the event that the Indenture Trustee alone shall have
appointed an additional trustee or trustees as above provided, it may at
any time, by an instrument in writing, remove any such additional trustee,
the successor to any such additional trustee so removed to be appointed by
the Owner Trustee and the Indenture Trustee, or by the Indenture Trustee
alone, as hereinbefore in this Section provided, subject to the aforesaid
right of the Owner Trustee, if there shall not have occurred and be
continuing an Indenture Event of Default, to remove, after consultation
with Tenant, such additional trustee within 90 days after such appointment.
SECTION 9.12 Withholding Taxes. The Indenture Trustee agrees to exclude
-----------------
and withhold from each payment received by the Indenture Trustee of principal,
the Make-Whole Premium, if any, and interest and other amounts due hereunder or
under the Notes any and all withholding taxes applicable thereto as required by
law. The Indenture Trustee agrees to act as such withholding agent and, in
connection therewith, whenever any present or future taxes or similar charges
are required to be withheld with respect to any amounts payable in respect of
the Notes, to withhold such amounts and timely pay the same to the appropriate
authority in the name and on behalf of the Holders of the Notes, that it will
file any necessary withholding tax returns or statements when due, and that, as
promptly as possible
<PAGE>
49
after the payment thereof, it will deliver to each holder of a Note appropriate
documentation showing the payment thereof, together with such additional
documentary evidence as such holders may reasonably request from time to time.
By acceptance of a Note, each Noteholder is deemed to agree that no such
withholding shall give rise to an Indenture Default or Indenture Event of
Default.
ARTICLE 10
NOTEHOLDERS' LISTS
SECTION 10.1 List of Names and Addresses of Noteholders. The Indenture
------------------------------------------
Trustee shall preserve in as current a form as is reasonably practicable the
most recent list delivered to it pursuant to this Section 10.1, as the case may
be, of the names and addresses of the Noteholders. If the Indenture Trustee is
not the Registrar, the Registrar will furnish or cause to be furnished to the
Indenture Trustee semiannually, on a date not more than 15 days after each
regular Record Date with respect to an Interest Payment Date, in each year, and
at such other times as the Indenture Trustee may request in, writing, within 30
days after receipt by the Registrar of any such request, a list, in such form as
the Indenture Trustee may reasonably require, containing all of the information
in the possession or control of the Registrar as to the names and addresses of
the Noteholders, in each case as of a date not more than 15 days prior to the
time such list is furnished. The Indenture Trustee may destroy any list
furnished to it as provided in this Section 10.1, as the case may be, upon
receipt of a new list so furnished.
ARTICLE 11
SUPPLEMENTAL INDENTURES
SECTION 11.1 Supplemental Indentures Without Consent of Noteholders.
------------------------------------------------------
Without the consent of any of the Noteholders, each of the Owner Trustee and the
Indenture Trustee shall enter into one or more Supplemental Indentures, in form
satisfactory to the Indenture Trustee, for the following purposes:
(a) to effect the issuance of Notes pursuant to Section 2.12;
(b) subject to the provisions of the Operative Documents, to evidence
the succession of another corporation to Tenant or to evidence the succession of
another corporation to the Owner Trustee, and the assumption by any such
successor of the covenants of the Owner Trustee contained herein and in the
Notes;
<PAGE>
50
(c) to add to the covenants of the Owner Trustee, for the benefit of
the Noteholders, or to surrender any right or power herein conferred upon the
Owner Trustee;
(d) to convey, transfer and assign to the Indenture Trustee, as the
case may be, liens and security interests on, in and to additional properties,
and to correct or amplify the description of any property at any time subject to
the lien of a Supplemental Indenture or to assure, convey and confirm unto the
Indenture Trustee, as the case may be, any property included or required to be
included in the Indenture Estate;
(e) to cure any ambiguity or to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein;
(f) to establish the form or terms of the Notes of any series as
permitted by Section 2.12;
(g) to permit or facilitate the issuance of Notes in uncertificated
form;
(h) to change or amend any provision hereof; provided that such change
--------
or amendment shall become effective only when there is no Outstanding Note of
any series created prior to the execution of such Supplemental Indenture which
is entitled to the benefit of such provision;
(i) to evidence the succession of a new Indenture Trustee hereunder or
add a co-trustee or separate trustee and to make provisions as to the rights and
duties of such additional trustee and as to the appointment and dismissal of any
such additional trustee;
(j) to make any other amendments or provisions with respect to matters
or questions arising under this Indenture, provided such action shall not
adversely affect the interest of the Noteholders;
(k) in the event of a substitution pursuant to Article 41 of the
Lease, to subject the substituted property and the Landlord Interest to the
liens and security interests contemplated by the Supplemental Indenture pursuant
to which such Notes were issued and release the Indenture Estate subject to such
Supplemental Indenture;
(l) to convey, transfer and assign to the Indenture Trustee any
additional contiguous land to be included in the Indenture Estate after a
condemnation, in accordance with Article 15(c) of the Lease; or
(m) to effect a refinancing of the Notes pursuant to Section 13.1.
<PAGE>
51
Notwithstanding the foregoing, no Supplemental Indenture shall become
effective except with the consent of the Noteholders of all Notes then
Outstanding if as a result thereof the amounts payable to the Owner Trustee
under a Lease (other than Excepted Payments) and assigned to the Indenture
Trustee hereunder shall not be sufficient to pay when due the principal of, the
Make-Whole Premium, if any, and interest on all Outstanding Notes. In the case
of clause (k) above, all provisions of this Indenture shall apply with respect
to such substituted property and Indenture Estate as if they had constituted a
part of the original Indenture Estate.
SECTION 11.2 Amendments with Consent of Noteholders. With respect to any
--------------------------------------
Supplemental Indenture, with the consent of a Majority in Interest of
Noteholders, by Directive delivered to the Owner Trustee and the Indenture
Trustee, the Owner Trustee may, and the Indenture Trustee, subject to Section
11.3 hereof, shall, enter into amendments to such Supplemental Indenture for the
purpose of adding any provisions to or changing in any manner the rights and
obligations of such Noteholders and of the Owner Trustee under this Indenture
and such Supplemental Indenture; provided, however, that no such amendment
-------- -------
shall, without the consent of the holder of each Outstanding Note affected
thereby,
(i) change the Stated Maturity of the principal of, or any
installment of interest on, or the dates or circumstances of payment of the
Make-Whole Premium, if any, on, any Note, or reduce the principal amount
thereof or the interest thereon or any amount payable upon the redemption
thereof, or change the circumstances for redemption or change the place of
payment where, or the coin or currency in which, any Note or the Make-Whole
Premium, if any, or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment of principal or
interest on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date subject, however, to Section
6.4(c)) or such payment of the Make-Whole Premium, if any, on or after the
date such the Make-Whole Premium becomes due and payable or change the
dates or the amounts of payments to be made through installment payments in
respect of a Note of any series,
(ii) permit the creation of any Lien prior to the lien of the
First Supplemental Indenture with respect to any of the Indenture Estate,
or deprive any Noteholder of the security afforded by the lien of the First
Supplemental Indenture except as may be required, in the case of the First
Supplemental Indenture, to effectuate Article 3 thereof or, in the case of
any other Supplemental Indenture, to effectuate any equivalent provision
contained therein,
(iii) terminate the Lease, reduce the amounts payable under the
Lease assigned to the Indenture Trustee or change the time for the payment
thereof so
<PAGE>
52
that such payments are less than the amounts necessary to pay when due the
principal of, the Make-Whole Premium, if any, and interest on the
Outstanding Notes,
(iv) reduce the percentage in principal amount of the
Outstanding Notes, the consent of whose holders is required for any such
amendment, or the consent of whose holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture, or
(v) modify any of the provisions of this Section 11.2, except
to increase any such percentage or to provide that certain other provisions
of this Indenture or such Supplemental Indenture cannot be modified or
waived without the consent of each Noteholder affected thereby.
Upon receipt by the Indenture Trustee of an Officers' Certificate of the
Owner Trustee and such other documentation as the Indenture Trustee may
reasonably require and upon the filing with the Indenture Trustee of evidence of
the Act of such Noteholders, the Indenture Trustee shall join in the execution
of such amendment or other instrument, as the case may be, subject to the
provisions of Section 11.3.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed amendment, but it shall be
sufficient if such Act shall approve the substance thereof. Promptly after the
execution by the Owner Trustee and the Indenture Trustee of any amendment
pursuant to the provisions of this Section 11.2, the Owner Trustee shall
transmit a written notice, setting forth in general terms the substance of such
amendment, to Tenant and all Noteholders, as the names and addresses of such
Noteholders appear on the Note Register. Any failure of the Owner Trustee to
mail such notice, or any defeat therein, shall not, however, in any way impair
or affect the validity of any such amendment.
SECTION 11.3 Execution of Supplemental Indentures. In executing, or
------------------------------------
accepting the additional trusts created by, any Supplemental Indenture or
amendment permitted by this Article or the modifications thereby of the trusts
created by this Indenture, the Indenture Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel stating that
the execution of such Supplemental Indenture or amendment is authorized or
permitted by this Indenture.
SECTION 11.4 Effect of Supplemental Indentures. Upon the execution of any
---------------------------------
Supplemental Indenture permitted under this Article, this Indenture shall be
modified in accordance therewith, and each Supplemental Indenture shall form a
part of this Indenture for all purposes; and every holder of Notes theretofore
or thereafter authenticated and delivered hereunder shall be bound to this
Indenture as so supplemented.
<PAGE>
53
SECTION 11.5 Reference Notes to Supplemental Indentures. Notes
------------------------------------------
authenticated and delivered after the execution of any Supplemental Indenture
pursuant to this Article may, and shall if required by the Owner Trustee, bear a
notation in form approved by the Owner Trustee and the Indenture Trustee as to
any matter provided for in such Supplemental Indenture; and, in such case,
suitable notation may be made upon Outstanding Notes after proper presentation
and demand. If the Owner Trustee shall so determine, new Notes so modified as
to conform, in the opinion of the Owner Trustee and the Indenture Trustee, to
any such Supplemental Indenture may be prepared and executed by the Owner
Trustee and authenticated and delivered by the Indenture Trustee or other
Authorized Agent in exchange for Outstanding Notes.
ARTICLE 12
MISCELLANEOUS PROVISIONS
SECTION 12.1 Execution in Counterparts. This instrument may be executed
-------------------------
in any number of counterparts, each of which when so executed shall be deemed to
be an original, but all such counterparts shall together constitute but one and
the same instrument.
SECTION 12.2 Tenant Not Liable. In no event shall any provision of this
-----------------
Indenture or the Notes constitute a guaranty or assumption by Tenant of the
Notes or the indebtedness represented thereby.
SECTION 12.3 Limitation of Liability. It is expressly understood and
-----------------------
agreed by the parties hereto that (a) each of the representations, undertakings
and agreements herein made on the part of the Indenture Trustee is made and
intended not as personal representations, undertakings and agreements by Shawmut
Bank Connecticut, National Association but is made and intended for the purpose
of binding only the Indenture Estate and (b) under no circumstances shall
Shawmut Bank Connecticut, National Association be personally liable for the
payment of any indebtedness or expenses of the Indenture Trustee or be liable
for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Indenture Trustee under this Indenture
(except as otherwise expressly provided herein or in the Operative Documents).
<PAGE>
54
ARTICLE 13
REFINANCING
SECTION 13.1 Refinancing. The Owner Trustee shall have the right,
-----------
from time to time, to cause a refinancing of all, but not less than all, of the
Notes then Outstanding pursuant to a Supplemental Indenture; provided, however,
-------- -------
that the aggregate principal amount of any notes issued in such refinancing
shall not exceed 100% of the aggregate principal amount of the Outstanding Notes
to be redeemed in connection with such refinancing.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
55
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed on the ____ day of June, 1995, to be effective as of the day
and year first above written.
CORPORATE OWNER TRUSTEE:
[Corporate seal] Wilmington Trust Company, not in its
individual capacity, except as otherwise
provided, but solely as the Corporate
Owner Trustee
Attest:
By:
- ----------------------------- -------------------------------------
Name: Name:
Title: Title:
WITNESSES:
- -----------------------------
Name:
- -----------------------------
Name:
WITNESSES: INDIVIDUAL OWNER TRUSTEE:
- ----------------------------- ----------------------------------------
Name: William J. Wade, not in his individual
capacity, except as otherwise provided,
but solely as the Individual Owner Trustee
- -----------------------------
Name:
<PAGE>
56
CORPORATE INDENTURE TRUSTEE:
[Corporate seal] Shawmut Bank Connecticut, National
Association,
not in its individual capacity, except as
otherwise provided, but solely as the
Corporate Indenture Trustee
Attest:
By:
- ----------------------------- -------------------------------------
Name: Name:
Title: Title:
WITNESSES:
- -----------------------------
Name:
- -----------------------------
Name:
WITNESSES: INDIVIDUAL INDENTURE TRUSTEE:
- ----------------------------- -----------------------------------------
Name: Kathy A. Larimore, not in her individual
capacity, except as otherwise provided,
but solely as the Co-Indenture Trustee
- -----------------------------
Name:
<PAGE>
Appendix A
DEFINITIONS AND RULES OF USAGE
Section 1.1 Rules of Usage. The following rules of usage shall apply
--------------
to the document to which this Appendix is appended unless otherwise required by
the context:
(a) Singular words shall connote the plural as well as the singular,
and vice versa (except as indicated), as may be appropriate.
(b) Unless otherwise indicated, references in the document to which
this Appendix is appended to appendices, articles, schedules, sections or
exhibits are references to appendices, articles, schedules, sections or
exhibits of such document.
(c) The headings, subheadings and table of contents used in the
document to which this Appendix is appended are solely for convenience of
reference and shall not constitute a part of any such document nor shall
they affect their meaning, construction or effect.
(d) References to any Person shall include such Person, its
successors and permitted assigns.
(e) "or" is not exclusive and "include" and "including" are not
limiting.
(f) "hereby," "herein," "hereof," "hereunder" or like words used in
the document to which this Appendix is appended refer to such document, as
it may be amended, modified or supplemented from time to time in accordance
with its terms.
Section 1.2 Definitions. As used in the document to which this
-----------
Appendix is appended, the following terms shall have the respective meanings
assigned thereto:
"Act" when used with respect to any Noteholder shall have the meaning
---
set forth in Section 1.4 of the Original Indenture.
"Additional Rent" shall have the meaning set forth in the Lease.
---------------
"Adjusted Termination Value" shall have the meaning set forth in the
--------------------------
Lease.
"Affiliate", with respect to any Person, shall mean any other Person
---------
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, the term
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to
<PAGE>
APP A-2
direct or cause the direction of the management policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Applicable Law" shall mean all applicable laws, Environmental Laws,
--------------
statutes, treaties, rules, codes, ordinances, regulations, permits,
certificates, orders, interpretations, licenses and permits of any Governmental
Authority and judgments, decrees, injunctions, writs, orders or like action of
any court, arbitrator or other administrative, judicial or quasi-judicial
tribunal or agency of competent jurisdiction.
"Assigned Payments" shall have the meaning set forth in the Granting
-----------------
Clause.
"Authenticating Agent" shall mean any Person authorized to
--------------------
authenticate and deliver Notes of any series on behalf of the Indenture Trustee
pursuant to Section 9.10(b) of the Original Indenture.
"Authorized Agent" shall mean any Paying Agent, Registrar or
----------------
Authenticating Agent.
"Authorized Officer" shall mean, with respect to the Indenture
------------------
Trustee, any officer in the Corporate Trust Administration department of the
Indenture Trustee who shall be duly authorized by appropriate corporate action
to authenticate a Note or to execute any Operative Document, and shall mean,
with respect to any Owner Trustee, any officer of any Owner Trustee in its
Corporate Trust Administration department who shall be duly authorized by
appropriate corporate action to deliver an Owner Trustee Request or to execute
any Operative Document.
"Bankruptcy Code" shall mean the Bankruptcy Reform Act of 1978, as
---------------
amended and as the same may be further amended, and any other Applicable Law
with respect to bankruptcy, insolvency or reorganization that is successor
thereto.
"Base Term" shall have the meaning set forth in the Lease.
---------
"Basic Rent" shall have the meaning set forth in the Lease.
----------
"Business Day" shall mean any day other than a Saturday or Sunday or
------------
other day on which banks in New York, New York, Troy, Michigan or the city in
which the Indenture Trustee's Office is located are authorized or required to be
closed, or, if no Note is Outstanding, the city in which the principal corporate
trust office of the Owner Trustee is located.
"Casualty" shall mean an event by which the Improvements or any
--------
substantial portion thereof are damaged or destroyed and which causes Tenant to
terminate the Lease
<PAGE>
APP A-3
and to make a Tenant's Purchase Offer in accordance with Articles 14(h) and 40
of the Lease.
"Closing Date" shall mean June __, 1995.
------------
"Condemnation" shall mean a total or partial condemnation of the
------------
Property which causes Tenant to terminate the Lease and to make a Tenant's
Purchase Offer in accordance with Articles 15(a) and 40 of the Lease.
"Corporate Owner Trustee" shall have the meaning set forth in the
-----------------------
preamble to the Indenture.
"Deed" shall mean the deed delivered by Tenant or other applicable
----
seller to the Owner Trustee pursuant to the Purchase Agreement conveying the
Estate for Years in the Land and the fee interest in the Improvements.
"Defaulted Installment" shall have the meaning set forth in Section
---------------------
2.7 of the Original Indenture.
"Defaulted Interest" shall have the meaning set forth in Section 2.7
------------------
of the Original Indenture.
"Demised Premises" shall have the meaning set forth in the Lease.
----------------
"Directive" shall mean one or more instruments in writing executed in
---------
accordance with the terms and provisions of the Indenture by the party issuing
the Directive, or its duly authorized agents or attorneys-in-fact, by Persons
representing a Majority in Interest of the Holders of the Notes in question
directing the Indenture Trustee to take or refrain from taking the action
specified in such instrument or otherwise advising the Indenture Trustee;
provided, however, that each Holder of the Notes in question, or its duly
- -------- -------
authorized agent or attorney-in-fact, shall be entitled to direct the Indenture
Trustee only with respect to the aggregate unpaid principal amount of such Notes
(or portion thereof) issued and Outstanding that are registered in the name of
such Holder and that are certified by such Holder or its duly authorized agent
or attorney-in-fact to be (a) held by it for its own account and not pledged as
collateral for any of its obligations or (b) pledged as collateral for one or
more of its obligations, or obligations with respect to which it is acting as
trustee under a related indenture, but in respect of which it has received a
directive, satisfactory in form and substance to the Indenture Trustee given by
the Holder or Holders of a proportionate interest in the obligations secured by
such Notes in accordance with the instrument governing such obligations. More
than one Directive can be given by a registered Holder of such Notes or its duly
authorized agent or attorney-in-fact pursuant to clause (b) of the preceding
sentence, and such Directives may be contradictory or inconsistent, so long as
each Directive to take
<PAGE>
APP A-4
or refrain from taking the action specified therein or otherwise advising the
Indenture Trustee meets the requirements of said clause (b).
"Dollar" or "$" shall mean the lawful currency of the United States of
------ -
America.
"Environmental Claims" shall have the meaning set forth in the Lease.
--------------------
"Environmental Law" shall have the meaning set forth in the Lease.
-----------------
"Estate for Years" shall mean, with respect to the Property, the
----------------
estate for years granted by Tenant or other applicable seller to the Owner
Trustee in the land of such Property, for a term of 30 years.
"Event of Default" shall have the meaning set forth in Article 20 of
----------------
the Lease.
"Event of Loss" shall mean a Casualty or a Condemnation.
-------------
"Excepted Payments" shall mean:
-----------------
(a) any amounts payable as Additional Rent under the Lease to the
Owner Trustee in its individual capacity or to the Owner Participant,
including all indemnity payments to which the Owner Trustee in its
individual capacity or the Owner Participant, or any of their respective
Affiliates (or the respective successors, assigns, agents, officers,
directors or employees thereof) is entitled under the Operative Documents;
(b) any amounts other than Basic Rent payable under any Operative
Document to reimburse the Owner Trustee or the Owner Participant or any of
their respective Affiliates (including the reasonable expenses of the Owner
Trustee or the Owner Participant, incurred in connection with any such
payment) for performing or complying with any of the obligations of Tenant
under and as permitted by any Operative Document;
(c) any insurance proceeds (or payments with respect to risks self-
insured or policy deductibles) under liability policies payable to, or
maintained by, the Owner Trustee in its individual capacity or the Owner
Participant or any Affiliate of the Owner Participant;
(d) any amount payable to, or for the benefit of, the Owner
Participant as the purchase price for the interests conveyed pursuant to
Section 3 of the Participation Agreement; and
<PAGE>
APP A-5
(e) any payments in respect of interest to the extent attributable to
payments referred to in clauses (a) through (d) above.
"Excepted Rights" shall mean (a) all rights with respect to Excepted
---------------
Payments of the Person entitled thereto; provided, however, that the rights of
-------- -------
the Owner Trustee to receive Rent under each Lease shall not constitute an
Excepted Right, (b) the rights of such Person to demand, collect, sue for or
otherwise receive and enforce payment of Excepted Payments, including, but not
limited to, the right to declare an Event of Default under the Lease by reason
of such failure to receive an Excepted Payment; provided, however, that the
-------- -------
rights set forth in the clause (b) shall not include any remedies under the
Lease other than the right to proceed by appropriate action to enforce
performance by Tenant of the applicable covenants or to recover damages because
of such failure and (c) all rights and privileges expressly reserved to the
Owner Trustee with the Indenture Trustee pursuant to the First Supplemental
Indenture for the periods specified in the First Supplemental Indenture and the
Original Indenture.
"Exchange Date" shall have the meaning set forth in Section 7.1 of the
-------------
Original Indenture.
"Expenses" shall mean liabilities, obligations, losses (excluding loss
--------
of anticipated profits), damages, penalties, claims (including Environmental
Claims), actions, suits, judgments, out-of-pocket costs, expenses and
disbursements (including reasonable legal fees and expenses and reasonable
consultants' fees and expenses) of any kind and nature whatsoever, whether or
not subject to litigation; provided, however, that "Expenses" shall in no
-------- ------- --------
circumstances include ordinary and usual operating or overhead expenses,
including internal legal costs.
"First Supplemental Indenture" shall mean that certain Mortgage, Deed
----------------------------
of Trust, Assignment of Leases and Rents, Security Agreement, Financing
Statement and First Supplemental Indenture, dated as of the Closing Date,
between the Owner Trustee and the Indenture Trustee with respect to the
Property, as the same may be amended from time to time.
"GAAP" shall mean generally accepted accounting principles.
----
"Governmental Action" shall have the meaning set forth in the
-------------------
Participation Agreement.
"Governmental Authority" shall mean any local, regional, county, state
----------------------
and Federal governments, agencies, authorities, courts and offices having
jurisdiction over the Property.
<PAGE>
APP A-6
"Granting Clause" shall mean the clause entitled "GRANT OF SECURITY"
---------------
in the First Supplemental Indenture.
"Granting Clause Documents" shall have the meaning set forth in the
-------------------------
Granting Clause.
"Improvements" shall mean the improvements located on the Land.
------------
"Indemnitee" shall have the meaning set forth in the Participation
----------
Agreement.
"Indenture Default" shall mean an event which, after giving of notice
-----------------
or lapse of time, or both, would become an Indenture Event of Default.
"Indenture Estate" shall have the meaning set forth in the First
----------------
Supplemental Indenture.
"Indenture Event of Default" shall mean any of the events specified in
--------------------------
Section 8.1 of the Original Indenture.
"Indenture Trustee" shall have the meaning given in the preamble to
-----------------
the Original Indenture.
"Indenture Trustee's Liens" shall mean Liens against the Indenture
-------------------------
Estate that result from acts of, or any failure to act by, or as a result of
claims against, the Indenture Trustee, in its individual or fiduciary capacity,
unrelated to the transactions contemplated by the Operative Documents or that
are in breach of any covenant or agreement of the Indenture Trustee, in its
individual or fiduciary capacity, set forth in any of the Operative Documents,
unless such action or failure to act is consented to by Landlord and Tenant or
is a result of the occurrence or continuance of an Event of Default.
"Indenture Trustee's Office" shall mean the office of the Indenture
--------------------------
Trustee located at 777 Main Street, Hartford, Connecticut 06115, or such other
office as may be designated by the Indenture Trustee to the Owner Trustee and
each Holder of an Outstanding Note under the Indenture.
"Independent Investment Banker" shall mean an independent investment
-----------------------------
banking institution of national standing appointed by Tenant (who shall be
reasonably acceptable to the Owner Participant) on behalf of the Owner Trustee;
provided that if the Indenture Trustee shall not have received written notice of
- -------- ----
such an appointment at least 10 days prior to the applicable redemption date or
if an Indenture Event of Default shall have occurred and be continuing,
"Independent Investment Banker" shall mean such an institution
- ------------------------------
<PAGE>
APP A-7
appointed by the Indenture Trustee. The fees and expenses of any such
Independent Investment Banker shall be paid by Tenant.
"Individual Owner Trustee" shall have the meaning set forth in the
------------------------
preamble to the Indenture.
"Installment Payment Amount" shall mean, with respect to any
--------------------------
Outstanding Note, the amount of the installment payment of principal due and
payable on each Installment Payment Date other than the Stated Maturity thereof,
which amount shall be set forth in the Supplemental Indenture creating the
applicable series of Notes.
"Installment Payment Date" shall mean each date on which an
------------------------
Installment Payment Amount is due and payable on any Outstanding Note, as set
forth in the Supplemental Indenture creating the applicable series of Notes.
"Interest Payment Date" shall mean each date on which interest is due
---------------------
on any Outstanding Note, as set forth in the Supplemental Indenture creating the
applicable series of Notes.
"Land" shall mean the land described in Exhibit A of the First
---- ---------
Supplemental Indenture.
"Landlord" shall have the meaning set forth in the Lease.
--------
"Landlord's Acceptance" shall have the meaning set forth in the Lease.
---------------------
"Landlord Interest" shall mean the Improvements on, the Estate for
-----------------
Years in, and the rights of Landlord under the Option Agreement with respect to,
the Land.
"Lease" shall mean that certain lease, dated as of the Closing Date,
-----
between Landlord and Tenant covering the Property, as amended, supplemented or
otherwise modified from time to time.
"Liabilities" shall have the meaning set forth in Section 9.1 of the
-----------
Original Indenture.
"Lien" shall mean any mortgage, deed of trust, pledge, security
----
interest, encumbrance, lien, easement, restriction, servitude or charge of any
kind encumbering the Property other than Permitted Exceptions, including,
without limitation, any irrevocable license, conditional sale or other title
retention agreement, any lease in the nature thereof or the filing of, or
agreement to execute as "debtor", any financing or continuation statement
<PAGE>
APP A-8
under the Uniform Commercial Code of any jurisdiction or any federal, state or
local lien imposed pursuant to any Environmental Law.
"Majority in Interest of Noteholders" shall mean Holders of a
-----------------------------------
particular series or subseries of Notes holding a majority in principal amount
of all Outstanding Notes of such series or subseries of Notes at the time of any
such determination.
"Make-Whole Premium" shall mean, with respect to any Notes to be
------------------
redeemed, the excess, if any, of (i) the sum of the present values of all the
remaining scheduled payments of principal and interest from the date of such
redemption to the Stated Maturity of such Notes discounted semiannually on each
Installment Payment Date at a rate equal to the Treasury Rate, based on a 360-
day year of twelve 30-day months, over (ii) the aggregate unpaid principal
amount of such Notes plus accrued but unpaid interest on such Notes (but not any
accrued interest in default), as determined by an Independent Investment Banker
as of the third Business Day prior to the Redemption Date for such Notes;
provided, however, that if such redemption occurs on or after the Make-Whole
- -------- -------
Premium Termination Date for such Note, the Make-Whole Premium shall be zero;
provided further, however, that in no event shall the aggregate of all amounts
- -------- ------- -------
accrued or paid pursuant to any Notes or any related document that, under
Applicable Laws, constitute or may be deemed to constitute interest on the
indebtedness evidenced by such Notes ever exceed the maximum nonusurious rate of
interest permitted by whichever of applicable federal or state laws permits the
lower interest rate.
"Make-Whole Premium Termination Date" shall mean, with respect to the
-----------------------------------
Series *-1 Notes, ______ __, ____, and with respect to the Series *-2 Notes,
______ __, ____.
"Material Default" shall have the meaning set forth in the Lease.
----------------
"Maturity", when used with respect to any Note, shall mean the date on
--------
which the principal of such Note becomes due and payable as therein or in the
corresponding Indenture provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Noteholder" or "Holder" shall mean the registered owners from time to
---------- ------
time of the Outstanding Notes.
"Note Register" shall have the meaning given in Section 2.5 of the
-------------
Original Indenture.
"Notes" shall mean the notes issued pursuant to any Supplemental
-----
Indenture.
<PAGE>
APP A-9
"Officers' Certificate" shall mean (a) in the case of an Owner Trustee
---------------------
in its individual capacity or as Owner Trustee, or in the case of the Indenture
Trustee in its individual capacity or as Indenture Trustee, a certificate signed
by any Authorized Officer of such Person and (b) in the case of any other
Person, a certificate signed by the President or any Vice President and by the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
such Person.
"Operative Documents" shall have the meaning set forth in the Purchase
-------------------
Agreement.
"Opinion of Counsel" shall mean a written opinion of counsel for any
------------------
Person either expressly referred in the Indenture or otherwise reasonably
satisfactory to the Indenture Trustee which may include, without limitation,
counsel to the Owner Trustee or the Owner Participant, whether or not such
counsel is an employee of any of them.
"Option Agreement" shall mean the Option Agreement, dated as of the
----------------
Closing Date, between the Owner Trustee and the Remainderman Trustee setting
forth the option of Landlord to ground lease or purchase the Land from the
Remainderman Trustee effective at the expiration of the Estate for Years, as
amended, supplemented or otherwise modified from time to time.
"Original Indenture" shall mean that certain Trust Indenture, dated as
------------------
of the Closing Date, between the Owner Trustee and the Indenture Trustee with
respect to the Property, as the same may be supplemented and/or amended pursuant
to Supplemental Indentures.
"Outstanding", when used with respect to Notes, shall mean, as of the
-----------
date of determination, all such Notes theretofore issued, authenticated and
delivered under the Indenture, except (a) Notes theretofore canceled by the
Indenture Trustee or delivered to the Indenture Trustee for cancellation, (b)
Notes or portions thereof for the payment of which the Indenture Trustee holds
(and has notified the Noteholders thereof that it holds) in trust for that
purpose an amount sufficient to make full payment thereof when due and (c) Notes
in exchange for, or in lieu of, which other Notes have been issued,
authenticated and delivered pursuant to the Original Indenture.
<PAGE>
APP A-10
"Owner Participant" shall mean the Owner Participant under the Trust
-----------------
Agreement.
"Owner Participant Interest" shall have the meaning set forth in
--------------------------
Section 2 of the Participation Agreement.
"Owner Trustee" shall mean Wilmington Trust Company, a Delaware
-------------
banking corporation, not in its individual capacity, except as expressly
provided herein, but solely as owner trustee (together with its permitted
successors and assigns, the "Corporate Owner Trustee") having an address at 1100
-----------------------
North Market Street, Rodney Square North, Wilmington, Delaware 19890-0001 and
William J. Wade, not in his individual capacity, except as expressly provided
herein, but solely as owner trustee (together with his permitted successors and
assigns, the "Individual Owner Trustee"; together with the Corporate Owner
------------------------
Trustee, the "Owner Trustee", as trustee under the Trust Agreement, having an
-------------
address c/o the Corporate Owner Trustee.
"Owner Trustee Liens" shall have the meaning set forth in Section 8 of
-------------------
the Participation Agreement.
"Owner Trustee Purchase Price" shall have the meaning set forth in the
----------------------------
Purchase Agreement.
"Participation Agreement" shall mean the Participation Agreement
-----------------------
(1995-*), dated as of the Closing Date, among Tenant, the Owner Participant, the
Owner Trustee, the Indenture Trustee, the Remainderman Participant, the
Remainderman Trustee and the Pass Through Trustee, as the same may be further
amended, modified or supplemented from time to time in accordance with the
provisions thereof.
"Pass Through Certificate" shall mean any Pass Through Certificate
------------------------
issued pursuant to a Pass Through Trust Agreement, as contemplated by, or
otherwise in connection with, the Participation Agreement.
"Pass Through Trust" shall mean each Pass Through Trust created
------------------
pursuant to a Pass Through Trust Agreement.
"Pass Through Trust Agreement" shall mean each Pass Through Trust
----------------------------
Agreement, dated as of the Closing Date, between Tenant and the Pass Through
Trustee.
"Pass Through Trustee" shall mean Shawmut Bank Connecticut, National
--------------------
Association, not in its individual capacity except as expressly provided
otherwise in the Participation Agreement but solely in its capacity as trustee
under each Pass Through Trust
<PAGE>
APP A-11
Agreement, and such other person that may from time to time be acting as
successor trustee under each Pass Through Trust Agreement.
"Paying Agent" shall have the meaning set forth in Section 5.9 of the
------------
Original Indenture.
"Permitted Exceptions" shall mean, with respect to the Property, the
--------------------
Indenture and the Lease and those exceptions to title listed on Schedule B-II to
the policy of owner's and lender's title insurance delivered pursuant to Article
5 of the Purchase Agreement and approved by the Owner Trustee and the Indenture
Trustee.
"Permitted Investments" shall mean bonds, notes and other obligations
---------------------
of the United States of America and securities unconditionally guaranteed as to
the payment of principal and interest by the United States of America or any
agency thereof having the full faith and credit of the United States of America,
and having maturities, when acquired, of not more than six months or such lesser
time as is necessary for payment of any amounts pursuant to the Indenture.
"Permitted Liens" shall have the meaning set forth in Article 19 of
---------------
the Lease.
"Person" shall mean any individual, partnership, corporation, limited
------
liability company, trust, unincorporated association or joint venture, a
government or any department or agency thereof, or any other entity.
"Property" shall mean the Land together with the Improvements.
--------
"Prospectus" shall mean each prospectus contained in the Registration
----------
Statement at the time it becomes effective and at the time that any post
effective amendment thereto becomes effective and each prospectus filed pursuant
to Rule 424(b) under the Securities Act in connection with any sale of the Pass
Through Certificates, as the same may be supplemented.
"Purchase Agreement" shall mean that certain Agreement for Sale of
------------------
Real Estate, dated as of the Closing Date, among Tenant, the Owner Trustee, the
Remainderman Trustee and the other parties thereto.
"Purchase Offer Termination Date" has the meaning set forth in the
-------------------------------
Lease.
"Record Date" shall have the meaning set forth in Section 2.7 of the
-----------
Original Indenture.
<PAGE>
APP A-12
"Redemption Date", when used with respect to any Note or portion
---------------
thereof to be redeemed, shall mean the date or dates fixed for such redemption
by or pursuant to the Indenture.
"Redemption Price", when used with respect to any Note or portion
----------------
thereof to be redeemed, shall mean the price at which such Note or portion
thereof is to be redeemed, determined as of the applicable Redemption Date,
pursuant to Article 6 of the Original Indenture.
"Registrar" shall mean any Person acting as Note Registrar pursuant to
---------
Section 2.5 of the Original Indenture.
"Registration Statement" shall mean the Registration Statement on Form
----------------------
S-3 (File No. _______), including any amendments or supplements thereto and
including all exhibits and schedules thereto and all documents incorporated in
such registration statement by reference, filed with the SEC under the
Securities Act in connection with the offer, issuance and sale of the Pass-
Through Certificates at the time such registration statement becomes effective
and at the time that each post-effective amendment thereto becomes effective.
"Remainderman Participant" shall mean the Remainderman Participant
------------------------
under the Remainderman Trust Agreement.
"Remainderman Trustee" shall mean First Security Bank of Utah, N.A., a
--------------------
national banking association (the "Corporate Remainderman Trustee") and Val T.
------------------------------
Orton, an individual (the "Individual Remainderman Trustee"), not in their
-------------------------------
individual capacities, but solely as the Remainderman Trustee under the
Remainderman Trust Agreement and each additional or separate trustee appointed
pursuant to Section 11.2 of the Remainderman Trust Agreement.
"Remainderman Trust Agreement" shall mean the Remainderman Trust
----------------------------
Agreement (1995-*), dated as of June __, 1995, between the Remainderman Trustee
and the Remainderman Participant, as the same may be amended, modified or
supplemented from time to time in accordance with the provisions thereof and the
Participation Agreement.
"Remaining Weighted Average Life" shall mean, for any Note, at the
-------------------------------
Redemption Date of such Note, the number of days equal to the quotient obtained
by dividing (a) the sum of the products obtained by multiplying (i) the amount
of each then remaining scheduled payment of principal, including the payment due
on the Stated Maturity of such Note, by (ii) the number of days from and
including the Redemption Date to but excluding the regularly scheduled dates of
each such scheduled payment of principal by (b) the then unpaid principal amount
of such Note.
<PAGE>
APP A-13
"Rent" shall have the meaning set forth in the Lease.
----
"Request" shall mean a request signed in the name of the requesting
-------
party by an Authorized Officer thereof.
"Responsible Officer" shall mean, with respect to the subject matter
-------------------
of any representation, warranty, covenant, agreement or obligation of any party
contained in any Operative Document, the President, or any Vice President,
Assistant Vice President, Treasurer, Assistant Treasurer or other officer who in
the normal performance of his operational responsibility would have knowledge of
such matter and the requirements with respect thereto.
"SEC" shall mean the Securities and Exchange Commission of the United
---
States of America, as from time to time constituted, created under the
Securities Exchange Act, or if at any time such commission is not existing and
performing the duties assigned to it as of the Closing Date under the Trust
Indenture Act, then the body performing such duties at such time.
"Secured Obligations" shall have the meaning set forth in the
-------------------
paragraph immediately prior to the Granting Clause.
"Securities Act" shall mean the Securities Act of 1933, as amended and
--------------
as the same may be further amended, or any comparable successor Applicable Law.
"Securities Exchange Act" shall mean the Securities Exchange Act of
-----------------------
1934, as amended and as the same may be further amended, or any comparable
successor Applicable Law.
A "series of Notes" shall mean all Notes issued pursuant to a
---------------
particular Supplemental Indenture.
"Special Additional Rent" shall have the meaning set forth in Article
-----------------------
3(b) of the Lease.
"State Law Addendum" means an addendum, if any, to the First
------------------
Supplemental Indenture setting forth special granting clauses, provisions
regarding remedies of the Indenture Trustee and certain other provisions which
are necessary or appropriate to reflect the laws and regulations of the state in
which the Property encumbered by the First Supplemental Indenture is located.
<PAGE>
APP A-14
"Stated Maturity", when used with respect to any Note, shall mean the
---------------
date specified in such Note as the fixed date on which the final payment of
principal of such Note is due and payable.
"Supplemental Indenture" shall mean a supplemental indenture to the
----------------------
Indenture pursuant to which the Notes are issued, including, without limitation,
the First Supplemental Indenture.
"Tax" or "Taxes" shall mean any and all fees (including, without
--- -----
limitation, documentation, recording, license and registration fees), taxes
(including, without limitation, net income, net receipts, franchise, value
added, ad valorem, gross income, gross receipts, sales, use, excise, transfer,
rental, property (personal and real, tangible and intangible), and stamp taxes),
levies, imposts, duties, charges, assessments or withholding of any nature
whatsoever, general or special, ordinary or extraordinary, together with any and
all penalties, fines, additions to tax, interest thereon and other charges.
"Tenant" shall mean Kmart Corporation, a Michigan corporation.
------
"Tenant's Purchase Offer" shall have the meaning set forth in the
-----------------------
Lease.
"Termination Date" shall have the meaning set forth in the Lease.
----------------
"Termination Value" shall have the meaning set forth in the Lease.
-----------------
"Transaction Expenses" shall have the meaning set forth in the
--------------------
Participation Agreement.
"Treasury Rate" shall mean, with respect to each Note to be redeemed,
-------------
a per annum rate (expressed as a semiannual equivalent and as a decimal and, in
the case of United States Treasury bills, converted to a bond equivalent yield)
determined to be the per annum rate equal to the semiannual yield to maturity of
United States Treasury securities maturing on the Average Life Date (as defined
below) of such Note, as determined by interpolation between the most recent
weekly average yield to maturity for two series of United States Treasury
securities (A) one maturing as close as possible to, but earlier than, the
Average Life Date of such Note and (B) the other maturing as close as possible
to, but later than, the Average Life Date of such Note, in each case as
published in the most recent H.15(519) (or, if a weekly average yield to
maturity for United States Treasury securities maturing on the Average Life Date
of such Note is reported in the most recent H.15(519), as published in
H.15(519)). For purposes hereof: "H.15(519)" means, Statistical Release H.
---------
15(519), Selected Interest Rates, or any successor publication, published by the
Board of Governors of the Federal Reserve system; "the most recent H.15(5l9)"
-------------------------
means the latest H.15(519) which is published prior to 12:00 noon New York city
time on the third Business Day prior to the applicable Redemption Date; and
"Average Life Date" means, with respect to the redemption
- ------------------
<PAGE>
APP A-15
of a Note, the date that follows the applicable Redemption Date by a period
equal to the Remaining Weighted Average Life of such Note.
"Tripartite Agreement" shall mean that certain Agreement of Covenants,
--------------------
Conditions and Restrictions (Tripartite Agreement), dated as of the Closing
Date, among Tenant, Landlord and the Remainderman Trustee, as amended, modified
or otherwise supplemented from time to time.
"Trust" shall mean the trust created by the Trust Agreement.
-----
"Trust Agreement" shall mean the Trust Agreement (1995-*), dated as of
---------------
June __, 1995, between the Owner Participant and the Owner Trustee, as the same
may be further amended, modified or supplemented from time to time in accordance
with the provisions thereof and of the Indenture and the Participation
Agreement.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as
-------------------
amended and as the same may be further amended, or any comparable successor
Applicable Law.
"UCC" or "Uniform Commercial Code" shall mean the Uniform Commercial
--- -----------------------
Code as in effect in any applicable jurisdiction.
<PAGE>
EXHIBIT 4.2(b)
MORTGAGE, DEED OF TRUST,
ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT,
FINANCING STATEMENT AND FIRST SUPPLEMENTAL INDENTURE
dated as of June __, 1995
between
WILMINGTON TRUST COMPANY,
a Delaware banking corporation, and
WILLIAM J. WADE, an individual,
not in their individual capacities except as expressly
stated herein, but solely as the Owner Trustee
under the Trust Agreement [1995-*] dated as of June __, 1995
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
a national banking association,
and KATHY A. LARIMORE, an individual,
not in their individual capacities but
as the Indenture Trustee
Leveraged Lease of the Store
located at:
___________________
RECORDING REQUESTED BY THIS DOCUMENT WAS, WITH
AND UPON RECORDATION THE ADVICE OF LOCAL
RETURN TO: COUNSEL, PREPARED BY:
Shawmut Bank Connecticut, Timothy G. Little, Esq.
National Association Shearman & Sterling
777 Main Street 153 East 53rd Street
Hartford, Connecticut 06115 New York, New York 10022
Attention: Corporate Trust Administration (212) 848-4686
THIS INSTRUMENT IS TO BE INDEXED AS A MORTGAGE/DEED OF TRUST AND AS A FIXTURE
FILING.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
RECITALS.................................................................... 1
GRANT OF SECURITY........................................................... 2
ARTICLE 1
THE NOTES
............................................................................ 7
SECTION 1.1 Definitions............................................... 7
SECTION 1.2 Designation of the Notes.................................. 7
SECTION 1.3 Maximum Principal Amount.................................. 7
SECTION 1.4 Maturities................................................ 7
SECTION 1.5 Denominations............................................. 8
SECTION 1.6 Principal; Interest Payments, Interest Payment Dates and
Interest Rates.................................................... 8
SECTION 1.7 Redemption................................................ 9
SECTION 1.8 Form of the Series * Notes................................ 9
SECTION 1.9 Certificate of Authentication............................. 9
SECTION 1.10 Other Terms............................................... 9
SECTION 1.11 Equally and Ratably Secured Notes......................... 9
SECTION 1.12 Indenture Estate.......................................... 9
SECTION 1.13 Satisfaction and Discharge................................ 10
ARTICLE 2
INDENTURE EVENTS OF DEFAULT; REMEDIES
............................................................................ 10
SECTION 2.1 Enforcement of Remedies................................... 10
SECTION 2.2 Actions for Ratable Benefit of Noteholders................ 13
SECTION 2.3 Noteholders May Demand Enforcement of Rights by the
Indenture Trustee................................................. 13
SECTION 2.4 Control by Noteholders.................................... 14
SECTION 2.5 Noteholder May Not Bring Suit Except Under Certain
Conditions........................................................ 14
SECTION 2.6 Right of Noteholders to Receive Payment Not to Be
Impaired.......................................................... 15
SECTION 2.7 No Action Contrary to Tenant's Rights Under the Lease..... 15
SECTION 2.8 Waiver of Stay............................................ 16
SECTION 2.9 Right of the Indenture Trustee to Perform Covenants, Etc.. 16
SECTION 2.10 Restoration of Rights and Remedies........................ 16
SECTION 2.11 Rights and Remedies Cumulative............................ 17
<PAGE>
ii
SECTION 2.12 Right of the Owner Trustee to Pay Interest,
Principal, Etc.................................................... 17
ARTICLE 3
SUBORDINATION OF INDENTURE
............................................................................ 19
SECTION 3.1 Subordination of Security Interest in Indenture Estate for
Reasons Other Than Condemnation................................... 19
SECTION 3.2 Appointment of the Indenture Trustee as Attorney-in-Fact.. 19
ARTICLE 4
MISCELLANEOUS PROVISIONS
............................................................................ 19
SECTION 4.1 Execution in Counterparts................................. 19
SECTION 4.2 Tenant Not Liable......................................... 19
SECTION 4.3 Limitation of Liability................................... 19
SECTION 4.4 Security Agreement and Financing Statement................ 20
SECTION 4.5 Assignment of Rent........................................ 20
SECTION 4.6 State Law Provisions...................................... 20
SECTION 4.7 Execution as First Supplemental Indenture................. 20
SECTION 4.8 Responsibility for Recitals, Etc.......................... 20
SECTION 4.9 GOVERNING LAW............................................. 21
SECTION 4.10 Ratification of Indenture................................. 21
SECTION 4.11 Effect of Headings and Table of Contents.................. 21
SECTION 4.12 Successors and Assigns.................................... 21
SECTION 4.13 Severance................................................. 21
SECTION 4.14 Benefits of Indenture..................................... 21
SECTION 4.15 No Recourse Against Others................................ 21
SECTION 4.16 Exculpation............................................... 21
SECTION 4.17 Compensation, Reimbursement and Indemnification........... 22
<PAGE>
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT,
FINANCING STATEMENT AND FIRST SUPPLEMENTAL INDENTURE (this "First Supplemental
------------------
Indenture"), dated as of June __, 1995, between:
- ---------
WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its
individual capacity, except as expressly provided herein, but solely as
owner trustee (together with its permitted successors and assigns, the
"Corporate Owner Trustee") having an address at 1100 North Market Street,
------------------------
Rodney Square North, Wilmington, Delaware 19890-0001 and WILLIAM J. WADE,
not in his individual capacity, except as expressly provided herein, but
solely as owner trustee (together with his permitted successors and
assigns, the "Individual Owner Trustee"; together with the Corporate Owner
------------------------
Trustee, the "Owner Trustee", as trustees under that certain Trust
-------------
Agreement (1995-*), dated as of June __, 1995 (the "Trust Agreement")),
---------------
having an address c/o the Corporate Owner Trustee,
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States of
America, not in its individual capacity, except as expressly provided
herein, but solely as trustee hereunder (together with its permitted
successors and assigns, the "Corporate Indenture Trustee"), having an
---------------------------
address at 777 Main Street, Hartford, Connecticut 06115, and KATHY A.
LARIMORE, an individual having an address at 777 Main Street, Hartford,
Connecticut 06115, not in her individual capacity, except as expressly
provided herein, but solely as trustee hereunder (together with her
permitted successors and assigns, the "Co-Indenture Trustee"; together with
--------------------
the Corporate Indenture Trustee, the "Indenture Trustee"), having an
-----------------
address c/o the Corporate Indenture Trustee.
RECITALS:
--------
(a) The Owner Participant and the Owner Trustee have entered into the
Trust Agreement whereby, among other things, the Owner Trustee has declared a
certain trust for the use and benefit of the Owner Participant, subject,
however, to the lien and security interest of this First Supplemental Indenture
and the Owner Trustee is authorized and directed to execute and deliver this
Indenture;
(b) The Owner Trustee has heretofore executed and delivered to the
Indenture Trustee a Trust Indenture of even date herewith (the "Original
--------
Indenture", together with this First Supplemental Indenture and any subsequent
- ---------
Supplemental Indentures, the "Indenture") with respect to the Property that
---------
provides, inter alia, for the issuance from time to time of Notes to be issued
----- ----
in one or more series;
<PAGE>
2
(c) Sections 2.12 and 11.1 of the Original Indenture provide, among
other things, that the Owner Trustee and the Indenture Trustee may enter into
indentures supplemental to the Original Indenture for, among other things, the
purpose of establishing the form and terms of Notes of any series as permitted
by such Sections;
(d) The Owner Trustee desires the issuance of a series of Notes with
differing maturities, to be designated as "Series *-1 Notes" and the "Series *-
2 Notes" (collectively, the "Series * Notes") in order to finance a portion of
--------------
the Owner Trustee Purchase Price in connection with the purchase by the Owner
Trustee of its interests in the Property;
(e) All action on the part of the Owner Trustee necessary to authorize
the issuance of the Series * Notes under the Original Indenture and this First
Supplemental Indenture has been duly taken; and
(f) All acts and things necessary to make the Series * Notes, when
executed by the Owner Trustee and authenticated and delivered by the Indenture
Trustee as provided in the Original Indenture, the legal, valid and binding
obligations of the Owner Trustee, and to constitute this First Supplemental
Indenture as a valid and binding Supplemental Indenture according to its terms,
have been done and performed, and the execution of this First Supplemental
Indenture and the creation and issuance under the Indenture of the Series *
Notes have in all respects been duly authorized, and the Owner Trustee, in the
exercise of the legal right and power vested in it, executes this First
Supplemental Indenture and proposes to create, execute, issue and deliver the
Series * Notes.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH that in
consideration of the premises, of the acceptance by the Indenture Trustee of the
trust hereby created and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, in order to secure
(collectively, the "Secured Obligations") (a) the payment of the principal of,
-------------------
the Make-Whole Premium, if any, and interest on, the Notes Outstanding from time
to time under the Indenture according to their tenor and effect, and (b) the
performance and observance by the Owner Trustee for the benefit of the
Noteholders and the Indenture Trustee of all the covenants, agreements and
provisions contained herein, in accordance with the terms of the Indenture, in
each case for the uses and purposes and subject to the terms and provisions
hereof:
GRANT OF SECURITY:
-----------------
The Owner Trustee hereby grants, transfers, assigns, mortgages, warrants,
aliens, demises, releases, sets over, grants a lien and security interest,
delivers and conveys to the Indenture Trustee, its successors and assigns, with
power of sale and right of entry, upon the terms herein set forth, the following
described property, rights and privileges, whether now
<PAGE>
3
owned or held or hereafter acquired (herein referred to collectively, the
"Indenture Estate"), to wit:
----------------
(a) the Estate for Years in the land described in Exhibit A hereto
---------
(the "Land");
----
(b) the Improvements located on the Land;
(c) all right, title and interest of the Owner Trustee, now existing
or hereafter arising, in and to the Option Agreement, the Tripartite Agreement
and the Lease (collectively, the "Granting Clause Documents") and all sums now
-------------------------
or hereafter payable to the Owner Trustee with respect thereto, including,
without limitation, (i) all amounts of Rent (other than Excepted Payments) now
or hereafter payable (the "Assigned Payments") and (ii) all rights (exclusive of
-----------------
Excepted Rights) of the Owner Trustee, now existing or hereafter arising, to
exercise any election or option or to make any decision or determination or to
give or receive any notice, consent, waiver or approval or to take any other
action under or in respect of the Granting Clause Documents in connection with
the Landlord Interest (including, without limitation, all of the Owner Trustee's
right, title, interest and estate in, to and under any and all warranties and
other claims against dealers, manufacturers, vendors, contractors and
subcontractors relating to the construction, use or maintenance of the Landlord
Interest), as well as all rights, powers and remedies on the part of the Owner
Trustee, now existing or hereafter arising and whether arising under the
Granting Clause Documents in connection with the Landlord Interest, or by
statute or at law or equity or otherwise, arising out of any Event of Default;
(d) all moneys and securities now or at any time hereafter paid to or
deposited with or required to be paid to or deposited with the Indenture Trustee
pursuant to any provision of the Indenture or any Granting Clause Document
(other than deposits made pursuant to Section 3.1(c) of the Original Indenture)
and held or required to be held by the Indenture Trustee hereunder;
(e) all other rents, issues, profits, products, revenues and other
income of all property from time to time subjected to the lien and security
interest of this First Supplemental Indenture relating to or in connection with
the Landlord Interest and all right, title and interest of every nature
whatsoever of the Owner Trustee, now existing or hereafter arising, in and to
the same and every part thereof;
(f) all other property of every kind and description, real, personal
and mixed, including all equipment, fixtures and goods, and all interests
therein, now owned or hereafter acquired by the Owner Trustee, pursuant to the
provisions of the Granting Clause Documents; and
<PAGE>
4
(g) all proceeds of any of the foregoing.
BUT EXCLUDING, HOWEVER, from the Indenture Estate any and all Excepted
Payments and Excepted Rights now existing or hereafter arising and subject to
the following provisions:
(aa) Without regard to the existence of an Indenture Event of Default,
the Owner Trustee at all times shall retain, to the exclusion of the Indenture
Trustee, the rights (I) to adjust Basic Rent and/or Termination Value in
accordance with the terms of the Lease, (II) to perform Tenant's obligations
pursuant to Article 42 of the Lease, (III) to solicit bids and/or to elect to
retain the Property pursuant to Article 39 of the Lease, (IV) to accept or
reject a Tenant's Purchase Offer in accordance with Article 40 of the Lease, (V)
to take any action with respect to purchase options and/or renewal options under
the Lease, including, but not limited to, the determination of fair market
value, fair market rental value or remaining useful life of the Property made in
connection therewith and (VI) to select accountants, engineers, counsel or
appraisals required in connection with the Lease.
(bb) In addition to the rights of the Owner Trustee set forth in
clause (aa) above, so long as no Indenture Event of Default shall have occurred
and be continuing, the Owner Trustee at all times shall retain, to the exclusion
of the Indenture Trustee (except with respect to those rights shared with the
Indenture Trustee as set forth in clause (cc) below), all other rights of the
Owner Trustee, now existing or hereafter arising, to exercise any election or
option or to make any decision or determination or to give or receive any
notice, consent, waiver or approval or to take any other action under or in
respect of the Granting Clause Documents including, but not limited to, (1) any
such elections, options, decisions, determinations, notices, consents, waivers,
approvals or actions with respect to alterations, additions (structural or
otherwise), additional buildings or structures or any demolition and any non-
disturbance and attornment agreements granted by the Owner Trustee; and (2) the
right to request payment of that portion of Basic Rent, Termination Value or
Adjusted Termination Value (and interest thereon) in excess of the amount
necessary to pay any principal, Make-Whole Premium and interest then due on the
Notes; provided, however, that, except insofar as the same relates to Excepted
-------- -------
Payments to which the Owner Trustee or the Owner Participant is entitled, the
Owner Trustee shall not, without prior written consent of the Indenture Trustee
given with the consent of a Majority in Interest of Noteholders, agree to any
amendment to, or any modification, waiver, discharge, supplement or termination
of, or grant any consent under, any term or provision of (i) the following
provisions of the Lease: Article 1, Article 2 (if the result thereof would be
to shorten the term of the Lease to a period shorter than the period ending with
the latest maturity of any series of the Notes), Article 3(a) (if the result
thereof would be (x) that the Basic Rent payable thereunder would be
insufficient to pay principal or interest on the Notes as same became due and
payable or (y) to reduce the amounts payable to or for the account of the
Indenture Trustee or the Pass Through Trustee), Article 3(b) (if the result
thereof
<PAGE>
5
would be that the Special Additional Rent payable thereunder would be
insufficient to pay the amounts then due and payable under the Notes), Article
3(c)(i), Article 3(d), Article 3(e), Article 4, Article 6 (other than the
contest provisions set forth in such Article and provided that the result
thereof would not materially reduce Tenant's obligations with respect to the
payment of Assessments), Article 7, Article 9, Article 10 (other than any waiver
or supplement of any obligation of Tenant thereunder if the result thereof would
not materially affect the fair market value of the Demised Premises), Article
11, Article 12, Article 13 (if the result thereof would be to permit Tenant to
grant easements, release easements, transfer portions of the Property or take
any other actions that would materially adversely affect the fair market value
of the Landlord Interest), Article 14 (if the result thereof would be to permit
Tenant to terminate the Lease upon the occurrence of an insubstantial casualty
or adversely affect or delay or decrease the amount of any prepayment of the
Notes), Article 15 (if the result thereof would be to permit Tenant to terminate
the Lease upon a taking of less than a substantial portion of the Property or
adversely affect or delay or decrease the amount of any prepayment of the
Notes), Article 17, Article 19, Article 20, Article 21, Article 25, Article 27,
Article 29, Article 34, Article 36, Article 38, Article 39, Article 40 (if the
result thereof would adversely affect or delay or decrease the amount of any
prepayment of the Notes), Article 41 (other than any waiver or supplement of any
obligation of Tenant thereunder if the result would not materially affect the
fair market value of the substitute property), Article 42, Article 43, Article
46 or Article 49; (ii) the definitions contained in Appendix A to the extent
that any amendment, modification, waiver, discharge, supplement or termination,
or consent to any thereof, would result in a substantive change to any of the
foregoing provisions which would contradict or alter any such provision in a
manner that would be prohibited as set forth above; or (iii) the Tripartite
Agreement or the Option Agreement if the result thereof would be a material
diminution of the rights or interests granted Landlord thereby.
(cc) During the continuance of any Indenture Event of Default caused
by an Event of Default, the Owner Trustee at all times shall be entitled on a
nonexclusive basis with the Indenture Trustee to (i) enforce any covenant or
obligation (including obligations in respect of the payment of Rent) of Tenant
under the Lease; provided that in so enforcing any such covenant, the Owner
--------
Trustee may not exercise any remedies under Article 21 of the Lease other than
as provided in clause (ii) below, unless such exercise is required by law in
order to effect the Owner Trustee's rights under clause (ii) below, (ii) declare
the Lease in default and exercise remedies solely pursuant to Article 21(d)(iv)
thereof (and such other remedies as are required by law in order to effect the
rights of the Owner Trustee under this clause), (iii) give or receive any
notice, consent, opinion, document, information, estoppel certificate, waiver,
approval or make any determination under the Lease and (iv) determine the fair
market value or the fair market rental value of the Property, provided that any
--------
amount obtained by the Owner Trustee, as a consequence of any of the above
actions which is payable to the Indenture Trustee or any Noteholder or to which
the Indenture Trustee is
<PAGE>
6
entitled shall (apart from Excepted Payments) be received by the Owner Trustee,
for the benefit of, and immediately paid over to, the Indenture Trustee.
(dd) The Owner Trustee shall at all times retain the right, on a
nonexclusive basis with the Indenture Trustee, to (i) receive from Tenant any
notices, certificates or other reports which Tenant shall provide pursuant to
the Operative Documents, (ii) make any inspection of the Property permitted
under the Lease, (iii) give any notice of default for nonpayment of Additional
Rent and (iv) take any action under Article 41 of the Lease.
(ee) Subject to the restrictions on the actions of Landlord contained
in subparagraphs (aa) and (bb) above, but otherwise without the consent of any
of the Noteholders, at any time and from time to time, the respective parties to
the Operative Documents may modify, amend or supplement any of such Operative
Documents (other than this First Supplemental Indenture or the Original
Indenture) for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions thereof or modifying in any manner the
rights of the respective parties thereunder or may give any consent or waiver
thereunder; provided, however, that no such modification, amendment, supplement,
-------- -------
consent or waiver shall, without the consent of each Noteholder affected
thereby, modify, amend or supplement, or give any consent in respect of or waive
any provision of, the Lease in such manner (i) as to reduce the amounts payable
by Tenant under the Lease assigned to the Indenture Trustee, or change the time
for the payment thereof, so that such payments are less than the amounts
necessary to pay the principal of, the Make-Whole Premium, if any, and interest
on the Outstanding Notes when due (whether at maturity, upon acceleration or
otherwise) or (ii) as would release Tenant from its obligation in respect of
payment of Rent, Termination Value or any other amount payable under the Lease
and intended to be used to pay the principal of, the Make-Whole Premium, if any,
or interest on the Notes, in any manner inconsistent with clause (i) above.
PROVIDED, HOWEVER, THAT (i) during the continuance of an Indenture Event of
-------- -------
Default caused by reason other than an Event of Default, the Indenture Trustee
shall have the exclusive right to declare an Event of Default and to pursue any
and all remedies thereunder and (ii) during such time as Tenant is the owner of
the beneficial interest in the Trust, the Indenture Trustee shall have the
exclusive right to exercise the rights of the Owner Trustee and of Landlord
under the Lease and the other Operative Documents.
If the Land is located in the States of Alaska, Louisiana, Massachusetts,
Michigan, New York, Ohio or South Carolina, this First Supplemental Indenture is
a Mortgage, Assignment of Leases and Rents, Security Agreement, Financing
Statement and First Supplemental Indenture. If the Land is located in the
States of California, Idaho, Mississippi, Missouri, Nevada, North Carolina,
Texas or Virginia, this First Supplemental Indenture is a Deed of Trust,
Assignment of Leases and Rents, Security Agreement, Financing Statement and
First Supplemental Indenture.
<PAGE>
7
IT IS HEREBY COVENANTED AND AGREED that all the Series * Notes are to be
issued and delivered, and that all property, rights and privileges subject or to
become subject hereto are to be held subject to the further covenants,
conditions, uses and trusts herein set forth, and the Owner Trustee, intending
to be legally bound hereby, hereby covenants and agrees with the Indenture
Trustee for itself and for the equal and proportionate benefit and security of
the Noteholders of the Outstanding Series * Notes from time to time, and the
Indenture Trustee agrees to accept the trusts and duties herein set forth, as
follows:
ARTICLE 1
THE NOTES
SECTION 1.1 Definitions. Unless the context shall otherwise
-----------
require, each of the capitalized terms used in this First Supplemental Indenture
and not otherwise defined in this First Supplemental Indenture shall have the
meaning assigned to it in Appendix A hereto, and the rules of usage set forth in
such Appendix A shall apply thereto. As used in this First Supplemental
Indenture, the term "parties" means, collectively, the Owner Trustee and the
-------
Indenture Trustee. Unless otherwise indicated, references in this First
Supplemental Indenture to articles, sections, paragraphs, clauses, appendices,
schedules and exhibits are to the same contained in or attached to this First
Supplemental Indenture.
SECTION 1.2 Designation of the Notes. There is created by this First
------------------------
Supplemental Indenture the Series * Notes. The Series * Notes may forthwith be
executed by the Owner Trustee and delivered to the Indenture Trustee for
authentication and delivery by the Indenture Trustee in accordance with the
provisions of Section 1.12 of the Original Indenture.
SECTION 1.3 Maximum Principal Amount. Except as otherwise provided
------------------------
in the Indenture, the Series * Notes shall be limited in an aggregate principal
amount to $_______. The Series *-1 Notes in the principal amount of $_______
shall have a Stated Maturity of ______ __, 20__ and the Series *-2 Notes in the
principal amount of $_______ shall have a Stated Maturity of _____ __, 20__.
SECTION 1.4 Maturities. The Series * Notes shall be dated the date
----------
hereof, shall have stated maturities on the dates and years set forth below, and
shall have aggregate principal amounts as set forth below:
<PAGE>
8
<TABLE>
<CAPTION>
Aggregate
Stated Principal
Note Maturity Amount
------ -------- ---------
<S> <C> <C>
*-1 $________
*-2 $________
</TABLE>
SECTION 1.5 Denominations. The Series * Notes shall be issued in
-------------
denominations of $1,000 of principal amount or integral multiples thereof.
SECTION 1.6 Principal; Interest Payments, Interest Payment Dates and
--------------------------------------------------------
Interest Rates.
- --------------
(a) Each of the Series * Notes shall bear interest at the rates
specified in such Series * Notes on the principal amount from time to time
outstanding in respect of the period commencing on and including the date of
issuance of such Series * Notes and ending on and excluding the date when the
principal amount of such Series * Notes shall have been paid in full and shall
be payable on each Interest Payment Date specified in such Series * Notes;
provided, that if such Interest Payment Date shall not be a Business Day, any
- --------
such interest shall be payable on the next succeeding Business Day and such
extension of time shall not be included in the computation of interest.
(b) The principal of each Series * Note shall be payable in
installments, on each Installment Payment Date and at Stated Maturity, in
amounts equal to the Installment Payment Amount for each Installment Payment
Date and Stated Maturity, as provided in such Series * Notes.
(c) Payment of interest and Installment Payment Amounts, if any,
payable on any Interest Payment Date or any Installment Payment Date (other than
the Stated Maturity of the Series * Notes) shall be on each Interest Payment
Date or Installment Payment Date (other than the Stated Maturity of the Series *
Notes) to the holder of record on the relevant Record Date. With respect to the
Series * Notes, "Record Date" for the interest or Installment Payment Amounts
-----------
payable on any Interest Payment Date or Installment Payment Date shall mean the
calendar day (whether or not a Business Day) which is 15 calendar days prior to
the related Interest Payment Date or Installment Payment Date.
(d) The principal of, Make-Whole Premium, if any, and interest on the
Series * Notes shall be payable in immediately available funds at the principal
corporate trust office of the Indenture Trustee or at any office or agency
maintained for such purpose pursuant to Section 5.3 of the Original Indenture,
or as otherwise directed in the manner herein provided. Notwithstanding the
foregoing or any provision in any Series * Notes to the contrary, the Indenture
Trustee will pay, or cause to be paid; if so requested by any
<PAGE>
9
Holder of Series * Notes by written notice to the Owner Trustee and the
Indenture Trustee, all amounts payable by the Owner Trustee hereunder to such
Holder of Series * Notes or a nominee therefor either (i) by transferring by
wire in immediately available funds to an account maintained by such Holder of
Series * Notes with a bank in the United States the amount to be distributed to
such Noteholder or (ii) by mailing a check denominated in U.S. dollars to such
Holder of Series * Notes at such address as such Holder of Series * Notes shall
have specified in such notice, in any case without any presentment or surrender
of any Series * Notes, except that any Holder of Series * Notes shall surrender
any Series * Notes to the Indenture Trustee upon payment in full of the
principal amount of and interest on such Series * Notes and such other sums
payable to such Holder hereunder or under the Series * Notes.
SECTION 1.7 Redemption. The Series * Notes shall be subject to
----------
redemption as set forth in Article 6 of the Original Indenture and notice of any
such redemption shall be given in accordance with Sections 6.2, 6.3 and 6.4
thereof. The Redemption Price for each such Series * Note redeemed shall be as
set forth in Section 6.1 thereof.
SECTION 1.8 Form of the Series * Notes. The Series * Notes shall be
--------------------------
issued in substantially the form attached as Exhibit B hereto.
---------
SECTION 1.9 Certificate of Authentication. The form of the
-----------------------------
certificate of authentication of the Series * Notes to be executed by the
Indenture Trustee shall be as set forth at the end of Exhibit B. The alternate
---------
form of certificate of authentication for the Series * Notes to be executed by
an Authenticating Agent on behalf of the Indenture Trustee shall be as set forth
in Section 9.10 of the Original Indenture.
SECTION 1.10 Other Terms. The Series * Notes shall have and be
-----------
subject to such other terms not inconsistent with the terms of this First
Supplemental Indenture as are set forth in the Original Indenture.
SECTION 1.11 Equally and Ratably Secured Notes. All Series * Notes
---------------------------------
shall be equally and ratably secured by this First Supplemental Indenture and
the Indenture Estate, without preference, priority or distinction on account of
the date or dates or the actual time or times of the issue or Stated Maturity of
such Series * Notes, so that all Outstanding Series * Notes shall have the same
right, lien and preference under and by virtue of the Indenture and the
Indenture Estate.
SECTION 1.12 Indenture Estate. Neither the Owner Participant nor any
----------------
Noteholder shall have legal title to any part of the Indenture Estate. No
transfer, by operation of law or otherwise, of any Series * Note or other right,
title or interest of the Owner Participant in and to the Indenture Estate or
hereunder shall operate to terminate the Indenture or the trusts thereunder or
entitle any successor or transferee of the Owner
<PAGE>
10
Participant to any accounting or to the transfer to it of legal title to any
part of the Indenture Estate, other than as set forth in the Original Indenture
and this First Supplemental Indenture, and such restriction shall run with the
land and survive any termination of this First Supplemental Indenture in
violation thereof.
SECTION 1.13 Satisfaction and Discharge. The Series * Notes shall be
--------------------------
subject to satisfaction and discharge as provided in Section 3.1 of the Original
Indenture.
ARTICLE 2
INDENTURE EVENTS OF DEFAULT; REMEDIES
SECTION 2.1 Enforcement of Remedies.
-----------------------
(a) Subject to Section 8.4 of the Original Indenture, Section 2.12
hereof and the limitations set forth in this Section 2.1(a), if an Indenture
Event of Default that arises out of an Event of Default shall have occurred and
be continuing, then in every such case the Indenture Trustee, as assignee and
grantee or secured party hereunder or otherwise, may, to the extent permitted by
Applicable Law, exercise any or all of the rights and powers and pursue any or
all of the remedies set forth in Section 2.1(b); provided, however, that,
-------- -------
notwithstanding any provision herein to the contrary, the Indenture Trustee
shall not exercise any remedies against the Indenture Estate seeking to deprive
the Owner Trustee of its interests therein unless a declaration of acceleration
has been made pursuant to Section 8.2 of the Original Indenture. Any provision
of the Lease, the Original Indenture, this First Supplemental Indenture or any
other Operative Document to the contrary notwithstanding, the Indenture Trustee
shall not foreclose the lien of this First Supplemental Indenture or otherwise
exercise remedies which would result in the exclusion of the Owner Trustee from
the Indenture Estate or any substantial part thereof demised as a result of any
Indenture Event of Default that arises solely by reason of one or more events or
circumstances that constitute an Event of Default under the Lease unless either
(i) the Indenture Trustee has exercised or is currently exercising remedies
under Article 21 of the Lease involving termination of the Lease or termination
of Tenant's right to possession thereunder or (ii) (A) such Event of Default
shall have continued for a period of at least 270 days and (B) a stay is in
effect prohibiting the exercise of such remedies as of the expiration of such
270 day period.
(b) In the event of an occurrence of any Indenture Event of Default
and an acceleration of the Series * Notes pursuant to, and in accordance with,
Section 8.2 of the Original Indenture, then, subject to Sections 2.1(a) and 2.12
hereof and Section 8.4 of the Original Indenture, the Indenture Trustee may,
subject to the rights of Tenant under Section 2.7, without notice to or demand
upon the Owner Trustee, which are expressly waived by
<PAGE>
11
the Owner Trustee (except for notices or demands otherwise required by
Applicable Law to the extent not effectively waived by the Owner Trustee and any
notices or demands specified below), and without releasing any Secured
Obligations, exercise any one or more of the following remedies as the Indenture
Trustee may determine:
(i) The Indenture Trustee may, either directly or through an agent or
court-appointed receiver, and without regard to the adequacy of any
security for the Secured Obligations, exercise any or all of the rights and
powers and pursue any or all of the remedies under the Lease (including
Article 21 thereof) and, in connection therewith, corresponding remedies
under this Section 2.1(b), and may take possession of all or part of the
Indenture Estate and may exclude the Owner Trustee and Tenant and, to the
extent permitted by Applicable Law, all Persons claiming under either of
them wholly or partly therefrom.
(ii) The Indenture Trustee may 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 Series * Notes, and the Indenture Trustee is hereby given
and granted full power and authority to do any act or thing which the Owner
Trustee 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 First
Supplemental Indenture and without applying at any time for a receiver of
such rents.
(iii) The Indenture Trustee may 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 First Supplemental Indenture, and
proceed thereon to final judgment and execution of the entire unpaid
balance of the Series * Notes which is 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 Trustee in its sole discretion may elect.
Subject to the rights of Tenant, the failure to make any tenants parties
defendant to a foreclosure proceeding and to foreclose their rights will
not be asserted by the Owner Trustee as a defense in any proceeding
instituted by the Indenture Trustee to realize upon the Indenture Estate.
Notwithstanding the foregoing, if there is an Event of Default under the
Lease, unless it is legally constrained from doing so, the Indenture
Trustee will join Tenant as a party defendant in any foreclosure action.
(iv) The Indenture Trustee may appoint a receiver of the rents, issues
and profits of the Indenture Estate without the necessity of proving either
the depreciation
<PAGE>
12
or the inadequacy of the value of the security or the insolvency of the
Owner Trustee 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 Trustee and each such Person waive such proof and hereby
consent to the appointment of a receiver.
(v) In the event the Owner Trustee, the Owner Participant, or any
Affiliate of either of them, is in fact (not constructively) physically
occupying the Indenture Estate, or any part thereof, it is hereby agreed
that the Owner Trustee shall pay such reasonable rental monthly in advance
as the Indenture Trustee shall demand for the Indenture Estate, or the part
so occupied, and the use of personalty covered by this First Supplemental
Indenture, such amounts to be applied in accordance with Section 4.3 of the
Original Indenture.
(vi) The Indenture Trustee may apply on account of the Series * Notes
and the interest and Make-Whole Premium, if any, thereon or on account of
any arrearage of interest thereon, or on account of any balance due
pursuant to the Series * Notes or after a foreclosure sale of the Indenture
Estate, or any part thereof, all in accordance with the provisions of
Section 4.3 of the Original Indenture, any unexpended moneys other than
Excepted Payments still retained by the Indenture Trustee that were paid to
the Indenture Trustee by Tenant pursuant to the Lease or otherwise or by
the Owner Trustee 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 Trustee or
Tenant.
(vii) The Indenture Trustee may exercise all rights and remedies of a
secured party pursuant to the Uniform Commercial Code, as it is currently
constituted or may hereafter be amended.
(viii) The Indenture Trustee may exercise any and all other rights
and remedies granted under this First Supplemental Indenture or the
Original Indenture or now or hereafter existing in equity, at law, by
virtue of statute or otherwise.
(c) Anything to the contrary provided in this First Supplemental
Indenture or the Original Indenture notwithstanding, the Indenture Trustee shall
not exercise any remedy hereunder other than the commencement of an action for
judicial foreclosure of the lien of this First Supplemental Indenture unless the
Indenture Trustee shall either (i) simultaneously and in conjunction with the
exercise of such remedy, commence and pursue an action for judicial foreclosure
of the lien of this First Supplemental Indenture or (ii) deliver to the Owner
Trustee an Opinion of Counsel in form and from counsel reasonably satisfactory
to the Owner Trustee that the exercise of such remedy in the absence of a
<PAGE>
13
concurrent action for judicial foreclosure will not impair the exercise of any
rights or remedies reserved to the Owner Trustee pursuant to clause (cc) of the
Granting Clause.
(d) Any provision of the Lease, the Original Indenture or this First
Supplemental Indenture to the contrary notwithstanding, if Tenant shall fail to
pay any Excepted Payment to any Person entitled thereto as and when due, such
Person shall have the right at all times, to the exclusion of the Indenture
Trustee, to demand, collect, sue for, enforce performance of obligations
relating to or otherwise obtain all amounts due in respect of such Excepted
Payment; provided, however, that such Person shall not be entitled to collect
-------- -------
such payment from or execute any judgment against or otherwise cause the placing
of a Lien upon any asset constituting a portion of the Indenture Estate.
SECTION 2.2 Actions for Ratable Benefit of Noteholders. All proofs
------------------------------------------
of claim, rights of action and rights to assert claims under the Original
Indenture, this First Supplemental Indenture or under any of the Notes may be
enforced by the Indenture Trustee without the possession of any of the Notes or
the production thereof in any trial or other proceedings relative thereto, and
any such action or proceedings instituted by the Indenture Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment or reimbursement of the proper
charges, expenses or advances of the Indenture Trustee, be for the ratable
benefit of the Noteholders in respect of which such judgment has been recovered.
SECTION 2.3 Noteholders May Demand Enforcement of Rights by the
---------------------------------------------------
Indenture Trustee. Subject to Sections 2.1 and 2.12 hereof and Sections 8.3 and
- -----------------
8.4 of the Original Indenture, if an Indenture Event of Default shall have
occurred and shall be continuing, the Indenture Trustee shall, upon the receipt
of a Directive from a Majority in Interest of Noteholders and upon the offering
of indemnity as provided in Section 9.1(e) of the Original Indenture, proceed to
institute one or more suits, actions or proceedings at law, in equity or
otherwise, or, take any other appropriate remedy, to enforce payment of the
principal of, or the Make-Whole Premium, if any, or interest on, the Notes or to
foreclose the lien of this First Supplemental Indenture or to sell or to cause
to be sold the Indenture Estate under a judgment or decree of a court or courts
of competent jurisdiction or under the power of sale herein granted, or take
such other appropriate legal, equitable or other remedy, as the Indenture
Trustee, being advised by counsel, shall deem most effectual to protect and
enforce any of the rights or powers of the Indenture Trustee or the Noteholders,
or, in case such Noteholders shall have requested a specific method of
enforcement permitted hereunder, in the manner requested, provided that such
action shall be in accordance with law and the provisions of this First
Supplemental Indenture, and the Indenture Trustee, subject to such indemnity
provisions, shall have the right to decline to follow any such request if the
Indenture Trustee in good faith shall determine that the suit, proceeding or
exercise of the other remedy so requested would involve the Indenture Trustee in
personal liability or expense.
<PAGE>
14
SECTION 2.4 Control by Noteholders. A Majority in Interest of
----------------------
Noteholders of Outstanding Notes shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Indenture
Trustee or exercising any trust or power conferred on the Indenture Trustee
pursuant to this First Supplemental Indenture with respect to the Indenture
Estate, provided that:
(a) such direction shall not be in conflict with any rule of law or
with the rights of the Owner Trustee under the Indenture, and
(b) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee which is not inconsistent with such direction.
SECTION 2.5 Noteholder May Not Bring Suit Except Under Certain
--------------------------------------------------
Conditions. Subject to Sections 2.1 and 2.12 hereof and Sections 8.3 and 8.4 of
- ----------
the Original Indenture, a Noteholder shall not have the right to institute any
suit, action or proceeding at law or in equity or otherwise for the foreclosure
of this First Supplemental Indenture or for the enforcement of any other remedy
under or upon this First Supplemental Indenture, unless:
(a) such Noteholder previously shall have given written notice to the
Indenture Trustee of a continuing Indenture Event of Default;
(b) the Indenture Trustee shall have received a Directive from not
less than a Majority in Interest of Noteholders requesting that it
institute such action, suit or proceeding and shall have been offered
indemnity as provided in Section 9.1(e) of the Original Indenture;
(c) the Indenture Trustee shall have refused or neglected to institute
or prosecute any such action, suit or proceeding for 60 days after receipt
of such notice, request and offer of indemnity; and
(d) no subsequent Directive from not less than a Majority in Interest
of Noteholders inconsistent with the first such Directive has been given to
the Indenture Trustee during such 60-day period.
It is understood and intended that no one or more of the Noteholders
shall have any right in any manner whatever hereunder or under the Notes to (i)
surrender, impair, waive, affect, disturb or prejudice the lien of this First
Supplemental Indenture on any property subject thereto or the rights of the
Noteholders of any other Notes, (ii) obtain or seek to obtain priority over or
preference to any other such Noteholder or (iii) enforce any right under this
First Supplemental Indenture, except in the manner herein provided and for
<PAGE>
15
the equal, ratable and common benefit of all the Noteholders, subject to the
provisions of this First Supplemental Indenture.
SECTION 2.6 Right of Noteholders to Receive Payment Not to Be
-------------------------------------------------
Impaired. Anything in this First Supplemental Indenture to the contrary
- --------
notwithstanding, the right of any Holder of a Series * Note to receive payment
of the principal of, the Make-Whole Premium, if any, and interest on, such
Series * Note, on or after the respective due dates expressed in such Series *
Note (or, in case of redemption, on the Redemption Date fixed for such Series *
Note subject, however, in the case of an optional redemption or redemption
pursuant to Section 6.1(b)(v) or 6.1(b)(vi) of the Original Indenture, to
Section 6.4(c) of the Original Indenture), or to institute suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder of a Series * Note;
provided, however, that such Holder of a Series * Note shall not have the right
- -------- -------
to institute any such suit, if and to the extent that the institution or
prosecution thereof or the entry of judgment therein would, under Applicable Law
result in the surrender, impairment, waiver or loss of the lien of this First
Supplemental Indenture on the Indenture Estate or any part thereof.
SECTION 2.7 No Action Contrary to Tenant's Rights Under the Lease.
-----------------------------------------------------
Notwithstanding the Granting Clause or any other provision of this First
Supplemental Indenture or any provision of any other Operative Document to the
contrary, the Indenture Trustee warrants, covenants and agrees that, unless an
Event of Default shall have occurred and be continuing, the Indenture Trustee
shall not (i) name Tenant as a party in any action or procedures to foreclose
the lien of this First Supplemental Indenture, unless such joinder shall be
required under Applicable Law, and in which case the Indenture Trustee shall not
seek affirmative relief from Tenant in such action nor shall the Lease be cut-
off or terminated nor Tenant's possession thereunder be disturbed in any such
action or proceeding, and (ii) subject to the next succeeding sentence of this
Section 2.7, the Indenture Trustee will recognize the Lease and Tenant's rights
thereunder. Without in any way limiting the requirements of Section 2.9, upon
any acquisition by the 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 the Owner Trustee's
------------------
interest in the Lease, the Lease shall continue as a direct Lease between the
Successor Landlord and Tenant upon all terms, covenants and conditions set forth
in the Lease, except that the Successor Landlord shall not be (A) liable for any
previous act or omission of Landlord under the Lease including, without
limitation, with respect to any Owner Trustee Liens arising from any action or
inaction of Landlord, (B) subject to any offsets, claims, defenses or
counterclaims Tenant may have against the Owner Trustee, (C) bound by any
prepayment of Rent not actually received by the Successor Landlord or (D) bound
by any amendment to the Lease requiring the Indenture Trustee's consent unless
such consent was obtained.
<PAGE>
16
SECTION 2.8 Waiver of Stay. To the extent it may lawfully do so, the
--------------
Owner Trustee, for itself and for any Person who may claim through or under it,
hereby:
(a) agrees that neither it nor any such Person will set up, plead,
claim or in any manner whatsoever take advantage of, any statute or rule of law
now or hereafter in force providing for any stay, moratorium, extension,
appraisement, valuation or redemption or any statute of limitations or any
rights to require a marshalling of assets which may delay, prevent or otherwise
hinder (i) the performance or enforcement or foreclosure of this First
Supplemental Indenture, (ii) the sale of any of the Indenture Estate, or (iii)
the putting of the purchaser or purchasers thereof into possession of the
Property immediately after the sale thereof;
(b) waives and releases all benefit or advantage of such laws; and
(c) consents and agrees that the Indenture Estate may at any such sale
be sold by the Indenture Trustee in parcels or as an entirety.
SECTION 2.9 Right of the Indenture Trustee to Perform Covenants, Etc.
---------------------------------------------------------
If the Owner Trustee shall fail to make any payment required to be made or to
perform any act required to be performed by it hereunder or under the Lease, the
Indenture Trustee, without notice to or demand upon the Owner Trustee and
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 the Indenture Estate. All sums so paid by
the Indenture Trustee and all costs and expenses (including, without limitation,
reasonable fees and expenses of legal counsel and other professionals) so
incurred together with interest thereon from the date of payment or occurrence,
shall constitute additional indebtedness secured by this First Supplemental
Indenture and shall be paid from the Indenture Estate to the Indenture Trustee
on demand. The Indenture Trustee shall not be liable for any damages resulting
from any such payment or action unless such damages shall be a consequence of
willful misconduct or negligence on the part of the Indenture Trustee.
SECTION 2.10 Restoration of Rights and Remedies. In case the
----------------------------------
Indenture Trustee shall have instituted any proceeding to enforce any right,
power or remedy under this First Supplemental Indenture by foreclosure, entry or
otherwise, and such proceedings shall have been discontinued or abandoned for
any reason or shall have been determined adversely to the Indenture Trustee,
then and in every such case the Owner Trustee, the Owner Participant, the
Indenture Trustee, the Noteholders and Tenant shall be restored to their former
positions and rights hereunder with respect to the Indenture Estate, and all
rights, powers and remedies of the Indenture Trustee shall continue as if no
such proceedings had been taken.
<PAGE>
17
SECTION 2.11 Rights and Remedies Cumulative. Each and every right,
------------------------------
power and remedy herein specifically given to the Indenture Trustee under this
First Supplemental Indenture 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 the Indenture Trustee and the exercise or the beginning of the
exercise of any right, power and 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 Indenture Trustee in the exercise of any
right, power or remedy 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 the Owner Trustee or the Owner Participant or to be an acquiescence therein.
SECTION 2.12 Right of the Owner Trustee to Pay Interest, Principal,
------------------------------------------------------
Etc.
- ---
(a) (i) In the event of any default by Tenant in the payment of any
installment of Basic Rent due under the Lease, the Owner Trustee or the
Owner Participant, without the consent of the Indenture Trustee or any
Noteholder, may pay to the Indenture Trustee, for application in accordance
with Section 4.1 of the Original Indenture, a sum equal to the amount of
all (but not less than all) principal and interest as shall then be due and
payable on the Series * Notes, together with any interest on account of
such payment being overdue as provided in Article 4 of the Original
Indenture.
(ii) In the event of any default by Tenant in the performance of any
obligation under the Lease (other than the obligation to pay Basic Rent) or
any other Operative Document, the Owner Trustee or the Owner Participant,
without the consent of the Indenture Trustee or any Holder of a Series *
Note, may exercise Landlord's rights under Article 42 of the Lease to
perform such obligation on behalf of Tenant.
(iii) Solely for the purpose of determining whether there exists an
Indenture Event of Default, (A) any payment by the Owner Trustee or the
Owner Participant pursuant to, and in compliance with, Section 2.12(a)(i)
shall, for the purposes of the Indenture, be deemed to remedy any default
by Tenant in the payment of installments of Basic Rent theretofore due and
payable under the Lease and to remedy any default by the Owner Trustee in
the payment of any amount due and payable under the Series * Notes and (B)
any performance by the Owner Trustee or the Owner Participant of any
obligation of Tenant under the Lease pursuant to, and in compliance with,
Section 2.12(a)(ii) shall, for the purposes of the Indenture, be deemed to
remedy any
<PAGE>
18
default by Tenant in the performance of such obligation under the Lease and
to remedy any related default by the Owner Trustee under this Indenture.
(iv) This Section 2.12(a) shall not apply to any default by Tenant in
the payment of any installment of Basic Rent due under the Lease if such
default by Tenant is the fourth (4th) or more consecutive, or the seventh
(7th) or more during the term of this Indenture, default in the payment of
Basic Rent under the Lease.
(v) Upon the exercise of any cure right under this Section 2.12(a),
neither the Owner Trustee nor the Owner Participant shall obtain any Lien
on any part of the Indenture Estate on account of any payment made or the
costs and expenses incurred in connection therewith nor shall any claim of
the Owner Trustee or the Owner Participant against Tenant or any other
Person for the repayment thereof impair the prior right and security
interest of the Indenture Trustee in and to the Indenture Estate.
(b) (i) Upon the exercise of any right to cure defaults under Section
2.12(a), the Owner Participant or the Owner Trustee, as the case may be,
shall be subrogated to the rights of the Holders of the Series * Notes to
receive from the Indenture Trustee the installment of Basic Rent with
respect to which the Owner Trustee or the Owner Participant effected such a
cure (including interest on account of such installment being overdue) in
the manner set forth in Section 2.12(b)(ii).
(ii) If the Indenture Trustee shall thereafter receive such
installment of Basic Rent, then, notwithstanding the requirements of
Section 4.1 of the Original Indenture, the Indenture Trustee forthwith
shall remit such installment of Basic Rent to the Owner Trustee or the
Owner Participant, as the case may be, in reimbursement for the funds so
advanced by either of them; provided, however, that, if any Indenture Event
-------- -------
of Default shall have occurred and then be continuing, such installment of
Basic Rent shall not be remitted to the Owner Trustee or the Owner
Participant but shall be held by the Indenture Trustee as security for the
obligations secured hereby with respect to the Series * Notes and
distributed in accordance with Section 4.1(b) of the Original Indenture, as
appropriate; and provided, further, that if the principal of and interest
-------- -------
on the Series * Notes shall have become due and payable pursuant to Section
8.2 of the Original Indenture, such installment of Basic Rent shall be
distributed by the Indenture Trustee in accordance with Section 4.3 of the
Original Indenture.
(c) The provisions of this Section 2.12 shall not apply during any
period when Tenant is either an Owner Participant or otherwise controls the
Owner Trustee.
<PAGE>
19
ARTICLE 3
SUBORDINATION OF INDENTURE
SECTION 3.1 Subordination of Security Interest in Indenture Estate
------------------------------------------------------
for Reasons Other Than Condemnation. The Indenture Trustee shall subordinate
- -----------------------------------
the lien of this First Supplemental Indenture to any easements or rights-of-way
granted pursuant to Article 13 of the Lease upon receipt by the Indenture
Trustee of a Request from the Owner Trustee or Tenant requesting such
subordination.
SECTION 3.2 Appointment of the Indenture Trustee as Attorney-in-Fact.
---------------------------------------------------------
For the purpose of executing and delivering any subordination agreement
described in this Article 3, the Indenture Trustee is hereby irrevocably
constituted as agent and attorney-in-fact for the Holders of the Series * Notes
and to that end may execute, sign, seal, acknowledge and deliver all necessary
instruments of subordination as may be requested by Tenant or the Owner Trustee.
ARTICLE 4
MISCELLANEOUS PROVISIONS
SECTION 4.1 Execution in Counterparts. This instrument may be
-------------------------
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
SECTION 4.2 Tenant Not Liable. In no event shall any provision of
-----------------
this First Supplemental Indenture or the Series * Notes constitute a guaranty or
assumption by Tenant of the Series * Notes or the indebtedness represented
thereby.
SECTION 4.3 Limitation of Liability. It is expressly understood and
-----------------------
agreed by the parties hereto that (a) each of the representations, undertakings
and agreements herein made on the part of the Indenture Trustee is made and
intended not as personal representations, undertakings and agreements by Shawmut
Bank Connecticut, National Association but is made and intended for the purpose
of binding only the Indenture Estate and (b) under no circumstances shall
Shawmut Bank Connecticut, National Association be personally liable for the
payment of any indebtedness or expenses of the Indenture Trustee or be liable
for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Indenture Trustee under this First
Supplemental Indenture (except as otherwise expressly provided herein or in the
Operative Documents).
<PAGE>
20
SECTION 4.4 Security Agreement and Financing Statement. It is the
------------------------------------------
intention of the parties hereto that this First Supplemental Indenture shall
constitute a security agreement within the meaning of the Uniform Commercial
Code with respect to the interest of the Owner Trustee, as debtor, in the
Indenture Estate that is covered by the Uniform Commercial Code, and that a
security interest shall attach thereto for the benefit of the Indenture Trustee,
as secured party, as security for the Secured Obligations. This instrument
shall also be effective as a financing statement filed as a fixture filing with
respect to all fixtures included in the Indenture Estate, and the Owner Trustee
shall be the "debtor" and the Indenture Trustee shall be the "secured party"
with respect thereto, and the addresses of each such party shall be as set forth
on the first page hereof. The Owner Trustee hereby authorizes the Indenture
Trustee to file financing and continuation statements with respect to such
security interests, without the signature of the Owner Trustee whenever lawful
and, upon request, the Owner Trustee shall promptly execute financing and
continuation statements to further evidence and secure the Indenture Trustee's
interest therein, and shall pay all filing fees in connection therewith.
SECTION 4.5 Assignment of Rent. The Owner Trustee irrevocably and
------------------
absolutely grants, transfers and assigns to the Indenture Trustee, for so long
as any of the Series * Notes remain outstanding, all of the Owner Trustee's
right, title and interest in and to all Rent (excluding all Excepted Payments
and Excepted Rights) under the Lease. Nothing contained in this First
Supplemental Indenture, nor the exercise of the right by the Indenture Trustee
to collect the Rent under the Lease, shall be deemed to make the Indenture
Trustee a "mortgagee in possession" or shall be, or be construed to be, an
affirmation by the Indenture Trustee of, or an assumption of liability by the
Indenture Trustee under, or a subordination of the lien of this First
Supplemental Indenture to, any tenancy, lease or option.
SECTION 4.6 State Law Provisions. In each state for which there is a
--------------------
State Law Addendum annexed hereto, the provisions of such State Law Addendum
shall apply to this First Supplemental Indenture, and, to the extent that there
are any inconsistencies between the terms and provisions hereof and thereof, the
terms of the State Law Addendum shall govern.
SECTION 4.7 Execution as First Supplemental Indenture. This First
-----------------------------------------
Supplemental Indenture is executed and shall be construed as an indenture
supplemental to the Original Indenture and, as provided in the Original
Indenture, this First Supplemental Indenture forms a part thereof.
SECTION 4.8 Responsibility for Recitals, Etc. The recitals contained
--------------------------------
herein and in the Series * Notes, except the Indenture Trustee's certificate of
authentication, shall be taken as the statements of the Owner Trustee, and the
Indenture Trustee assumes no responsibility for the correctness of the same.
<PAGE>
21
SECTION 4.9 GOVERNING LAW. THIS FIRST SUPPLEMENTAL INDENTURE SHALL
-------------
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH
THE LAND IS LOCATED WITHOUT REFERENCE TO THE CHOICE OF LAW DOCTRINE OF SUCH
STATE.
SECTION 4.10 Ratification of Indenture. As supplemented by this
-------------------------
First Supplemental Indenture, the Original Indenture is in all respects ratified
and confirmed and the Original Indenture as so supplemented by this First
Supplemental Indenture shall be read, taken and construed as one and the same
instrument.
SECTION 4.11 Effect of Headings and Table of Contents. The Article
----------------------------------------
and Section headings herein and the Table of Contents are for convenience of
reference only and shall not affect the construction hereof.
SECTION 4.12 Successors and Assigns. All covenants, agreements,
----------------------
representations and warranties in this First Supplemental Indenture by the
Indenture Trustee and the Owner Trustee shall bind and, to the extent permitted
hereby, shall inure to the benefit of and be enforceable by their respective
successors and assigns, whether so expressed or not.
SECTION 4.13 Severance. In case any provision in this First
---------
Supplemental Indenture or in the Series * 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 4.14 Benefits of Indenture. Nothing in this First
---------------------
Supplemental Indenture or in the Series * Notes, express or implied, shall give
to any Person, other than the parties hereto and their successors and assigns
hereunder, the Owner Participant and its successors and permitted assigns and
the Holders of the Series * Notes, any benefit or any legal or equitable right,
remedy or claim under this First Supplemental Indenture.
SECTION 4.15 No Recourse Against Others. No director, officer,
--------------------------
employee or stockholder, as such, of the Remainderman Participant, the
Remainderman Trustee, the Owner Trustee or the Owner Participant, as the case
may be, or any Affiliate of the foregoing shall have any liability for any
obligations of the Owner Trustee under this First Supplemental Indenture or for
any claim based on, or in respect of or by reason of such obligations or their
creation. Each Holder of a Series * Note by accepting a Series * Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issue of the Series * Notes.
SECTION 4.16 Exculpation. Anything herein to the contrary
-----------
notwithstanding, except as set forth in the following proviso: (i) all and each
of the
<PAGE>
22
representations, warranties, covenants and agreements herein made on the part of
the Owner Trustee are made and intended not as personal representations,
warranties, covenants and agreements by the Owner Trustee in its individual
capacity or for the purpose or with the intention of binding it personally but
are made and intended for the purpose of binding only the Indenture Estate, and
the Original Indenture, this First Supplemental Indenture and the Series * Notes
are executed and delivered by the Owner Trustee solely in the exercise of the
powers expressly conferred upon it as trustee under the Trust Agreement; and
(ii) no personal liability or responsibility is assumed hereunder or under the
Series * Notes by or shall at any time be enforceable against the Owner Trustee
in its individual capacity or the Owner Participant on account of any
representation, warranty, covenant or agreement hereunder of the Owner Trustee,
either express or implied, all such personal liability, if any, being expressly
waived by the Indenture Trustee and (by its acceptance of a Series * Note)
deemed to have been waived by each Holder of a Series * Note and by all Persons
claiming by, through or under such Holder of a Series * Note; provided, however,
-------- -------
that (A) the Corporate Owner Trustee in its individual capacity shall be liable
hereunder (1) for the performance of its agreements made in such capacity under
Section 8 of the Participation Agreement, (2) in the case of the inaccuracy of
any representation or warranty on the part of the Corporate Owner Trustee made
in its individual capacity under Section 14(d) of the Participation Agreement
and (3) for its own willful misconduct or gross negligence; and (B) the
Individual Owner Trustee, if any, in his individual capacity shall be liable
hereunder (1) for the performance of his agreements made in such capacity under
Section 8 of the Participation Agreement, (2) in the case of the inaccuracy of
any representation or warranty on the part of the Individual Owner Trustee made
in his individual capacity under Section 14(e) of the Participation Agreement
and (3) for his own willful misconduct or gross negligence. If a successor
Owner Trustee is appointed in accordance with the terms of the Trust Agreement,
such successor Owner Trustee shall, without any further act, succeed to all the
rights, duties, immunities and obligations hereunder, and its predecessor Owner
Trustee in its individual capacity and as the Owner Trustee shall be released
from all further duties and obligations hereunder and under each other Operative
Document, without prejudice to any claims against such predecessor Owner Trustee
in its individual capacity or as the Owner Trustee for any default by such
predecessor Owner Trustee in its individual capacity or as the Owner Trustee,
respectively, in the performance of its obligations hereunder and under the
other Operative Documents to which it is a party prior to such appointment or
for any inaccuracies in warranties, willful misconduct or gross negligence
during the term of such predecessor Owner Trustee.
SECTION 4.17 Compensation, Reimbursement and Indemnification.
-----------------------------------------------
(a) It is understood that the Owner Trustee or, to the extent so
provided, Tenant, shall pay all Transaction Expenses in the amounts and manner
set forth in Section 32 of the Participation Agreement and that the Owner
Trustee shall be entitled to receive Additional Rent from Tenant to pay the
reasonable on-going fees and expenses of the
<PAGE>
23
Indenture Trustee (including reasonable legal fees) incurred in connection with
the performance of the Indenture Trustee's duties under this Indenture and the
other Operative Documents. To the extent that the Owner Trustee and Tenant do
not fulfill their respective obligations with respect to the compensation and
reimbursement of the Indenture Trustee, the Indenture Trustee shall have, and
the Owner Trustee hereby grants to the Indenture Trustee, a lien on the
Indenture Estate with respect to the Landlord Interest, second only to the lien
created by this First Supplemental Indenture in favor of the Holders of the
Series * Notes, to secure the payment of such compensation and expense
reimbursement to the Indenture Trustee.
(b) The Owner Trustee hereby agrees to indemnify, or cause to be
indemnified, each of the Indenture Trustee, in its individual capacity, any
predecessor Indenture Trustee and any Authorized Agent for, and to hold it
harmless against, any loss, liability or expense incurred without gross
negligence, willful misconduct or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trusts created hereunder
or the performance of its duties hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder but only to the extent
such loss, liability or expense is indemnified by Tenant pursuant to Sections 23
and 24 of the Participation Agreement and only if Tenant has failed to pay such
loss, liability or expense. To the extent that the Owner Trustee does not
fulfill its obligations set forth in the preceding sentence with respect to the
indemnification of the Indenture Trustee, the Indenture Trustee shall have, and
the Owner Trustee hereby grants to the Indenture Trustee, a lien on the
Indenture Estate with respect to the Landlord Interest, second only to the lien
created by this First Supplemental Indenture in favor of the Holders of the
Series * Notes, to secure the payment of such compensation and expense
reimbursement to the Indenture Trustee.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
24
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed on the ____ day of June, 1995, to be
effective as of the day and year first above written.
CORPORATE OWNER TRUSTEE:
[Corporate seal] Wilmington Trust Company, not in its individual
capacity, except as otherwise provided, but solely
as the Corporate Owner Trustee
Attest:
By:
- ---------------------------------- ----------------------------------
Name: Name:
Title: Title:
WITNESSES:
- ----------------------------------
Name:
- ----------------------------------
Name:
WITNESSES: INDIVIDUAL OWNER TRUSTEE:
- ---------------------------------- ----------------------------------
Name: William J. Wade, not in his individual
capacity, except as otherwise
provided, but solely as the Individual
Owner Trustee
- ----------------------------------
Name:
<PAGE>
25
CORPORATE INDENTURE TRUSTEE:
[Corporate seal] Shawmut Bank Connecticut, National
Association,
not in its individual capacity,
except as otherwise provided, but
solely as the Corporate Indenture
Trustee
Attest:
By:
- ---------------------------------- ----------------------------------
Name: Name:
Title: Title:
WITNESSES:
- ----------------------------------
Name:
- ----------------------------------
Name:
WITNESSES: INDIVIDUAL INDENTURE TRUSTEE:
- ---------------------------------- ----------------------------------
Name: Kathy A. Larimore, not in her
individual capacity, except as
otherwise provided, but solely as the
Co-Indenture Trustee
- ----------------------------------
Name:
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
The foregoing First Supplemental Indenture was acknowledged before me,
the undersigned Notary Public, in the County of _______ this _____ day of
_____________, 1995, by ____________________, as ____________________ of
Wilmington Trust Company, ___________________________, not in its individual
capacity, except as expressly set forth in the foregoing Indenture, but solely
as the Corporate Owner Trustee on behalf of the Owner Trustee.
----------------------------------
Notary Public
STATE OF )
) ss.:
COUNTY OF )
The foregoing First Supplemental Indenture was acknowledged before me,
the undersigned Notary Public, in the County of _______ this _____ day of
_____________, 1995, by William J. Wade, not in his individual capacity, except
as expressly set forth in the foregoing Indenture, but solely as the Individual
Owner Trustee on behalf of the Owner Trustee.
----------------------------------
Notary Public
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
The foregoing First Supplemental Indenture was acknowledged before me,
the undersigned Notary Public, in the County of ____________ this __ day of
________________, 1995, by _____________________, as ______________________ of
Shawmut Bank Connecticut, National Association, not in its individual capacity,
except as expressly set forth in the foregoing Indenture, but solely as the
Corporate Indenture Trustee on behalf of the Indenture Trustee.
----------------------------------
Notary Public
STATE OF )
) ss.:
COUNTY OF )
The foregoing First Supplemental Indenture was acknowledged before me,
the undersigned Notary Public, in the County of ____________ this __ day of
________________, 1995, by Kathy A. Larimore, not in her individual capacity,
except as expressly set forth in the foregoing Indenture, but solely as the Co-
Indenture Trustee on behalf of the Indenture Trustee.
----------------------------------
Notary Public
<PAGE>
Appendix A
DEFINITIONS AND RULES OF USAGE
Section 1.1 Rules of Usage. The following rules of usage shall apply
--------------
to the document to which this Appendix is appended unless otherwise required by
the context:
(a) Singular words shall connote the plural as well as the
singular, and vice versa (except as indicated), as may be appropriate.
(b) Unless otherwise indicated, references in the document to
which this Appendix is appended to appendices, articles, schedules,
sections or exhibits are references to appendices, articles,
schedules, sections or exhibits of such document.
(c) The headings, subheadings and table of contents used in the
document to which this Appendix is appended are solely for convenience
of reference and shall not constitute a part of any such document nor
shall they affect their meaning, construction or effect.
(d) References to any Person shall include such Person, its
successors and permitted assigns.
(e) "or" is not exclusive and "include" and "including" are not
limiting.
(f) "hereby," "herein," "hereof," "hereunder" or like words used
in the document to which this Appendix is appended refer to such
document, as it may be amended, modified or supplemented from time to
time in accordance with its terms.
Section 1.2 Definitions. As used in the document to which this
-----------
Appendix is appended, the following terms shall have the respective meanings
assigned thereto:
"Act" when used with respect to any Noteholder shall have the meaning
---
set forth in Section 1.4 of the Original Indenture.
"Additional Rent" shall have the meaning set forth in the Lease.
---------------
"Adjusted Termination Value" shall have the meaning set forth in
--------------------------
the Lease.
<PAGE>
APP A-2
"Affiliate", with respect to any Person, shall mean any other Person
---------
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, the term
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Applicable Law" shall mean all applicable laws, Environmental Laws,
--------------
statutes, treaties, rules, codes, ordinances, regulations, permits,
certificates, orders, interpretations, licenses and permits of any Governmental
Authority and judgments, decrees, injunctions, writs, orders or like action of
any court, arbitrator or other administrative, judicial or quasi-judicial
tribunal or agency of competent jurisdiction.
"Assigned Payments" shall have the meaning set forth in the
-----------------
Granting Clause.
"Authenticating Agent" shall mean any Person authorized to
--------------------
authenticate and deliver Notes of any series on behalf of the Indenture Trustee
pursuant to Section 9.10(b) of the Original Indenture.
"Authorized Agent" shall mean any Paying Agent, Registrar or
----------------
Authenticating Agent.
"Authorized Officer" shall mean, with respect to the Indenture
------------------
Trustee, any officer in the Corporate Trust Administration department of the
Indenture Trustee who shall be duly authorized by appropriate corporate action
to authenticate a Note or to execute any Operative Document, and shall mean,
with respect to any Owner Trustee, any officer of any Owner Trustee in its
Corporate Trust Administration department who shall be duly authorized by
appropriate corporate action to deliver an Owner Trustee Request or to execute
any Operative Document.
"Bankruptcy Code" shall mean the Bankruptcy Reform Act of 1978, as
---------------
amended and as the same may be further amended, and any other Applicable Law
with respect to bankruptcy, insolvency or reorganization that is successor
thereto.
"Base Term" shall have the meaning set forth in the Lease.
---------
"Basic Rent" shall have the meaning set forth in the Lease.
----------
"Business Day" shall mean any day other than a Saturday or Sunday or
------------
other day on which banks in New York, New York, Troy, Michigan or the city in
which the
<PAGE>
APP A-3
Indenture Trustee's Office is located are authorized or required to be closed,
or, if no Note is Outstanding, the city in which the principal corporate trust
office of the Owner Trustee is located.
"Casualty" shall mean an event by which the Improvements or any
--------
substantial portion thereof are damaged or destroyed and which causes Tenant to
terminate the Lease and to make a Tenant's Purchase Offer in accordance with
Articles 14(h) and 40 of the Lease.
"Closing Date" shall mean June __, 1995.
------------
"Condemnation" shall mean a total or partial condemnation of the
------------
Property which causes Tenant to terminate the Lease and to make a Tenant's
Purchase Offer in accordance with Articles 15(a) and 40 of the Lease.
"Corporate Owner Trustee" shall have the meaning set forth in the
-----------------------
preamble to the Indenture.
"Deed" shall mean the deed delivered by Tenant or other applicable
----
seller to the Owner Trustee pursuant to the Purchase Agreement conveying the
Estate for Years in the Land and the fee interest in the Improvements.
"Defaulted Installment" shall have the meaning set forth in
---------------------
Section 2.7 of the Original Indenture.
"Defaulted Interest" shall have the meaning set forth in Section
------------------
2.7 of the Original Indenture.
"Demised Premises" shall have the meaning set forth in the Lease.
----------------
"Directive" shall mean one or more instruments in writing executed in
---------
accordance with the terms and provisions of the Indenture by the party issuing
the Directive, or its duly authorized agents or attorneys-in-fact, by Persons
representing a Majority in Interest of the Holders of the Notes in question
directing the Indenture Trustee to take or refrain from taking the action
specified in such instrument or otherwise advising the Indenture Trustee;
provided, however, that each Holder of the Notes in question, or its duly
- -------- -------
authorized agent or attorney-in-fact, shall be entitled to direct the Indenture
Trustee only with respect to the aggregate unpaid principal amount of such Notes
(or portion thereof) issued and Outstanding that are registered in the name of
such Holder and that are certified by such Holder or its duly authorized agent
or attorney-in-fact to be (a) held by it for its own account and not pledged as
collateral for any of its obligations or (b) pledged as collateral for one or
more of its obligations, or obligations with respect to which it is acting as
trustee under a
<PAGE>
APP A-4
related indenture, but in respect of which it has received a directive,
satisfactory in form and substance to the Indenture Trustee given by the Holder
or Holders of a proportionate interest in the obligations secured by such Notes
in accordance with the instrument governing such obligations. More than one
Directive can be given by a registered Holder of such Notes or its duly
authorized agent or attorney-in-fact pursuant to clause (b) of the preceding
sentence, and such Directives may be contradictory or inconsistent, so long as
each Directive to take or refrain from taking the action specified therein or
otherwise advising the Indenture Trustee meets the requirements of said clause
(b).
"Dollar" or "$" shall mean the lawful currency of the United
------ -
States of America.
"Environmental Claims" shall have the meaning set forth in the
--------------------
Lease.
"Environmental Law" shall have the meaning set forth in the
-----------------
Lease.
"Estate for Years" shall mean, with respect to the Property, the
----------------
estate for years granted by Tenant or other applicable seller to the Owner
Trustee in the land of such Property, for a term of 30 years.
"Event of Default" shall have the meaning set forth in Article 20
----------------
of the Lease.
"Event of Loss" shall mean a Casualty or a Condemnation.
-------------
"Excepted Payments" shall mean:
-----------------
(a) any amounts payable as Additional Rent under the Lease to the
Owner Trustee in its individual capacity or to the Owner Participant,
including all indemnity payments to which the Owner Trustee in its
individual capacity or the Owner Participant, or any of their respective
Affiliates (or the respective successors, assigns, agents, officers,
directors or employees thereof) is entitled under the Operative Documents;
(b) any amounts other than Basic Rent payable under any Operative
Document to reimburse the Owner Trustee or the Owner Participant or any of
their respective Affiliates (including the reasonable expenses of the Owner
Trustee or the Owner Participant, incurred in connection with any such
payment) for performing or complying with any of the obligations of Tenant
under and as permitted by any Operative Document;
<PAGE>
APP A-5
(c) any insurance proceeds (or payments with respect to risks
self-insured or policy deductibles) under liability policies payable to, or
maintained by, the Owner Trustee in its individual capacity or the Owner
Participant or any Affiliate of the Owner Participant;
(d) any amount payable to, or for the benefit of, the Owner
Participant as the purchase price for the interests conveyed pursuant
to Section 3 of the Participation Agreement; and
(e) any payments in respect of interest to the extent
attributable to payments referred to in clauses (a) through (d) above.
"Excepted Rights" shall mean (a) all rights with respect to Excepted
---------------
Payments of the Person entitled thereto; provided, however, that the rights of
-------- -------
the Owner Trustee to receive Rent under each Lease shall not constitute an
Excepted Right, (b) the rights of such Person to demand, collect, sue for or
otherwise receive and enforce payment of Excepted Payments, including, but not
limited to, the right to declare an Event of Default under the Lease by reason
of such failure to receive an Excepted Payment; provided, however, that the
-------- -------
rights set forth in the clause (b) shall not include any remedies under the
Lease other than the right to proceed by appropriate action to enforce
performance by Tenant of the applicable covenants or to recover damages because
of such failure and (c) all rights and privileges expressly reserved to the
Owner Trustee with the Indenture Trustee pursuant to the First Supplemental
Indenture for the periods specified in the First Supplemental Indenture and the
Original Indenture.
"Exchange Date" shall have the meaning set forth in Section 7.1
-------------
of the Original Indenture.
"Expenses" shall mean liabilities, obligations, losses (excluding loss
--------
of anticipated profits), damages, penalties, claims (including Environmental
Claims), actions. suits, judgments, out-of-pocket costs, expenses and
disbursements (including reasonable legal fees and expenses and reasonable
consultants' fees and expenses) of any kind and nature whatsoever, whether or
not subject to litigation; provided, however, that "Expenses" shall in no
-------- ------- --------
circumstances include ordinary and usual operating or overhead expenses,
including internal legal costs.
"First Supplemental Indenture" shall mean that certain Mortgage, Deed
----------------------------
of Trust, Assignment of Leases and Rents, Security Agreement, Financing
Statement and First Supplemental Indenture, dated as of the Closing Date,
between the Owner Trustee and the Indenture Trustee with respect to the
Property, as the same may be amended from time to time.
"GAAP" shall mean generally accepted accounting principles.
----
<PAGE>
APP A-6
"Governmental Action" shall have the meaning set forth in the
-------------------
Participation Agreement.
"Governmental Authority" shall mean any local, regional, county, state
----------------------
and Federal governments, agencies, authorities, courts and offices having
jurisdiction over the Property.
"Granting Clause" shall mean the clause entitled "GRANT OF
---------------
SECURITY" in the First Supplemental Indenture.
"Granting Clause Documents" shall have the meaning set forth in
-------------------------
the Granting Clause.
"Improvements" shall mean the improvements located on the Land.
------------
"Indemnitee" shall have the meaning set forth in the
----------
Participation Agreement.
"Indenture Default" shall mean an event which, after giving of notice
-----------------
or lapse of time, or both, would become an Indenture Event of Default.
"Indenture Estate" shall have the meaning set forth in the First
----------------
Supplemental Indenture.
"Indenture Event of Default" shall mean any of the events
--------------------------
specified in Section 8.1 of the Original Indenture.
"Indenture Trustee" shall have the meaning given in the preamble
-----------------
to the Original Indenture.
"Indenture Trustee's Liens" shall mean Liens against the Indenture
-------------------------
Estate that result from acts of, or any failure to act by, or as a result of
claims against, the Indenture Trustee, in its individual or fiduciary capacity,
unrelated to the transactions contemplated by the Operative Documents or that
are in breach of any covenant or agreement of the Indenture Trustee, in its
individual or fiduciary capacity, set forth in any of the Operative Documents,
unless such action or failure to act is consented to by Landlord and Tenant or
is a result of the occurrence or continuance of an Event of Default.
"Indenture Trustee's Office" shall mean the office of the Indenture
--------------------------
Trustee located at 777 Main Street, Hartford, Connecticut 06115, or such other
office as may be designated by the Indenture Trustee to the Owner Trustee and
each Holder of an Outstanding Note under the Indenture.
<PAGE>
APP A-7
"Independent Investment Banker" shall mean an independent investment
-----------------------------
banking institution of national standing appointed by Tenant (who shall be
reasonably acceptable to the Owner Participant) on behalf of the Owner Trustee;
provided that if the Indenture Trustee shall not have received written notice of
- -------- ----
such an appointment at least 10 days prior to the applicable redemption date or
if an Indenture Event of Default shall have occurred and be continuing,
"Independent Investment Banker" shall mean such an institution appointed by the
- ------------------------------
Indenture Trustee. The fees and expenses of any such Independent Investment
Banker shall be paid by Tenant.
"Individual Owner Trustee" shall have the meaning set forth in
------------------------
the preamble to the Indenture.
"Installment Payment Amount" shall mean, with respect to any
--------------------------
Outstanding Note, the amount of the installment payment of principal due and
payable on each Installment Payment Date other than the Stated Maturity thereof,
which amount shall be set forth in the Supplemental Indenture creating the
applicable series of Notes.
"Installment Payment Date" shall mean each date on which an
------------------------
Installment Payment Amount is due and payable on any Outstanding Note, as set
forth in the Supplemental Indenture creating the applicable series of Notes.
"Interest Payment Date" shall mean each date on which interest is due
---------------------
on any Outstanding Note, as set forth in the Supplemental Indenture creating the
applicable series of Notes.
"Land" shall mean the land described in Exhibit A of the First
---- ---------
Supplemental Indenture.
"Landlord" shall have the meaning set forth in the Lease.
--------
"Landlord's Acceptance" shall have the meaning set forth in the
---------------------
Lease.
"Landlord Interest" shall mean the Improvements on, the Estate for
-----------------
Years in, and the rights of Landlord under the Option Agreement with respect to,
the Land.
"Lease" shall mean that certain lease, dated as of the Closing Date,
-----
between Landlord and Tenant covering the Property, as amended, supplemented or
otherwise modified from time to time.
"Liabilities" shall have the meaning set forth in Section 9.1 of
-----------
the Original Indenture.
<PAGE>
APP A-8
"Lien" shall mean any mortgage, deed of trust, pledge, security
----
interest, encumbrance, lien, easement, restriction, servitude or charge of any
kind encumbering the Property other than Permitted Exceptions, including,
without limitation, any irrevocable license, conditional sale or other title
retention agreement, any lease in the nature thereof or the filing of, or
agreement to execute as "debtor", any financing or continuation statement under
the Uniform Commercial Code of any jurisdiction or any federal, state or local
lien imposed pursuant to any Environmental Law.
"Majority in Interest of Noteholders" shall mean Holders of a
-----------------------------------
particular series or subseries of Notes holding a majority in principal amount
of all Outstanding Notes of such series or subseries of Notes at the time of any
such determination.
"Make-Whole Premium" shall mean, with respect to any Notes to be
------------------
redeemed, the excess, if any, of (i) the sum of the present values of all the
remaining scheduled payments of principal and interest from the date of such
redemption to the Stated Maturity of such Notes discounted semiannually on each
Installment Payment Date at a rate equal to the Treasury Rate, based on a 360-
day year of twelve 30-day months, over (ii) the aggregate unpaid principal
amount of such Notes plus accrued but unpaid interest on such Notes (but not any
accrued interest in default), as determined by an Independent Investment Banker
as of the third Business Day prior to the Redemption Date for such Notes;
provided, however, that if such redemption occurs on or after the Make-Whole
- -------- -------
Premium Termination Date for such Note, the Make-Whole Premium shall be zero;
provided further, however, that in no event shall the aggregate of all amounts
- -------- ------- -------
accrued or paid pursuant to any Notes or any related document that, under
Applicable Laws, constitute or may be deemed to constitute interest on the
indebtedness evidenced by such Notes ever exceed the maximum nonusurious rate of
interest permitted by whichever of applicable federal or state laws permits the
lower interest rate.
"Make-Whole Premium Termination Date" shall mean, with respect to the
-----------------------------------
Series *-1 Notes, ______ __, ____, and with respect to the Series *-2 Notes,
________, ____.
"Material Default" shall have the meaning set forth in the Lease.
----------------
"Maturity", when used with respect to any Note, shall mean the date on
--------
which the principal of such Note becomes due and payable as therein or in the
corresponding Indenture provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Noteholder" or "Holder" shall mean the registered owners from
---------- ------
time to time of the Outstanding Notes.
<PAGE>
APP A-9
"Note Register" shall have the meaning given in Section 2.5 of
-------------
the Original Indenture.
"Notes" shall mean the notes issued pursuant to any Supplemental
-----
Indenture.
"Officers' Certificate" shall mean (a) in the case of an Owner Trustee
---------------------
in its individual capacity or as Owner Trustee, or in the case of the Indenture
Trustee in its individual capacity or as Indenture Trustee, a certificate signed
by any Authorized Officer of such Person and (b) in the case of any other
Person, a certificate signed by the President or any Vice President and by the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
such Person.
"Operative Documents" shall have the meaning set forth in the
-------------------
Purchase Agreement.
"Opinion of Counsel" shall mean a written opinion of counsel for any
------------------
Person either expressly referred in the Indenture or otherwise reasonably
satisfactory to the Indenture Trustee which may include, without limitation,
counsel to the Owner Trustee or the Owner Participant, whether or not such
counsel is an employee of any of them.
"Option Agreement" shall mean the Option Agreement, dated as of the
----------------
Closing Date, between the Owner Trustee and the Remainderman Trustee setting
forth the option of Landlord to ground lease or purchase the Land from the
Remainderman Trustee effective at the expiration of the Estate for Years, as
amended, supplemented or otherwise modified from time to time.
"Original Indenture" shall mean that certain Trust Indenture, dated as
------------------
of the Closing Date, between the Owner Trustee and the Indenture Trustee with
respect to the Property, as the same may be supplemented and/or amended pursuant
to Supplemental Indentures.
"Outstanding", when used with respect to Notes, shall mean, as of the
-----------
date of determination, all such Notes theretofore issued, authenticated and
delivered under
<PAGE>
APP A-10
the Indenture, except (a) Notes theretofore canceled by the Indenture Trustee or
delivered to the Indenture Trustee for cancellation, (b) Notes or portions
thereof for the payment of which the Indenture Trustee holds (and has notified
the Noteholders thereof that it holds) in trust for that purpose an amount
sufficient to make full payment thereof when due and (c) Notes in exchange for,
or in lieu of, which other Notes have been issued, authenticated and delivered
pursuant to the Original Indenture.
"Owner Participant" shall mean the Owner Participant under the
-----------------
Trust Agreement.
"Owner Participant Interest" shall have the meaning set forth in
--------------------------
Section 2 of the Participation Agreement.
"Owner Trustee" shall mean Wilmington Trust Company, a Delaware
-------------
banking corporation, not in its individual capacity, except as expressly
provided herein, but solely as owner trustee (together with its permitted
successors and assigns, the "Corporate Owner Trustee") having an address at 1100
-----------------------
North Market Street, Rodney Square North, Wilmington, Delaware 19890-0001 and
William J. Wade, not in his individual capacity, except as expressly provided
herein, but solely as owner trustee (together with his permitted successors and
assigns, the "Individual Owner Trustee"; together with the Corporate Owner
------------------------
Trustee, the "Owner Trustee", as trustee under the Trust Agreement, having an
-------------
address c/o the Corporate Owner Trustee.
"Owner Trustee Liens" shall have the meaning set forth in Section
-------------------
8 of the Participation Agreement.
"Owner Trustee Purchase Price" shall have the meaning set forth
----------------------------
in the Purchase Agreement.
"Participation Agreement" shall mean the Participation Agreement
-----------------------
(1995-*), dated as of the Closing Date, among Tenant, the Owner Participant, the
Owner Trustee, the Indenture Trustee, the Remainderman Participant, the
Remainderman Trustee and the Pass Through Trustee, as the same may be further
amended, modified or supplemented from time to time in accordance with the
provisions thereof.
"Pass Through Certificate" shall mean any Pass Through Certificate
------------------------
issued pursuant to a Pass Through Trust Agreement, as contemplated by, or
otherwise in connection with, the Participation Agreement.
"Pass Through Trust" shall mean each Pass Through Trust created
------------------
pursuant to a Pass Through Trust Agreement.
<PAGE>
APP A-11
"Pass Through Trust Agreement" shall mean each Pass Through Trust
----------------------------
Agreement, dated as of the Closing Date, between Tenant and the Pass Through
Trustee.
"Pass Through Trustee" shall mean Shawmut Bank Connecticut, National
--------------------
Association, not in its individual capacity except as expressly provided
otherwise in the Participation Agreement but solely in its capacity as trustee
under each Pass Through Trust Agreement, and such other person that may from
time to time be acting as successor trustee under each Pass Through Trust
Agreement.
"Paying Agent" shall have the meaning set forth in Section 5.9 of
------------
the Original Indenture.
"Permitted Exceptions" shall mean, with respect to the Property, the
--------------------
Indenture and the Lease and those exceptions to title listed on Schedule B-II to
the policy of owner's and lender's title insurance delivered pursuant to Article
5 of the Purchase Agreement and approved by the Owner Trustee and the Indenture
Trustee.
"Permitted Investments" shall mean bonds, notes and other obligations
---------------------
of the United States of America and securities unconditionally guaranteed as to
the payment of principal and interest by the United States of America or any
agency thereof having the full faith and credit of the United States of America,
and having maturities, when acquired, of not more than six months or such lesser
time as is necessary for payment of any amounts pursuant to the Indenture.
"Permitted Liens" shall have the meaning set forth in Article 19
---------------
of the Lease.
"Person" shall mean any individual, partnership, corporation, limited
------
liability company, trust, unincorporated association or joint venture, a
government or any department or agency thereof, or any other entity.
"Property" shall mean the Land together with the Improvements.
--------
"Prospectus" shall mean each prospectus contained in the Registration
----------
Statement at the time it becomes effective and at the time that any post
effective amendment thereto becomes effective and each prospectus filed pursuant
to Rule 424(b) under the Securities Act in connection with any sale of the Pass
Through Certificates, as the same may be supplemented.
"Purchase Agreement" shall mean that certain Agreement for Sale of
------------------
Real Estate, dated as of the Closing Date, among Tenant, the Owner Trustee, the
Remainderman Trustee and the other parties thereto.
<PAGE>
APP A-12
"Purchase Offer Termination Date" has the meaning set forth in
-------------------------------
the Lease.
"Record Date" shall have the meaning set forth in Section 2.7 of
-----------
the Original Indenture.
"Redemption Date", when used with respect to any Note or portion
---------------
thereof to be redeemed, shall mean the date or dates fixed for such redemption
by or pursuant to the Indenture.
"Redemption Price", when used with respect to any Note or portion
----------------
thereof to be redeemed, shall mean the price at which such Note or portion
thereof is to be redeemed, determined as of the applicable Redemption Date,
pursuant to Article 6 of the Original Indenture.
"Registrar" shall mean any Person acting as Note Registrar
---------
pursuant to Section 2.5 of the Original Indenture.
"Registration Statement" shall mean the Registration Statement on Form
----------------------
S-3 (File No. _______), including any amendments or supplements thereto and
including all exhibits and schedules thereto and all documents incorporated in
such registration statement by reference, filed with the SEC under the
Securities Act in connection with the offer, issuance and sale of the Pass-
Through Certificates at the time such registration statement becomes effective
and at the time that each post-effective amendment thereto becomes effective.
"Remainderman Participant" shall mean the Remainderman
------------------------
Participant under the Remainderman Trust Agreement.
"Remainderman Trustee" shall mean First Security Bank of Utah, N.A., a
--------------------
national banking association (the "Corporate Remainderman Trustee") and Val T.
------------------------------
Orton, an individual (the "Individual Remainderman Trustee"), not in their
-------------------------------
individual capacities, but solely as the Remainderman Trustee under the
Remainderman Trust Agreement and each additional or separate trustee appointed
pursuant to Section 11.2 of the Remainderman Trust Agreement.
"Remainderman Trust Agreement" shall mean the Remainderman Trust
----------------------------
Agreement (1995-*), dated as of June __, 1995, between the Remainderman Trustee
and the Remainderman Participant, as the same may be amended, modified or
supplemented from time to time in accordance with the provisions thereof and the
Participation Agreement.
<PAGE>
APP A-13
"Remaining Weighted Average Life" shall mean, for any Note, at the
-------------------------------
Redemption Date of such Note, the number of days equal to the quotient obtained
by dividing (a) the sum of the products obtained by multiplying (i) the amount
of each then remaining scheduled payment of principal, including the payment due
on the Stated Maturity of such Note, by (ii) the number of days from and
including the Redemption Date to but excluding the regularly scheduled dates of
each such scheduled payment of principal by (b) the then unpaid principal amount
of such Note.
"Rent" shall have the meaning set forth in the Lease.
----
"Request" shall mean a request signed in the name of the
-------
requesting party by an Authorized Officer thereof.
"Responsible Officer" shall mean, with respect to the subject matter
-------------------
of any representation, warranty, covenant, agreement or obligation of any party
contained in any Operative Document, the President, or any Vice President,
Assistant Vice President, Treasurer, Assistant Treasurer or other officer who in
the normal performance of his operational responsibility would have knowledge of
such matter and the requirements with respect thereto.
"SEC" shall mean the Securities and Exchange Commission of the United
---
States of America, as from time to time constituted, created under the
Securities Exchange Act, or if at any time such commission is not existing and
performing the duties assigned to it as of the Closing Date under the Trust
Indenture Act, then the body performing such duties at such time.
"Secured Obligations" shall have the meaning set forth in the
-------------------
paragraph immediately prior to the Granting Clause.
"Securities Act" shall mean the Securities Act of 1933, as amended and
--------------
as the same may be further amended, or any comparable successor Applicable Law.
"Securities Exchange Act" shall mean the Securities Exchange Act of
-----------------------
1934, as amended and as the same may be further amended, or any comparable
successor Applicable Law.
A "series of Notes" shall mean all Notes issued pursuant to a
---------------
particular Supplemental Indenture.
"Special Additional Rent" shall have the meaning set forth in
-----------------------
Article 3(b) of the Lease.
<PAGE>
APP A-14
"State Law Addendum" means an addendum, if any, to the First
------------------
Supplemental Indenture setting forth special granting clauses, provisions
regarding remedies of the Indenture Trustee and certain other provisions which
are necessary or appropriate to reflect the laws and regulations of the state in
which the Property encumbered by the First Supplemental Indenture is located.
"Stated Maturity", when used with respect to any Note, shall mean the
---------------
date specified in such Note as the fixed date on which the final payment of
principal of such Note is due and payable.
"Supplemental Indenture" shall mean a supplemental indenture to the
----------------------
Indenture pursuant to which the Notes are issued, including, without limitation,
the First Supplemental Indenture.
"Tax" or "Taxes" shall mean any and all fees (including, without
--- -----
limitation, documentation, recording, license and registration fees), taxes
(including, without limitation, net income, net receipts, franchise, value
added, ad valorem, gross income, gross receipts, sales, use, excise, transfer,
rental, property (personal and real, tangible and intangible), and stamp taxes),
levies, imposts, duties, charges, assessments or withholding of any nature
whatsoever, general or special, ordinary or extraordinary, together with any and
all penalties, fines, additions to tax, interest thereon and other charges.
"Tenant" shall mean Kmart Corporation, a Michigan corporation.
------
"Tenant's Purchase Offer" shall have the meaning set forth in the
-----------------------
Lease.
"Termination Date" shall have the meaning set forth in the Lease.
----------------
"Termination Value" shall have the meaning set forth in the
-----------------
Lease.
"Transaction Expenses" shall have the meaning set forth in the
--------------------
Participation Agreement.
"Treasury Rate" shall mean, with respect to each Note to be redeemed,
-------------
a per annum rate (expressed as a semiannual equivalent and as a decimal and, in
the case of United States Treasury bills, converted to a bond equivalent yield)
determined to be the per annum rate equal to the semiannual yield to maturity of
United States Treasury securities maturing on the Average Life Date (as defined
below) of such Note, as determined by interpolation between the most recent
weekly average yield to maturity for two series of United States Treasury
securities (A) one maturing as close as possible to, but earlier than, the
Average Life Date of such Note and (B) the other maturing as close as possible
to, but later than, the Average Life Date of such Note, in each case as
published in the most recent
<PAGE>
APP A-15
H.15(519) (or, if a weekly average yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Note is reported in the
most recent H.15(519), as published in H.15(519)). For purposes hereof:
"H.15(519)" means, Statistical Release H. 15(519), Selected Interest Rates, or
- ----------
any successor publication, published by the Board of Governors of the Federal
Reserve system; "the most recent H.15(5l9)" means the latest H.15(519) which is
-------------------------
published prior to 12:00 noon New York city time on the third Business Day prior
to the applicable Redemption Date; and "Average Life Date" means, with respect
-----------------
to the redemption of a Note, the date that follows the applicable Redemption
Date by a period equal to the Remaining Weighted Average Life of such Note.
"Tripartite Agreement" shall mean that certain Agreement of Covenants,
--------------------
Conditions and Restrictions (Tripartite Agreement), dated as of the Closing
Date, among Tenant, Landlord and the Remainderman Trustee, as amended, modified
or otherwise supplemented from time to time.
"Trust" shall mean the trust created by the Trust Agreement.
-----
"Trust Agreement" shall mean the Trust Agreement (1995-*), dated as of
---------------
June __, 1995, between the Owner Participant and the Owner Trustee, as the same
may be further amended, modified or supplemented from time to time in accordance
with the provisions thereof and of the Indenture and the Participation
Agreement.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as
-------------------
amended and as the same may be further amended, or any comparable successor
Applicable Law.
"UCC" or "Uniform Commercial Code" shall mean the Uniform Commercial
--- -----------------------
Code as in effect in any applicable jurisdiction.
<PAGE>
EXHIBIT A
---------
Real Property Descriptions
<PAGE>
EXHIBIT B
---------
FORM OF SERIES * NOTE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SAID ACT.
No.____
$ _________ (________ United States Dollars) (the "Principal Amount")
WILMINGTON TRUST COMPANY,
a Delaware banking corporation, and
WILLIAM J. WADE, an individual,
not in their individual capacities except as
expressly stated in the Indenture, but solely as the Owner Trustee
under the Trust Agreement (1995-*)
dated as of June __, 1995
SERIES * NOTE
INTEREST RATE: [ ]
STATED MATURITY: [ ]
REGISTERED NOTEHOLDER: [ ]
<PAGE>
WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its
individual capacity, except as expressly provided herein, but solely as owner
trustee (together with its permitted successors and assigns, the "Corporate
---------
Owner Trustee") having an address at 1100 North Market Street, Rodney Square
- -------------
North, Wilmington, Delaware 19890-0001 and WILLIAM J. WADE, not in his
individual capacity, except as expressly provided herein, but solely as owner
trustee (together with his permitted successors and assigns, the "Individual
----------
Owner Trustee"; together with the Corporate Owner Trustee, the "Owner Trustee",
- ------------- -------------
as trustees under that certain Trust Agreement (1995-*), dated as of June __,
1995 (the "Trust Agreement")), having an address c/o the Corporate Owner
---------------
Trustee, for value received and intending to be legally bound, hereby promises
to pay to the Registered Noteholder named above, or registered assigns, the
principal sum in Dollars equal to the Principal Amount specified on the face
hereof in installments on each Installment Payment Date as set forth herein
below with the final installment due and payable at the Stated Maturity
specified above and to pay interest (computed on the basis of a 360-day year of
twelve 30-day months) at the interest rate per annum specified above on the
principal amount from time to time Outstanding in respect of the period
commencing on and including the date hereof and ending on the date when the
principal amount hereof shall have been paid in full, payable on each
Interest Payment Date.
All amounts payable by the Owner Trustee hereunder and under the Trust
Indenture (the "Original Indenture"), dated as of June __, 1995, between the
------------------
Owner Trustee and Shawmut Bank Connecticut, National Association, a national
banking association organized and existing under the laws of the United States
of America, not in its individual capacity, except as expressly provided
thereunder, but solely as trustee thereunder (together with its permitted
successors and assigns, the "Corporate Indenture Trustee") and Kathy A.
---------------------------
Larimore, an individual, not in her individual capacity, except as expressly
provided therein, but solely as trustee thereunder (together with her permitted
successors and assigns, the "Co-Indenture Trustee"; together with the Corporate
--------------------
Indenture Trustee, the "Indenture Trustee"), as supplemented by the Mortgage,
-----------------
Deed of Trust, Assignment of Leases and Rents, Security Agreement, Financing
Statement and First Supplemental Indenture, dated as of June __, 1995 (the
"First Supplemental Indenture"; the Original Indenture, together with the First
- -----------------------------
Supplemental Indenture and all other supplemental indentures thereto is referred
to herein as the "Indenture"), shall be made only from assets subject to, or
---------
intended to be subject to the lien of the First Supplemental Indenture, the
income and all payments of principal and interest shall be made in accordance
with the terms of the Indenture. Each Noteholder, by its acceptance of this
Series * Note, agrees that (a) it will look solely to the assets subject to or
intended to be subject to the lien of the First Supplemental Indenture or the
income and proceeds received by the Indenture Trustee therefrom to the extent
available for distribution to such Noteholder as provided in the Indenture and
(b) neither the Owner Participant nor, except as otherwise expressly provided in
the Indenture, the Owner Trustee in its individual capacity is liable to such
Noteholder for any amounts payable under this Series * Note or the Indenture.
<PAGE>
B-2
The interest or Installment Payment Amount (other than that payable on
the Stated Maturity hereof) so payable, and punctually paid or duly provided
for, on the applicable Installment Payment Date or Interest Payment Date, as
provided in the Indenture, shall be paid to the Person in whose name this Series
* Note is registered at the close of business on the Record Date for payment of
such interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date or
Installment Payment Date, as the case may be. Any such interest or Installment
Payment Amount not so punctually paid or duly provided for shall forthwith cease
to be payable to the registered Noteholder on such Record Date and may be paid
to the Person in whose name this Series * Note is registered at the close of
business on a subsequent Record Date for the payment of such Defaulted Interest
or Defaulted Installment to be fixed by the Indenture Trustee (which date shall
be not less than 10 Business Days prior to the payment of such Defaulted
Interest or Defaulted Installment), notice of which shall be given to
Noteholders entitled thereto not less than 15 days preceding such subsequent
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Series * Notes may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in Section 2.7 of the Original Indenture.
The principal of, the Make-Whole Premium, if any, and interest on this
Series * Note shall be payable in immediately available funds at the principal
corporate trust office of the Indenture Trustee or at any office or agency
maintained for such purpose pursuant to Section 5.3 of the Original Indenture,
or as otherwise directed in the manner provided in the Indenture.
Notwithstanding the foregoing or any provision herein to the contrary, the
Indenture Trustee will pay, or cause to be paid, if so requested by any Holder
of this Series * Note by written notice to the Owner Trustee and the Indenture
Trustee, all amounts payable by the Owner Trustee hereunder to such Holder of
this Series * Note or a nominee therefor either (i) by transferring by wire in
immediately available funds to an account maintained by such Holder with a bank
in the United States the amount to be distributed to such Holder or (ii) by
mailing a check denominated in U.S. dollars to such Holder at such address as
such Holder of this Series * Note shall have specified in such notice, in any
case without any presentment or surrender of this Series * Note except that the
Holder shall surrender this Series * Note to the Indenture Trustee upon payment
in full of the principal amount of and interest on this Series * Note and such
other sums as may then be payable to such Holder under the Indenture or under
this Series * Note.
Capitalized terms used in this Series * Note which are not otherwise
defined herein shall have the meanings ascribed thereto in Appendix A to the
Original Indenture. Reference is made to the Original Indenture and the First
Supplemental Indenture (copies of which are on file with the Indenture Trustee
at its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged, mortgaged and assigned, the nature and extent of the
security, the respective rights thereunder of the Owner Trustee, the Indenture
Trustee and the
<PAGE>
B-3
Holders of the Series * Notes and the terms upon which the Series * Notes are,
and are to be, executed and delivered, as well as a statement of the terms and
conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder agrees by its acceptance of this Series
* Note.
On each Installment Payment Date, the Holder hereof will receive a
payment of principal equal to the Installment Payment Amount set forth in
the following chart for such Installment Payment Date:
<TABLE>
<CAPTION>
Installment Installment
Payment Payment
Date Amount
------------- ------------
<S> <C>
$________
$________
$________
$________
$________
$________
$________
$________
$________
$________
$________
$________
$________
$________
$________
</TABLE>
<PAGE>
B-4
As more fully provided in the Indenture, the Series * Notes are
subject to redemption under the circumstances set forth in Article 6 of the
Original Indenture.
If an Indenture Event of Default shall occur and be continuing, the
principal amount remaining unpaid and any interest accrued hereon of the Series
* Notes may, subject to certain rights of the Owner Trustee or the Owner
Participant (or both) contained or referred to in the Indenture, be declared due
and payable in the manner and with the effect provided in the Indenture. If,
and only if, such an Indenture Event of Default constitutes an Event of Default
by the Tenant under the Lease, subject to the provisions of the Indenture,
including certain specified limitations, the Indenture Trustee may declare the
Lease to be in default, and may exercise one or more of the remedies of the
Owner Trustee provided in the Lease.
The Owner Trustee or the Owner Participant may cure any default by the
Tenant under the Lease arising from the failure of the Tenant to make any
payment of Basic Rent under the Lease, provided that such failure of the Tenant
is not the fourth consecutive such failure, or the seventh cumulative such
failure. In the event of any default by the Tenant of any obligation under the
Lease (other than the obligation to pay Basic Rent), the Owner Trustee or the
Owner Participant may (but are not obligated to, to the extent not prohibited by
Applicable Law) make any payment or perform or comply with any such agreement as
the Tenant shall be obligated to pay, perform or comply with under the Lease.
The right of the Holder of this Series * Note to institute action for
any remedy under the Indenture, including the enforcement of payment of any
amount due hereon, is subject to certain restrictions specified in the
Indenture.
Following an Indenture Event of Default arising out of a Lease Event
of Default, the Owner Trustee may, subject to the conditions specified in the
Indenture, purchase or redeem all of the Notes in accordance with the terms of
the Indenture. Each Noteholder, by accepting this Series * Note, agrees, subject
to the provisions of the Indenture, that, upon payment to the Indenture Trustee
of the aggregate unpaid principal amount of the Outstanding Notes, plus, in the
event, and only in the event, the condition set forth in Section 8.4(c)(D) of
the Original Indenture has been satisfied, the Make-Whole Premium, together with
accrued but unpaid interest thereon to the date of such redemption or purchase
(as well as any interest on overdue principal) and any other amounts due and
payable to the Noteholders, and upon satisfaction of all of the conditions
contained in the Indenture pertaining to the purchase of the Notes by the Owner
Trustee, such Holder shall be deemed to have sold this Series * Note to the
Owner Trustee or its designee.
<PAGE>
B-5
The Series * Notes are issuable only in registered form in
denominations of $1,000 or integral multiples thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Series *
Notes (i) are transferred on the Note Register upon surrender of the Series *
Note for registration of transfer at the office or agency of the Note Registrar
to be maintained for that purpose, duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Note Registrar duly executed
by the Holder of such Series * Notes or his attorney duly authorized in writing,
or (ii) are exchangeable at the office or agency of the Registrar maintained for
that purpose for an equal aggregate principal amount of Series * Notes and, in
each case, thereupon one or more new Series * Notes of the same series with the
same interest rate and Stated Maturity as the Series * Notes so to be
transferred or exchanged, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or such Holder, as
the case may be.
No service charge will be made to any Holder of a Series * Note for
any such transfer or exchange, but the Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Prior to due presentation of this Note for registration of transfer,
the Person in whose name this Series * Note is registered shall be deemed to be
the absolute owner hereof for the purpose of receiving payment as herein
provided and for all other purposes whether or not this Series * Note shall be
overdue, regardless of any notice to anyone to the contrary.
THE SERIES * NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW
DOCTRINE OF SUCH STATE.
* * *
<PAGE>
B-6
IN WITNESS WHEREOF, the Owner Trustee has caused this instrument to
be duly executed.
Date: June __, 1995 CORPORATE OWNER TRUSTEE:
Wilmington Trust Company, not in its
individual capacity, except as otherwise
provided, but solely as the Corporate Owner
Trustee
By:
-------------------------------------
Name:
Title:
INDIVIDUAL OWNER TRUSTEE:
-------------------------------------------
William J. Wade, not in his individual
capacity, except as otherwise provided, but
solely as the Individual Owner Trustee
<PAGE>
FORM OF CERTIFICATE OF AUTHENTICATION
-------------------------------------
This is one of the Series * Notes, due [ ] described in the within mentioned
Indenture.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as Indenture Trustee
By:
--------------------------------------
Authorized Officer
<PAGE>
EXHIBIT 4.5
PARTICIPATION AGREEMENT
(1995-[ ])
among
KMART CORPORATION,
as Tenant
__________________________,
as Owner Participant
WILMINGTON TRUST COMPANY
not in its individual capacity (except as expressly stated
herein) but solely as Owner Trustee under Trust Agreement (1995-
[1,2,3,4])
with the Owner Participant dated as of the date hereof,
as Landlord
[WILLIAM J. WADE, not in his individual capacity,
but solely as Individual Owner Trustee]
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
and KATHY A. LARIMORE
acting not individually (except as expressly provided herein) but
solely as trustees under [__] Trust Indentures
dated as of the date hereof, as Indenture Trustee
_________________________________________,
as Remainderman Participant
FIRST SECURITY BANK OF UTAH, N.A.
not in its individual capacity (except as expressly stated
herein) but solely as Remainderman Trustee under Remainderman
Trust Agreement (1995-[1,2,3,4]) with the Remainderman Participant
dated as of the date hereof, as Remainderman Trustee
[VAL T. ORTON, not in his individual capacity, but
solely as Individual Remainderman Trustee]
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
acting not individually (except as expressly provided herein) but
solely as trustee under the Pass Through Trust Agreements,
as Pass Through Trustee
Dated as of ____________, 1995
<PAGE>
Page
----
TABLE OF CONTENTS
-----------------
1. CERTAIN DEFINITIONS........................................... 2
2. RESTRICTION ON TRANSFERS BY OWNER PARTICIPANT
AND LANDLORD................................................. 2
3. OWNER PARTICIPANT AS COMPETITOR............................... 7
4. FUNDING ON THE CLOSING DATE................................... 12
5. TRANSFERS BY REMAINDERMAN TRUSTEE............................. 15
6. OWNER PARTICIPANT COVENANTS................................... 15
7. COVENANTS OF TENANT........................................... 16
8. OWNER TRUSTEE COVENANTS....................................... 19
9. COVENANTS OF INDENTURE TRUSTEE................................ 20
10. COVENANTS OF REMAINDERMAN PARTICIPANT......................... 21
11. COVENANTS OF REMAINDERMAN TRUSTEE............................. 23
12. COVENANTS OF PASS THROUGH TRUSTEE............................. 24
13. INTENTIONALLY DELETED......................................... 25
14. REPRESENTATIONS AND WARRANTIES................................ 25
15. NOTICES....................................................... 49
16. SEVERABILITY; BINDING EFFECT.................................. 49
17. INDENTURE..................................................... 50
18. PAYMENT OF EXPENSES........................................... 51
19. TERMINATION OR REVOCATION OF TRUST UNDER TRUST
AGREEMENTS................................................... 51
20. EXCHANGE OF OBLIGATIONS OF LANDLORD BY THE TENANT............. 52
21. INTERIM INTEREST PAYMENTS..................................... 52
22. BASIC RENTAL ADJUSTMENTS AFTER CLOSING........................ 53
- i -
<PAGE>
Page
----
23. GENERAL INDEMNITY............................................. 55
24. GENERAL TAX INDEMNITY......................................... 64
25. TRUSTEE LIABILITY............................................. 72
26. EXTENT OF INTEREST OF NOTEHOLDERS............................. 74
27. NO MERGER OF TITLE............................................ 75
28. COUNTERPARTS.................................................. 75
29. FURTHER ASSURANCES............................................ 75
30. SURVIVAL OF AGREEMENTS........................................ 75
31. CONFIDENTIALITY............................................... 76
32. TRANSACTION EXPENSES.......................................... 76
33. BENEFICIARY................................................... 78
34. ADVERSE ACTS.................................................. 78
35. INTENT OF PARTIES............................................. 78
Exhibit A - Form of Guaranty
Exhibit B - Form of Transferee Agreement
Exhibit B-1 - Form of Opinion of Counsel to Transferee
Exhibit C - Property Inspection Dates
Exhibit D - Pricing Assumptions
- ii -
<PAGE>
Term Where Defined
- ---- -------------
INDEX OF DEFINED TERMS
----------------------
Adjusted Termination Value............................................. Lease
Affiliate.......................................................... Indenture
Assignment of Intangibles..................................Purchase Agreement
Bankruptcy Code.................................................... Indenture
Base Term.............................................................. Lease
Basic Rent............................................................. Lease
Bill of Sale.............................................. Purchase Agreement
Business Days...................................................... Indenture
Certificates.............................................. Purchase Agreement
Claims.............................................................Section 23
Closing Date...............................................Purchase Agreement
Code....................................................................Lease
Competitor..................................................... Section 2 & 3
Competitor Option.................................................. Section 3
Competitor Option Period........................................... Section 3
Competitor Price................................................... Section 3
Corporate Indenture Trustee..................................... Introduction
Corporate Owner Trustee......................................... Introduction
Corporate Remainderman Trustee.................................. Introduction
Debt Financing Amount...............................................Section 4
Default Rate........................................................... Lease
Demised Premises....................................................... Lease
Discount Rate..................................................... Section 22
Environmental Claims................................................... Lease
Environmental Laws..................................................... Lease
Environmental Report.......................................Purchase Agreement
Equity Financing Amount.............................................Section 4
ERISA...............................................................Section 2
Estate for Years.......................................... Purchase Agreement
Event of Default....................................................... Lease
Event of Loss.......................................................Indenture
Excepted Rights.....................................................Indenture
Exercise Notice.................................................... Section 3
Fee Mortgage....................................................... Section 2
First Supplemental Indentures.......................................Section 4
GAAP...............................................................Section 14
Governmental Action................................................Section 14
Governmental Authority.................................... Purchase Agreement
Hazardous Materials.................................................... Lease
Improvements.............................................. Purchase Agreement
Indemnitee........................................................ Section 23
Indenture....................................................... Introduction
Indenture Default...................................................Indenture
Indenture Estate................................................... Indenture
Indenture Event of Default......................................... Indenture
Indenture Trustee................................................Introduction
- iii -
<PAGE>
Term Where Defined
- ---- -------------
Indenture Trustee's Liens.......................................... Indenture
Individual Owner Trustee........................................ Introduction
Individual Remainderman Trustee................................. Introduction
Institution........................................................ Section 2
Intangibles............................................... Purchase Agreement
Land.......................................................Purchase Agreement
Landlord........................................................ Introduction
Landlord Interest.................................................. Section 3
Lease............................................................... Recitals
Legal Requirement......................................... Purchase Agreement
Lessor Lien............................................................ Lease
Lien............................................................... Indenture
Material Default....................................................... Lease
Noteholder......................................................... Indenture
Notes.................................................................. Lease
Notice............................................................ Section 15
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 90-day Period.................................... Section 3
Owner Participant's Economics..................................... Section 22
Owner Trustee................................................... Introduction
Owner Trustee Deeds....................................... Purchase Agreement
Owner Trustee Liens.................................................Section 8
Owner Trustee Purchase Price.............................. Purchase Agreement
Pass Through Trustee Agreements................................. Introduction
Pass Through Trustee............................................ Introduction
Pass Through Liens................................................ Section 12
Person............................................................. Indenture
Personalty................................................ Purchase Agreement
Plans......................................................Purchase Agreement
Property(ies)...................................................... Section 1
Property Assessment.................................................... Lease
Prospectus..........................................................Indenture
Purchase Agreement.................................................. Recitals
Purchase Date...................................................... Section 3
Purchase Price.............................................Purchase Agreement
Registration Statement..............................................Indenture
Remainderman Purchaser Deeds.............................. Purchase Agreement
Remainder Trust Estate.......................................... Remainderman
Remainderman Lien...................................................... Lease
Remainderman Participant........................................ Introduction
Remainderman Purchaser Purchase Price..................... Purchase Agreement
Remainderman Trust Agreement.................................... Introduction
Remainderman Trustee............................................ Introduction
Rent Payment Date...................................................... Lease
- iv -
<PAGE>
Term Where Defined
- ---- -------------
Rental Adjustment................................................. Section 22
Sale Notice........................................................ Section 3
SEC................................................................ Indenture
Successor Landlord.............................................. Section 9(b)
Supplemental Indentures............................................ Indenture
Tax Indemnification Agreement............................. Purchase Agreement
Tenant ..........................................................Introduction
Tenant's Purchase Offer.................................................Lease
Third Party Buyer.................................................. Section 3
Title Company............................................. Purchase Agreement
Transaction Expense Cap........................................... Section 32
Transaction Expenses...............................................Section 32
Transfer............................................................Section 2
Tripartite Agreement...................................... Purchase Agreement
Trust Agreement..................................................Introduction
Trust Estate....................................................... Section 2
Trust Indenture Act................................................ Indenture
UCC................................................................ Indenture
Underwriter.........................................................Indenture
Underwriting Agreement............................................. Indenture
U.S. Person........................................................ Section 2
- v -
<PAGE>
PARTICIPATION AGREEMENT
-----------------------
(1995-[ ])
AGREEMENT, DATED AS OF ______________, 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 ______________________________________________________
("Owner Participant"), WILMINGTON TRUST COMPANY, a Delaware banking corporation,
- -------------------
acting not individually (except as expressly stated herein) but solely as Owner
Trustee "Corporate Owner Trustee") [and WILLIAM J. WADE, acting not individually
-----------------------
(except as expressly stated herein) but solely as Individual Owner Trustee
("Individual Owner Trustee")], (the Corporate Owner Trustee [and the Individual
------------------------
Owner Trustee collectively,] "Owner Trustee") under the Trust Agreement [1995-1]
-------------
[1995-2] [1995-3] [1995-4] ("Trust Agreement") with Owner Participant dated as
---------------
of June __, 1995, having an address at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001, Attn: Corporate Trust Administration
("Landlord"), SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking
--------
association ("Corporate Indenture Trustee"), and KATHY A. LARIMORE ("Individual
--------------------------- ----------
Indenture Trustee"), having an address at c/o Shawmut Bank Connecticut, National
- -----------------
Association, 777 Main Street, Hartford, Connecticut 06115, acting not
individually (except as expressly provided herein) but solely as trustees
(collectively, the "Indenture Trustee") under [__] Trust Indentures of even date
-----------------
herewith, between Landlord and Indenture Trustee (as the same may be amended or
supplemented, the "Indenture"), _______________________________, a ____________
---------
corporation, having an address at _____________________________________________
__________________________________________________ ("Remainderman Participant"),
------------------------
FIRST SECURITY BANK OF UTAH, N.A., a national banking association ("Corporate
---------
Remainderman Trustee") [and VAL T. ORTON ("Individual Remainderman Trustee")],
- -------------------- -------------------------------
acting not individually (except as expressly provided herein) but solely as
Remainderman Trustee ([collectively,] "Remainderman Trustee") under Remainderman
--------------------
Trust Agreement [1995-1] [1995-2] [1995-3] [1995-4] ("Remainderman Trust
------------------
Agreement") dated as of June __, 1995, having an address at ____________________
- ---------
____________________________________, and SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association (the "Pass Through Trustee"), having
--------------------
an address at 777 Main Street, Hartford, Connecticut 06115, acting not
individually (except as expressly provided herein) but solely as trustee under
the Pass Through Trust Agreements, dated as of even date herewith.
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 Trustee, as remainder purchaser, and other parties, and [__] leases
<PAGE>
(collectively, or with respect to a single lease in respect of a single
Property, the "Lease") between Landlord, as lessor, and Tenant, as lessee, each
-----
covering a Property more particularly described therein; 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, or the
Operative Document set forth opposite such term in the Index of Defined Terms.
For the purposes of this Agreement, the term "Properties" shall mean the
"1995-[ ] Properties" (as defined in the Purchase Agreement), and individually,
a "Property". Unless otherwise indicated, references in this Agreement to
sections, paragraphs, clauses, annexes, schedules and exhibits are to the same
contained in or attached to this Agreement.
2. Restriction on Transfers by Owner Participant and Landlord. (a)
----------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement or any
other Operative Document, Owner Participant shall not (except as permitted by
Sections 2(b), (c), (f) and (h)) Transfer all or any part of the Owner
Participant Interest or Transfer the beneficial interest with respect to any
Property to any Person (other than Tenant pursuant to Section 3 or pursuant to
the terms of the Lease). "Owner Participant Interest" means, with respect to
--------------------------
each Property, Owner Participant's right, title and interest in and to the Trust
Agreement, the trust estate created and held under the Trust Agreement (the
"Trust Estate"), such Property and the other Operative Documents. "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 separate trustee or a successor to
Landlord, any separate trustee or co-trustee of Landlord or any merger,
conversion, consolidation or sale of substantially all of the corporate trust
business of Landlord, any separate trustee or co-trustee of Landlord shall not
constitute a Transfer under this Agreement.
(b) 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
- 2 -
<PAGE>
Transfer all (but not less than all) of its Owner Participant Interest upon not
less than thirty (30) days' prior written notice from Owner Participant to
Tenant, Owner Trustee, Remainderman Participant 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"),
-----------
corporation or partnership and (C) either (x) has a tangible net worth
(computed in accordance with generally accepted accounting principles
consistently applied) of at least $50,000,000, or (y) provides a full
and unconditional guaranty, in the form attached as Exhibit A, of all
of such transferee's obligations under the Operative Documents by an
Institution or a corporation which has a tangible net worth (as so
computed) of at least $50,000,000, 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"), the designee of any such holder or any Successor Landlord
--------
(as defined in Section 9(b)) or (II) an Affiliate of the Owner
Participant which is a U.S. Person, provided that if the Affiliate
--------
does not have a tangible net worth of at least $50,000,000, Owner
Participant Parent shall provide a guaranty, in the form provided at
the closing, to Tenant and Owner Trustee of all of such transferee's
obligations;
(ii) the transferee enters into an agreement (in the form
attached as Exhibit B) 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 Trust
Agreement and each and every Operative Document entered into by the
transferring Owner Participant (except if the transferee is the holder
of a Fee Mortgage or any Successor Landlord, then such confirmation
shall not apply to the Tax Indemnification Agreement or any other
Operative Document (other than the Trust Agreement) not assigned or
pledged to such holder of a Fee Mortgage or Successor Landlord), (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 (if applicable), the
Trust Agreement 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 14(b) by such
- 3 -
<PAGE>
transferring Owner Participant, provided that this clause (ii)(C)
shall not apply to the holder of a Fee Mortgage or any Successor
Landlord;
(iii) the transferee is not, and is not an Affiliate of, a
Competitor of Tenant, provided that (x) this clause (iii) shall not be
--------
applicable to the holder of any Fee Mortgage or any Successor Landlord
and (y) Owner Participant may request Tenant to waive the condition of
this Section 2(b)(iii) and the application of Section 3 to such
transferee (which waiver Tenant may grant or withhold in its sole
discretion) and Tenant shall respond to such waiver request within 45
days; for purposes of this Section 2, "Competitor" means any national
----------
general merchandise retailer operating a business similar to Tenant 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
Tenant 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
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 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 federal law or any other material
applicable law, order or regulation (except that, for the purposes of
this clause (iv), the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") shall be deemed not to be an applicable law,
-----
order or regulation);
- 4 -
<PAGE>
(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;
(vi) Owner Participant and the transferee furnish to Tenant,
Owner Trustee and Indenture Trustee evidence of, and legal opinions of
counsel reasonably acceptable to Tenant, Owner Trustee and Indenture
Trustee with respect to, compliance with the immediately preceding
clauses (ii)(A) (with respect to requisite power and authority) and
(v) (such opinions to be in the form of Exhibit B-1 and, if
applicable, Exhibit B-2 hereto); and
(vii) no part of the funds used by the transferee to acquire the
Owner Participant Interest constitutes assets of an "employee benefit
plan" (or its related trust) as defined in Section 3(3) of ERISA or
any "plan" (or its related trust) as defined in Section 4975(e)(1) of
the Code or any entity that is deemed to hold "plan assets" within the
meaning of 29 CFR {2510.3-101 of any employee benefit plan or plan.
(c) Notwithstanding anything to the contrary contained in this Section
2, 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 (other than Excepted Rights), in each case as security for
the Notes.
(d) Notwithstanding anything to the contrary contained in this
Agreement or any other Operative Document, 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,
without limitation, as security to any holder of a Fee Mortgage permitted under
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;
provided, that, after the Notes shall no longer be outstanding, Owner
- --------
Participant shall have the right to terminate the Trust Agreement and direct
Landlord to transfer Landlord's right, title or interest in and to the related
Properties, Trust Estate, this Agreement, Trust Agreement, the Tax
Indemnification Agreement or any other Operative Document to Owner Participant
and to amend, supplement or modify any of the Operative Documents or to enter
into such other agreements as Owner Participant deems reasonably necessary to
evidence such transactions, in each case, in form and substance
- 5 -
<PAGE>
reasonably satisfactory to Tenant, and provided, further, that after the Notes
-------- -------
shall no longer be outstanding, Landlord may Transfer all or any part of its
interest in and to any Property or any Operative Document to a lender, it being
understood that Tenant shall have no obligation to subordinate its interest in
any related Lease to such lender.
(e) Except as provided in the following two sentences, the
transferring Owner Participant shall pay all reasonable costs and expenses
(including, without limitation, those of Tenant and Remainderman Participant)
incurred in connection with any Transfer pursuant to this Section 2 or, if such
costs and expenses are incurred by any other party, they shall be reimbursed by
Owner Participant to such party, within 30 days following demand. Tenant shall
pay all reasonable costs and expenses (including, without limitation, those of
Owner Participant and Remainderman Participant) incurred in connection with any
Transfer pursuant to Sections 2(d)(i), (iv) (but only a foreclosure (or deed or
assignment in lieu of foreclosure) in connection with an Event of Default under
the Lease) and Section 2(h) or, if incurred by any other party, 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 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 14, 15, 16,
23, 24, 25 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 (other than Section 2(d)), the transferee shall be deemed the "Owner
Participant" for all purposes of the Operative Documents 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.
(h) Notwithstanding anything to the contrary contained in this Section
2 or in any provision of any other Operative Document, in the event of the
occurrence and continuance of a Material Default or Event of Default with
respect to any of the Properties, Owner Participant may Transfer, without
restriction, all or any part of its interest in the affected Property through
the Transfer of the Owner Participant Interest; provided, however, so long as
-------- -------
the lien of the Indenture shall then be in effect, such transferee must be a
U.S. Person.
- 6 -
<PAGE>
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 under
the Operative Documents prior to such Transfer, but shall be released from any
obligation arising or accruing under the Operative Documents after such Transfer
to the extent of the obligations assumed by the transferee. Notwithstanding any
Transfer effected in accordance with this Section 2, the transferring Owner
Participant shall nevertheless be responsible for all obligations and 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 evidence
of such assignment in form and substance satisfactory to Tenant. Tenant agrees
that it shall, to the extent so requested by Owner Participant, use reasonable
efforts to cooperate with Owner Participant in effecting any Transfer permitted
pursuant to this Section 2 and, if requested by the transferor or transferee,
Tenant will give its written consent to any such Transfer complying with the
provisions of this Section 2 promptly after a request therefor.
3. Owner Participant as Competitor.
-------------------------------
(a) Notwithstanding anything to the contrary contained in this Agreement or
any other Operative Document, but subject to applicable provisions of the
Indenture, if the 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, provided that no Material Default or Event of Default under the Lease
shall have occurred and be continuing, the exclusive and irrevocable option (the
"Competitor Option"), 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 Owner
Participant has become a Competitor (or an Affiliate of a Competitor), to cause
Owner Participant to sell all (but not less than all) of its Owner Participant
Interest, or to cause Landlord to sell all (but not less than all) of the
Landlord Interest in all of the related Properties as provided in this Section
3, provided that if Owner Participant or an Affiliate of Owner Participant
--------
becomes a Competitor as a result of a default in a passive financing and (i)
thereafter is managing its assets in a work out to preserve its investment or
(ii) receives securities rendering Owner Participant or such Affiliate a
Competitor, the Competitor Option shall not be exercisable in either case until
12 months after Owner Participant or such Affiliate becomes a Competitor,
provided, further, that in the case Owner Participant becomes a Competitor or an
- -----------------
Affiliate of
- 7 -
<PAGE>
a Competitor pursuant to clause (i), Owner Participant may transfer its Owner
Participant Interest to an independent trustee who will act as Owner Participant
under the Operative Documents and in the event Owner Participant makes such
transfer, the Competitor Option shall not be exercisable for such additional
period as the Owner Participant Interest is held by the independent trustee and
Owner Participant continues to manage such assets in a work out to preserve its
investment. In each such case, the Competitor Option shall not be exercised
more than 12 months after it first becomes exercisable. For purposes of this
Agreement, "Landlord Interest" shall mean, with respect to any Property, the
-------- --------
Improvements on, Estate for Years in, and the rights of Landlord under the
Option Agreement with respect to, the Land related to such Property.
(b) The Competitor Option shall be exercisable by an irrevocable exercise
notice (an "Exercise Notice") delivered by Tenant to Owner Participant and the
---------------
Indenture Trustee. The Exercise Notice shall specify the date on which Tenant
obtained knowledge that Owner Participant has become a Competitor as set forth
in subsection (a) above.
(c) Owner Participant shall have the sole right for a period of 90 days
following receipt of the Exercise Notice ("Owner Participant 90-day Period") in
-------------------------------
which to sell its Owner Participant Interest or Landlord's Interest in the
related Properties to a transferee 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 day following expiration of the
Owner Participant 90-day 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 Landlord Interest in all of the related 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 an acceptable bid,
------------------
Third Party Buyer shall purchase such Owner Participant Interest or such
Landlord Interest, 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 such Owner
Participant Interest or such Landlord Interest, 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, Owner Trustee, Remainderman Participant
-----------
and Indenture Trustee that Tenant or Third Party Buyer, as the case may be, has
elected to purchase such Owner Participant Interest or such Landlord Interest.
- 8 -
<PAGE>
(e) If Tenant shall be required to deliver the Sale Notice, Owner
Participant shall sell or cause Landlord to sell and Tenant or Third Party Buyer
shall purchase the Owner Participant Interest or the Landlord Interest, as the
case may be, in all of the related Properties, for a price (the "Competitor
----------
Price") equal to the aggregate of the following calculation made in respect of
- -----
each such Property: (I) the excess of (a) the higher of (i) Adjusted Termination
Value under the Lease for such Property as of the Purchase Date (as herein
defined) plus, if the Purchase Date is not a Rent Payment Date, any unaccrued
----
Basic Rent with respect to such Property paid in advance on the immediately
preceding Rent Payment Date and (ii) the fair market value of the Demised
Premises relating to such Property (taking into consideration the matters set
forth in Sections 31(b) and 45(g) of the Lease relating to such Property) over
(b) if the Purchase Date is not a Rent Payment Date, any unaccrued Basic Rent
with respect to each such Property paid in advance on the immediately preceding
Rent Payment Date minus (II) the outstanding principal amount of, and accrued
-----
interest on, the Notes secured by such Property. Fair market value for this
purpose shall be as agreed to between Landlord and Tenant or as determined by an
appraisal reasonably satisfactory to Landlord and Tenant obtained at Tenant's
sole cost and expense, to be performed in accordance with Article 45 of the
Lease. The closing shall take place at the principal office of Tenant on a date
(the "Purchase Date") to be mutually agreed to by the parties occurring at least
-------------
40 days but no more than 120 days after the date of the Sale Notice.
(f) At the closing of any sale relating to each Property pursuant to this
Section 3:
(i) Tenant shall pay or cause to be paid to Landlord of such
Property, or in the case of Additional Rent, to Landlord or the Person
entitled thereto, in immediately available funds to the same account
to which Basic Rent is payable (A) the portion of the Competitor Price
relating to such Property, (B) all unpaid Basic Rent for such Property
payable in arrears accrued up to but excluding the Purchase Date, (C)
all unpaid Basic Rent for such Property payable in advance due prior
to the Purchase Date, and (D) all accrued and unpaid Additional Rent
for such Property.
(ii) If Tenant or Third Party Buyer elects to purchase the
Landlord Interest:
(A) in the case of Third Party Buyer, (1) Third Party Buyer shall take
title to such Landlord Interest and shall assume the obligations of Landlord
under the Tripartite Agreement, the Option Agreement and the Ground Lease (as
defined in the Option Agreement) if then in effect and (2) Landlord shall
deliver to
- 9 -
<PAGE>
Third Party Buyer limited warranty deeds (or the type of deed available, in the
applicable state, that is most nearly equivalent to a New York bargain and sale
deed with covenants) to Landlord's interest in the related Land and such other
instruments as are necessary to convey title thereto, all in form and substance
reasonably satisfactory to Landlord and Third Party Buyer, subject only to
Permitted Liens (other than (aa) Lessor Liens and (bb) any Fee Mortgage) 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 applicable
Lease; or
(B) in the case of Tenant, (1) Tenant shall take title to such
Landlord Interest, shall assume the obligations of Landlord under the Tripartite
Agreement, the Option Agreement and the Ground Lease if then in effect and may,
subject to the satisfaction by Tenant of the conditions precedent to such
exchange set forth in the Indenture, exchange the Notes related to such Property
for full recourse Notes of Tenant in accordance with the terms of the related
Indenture and (2) Landlord shall deliver to Tenant limited warranty deeds (or
the type of deed available, in the applicable state, that is most nearly
equivalent to a New York bargain and sale deed with covenants) to Landlord's
interest in the related Land and such other instruments as are necessary to
convey title thereto, all in form and substance reasonably satisfactory to
Landlord and Tenant, subject only to Permitted Liens (other than (aa) Lessor
Liens and (bb) 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 applicable
Lease.
(C) If either (1) Third Party Buyer shall take title to the Landlord
Interest in any Property or (2) Tenant does not validly elect to exchange the
Notes in accordance with the terms of the Indenture related to any Property (or
fails to satisfy the conditions precedent to such exchange), then Tenant shall
pay in respect of each such Property on the date of closing (in addition to the
amount described in paragraph (f)(i) of this Section 3 to be paid on such date
to the Landlord of such Property) to the Indenture Trustee related to such
Property an amount equal to the outstanding principal balance of the Notes
related to such Property, plus accrued and unpaid interest thereon through the
date of closing, plus the Make-Whole Premium, if any, with respect to such
Notes.
(iii) If Tenant or Third Party Buyer elects to purchase the
Owner Participant Interest:
(A) In the case of Third Party Buyer, Owner Participant shall deliver
to Third Party Buyer such assignment agreements as are necessary or appropriate
to transfer the Owner
- 10 -
<PAGE>
Participant Interest to Third Party Buyer subject only to Permitted Liens (other
than (1) Lessor Liens and (2) any Fee Mortgage other than the Indenture) and any
liens and encumbrances that Tenant is obligated (or which, if filed, Tenant
would be obligated) to discharge of record pursuant to Article 19 of the Lease.
(B) In the case of Tenant, (1) Tenant shall take title to such Owner
Participant Interest and may, subject to the satisfaction by Tenant of the
conditions precedent to such exchange set forth in the Indenture, exchange the
Notes related to such Owner Participant Interest for full recourse Notes of
Tenant in accordance with the terms of the related Indenture and (2) Owner
Participant shall deliver to Tenant such assignment agreements as are necessary
or appropriate to transfer the Owner Participant Interest to Tenant, subject
only to Permitted Liens (other than (aa) Lessor Liens and (bb) any Fee Mortgage
other than the Indenture) and any liens and encumbrances that Tenant is
obligated (or which, if filed, Tenant would be obligated) to discharge of record
pursuant to Article 19 of the Lease.
(C) If Tenant does not validly elect to exchange the Notes in
accordance with the terms of the Indenture related to such Owner Participant
Interest (or fails to satisfy the conditions precedent to such exchange), then
Tenant shall pay in respect of such Owner Participant Interest on the date of
closing (in addition to the amount described in paragraph (f)(i) of this Section
3 to be paid on such date to the related Landlord of such Owner Participant
Interest) to the Indenture Trustee related to such Owner Participant Interest an
amount equal to the outstanding principal balance of the Notes related to such
Owner Participant Interest, plus accrued and unpaid interest thereon through the
date of closing, plus the Make-Whole Premium, if any, with respect to such
Notes.
(g) Tenant shall pay all charges incident to such conveyance,
including, without limitation, recording fees, Landlord's, Remainderman
Participant'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) Upon the completion of any purchase by Tenant pursuant to this
Section 3, but not prior thereto, the Lease shall terminate with respect to any
affected Property, except with respect to obligations and liabilities of Tenant,
actual or contingent, which have arisen with respect to such Property on or
prior to such date of purchase, and except as otherwise provided in the Lease.
In the event that Tenant elects to purchase the Owner Participant Interest or
the Landlord Interest, as the case may be, and exchange the Notes (which right
of Tenant the Indenture Trustee
- 11 -
<PAGE>
hereby acknowledges and accepts), each of the parties to this Agreement agrees
to cooperate in good faith with Tenant in effecting such purchase.
(i) For purposes of this Section 3, "Competitor" means any national
----------
general merchandise retailer operating a business similar to Tenant 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 (i) such securities are held as portfolio
investments and (ii) 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.
(j) Notwithstanding the foregoing provisions of this Section 3, after
any Transfer effected in accordance with this Section 3, the transferring Owner
Participant shall not be released from any obligation arising or accruing, under
the Operative Documents prior to such Transfer, but shall be released from any
obligation arising or accruing under the Operative Documents after such
Transfer. Notwithstanding any Transfer effected in accordance with this Section
3, the transferring Owner Participant shall nevertheless be responsible for all
obligations and 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 evidence of such assignment in form and substance
satisfactory to Tenant.
4. Funding on the Closing Date.
---------------------------
(a) Subject to the satisfaction or waiver of the conditions set forth
below, on the Closing Date, Pass Through Trustee shall purchase from Landlord,
and Landlord shall issue to Pass Through Trustee, the Notes having the maturity,
principal amount and interest rate set forth in each Supplemental Indenture to
the Indenture, dated as of the Closing Date, between Landlord
- 12 -
<PAGE>
and Indenture Trustee, providing for the issuance of the Notes (the "First
-----
Supplemental Indentures") for a purchase price equal to $_______________ (the
- -----------------------
"Debt Financing Amount"), which Debt Financing Amount shall be set forth in the
---------------------
First Supplemental Indentures. The obligation of Pass Through Trustee to
purchase the Notes shall be subject to the satisfaction or waiver by Pass
Through Trustee of the following conditions (funding by Pass Through Trustee of
the Debt Financing Amount to be evidence of such satisfaction or waiver):
(i) Landlord or Owner Participant shall have paid an amount
equal to the difference between the Owner Trustee Purchase Price and
the Debt Financing Amount (the "Equity Financing Amount"), in
-----------------------
immediately available funds, by wire transfer to Landlord's account at
________________, _________________, _____________________, ABA
#_____________, Account #__________, or to such other account as
Landlord may specify in writing to the parties hereto at least one
Business Day prior to the Closing Date.
(ii) Remainderman Trustee or Remainderman Participant shall have
paid an amount equal to the Remainderman Purchaser Purchase Price, in
immediately available funds, by wire transfer to Tenant to an account
or accounts specified by Tenant.
(iii) Indenture Trustee shall have received with respect to each
Property an ALTA extended coverage lender's title insurance policy in
its most current form issued by the Title Company, dated as of the
Closing Date and naming the Indenture Trustee as the insured, with a
face amount equal to the Debt Financing Amount showing the Indenture
to be a valid and perfected first priority mortgage lien or security
title subject to no exceptions other than Permitted Exceptions and
including the affirmative coverages and satisfying the requirements
set forth in Section 5A of the Purchase Agreement.
(iv) Indenture Trustee shall have received with respect to each
Property, certified to it, the survey described in Section 5B of the
Purchase Agreement.
(v) Indenture Trustee shall have received with respect to each
Property the Environmental Report described in Section 5C of the
Purchase Agreement.
(vi) Indenture Trustee shall have received, addressed to it, the
certificates described in Sections 6A(7) and (8) of the Purchase
Agreement.
- 13 -
<PAGE>
(vii) Indenture Trustee shall have received, addressed to it,
all documents and opinions described in Sections 6A(9)(a)(ii) and
(iii) and Section 6A(9)(b)(ii) of the Purchase Agreement, and the
documents described in Sections 6A(9)(a)(i) and (iv) and Sections
6A(9)(b)(i) and (iii) thereof.
(viii) Indenture Trustee shall have received, addressed to it,
the affidavit described in Section 6A(10) of the Purchase Agreement.
(ix) Indenture Trustee shall have received copies of all Plans
and Permits with respect to each Property.
(x) The Tripartite Agreements shall have been fully executed and
delivered.
(xi) Indenture Trustee shall have received, addressed to it, all
documents and opinions described in Sections 6B(6) and (7) of the
Purchase Agreement.
(xii) The Option Agreements shall have been fully executed and
delivered.
(xiii) Indenture Trustee shall have received, addressed to it,
the certificates described in Sections 6B(9) and (10) of the Purchase
Agreement.
(xiv) Indenture Trustee shall have received the Owner
Participant Parent Guaranty.
(xv) Indenture Trustee shall have received, addressed to it, the
certificate described in Section 6C(3) of the Purchase Agreement.
(xvi) Indenture Trustee shall have received, addressed to it,
all documents and opinions described in Section 6C(7) of the Purchase
Agreement.
(xvii) Indenture Trustee shall have received, addressed to it,
the opinions described in Section 7I of the Purchase Agreement.
(xviii) The conditions stated in Sections 7D, 7E (but with
respect to all parties other than the Indenture Trustee and the Pass
Through Trustee), 7F, 7J, 7K (but with respect to all parties other
than Indenture Trustee and Pass Through Trustee), 7L, 7M and 7N of the
Purchase Agreement shall be satisfied as of the Closing Date.
- 14 -
<PAGE>
(xix) Indenture Trustee and Pass Through Trustee shall have
received copies of all documentation provided pursuant to Sections 7P
and 7Q of the Purchase Agreement.
(xx) Pass Through Trustee shall have received at least $_______
of proceeds from the sale of the Certificates.
(xxi) The Certificates shall have been rated at least BBB by
Standard & Poor's Ratings Group and Baa1 by Moody's Investors
Services, Inc.
(xxii) Indenture Trustee shall have received, addressed to it,
the certificate described in Section 6A(8) of the Purchase Agreement.
(xxiii) Pass Through Trustee shall have received, addressed to
it, the certificate described in Section 7R of the Purchase Agreement.
(xxiv) Indenture Trustee shall have received a certificate from
Deloitte & Touche, LLP as to the fair market value of the Landlord's
Interest in each Property.
(xxv) The Remainder Trust Agreement shall have been fully
executed and delivered.
(xxvi) Indenture Trustee and Pass Through Trustee shall have
received copies of all other documents, instruments, affidavits,
certifications and agreements reasonably requested by either of them.
5. Transfers by Remainderman Trustee. Remainderman Trustee shall not
---------------------------------
Transfer all or any part of or interest in its interest in the Properties except
pursuant to the Tripartite Agreement, the Ground Lease or the Option Agreement.
6. Owner Participant Covenants. 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, other than as set
forth in the last two sentences of this Section 6(a), (i) Transfer its interest
in the Trust Estate or any part thereof, except as permitted by Section 2 or 3,
or (ii) create or suffer to be created any Lessor Lien attributable to the Owner
Participant, except for any Lessor Lien 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 material risk or danger of
the sale, forfeiture or loss
- 15 -
<PAGE>
of any Property or any part thereof or interest therein, (B) unless Landlord is
exercising remedies pursuant to the Lease, 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 Lease,
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 the related Property or any part thereof or interest therein, except
as set forth in the Ground Lease. After the Notes shall no longer be
outstanding, Owner Participant may cause Landlord to Transfer all or part of its
interest in the Trust Estate to a lender, it being understood that neither
Tenant nor Remainderman Trustee shall have any obligation to subordinate its
respective interest in any related Lease or Property to such lender.
(b) Quiet Enjoyment. Owner Participant acknowledges the provisions of
---------------
Article 23 of the Lease.
(c) Compliance with and Amendment of Trust Agreement. Owner Participant
------------------------------------------------
agrees that (i) it shall comply with all of the terms of the Trust Agreement
applicable to it and direct Owner Trustee to comply with all the terms of the
Trust Agreement applicable to Owner Trustee 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 Agreement without the prior written consent of Tenant,
if such amendment or supplement would 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 the Supplemental Indentures, or any rights of
the Indenture Trustee under the Indenture or the Supplemental Indentures (in
which case the prior written consent of the Indenture Trustee to such amendment
or supplement also must be obtained).
(d) Notice. Owner Participant covenants and agrees that at all times that
------
a successor Owner Trustee is appointed, an Owner Trustee resigns or an
additional trustee or separate trustee is appointed pursuant to the Trust
Agreement, Owner Participant shall give notice of such fact within 30 days of
its occurrence to (i) the Tenant and (ii) the Indenture Trustee, if the lien of
the Indenture has not been discharged in accordance with the terms thereof.
7. Covenants of Tenant. Tenant covenants and agrees as follows:
-------------------
- 16 -
<PAGE>
(a) Chief Executive Office. Tenant shall give Landlord, Owner
----------------------
Participant, Indenture Trustee and Pass Through 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 or any other change in Tenant's identity that would require a filing
under the UCC as adopted in any applicable state, 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, Indenture Trustee and Pass Through Trustee) to all UCC
financing statements filed in connection with the transactions contemplated by
the Operative Documents, and thereafter, promptly upon demand by Landlord,
Indenture Trustee or Pass Through Trustee, Tenant shall execute and deliver to
Landlord, Indenture Trustee and Pass Through Trustee such other documents (each
in form and substance reasonably satisfactory to Landlord, Indenture Trustee and
Pass Through Trustee) as any thereof may reasonably require.
(b) Filings. Upon the reasonable request of Landlord, Indenture
-------
Trustee or Pass Through Trustee from time to time, Tenant shall cause
appropriate UCC financing statements (including protective filings) and
continuation statements with respect thereto (each in form and substance
reasonably satisfactory to Indenture Trustee, Landlord and Pass Through
Trustee), and the First Supplemental Indenture, 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, the interests and rights of Indenture Trustee under the
Indenture and the interests and rights of Pass Through Trustee under the Pass
Through Trust Agreements. Within 120 days after the end of each fiscal year of
Tenant, until satisfaction and discharge of the Indenture, Tenant will provide
to Landlord, Owner Participant and Indenture Trustee an officer's certificate
stating (i) whether or not any recordings, filings or UCC continuation
statements are required to be filed within the 16-month period immediately
following the delivery of such officer's certificate in order to maintain the
lien of the Indenture and the perfection thereof or to protect the interests and
rights of Landlord under the Lease, and identifying the jurisdictions in which
such filings or recordings are required to be made and (ii) either that Tenant
has taken or caused, or will cause, to be taken such actions with respect to the
recording, filing, rerecording and refiling to the Indenture and the perfection
thereof, and reciting the details of such actions, or stating that no such
action is necessary to maintain such lien during such 16-month period.
- 17 -
<PAGE>
(c) Financial Statements. During the term of the Lease, Tenant shall
--------------------
deliver to Landlord, Owner Participant, Indenture Trustee and Pass Through
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 and
simultaneously with such distributions, all other reports distributed to
shareholders of Tenant; provided, that if Tenant shall no longer be required to
--------
file such reports, it shall deliver to Landlord, Indenture Trustee and Pass
Through 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) 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.
(e) 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 (i) Owner Participant shall be the sole owner of the Improvements
and the Estate for Years for federal, state and local income tax purposes and
(ii) 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).
(f) No Purchase of Notes. Tenant shall not acquire, and will not
--------------------
permit any of its Affiliates to acquire, any interest in the Notes or the
Certificates.
(g) Certain Information. Tenant will provide to Landlord, Indenture
-------------------
Trustee and Owner Participant prompt notice of material litigation or other
claims with respect to a Property which litigation or claim could, in the
reasonable opinion of Tenant, in each case or in the aggregate, have a material
adverse effect on the Properties and will provide periodic reports with respect
thereto thereafter in such detail as Landlord, Indenture Trustee or Owner
Participant may reasonably request.
(h) Maintenance of Existence. Tenant at all times shall maintain its
------------------------
corporate existence and shall qualify and remain qualified to do business in
each jurisdiction where the failure to so qualify would materially adversely
affect its ability to perform its obligations under the Operative Documents to
which Tenant is a
- 18 -
<PAGE>
party for so long as it shall have any obligations hereunder or under any of the
other Operative Documents.
(i) Tenant Liens. Tenant shall not, during the Lease Term, directly
------------
or indirectly create, incur, assume, suffer, or permit any lien or encumbrance
on or with respect to the Demised Premises or any part thereof, any Rent, or any
of Landlord's, Remainderman Trustee's or Tenant's title to or interest in any of
the foregoing except for Permitted Liens (as defined in the Lease). 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 or encumbrance. In the event such lien or encumbrance is
not so discharged, eliminated or bonded, Landlord or Remainderman Trustee may
pay and discharge the same and relieve the Demised Premises therefrom, and
Tenant agrees to repay and reimburse Landlord or Remainderman Trustee upon
demand for the amount so paid by Landlord or Remainderman Trustee together with
interest thereon at the Default Rate.
8. Owner Trustee Covenants. Each Owner Trustee, in its individual
-----------------------
capacity as to paragraph (a) and (b) below, and as Landlord as to paragraph (c)
below, 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 Agreement 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 Agreement without the
prior written consent of Tenant if such amendment or supplement would 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 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) Owner Trustee 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
Owner Trustee Liens, and Owner Trustee in its individual capacity agrees that it
will at its own cost and expense take such action as may be necessary to duly
discharge and satisfy in full all such Owner Trustee Liens. Owner Trustee
hereby indemnifies and holds harmless Tenant, Remainderman Participant,
Remainderman Trustee, Indenture Trustee, Pass Through Trustee and Owner
Participant from and against any loss, cost or expense (including reasonable
fees, disbursements and
- 19 -
<PAGE>
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 Owner Trustee Lien
created or incurred as a result of any action or inaction of Owner Trustee in
its individual capacity.
"Owner Trustee Liens" shall mean liens on or against any Property, any
-------------------
Lease, the Trust Estate or any payment of Rent (i) which result from any act of,
or any claim against, Owner Trustee (in its individual capacity) unrelated to
the transactions contemplated by the Purchase Agreement, or (ii) which result
from any violation by Owner Trustee (in its individual capacity) of any of the
terms of the Operative Documents, or (iii) which result from liens in favor of
any taxing authority by reason of any Tax owed by Owner Trustee (in its
individual capacity) the payment of which is not the obligation of Tenant under
the Operative Documents.
(c) Lessor Liens. 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 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. Landlord hereby
indemnifies and holds harmless Tenant, Remainderman Participant, Remainderman
Trustee, Indenture Trustee, Pass Through Trustee and 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.
9. Covenants of Indenture Trustee. Each Indenture Trustee, as Indenture
------------------------------
Trustee and, solely to the extent provided in paragraphs (a) and (c) below, in
its individual capacity, covenants and agrees as follows:
(a) Indenture Trustee's Liens. Indenture Trustee in its individual
-------------------------
capacity hereby unconditionally agrees with and for the benefit of the parties
to this Agreement that it will not directly or indirectly create, incur, assume
or suffer to exist any Indenture Trustee's Lien on or against any part of the
Indenture Estate, and the Indenture 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 Indenture Trustee's Liens attributable to it in its
individual capacity. Indenture Trustee in its individual capacity hereby
indemnifies and holds harmless Tenant, Remainderman Participant, Remainderman
Trustee, Owner Trustee, Landlord, Pass Through Trustee and Owner Participant
from and against any loss, cost or expense (including reasonable fees,
disbursements and expenses) which may be suffered
- 20 -
<PAGE>
or incurred by any of them as the result of the existence of any such Indenture
Trustee's Liens or the failure of Indenture Trustee to discharge and satisfy any
such Indenture Trustee's Liens created or incurred as a result of any action or
inaction of the Indenture Trustee in its individual capacity.
(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) during the term of the Lease, 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 9(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 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 amendment to such Lease requiring
Indenture Trustee's consent under the Indenture unless such consent was
obtained.
(c) Disbursement of Funds. Indenture Trustee agrees to indemnify and
---------------------
hold harmless Tenant, Owner Trustee, Landlord and Owner Participant, as the case
may be, from and against any loss, cost or expense (including reasonable legal
fees and disbursements) as the result of the failure by Indenture Trustee to
distribute, in accordance with the Operative Documents, any amounts received and
distributable by it as the Indenture Trustee thereunder.
10. Covenants of Remainderman Participant. Remainderman Participant
-------------------------------------
covenants and agrees as follows:
(a) Remainderman Participant's Activities and Liens. Remainderman
-----------------------------------------------
Participant will engage in no activities or businesses
- 21 -
<PAGE>
other than holding the beneficial interest in the Remainderman Trust or any
activity related thereto and will not incur any indebtedness for money borrowed,
other than as contemplated under the Operative Documents and will maintain its
existence as a corporation organized under the laws of one of the United States
for so long as it shall have any obligations hereunder or under any of the other
Operative Documents. Remainderman Participant hereby unconditionally agrees
with and for the benefit of the parties to this Agreement that it will not
directly or indirectly create, incur, assume or suffer to exist any Remainderman
Liens attributable to it, and the Remainderman Participant agrees that it will
at its own cost and expense (without right to indemnity under this Agreement)
promptly, and in any event within 15 days of notice from any of Tenant, Owner
Trustee, Pass Through Trustee, Owner Participant or Indenture Trustee, take such
action as may be necessary to duly discharge and satisfy in full all such
Remainderman Liens. Remainderman Participant hereby indemnifies and holds
harmless Tenant, Indenture Trustee, Owner Trustee, Landlord, Pass Through
Trustee and 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 Remainderman Lien.
(b) Quiet Enjoyment. Remainderman 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, during the term of the Lease, 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) Compliance with and Amendment of Remainderman Trust Agreement.
-------------------------------------------------------------
Remainderman Participant shall comply with all of the terms of the Remainderman
Trust Agreement applicable to it and shall not amend or supplement, or consent
to any amendment of or supplement to, the Remainderman Trust Agreement without
the prior written consent of Tenant, Owner Participant or Owner Trustee if such
amendment or supplement would adversely affect the rights or obligations of
Tenant, Owner Participant or Owner Trustee under this Agreement, each Lease or
any other Operative Document.
(d) Notice. Remainderman Participant covenants and agrees that at all
------
times that a successor Remainderman Trustee is appointed, a Remainderman Trustee
resigns or an additional trustee or separate trustee is appointed pursuant to
the Remainderman Trust Agreement, Remainderman Participant shall give notice of
such fact
- 22 -
<PAGE>
within 30 days of its occurrence to (i) the Tenant, (ii) the Owner Participant
and (iii) the Indenture Trustee, if the lien of the Indenture has not been
discharged in accordance with the terms thereof.
11. Covenants of Remainderman Trustee. Each Remainderman Trustee, in its
---------------------------------
individual capacity as to paragraph (a) and (b) below, and in its fiduciary
capacity as to paragraph (c), covenants and agrees as follows:
(a) Compliance with and Amendment of Remainderman Trust Agreement.
-------------------------------------------------------------
Remainderman Trustee shall comply with all of the terms of the Remainderman
Trust Agreement applicable to it and shall not amend or supplement, or consent
to any amendment of or supplement to, the Remainderman Trust Agreement without
the prior written consent of Tenant, Owner Participant or Owner Trustee if such
amendment or supplement would adversely affect the rights or obligations of
Tenant, Owner Participant or Owner Trustee under this Agreement, each Lease or
any other Operative Document.
(b) Remainderman Trustee Liens. Remainderman Trustee hereby
---------------------------
unconditionally agrees with and for the benefit of the parties to this Agreement
that Remainderman Trustee will not directly or indirectly create, incur, assume
or suffer to exist any Remainderman Lien attributable to it in its individual
capacity, and Remainderman 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 Remainderman Liens attributable to it in its individual
capacity. Remainderman Trustee hereby indemnifies and holds harmless Tenant,
Owner Trustee, Landlord, Indenture Trustee, Pass Through Trustee and Owner
Participant from and against any loss, cost or expense (including reasonable
fees, disbursements and expenses) which may be suffered or incurred by any of
them as the result of the existence of any such Remainderman Liens or the
failure of Remainderman Trustee to discharge and satisfy any such Remainderman
Liens created or incurred as a result of any action or inaction of Remainderman
Trustee in its individual capacity.
(c) Quiet Enjoyment. Remainderman Trustee 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, during the term of the Lease, Tenant shall have the exclusive
rights to possession, control, use and enjoyment of the Properties and
Remainderman Trustee 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.
- 23 -
<PAGE>
12. Covenants of Pass Through Trustee. Pass Through Trustee, as Pass
---------------------------------
Through Trustee and, solely to the extent provided in paragraphs (a) and (c)
below, in its individual capacity, covenants and agrees as follows:
(a) Pass Through Trustee Liens. Pass Through Trustee in its
---------------------------
individual capacity hereby unconditionally agrees with and for the benefit of
the parties to this Agreement that it will not directly or indirectly create,
incur, assume or suffer to exist any Pass Through Trustee Lien, and Pass Through
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 Pass
Through Trustee Liens attributable to it in its individual capacity. Pass
Through Trustee in its individual capacity hereby indemnifies and holds harmless
Tenant, Remainderman Participant, Remainderman Trustee, Owner Trustee, Landlord,
Indenture Trustee and Owner Participant from and against any loss, cost or
expense (including reasonable fees, disbursements and expenses) which may be
suffered or incurred by any of them as the result of the existence of any such
Pass Through Trustee Liens or the failure of Pass Through Trustee to discharge
and satisfy any such Pass Through Trustee Liens created or incurred as a result
of any action or inaction of the Pass Through Trustee in its individual
capacity.
"Pass Through Trustee Liens" shall mean Liens against any Property,
--------------------------
any Lease, the Indenture Estate or any payment of Rent that result from any act
of, or any failure to act by, or as a result of any claim against the Pass
Through Trustee, in its individual or fiduciary capacity, unrelated to the
transactions contemplated by the Operative Documents or that is in breach of any
covenant or any agreement of the Pass Through Trustee, in its individual or
fiduciary capacity, set forth in any of the Operative Documents to which it is a
party.
(b) Quiet Enjoyment. Notwithstanding any other provision of the
---------------
Indenture or of any other Operative Document, Pass Through Trustee warrants,
covenants and agrees that, unless an Event of Default shall have occurred and be
continuing, Pass Through 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 Pass Through 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) during the term of the Lease, Tenant shall have
the exclusive rights to possession, control, use and enjoyment of the Properties
and Pass Through Trustee will not take any other action that would interrupt or
interfere with Tenant's peaceable
- 24 -
<PAGE>
possession, control, use and enjoyment of any respective Property in any manner,
and (iii) subject to the next succeeding sentence of this Section 12(b), Pass
Through Trustee will recognize each Lease and Tenant's rights thereunder. Upon
any acquisition by Pass Through Trustee (or a Successor Landlord) of Owner
Trustee'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 amendment to such Lease requiring Pass
Through Trustee's consent unless such consent was obtained.
(c) Disbursement of Funds. Pass Through Trustee agrees to indemnify
---------------------
and hold harmless Tenant, Owner Trustee, Landlord and Owner Participant, as the
case may be, from and against any loss, cost or expense (including reasonable
legal fees and disbursements) as the result of the failure by Pass Through
Trustee to distribute, in accordance with the Operative Documents, any amounts
received and distributable by it as Pass Through Trustee thereunder.
13. Intentionally deleted.
14. 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, authority and legal
right to conduct its business as now conducted, to own or hold under
lease its properties and 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 a Property is located and in
every other jurisdiction in which its failure to be so qualified would
have a material adverse effect on its financial condition, business,
operation or 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
- 25 -
<PAGE>
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 or Governmental Action applicable to or binding on
it or any of the Properties, which contravention would materially
adversely affect its financial condition, business, operation or 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, 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 financial condition, business, operation or 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 Trustee, Pass Through Trustee and Indenture Trustee
intended to be created by the Operative Documents and any filings that
are required (a) in the ordinary course of business in connection with
the ownership, use and operation of the Demised Premises or (b) to
carry out the purposes of this Agreement and the other Operative
Documents and the transactions contemplated thereby. "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, any federal, state and local
government or department, commission, board or officer thereof, or
required by any Legal Requirements.
(iii) Enforceability. Assuming the due authorization, execution
---------------
and delivery by all other
- 26 -
<PAGE>
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' rights and to general equity principles. No
basis exists for any claims by Tenant or any Affiliate of Tenant under
the Operative Documents against any party thereto and, to the best of
Tenant's knowledge, nothing has arisen that will provide a defense by
Tenant to enforcement of an otherwise enforceable provision of any
Operative Document.
(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 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 is reasonably likely,
if adversely determined individually or in the aggregate, to have a
material adverse effect on the ability of Tenant to perform its
obligations under any Operative Document. Tenant is not in default
with respect to any order of any Governmental Authority, the default
under which is reasonably likely to materially adversely affect its
financial condition, business or operation or to materially adversely
affect the ability of Tenant to perform its obligations under the
Operative Documents to which Tenant is a party.
(v) Financial Statements. The consolidated balance sheets of
--------------------
Tenant and its consolidated subsidiaries as of January 25, 1995, and
the related statements of income and cash flows of Tenant and its
consolidated subsidiaries for the fiscal year ended January 25, 1995,
contained or incorporated by reference in Tenant's Annual Report on
Form 10-K for the fiscal year ended January 25, 1995, 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.
----
- 27 -
<PAGE>
(vi) No Material Adverse Change. Since January 25, 1995, there
--------------------------
has been no material adverse change, financial or otherwise, in 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 or in press releases by Tenant copies of which
have been delivered to Owner Participant prior to the date hereof.
(vii) No Defaults. If the Operative Documents had been in
-----------
effect immediately prior to the execution of this Agreement, no
Material Default or Event of Default would have occurred and be
continuing, and no condition would exist that constitutes or, with the
giving of notice or lapse of time or both, would constitute a Material
Default or Event of Default. 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. If
the Operative Documents had been in effect immediately prior to the
execution of this Agreement, no Event of Loss would have 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.
No unrepaired material damage and no modification has occurred with
respect to any Property since the dates set forth on Exhibit C hereto.
(viii) ERISA. The execution, delivery and performance of this
-----
Agreement and the other Operative Documents and the consummation of
the transactions contemplated hereby and thereby will not involve any
prohibited transaction, within the meaning of Section 406 of ERISA or
Section 4975 of the Code, and the acquisition and holding by Owner
Participant of the Owner Participant Interest for its own account, and
the acquisition and holding by Remainderman Participant of the
Remainderman Trust for its own account, will not constitute a
prohibited transaction as to any plan investing in Notes or
Certificates (or any similar interest) within the meaning of Section
4975(c)(1)(A) through (D) of the Code for which no exemption is
applicable.
(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
- 28 -
<PAGE>
Improvements and the Estate for Years by the Landlord and the
Remainderman Interest by the Remainderman Trustee, 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 effect on the
value or remaining useful life of the respective Improvements.
(x) Legal Effect. The Owner Trustee Deeds are effective, under
------------
each state law in which the Properties are respectively located, to
convey good, marketable and insurable title to the Estates for Years,
and good, marketable and insurable fee title in the Improvements, free
and clear of all Liens other than Permitted Exceptions. The
Indentures are effective, under each state law in which the Properties
are respectively located, to convey a valid and perfected first
priority mortgage lien or security title, as the case may be, and
security interest in and to the applicable Indenture Estate, free and
clear of all Liens other than Permitted Exceptions. The Leases
constitute operating Leases under each state law in which the
Properties are respectively located. The Remainder Purchaser Deeds are
effective, under each state law in which the Properties are
respectively located, to convey good, marketable and insurable title
to all of Tenant's right, title and interest in the Remainder
Interests, free and clear of all Liens other than Permitted
Exceptions. The Bills of Sale are effective, under each state law in
which the Properties are respectively located, to convey good and
marketable title to all of Tenant's right, title and interest in the
Personalty, free and clear of all Liens other than Permitted
Exceptions. The Assignments of Intangibles are effective, under each
state law in which the Properties are respectively located, to convey
good and marketable title to all of Tenant's right, title and interest
in the Intangibles, free and clear of all Liens other than Permitted
Exceptions.
(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
- 29 -
<PAGE>
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 Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co.
(xiii) Insurance. The insurance required by Articles 7 and 14
---------
of the Lease is in effect and all premiums due in respect of such
insurance have been paid or Tenant satisfies the Net Worth Standard
set forth in the Lease.
(xiv) 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) Use of Proceeds. None of the transactions contemplated by
---------------
the Operative Documents in connection with the consummation of the
sale and leaseback on the Closing Date (including, without limitation,
the use of the proceeds indirectly received by Tenant from the sale of
the Certificates or Notes) will result in a violation of Section 7 of
the Securities Exchange Act of 1934, as amended, or any regulation
issued pursuant thereto.
(xvi) Disclosure. To the knowledge of the officers of Tenant
----------
with oversight of the transactions contemplated by the Operative
Documents, (A) nothing disclosed in writing by Tenant (or any Person
authorized or employed by Tenant) to Owner Participant or any agent of
Owner Participant contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements
therein not misleading and (B) there is no fact peculiar to Tenant or
existing on or in the Land, Improvements and Properties relating to
their compliance with Legal Requirements that Tenant has not disclosed
in writing to Owner Participant that materially adversely affects the
condition, financial or otherwise, of Tenant or the physical condition
or value of any of the Properties or materially impairs the ability of
Tenant to perform its obligations under the Operative Documents to
which it is a party.
- 30 -
<PAGE>
(xvii) Offering Documents. The Registration Statement at the
------------------
time it became effective and at the time each post-effective amendment
thereto becomes effective does not and will not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading and the final Prospectus either contained in the
Registration Statement or a post-effective amendment thereto filed
pursuant to Rule 424(b) of the Securities Act in connection with the
sale of the Certificates will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that
these representations and warranties do not apply to statements or
omissions contained in the Registration Statement, such final
Prospectus or any Prospectus supplement based upon information
furnished to Tenant in writing by the Underwriters expressly for the
use therein or to statements or omissions in the statement of
eligibility on Form T-1 of the Pass Through Trustee.
(b) 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, nor the consummation
of the transactions contemplated thereby, nor the compliance by it
with any of the terms and provisions thereof (A) requires any further
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 or Governmental Action applicable to or binding on it,
which contravention would materially adversely affect its ability to
perform its obligations under the Operative
- 31 -
<PAGE>
Documents (except that no representation or warranty is made as to
ERISA, other than to the extent set forth in Section 14(b)(vi), or as
to the nature of the Properties or any Legal Requirements or
Governmental Action pertaining thereto), (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 Trustee, Indenture
Trustee and the Tenant intended to be created by the Operative
Documents and any filings that are required (a) in the ordinary course
of business in connection with the ownership, use and operation of
properties other than the Properties or (b) to carry out the purposes
of this Agreement and the other Operative Documents and the
transactions contemplated thereby (except that no representation or
warranty is made as to the nature of the Properties or any
Governmental Action pertaining thereto).
(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 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
- 32 -
<PAGE>
material adverse effect on the ability of Owner Participant to perform
its obligations under any Operative Document.
(v) Accredited Investor. Owner Participant is an "accredited
--------------------
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 accredited
investor. Owner Participant is acquiring its beneficial interest in
the Trust Estate for its own account for investment and not with a
present 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 or any entity that is deemed to hold "plan
assets" within the meaning of 29 CFR {2510.3-101 of any employee
benefit plan or plan.
(vii) No Brokers. No broker's, finder's or placement fee or
----------
commission will be payable by Owner Participant arising out of the
transactions contemplated hereby, other than to Fieldstone Private
Capital Group, L.P.
(viii) No Default. If the Operative Documents had been in
----------
effect immediately prior to the execution of this Agreement, no breach
or default would have occurred by Owner Participant which would, with
the passage of time or giving of notice, or both, constitute a breach
or default by Owner Participant under the Operative Documents to which
Owner Participant is or is to become a party.
(c) Landlord represents and warrants as of the date hereof as follows:
(i) 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 contemplated thereby, nor compliance by it with any
of the terms and
- 33 -
<PAGE>
provisions thereof (A) 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, (B) contravenes any current Legal Requirement or
Governmental Action applicable to or binding on it, which
contravention would materially adversely affect its ability to perform
its obligations under the Operative Documents (except that no
representation or warranty is made as to the nature of the Properties
or any Legal Requirements or Governmental Action pertaining thereto),
(C) 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 (D) requires any Governmental Action, except for filings
and recordings necessary or advisable to perfect the rights of
Landlord, Remainderman Trustee, Indenture Trustee and the Tenant
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 (except that no
representation or warranty is made as to the nature of the Properties
or any Governmental Action pertaining thereto).
(ii) 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.
(iii) 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
- 34 -
<PAGE>
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.
(iv) No Lessor Liens. No Lessor Lien is in existence. 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.
(d) Corporate Owner Trustee, in its individual capacity and as Owner
Trustee with respect to paragraphs (ii), (iii) and (v)-(viii) below, 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
Agreement and the other Operative Documents to which it is a party.
(ii) Authorization; No Conflict. The execution, delivery and
--------------------------
performance by Corporate 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 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 or Governmental Action, which
contravention would materially adversely affect its ability to perform
its obligations under the Operative Documents (except that no
representation or warranty is made as to the nature of the Properties
or any Legal Requirements or Governmental Action pertaining thereto),
(D) contravenes or results in any breach of or constitutes any default
under, any indenture, mortgage, chattel mortgage, deed of trust,
- 35 -
<PAGE>
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 each Operative Document to which
Owner Trustee is a party (as Owner Trustee or in its individual
capacity, as the case may be), each such Operative Document is,
respectively, a legal, valid and binding obligation of Corporate Owner
Trustee (as Owner Trustee or in its individual capacity, as the case
may be), 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 Owner Trustee Liens. No Owner Trustee Lien is in
----------------------
existence. The execution, delivery and performance by Corporate 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 Owner Trustee Liens.
(v) Offer of Interest. Except as contemplated herein or by the
-----------------
Indentures or Pass Through Trust Agreements, neither Corporate Owner
Trustee, nor any person authorized by Corporate 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 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. Corporate Owner Trustee has dealt with no
----------
broker, finder, advisor or other party that could
- 36 -
<PAGE>
claim a commission, fee or other compensation arising out of the
transactions contemplated hereby.
(vii) No Action 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 Corporate Owner Trustee having oversight of the
transactions contemplated by the Trust Agreement, threatened against
or affecting Corporate Owner Trustee or naming Corporate Owner Trustee
as a party, the probable outcome of which would materially impair the
ability of Corporate Owner Trustee to perform its obligations under
the Trust Agreement.
(viii) No Default. Corporate Owner Trustee is not in breach of
----------
or default under the Trust Agreement. If the Operative Documents had
been in effect immediately prior to the execution of this Agreement,
no Indenture Event of Default would have occurred and be continuing,
and no event or condition has occurred which would, with the passage
of time or giving of notice, or both, constitute an Indenture Event of
Default.
[(e) Individual Owner Trustee, in his individual capacity, represents and
warrants as of the date hereof as follows:
(i) Legal Capacity. Individual Owner Trustee has the power,
--------------
authority and capacity to enter into and perform his obligations under
the Trust Agreement and the other Operative Documents to which he is a
party.
(ii) Offer of Interest. Except as contemplated herein or by the
-----------------
Indentures or Pass Through Trust Agreements, neither Individual Owner
Trustee, nor any person authorized by Individual Owner Trustee to act
on his 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 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.
- 37 -
<PAGE>
(iii) No Brokers. Individual 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.
(iv) No Default. Individual Owner Trustee is not in breach of or
----------
default under the Trust Agreement. If the Operative Documents had
been in effect immediately prior to the execution of this Agreement,
no Indenture Event of Default would have occurred and be continuing,
and no event or condition has occurred which would, with the passage
of time or giving of notice, or both, constitute an Indenture Event of
Default.
(v) No Owner Trustee Liens. No Owner Trustee Lien attributable
----------------------
to Individual Owner Trustee is in existence. The execution, delivery
and performance by Individual Owner Trustee of the Operative Documents
to which he is a party (in his individual capacity) will not subject
the Indenture Estate, or any portion thereof, to any Owner Trustee
Liens attributable to Individual Owner Trustee.
(vi) No Action 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 Individual Owner
Trustee, threatened against or affecting Individual Owner Trustee or
naming Individual Owner Trustee as a party, the probable outcome of
which would materially impair the ability of Individual Owner Trustee
to perform his obligations under the Trust Agreement.]
(f) The Corporate Indenture Trustee, in its individual capacity and as
Indenture Trustee, represents and warrants as of the date hereof as follows:
(i) Due Organization, etc. Corporate Indenture Trustee is a
---------------------
national banking association duly organized, validly existing and in
good standing under the laws of the United States of America 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 (as
Indenture Trustee or in its individual capacity) have been duly
authorized by all necessary action on its part
- 38 -
<PAGE>
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
or Governmental Action of the United States or the State of
Connecticut 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,
(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 United States
or the State of Connecticut governing its banking and trust powers,
except for filings and recordings necessary or advisable to perfect
the rights of the Landlord, Remainderman Trustee, 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 (as Indenture Trustee or in its
individual capacity, as the case may be), each such Operative Document
is, respectively, a legal, valid and binding obligation of Indenture
Trustee (as Indenture Trustee or in its individual capacity, as the
case may be), 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 Indenture Trustee or naming Indenture
Trustee as a party (in each such case, as Indenture Trustee or in its
individual capacity), that questions
- 39 -
<PAGE>
the validity or enforceability of this 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 (as Indenture Trustee or in
its individual capacity) to perform its obligations under any
Operative Document to which it is a party.
(v) No Indenture Trustee's Liens. No Indenture Trustee's Lien
----------------------------
attributable to Indenture Trustee in its individual capacity is in
existence. The execution, delivery and performance by Indenture
Trustee of the Operative Documents to which it is a party (as
Indenture Trustee or in its individual capacity) will not subject the
Indenture Estate, or any portion thereof, to any Indenture Trustee's
Liens attributable to Indenture Trustee in its individual capacity.
(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 Indenture Estate 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.
(viii) No Default. If the Operative Documents had been in
----------
effect immediately prior to the execution of this Agreement, no breach
or default would have occurred which would, with the passage of time
or giving of notice, or both, constitute a breach or default by
Indenture Trustee under the Operative Documents to which Corporate
Indenture Trustee is or is to become a party.
(g) Remainderman Participant represents and warrants as of the date
hereof as follows:
- 40 -
<PAGE>
(i) Due Organization, etc. Remainderman Participant is a
---------------------
corporation duly organized, validly existing and in good standing
under the laws of the State of New Jersey 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 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
or Governmental Action applicable to or binding on it, which
contravention would materially adversely affect its ability to
perform its obligations under the Operative Documents (except that no
representation or warranty is made as to the nature of the Properties
or any Legal Requirements or Governmental Action pertaining thereto),
(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 filings and recordings necessary or advisable to
perfect the rights of the Landlord, Remainderman Trustee, Indenture
Trustee and the Tenant intended to be created by the Operative
Documents (except that no representation or warranty is made as to the
nature of the Properties or any Governmental Action pertaining
thereto).
(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,
- 41 -
<PAGE>
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) No Remainderman's Liens. No Remainderman Lien attributable
-----------------------
to Remainderman Participant is in existence. The execution, delivery
and performance by Remainderman Participant 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 Remainderman Liens attributable to Remainderman
Participant.
(vi) Offer of Interest. Except as contemplated herein or by the
-----------------
Indentures or Pass Through Trust Agreements, neither 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
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 Participant has dealt with no
----------
broker, finder, advisor or other party that
- 42 -
<PAGE>
could claim a commission, fee or other compensation arising out of the
transactions contemplated hereby.
(viii) No Default. If the Operative Documents had been in
----------
effect immediately prior to the execution of this Agreement, no breach
or default would have occurred which would, with the passage of time
or giving of notice, or both, constitute a breach or default by
Remainderman Participant under the Operative Documents to which
Remainderman Participant is or is to become a party.
(ix) ERISA. Remainderman Participant is not acquiring its
-----
interest in the Remainder 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 or any entity that is
deemed to hold "plan assets" within the meaning of 29 C.F.R.
(S)(S)2510.3-101 of any employee benefit plan or plan.
(h) Corporate Remainderman Trustee, in its individual capacity and as
Remainderman Trustee, represents and warrants as of the date hereof as follows:
(i) Due Organization, etc. Corporate Remainderman Trustee is a
---------------------
national banking association duly organized, validly existing and in
good standing under the laws of the United States 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 Corporate Remainderman 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 (as Remainderman Trustee or in its individual capacity) 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 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 of the
State of Utah or the United States governing its banking or trust
powers applicable to or binding on it or any Governmental Action,
which contravention would materially adversely affect its
- 43 -
<PAGE>
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 Utah
or the United States governing its banking or trust powers.
(iii) Enforceability. Assuming the due authorization, execution
---------------
and delivery by all other parties to each Operative Document to which
Corporate Remainderman Trustee is a party (as Remainderman Trustee or
in its individual capacity, as the case may be), each such Operative
Document is, respectively, a legal, valid and binding obligation of
Corporate Remainderman Trustee (as Remainderman Trustee or in its
individual capacity, as the case may be), 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 Action 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 Corporate
Remainderman Trustee, threatened against or affecting Corporate
Remainderman Trustee or naming Corporate Remainderman Trustee as a
party (in each such case, as Remainderman Trustee or in its individual
capacity), that questions the validity or enforceability of this
Agreement or any other Operative Document to which Corporate
Remainderman Trustee is or is to become a party or that would, if
adversely determined, have a material adverse effect on the ability of
Corporate Remainderman Trustee (as Remainderman Trustee or in its
individual capacity) to perform its obligations under any Operative
Document to which it is a party.
(v) No Remainderman Liens. No Remainderman Lien attributable to
---------------------
Corporate Remainderman Trustee in its individual capacity is in
existence. The execution, delivery and performance by Corporate
Remainderman Trustee of the Operative Documents to which it is a party
(as Remainderman Trustee or in its individual capacity) will not
subject the Indenture Estate, or any portion thereof, to any
Remainderman Liens attributable to
- 44 -
<PAGE>
Corporate Remainderman Trustee in its individual capacity.
(vi) Offer of Interest. Except as contemplated herein or by the
-----------------
Indentures or Pass Through Trust Agreements, neither Corporate
Remainderman Trustee, nor any person authorized by Corporate
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.
(vii) No Brokers. Corporate 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.
(viii) No Default. Corporate Remainderman Trustee is not in
----------
breach of or default under the Remainderman Trust Agreement. If the
Operative Documents had been in effect immediately prior to the
execution of this Agreement, no breach or default would have occurred
which would, with the passage of time or giving of notice, or both,
constitute a breach or default under the Operative Documents to which
Corporate Remainderman Trustee is or is to become a party.
[(i) Individual Remainderman Trustee, in his individual capacity,
represents and warrants as of the date hereof as follows:
(i) Individual Remainderman Trustee has the power, authority and
capacity to enter into and perform his obligations under the
Remainderman Trust Agreement and the other Operative Documents to
which he is a party.
(ii) Offer of Interest. Except as contemplated herein or by the
-----------------
Indentures or Pass Through Trust Agreements, neither Individual
Remainderman Trustee, nor any person authorized by Individual
Remainderman Trustee to act on his 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
- 45 -
<PAGE>
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.
(iii) No Brokers. Individual 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.
(iv) No Default. Individual Remainderman Trustee is not in
----------
breach of or default under the Remainderman Trust Agreement. If the
Operative Documents had been in effect immediately prior to the
execution of this Agreement, no Indenture Event of Default would have
occurred and be continuing, and no event or condition has occurred
which would, with the passage of time or giving of notice, or both,
constitute an Indenture Event of Default.
(v) No Remainderman Liens. No Remainderman Lien attributable to
---------------------
Individual Remainderman Trustee is in existence. The execution,
delivery and performance by Individual Remainderman Trustee of the
Operative Documents to which he is a party (as Individual Remainderman
Trustee or in his individual capacity) will not subject the Indenture
Estate, or any portion thereof, to any Remainderman Liens.
(vi) No Action 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 Individual
Remainderman Trustee, threatened against or affecting Individual
Remainderman Trustee or naming Individual Remainderman Trustee as a
party, the probable outcome of which would materially impair the
ability of Individual Remainderman Trustee to perform his obligations
under the Remainder Trust Agreement.]
(j) Pass Through Trustee, in its individual capacity (except as to
paragraph (ix) below) and as Pass Through Trustee, represents and warrants as of
the date hereof as follows:
(i) Due Organization, etc. Pass Through Trustee is a national
---------------------
banking association duly organized, validly existing and in good
standing under the laws of the
- 46 -
<PAGE>
United States of America 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 Pass Through 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 (as
Pass Through Trustee or in its individual capacity) 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 or
Governmental Action of the United States or the State of Connecticut
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, (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 United States or the State of
Connecticut governing its banking and trust powers, except for filings
and recordings necessary or advisable to perfect the rights of the
Landlord, Remainderman Trustee, Indenture Trustee, Pass Through
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
Pass Through Trustee is a party (as Pass Through Trustee or in its
individual capacity, as the case may be), each such Operative Document
is, respectively, a legal, valid and binding obligation of Pass
Through Trustee (as Pass Through Trustee or in its individual
capacity, as the case may be), enforceable against it in accordance
with its terms, subject to bankruptcy, insolvency,
- 47 -
<PAGE>
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 Pass Through Trustee's actual knowledge,
threatened in writing against Pass Through Trustee or naming Pass
Through Trustee as a party (in each such case, as Pass Through Trustee
or in its individual capacity), that questions the validity or
enforceability of this Agreement or any other Operative Document to
which Pass Through Trustee is or is to become a party or that would,
if adversely determined, have a material adverse effect on the
ability of Pass Through Trustee (as Pass Through Trustee or in its
individual capacity) to perform its obligations under any Operative
Document to which it is a party.
(v) No Pass Through Trustee Liens. No Pass Through Trustee Lien
-----------------------------
attributable to Pass Through Trustee in its individual capacity is in
existence. The execution, delivery and performance by Pass Through
Trustee of the Operative Documents to which it is a party (as Pass
Through Trustee or in its individual capacity) will not subject the
Indenture Estate, or any portion thereof, to any Pass Through Trustee
Liens attributable to Pass Through Trustee in its individual capacity.
(vi) Offer of Interest. Except as contemplated herein or by the
-----------------
Indentures or Pass Through Trust Agreements, neither Pass Through
Trustee, nor any person authorized by Pass Through 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 Pass Through 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. Pass Through 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.
- 48 -
<PAGE>
(viii) No Default. If the Operative Documents had been in
----------
effect immediately prior to the execution of this Agreement, no breach
or default would have occurred which would, with the passage of time
or giving of notice, or both, constitute a breach or default by Pass
Through Trustee under the Operative Documents to which Pass Through
Trustee is or is to become a party.
(ix) Purchase. Pass Through Trustee is purchasing the Notes for
--------
the purposes contemplated by the Operative Documents and not with a
view to the transfer or distribution of any Notes to any other Person,
except as contemplated by the Operative Documents.
15. Notices. (a) Any notice, demand, request, approval, revocation,
-------
confirmation, election, consent, waiver or other communication hereunder (a
"notice") must be in writing and must be 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 also be sent to Owner Participant at its address set forth above. Copies
of all notices to Remainderman Trustee hereunder shall also be sent to
Remainderman 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 received. 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.
(b) Promptly after the execution by Owner Trustee of any amendment to
the Trust Agreement or by Remainderman Trustee of any amendment to the
Remainderman Trust Agreement, Owner Trustee or Remainderman Trustee, as the case
may be, shall send conformed copies thereof (i) to Tenant, (ii) to Indenture
Trustee, if the lien of the Indenture has not been discharged in accordance with
the terms thereof, and (iii) to Owner Participant.
16. 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 invalid or
unenforceable, the remaining provisions hereof, or the
- 49 -
<PAGE>
application of such provision to Persons or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby. To the
extent permitted by applicable law, the parties hereto waive any provision
thereof that renders any term or provision hereof invalid or unenforceable in
any respect.
(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.
(c) This Agreement may not be 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 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.
17. Indenture. Notwithstanding anything to the contrary contained in the
---------
Indenture, the provisions of this Section 17 shall control certain rights and
obligations of the parties thereto with respect to matters covered by the
Indenture and this Section 17.
(a) 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
- 50 -
<PAGE>
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.
(b) Each of Tenant, Landlord and Indenture Trustee agrees, for the
benefit of the Indenture Trustee and the holders of the Notes from time to time,
that payment of all amounts payable hereunder or under the Leases and comprising
part of the applicable Indenture Estate shall, so long as any Notes issued under
such Indenture remain outstanding, be paid directly to Indenture Trustee, for
distribution in accordance with the terms of the Indenture.
(c) Tenant shall be entitled to receive copies of all notices,
requests, demands, approvals, authorizations, directions, consents, waivers or
documents provided or permitted by the Indenture, including, but not limited to,
copies of any proposed and final supplemental indentures entered into pursuant
to Article 11 of the Indenture.
18. Payment of Expenses. (a) Tenant covenants and agrees that, unless
-------------------
payment thereof is governed by a specific provision of an Operative Document, it
shall pay on an After-Tax Basis all reasonable out-of-pocket expenses, including
reasonable attorneys' fees, incurred by Owner Participant, Landlord, Owner
Trustee (and any co-trustee or separate trustee), Remainderman Participant,
Remainderman Trustee, Pass Through Trustee or Indenture Trustee in connection
with (i) the entering into or giving or withholding of any proposed amendment,
modification, supplement, waiver, termination, approval or consent requested by
Tenant or (ii) any Event of Loss or any redemption, prepayment, refinancing or
exchange of the Notes by Tenant, at Tenant's request or attributable to the
events specified in Section 3 of this Agreement or Articles 9, lO, 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 23(b)
below with respect to such party.
(b) Tenant further covenants and agrees to pay, as Additional Rent,
the ordinary and extraordinary fees and expenses of Remainderman Trustee, but
not including fees and expenses incurred as a result of Remainderman
Participant's or Remainderman Trustee's breach of its obligations under the
Operative Documents (except to the extent caused by Tenant's default under the
Lease or under any other Operative Document).
19. Termination or Revocation of Trust Under Trust Agreement. (a) Without
--------------------------------------------------------
prejudice to any right under the Trust Agreement of the Owner Trustees (in their
individual capacities) to resign, or of Owner Participant under the Trust
Agreement to remove the Owner
- 51 -
<PAGE>
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 as to itself hereby
irrevocably and unconditionally agrees (i) with Tenant that prior to the
expiration or earlier termination of all related Leases it will not terminate or
revoke the trust created by the Trust Agreement and (ii) with Indenture Trustee,
that prior to the payment in full of the Notes and discharge of the related
Indentures, in accordance with the terms thereof, it will not terminate or
revoke the trust created by the Trust Agreement.
(b) Without prejudice to any right under the Remainderman Trust
Agreement of the Remainderman Trustees (in their individual capacities) to
resign, or of Remainderman Participant under the Remainderman Trust Agreement to
remove the Remainderman 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 Remainderman Participant and Remainderman Trustees
hereby irrevocably and unconditionally agrees with Tenant, Owner Participant,
Owner Trustee and Indenture Trustee that each will not terminate or revoke the
trust created by the Remainderman Trust Agreement.
20. Exchange of Obligations of Landlord by the Tenant. Upon the
-------------------------------------------------
conditions and as more fully provided in Article VII of the Indenture, each of
Owner Trustee, Owner Participant, Remainderman Participant, Remainderman
Trustee, Pass Through Trustee and Indenture Trustee agree that if any Lease is
terminated pursuant to Article 39 thereof and the related Landlord Interest is
transferred to Tenant, or if any Owner Participant Interest or the Landlord
Interest is purchased by Tenant in accordance with Section 3(e) hereof, Tenant
may elect to exchange new secured, full recourse securities of Tenant for the
related Notes by giving notice of such exchange to each such party and, upon
satisfaction of the conditions precedent to such exchanges set forth in the
related Indenture, each such party will execute and deliver appropriate
documentation reasonably satisfactory in form and substance to each of the
parties (i) releasing Owner Trustee and 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 Trustee,
Remainderman Participant, Owner Trustee or Owner Participant.
21. Interim Interest Payments. Owner Participant hereby agrees with
-------------------------
Tenant, and only with Tenant, that it will have the
- 52 -
<PAGE>
right (but not the obligation) to pay or cause to be paid to the Owner Trustee,
for immediate transfer to the Indenture Trustee, the amount identified as
Special Additional Rent set forth on Schedule ___ of each Lease on the date set
forth on such schedule, each 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 date pursuant to the
provisions of the Indenture. Tenant agrees to give Owner Participant written
notice not more than 10 and not less than 5 Business Days prior to the date such
payment is due of the due date and the amount to be so paid. Upon receipt of
such notice, Owner Participant agrees to cause Owner Trustee to give Tenant
notice by 11:00 a.m. on the date two (2) Business Days prior to such due date if
Owner Participant has elected not to exercise its right to make such payment
when due. 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.
22. Basic Rental Adjustments After Closing.
--------------------------------------
(a) If (i) there shall be a tax law change (including a change in Code
or applicable regulations) enacted or promulgated prior to Closing or if a 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 promulgated in final form after
Closing, or (ii) the Transaction Expenses paid by the Owner Trustee or Owner
Participant pursuant to Section 32 hereof shall exceed the Transaction Expense
Cap, Basic Rent and Termination Value under the Lease for the affected Property
or Properties will be adjusted up or down ("Rental Adjustment").
-----------------
(b) Any Rental Adjustment shall be based on the same calculation
methods and Pricing Assumptions (as set forth on Exhibit D attached hereto)
(including the income tax assumptions and such other 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 be subject to the preservation
of Tenant's off-balance sheet treatment and (ii) shall (A) satisfy the tests of
Sections 4.02(5), 4.07(1) and 4.07(2) of Revenue Procedure 75-28, 1975-1 C.B.
752 and any successor or supplemental procedure or provision relating thereto
- 53 -
<PAGE>
and (B) be made in a manner designed to comply with Section 467 of the Code and
4.08(2) of Revenue Procedure 75-28 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 and shall be immediately effective, provided that all
adjustments to Termination Value shall be retroactive to the date of the event
giving rise to the 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 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 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 after
taking into account any underpayment or overpayment resulting from the earlier
effectiveness of the original adjustment calculated by Owner Participant such
accounting firm shall determine the correct adjustments, and such determination
shall be final and binding in the absence of manifest error and shall be
immediately effective, provided that the adjustment of Termination Value shall
be retroactive to the date of the event giving rise to the original adjustment.
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 using the per annum discount rate
specified in the Pricing Assumptions attached as Exhibit D (the "Discount
--------
Rate")) 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,
and not to Tenant, 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 or any records related thereto to such accounting firm, 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
- 54 -
<PAGE>
Agreement or the Leases 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 (i) annual FASB after-tax
lease income for the first five years or (ii) after the first five years, annual
FASB after-tax lease income plus or minus five percent 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.
Notwithstanding any of the foregoing, Owner Participant shall have the right to
reoptimize Basic Rent immediately subsequent to any adjustment made pursuant to
this Section 22, provided that the average annual Basic Rent with respect to all
--------
Leases shall not be increased and provided further, that for each Rent Payment
Date, the sum of the present value of all Basic Rent payable on or prior to such
date (other than Basic Rent payable in advance on such date) plus the present
value of the corresponding Termination Values payable on such date shall not be
increased. All present value calculations shall be computed using the Discount
Rate.
23. General Indemnity. (a) Tenant agrees, whether or not any of the
-----------------
transactions contemplated by this Agreement, the Purchase Agreement, Leases,
Trust Agreement and Indentures ("Sale and Leaseback Documents") and the other
----------------------------
Operative Documents shall be consummated, to assume liability for, and to
indemnify, protect, defend, save 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, arising out of, in
any way relating to, resulting from or in connection with, in each case,
directly or indirectly, any one or more of the following:
(i) any of the Properties or the acquisition, ownership,
operation, possession, use, non-use, improvement, rental, leasing,
subleasing, inspection, transfer of title, sale, attempted sale,
return, disposition, reconveyance, repair or maintenance of,
construction, design, purchase, acceptance, rejection, modification,
reconstruction, restoration, substitution, financing or refinancing
pursuant to the Indenture, alteration, addition, demolition,
replacement, non-acceptance, or condition of 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
- 55 -
<PAGE>
substituted for any such Property pursuant to the Lease relating to
such substituted property and any Property for which a property is
substituted pursuant to the applicable Lease) (including, without
limitation, (A) injury or death of any Person or loss of or damage to
any Property, (B) latent or other defects, whether or not
discoverable, (C) any Claim arising out of the performance of any
labor or services or the furnishing of any materials or other property
in respect of the Properties or any part thereof, (D) any Claim
arising out of any negligence or tortious act on the part of Tenant or
any of its agents, contractors, sublessees, licensees or invitees and
(E) any Claim arising out of any work in connection with any Property
or any alterations, changes, modifications, new construction or
demolition of the Properties);
(ii) a Release, a violation or alleged violation of or
noncompliance or alleged non-compliance with any Environmental Law,
the presence of 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, 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) This Agreement or any other Operative Document, the
Underwriting Agreement or any transactions contemplated thereby;
(iv) any act or omission (whether negligent or otherwise) or any
breach of, or failure to perform or observe, or any other
noncompliance with, any covenant, condition or agreement to be
performed by, or other obligation of, Tenant or its Affiliates in any
of the Operative Documents, or the falsity of any representation or
warranty of Tenant or its Affiliates in any of the Operative Documents
or any misstatement or omission or alleged misstatement or alleged
omission in any prospectus delivered or required to be delivered in
connection therewith, other than representations and warranties in the
Tax Indemnification Agreement;
- 56 -
<PAGE>
(v) any violation of law, rule, regulation or order by Tenant or
any Affiliate of Tenant or any of their respective agents, officers,
directors or employees;
(vi) the offer, issue, sale, purchase or delivery of any Notes or
Certificates or any similar interest or the Owner Participant Interest
in the Trust Estate (other than, with respect to the Owner Participant
Interest, by Owner Participant after the Closing Date unless required
by Section 3 hereof);
(vii) the imposition of any lien on the Properties other than
Permitted Liens;
(viii) Claims attributable to a sale, assignment or transfer by
Landlord to Tenant pursuant to Article 14, 15, 39, 40 and 41 of the
Lease or to any other Person pursuant to Article 13, 21 and 39 of the
Lease; or
(ix) the costs of enforcement of the terms of any Operative
Documents or any other agreement relating to the transactions
contemplated therein or any agreement, restriction, Legal Requirement
or Governmental Action affecting the Properties or any part thereof.
(b) Tenant shall not be required to indemnify an Indemnitee under this
Section 23 for or in respect of any of the following:
(i) with respect to an Indemnitee,
(A) any Claim to the extent 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 the Lease,
(y) any transfer to the holder of a Fee Mortgage or any Successor
Landlord as a result of the exercise of remedies under such Fee
Mortgage or (z) any Claim attributable to a transfer of any
Property or any interest therein under Articles 13, 14, 15, 21,
39, 40 or 41 of the Lease or Section 3 of this Agreement;
- 57 -
<PAGE>
(i) any fee, cost or expense expressly provided under the
Operative Documents to be paid or borne by any 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;
(ii) any Claim in respect of any Indemnified Taxes or Property
Assessments, other than any payment necessary to make payments under
this Section 23 on an After-Tax Basis;
(iii) any Claim (A) to the extent attributable to acts, events
or circumstances which first occur after the later of (x) the
expiration or earlier termination of the applicable Lease and (y)
Tenant's actual surrender or return of possession of the applicable
Property in accordance with the applicable Lease and (B) that is not
attributable to and does not arise from any act, event or circumstance
occurring on or before the later to occur of (x) and (y), provided,
--------
that nothing in clause (x) shall be deemed to exclude or limit any
Claim that any Indemnitee may have under applicable law by reason of
an Event of Default or for damages for breach of any of Tenant's
covenants contained in the Operative Documents to which it is a party
that expressly provide for performance after termination or expiration
of the Lease;
(iv) 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 breach of fiduciary duty under an
Operative Document by such Indemnitee;
(v) the failure of such Indemnitee to perform or observe any
covenant or agreement on its part (including, without limitation, the
obligation to remove Lessor Liens, Remainderman Liens, Owner Trustee
Liens, Pass Through Trustee Liens or Indenture Trustee's Liens)
required to be performed or observed in this Agreement or any of the
other Operative Documents;
(vi) any Claim of an Indemnitee relating to or arising from the
inaccuracy, incompleteness or misleading nature of any statement or
representation included in any registration statement issued in
connection with any of an offer, sale or disposition of any Notes,
Certificates or similar interest, which statement or representation is
based on written information supplied or made available
- 58 -
<PAGE>
by such Indemnitee specifically for inclusion in such registration
statement;
(vii) any Indenture Event of Default caused by Owner
Participant; and
(viii) any Claim arising out of or related to a refinancing of
the Properties by Owner Participant or Owner Trustee after payment in
full of the Notes.
Notwithstanding anything in this Section 23 to the contrary, Tenant shall
indemnify Owner Participant and its Affiliates for any Claim arising under ERISA
with respect to the purchase, sale, holding or transfer of the Notes or
Certificates.
(c) With respect to any amount that Tenant is requested by an
Indemnitee to pay by reason of this Section 23, such Indemnitee shall (subject
to entering into a mutually satisfactory confidentiality agreement, if
reasonably requested by Tenant or such Indemnitee), at Tenant's expense, submit
such information or additional information and/or documentation not within the
control of Tenant and that is reasonably available to such Indemnitee to Tenant
as Tenant may reasonably request.
(d) (i) If Tenant shall obtain knowledge of any Claim indemnified
against under this Section 23, Tenant shall give prompt notice thereof to the
appropriate Indemnitee (or Indemnitees), and if any Indemnitee shall obtain
actual knowledge of any Claim indemnified under this Section 23, such Indemnitee
shall give prompt notice thereof to Tenant and any other affected Indemnitees,
provided that failure to so notify Tenant shall not release Tenant from any of
its obligations to indemnify such Indemnitee hereunder except to the extent that
Tenant shall demonstrate that such failure precludes Tenant from contesting such
Claim hereunder or such failure materially increases the amount of such Claim in
which event Tenant shall be relieved only to the extent of such increase.
(ii) In case any action, suit or proceeding shall be brought
against any Indemnitee, such Indemnitee shall notify Tenant in writing
of the commencement thereof.
(A) In the case of any action, suit or proceeding with
respect to which Tenant (as opposed to Indemnitee) receives notice, or
if requested by Tenant, within 60 days after receipt by Tenant of the
required notice with respect to the action, suit or proceeding that is
the subject of the Claim, Indemnitee shall, except in the case of an
action, suit or proceeding described in subsection (B) below, permit
the Tenant to control any such action, suit or proceeding with counsel
reasonably acceptable to Indemnitee. The Indemnitee may
- 59 -
<PAGE>
participate, in a reasonable manner at its own expense and with its
own counsel, but shall not control any action, suit or proceeding
conducted by the Tenant in accordance with this subsection.
(B) Tenant shall not be entitled to assume and control the
defense of any action, suit or proceeding (unless Indemnitee shall
request Tenant to assume such control) if (1) Tenant has not
acknowledged that in the event of an adverse result, Tenant is
required to indemnify the Indemnitee to the extent required by Section
23, (2) a Material Default or Event of Default with respect to the
Property giving rise to the Claim has occurred and is continuing, (3)
the Indemnitee can demonstrate to the reasonable satisfaction of
Tenant that there is a reasonable possibility that any such action,
suit or proceeding with respect to such Claim would, if determined
adversely to such Indemnitee, have a material adverse impact on the
business of such Indemnitee and such adverse determination is a
reasonable possibility, or involves the potential imposition of
criminal liability on such Indemnitee or there exists a conflict of
interest such that it is advisable for such Indemnitee to retain
control of such proceeding, (4) such defense would at any time involve
any material risk of the sale, forfeiture or loss of use, or the
creation of any lien (other than Permitted Liens) on the Properties,
unless Tenant shall have posted a bond or other security reasonably
satisfactory to Owner Participant and such Indemnitee with respect to
such risk or (5) in the case of Owner Participant or Remainderman
Participant, Owner Participant or Remainderman Participant can
demonstrate to the reasonable satisfaction of Tenant that there is a
reasonable possibility that the amounts or issues involved if the
Claim is adversely determined to Owner Participant or Remainderman
Participant would have a material adverse affect on its business (or
the business of Owner Participant Parent or the parent of Remainderman
Participant) other than the ownership, leasing or financing of the
Properties and such adverse determination is a reasonable possibility,
provided that, in the case of this clause (5), if the amounts
--------
involved, in the good faith opinion of Tenant, are also likely to
have a material adverse affect on the Tenant's business other than the
leasing, operation and maintenance of the Properties, Tenant shall be
entitled to mutually share control and responsibility with Owner
Participant or Remainderman Participant for defense of such Claim;
provided, that if this clause (5) applies to both Owner Participant
and Remainderman Participant, Owner Participant shall control the
Claim and Remainderman
- 60 -
<PAGE>
Participant shall be entitled to engage separate counsel, at Tenant's
expense, to represent Remainderman Participant's interests in such
Claim. In the case of any such action, suit or proceeding described
in the preceding sentence, the Indemnitee will be entitled to assume
and take control of the defense thereof at Tenant's expense and on an
After-Tax Basis (including the payment of reasonable attorneys' fees
and expenses incurred) and Indemnitee shall itself contest in good
faith (including, without limitation, by pursuit of appeals and
administrative procedures) the validity, applicability or amount of
any such Claim in such action, suit or proceeding. Tenant may
participate in a reasonable manner at its own expense and with its own
counsel, but shall not control any action, suit or proceeding
conducted by any Indemnitee in accordance with this subsection.
(C) In the case of any action, suit or proceeding described in
subsection (A) or (B) above, Indemnitee and Tenant shall fully
cooperate and shall supply one another with such information and
documents (to the extent not adverse to Indemnitee's defense in (B))
as may be reasonably requested by the party in control to fully and
effectively prosecute and conduct such action, suit or proceeding.
(e) As long as no Material Default or Event of Default has occurred
and is continuing, 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 23 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 23 with respect to such Claim.
(f) Any amount payable to an Indemnitee pursuant to this Section 23
shall be paid to such Indemnitee promptly upon presentation and in any event
within 45 days after the latest to occur of: (i) Indemnitee's compliance with
the notification requirements of Section (d)(i); (ii) Indemnitee's compliance
with the information exchange requirements of subsection (c); and (iii) Tenant's
receipt of a written demand therefor from such Indemnitee, accompanied by a
written statement describing the basis for such indemnity and the computation of
the amount so payable; provided, however, in the case of any Claim that is
contested in accordance with subsection (d), any indemnity payment hereunder
with respect to such contested Claim (but only to the extent of any amounts
contested hereunder and not amounts incurred in connection with the conduct of
such contest) may be deferred until a final resolution of such contest
hereunder; provided, further, however, if the Indemnitee is required to pay to
any person or governmental body or
- 61 -
<PAGE>
entity any amounts in respect of such Claim prior to a final resolution of such
Claim hereunder, Tenant shall advance to such Indemnitee the amount of such
Claim on an interest-free basis (with no additional net after-tax cost to such
Indemnitee). If any amount payable by Tenant under Section 23 hereof is not
paid when due, Tenant shall pay on demand, to the Person entitled thereto,
interest on any such amount for the period from and including the due date for
such amount to but excluding the date the same is paid, at the Default Rate.
(g) Upon payment in full of any Claim by Tenant pursuant to this
Section 23 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 at Tenant's expense 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 reasonably cooperate in good faith with Tenant and give such further
assurances as are reasonably necessary or advisable to enable Tenant to pursue
such claims.
(h) Nothing in this Section 23 shall (i) be construed as a guaranty by
Tenant of payment of any amount or of payment with respect to any matter not
specifically set forth herein including, without limitation, 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.
(i) The right to enforce the indemnities contained in Section 23 is
personal to the Indemnitees, may not be assigned by them (other than in
connection with a transfer permitted by the Operative Documents) and shall in no
case be deemed a covenant running with the Land (except that Landlord may assign
the same to the Indenture Trustee pursuant to the Indenture). Without limiting
the generality of the foregoing, only the Persons who are Indemnitees as of the
last day of the term of the Lease and the Persons who have ever been Indemnitees
during the term of the Lease and, in each case, any successor thereto shall be
entitled to an indemnity pursuant to Section 23 on account of environmental
conditions first discovered after the end of the term of the Lease.
Notwithstanding anything to the contrary contained in the Lease, Tenant shall
have no liability to an Indemnitee to the extent that such liability derives
(directly or indirectly) from a contractual indemnity given by such Indemnitee
to any other Person, other than (i) an officer, director, employee, agent or
consultant of such Indemnitee, (ii) the Indenture Trustee pursuant to the
Indenture,
- 62 -
<PAGE>
(iii) a transferee of a Property in a transfer under Article 14, 15, 39, 40 or
41 of the Lease, to the extent any contractual indemnity is required by the
applicable Article or if not so required, has been consented to by Tenant in
writing, (iv) the Owner Trustee, in its fiduciary and individual capacity,
pursuant to the Trust Agreement and (v) the Remainderman Trustee, in its
fiduciary and individual capacity, pursuant to the Remainderman Trust Agreement.
(j) For purposes of the Operative Documents, the following terms shall
have the meanings ascribed to them below.
"After-Tax Basis" shall have the same meaning with respect to any
---------------
Indemnitee as is set forth in the Tax Indemnification Agreement.
"Claims" shall mean liabilities, obligations, damages (including
------
punitive damages against Tenant or against any Indemnitee in its capacity as the
owner of the Property only), losses, penalties, fines, claims (including,
without limitation, Environmental Claims), actions, suits, judgments,
administrative or judicial orders, settlements, utility charges, interest, fees,
liabilities (including strict liability), encumbrances, liens, costs, expenses
and disbursements (including, without limitation, reasonable legal fees and
expenses and costs of investigation) of any kind and nature whatsoever.
"Indemnitee" shall mean Owner Participant, Owner Participant Parent,
----------
Landlord, Remainderman Participant, Remainderman Trustee (in its individual
capacity and as trustee under the Remainderman Trust Agreement together with any
co-trustees permitted under such Remainderman Trust Agreement), Indenture
Trustee (in its individual capacity and as trustee under each of the
Indentures), Pass Through Trustee (in its individual capacity and as trustee
under the Pass Through Trust Agreements) and Corporate Owner Trustee and
Individual Owner Trustee (each in its individual capacity and as trustee under
the Trust Agreement together with any co-trustees permitted under such Trust
Agreement) and each of their respective Affiliates, permitted successors,
assigns, and transferees, servants, employees, agents, shareholders, directors
and officers.
"Release" shall mean the release, deposit, disposal, leak or dispersal
-------
of any Hazardous Material into, upon or under any land, water or air, or
otherwise into the indoor or outdoor environment, including without limitation
by means of burial, disposal, discharge, emission, injection, spillage, leakage,
seepage, leaching, dumping, pumping, pouring, escaping, emptying, placement and
the like.
- 63 -
<PAGE>
24. General Tax Indemnity.
---------------------
(a) Tenant agrees subject to subsection (b) of this Section 24, whether or
not any of the transactions contemplated by the Sale and Leaseback Documents
shall be consummated, to assume liability for, and to indemnify, protect,
defend, save and keep harmless each Tax Indemnitee on an After-Tax Basis, from
and against any and all claims that may be imposed on, incurred by or asserted
against any Tax Indemnitee, whether or not such claim arises or accrues prior to
the date of this Agreement with respect to any Indemnified Taxes.
(b) Tenant shall not be required to pay, reimburse or indemnify any Tax
Indemnitee under this Section 24 for any of the following:
(i) any Excluded Taxes;
(ii) with respect to any Tax Indemnitee any Indemnified Tax
attributable to:
(A) the gross negligence or willful misconduct of such Tax
Indemnitee, it being understood that any breach by any Tax
Indemnitee of its representations, warranties and covenants set
forth in the Sale and Leaseback Documents to which it is a party
or any violation of laws by such Tax Indemnitee shall be
construed as willful misconduct for purposes of this Agreement
unless such breach or violation results from Tenant's acts or
omissions or misrepresentations.
(B) a sale or transfer by such Tax Indemnitee of any
Property, Lease, Rent or Remainder Interest or any part thereof
or interest therein, or any addition, alteration, modification or
improvement of a Property by such Tax Indemnitee, other than: (x)
any transfer of a Property, Lease, Rent or Remainder Interest or
any part thereof or any interest therein while a Material Default
or Event of Default shall have occurred and be continuing under
the 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;
(iii) any Tax expressly provided under the Sale and Leaseback
Documents to be borne by a party other than the Tenant;
- 64 -
<PAGE>
(iv) any Indemnified Tax to the extent attributable (A) to acts,
events or circumstances which occur after the later of (x) the
expiration or earlier termination of the applicable Lease and (y) the
Tenant's actual surrender or return of possession of the applicable
Property in accordance with the applicable Lease and (B) that is not
attributable to and does not arise from any act, event or circumstance
occurring on or before the later to occur of (x) and (y);
(v) any Indemnified Tax attributable to the failure of such Tax
Indemnitee to file any return or report in a procedurally proper and
timely manner unless such failure is caused by the failure of Tenant
to fulfill its obligations, if any, with respect to such return or
report or unless Tenant has not timely notified the Tax Indemnitee
that such return or report is required;
(vi) any Indemnified Tax attributable to the failure of such Tax
Indemnitee to comply with (A) certification, information,
documentation, reporting or other similar requirements (each being a
"Requirement") concerning the nationality, residence, identity or
connection with the jurisdiction imposing such taxes, if such
compliance is timely requested by Tenant in writing and such
compliance is required by statute or by regulation of the jurisdiction
imposing any tax with respect to which indemnification is claimed as a
precondition to relief or exemption from such tax and such Tax
Indemnitee or its respective Tax Affiliates were eligible to comply
with such Requirement or (B) any other Requirements under the Tax laws
or regulations of the jurisdiction imposing such Taxes that would
establish entitlement to otherwise applicable relief or exemption from
such Taxes if such compliance by such Tax Indemnitee or its respective
Tax Affiliates were timely requested by Tenant in writing and such Tax
Indemnitee or its respective Tax Affiliates were eligible to comply
with such Requirement provided, in the case of both clause (A) and
(B), such Requirements or compliance therewith would not, in the
reasonable opinion of such Tax Indemnitee, subject such Tax Indemnitee
or its Affiliates to the risk of material adverse unindemnified tax
consequences, or if in the opinion of such Tax Indemnitee it would be
so subject, such Tax Indemnitee shall provide to Tenant a written
statement articulating the reasons for the Tax Indemnitee's failure to
comply; or
(vii) any Indemnified Tax attributable to the business
activities of the Landlord or the Owner Participant or their
respective Tax Affiliates in the
- 65 -
<PAGE>
jurisdiction imposing such Indemnified Tax which activities are
unrelated to the transactions contemplated by the Sale and Leaseback
Documents, but only to the extent attributable to, and increased by,
such unrelated activities;
Notwithstanding anything in this Section 24 to the contrary, Tenant shall
indemnify Owner Participant, Remainderman Participant and their respective
Affiliates for any Indemnified Tax imposed under Section 4975 of the Code or
Section 502 of ERISA with respect to the purchase, sale, holding or transfer of
the Notes or Certificates.
(c) (i) If any written claim shall be made against a Tax Indemnitee or if
any proceeding shall be commenced against any such Tax Indemnitee, such Tax
Indemnitee shall notify the Tenant in writing of the commencement thereof
(provided, that failure to so notify Tenant shall not release Tenant from any of
--------
its obligations to indemnify such Tax Indemnitee hereunder except to the extent
such failure precludes Tenant from contesting such claim hereunder or such
failure materially increases the amount of such claim but only to the extent of
such increase), but shall not take any action with respect to such claim or
proceeding 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 action, suit or
proceeding, if a Tax Indemnitee shall be required by law or regulation to take
action prior to the end of such 60-day period, such Tax Indemnitee shall in such
notice to Tenant, so inform Tenant, and Tax Indemnitee shall not take any action
with respect to such action, suit or proceeding 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 such Tax Indemnitee shall be
required by law or regulation to take action prior to the end of such 10-day
period, in which case such Tax Indemnitee may take any action with respect to
such claim, proceeding or assessment 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 subsection (A), below.
(A) If requested by Tenant within 60 days or such shorter period
as specified above, after receipt by Tenant of the required notice
with respect to the claim or proceeding that is the subject of such
notice, the Tax Indemnitee either (i) in the case of a claim which may
be contested in the name of the Tenant and independently (without
joinder, contribution or otherwise) from any claim, proceeding or
action that is not subject to indemnification by Tenant, shall permit
Tenant to control or, in the case of any claim, proceeding or action,
may
- 66 -
<PAGE>
request the Tenant to control, or (ii) in the case of a claim,
proceeding or action which must be contested in the name of the Tax
Indemnitee or its Affiliates, but which may be contested independently
(without joinder, contribution or otherwise) from any claim,
proceeding or action that is not subject to indemnification by Tenant,
may, upon prior written consent by the Tax Indemnitee 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 the 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 relations interests of the Tax Indemnitee or its
Affiliates, in which case, the Tax Indemnitee may assert or reassert
control of the contest; the Tax Indemnitee shall itself, contest in
good faith (including, without limitation, by pursuit of appeals and
administrative procedures) the validity, applicability or amount of
such Assessments.
(B) In the case of any action, suit or proceeding described
above, the Tax Indemnitee and Tenant shall fully cooperate and shall
supply one another with such information and documents as may be
reasonably requested by the party in control to fully and effectively
prosecute and conduct such action, suit or proceeding, provided that
nothing herein shall require Tenant or a Tax Indemnitee to provide the
other party with its income tax returns.
(C) In no event shall any contest of Indemnified Taxes be
required or permitted under this subsection (c) unless:
(1) In the case of a contest pursuant to subsection
(c)(i)(A)(ii), the amount at issue (taking into account all similar
and logically related claims with respect to the transactions
contemplated by the Operative Documents that have been or could be
raised in an audit by the tax authority in question for any other
taxable period with respect to which an assessment of tax deficiency
is not barred by a statute of limitations, including, without
limitation, such claims that may arise in future periods) exceeds
$25,000;
(2) Tenant shall have agreed in writing to pay the Tax Indemnitee
and shall pay on an After-Tax Basis as incurred all reasonable out-of-
pocket costs and expenses the Tax Indemnitee shall incur in connection
with the contest of such claim (including, without limitation, all
- 67 -
<PAGE>
reasonable costs, expenses, legal and accounting fees and
disbursements);
(3) the 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
of the Property, or any part thereof or interest therein or the
creation of any lien on any of the Property 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
the Tax Indemnitee;
(4) 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 the Tax Indemnitee
but taking into account any net tax savings associated with such
advance);
(5) no Material Default or Event of Default shall have occurred
and be continuing;
(6) In the case of a contest pursuant to subsection
(c)(i)(A)(ii), prior to initiating the contest, Tenant shall have
furnished the Tax Indemnitee with an opinion of independent tax
counsel selected by the Tenant and reasonably acceptable to the Tax
Indemnitee ("Tax Counsel"), which opinion shall be furnished solely at
Tenant's expense, to the effect that a Reasonable Basis exists for
such contest, and prior to the appeal of any adverse judicial
determination, Tenant shall have furnished the Tax Indemnitee 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
modification of such determination on appeal; and
(7) after the completion of an administrative proceeding of first
instance and prior to any administrative appeal, Tenant shall have
acknowledged in writing its obligation to indemnify the Tax
Indemnitee for the Tax claim hereunder in the event 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) the Tax Indemnitee for the Tax claim 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
- 68 -
<PAGE>
acknowledgment hereunder shall not preclude Tenant from raising a
defense to liability under this Section 24 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 hereunder or under
Article 6 of the Lease.
(ii) No Tax Indemnitee shall enter into any settlement or other
compromise with respect to any claim for any Indemnified Tax which is the
subject of a contest under this subsection (c) which it asserts is entitled
to be indemnified under this Section 24 without the prior written consent
of the Tenant, which consent shall not be unreasonably withheld, unless
such Tax Indemnitee waives its right to be indemnified under this Section
24 with respect to such claim. In no event shall a Tax Indemnitee be
required to contest any claim, proceeding or Tax if the subject matter of
such claim, proceeding or Tax shall be of a continuing nature and shall
have previously been the subject of an adverse final determination
hereunder or under Article 6 of the Lease after exercise by Tenant of its
rights pursuant to this Section 24 or under Article 6 of the Lease unless
Tenant shall have delivered to the Tax Indemnitee 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 the Tax Indemnitee will prevail in the
contest of such claim. In addition, in no event will a Tax Indemnitee be
required, or Tenant allowed, to prosecute an appeal of an adverse
determination to the United States Supreme Court.
(iii) Any amount payable to a Tax Indemnitee with respect to an
Indemnified Tax which is the subject of this subsection (c) shall be paid
to such Tax Indemnitee within 60 days after the Tenant's receipt of a
written demand therefor from such Tax Indemnitee, accompanied by a written
statement describing the basis for such indemnity and the computation of
the amount so payable; provided, however, in the case of any claim for
Indemnified Tax that is contested in accordance with this subsection (c),
any indemnity payment hereunder with respect to such contested Indemnified
Tax (but only to the extent of any amounts contested hereunder) may be
deferred until a final resolution of such contest hereunder;
(iv) Upon payment in full of any Indemnified Tax by the Tenant
pursuant to this Section 24 to or on behalf of an Tax Indemnitee, the
Tenant, without any further action, shall be subrogated to the indemnified
claim and any and all claims that such Tax Indemnitee may have relating
thereto (other than claims in respect of insurance policies maintained by
such Tax Indemnitee at its own expense), provided however, that Tenant's
right to receive the economic benefit of such
- 69 -
<PAGE>
subrogation shall not otherwise waive or amend the contest provisions of
this subsection (c) other than with respect to Tenant's entitlement to
receive such economic benefit if such benefit is obtained and such Tax
Indemnitee shall at Tenant's expense 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 reasonably cooperate with the Tenant and give
such further assurances as are reasonably necessary or advisable to enable
the Tenant to pursue such claims.
(d) (i) Each Tax Indemnitee agrees to take any action at Tenant's expense
reasonably requested by Tenant to avoid or minimize the amount of such tax;
provided that such Tax Indemnitee determines in good faith, after consultation
- --------
with Tenant's counsel, that neither the Tax Indemnitee nor any of its respective
Tax Affiliates will suffer any adverse consequences as a result of taking such
requested action;
(ii) If a Tax Indemnitee shall receive a refund of all or part of any
Indemnified Tax paid, reimbursed or advanced by Tenant with respect to any
Contest under this Section 24, then, such Tax Indemnitee 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 Indemnified Tax plus or minus any net tax benefit or cost
(taking into account any Tax incurred by such Tax Indemnitee by reason of the
receipt or accrual of such refund) realized by such Tax Indemnitee as a result
of the receipt or accrual of such refund and as a result of any payment made
pursuant to this sentence (including this clause (A)), and (B) the amount of
such Indemnified Tax paid, reimbursed or advanced by Tenant to such Tax
Indemnitee, it being intended that the applicable Tax Indemnitee shall retain a
net tax benefit pursuant to this Section 24 only if Tenant shall first have been
reimbursed for all Indemnified Tax it paid to any applicable Tax Indemnitee
pursuant to this Section 24. If, in addition to such refund, a Tax Indemnitee
shall receive an amount representing interest on the amount of such refund, such
Tax Indemnitee shall pay Tenant within 30 days of receipt, that portion of such
interest that shall be fairly attributable to Indemnified Tax paid, reimbursed
or advanced by Tenant prior to the receipt of such refund taking into account
the net tax effect to such Tax Indemnitee of the receipt or accrual of the
portion of such interest fairly attributable to the Indemnified Tax paid,
reimbursed or advanced by Tenant hereunder and the payment to Tenant hereunder.
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 Tenant's rights to contest such denial, loss, repayment or recapture
under, and in accordance with, this Section 24(c) as though it were a new claim,
proceeding or Indemnified Tax hereunder.
- 70 -
<PAGE>
Nothing in this Section 24 shall be construed to limit Tenant's
obligations under Article 6 of the Lease with respect to Assessments and nothing
in Article 6 of the Lease shall be construed to limit Tenant's obligations to
Remainderman Trustee or Remainderman Participant under this Section 24.
(e) For purposes of this Section 24, the following terms shall have the
meanings ascribed to them below.
"After-Tax Basis" shall have the same meaning with respect to any Tax
---------------
Indemnitee as is set forth in the Tax Indemnification Agreement.
"Excluded Tax(es)" shall mean any 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 of how named
or denominated, including the Michigan Single Business Tax) except for any such
tax (i) 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 for any Indemnified Tax which Tenant would otherwise be obligated to pay
under this Agreement or for which Tenant has provided an indemnity hereunder,
(ii) which is, or is in the nature of, a real property franchise charge, or a
sales, use, rental, property, license, stamp, recording, value added or transfer
tax, or (iii) which is indemnified as necessary to make any payments hereunder
on an After-Tax Basis.
"Indemnified Tax(es)" shall mean any Tax, levied, assessed or imposed
-------------------
on any Tax Indemnitee, Tenant, or any Property or part thereof or interest
therein or any addition, alteration, modification or improvement thereto, any
Remainder Interest, or the Rent payable under any Lease or otherwise levied,
assessed or imposed in connection with the transactions contemplated by the
Operative Documents. Such term shall include, without limitation, taxes or such
other amounts that are or are in the nature of sales, use, rental, value added
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 of 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, any Property, or any estate, right, title or
interest therein, or any occupancy, operation, leasing, subleasing, use or
possession of, or sales from, or other activity conducted on any Property, any
addition, alteration, modification or improvement
- 71 -
<PAGE>
thereto, any Remainder Interest, any Lease or other Sale and Leaseback Document,
the Rents, and any other payments under the Sale and Leaseback Documents or
otherwise with respect to or in connection with the transactions contemplated by
the Operative Documents (including, without limitation, the offer, issue, sale,
resale, purchase or delivery of any Notes or Certificates (or any similar
interest)). Any such taxes, levies, charges, assessments or other amounts
payable or indemnifiable by Tenant hereunder together with Assessments (as
defined in the Lease) payable or indemnifiable by Tenant constitute "Indemnified
Taxes".
"Tax" shall mean all taxes, excises, 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.
"Tax Affiliate" shall mean any affiliate of a Tax Indemnitee which is
-------------
a member of the affiliated group of which the Tax Indemnitee is also a member
for purposes of filing consolidated federal income tax returns pursuant to Code
{{1501 et. seq. or consolidated or combined state or local income tax returns.
-- ---
"Tax Indemnitee" shall mean Owner Participant, Landlord, Remainderman
--------------
Participant, Owner Trust, and Indenture Trust, together with the Corporate Owner
Trustee, Individual Owner Trustee, Remainderman Trustee, Corporate Indenture
Trustee and Individual Indenture Trustee (each such trustee both in its
individual capacity and as trustee under the Trust Agreement together with any
co-trustees or successor trustees permitted under the Trust Agreement), and with
respect to each of the foregoing, their respective Tax Affiliates, their
permitted successors, assigns, and transferees, and their servants, employees,
agents, shareholders, directors and officers.
25. Trustee Liability. It is expressly understood and agreed by the
-----------------
parties hereto that:
(a) Owner Trustee Liability. (i) Except as expressly provided
-----------------------
otherwise herein, this Agreement is executed and delivered by the Owner Trustees
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 Agreement, (ii) each of the
representations, warranties, undertakings, covenants and agreements herein made
by Landlord (other than those made by the Owner Trustees in their respective
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 (as defined
in the Trust
- 72 -
<PAGE>
Agreement) created by the Trust Agreement, (iii) except as set forth in the
proviso to this sentence, 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) so far
as the Owner Trustees are concerned, each of the other parties hereto and any
Persons claiming by, through, or under any such party shall (other than with
respect to Claims (as defined in Section 23), arising from the willful
misconduct or gross negligence of the Owner Trustees) look solely to the Trust
Estate for the performance of any obligation under any of the instruments
referred to herein; provided, however, that notwithstanding anything contained
-----------------
in this Section 25 to the contrary, each Owner Trustee shall be liable (A) in
its individual capacity and as owner trustee to the Owner Participant as
expressly set forth in the Trust Agreement, (B) in its individual capacity, in
respect of the representations, warranties and agreements of each Owner Trustee
made in its individual capacity as expressly set forth herein or in any other
Operative Document to which it is a party or in any officer's certificate of the
Owner Trustees delivered pursuant hereto or thereto, and (C) in its individual
capacity for the consequences of its own gross negligence or willful misconduct,
or in case of the holding or transfer of funds, negligence (including, without
limitation, its willful breach of contract) with respect to any Operative
Document to which the Owner Trustee is or will be a party.
(b) Remainderman Trustee Liability. (i) Except as expressly provided
------------------------------
otherwise herein, this Agreement is executed and delivered by the Remainderman
Trustees not individually or personally but solely as trustees under the
Remainderman Trust Agreement, in the exercise of the powers and authority
conferred and vested in them as the trustees 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 the
Remainderman Trustees in their respective individual capacity) are made and
intended not as personal representations, warranties, undertakings, covenants
and agreements by the Remainderman Trustees but are made and intended for the
purpose of binding only the Remainder Trust Estate (as defined in the
Remainderman Trust Agreement) created by the Remainderman Trust Agreement, (iii)
except as set forth in the proviso to this sentence, nothing herein contained
shall be construed as creating any liability on the Remainderman 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) so far as the Remainderman Trustees are concerned, each
of the other parties
- 73 -
<PAGE>
hereto and any Persons claiming by, through, or under any such party shall
(other than with respect to Claims (as defined in Section 23), arising from the
willful misconduct or gross negligence of the Remainderman Trustees) look solely
to the Remainder Trust Estate for the performance of any obligation under any of
the instruments referred to herein; provided, however, that notwithstanding
-----------------
anything contained in this Section 25 to the contrary, each Remainderman Trustee
shall be liable (A) in its individual capacity and as trustee to the
Remainderman Participant as expressly set forth in the Remainderman Trust
Agreement, (B) in its individual capacity, in respect of the representations,
warranties and agreements of each Remainderman Trustee made in its individual
capacity as expressly set forth herein or in any other Operative Document to
which it is a party or in any officer's certificate of the Remainderman Trustees
delivered pursuant hereto or thereto, and (C) in its individual capacity for the
consequences of its own gross negligence or willful misconduct, or in case of
the holding or transfer of funds, negligence (including, without limitation, its
willful breach of contract) with respect to any Operative Document to which the
Remainderman Trustee is or will be a party.
(c) Indenture Trustee Liability. (i) Except as expressly provided
---------------------------
otherwise herein, this Agreement is executed and delivered by 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 or in
any other Operative Document, nothing herein or therein 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 and except as
otherwise provided in the Indenture) 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.
26. Extent of Interest of Noteholders. No Noteholder shall have any
---------------------------------
further interest in, or other right with respect to the
- 74 -
<PAGE>
Properties when and if the principal of, Make-Whole 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 2.11 of the Indenture and that
none of Owner Participant 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, except as expressly
provided in the Operative Documents.
27. No Merger of Title. None of the remainderman interest, estate for
------------------
years interest and leasehold estate, as well as the ground leasehold interest
(if any) with respect to each Property, shall merge but shall always be kept
separate and distinct, notwithstanding the union of such estates or any part
thereof in Landlord, Tenant, Remainderman Trustee, or any other party, whether
by purchase or otherwise unless (a) the lien of the Indenture shall have been
discharged in accordance with the terms thereof and (b) a document merging such
interests executed by the holder of all such interests is filed or recorded with
the appropriate recording officer; provided, however, that the estate for years
-------- -------
interest and remainderman interest with respect to a Property may merge if
Tenant purchases each such 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.
- 75 -
<PAGE>
(b) The indemnities contained in Sections 23 and 24 shall survive the
expiration or earlier termination of the Lease.
31. Confidentiality. Notwithstanding anything to the contrary contained
---------------
in this Agreement, each of the parties hereto agrees, and each successor or
assign thereto, by becoming a party to any Operative Document, shall be deemed
to have agreed (a) that it will not issue or release for publication any article
or advertising or publicity matter relating to or otherwise disclose the
transactions contemplated hereby and mentioning the identity of the Owner
Participant or Owner Participant Parent without the prior written consent of the
Owner Participant Parent and (b) that the terms and conditions of the Operative
Documents and each other document or agreement entered into in connection with
the transactions contemplated by the Operative Documents will, except to the
extent required to be disclosed to or filed with a Governmental Authority
pursuant to applicable Legal Requirements, be maintained in strictest confidence
and shall not be disclosed or disseminated to any other Person other than (i) to
any prospective successor or assign which has agreed with such party that, upon
disclosure of such terms and conditions, such successor or assign shall be bound
by the provisions of this Section 30 and (ii) to attorneys, accountants and
financial, insurance and other independent advisors of any such party who have
been advised of the provisions of this Section 31.
32. Transaction Expenses. (a) Tenant, in its sole discretion,
--------------------
may elect to pay all or any portion of Transaction Expenses (other than fees and
expenses of the Owner Trustee, Owner Participant counsel fees and the fees of
the Appraiser) in excess of the Transaction Expense Cap (as defined below)
directly or to have Landlord pay, with funds to be provided by Owner Participant
for that purpose, when due, or reimburse any Person who has previously paid, all
or any portion of Transaction Expenses; provided, that Tenant will consider in
--------
good faith any reasonable requests of Owner Participant regarding which
Transaction Expenses, if any, shall be paid by Tenant. To the extent not paid
on the Closing Date, if Tenant shall have elected to have Landlord pay all or
any portion of Transaction Expenses, Owner Participant shall provide funds to
Landlord for the timely payment of Transaction Expenses for which it has
received invoices within 60 days, as applicable, after the Closing Date. Such
invoices shall be approved by Owner Participant (and reviewed by Tenant) before
presentation for payment. Owner Participant shall provide such funds upon
presentation of such invoices promptly, but in no event later than 10 days after
such presentation.
"Transaction Expenses" shall mean the reasonable fees and out-of-
--------------------
pocket expenses, disbursements and costs (each of which shall be evidenced by
appropriate bills or invoices) incurred by the parties to this Agreement in
connection with the preparation,
- 76 -
<PAGE>
execution and delivery of the Operative Documents and the consummation of the
transactions provided for therein on the Closing Date, including, without
limitation:
(a) the reasonable fees and disbursements of Owner Participant's
special counsel, Owner Participant's special local counsels, the Underwriter's
special counsel, the Owner Trustee's counsel, Indenture Trustee's counsel, Pass
Through Trustee's counsel, Remainderman Participant's counsel, Remainderman
Trustee's counsel and Tenant's special counsel, for their services rendered in
connection with the execution and delivery of the Operative Documents;
(b) the initial (but not the ongoing) fees and expenses of Owner
Trustee, Remainderman Trustee, Indenture Trustee and Pass Through Trustee;
(c) all stenographic, printing, reproduction and other reasonable out-
of-pocket expenses (other than investment banking or brokerage fees) incurred in
connection with the execution and delivery of the Operative Documents and all
other agreements, documents or instruments prepared in connection therewith
including the out-of-pocket expenses of Owner Participant and the out-of-pocket
expenses of Fieldstone Private Capital Group, L.P.;
(d) the fees and expenses of the Appraiser;
(e) the reasonable fees and disbursements of surveyors and engineers
engaged pursuant to the Operative Documents, including environmental and other
reports;
(f) the reasonable fees and expenses of the Underwriter under the
Underwriting Agreement;
(g) SEC registration fees and rating agency costs; and
(h) taxes and fees incurred in the recording of any Operative Document
or other instrument, document or certificate contemplated by or required under
an Operative Document, any title insurance search fees, commitment fees or
premiums and any other search fees for reports required under or contemplated by
the Operative Documents;
BUT EXCLUDING, HOWEVER, any fees and expenses (other than as provided in clause
(c) above) of financial or other advisors to parties other than Tenant.
(b) If Transaction Expenses paid by Landlord exceed fifty five
hundredths of one percent (.55%) of the Purchase Price (the "Transaction Expense
-------------------
Cap"), then Basic Rent and Termination
- ---
- 77 -
<PAGE>
Value under the Lease for the Properties will be adjusted pursuant to Section 22
hereof.
33. Beneficiary. Remainderman Trustee and Remainderman Participant are
-----------
third party beneficiaries of Tenant's undertakings in the Lease specifically
referencing such parties; provided, however, that Tenant's failure to perform
-------- -------
any such undertakings shall not constitute an Event of Default under the Lease.
34. Adverse Acts. Landlord and Owner Participant agree not to grant any
------------
consents or waivers, or amend any Operative Documents, if such action decreases
the value of the Remainder Interests or the value of the Remainderman
Participant's interest and rights under the Operative Documents, in each case
other than to a de minimis extent. Landlord or Owner Participant shall send
notice of any such proposed action to Remainderman Participant, which notice
shall specifically describe the proposed action, prior to taking such action.
If Remainderman Participant fails to object to such proposed action within five
Business Days of receipt, it shall be deemed to have agreed to such action. If
Remainderman Participant objects to such proposed action, it shall send a
written notice to Landlord or Owner Participant, specifically identifying the
reasons why it objects to such proposed action.
35. Intent of Parties. Landlord and Tenant intend that each of the Leases
-----------------
be operating leases under applicable state law. It is hereby agreed between
Tenant and Owner Participant that for United States of America federal, state
and local tax purposes, it is intended that Owner Participant will be treated as
the owner and lessor of the Demised Premises to be leased under the Lease and
Tenant will be treated as the lessee of such Demised Premises.
- 78 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereby executed this Agreement
as of the date first written above.
KMART CORPORATION
By:_____________________________________
Its:______________________________
[OWNER PARTICIPANT]
By:_____________________________________
Its:______________________________
WILMINGTON TRUST COMPANY, acting in its
individual capacity solely for the purposes
of the representations set forth in Section
14(d) and otherwise not in its individual
capacity but solely as Owner Trustee
By:_____________________________________
Its:______________________________
[WILLIAM J. WADE, acting not individually
(except as expressly set forth herein) but
solely as Owner Trustee]
________________________________________
- 79 -
<PAGE>
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, acting in its individual
capacity solely for the purposes of the
representations set forth in Section 14(f)
and otherwise not in its individual
capacity but solely as trustee under [ ]
Trust Indentures dated as of the date
hereof
By:_____________________________________
Its:______________________________
By: KATHY A. LARIMORE, acting not
individually but solely as trustee
under [ ] Trust Indentures dated as of
the date hereof
________________________________________
[REMAINDERMAN PARTICIPANT]
By:_____________________________________
Its:______________________________
FIRST SECURITY BANK OF UTAH, N.A., acting
in its individual capacity solely for the
purposes of the representations set forth
in Section 14(h) and otherwise not in its
individual capacity but solely as
Remainderman Trustee
By:_____________________________________
Its:______________________________
- 80 -
<PAGE>
[VAL T. ORTON, acting not individually
(except as expressly set forth herein) but
solely as Remainderman Trustee]
SHAWMUT BANK CONNECTICUT NATIONAL
ASSOCIATION, acting not individually
(except as expressly set forth herein), but
solely as trustee under the Pass Through
Trust Agreements
By:_____________________________________
Its:______________________________
- 81 -
<PAGE>
EXHIBIT 4.6
FORM OF LEASE
================================================================================
KMART CORPORATION,
Tenant,
and
[_________________________________]
(solely as Owner Trustee under Trust Agreement [1995 - 1,2,3,4]
Landlord.
LEASE
------------
Kmart Store No.: ____
Location: _______________________
Dated as of ______________, 1995
===============================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C>
1. DEMISED PREMISES................................................ 2
2. TERM............................................................ 3
3. BASIC AND ADDITIONAL RENT....................................... 3
4. NET LEASE; NON-TERMINATION...................................... 6
5. NO CONTINUOUS OPERATION......................................... 8
6. REAL ESTATE TAXES............................................... 8
7. LIABILITY INSURANCE............................................. 18
8. OPTIONS TO EXTEND LEASE......................................... 21
9. REPAIRS AND MAINTENANCE......................................... 23
10. ALTERATIONS AND ADDITIONAL CONSTRUCTION......................... 24
11. UTILITIES....................................................... 27
12. GOVERNMENTAL REGULATIONS........................................ 27
13. LANDLORD TO GRANT EASEMENTS, DEDICATIONS, ETC................... 29
14. INSURANCE; DAMAGE TO DEMISED PREMISES........................... 30
15. EMINENT DOMAIN.................................................. 34
16. INSURANCE PROCEEDS, CLAIMS SETTLEMENT........................... 36
17. USE, ASSIGNMENT AND SUBLETTING.................................. 40
18. SIGNS........................................................... 42
19. LIENS........................................................... 43
20. TENANT DEFAULTS................................................. 44
21. LANDLORD REMEDIES............................................... 46
22. BANKRUPTCY...................................................... 51
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
23. QUIET ENJOYMENT................................................. 51
24. LANDLORD EXCULPATION............................................ 51
25. REMEDIES CUMULATIVE............................................. 51
26. ESTOPPEL LETTERS................................................ 52
27. CONDITION OF PREMISES AT TERMINATION............................ 52
28. NOTICES......................................................... 56
29. NOTICE OF ENVIRONMENTAL MATTERS................................. 57
30. ENTRY BY LANDLORD............................................... 57
31. CAPTIONS AND DEFINITIONS........................................ 58
32. SUCCESSORS AND ASSIGNS.......................................... 58
33. SEVERABILITY.................................................... 58
34. INDEPENDENT COVENANTS........................................... 59
35. CHOICE OF LAW................................................... 59
36. WAIVER AND MODIFICATIONS........................................ 59
37. MEMORANDUM OF LEASE............................................. 59
38. HAZARDOUS MATERIALS............................................. 59
39. ECONOMIC ABANDONMENT............................................ 61
40. TENANT'S PURCHASE OFFER......................................... 63
41. PROPERTY SUBSTITUTION........................................... 64
42. LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT....................... 68
43. NO MERGER OF TITLE.............................................. 68
44. OWNERSHIP OF THE LEASED PROPERTY................................ 68
45. PROCEDURE FOR APPRAISALS........................................ 69
46. SURVIVAL OF TENANT'S OBLIGATIONS................................ 70
47. COUNTERPARTS.................................................... 70
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
48. LIABILITIES OF LANDLORD......................................... 70
49. INDENTURE....................................................... 71
50. CHANGE IN CONTROL; SALE OF ASSETS............................... 73
</TABLE>
(iii)
<PAGE>
Schedule and Exhibits
---------------------
Exhibit A Legal Description
- ---------
Exhibit B Depiction of Site
- ---------
Exhibit C Rents and Rent Payment Dates
- ---------
Exhibit C-1 Rental Adjustment Certificate
- -----------
Exhibit D Termination Value
- ---------
Exhibit E Form of Estoppel Letter
- ---------
<PAGE>
LEASE
THIS LEASE made and entered into as of this ______ day of ______________,
1995, between __________________________, a ________________________________,
not in its individual capacity, except as expressly set forth herein, but solely
as Owner Trustee under Trust Agreement 1995-[____] dated as of June ____, 1995
("Landlord"), having its principal office at ________________________________
_________________________________________, 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 in the Land (as
hereinafter defined) and the fee interest in the site improvements and building
improvements and certain personalty thereon, and has sold to [Val T. Orton]
[First Security Bank of Utah, N.A.], not in [its/his] individual capacity, but
solely as trustee under Remainder Trust Agreement (1995-[ ]) dated as of June
____, 1995, ("Remainderman Trustee") the 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:
06/01/95
<PAGE>
1. Demised Premises.
(a) Landlord demises unto Tenant and Tenant does lease from Landlord
for the Lease Term (as hereinafter defined) 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, personalty and all site improvements now or hereafter constructed or
located thereon, together with all licenses, rights, privileges and easements
appurtenant thereto. (The Land, building, personalty, site improvements and
licenses, rights, privileges and easements appurtenant thereto being
collectively referred to as the "Demised Premises").
(b) THE DEMISED PREMISES IS LEASED TO TENANT IN ITS PRESENT "AS IS"
CONDITION WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESSED OR IMPLIED) BY
LANDLORD AND SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY
PARTIES IN POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY
OR PHYSICAL INSPECTION MIGHT SHOW, (D) ALL LEGAL REQUIREMENTS NOW OR HEREAFTER
IN EFFECT, (E) ALL PRESENT AND FUTURE LIENS, (F) VIOLATIONS OF LEGAL
REQUIREMENTS WHICH MAY EXIST AT THE COMMENCEMENT OF THIS LEASE AND (G) THE
PRESENCE OR ABSENCE OF ANY ENVIRONMENTAL CONDITION ON THE DEMISED PREMISES OR
ANY PROPERTY IN THE VICINITY OF THE DEMISED PREMISES. TENANT HAS EXAMINED THE
DEMISED PREMISES AND TITLE THERETO AND HAS FOUND ALL OF THE SAME SATISFACTORY
FOR ALL PURPOSES. NONE OF LANDLORD, THE INDENTURE TRUSTEE (AS HEREINAFTER
DEFINED) OR THE OWNER PARTICIPANT (AS DEFINED IN THE PURCHASE AGREEMENT) HAS
MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED OR OTHERWISE, OR HAS MADE ANY INSPECTION OF THE DEMISED PREMISES OR
SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE, OWNERSHIP,
VALUE, HABITABILITY, USE, LOCATION, CONDITION, DESCRIPTION, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE FOR ANY PARTICULAR PURPOSE, CONDITION OR
DURABILITY THEREOF OF THE DEMISED PREMISES (OR ANY PART THEREOF), OR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE
DEMISED PREMISES (OR ANY PART THEREOF) AND NONE OF LANDLORD, THE INDENTURE
TRUSTEE OR THE OWNER PARTICIPANT SHALL BE LIABLE FOR ANY LATENT, HIDDEN OR
PATENT DEFECT THEREIN OR THE FAILURE OF THE DEMISED PREMISES, OR ANY PART
THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENTS IT BEING AGREED THAT ALL RISKS
INCIDENT THERETO ARE TO BE BORNE BY TENANT. THE PROVISIONS OF THIS ARTICLE
1(b) HAVE BEEN NEGOTIATED AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND
NEGATION BY LANDLORD OF, AND TENANT DOES HEREBY DISCLAIM, ANY AND ALL WARRANTIES
BY LANDLORD, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR OF HABITABILITY WITH RESPECT TO THE DEMISED
PREMISES, OR ANY FIXTURE OR OTHER ITEM CONSTITUTING A PORTION THEREOF, WHETHER
ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANOTHER LAW NOW OR
2
<PAGE>
HEREAFTER IN EFFECT OR OTHERWISE, EXCEPT THAT LANDLORD HEREBY REPRESENTS AND
WARRANTS THAT THE DEMISED PREMISES ARE AND SHALL BE FREE OF ALL LIENS
ATTRIBUTABLE TO LANDLORD (OTHER THAN PERMITTED LIENS ATTRIBUTABLE TO LANDLORD.)
2. Term.
The interim term of this Lease ("Interim Term") shall commence on the
date hereof and shall consist of a first period ending on December ____, 1995
and a second period commencing on the day immediately succeeding the end of the
first period and terminating on January 1, 1996, and the base term of this Lease
("Base Term") shall commence on January 2, 1996 (the "Base Term Commencement
Date") and terminate on June ___, 2020; 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 or any deemed extension thereof
pursuant to Articles 10(e), 14(g), 15(b) or 27(b).
3. Basic and Additional Rent.
(a) Tenant shall pay by wire transfer of funds consisting of lawful
currency of the United States of America at the time of any such payment to
Landlord or its designee, at such place as Landlord shall designate in writing
from time to time, rent with respect to the second period of the Interim Term,
the Base Term and during any extended term pursuant to Article 8 ("Basic Rent")
in such amounts and on such dates ("Rent Payment Dates") as set forth in Exhibit
C or as described in Article 8, 10(e), 14(g), 15(b) or 27(b). Tenant shall also
pay during the Lease Term all amounts of Additional Rent as and when due. Basic
Rent, Special Additional 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 defined in
the Purchase Agreement) of any nature or type 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 (as defined in
Appendix A to the Indenture (as hereinafter defined)) expressly required to be
paid under this Lease, and Special Additional Rent (as hereinafter defined),
(ii) Tenant's share (whether as Tenant or on behalf of Landlord as owner of the
Demised Premises) of expenses under the REA (as defined in Article 9 hereof),
(iii) Trustee Expenses (as defined below), and (iv) amounts due and payable by
Tenant under that certain Participation Agreement (1995-[ ]) ("Participation
Agreement") and that certain Tax Indemnification Agreement relating to the
Demised Premises ("Tax Indemnification Agreement"), each of even date herewith
(collectively, "Indemnification Agreements"). Notwithstanding the foregoing
sentence, to the extent that any
3
<PAGE>
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 Landlord as the Owner Trustee ("Owner Trustee") under that
certain Trust Agreement (1995-[_________]) with Owner Participant dated June
_____, 1995) ("Trust Agreement"), but not including fees and expenses incurred
as a result of Owner Participant's breach of its obligations under the Operative
Documents (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 Shawmut Bank Connecticut, National Association, as trustee
("Indenture Trustee") under that certain Trust Indenture and certain Mortgage,
Deed of Trust, Assignment of Leases and Rents, Security Agreement, Financing
Statement and First Supplemental Indenture, each with Landlord and of even date
herewith (such Trust Indenture, as so supplemented, and together with any other
supplements thereto, "Indenture"), but excluding any principal, interest,
prepayment premium or penalties on Landlord's indebtedness issued pursuant to
the Indenture ("Landlord's Debt" or "Notes") and excluding any expenses incurred
by Owner Participant or Owner Trustee at the direction of Owner Participant
arising out of or in connection with an Indenture Event of Default (as defined
in the Indenture) which is caused by the Owner Trustee or Owner Participant; 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 or prior to the Base Term Commencement Date, the amount set forth
with respect to the Demised Premises on Exhibit C (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 date)
pursuant to the provisions of the Indenture unless the Indenture Trustee shall
have received such payment from the Owner Trustee on such due date, sufficient
for payment in full of the interest then due and owing on the Notes in
accordance with Section 21 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) the unreimbursed portion of such
4
<PAGE>
reimbursement obligation of Owner Participant against each succeeding payment or
portion thereof (other than as limited by the last sentence of this subsection
(b)) 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
rate set forth in clause (ii) of the definition of the Default Rate in Article
3(c) hereof, and in each case, such offset shall be deemed to constitute a
reduction in the amount of the reimbursement obligation of the Owner
Participant. No such offset or aggregate combined effect of separate offsets
shall reduce the amount of any installment of Basic Rent or Termination Value 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 account of
the principal amount of and any interest on the Notes then outstanding and any
Make-Whole Premium.
(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 such 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 as its "prime rate" for United States dollar loans plus two percent
(2%), but in any event with respect to clause (i) or (ii) above, an amount not
in excess of that permitted by law. If such bank shall no longer exist, or
shall no longer publicly announce a "prime rate", then Landlord may designate by
notice to Tenant a substitute banking institution of equivalent recognition and
standing 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 that (i) as of the date hereof and as
of the date of each Rental Adjustment (as referenced below), each installment of
Special Additional Rent and Basic Rent as of the due date of such installment as
set forth on Exhibit C hereto, as adjusted, if required, is, and shall be, under
any circumstances and in any event, in an amount which, together with any other
amounts required to be paid by Tenant, will be at least sufficient for Landlord
to pay in full, as of the due date of such installment, any scheduled payment of
principal of and interest on the Notes, as well as any other amounts required to
be paid by Landlord pursuant to the Indenture on such due date; and
5
<PAGE>
(ii) as of the date hereof, the date of each Rental Adjustment (as referenced
below) and the date of each Termination Value adjustment the sum of all Special
Additional Rent and Basic Rent payable in arrears on such date together with
each Termination Value set forth on Exhibit D hereto, as adjusted, if required,
and any other amounts required to be paid by Tenant 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 Indenture (as in effect on the date
hereof), together with all unpaid interest thereon accrued to the date on which
such amount is paid.
(e) In the event that a Rental Adjustment shall be required pursuant
to and in accordance with Section 22 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-1
hereto. "Rental Adjustment" shall have the meaning set forth in Section 22 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 paid by Tenant without notice, demand, setoff,
counterclaim, abatement, deduction or defense, except as expressly provided in
Article 3(b) hereof. 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
and except for Special Additional Rent as provided in Article 3(b) hereof), nor
shall the obligations of Tenant under this Lease be affected, by reason of: (i)
any damage to, or removal, abandonment, dismantling, loss, theft 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) 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, (vii) the invalidity, illegality or
6
<PAGE>
unenforceability of this Lease, any other Operative Document or any other
instrument referred to herein or therein or any other infirmity herein or
therein or any lack of right, power or authority of Landlord, Tenant, Owner
Participant, Indenture Trustee, Pass Through Trustee, Remainderman Trustee,
Remainderman Participant (as defined in the Purchase Agreement) or any other
Person (as defined in Appendix A to the Indenture) to enter into this Lease, or
any other Operative Document, or to perform the obligations hereunder or
thereunder or consummate the transactions contemplated hereby or thereby or any
doctrine of force majeure, impossibility, frustration or failure of
consideration; (viii) the breach or failure of any warranty or representation
made in this Lease or any other Operative Document by Landlord, Tenant, Owner
Participant, Indenture Trustee, Pass Through Trustee, Remainderman Trustee,
Remainderman Participant, or any other Person; or (ix) 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. Tenant hereby waives, to the extent permitted by law, any and all
rights that it may now have or that at any time hereafter may be conferred upon
it, by statute or otherwise, to modify, terminate, cancel, quit or surrender
this Lease or to effect or claim any diminution or reduction of any Rent payable
by Tenant hereunder, except in accordance with the express terms hereof. Tenant
agrees that if for any reason whatsoever this Lease shall be terminated in whole
or in part by operation of law or otherwise (other than a termination by
Landlord or Tenant as expressly provided for in this Lease), then, except as
provided herein, Tenant shall pay, to the maximum extent permitted by law, to
Landlord or any other Person entitled thereto, an amount equal to each
installment of Basic Rent and all Additional Rent at the time such payment would
have become due and payable in accordance with the terms hereof had this Lease
not been so terminated. Each payment of Basic Rent, Special Additional Rent
and/or Additional Rent made by Tenant hereunder shall be final and Tenant shall
not seek or have any right to recover all or any part of such payment from
Landlord or any Person for any reason whatsoever, except as specifically
provided in Article 3(b) hereof. Under no circumstances or conditions shall
Landlord be expected or required to make any payment of any kind hereunder or
have any obligations with respect to the use, possession, control, maintenance,
alteration, rebuilding, replacing, repair, restoration or operation of all or
any part of the Demised Premises or the Common Areas (as defined in Article 7),
so long as the Demised Premises or any part
7
<PAGE>
thereof are subject to this Lease, and Tenant expressly waives the right to
perform any such action at the expense of Landlord pursuant to any law.
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 foregoing, Tenant agrees to provide Landlord with
written notice of Tenant's intention to cease the operation of business at the
Demised Premises, or any part thereof, and of Tenant's intention, if any, to
resume such operation, no less than 60 days prior to the date at which such
cessation or resumption, as the case may be, of business is scheduled to occur.
6. Real Estate Taxes.
(a) Tenant shall, at no after-tax cost to Landlord or Owner
Participant, 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 the Ground Lease
(as defined in Article 8 hereof) 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 this Lease and (y) Tenant's actual return of possession of the
Demised Premises in accordance with this Lease.
(b) Tenant shall also, at no after-tax cost to Landlord or Owner
Participant, 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,
8
<PAGE>
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 or portion
thereof 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 this 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 or the Ground 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 this 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. 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 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
9
<PAGE>
transfer pursuant to Tenant's Purchase Offer set forth in Articles 14, 15 or 40
hereof or any sale under Article 39 hereof, (ii) any disposition or transfer
arising out of or in connection with Articles 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 solely to the extent
such tax, assessment, charge or levy would have been imposed or levied on
Landlord 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 Landlord that is unrelated to the transactions contemplated
by any of the Operative Documents, the Notes or the Pass Through Certificates),
or (z) with respect to Landlord, any tax resulting from the willful misconduct
(including tax fraud) or gross negligence of Landlord which misconduct or
negligence is not imputed to Landlord solely by reason of its participation in
the transactions contemplated by this Lease and is not attributable to a breach
or default by Tenant.
(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.
(e) (1) If any written claim shall be made against Landlord or if any
proceeding shall be commenced against Landlord (including a written notice of
such proceeding) for any Assessments as to which Tenant may be obligated
pursuant to this Article 6, Landlord 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
10
<PAGE>
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; provided that Landlord's failure to give notice
required by this paragraph shall not relieve Tenant of its obligations under
this Article 6 except to the extent Tenant's ability to cause a contest of such
claim is legally precluded by such failure or materially prejudiced by such
failure.
(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 (as opposed to
Landlord) receives notice, upon the request of Tenant, Landlord either (i) in
the case of an Assessment which may be contested in the name of Tenant and
independently (without joinder, contribution or otherwise) from any claim,
proceeding or Assessment that is not subject to indemnification by Tenant, shall
permit Tenant to control or, in the case of any claim, proceeding or Assessment,
may request 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 or any tax affiliates thereof (which for purposes hereof means any
entity which is included in the same consolidated or combined tax return as
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
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,
11
<PAGE>
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 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 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
12
<PAGE>
Liens and that there is no risk of criminal liability that may be imposed
on or with respect to Landlord or Owner 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 or Owner Participant
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 Tax Indemnification 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 to indemnify Landlord for the
Assessment hereunder in the event the Contest is unsuccessful (in whole or
in part) or shall, in good 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 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
13
<PAGE>
pay an Assessment hereunder or an indemnity under Section 24 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 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 effectively determined by 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.
(f) (1) Any amount payable by Tenant to Landlord pursuant to this
Article 6 shall be paid within 30 days after receipt by Tenant of a written
demand therefor from Landlord
14
<PAGE>
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
more than five Business Days before such Assessment is due. Any payments made
pursuant to this Article 6 shall be made directly to Landlord 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 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.
(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 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
15
<PAGE>
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 on an After-Tax Basis 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 24 of the Participation Agreement
or under the Tax Indemnification 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 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 may also be indemnified with
respect to the same matter under the terms of the Purchase Agreement, the Trust
Agreement, the Participation Agreement, the Tax Indemnification 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 any right to any double recovery or double
indemnity with respect to any claim, proceeding or Assessment hereunder of
amounts for which Landlord has received under such other document or instrument
(and is entitled to retain full indemnification)). If Tenant shall have fully
reimbursed or indemnified Landlord, then Tenant shall be subrogated to the
rights of Landlord with respect to any such reimbursed or indemnified claim
(other than rights against Owner Participant or against any taxing authority and
other than rights to pursue a refund of any Assessments other than pursuant to a
Contest). Tenant further acknowledges and agrees that nothing contained herein
is intended to reduce or impair any rights of Landlord or any other Tax
Indemnitee (as defined in the Participation Agreement) or any obligations of
Tenant under Section 24 of the Participation Agreement (including, without
limitation, Tenant's obligations with respect to contest preconditions).
(i) If Landlord 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,
16
<PAGE>
Landlord 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 and any cost or expense (taking into account any Assessments
incurred by Landlord by reason of the receipt or accrual of such refund and
taking into account any tax benefit realized by Landlord 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, it
being intended that Landlord 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 pursuant to this Article 6. If, in addition to such refund,
Landlord shall receive an amount representing interest on the amount of such
refund, Landlord 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 net of any Assessments
incurred by reason of the receipt or accrual of the portion of such interest
attributable to Tenant's indemnity payment (taking into account tax benefits
actually realized by Landlord resulting from Landlord's payment to Tenant
hereunder). Any subsequent denial, loss, repayment or recapture of such refund
will be treated as an Assessment for which 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 without regard to Article 6(c) hereof.
(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 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 harmless on an After-Tax
Basis. If, by reason of any Assessment payment made to or for the account of
Landlord by or on behalf of Tenant pursuant to this Article 6 (or the
circumstances or event giving rise thereto), Landlord 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 shall promptly pay to Tenant an amount equal to the sum
of (I) the actual net reduction in Assessments, if any, realized by Landlord
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 pursuant to this
sentence. Notwithstanding the foregoing, Landlord shall not be required to make
any payment to Tenant pursuant to this Article 6 to the extent such payment
would exceed, in the
17
<PAGE>
aggregate at any time, the amount of all prior payments made by or on behalf of
Tenant to Landlord of the Assessment giving rise to such tax savings less the
amount of all prior payments made by Landlord 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. 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 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 without regard to Article 6(c). References in Article 6
to "Landlord" shall include Owner Participant and its tax affiliates where
appropriate.
7. Liability Insurance.
(a) During the Lease Term, Tenant at its sole expense shall keep
Landlord, Landlord's mortgagees (including Indenture Trustee, in its fiduciary
capacity), Owner Participant, Remainderman Trustee and 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 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) 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.
(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 VIII "financial size category," or better, or a
comparable rating by any successor agency. All such policies shall bear
endorsements to the effect that Landlord, Landlord's mortgagee (including
Indenture Trustee, in its fiduciary capacity), Owner Participant, Remainderman
Trustee and Remainderman Participant and Tenant are
18
<PAGE>
named as additional insureds as their interests may appear and each such policy
shall specifically provide that:
(i) each such additional insured party shall be notified promptly
in writing of any default in the payment of premiums;
(ii) the insurer, upon its knowledge of any other act or omission
on the part of any Person which might invalidate or render
unenforceable such policy, will promptly notify in writing each such
additional insured party;
(iii) no cancellation, lapse, reduction in amount or material
change in coverage thereof shall be effective until at least 30 days
after receipt by each such additional insured party of written notice
thereof by certified mail;
(iv) the interests of each such additional insured party will be
insured regardless of any action or inaction of Tenant or another
insured under such policy or any breach or violation by Tenant or any
other Person of any warranties, declarations or conditions contained
therein;
(v) no such additional insured party (other than Tenant) shall
have any obligation or liability for premiums, commissions,
assessments or calls in connection with such insurance (but that any
such additional insured party shall have the right to pay any such
amounts);
(vi) such insurance shall be primary without right of
contribution from any other valid, existing or applicable insurance
carried by or on behalf of any additional insured party; and
(vii) except with respect to the limits of the insurance under
each policy, and any rights or duties specifically assigned in the
coverage parts thereof to Tenant, the insurance applies as if each
additional insured party were the only named insured.
All insurance companies providing such insurance shall also have a Standard
& Poors Rating Group claims paying ability rating
19
<PAGE>
of at least BBB-, and a Moody's Investor's Services, Inc. claims paying ability
rating of at least Baa.
Copies of such policies, so endorsed, or certificates evidencing the
existence thereof, or a certificate of self-insurance evidencing Tenant's
election to self-insure such obligations shall be promptly delivered to Landlord
and Landlord's mortgagee, Owner Participant, Remainderman Trustee 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 shall deliver to each additional insured party prior notice
of any proposed change in insurance arrangements that Tenant intends to put into
effect which differs in any material respect from the insurance arrangements in
effect prior to such proposed change.
(d) On each policy anniversary, Tenant shall furnish to the additional
insured parties a certificate of one or more independent insurance brokers
reasonably satisfactory to such additional insured parties showing in reasonable
detail the insurance maintained by or on behalf of Tenant pursuant to this
Article (including identification of underwriters, type of insurance, coverage
limits, annual aggregate limits, if any, and the policy term), naming the
additional insured parties as additional insureds and loss payees.
(e) 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.
(f) 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 the consolidated
tangible net worth of Tenant calculated in accordance with generally accepted
accounting principles less the amount of any and all guaranties made by Tenant
of obligations of (i) any affiliate of Tenant that holds, beneficially or of
record, five percent (5%) or more of the equity securities of Tenant and (ii)
any affiliate of any such affiliate (other than Tenant and any subsidiaries of
Tenant whose financial statements are consolidated with Tenant's financial
statements), is and is maintained at an amount of at least One Billion Dollars
($1,000,000,000.00) ("Net Worth Standard"). Notwithstanding the foregoing,
Tenant shall at all times maintain in effect such insurance coverages as to the
Demised Premises as maintained by Kmart with respect to similar properties owned
or
20
<PAGE>
leased by Kmart and located in the state and general geographic area where the
Demised Premises is located, or, if no similar properties of Tenant are located
in the same geographical area, coverages generally maintained by Tenant, taking
into account geographical differences.
8. Options to Extend Lease.
(a) Provided that no Material Default or Event of Default hereunder
has occurred and is continuing, Tenant shall have six (6) successive options to
extend the term of this Lease 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 the Basic Rent for each semiannual
period of each such extended term shall be an amount equal to the sum of (a)
4.25% of the Purchase Price (as defined in Section 3A of the Purchase Agreement)
relating to the Property and (b) if applicable, the total amount of rent,
including without limitation, basic rent and additional rent payable during the
corresponding period of this Lease under the ground lease entered into by and
between the holder of the Remainder Interest, as ground lessor, and the
Landlord, as ground lessee (the "Ground Lease") pursuant to the terms and
conditions of the Option Agreement (as defined in the Purchase Agreement) and
shall be payable as and when due under the Ground Lease. Termination Value for
each of the renewal terms pursuant to this paragraph 8(a) shall be that in
effect on the last day of the Base Term. The Tenant shall notify Landlord and
Remainderman Trustee not more than thirty-six (36) months prior to and not less
than twenty-four (24) months prior to such expiration (in the case of the Base
Term) and not more than twenty-four (24) months and not less than twelve (12)
months prior to the expiration (in the case of any additional term) of its
intention to extend or not to extend the then current term of 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 thereafter
elect to exercise the aforesaid options, it shall do so by irrevocable notice in
writing and otherwise in accordance with the requirements of Article 28 hereof
given to Landlord and Remainderman Trustee not less than eighteen (18) months
prior to the expiration of the Base Term of this Lease or not less than nine (9)
months prior to the expiration of the Lease Term as extended. 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. If the Ground Lease shall be in
effect during the Lease Term, Tenant agrees, without the need for the execution
of any additional documents, that (i) this Lease shall be a sublease of the Land
and (ii) it shall comply with all the covenants, conditions and restrictions of
the ground lessee under the Ground Lease.
21
<PAGE>
(b) Notwithstanding the foregoing paragraph 8(a), Tenant shall not
have the right to extend the term of the Lease beyond the Base Term as described
in Article 8(a) unless Tenant shall have exercised such option with respect to
the first such renewal term with respect to 100% of the leases for Properties
originally covered by the Purchase Agreement (or Properties received in
substitution therefor) and in effect on the last day of the Base Term, exclusive
of any leases terminated pursuant to the respective provisions of Articles 14,
15 and 39 of such leases.
(c) 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 8 (a) above, Tenant shall have the one-time right
to, at its expense, obtain an appraisal in accordance with the next succeeding
sentence to determine the uninflated fair market residual value and remaining
economic useful life of the building and site improvements at the end of such
extended term. Based upon the determination of remaining economic useful life
and uninflated residual value, but subject in all events to the maximum term
available under the Ground Lease, 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 which (taking into account the Tenant's right to extend this Lease
under paragraph (d) below), (i) 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 useful life of
the building and site improvements and the prior number of years of the Lease
Term (including the Interim Term, Base Term and all extended terms provided for
in paragraph (a) above) and (ii) would end, prior to the point at 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 and site improvements equals or exceeds twenty percent
(20%) of Owner Trustee's Purchase Price applicable to such building and site
improvements 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 under this paragraph (c)
and no earlier than twelve (12) months prior to the expiration of the last
extended term provided for in paragraph (a) above. Basic Rent for each of any
such additional extended terms shall be fair market value rent determined by an
appraisal conducted pursuant to Article 45 hereof, absent agreement.
Termination Value for each of the additional renewal terms pursuant to this
paragraph (c) shall be that in effect on the last day of the Base Term.
(d) 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 Lease Term for
22
<PAGE>
such period of time as shall cause the last day of the Lease Term to be the
January 31 next succeeding the date upon which the Lease Term would expire but
for the exercise of this option, subject in all events to the maximum term
available under the Ground Lease. This option shall be deemed to have been
exercised by Tenant unless Landlord shall have received irrevocable notice from
Tenant to the contrary not less than eighteen (18) months prior to the
expiration of the Base Term of this Lease or not less than nine (9) months prior
to the expiration of the Lease Term as extended (determined without regard to
this section (d)). Basic Rent during this additional option period shall be the
same rental payable under the terms of this Lease with respect to the last year
of the immediately preceding term and shall be payable in advance or arrears on
the same basis as Basic Rent in the last year of the immediately preceding term
except that Basic Rent shall be prorated upon a daily basis for the additional
period and Termination Value shall be that in effect on the last day of the Base
Term, provided, however, that if the additional option period extends beyond the
expiration of the Estate for Years, Basic Rent shall include the rent payable
under the Ground Lease during such additional option period, which shall be paid
as and when due under the Ground Lease, with a prorated amount thereof
(calculated on a daily basis) due on such January 31.
9. Repairs and Maintenance.
(a) Tenant shall make and pay for all maintenance, replacement and
repair of the Demised Premises on a timely basis whether foreseeable or not
foreseeable, including roof repair and replacement, necessary to keep all of the
Demised Premises, both structural and non-structural portions, in the state of
repair and tenantable condition as when delivered hereunder, 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 the insurance policies required by Articles 7 and 14
hereof, and in keeping with the objective of preserving the fair market value
and useful life of the Demised Premises.
Tenant shall pay for all of the costs of maintaining the Common Areas
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
23
<PAGE>
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, 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 is designated as "Owner" as contemplated under the
applicable REA solely for the limited purpose of performing "Owner" obligations
under the REA) 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, and (ii) the Permitted Liens described in
clause (f) of the definition thereof ((i) and (ii) herein collectively referred
to as the "REA"). 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 or such amendments or
modifications have arisen by operation of law.
10. Alterations and Additional Construction.
(a) Provided no Material Default or Event of Default hereunder has
occurred and is continuing, Tenant may, at its own expense, from time to time
make such alterations and additions, structural or otherwise, in and to any
building 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 (i) to demolish any
building in its entirety unless approved by Landlord in writing, which approval
shall not be unreasonably withheld if (x) the existing building is to be
replaced promptly and with due diligence within eighteen (18) months of such
demolition and in any event no later than six (6) months prior to the end of the
then current Lease Term with a building of at least equivalent fair market value
and remaining useful life as the demolished improvements immediately prior to
such demolition (assuming the Demised Premises was being maintained in
accordance with the terms
24
<PAGE>
of this Lease until such time) and without cost or liability to Landlord or
Remainderman Trustee, and (y) the long term senior unsecured debt securities of
Tenant shall then be rated in one of the generic rating categories that signify
"investment grade" by at least two nationally recognized statistical rating
organizations and Tenant shall then meet the Net Worth Standard, or (ii) to make
any such alterations, additions, or erect or construct additional buildings or
additional structures which would diminish the fair market value or remaining
useful life of the Demised Premises immediately prior to such alteration,
addition, or construction of additional buildings or structures (assuming the
Demised Premises was being maintained in accordance with the terms of this Lease
until such time), increase the risk of liability to Tenant, Landlord, Owner
Participant, Remainderman Trustee or Remainderman Participant under any
Environmental Laws (as defined in Article 12 hereof) 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 new structures, structural alterations,
additions or additional buildings or structures. With respect to any new
structures, structural alterations, additions or additional buildings or
structures permitted pursuant to this Article 10, Tenant shall certify that: (x)
the new structures, and structural alterations, additions or additional
buildings or structures shall be built under the supervision of a certified
architect, (y) the structural integrity of the existing buildings will not be
impaired by such work, (z) Tenant is complying with all applicable Laws and the
requirements of the Permitted Exceptions and the Permitted Liens described in
clause (f) of the definition thereof, (xx) Tenant has obtained any licenses,
permits, authorizations and approvals required, copies of which shall be
delivered to Landlord upon request, and (yy) such new structures, structural
alterations, additions or additional buildings or structures or the results of
such demolition will not encroach upon (or with respect to demolitions, cause
any damage to) any adjacent premises. With respect to demolitions, Tenant shall
certify, with respect to buildings not demolished, the substance of subclause
(y) of the immediately preceding sentence, and, with respect to buildings being
demolished, the substance of subclauses (z) and (xx) of the immediately
preceding sentence. 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 new structures,
structural alterations, additions or additional buildings or structures would
diminish the fair market value or remaining useful life of the Demised Premises
immediately prior to such structural alteration, addition, or construction of
new structures, additional buildings or structures (assuming the Demised
Premises was being maintained in accordance with the terms of this Lease until
such time), increase the risk of liability to
25
<PAGE>
Tenant, Landlord, Owner Participant, Remainderman Trustee or Remainderman
Participant under any Environmental Laws 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 (i.e. at no after-tax cost to Landlord or
Owner Participant), 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.
(b) The provisions of this Lease shall apply to and shall govern
Tenant's rights and obligations with respect to all such new structures,
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) 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 or demolition and replacement thereof, Tenant shall
perform and complete all work in a first class workmanlike manner in compliance
with applicable Laws. Tenant shall maintain at all times during construction
all risk builders insurance in an amount equal to the value of the improvements
or replacement building, as the case may be, and comprehensive general liability
insurance naming Landlord, Owner Participant, Remainderman Trustee and
Remainderman Participant 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 Tenant
meets the Net Worth Standard.
(d) All alterations, additions or additional buildings or structures
or replacements thereof made or erected by Tenant on the Demised Premises shall
without further act become the property of Landlord and Landlord shall not be
required to compensate Tenant therefor; provided, however, Tenant may claim all
tax benefits and
26
<PAGE>
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.
(e) All such work shall be completed with diligence prior to the
expiration of the then current Lease Term, but if such work is not completed
prior to expiration of the Lease Term and if additional time is required to
complete such work and Tenant otherwise does not extend the Lease Term as
provided in Article 8 hereof, the Lease Term shall automatically be extended on
a month to month basis until completion of such work in full (and Basic Rent
during such additional period shall be the same rental payable under the terms
of this Lease with respect to the last year of the immediately preceding term
prorated on a monthly basis and shall be payable in advance or arrears on the
same basis as Basic Rent in the last year of the immediately preceding term,
together with any rent payable under the Ground Lease, payable as and when due
thereunder on a prorated basis).
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 best efforts to maintain service with respect to all
such utilities at the Demised Premises.
12. Governmental Regulations.
(a) Tenant shall observe and comply in all respects with all
requirements of laws, rules, codes, orders and regulations of the federal, state
and municipal governments or other duly constituted public or quasi-public
authority applicable to the Demised Premises and the use and occupancy thereof
(collectively, "Laws") including, but not limited to, all Environmental Laws and
the Americans With Disabilities Act ("ADA"), as amended from time to time,
together with all regulations promulgated thereunder. 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 and title thereto shall immediately vest in Landlord.
(b) Tenant shall also comply 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 costs and 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
27
<PAGE>
Landlord, Owner Participant, Remainderman Trustee or Remainderman Participant or
to which Landlord, Owner Participant, Remainderman Trustee or Remainderman
Participant may become subject with respect to the Demised Premises. For
purposes of this Lease, "Environmental Laws" shall mean all federal, state, and
local laws, statutes, common 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 response or corrective action
related to, Hazardous Materials (as defined in Article 38) or otherwise relating
to the generation, presence, 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 actions or causes of action, suits, damages (including punitive damages),
obligations, liabilities, losses, proceedings, decrees, judgments, fines,
penalties, fees, demands, demand letters, investigations, orders, directives,
claims (including any claims involving liability in tort, strict, absolute or
otherwise), liens, notices of non-compliance or violation, and legal and expert
fees or costs of investigations or proceedings, relating in any way to or
arising from any Environmental Law, including, without limitation, the presence,
storage, emission, discharge or release or threatened release (or alleged
presence, storage, emission, discharge or release or threatened release) into
the environment of any Hazardous Materials, including, without limitation, and
regardless of the merit of such Environmental Claim, any and all Environmental
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.
28
<PAGE>
(c) Tenant shall not suffer or permit the attachment of any
Environmental Lien to the Demised Premises. For purposes of this Lease,
"Environmental Lien" shall mean a lien in favor of any Governmental Authority
for any (a) liability under any Environmental Laws, or (b) damages arising from,
or costs incurred by, such Governmental Authority in response to the presence or
release or threatened release of any Hazardous Materials into the environment,
except for any lien arising as a result of the existence of an obligation to
undertake remedial or corrective action, and which expires as a matter of law
upon completion of such remedial or corrective action, provided that such
exception shall apply only so long as such remedial or corrective action is
being contested or pursued and performed in accordance with the applicable terms
of this Lease. Tenant's obligations under this clause (c) shall be in addition
to, and shall in no way be construed as a limitation of, Tenant's obligations
under Article 19 of this Lease.
13. Landlord to Grant Easements, Dedications, Etc.
Provided that no Material Default or Event of Default hereunder has
occurred and is continuing, 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 and at the request of Tenant and at Tenant's
cost and expense (i.e. at no after-tax cost to Landlord or Owner Participant),
irrevocably appoint Tenant the attorney-in-fact, coupled with an interest, of
Landlord during the Lease Term, subject to the proviso contained in this
sentence, and the provisions of the succeeding sentence, with full power and
authority to perform the following acts: (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); provided, however, that the
rights granted to Tenant pursuant to the provisions of this paragraph are
subject to thirty (30) days' prior written notice to Landlord 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 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 the Demised Premises immediately prior to such
29
<PAGE>
grant, release, dedication, transfer, petition or amendment (assuming the
Demised Premises was being maintained in accordance with the terms of this Lease
until such time), or impair the Landlord's or Owner Participant'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 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.
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 together with such additional insurance
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, or if there are no such similar properties, as is generally
maintained by Tenant, taking into account geographical differences. 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
30
<PAGE>
shall be in an amount equal to not less than one hundred percent (100%) of the
full insurable replacement value 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. At any time during
the Lease Term 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, upon Landlord's request but not more than once in every five (5) year
period, an independent appraiser's or engineer's certification of the full
replacement cost of the Demised Premises, which certificate shall be relied
upon by Landlord and Tenant solely for the purpose of establishing such full
replacement cost for the purposes of this Article 14(a) only.
(b) Landlord, Owner Participant 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, Owner Participant 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. Each such policy shall specifically provide that:
(i) each such additional insured party shall be notified promptly in
writing of any default in the payment of premiums;
(ii) the insurer, upon its knowledge of any other act or omission on
the part of any Person which might invalidate or render unenforceable
such policy, will promptly notify in writing each such additional
insured party;
(iii) no cancellation, lapse, reduction in amount or material change
in coverage thereof shall be effective until at least 30 days after
receipt by each such additional insured party of written notice
thereof by certified mail;
(iv) the interests of each such additional insured party will be
insured regardless of any action or inaction of Tenant or another
insured under such policy or any breach or violation by Tenant or any
other Person of any warranties, declarations or conditions contained
therein;
(v) no such additional insured party (other than Tenant) shall have
any obligation or liability for premiums, commissions, assessments or
calls in connection with such insurance (but that any such additional
insured party shall have the right to pay any such amounts);
31
<PAGE>
(vi) the insurer thereunder, in the event of payment under such
policy, waives its rights of recovery against any Person to which or
to whom coverage is afforded under such policy, any Person with
majority ownership interest of or by any such additional insured
party, and any Person to whom a written waiver has been granted by any
such additional insured party prior to loss, but the insurer's waiver
shall apply only in respect of operations insured by such policy and
shall not be construed to be a waiver in respect of other operations
of such Person in which such additional insured party has no
contractual interest;
(vii) such insurance shall be primary without right of contribution
from any other valid, existing or applicable insurance carried by or
on behalf of any additional insured party;
(viii) except with respect to the limits of the insurance under each
policy, and any rights or duties specifically assigned in the coverage
parts thereof to Tenant, the insurance applies as if each additional
insured party were the only named insured; and
(ix) there is no condition to disbursements based on actual
restoration of the Demised Premises.
All insurance companies providing such insurance shall also have a
Standard & Poors Rating Group claims paying ability rating of at least BBB- and
a Moody's Investor's Services, Inc. claims paying ability rating of at least
Baa.
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 and Indenture Trustee 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 VIII "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 VIII (or such comparable ratings of any successor agency), Tenant
shall obtain insurance from a replacement insurer carrying an A+ and VIII rating
or comparable rating.
(c) Tenant shall deliver to each additional insured party prior notice
of any proposed change in insurance arrangements
32
<PAGE>
that Tenant intends to put into effect which differs in any material respect
from the insurance arrangements in effect prior to such proposed change.
(d) On each policy anniversary, Tenant shall furnish to the additional
insured parties a certificate reasonably satisfactory to such additional insured
parties showing in reasonable detail the insurance maintained by or on behalf of
Tenant pursuant to this Article (including identification of underwriters, type
of insurance, coverage limits, annual aggregate limits, if any, and the policy
term), naming the additional insured parties as additional insureds and loss
payees.
(e) Tenant shall be entitled to self-insure its aforesaid insurance
obligations at any time that Tenant meets the Net Worth Standard.
(f) Irrespective of the cause thereof, Landlord shall not be liable
for any loss or damage to said buildings 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.
(g) 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,
whether insured or not, Tenant shall without abatement of Rent, at its expense,
promptly and with due diligence and without regard to its receipt of insurance
proceeds or the sufficiency thereof, repair, rebuild and restore the same as
nearly as practicable to the condition existing just prior to such damage or
destruction (assuming compliance with the terms of this Lease) consistent with
the maintenance and repair obligations of Tenant in Articles 9 and 10 of this
Lease. Provided that Tenant has not given the notice in Article 14(h), at any
time that Tenant meets the Net Worth Standard or in the event of a loss below
Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00), and provided
further that no Material Default or Event of Default has occurred and is
continuing, insurance proceeds shall be released to Tenant for restoration and
repair; otherwise the Proceeds Trustee (as hereinafter defined) 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.
33
<PAGE>
Tenant shall complete such restoration promptly and in any event prior to the
expiration of the then current Lease Term, 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, the Lease Term shall automatically be extended
on a month to month basis until completion of such work in full (and Basic Rent
during such additional period shall be the same rent payable under the terms of
this Lease with respect to the last year of the immediately preceding term
prorated on a monthly basis, payable in advance or arrears on the same basis as
Basic Rent in the last year of the immediately preceding term, together with any
rent payable under the Ground Lease, payable as and when due thereunder, on a
prorated basis). Tenant shall use diligent and reasonable efforts to complete
such work as soon as possible.
(h) Notwithstanding the foregoing paragraph, in the event of a
substantial or total casualty of such building or improvements, Tenant may give
irrevocable written notice to Landlord and Remainderman Trustee 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 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, and, with respect
to any pending claim, an assignment of such pending claim shall be paid to
Landlord on the Purchase Offer Termination Date together with the amount of any
deductible under such insurance and together with all other amounts specified in
Article 40(c). In the event Landlord accepts Tenant's Purchase Offer and
provided the parties have satisfied their obligations under Article 40, 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 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 good faith 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
34
<PAGE>
obligations under Article 40, the Condemnation proceeds (less proceeds due the
Remainderman Trustee, if any) 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 (less proceeds due the Remainderman Trustee, if any)
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 Condemnation of any portion of the Demised
Premises constituting less than a substantial portion of the Demised Premises or
a Condemnation of a substantial portion that does not, in Tenant's good faith
judgment, render the Demised Premises unsuitable for the use and occupancy
thereof by Tenant, this Lease shall continue as to that portion of the Demised
Premises which shall not have been so taken, but without 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 Condemnation (assuming compliance with the terms of this Lease),
consistent with the maintenance and repair obligations of Tenant under Articles
9 and 10 hereof. Provided that no Material Default or Event of Default
hereunder has occurred and is continuing, at any time that Tenant 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 of the Condemnation award
(after reduction in respect of proceeds due the Remainderman Trustee, if any)
not in excess of the projected cost of such restoration shall be released to
Tenant for restoration; otherwise the Proceeds Trustee 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 promptly and in any
event prior to the expiration of the then current Lease Term, but if additional
time is required to complete such work and Tenant otherwise does not extend the
Lease Term as provided in Article 8 hereof, the Lease Term shall automatically
be extended on a month to month basis until completion of such work in full and
Basic Rent during such additional period shall be the same rental payable under
the terms of this Lease with respect to the last year of the immediately
preceding term prorated on a monthly basis and shall be payable in advance or
arrears on the same basis as Basic Rent in the last year of the immediately
preceding term, together with any rent payable under the Ground Lease, payable
as and when due
35
<PAGE>
thereunder, on a prorated basis. Tenant shall use diligent and reasonable
effort to complete such work as soon as possible.
(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 reasonably acceptable to Landlord 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 and requirements set forth in Article 41 hereof. Tenant shall be
entitled to receive the Condemnation award (less proceeds due the Remainderman
Trustee, if any) 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 shall be
subjected to the lien of the Indenture, and interests in such substitute land
equivalent to the Estate for Years and related options or Landlord's rights
under the Ground Lease shall vest in Landlord subject to this Lease. Tenant
shall take all actions necessary to vest title, and to protect such vested
title, to such land in Landlord and Remainderman Trustee.
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 good faith 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 Proceeds 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 Proceeds Trustee in accordance with Article 16 hereof. In the
event the Condemnation proceeds (less proceeds payable to the Remainderman
Trustee, if any) exceed the actual cost of restoration or acquisition of
substitute land in accordance with Article 15(c), any such excess shall be paid
to Landlord and Tenant, as their interests may appear.
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, Owner Participant and Landlord's mortgagee. Unless
36
<PAGE>
Landlord has rejected Tenant's Purchase Offer made in accordance with Article
14(h), 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 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) if 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. Tenant's
obligations under Articles 14(g) and 14(h) hereof shall remain in full force and
effect and shall be unaffected by Tenant's failure to file, adjust and settle
any claim.
(b) Provided that Tenant has not given the notice in Article 14(h), 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. Provided that Tenant has not given
the notice in Article 14(h), in the event the net proceeds are in excess of Two
Hundred Fifty Thousand and No/100 Dollars ($250,000.00) and Tenant does not meet
the Net Worth Standard, or if 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 (Indenture Trustee or such other
person is herein called the "Proceeds Trustee") as trustee for Landlord and
Tenant and disbursed in the manner hereinafter provided. Such 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. Such 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
37
<PAGE>
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;
(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 such as to
38
<PAGE>
which there has been obtained affirmative title insurance coverage over
such liens.
(3) Lien waivers from each person entitled to a mechanics' or
materialmen's lien against the Demised 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, the whole
balance of the deposited sums not theretofore disbursed pursuant to the
foregoing provisions of this Article 16 shall be disbursed, subject (with
respect to Condemnation proceeds) to the provisions of Article 15, 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) 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 "as
built" drawings of the improvements on the Demised Premises, which drawings
shall be delivered to Landlord, (3) an official search or a certificate of a
title company reasonably satisfactory to the Indenture 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
other than Permitted Liens which have not been discharged of record or for which
affirmative insurance has been provided, and (4) a final certificate of
occupancy or equivalent governmental approval. If Tenant is holding proceeds or
at the time of the casualty was self-insuring, promptly following completion in
full of the work, Tenant shall deliver to Landlord and Indenture Trustee the
items described in clauses (1)-(4) of this paragraph (c).
Any insurance proceeds remaining after completion of the
reconstruction as specified shall be paid to Tenant. 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
39
<PAGE>
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.
17. Use, Assignment and Subletting.
The Demised Premises may be used for any lawful purposes (in
compliance with the Permitted Exceptions) provided that Tenant obtains,
maintains in full force and effect and complies with all licenses, permits and
authorizations from any applicable governmental or regulatory authorities
necessary for such use, occupancy or operation of the Demised Premises and
provided further, that neither the Demised Premises nor any portion thereof
shall be used for the handling, processing, storage or disposal of Hazardous
Materials, nor shall there be installed on the Demised Premises any underground
tank or other underground storage receptacle for Hazardous Materials, except in
each case as may be incidental to the conduct of Tenant's business as currently
conducted on the Demised Premises, 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 (the "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 impossible to obtain or results in the cancellation of policies of
insurance required by this Lease, or (v) increases the risk of environmental
liability to Landlord or Remainderman Trustee, provided, however (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 so long as Tenant, any assignee or subtenant
relating to such retail or office use shall comply with the first two provisos
of this Article 17.
Tenant may assign this Lease in whole but not in part 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 subordinate to this Lease,
(iii) that Tenant 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 and Tenant shall so affirm in writing if so
requested by Landlord, (iv) Tenant may not without first obtaining Landlord's
consent assign this Lease, or sublease all or any portion of the Demised
Premises, to any tax-exempt entity (within the meaning of Section 168(h) of the
Code), (v) no term of any sublease shall extend beyond the Base or any extended
term already irrevocably committed to by Tenant and
40
<PAGE>
each sublease shall provide that, at the request of Landlord, upon the
termination of this Lease by reason of an Event of Default, sublessee shall
attorn to Landlord pursuant to the then executory provisions of the sublease,
unless the sublessee has the right pursuant to the sublease to terminate the
sublease upon termination of this Lease or discontinuance of Tenant's operations
at the Demised Premises, and (vi) any such assignee or sublessee shall not be a
debtor or debtor-in-possession in a voluntary or involuntary bankruptcy
proceeding at the commencement of the assignment or sublease term. 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 or sublease. 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 original-named Tenant 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 no less than 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 has entered into leases and/or vendor licenses with other
retail and service operators for space within the building. Landlord and Tenant
agree that (a) such leases have been assigned by Tenant to Landlord pursuant to
the Assignment of Intangibles and are hereby reassigned, without representation
or warranty, by Landlord to Tenant and shall be deemed subleases of this Lease,
(b) the licenses are permitted hereunder but shall remain the exclusive
obligation of Tenant and Tenant shall be entitled to all of the benefits,
entitlements, fees and other sums payable by the licenses thereunder, (c) Tenant
shall perform all of the obligations of the landlord under such leases and
Tenant shall be entitled to retain all benefits, entitlement, rent and other
sums paid by the tenants under such leases; provided, however, that upon
termination of this Lease following an Event of Default hereunder, such leases
as are designated by Landlord and all licenses shall be terminated by Tenant and
all leases not so terminated and not terminated at the election of the tenants
thereunder shall be automatically assigned to Landlord and, without regard to
any such termination or the termination of this Lease, all rights of Tenant in
and to the benefits, entitlement, rent and other sums paid by tenants under said
leases or by licensees under such licenses shall terminate and any payments made
to Tenant in respect thereof after an Event of Default shall be paid to
Landlord.
41
<PAGE>
Tenant represents and warrants to Landlord that (i) no tenant under any
such lease or licensee under any of the vendor licenses is a tax-exempt entity
(within the meaning of Section 168(h) of the Code), and Tenant shall not permit
the assignment or sublease of the tenant's interest under any such lease or the
transfer of any vendor license to such a tax-exempt entity, (ii) no term of any
such lease or license extends beyond the Base Term of this Lease, (iii) Tenant
shall cause each tenant under any such lease and each licensee under the vendor
licenses to comply in all respects with Articles 12(b), 17, 29 and 38, provided,
however, that Tenant shall remain primarily responsible to Landlord and Owner
Participant for compliance with such obligations and (iv) each such lease or
license is terminable by Tenant upon discontinuance of Tenant's operation at
the Demised Premises.
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 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 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.
42
<PAGE>
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 or
encumbrance on or with respect to the Demised Premises or any part thereof, any
Rent, or any of Landlord's or Tenant's title to or interest in any of the
foregoing 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 or encumbrance. In the event such lien or encumbrance is
not so discharged, eliminated or bonded, Landlord may 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, Remainderman Trustee, Indenture Trustee,
Pass Through Trustee and, after payment of the Notes in full and discharge of
the lien of the Indenture, Landlord's mortgagee, in each case as provided in the
Operative Documents; (b) Lessor Liens; (c) Remainderman Liens or liens for taxes
and assessments, in either case, 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
Indenture; (d) materialmen's, mechanics', workers', repairmen's, employees' or
other like liens arising prior to, on, 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 (as defined in the Purchase Agreement), 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 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
and which do not interfere with the payment of Rent; (f) easements, rights-of-
way, reservations, servitude and rights of others against the Land which (i) are
defined as
43
<PAGE>
Permitted Exceptions in the Purchase Agreement or (ii) are granted pursuant to
the specific provisions of this Lease; and (g) assignments, leases and subleases
expressly permitted by the Operative Documents; provided, however, that in no
event shall any Environmental Lien (as described in Article 12) be deemed a
Permitted Lien.
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 or
encumbrances on or against the Property, this 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 or Owner Participant unrelated to the
transactions contemplated by the Purchase Agreement, or (b) which result from
any violation by Landlord 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 or Owner Participant, the
payment of which is not the obligation of Tenant or Kmart under the Operative
Documents.
For purposes of this Lease, "Remainderman Liens" shall mean liens or
encumbrances on or against the Property, this Lease, any payment of Rent, the
Trust Estate, the Remainderman Trust Estate (as defined in the Participation
Agreement) or the Indenture Estate which (x) result from any act of, or any
claim against, Remainderman Trustee or Remainderman Participant unrelated to the
transactions contemplated by the Purchase Agreement or which result from any
violation by Remainderman Trustee or Remainderman Participant of any of the
terms of the Operative Documents or (y) which result from liens in favor of any
taxing authority by reason of any Tax owed by Remainderman Trustee or
Remainderman Participant, 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, Special
Additional Rent, Termination
44
<PAGE>
Value or amounts constituting Make-Whole Premium within five (5) days of the
date such payment is due if Landlord has given Tenant written notice of such due
date not more than thirty (30) business days nor less than two (2) business days
before such due date or within ten (10) days of the date the payment is due if
Landlord does not deliver such written notice; (ii) failure to make any payment
constituting Additional Rent other than Special Additional Rent, Termination
Value or amounts constituting Make-Whole Premium within fifteen (15) days after
notice of non-payment to Tenant; (iii) failure to maintain any insurance
required to be maintained hereunder or under any of the Operative Documents,
(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 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, provided, however, that
Tenant's failure to provide any notice to Remainderman Trustee or Remainderman
Participant as required pursuant to this Lease or to perform any covenant or
obligation under this Lease with respect to Remainderman Trustee or Remainderman
Participant shall not constitute an Event of Default under this Lease; (v)
Tenant 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 Tenant, or Tenant
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 Tenant
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) (A) any representation or warranty by Tenant or Kmart in this Lease or any
of the other Operative Documents (other than the Tax Indemnification Agreement)
or in any document or certificate expressly required to be delivered pursuant
hereto or thereto or (B) without regard to Tenant's or Kmart's knowledge and
assuming such representation or warranty had been given with no qualifications
as to knowledge, any representation or warranty by Tenant or Kmart with respect
to any of the Developers or the Developer Properties (as such terms are defined
in the Purchase Agreement) or matters related thereto, in each case
45
<PAGE>
described in clause (A) or (B) 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
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 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.
For purposes of this Lease, a "Material Default" shall mean (x) an event of
the type specified under clause (i) or (v) in the foregoing paragraph which, but
for the passage of time or the giving of notice, or both, would be an Event of
Default or (y) the failure to pay when due in accordance with the applicable
provisions of the Operative Documents any other amount owed by Tenant to Owner
Participant, Owner Trustee or to a third party for the account or on behalf of
Owner Participant or Owner Trustee for which Tenant has agreed to reimburse
Owner Participant or Owner Trustee pursuant to the provisions of any of the
Operative Documents.
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 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 period, Landlord at its option may, by notice to Tenant, declare
this Lease to be in default, and at any time thereafter, 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 this Lease and
remove Tenant from possession of the Demised Premises and all of Tenant's
property therefrom at Tenant's expense and without any liability to Tenant for
damages therefor, 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.
46
<PAGE>
(b) Landlord may sell the Demised Premises or any part thereof
(subject to the rights of the Remainderman Trustee), 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 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 (together with interest on such amount at the Default Rate
from the Final Payment Date to the date of actual payment): 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, 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, 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), any unpaid Rent
due and any accrued and unpaid Basic Rent 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
47
<PAGE>
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 Adjusted
Termination Value for the Demised Premises computed as of the Final
Payment Date, over the fair market sales value 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 Adjusted
Termination Value for the Demised Premises computed as of the Final
Payment Date over the present value of the fair market rental value as
of the Final Payment Date for the Demised Premises for the balance of
the Lease Term, such present value to be computed using a per annum
rate equal to the Debt Rate, discounted semiannually, from the
respective dates upon which such Basic Rent would be paid (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,
such present value to be computed using a per annum rate equal to the
Debt Rate, discounted semiannually, from the respective dates upon
which such Basic Rent would be paid 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, such present value to be
computed using a per annum rate equal to the Debt Rate, discounted
semiannually, from the respective dates upon which such Basic Rent
would be paid; or
48
<PAGE>
(iv) an amount equal to Adjusted Termination Value computed
as of the Final Payment Date; provided, however, that Landlord shall,
after receipt of such amount and all amounts due pursuant to Article
21 (h) hereof, use reasonable efforts to sell the Demised Premises or,
at Landlord's option, to have Tenant sell the Demised Premises at
Tenant's expense, and if such disposition shall occur within 90 days
of the payment by Tenant of the amount described in this clause (iv)
and Article 21(h), Landlord shall pay to Tenant from the proceeds of
such disposition the lesser of (A) such proceeds and (B) Adjusted
Termination Value.
"Debt Rate" shall mean the rate equal to the weighted average rate of
interest per annum borne by the Notes as of the date hereof (computed on the
basis of a 360-day year of twelve 30-day months).
"Adjusted Termination Value" shall mean, for any date, the excess of
(a) the sum of (i) the Termination Value corresponding to or next succeeding the
date in respect of which such calculation is being made (the "Determination
Date") plus (ii) if the Determination Date is not a Basic Rent Payment Date, the
unaccrued portion as of the Determination Date, of Basic Rent payable in
arrears, if any, due on the next succeeding Rent Payment Date (or, if the
Determination Date is a Basic Rent Payment Date, zero) over (b) if the
Determination Date is not a Basic Rent Payment Date, the unaccrued portion as of
the Determination Date, of interest payable on the Notes, if any, due on the
Rent Payment Date next succeeding the Determination Date (or, if the
Determination Date is a Basic Rent Payment Date, zero).
(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
49
<PAGE>
incurred by Landlord, the Indenture Trustee, the Remainderman Trustee 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 further, upon demand, immediately take all necessary steps to vest in
Landlord or its designee all operating licenses, other certificates, permits,
authorizations and approvals relating to the use and occupancy of the Demised
Premises, (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, 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.
In addition, Tenant shall be liable, except as otherwise specifically
provided in this Article 21, without duplication of any amounts payable
hereunder, for any and all unpaid Rent due hereunder before, after or during the
exercise of any of the foregoing remedies and on an After-Tax Basis for all
legal fees and other costs incurred by Landlord, Owner Participant, or Indenture
Trustee by reason of the occurrence of any Event of Default or the exercise of
remedies with respect thereto.
50
<PAGE>
22. Bankruptcy.
If an Event of Default described in Article 20(v) occurs, then
Landlord may terminate this Lease by giving notice to Tenant of its intention so
to do; provided, however, neither bankruptcy, insolvency, an assignment for the
benefit of creditors nor the appointment of a receiver shall affect this Lease
or permit its termination so long as (i) no Material Default or other Event of
Default has occurred and is continuing and (ii) the covenants to be performed
under this Lease shall be performed by Kmart or a person or entity claiming
under Kmart. In the event Basic Rent and Additional Rent are not paid as herein
provided after the filing of a petition in bankruptcy or any arrearage in Rent
is not made whole, Landlord shall be free to pursue its remedies set forth in
Article 21.
23. Quiet Enjoyment.
Landlord covenants that it and any person rightfully claiming by,
through or under Landlord, shall not (except for suits, claims or disturbances
in respect of Permitted Liens) interfere with Tenant's quiet enjoyment and use
of the Demised Premises in accordance with this Lease 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. The right of quiet enjoyment under this Lease described above is
independent of, and shall not affect, Landlord's rights otherwise to initiate
legal actions seeking to enforce the obligations of Tenant or the rights of
Landlord under this Lease.
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 with respect to the Land and neither Landlord nor the Owner
Participant nor any of its or their directors, officers, employees or affiliates
shall have any liability under this Lease in excess of, and Tenant shall have no
recourse against Landlord or any such parties 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
51
<PAGE>
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. Receipt by Landlord of any Rent with the
knowledge, on the part of Landlord at the time of such receipt, that Tenant is
in default of any covenant or obligation contained in this Lease shall not be
deemed a waiver by Landlord of such default.
26. Estoppel Letters.
Tenant will execute, acknowledge and deliver to Landlord, within
thirty (30) days of a good faith request by Landlord and Landlord will execute,
acknowledge and deliver to Tenant, within thirty (30) 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 whether Rent has been paid through and
including the last occurring Rent Payment Date, (d) as to the amount of any
prepaid Rent or any unreimbursed portion of Special Additional Rent, (e) 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 (f) 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 broom clean to Landlord
or its designee, together with all alterations, additions and improvements then
existing thereon, in as good order and condition as existing on the date hereof
except for ordinary wear and tear and 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) (but only if
52
<PAGE>
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 with respect to
liens of the type specified in clause (e), have been bonded to the satisfaction
of Landlord) 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, such assurances to be satisfactory to Landlord and such
designee. If such surrender shall be upon the expiration of the Base Term
(including any optional or automatic extension thereof other than a renewal
pursuant to Article 8(a) or 8(c) hereof), (i) notwithstanding Article 5 hereof,
immediately prior to such surrender not less than fifty percent (50%) of the
building located on the Demised Premises shall have been occupied and operated,
except as such occupation or operation may have been precluded by reason of a
casualty, loss or a condemnation, for a use permitted hereunder for the eighteen
(18) calendar months prior to the expiration of the Base Term (including any
optional or automatic extension thereof other than a renewal pursuant to Article
8(a) or 8(c) hereof) (inclusive of the month within which the Base Term or such
extension, as the case may be, expires), except that Tenant may cease such
operation, occupation or use within the last forty-five (45) days of the Base
Term or such extension, as the case may be, and (ii) if at the time of such
surrender the Demised Premises shall have been operated other than as a general
retail store, then either (x) the Demised Premises must be capable of being
refitted for use as a general retail store at no material expense to Landlord,
or (y) Tenant shall have provided no less than thirty (30) days prior to such
surrender an appraisal to the effect that the fair market rental value of the
continued use of the Demised Premises in the condition surrendered will be equal
to or greater than the fair market rental value of the Demised Premises as a
general retail store. All furniture, signage and trade fixtures installed in
said buildings or elsewhere on the Demised Premises at the expense of Tenant or
other occupant and not a part of the improvements transferred to Landlord
pursuant to the Purchase Agreement or any bill of sale related thereto or any
substitution or replacement thereof shall remain the property of Tenant or such
other occupant and shall be removed by Tenant at its expense and without damage
to the Demised Premises (any such damage to be repaired by Tenant prior to
surrender of the Demised Premises) 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 provided, further, however, that Tenant, irrespective of whether it
delivers its notice of relinquishment, shall pay, or reimburse Landlord for, any
reasonable costs incurred by Landlord in
53
<PAGE>
connection with the removal or disposal of such relinquished property or shall,
at the request of Landlord and, irrespective of whether it delivers its notice
of relinquishment, remove such property from the Demised Premises, or, if no
such notice of relinquishment is delivered, Landlord may, at its option, treat
such property as abandoned by Tenant, in which event title to such property
shall vest in Landlord.
(b) With respect to matters relating to Environmental Laws, not more
than one hundred eighty (180) days nor less than sixty (60) days prior to the
expiration or upon the earlier termination of the Lease Term Tenant shall, at
its sole cost and expense, provide to Landlord and Remainderman Participant a
phase I environmental site assessment report performed by a reputable
environmental consultant selected by Tenant and satisfactory to Landlord, in its
reasonable discretion, stating that no Hazardous Materials 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 corrective response action relating to the
Demised Premises as may be deemed necessary or advisable by the consultant
("Environmental Recommendations"). 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 results in any Environmental
Recommendations, it shall be Tenant's obligation, at Tenant's sole cost and
expense, to timely develop and implement to completion in compliance with all
relevant Environmental Laws a plan to satisfy the Environmental Recommendations
and comply with all applicable Environmental Laws which 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. Tenant
shall provide Landlord and Remainderman Participant with copies of all reports,
data, correspondence and other documentation relating to matters addressed in
this paragraph immediately upon Tenant's generation or receipt of such
documentation. If it is required by applicable Environmental Laws, reports
concerning such plan and the results of implementing such plan shall be
submitted by Tenant to the appropriate governmental agency for review and
approval. Tenant shall complete the implementation of any such plan promptly
and in any event prior to the expiration of the current term of this Lease, but
if additional time is required to complete the implementation of such plan and
Tenant otherwise does not extend
54
<PAGE>
the term of this Lease as provided in Article 8 hereof, the term of this Lease
shall automatically be extended on a month to month basis until completion of
such work in full (and Basic Rent during such additional period shall be the
same rental payable under the terms of this Lease with respect to the last year
of the immediately preceding term prorated on a monthly basis and shall be
payable in advance or in arrears on the same basis as Basic Rent in the last
year of the immediately preceding term, together with any rent payable under the
Ground Lease, payable as and when due thereunder, on a prorated basis).
(c) Simultaneously with such surrender of the Demised Premises to
Landlord or its designee, Tenant shall deliver to Landlord or its designee the
following items:
(i) originals or clear copies, if same are required to be left at the
Demised Premises, of all transferable operating licenses, other
certificates, permits, authorizations and approvals relating to the
use and occupancy of the Demised Premises;
(ii) to the extent in the possession or control of Tenant or any
affiliates of Tenant (or should be in the possession or control of
Tenant or any affiliates of Tenant): (x) plans and specifications for
all mechanical, electrical and HVAC systems pertaining to the Demised
Premises, (y) as-built drawings, blueprints, operating and repair
manuals, engineering logs and preventative maintenance records
relating to the Demised Premises or any additions, alterations or
modifications thereto that shall not be removed from the Demised
Premises at the time of, or in connection with, the surrender of the
Demised Premises to Landlord or its designee;
(iii) keys to all locks contained in the Demised Premises including
any additions, alterations or modifications to the Demised Premises,
in the possession or control of Tenant or any affiliate of Tenant; and
(iv) such other papers and documents which are in the possession or
control of Tenant or any affiliate of Tenant which may be necessary
for the ownership or proper operation of the Demised Premises, or any
portions thereof, with, in either case, all the additions, alterations
and modifications thereto.
(d) In connection with any such surrender, Tenant shall use
commercially reasonable efforts to assign to Landlord or its designee (x) all
then existing maintenance and management contracts relating to the Demised
Premises with Persons other than affiliates of Tenant, which Landlord has agreed
to assume and perform, (y) all
55
<PAGE>
then existing warranties against dealers, manufacturers, vendors, contractors
and subcontractors relating to the use and occupancy of the Demised Premises, or
any portions thereof, which have not theretofore been assigned to Landlord, and
(z) all then existing claims, except for any such claims against vendors,
customers or other retailers relating to the conduct of Tenant's retail
business, against dealers, manufacturers, vendors, contractors and
subcontractors which are not affiliates of Tenant relating to the Demised
Premises, or any portions thereof (including the use and occupancy thereof),
which have not theretofore been assigned to Landlord. The obligations of
Landlord and Tenant under this Article 27 shall survive the termination of this
Lease.
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, return receipt requested, to Landlord at the following address
(include telephone number):
[Wilmington Trust Company] [William J. Wade]
Rodney Square North
1100 North Market Street
Wilmington, Delaware (19890-0001)
Telephone No. (302) 651-8681
Telecopy No. (302) 651-8882
Attn: Corporate Trust Administration
with a copy to:
NCC _______________ Company
200 Park Avenue - 33rd Floor
New York, New York 10166-0005
Attention: Asset Administrator
Telephone No. (212) 499-3775
Telecopy No. _________________
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
56
<PAGE>
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, Landlord's mortgagee and Remainderman
Trustee with prompt written notice of any pending or threatened Environmental
Claim in connection with the Demised Premises. 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, Landlord's mortgagee and
Remainderman Trustee 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, Landlord's
mortgagee and Remainderman Trustee.
Tenant shall provide Landlord, Landlord's mortgagee and Remainderman
Trustee 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, to or from the
Demised Premises which is required to be reported to any Governmental Authority
pursuant to applicable Environmental Laws. Tenant shall also promptly provide
Landlord, Landlord's mortgagee and Remainderman Trustee with copies of all
correspondence, reports and other documentation relating to such violation or
release and Tenant's remedial response or corrective action in relation thereto.
30. Entry by Landlord.
From time to time during the term of this Lease, Landlord 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
57
<PAGE>
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 eighteen months of the Base Term or the final twelve months of
any renewal term or in accordance with Article 21, or (v) performing any
obligation of Tenant hereunder for which Tenant is in default. 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; Valuation Clarification.
(a) 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
provisions of this Lease apply (i) in the plural sense, and (ii) to any
corporation, association, partnership, or individual, male or female, shall in
all instances be assumed as though in each case fully expressed.
(b) Any determination of the fair market rental or sales value of the
Demised Premises made pursuant to the terms and provisions of this Lease shall
take into consideration the matters set forth in Article 45(g) hereof.
32. Successors and Assigns.
All provisions contained in this Lease, including, without limitation,
all 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 (to the same extent as
if such heirs, executors, administrators, successors and assigns were named as a
party hereto).
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 or the application of such provision to Persons or circumstances
other than those as to which it is invalid, illegal or unenforceable, but this
Lease shall be construed as if such invalid, illegal or unenforceable provision
had not been contained herein.
58
<PAGE>
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 not be altered, modified, amended or supplemented in any manner except
by a written instrument signed by the party against whom enforcement is sought
thereon. Tenant shall be responsible for all reasonable out-of-pocket costs
(including reasonable attorneys' fees and disbursements) incurred by Landlord in
connection with any alteration, modification, supplementation of this Lease
requested by Tenant or any affiliate of Tenant. Notice given other than
strictly in accordance with the terms hereof, if accepted in writing by the
party receiving such notice, shall be deemed to have been given in accordance
with the terms hereof.
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
59
<PAGE>
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, derivative, compound,
mixture, mineral, waste, gas, medical waste, contaminant, constituent 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, expenses, liabilities and
obligations arising prior to or during the Lease Term or arising after the Lease
Term, but predicated upon acts, conditions or omissions which occurred prior to
or during the Lease Term, incurred in connection with or due to the presence of
Hazardous Materials in, on, under or at the soil, surface water, ground water,
sediment, air or any other media associated with the Demised Premises, and shall
promptly and diligently undertake, any investigation or any clean up, response,
remedial, removal, containment, corrective action or restoration work at any
location required pursuant to any applicable Environmental Law or by any
federal, state or local government or political subdivision. Without limiting
the foregoing, if the presence of any Hazardous Materials 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 Materials to the Demised Premises. 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 sole cost and expense, to a reasonable extent in any such
effort.
60
<PAGE>
39. Economic Abandonment.
(a) Notwithstanding anything contained in this Lease to the contrary,
Landlord and Tenant acknowledge that it is possible that, during the Lease Term,
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 Date on and after
the 7th anniversary of the commencement of the Lease Term and before the
expiration of the Lease 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 ("Notice of Termination") and to Remainderman Trustee (provided,
however, that failure of Tenant to deliver any notices to Remainderman Trustee
or Remainderman Participant under this Article shall not affect Tenant's or
Landlord's rights as provided herein), terminate this Lease on the Rent Payment
Date specified in such notice ("Termination Date") and return the Demised
Premises to Landlord. Such notice (which for purposes of the Indenture will be
a "Redemption Notice" provided that such notice satisfies the requirements set
forth in Section 6 of the Indenture) may be revoked by Tenant on not more than
two occasions 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") and the Landlord, Owner
Participant, Remainderman Trustee and Remainderman Participant shall have been
reimbursed on an After-Tax Basis for any costs and expenses in connection with
such Redemption Notice and such revocation. 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, any of its affiliates or anyone with whom Tenant or any of its
affiliates has an understanding as to the subsequent leasing, sale or use of the
Demised Premises or any portions thereof. Landlord shall also have the right to
obtain cash bids for the purchase thereof, either directly or through Landlord's
agents. Tenant
61
<PAGE>
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 and such bidder shall assume Landlord's
obligations under the Tripartite Agreement (as defined in the Purchase
Agreement), the Option Agreement and the Ground Lease, if then in effect. 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 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.
(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.
(e) If Landlord's Acceptance has not been made and a sale shall not
have occurred on or before 30 days prior to the Termination Date, this Lease
shall continue provided that Tenant shall have the right for a period of 60 days
following such Termination Date to make a rejectable offer in writing to
Landlord to purchase the Demised Premises on the next Rent Payment Date (which
shall thereafter be deemed the Termination Date) for an amount equal to the
amounts set forth in clauses (C), (D) and (E) of paragraph (c) above (calculated
with respect to such deemed Termination Date) together with the higher of the
(x) then fair market sales value of the
62
<PAGE>
Demised Premises as agreed to by the parties or as determined by an appraisal
reasonably satisfactory to Landlord and Tenant obtained at Tenant'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 deemed
Termination Date. If Landlord rejects such offer, this Lease shall terminate,
and Landlord shall retain the Demised Premises, on the Termination Date, and
Tenant shall pay to Landlord on the Termination Date solely the amounts set
forth in clauses (C), (D) and (E) of paragraph (c) above. 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 accept Tenant's
offer and transfer the Demised Premises to Tenant on the Termination Date, upon
receipt by Landlord of the amounts set forth in the first sentence of Article
39(e) it shall transfer all of its right, title and interest in the Demised
Premises in an "as is" condition without recourse or warranty, except that the
Demised Premises shall be free and clear of Lessor Liens and Tenant shall assume
the obligations of Landlord under the Tripartite Agreement, Option Agreement and
Ground Lease, if then in effect.
Notwithstanding the foregoing, if in connection with a transfer to
Tenant pursuant to this clause (e), Tenant shall elect to exchange full recourse
securities for the Notes pursuant to Section 20 of the Participation Agreement
and shall satisfy the conditions precedent set forth in such Section 20 and
Section 7 of the Indenture for such exchange, the amount payable to Landlord
pursuant to this clause (e) shall be reduced by an amount equal to the unpaid
principal balance of such Notes.
(f) Landlord may, but 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, and Tenant purchases the Demised Premises pursuant to Article 39(e), the
Tenant covenants that it shall not use the Demised Premises for any purpose.
The provisions of this Article 39(f) shall survive termination of this Lease.
40. Tenant's Purchase Offer.
(a) At any time that an offer by Tenant to purchase the Demised
Premises ("Tenant's Purchase Offer") shall have been made or be required to be
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
Landlord shall further deliver to Tenant, no
63
<PAGE>
later than thirty-five (35) days prior to the Purchase Offer Termination Date,
the Indenture Trustee's confirmation of receipt of deposited funds pursuant to
Section 6.4 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, this 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).
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 in an
"as is" condition without recourse or warranty, except that the Demised Premises
shall be free and clear of Lessor Liens and Tenant shall assume the obligations
of Landlord under the Tripartite Agreement, Option Agreement and Ground Lease,
if then in effect.
Tenant shall pay, on an After-Tax Basis, 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.
(c) In the event Landlord rejects Tenant's Purchase Offer pursuant to
Article 14 or 15 of this Lease, 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 this 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 and that Landlord has not elected to retain the Demised Premises
in accordance with the terms hereof, at any time that Tenant shall be entitled
or required to acquire the Demised Premises pursuant to Articles 14, 15 or 39(e)
hereunder,
64
<PAGE>
Tenant shall be entitled, by notice delivered to Landlord within the periods
provided for in Articles 14, 15 or 39 for notice of any acquisition contemplated
thereby or following which Tenant is required to acquire, in lieu thereof to
substitute equivalent interests in a single retail store (such retail store,
including related site improvements and related land upon which such building
and improvements are constructed are herein referred to as the "Substitute
Property") as Landlord's interests in the Demised Premises immediately prior to
the event which gave rise to the substitution for Landlord's interests in the
Demised Premises provided that (i) the fair market value of such interests in
the Substitute Property as determined by appraisal procedures set forth in
Article 45 hereof shall be not less than the fair market value of Landlord's
interest in the Demised Premises immediately prior to the event which gave rise
to the substitution (assuming the Demised Premises was being maintained in
accordance with the terms of this Lease until such time); (ii) the useful life
of the improvements relating to the Substitute Property as determined by
appraisal procedures set forth in Article 45 hereof shall be not less than the
useful life of the improvements relating to the Demised Premises immediately
prior to the event which gave rise to the substitution (assuming the Demised
Premises was being maintained in accordance with the terms of this Lease until
such time); (iii) the economic terms relating to Landlord with respect to such
equivalent interests shall be at least equivalent to the economic terms in
effect with respect to the Demised Premises immediately prior to the event which
gave rise to the substitution, including, without limitation, an estate for
years at no additional cost of the same duration as the then-remaining term of
the Estate for Years with respect to the Demised Premises and an option to
ground lease the land related to the Substitute Property at the same rentals and
for not less than the same term (including renewals) as would apply to the
Demised Premises; (iv) the representations and warranties of Kmart made with
respect to the Demised Premises under the Operative Documents shall be remade
and true with respect to the Substitute Property on the effective date of
substitution; (v) a phase I environmental due diligence report, survey and title
report, each in form and substance satisfactory to Landlord, Owner Participant
and Indenture Trustee, concerning the Substitute Property, shall have been
provided in sufficient time for appropriate review by Landlord, Owner
Participant and Indenture Trustee prior to the effective date of such
substitution and (vi) the Substitute Property is free of material liability
exposures or matters disclosed by the applicable survey or title report and not
taken into account in the applicable appraisal that would materially adversely
affect the fair market value of the Substitute Property. 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
equivalent interests in another retail store for Landlord's
65
<PAGE>
interests in the Demised Premises, pursuant to the terms of this paragraph.
(b) On the substitution date, which shall be no later than 120 days
following the notice to Landlord pursuant to clause (a) of this Article 41,
Landlord shall convey all of its right, title and interest in and to the Demised
Premises to Tenant in an "as is" condition, without recourse or warranty except
that it shall be free and clear of Lessor Liens and Tenant shall assume the
obligations of Landlord under the Tripartite Agreement, Option Agreement and
Ground Lease, if then in effect, upon delivery by Tenant to Landlord of all of
the following, provided, however, that Tenant shall be entitled to an
appropriate extension of such 120-day period if Landlord and Owner Participant
or Indenture Trustee have not completed their review of all information required
hereunder within such period (provided that Tenant has provided Landlord and
Owner Participant the information to be reviewed on a timely basis throughout
such period):
(i) documents in form and substance satisfactory to Landlord and
Owner Participant which, in consideration of Landlord's agreement to accept
the interests in the Substitute Property in lieu of Tenant's acquisition of
the Demised Premises pursuant to Articles 14, 15 or 39 hereof, grant to
Landlord the equivalent interests in the Substitute Property as Landlord's
interests in the Demised Premises immediately prior to the event which gave
rise to the substitution, including those documents and the satisfaction of
the conditions with respect to the Substitute Property which are set forth
in Sections 6A(1), (3), (4), (9), (10), (11), (12) and (18) of the Purchase
Agreement;
(ii) an amendment to this Lease (or restatement thereof) and
memorandum of this Lease, as so amended or restated, duly executed and
acknowledged in form and substance reasonably satisfactory to Landlord,
Owner Participant and Tenant to replace the description of the Land with
the description of all land included in the Substitute Property and make
such other changes herein as may be reasonably necessary or appropriate
under the circumstances; provided, however, that in no event shall the
Termination Value or Basic Rent be reduced, deferred or abated;
(iii) a copy of a final as-built survey of the Substitute
Property, dated a recent date, reasonably satisfactory in form and
substance to Landlord and Owner Participant and meeting the survey
requirements for the Demised Premises set forth in Section 5B of the
Purchase Agreement;
66
<PAGE>
(iv) counterparts of an ALTA owner's and loan policies of title
insurance (or such other form of loan policy as may be prescribed by
statute in a particular state) covering the interests in the Substitute
Property to be conveyed to Landlord (or the valid, binding, unconditional
commitment therefor), dated the substitution date, in form and substance
reasonably satisfactory to Landlord, Owner Participant and Indenture
Trustee meeting the requirements of Section 5A of the Purchase Agreement,
issued to them by a title insurance company reasonably satisfactory to
Landlord and Owner Participant;
(v) certificates of insurance, if any, required with respect to
the Substitute Property pursuant to Articles 7 and 14 hereof;
(vi) a copy of the appraisal and environmental certification with
respect to the Substitute Property meeting the requirements of Section 7C
of the Purchase Agreement; and
(vii) such other certificates, documents, opinions of counsel,
surveys, consents, approvals, certified copies of duly adopted resolutions
of the respective boards of directors of Landlord and Tenant authorizing
the substitution of the interests in the Substitute Property and the
documents executed in connection therewith, and any other instruments as
may be reasonably required by either of them, Owner Participant or the
Indenture Trustee.
Tenant shall pay, on an After-Tax Basis, all costs and expenses
incurred by Landlord or Owner Participant in connection with the transfer of
Landlord's interests in the Demised Premises to Tenant and the transfer to
Landlord of the equivalent interests in the Substitute Property, including
without limitation, reasonable costs and expenses incurred in connection with
the review related to the Substitute Property and real estate transfer taxes.
Notwithstanding the foregoing the Tenant shall not be permitted to
exercise its substitution rights (i) unless the long-term senior unsecured debt
securities of Tenant shall then be rated in one of the generic rating categories
that signify "investment grade" by at least two nationally recognized
statistical rating organizations and Tenant shall then meet the Net Worth
Standard, 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, Owner Participant
shall have delivered to
67
<PAGE>
Tenant an opinion of independent tax counsel selected by Owner Participant and
reasonably acceptable to Tenant that there is a reasonable basis to believe that
the substitution could result in adverse tax consequences to Landlord, Owner
Participant or with respect to the transactions contemplated by the Operative
Documents which are not indemnified by Tenant pursuant to the Operative
Documents unless 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 adverse tax consequences to
Landlord, Owner Participant or with respect to the transactions contemplated by
the Operative Documents or to indemnify the Landlord and Owner Participant for
such adverse tax consequences in a form and manner satisfactory to Owner
Participant.
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 or a breach of Article 23 hereof. 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 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.
68
<PAGE>
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 21), 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 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 the other 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
69
<PAGE>
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, the appraiser of the other party shall be the sole appraiser, or in
the case of the third appraiser, his successor shall be appointed as provided in
paragraph (c) above.
(e) Unless otherwise expressly provided herein, the fees and expenses
of all such appraisers shall be borne by Tenant. 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.
(g) Each appraisal effected pursuant to this Article shall take into
consideration the estate for years and options granted by Remainderman Trustee
and exercisable by Landlord or any benefits available to Landlord under the
Ground Lease and shall, other than in connection with any determination pursuant
to Article 21, assume that the Demised Premises has been maintained in
accordance with the terms of this Lease until such time and are in the condition
required by Article 27 of this Lease.
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 or occurring prior to such
termination.
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 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
70
<PAGE>
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.
49. Indenture.
In order to secure the Notes, Landlord provides in the 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:
(a) consents to such assignment pursuant to the terms of the
Indenture;
(b) covenants to pay directly to Indenture Trustee (or, after
receipt of notice from Indenture Trustee stating that the Indenture has
been satisfied and discharged, to Landlord) Basic Rent, Special Additional
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 Indenture or any other Operative Document;
(c) 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
(d) agrees that until release of the Indenture as to the
Property, except with respect to Excepted Rights and Excepted Payments, (i)
the Indenture Trustee shall have such right to enforce the provisions of
this Lease as is provided in the Indenture; (ii) Landlord shall not, for
any reason, be obligated to seek to recover from the Indenture Trustee any
moneys paid to the Indenture Trustee by virtue of the Indenture; (iii) all
sums payable to the Indenture Trustee pursuant to the 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; (iv) 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
71
<PAGE>
respect to notices, delivered to Landlord and the Indenture Trustee as
provided above); (v) Tenant shall not pay any Basic Rent, Special
Additional Rent or Additional Rent payable to Landlord more than ten (10)
days prior to such payment's scheduled due date under this Lease; (vi)
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 Article 11 of the Indenture and except with respect to Excepted
Rights and Excepted 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; (vii) if this Lease shall be amended, it shall
continue to be subject to the provisions of the Indenture without the
necessity of any further act by Landlord, Tenant or the Indenture Trustee;
(viii) Tenant shall not take any action to terminate, rescind, surrender 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 such proceedings; and (ix) in
the event of a foreclosure under the 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
Indenture shall continue unaffected and shall be construed for all purposes
as if the Notes and the 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 Indenture. The Indenture Trustee is an express third party
beneficiary of the agreements contained in this Article.
72
<PAGE>
Tenant, at Tenant's expense, shall cause the 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 Demised Premises) 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 Indenture, in
each case, promptly after the execution and delivery thereof.
50. Change in Control; Sale of Assets.
Tenant shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and Tenant shall not permit any Person to consolidate with or
merge into Tenant or convey, transfer or lease its properties and assets
substantially as an entirety, unless:
(a) in case Tenant shall consolidate with or merge into another Person
or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, the Person formed by such consolidation
or into which Tenant is merged or the Person which acquires by
conveyance or transfer, or which leases, the properties and assets of
Tenant substantially as an entirety shall be a solvent corporation,
partnership or trust, shall be organized and validly existing under
the laws of the United States of America, any State thereof or the
District of Columbia and shall expressly assume, by an instrument
reasonably satisfactory to Landlord and the Indenture Trustee the
performance or observance of every covenant of this Lease and the
other Operative Documents including, without limitation, the
obligation to deliver financial statements of such Person
corresponding to those of Tenant described in Section 7 of the
Participation Agreement, on the part of Tenant to be performed or
observed;
(b) such transaction shall not result in an Event of Default or an
event which, after notice or lapse of time or both, would become an
Event of Default;
(c) Tenant has delivered to Landlord, Owner Participant and Indenture
Trustee a certificate of a responsible officer of Tenant stating that
such consolidation, merger, conveyance, transfer, or lease complies
with this Article 50 and that all conditions precedent herein
73
<PAGE>
provided for relating to such transaction have been complied with.
Upon any consolidation of Tenant with, or merger of Tenant into, any
other Person or any conveyance, transfer or lease of the properties and assets
of Tenant substantially as an entirety in accordance with this Article 50, the
successor Person formed by such consolidation or into which Tenant is merged or
to which such conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every power and right of, Tenant under this
Lease with the same effect as if such successor Person had been the named Tenant
herein.
74
<PAGE>
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:_________________________________
Name: Name:
Its:_____________________________
______________________
Name:
"TENANT"
KMART CORPORATION,
a Michigan corporation
______________________ By:_________________________________
Name: M. L. Skiles
Its: Senior Vice President
______________________
Name:
75
<PAGE>
ACKNOWLEDGEMENTS
STATE OF _____________ )
) SS
COUNTY OF ____________ )
The foregoing instrument was acknowledged before me this ____ day of
_______________, 1995 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 _________________
My Commission Expires:
76
<PAGE>
STATE OF MICHIGAN )
) SS
COUNTY OF ________ )
The foregoing instrument was acknowledged before me this ____ day of
______________________, 1995 by M. L. Skiles, the Senior Vice President of
KMART CORPORATION, a Michigan corporation, on behalf of the Corporation.
____________________________________
Notary Public, ______________ County
State of __________________
My Commission Expires:
77
<PAGE>
EXHIBIT A
Legal Description
[Exhibit A Intentionally Omitted]
78
<PAGE>
EXHIBIT B
Depiction of Site
[Exhibit B Intentionally Omitted]
79
<PAGE>
EXHIBIT C
Rents and Rent Payment Dates
[Exhibit C Intentionally Omitted]
80
<PAGE>
EXHIBIT C-1
Rental Adjustment Certificate
81
<PAGE>
EXHIBIT D
Termination Value
[Exhibit D Intentionally Omitted]
82
<PAGE>
EXHIBIT E
Form of Estoppel Letter
[Exhibit E Intentionally Omitted]
83
<PAGE>
EXHIBIT 5.1
June 7, 1995
Board of Directors
Kmart Corporation
3100 West Big Beaver Road
Troy, Michiqan 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 $210,000,000 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 Shawmut Bank Connecticut, National Association, as Pass Through Trustee
under each of Pass Through Trust Agreement 1995-K3 and Pass Through Trust
Agreement 1995-K4 (hereinafter Shawmut Bank Connecticut, National Association is
referred to as the "Pass Through Trustee"), and the Company, as contemplated in
the Company's Registration Statement on Form S-3 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 one of four owner
trustees (the "Owner Trustees") to finance the sale-leaseback transactions
involving 18 of the Company's retail stores, each acquired by an Owner Trustee
and leased by that Owner Trustee to the Company. Each Mortgage Note will be
issued under a trust indenture, as supplemented by a mortgage, deed of trust,
assignment of leases and rents, security agreement, financing statement and
supplemental indenture (as so supplemented, an "Indenture"), by and between the
related Owner Trustee and Shawmut Bank Connecticut, National Association, and
Kathy A. Larimore, 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
<PAGE>
Board of Directors
June 7, 1995
Page Two
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 Morgan Stanley & Co.
Incorporated 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 Shearman &
Sterling.
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 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
"Legal Opinions".
Very truly yours,
/s/ Dickinson, Wright, Moon,
Van Dusen & Freeman
DICKINSON, WRIGHT, MOON, VAN
DUSEN & FREEMAN
<PAGE>
[LETTERHEAD OF SHIPMAN & GOODWIN] EXHIBIT 5.2
June 7, 1995
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Re: Kmart 1995 Pass Through Certificates
------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Shawmut Bank Connecticut, National Association,
a national banking association ("Shawmut"), individually and as Pass Through
Trustee (the "Pass Through Trustee") under the proposed Pass Through Trust
Agreements (the "Pass Through Trust Agreements") by and between Shawmut and
Kmart Corporation ("Kmart"), in connection with the filing by Kmart with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
of a Registration Statement on Form S-3 (as amended from time to time, the
"Registration Statement"). The Registration Statement relates, inter alia, to
the issuance of Pass Through Certificates (the "Certificates") by the Pass
Through Trustee pursuant to the Pass Through Trust Agreements.
We have examined the forms of the Pass Through Trust Agreements (including
the forms of Certificates attached as an exhibit thereto) which you have
furnished to us and which are being filed as an exhibit to the Registration
Statement. We have also examined and relied upon originals, or copies certified
or otherwise identified to our satisfaction, of such documents, corporate
records and other instruments as we have deemed necessary or appropriate for the
purposes of this opinion.
The opinions set forth herein are limited to the federal laws of the United
States of America governing the banking and trust powers of Shawmut and the laws
of the State of Connecticut. Insofar as the opinions expressed herein involve
the laws of other jurisdictions, including, without limitation, the opinions
expressed in paragraph 4 below, we have with your permission assumed that the
laws of such
<PAGE>
Kmart Corporation
June 7, 1995
Page Two
jurisdictions are in all material respects identical to the laws of the State of
Connecticut. In addition, without limiting the foregoing, we express no opinion
with respect to (i) federal securities laws, including without limitation the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, and the Trust Indenture Act of 1939, as amended, or (ii) state
securities or blue sky laws. The opinions set forth herein are subject to (i)
applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance, receivership and similar laws affecting the rights and remedies of
creditors generally, and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
In rendering the opinions set forth herein, we have assumed that the Pass
Through Trust Agreements will not differ in any material respect from the forms
thereof delivered to us and filed as an exhibit to the Registration Statement,
that each series of Certificates will be issued in accordance with the
provisions of the Pass Through Trust Agreements, and that each Certificate will
not differ in any material respect from the form thereof attached to the form of
Pass Through Trust Agreement examined by us to which such Certificate relates.
In addition, we have assumed the due authorization, execution and delivery
of the Pass Through Trust Agreements by Kmart, the full power, authority and
legal right of Kmart to authorize, execute, deliver and perform each such
document and the compliance by each such document with Kmart's charter and by-
laws and with all laws, governmental rules and regulations that may be
applicable to Kmart.
To the extent that any opinion expressed herein speaks to any event which
may occur after the date hereof (a "Future Event"), we have assumed that at the
time of any such Future Event no change in any circumstance of fact or law that
exists on the date hereof (or that has been expressly assumed by us herein) will
have occurred such as to affect any opinion expressed herein.
Based on the foregoing, we are of the opinion that:
1. Shawmut has been duly incorporated and is validly existing as a
national banking association in good standing under the laws of the United
States of America.
<PAGE>
Kmart Corporation
June 7, 1995
Page Three
2. Upon the execution and delivery by Kmart of the Pass Through Trust
Agreements, the Pass Through Trust Agreements will have been duly authorized and
will constitute legal, valid and binding obligations of Shawmut.
3. Upon the execution and delivery by Shawmut of the Pass Through Trust
Agreements, the execution and delivery by the Pass Through Trustee of the
Certificates to be issued pursuant to the Pass Through Trust Agreements will
have been duly authorized by the Pass Through Trustee.
4. Upon the execution and delivery of the Certificates by the Pass
Through Trustee, in accordance with the terms of the Pass Through Trust
Agreements, each such Certificate, when issued and sold in accordance with the
underwriting agreement with respect thereto between Kmart and the underwriters
named therein will be a valid and binding obligation of the Pass Through Trustee
and will be entitled to the benefits of the Pass Through Trust Agreement to
which such Certificate relates.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us under the caption "Legal Opinions" in the
prospectus contained in the Registration Statement. In giving this consent, we
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the 1933 Act or the rules and regulations of the
Securities and Exchange Commission.
This opinion is only for your benefit in connection with the transactions
contemplated by the Registration Statement, except that it may be relied on by
Shearman & Sterling and Dickinson, Wright, Moon, Van Dusen & Freeman in
connection therewith.
Very truly yours,
/s/ Shipman & Goodwin
SHIPMAN & GOODWIN
<PAGE>
EXHIBIT 8.1
June 7, 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 $210,000,000 of pass through certificates (the "Pass Through
Certificates") as contemplated in the Company's Registration Statement on Form
S-3 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,
/s/ Dickinson, Wright, Moon,
Van Dusen & Freeman
DICKINSON, WRIGHT, MOON, VAN
DUSEN & FREEMAN
<PAGE>
[LETTERHEAD OF SHIPMAN & GOODWIN] EXHIBIT 8.2
June 7, 1995
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Re: Kmart Corporation Registration on Form S-3 1995-K
Pass Through Trusts Pass Through Certificates
-------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Shawmut Bank Connecticut, National Association,
a national banking association ("Shawmut"), individually and as Pass Through
Trustee (the "Pass Through Trustee") under the proposed Pass Through Agreements
(the "Pass Through Agreements") by and between Shawmut and Kmart Corporation
("Kmart"), in connection with the filing by Kmart with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "1933
Act"), of a Registration Statement on Form S-3 (as amended from time to time,
the "Registration Statement"). The Registration Statement relates, interalia,
to the issuance of Pass Through Certificates (the "Pass Through Certificates")
by the Pass Through Trustee pursuant to the Pass Through Agreements.
As such counsel, we have reviewed the form of the Pass Through Certificates
and the form of Pass Through Agreements which have been filed as exhibits to the
Registration Statement, and have examined and relied upon originals, or copies
certified or otherwise identified to our satisfaction, of such documents,
corporate records and other instruments as we have deemed necessary or advisable
for the purposes of this opinion.
The opinions set forth herein are based on and limited to the Federal laws
of the United States and the laws of the State of Connecticut. With respect to
the discussion in the prospectus which forms part of the Registration Statement
(the "Prospectus") entitled "Certain Connecticut Taxes", the assumptions set
forth therein are specifically incorporated herein.
<PAGE>
Kmart Corporation
June 7, 1995
Page Two
Based on the foregoing, we are of the opinion that:
The discussion in the Prospectus contained in the Registration Statement
entitled "Certain Connecticut Taxes," insofar as it relates to statements of law
or legal conclusions, is correct in all material respects.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the use of our name under the caption "Certain
Connecticut Taxes" in the Prospectus. In giving this consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the 1993 Act or the Rules and Regulations of the Securities and
Exchange Commission.
Very truly yours,
/s/ Shipman & Goodwin
SHIPMAN & GOODWIN
<PAGE>
EXHIBIT 12
KMART CORPORATION AND SUBSIDIARY COMPANIES
EXHIBIT 12 -- INFORMATION ON RATIO OF EARNINGS
TO FIXED CHARGES COMPUTATION
<TABLE>
<CAPTION>
Fiscal Year Ended Trailing 52 Weeks Ended (2)
--------------------------------------- ---------------------------
January 25, January 26, January 27, April 26, April 27,
1995 1994* 1993* 1995 1994*
----------- ----------- ----------- --------- ---------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
Net income (loss) from continuing retail operations
before extraordinary items and the effect of
accounting changes................................ $ 260 $(347) $ 901 $ 216 $(395)
Income taxes....................................... 114 (191) 474 96 (217)
------ ----- ------ ------ -----
Pretax income (loss) from continuing retail
operations........................................ 374 (538) 1,375 312 (612)
Equity income of unconsolidated affiliated retail
companies that exceeds distributions.............. (42) 3 6 (75) (22)
Fixed charges per below............................ 803 814 699 787 811
Less interest capitalized during the period...... (17) (14) (16) (14) (12)
------ ----- ------ ------ -----
Earnings from continuing retail operations......... $1,118 $ 265 $2,064 $1,010 $ 165
====== ===== ====== ====== =====
Fixed Charges:
Interest expense................................. $ 521 $ 507 $ 457 $ 507 $ 507
Rent expense -- portion of operating rentals
representative of the interest factor........... 263 290 225 263 290
Other............................................ 19 17 17 17 14
------ ----- ------ ------ -----
$ 803 $ 814 $ 699 $ 787 $ 811
====== ===== ====== ====== =====
Ratio of income to fixed charges................... 1.4 --(1) 3.0 1.3 --(3)
=== == === === ==
</TABLE>
- -------------
(1) The deficiency of earnings from continuing retail operations versus fixed
charges was $549 million for the fiscal year ended January 26, 1994.
(2) 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.
(3) The deficiency of income from continuing retail operations versus fixed
charges was $646 million for the 52 weeks ended April 27, 1994.
* Certain prior year amounts have been restated for the effect of discontinued
operations.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
February 27, 1995, which appears on page 30 of the 1994 Annual Report to
Shareholders of Kmart Corporation which is incorporated by reference in Kmart
Corporation's Annual Report on Form 10-K for the year ended January 25, 1995. We
also consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears on page 11 of such Annual Report on Form 10-K.
We also consent to the references to us under the heading "Experts" and
"Selected Financial Information" in such Prospectus. However, it should be noted
that Price Waterhouse LLP has not prepared or certified such "Selected Financial
Information".
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Detroit, Michigan 48243
June 5, 1995
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM T-1
----------------------------
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE
TRUST INDENTURE ACT OF l939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
[_] CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
--------------------------------------------------
(Exact name of trustee as specified in its charter)
Not applicable 06-0850628
------------------- --------------
(State of incorporation if (I.R.S. Employer
not a national bank) Identification No.)
777 Main Street, Hartford, Connecticut 06115
--------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Patricia Beaudry, 777 Main Street, Hartford, CT (203) 728-2065
--------------------------------------------------------------------------
(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 No.)
3100 West Big Beaver Road, Troy, Michigan 48084
--------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Pass Through Certificates
--------------------------------------------------------------------------
(Title of the indenture securities)
<PAGE>
Item l. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject:
The Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee; none with respect to Hartford
National Corporation, Shawmut Corporation, Shawmut Service Corporation and
Shawmut National Corporation (the "affiliates").
Item l6. List of exhibits. List below all exhibits filed as a part of
this statement of eligibility and qualification.
l. A copy of the Articles of Association and By-Laws of the trustee
as now in effect.
2. A copy of the Certificate of Authority of the trustee to do
Business.
3. A copy of the Certification of Fiduciary Powers of the Trustee.
4. A copy of the By-laws of the trustee are provided in Exhibit 1
referenced above.
5. Consent of the trustee required by Section 32l(b) of the Act.
6. A copy of the latest Consolidated Reports of Condition and Income
of the trustee, published pursuant to law or the requirements of its
supervising or examining authority.
-2-
<PAGE>
NOTES
Inasmuch as this Form T-l is filed prior to the ascertainment by the
trustee of all facts on which to base its answer to Item 2, the answer to said
Item is based upon incomplete information. Said Item may, however, be
considered correct unless amended by an amendment to this Form T-l.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of l939, the
trustee, Shawmut Bank Connecticut, National Association, a national banking
association organized and existing under the laws of the United States, has duly
caused this statement of eligibility and qualification to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Hartford, and State of Connecticut, on the ________day of June, 1995.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Trustee
By /s/ Mark A. Forgetta
---------------------------------------
Mark A. Forgetta
Vice President
-4-
<PAGE>
ARTICLES OF ASSOCIATION
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Shawmut Bank Connecticut,
National Association".
SECOND. The main office of the Association shall be in Hartford, County of
Hartford, State of Connecticut. The general business of the Association shall be
conducted at its main office and its branches.
THIRD. The board of directors of this Association shall consist of not less than
five (5) nor more than twenty-five (25) shareholders, the exact number of
directors within such minimum and maximum limits 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. Unless
otherwise provided by the laws of the United States, any vacancy in the board of
directors for any reason, including an increase in the number thereof, may be
filled by action of the board of directors.
FOURTH. The annual meeting of the shareholders for the election of directors and
the transaction of whatever other business may be brought before said meeting
shall be held at the main office or such other place as the board of directors
may designate, on the day of each year specified therefor in the bylaws, but if
no election is held on that day, it may be held on any subsequent day according
to the provisions of law; and all elections shall be held according to such
lawful regulations as may be prescribed by the board of directors.
FIFTH. The authorized amount of capital stock of this Association shall be three
million five hundred thousand (3,500,000) shares of common stock of the par
value of six and 25/100 dollars ($6.25) 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 the capital stock of any class of the corporation shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the corporation, whether now or hereafter authorized, or to
any obligations convertible into stock of the corporation, 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 from time to time, may authorize and issue debt
obligations, whether or not subordinated, without the approval of the
shareholders.
<PAGE>
SIXTH. The board of directors shall appoint one of its members president of this
Association, who shall be chairman of the board, unless the board appoints
another director to be the 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 this
Association.
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 bylaws that it may be lawful for them to make; and
generally 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 other place within the limits of the City of Hartford,
Connecticut, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; 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 this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this 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 (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this 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 his being or having been a director,
officer, or employee of the Association or any firm, corporation, or
organization which he served in any such capacity at the request of the
Association: provided, that no person shall be so indemnified or reimbursed in
relation to any matter in such action, suit, or proceeding as to which he shall
finally be adjudged to have been guilty of or liable for gross negligence,
willful misconduct or criminal acts in the performance of his duties to 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.
<PAGE>
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 this Association, unless the vote of the holders of greater
amount of stock is required by law, and in that case by the vote of the holders
of such greater amount. The notice of any shareholders' meeting at which an
amendment to the articles of association of this Association is to be considered
shall be given as hereinabove set forth.
I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.
Secretary/Assistant Secretary
- --------------------------------------------------
Dated at , as of .
------------------------------- --------------------------------
Revision of January 11, 1993
<PAGE>
BYLAWS
OF
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1.1. Annual Meeting. The regular annual meeting of the shareholders to
elect directors and transact whatever other business may properly come before
the meeting, shall be held at the main office of the association, city of
Hartford, state of Connecticut or such other places as the board of directors
may designate, at 1:00 o'clock, on the third Wednesday of April of each year, or
if that date falls on a legal holiday in the state in which the association is
located, on the next following banking day. If, for any cause, an election of
directors is not made on that date, or in the event of a legal holiday, on the
next following banking day, an election may be held on any subsequent day within
60 days of the date fixed, to be designated by the board of directors, or, if
the directors fail to fix the date, by shareholders representing two-thirds of
the shares.
Section 1.2. 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 upon call of the Chairman or at the
written request of shareholders owning, in the aggregate, not less than ten (10)
percent of the stock of the association.
Section 1.3. Notice of Meetings. Unless otherwise provided by the laws of the
United States, a notice of the time, place and purpose of every regular annual
meeting or special meeting of shareholders shall be given by first-class mail,
postage pre-paid, mailed at least ten (10) days prior to the date of such
meeting to each shareholder of record at his address as shown upon the books of
the association. If an annual or special shareholders' meeting is adjourned to
a different date, time, or place, notice need not be given of the new date, time
or place, if the new date, time or place is announced at the meeting before
adjournment, unless any additional items of business are to be considered, or
the association becomes aware of an intervening event materially affecting any
matter to be voted on more than 10 days prior to the date to which the meeting
is adjourned. If a new record date for the adjourned meeting is fixed, however,
notice of the adjourned meeting must be given to persons who are shareholders as
of the new record date.
Section 1.4. Proxies. Shareholders may vote at any meeting of the shareholders
by proxies duly authorized in writing. 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. Proxies with
rubber-stamped facsimile signatures may be used and unexecuted proxies may be
counted upon receipt of a confirming telegram from the shareholder. Proxies
meeting the above requirements submitted at any time during a meeting shall be
accepted.
<PAGE>
Section 1.5. Quorum. A majority of the outstanding capital stock, represented
in person or by proxy, shall constitute a quorum at any meeting of shareholders,
but less than a quorum may adjourn any meeting, from time to time, and the
meeting may be held, as adjourned, without further notice.
Section 1.6. Voting. In deciding on questions at meetings of shareholders,
except in the election of directors, each shareholder shall be entitled to one
vote for each share of stock held. A majority of votes cast shall decide each
matter submitted to the shareholders at the meeting except in cases where by law
a larger vote is required.
ARTICLE II
DIRECTORS
Section 2.1. Board of Directors. The board of directors shall 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 the board.
Section 2.2. Number. The board shall consist of not less than five nor more
than twenty-five shareholders, 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 a majority of the shareholders at any
meeting thereof.
Section 2.3. Term. The directors of this association shall hold office for one
year and until their successors are elected and have qualified.
Section 2.4. Oath. Each person elected or appointed a director of this
association must take the oath of such office as prescribed by the laws of the
United States. No person elected or appointed a director of this association
shall exercise the functions of such office until he has taken such oath.
Section 2.5. Honorary Directors. There may not be more than five honorary
directors of the association who shall be entitled to attend meetings of the
board and take part in its proceedings but without the right to vote. Honorary
directors shall be appointed at the annual meeting of the board of directors to
hold office until the next annual meeting provided, however, that the board may
at any regularly constituted meeting between annual meetings of the board of
directors appoint honorary directors within the limitations imposed by this
bylaw.
Section 2.6. Vacancies. Any vacancies occurring in the board of directors for
any reason, including an increase in the number thereof, may be filled, in
accordance with the laws of the United States, by appointment by the remaining
directors, and any director so appointed shall hold office until the next annual
meeting and until his successor is elected and has qualified.
-2-
<PAGE>
Section 2.7. Organization Meeting. The annual meeting of the board of
directors shall be held at the main office of the association to organize the
new board and appoint committees of the board and officers of the association
for the succeeding year, and for transacting such other business as properly may
come before the meeting. Such meeting shall be held on the day of the election
of directors or as soon thereafter as practicable, and, in any event, within 30
days thereof. If, at the time fixed for such meeting, there shall not be a
quorum, the directors present may adjourn the meeting, from time to time, until
a quorum is obtained.
Section 2.8. Regular Meetings. The regular meetings of the board of directors
shall be held, without notice, at the main office, or at such other place as has
been duly authorized by the board, on such day and at such time as the board
shall determine. When any regular meeting of the board falls upon a holiday, the
meeting shall be held on the next banking business day unless the board shall
designate another day.
Section 2.9. Special Meetings. Special meetings of the board of directors may
be called by the chairman, the president, or at the request of seven or more
directors. Each member of the board of directors shall be given notice stating
the time and place by telegram, letter, or in person, of each special meeting.
Section 2.10. Quorum. A majority of the members of the board shall constitute
a quorum at any meeting. If the number of directors is reduced below the number
that would constitute a quorum, no business may be transacted, except selecting
directors to fill vacancies in conformance with these bylaws. If a quorum is
present, the board of directors may take action through the vote of a majority
of the directors who are in attendance.
Section 2.11. Record Time. The board of directors may fix a day and hour, not
exceeding fifty (50) days preceding the date fixed for the payment of any
dividend or for any meeting of the shareholders as a record time for the
determination of shareholders entitled to receive such dividend, or as the time
as of which shareholders entitled to notice of and to vote at such meeting shall
be determined, as the case may be, and only shareholders of record at the time
so fixed shall be entitled to receive such dividend or to notice of and to vote
at such meeting.
Section 2.12. Fees. All directors other than directors who are officers of the
association or its affiliates shall be entitled to reasonable fees for their
services as such directors and as members of committees of the board, said fees
to be fixed by vote of the board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 3.1. Executive Committee. The board of directors may establish an
executive committee consisting of the chairman, not less than five directors,
not officers, who are appointed by the board, and such other directors as the
-3-
<PAGE>
board may appoint. The board shall designate the chairman thereof. The Executive
Committee shall possess and may exercise such powers as are provided in these
bylaws and all other delegable powers of the board and shall meet at the call of
any member thereof. All action of said committee shall be reported to the board
at the next regular board meeting thereafter. Four members of the Committee, of
whom not less than three shall be directors who are not officers, shall be
necessary to constitute a quorum.
Section 3.2. Loan and Investment Committee. The board of directors shall
establish a loan and investment committee consisting of the chairman, the
president, not less than four directors, not officers, who are appointed by the
board, and such other directors as the board may appoint. The committee shall
ensure that the association's credit and investment policies are adequate and
that lending and investment activities are conducted in accordance with the
association's policies and with applicable laws and regulations. The committee
shall exercise oversight and receive reports with respect to lending activities
and credit risk management. The committee shall also exercise oversight and
receive reports with respect to the association's securities portfolio and
securities portfolio activities to ensure appropriate portfolio diversification,
asset quality, liquidity, and profitability. The committee shall also have
oversight responsibilities with respect to the association's investment policy,
liquidity policy, liquidity contingency planning and interest rate risk
exposure. All action by the committee shall be reported to the board at the next
regular board meeting thereafter. Four members of the committee, of whom not
less than two shall be directors who are not officers, shall be necessary to
constitute a quorum.
Section 3.3. Trust Committee. The board of directors shall establish a trust
committee consisting of the president and not less than four directors, not
officers, who are appointed by the board and such other directors as the board
may appoint. The trust committee shall have authority, between meetings of the
board, to discharge the responsibilities of the association with respect to the
exercise of fiduciary powers, except as the board may by resolution or other
appropriate action otherwise from time to time determine. All action by said
committee shall be reported to the board at the next regular board meeting
thereafter. Four members of the trust committee, of whom at least two shall be
directors who are not officers, shall be necessary to constitute a quorum.
Section 3.4. Audit Committee. The audit committee of Shawmut National
Corporation, no member of whom is an officer of the association, is designated
to oversee the audit affairs of the association. Members of the association's
board of directors, none of whom may be officers of the association, may serve
on the audit committee of Shawmut National Corporation. In addition, the board
may, from time to time, appoint an audit committee consisting of not less than
four members of the board, no one of whom shall be an executive officer of the
association, to perform such audit functions as may be assigned by the board.
The duty of the audit committee shall be to examine at least once during each
calendar year and within 15 months of the last examination of affairs of the
association or cause suitable examination to be made by auditors responsible
only to the board of directors and to report the result of such examination in
writing to the board at the next regular meeting
-4-
<PAGE>
thereafter. Such report shall state whether the association is in a sound
condition, whether fiduciary powers have been administered according to law and
sound fiduciary principles, whether adequate internal controls and procedures
are being maintained, and shall recommend to the board of directors such
changes in the manner of conducting the affairs of the association as shall be
deemed advisable.
Section 3.5. Community Affairs Committee. The board of directors shall
establish a community affairs committee consisting of not less than four
directors and such other persons as shall be appointed by the board. The
community affairs committee shall oversee compliance by the association with
the policies and provisions of the Community Reinvestment Act of 1978, as
amended; shall establish and supervise policies relating to voluntary corporate
contributions and other matters of business and community conduct, all as the
board or the chairman may from time to time specify or request. All actions by
said committee shall be reported to the board at the next regular board meeting
thereafter. Three members of the committee, of whom at least two shall be
directors who are not officers, shall be necessary to constitute a quorum.
Section 3.6. Substitute Committee Members. In the case of the absence of any
member of any committee of the board from any meeting of such committee, the
directors who are not officers and are present at such meeting, or the senior
officer present if no such directors are there, may designate a substitute to
serve in lieu of such absent member. Such substitute need not be a director
unless such absent member is a director, but in any case when the board of
directors shall have designated one or more alternate members for such
committee, the substitute shall be selected from such of said alternates as are
then available.
Section 3.7. Additional Committees. The board of directors may by resolution
designate one or more additional committees, each consisting of two or more of
the directors. Any such additional committee shall have and may exercise such
powers as the board may from time to time prescribe for furthering the business
and affairs of the association.
ARTICLE IV
WAIVER OF NOTICE; WRITTEN CONSENT; PARTICIPATION BY TELEPHONE
Section 4.1. Waiver of Notice. Notice of the time, place and purpose of any
regular meeting of the board of directors or a committee thereof may be waived
in writing by any director or member of such committee, as the case may be,
either before or after such meeting. Attendance in person at a meeting of the
board of directors or a committee thereof shall be deemed to constitute a
waiver of notice thereof.
Section 4.2. Written Consent. Unless otherwise restricted by the articles of
association or these bylaws, any action required or permitted to be taken at
any meeting of the board of directors or a committee thereof may be taken
without a meeting if a consent in writing, setting forth the action to so be
-5-
<PAGE>
taken, shall be signed before or after such action by all of the directors, or
all of the members of a committee thereof, as the case may be. Such written
consent shall be filed with the records of the association.
Section 4.3. Participation by Telephone. One or more directors may participate
in a meeting of the board of directors, of a committee of the board, or of the
shareholders, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation in this manner shall constitute presence in person
at such meeting.
ARTICLE V
OFFICERS AND EMPLOYEES
Section 5.1. Officers. The officers of the association shall consist of a
chairman, a president, one or more vice chairmen, one or more executive vice
presidents, one or more senior vice presidents, one or more vice presidents, a
secretary, an auditor and such other officers as may be appropriate for the
prompt and orderly transaction of the business of the association. Any officer
may hold more than one office, except that the chairman and president may not
also serve as secretary. The chairman, the president, any vice chairman, and
the auditor shall be elected annually by the board of directors to serve for
one year and until his successor is elected and qualifies. All other officers
shall be appointed to hold office during the pleasure of the board, which may
in its discretion delegate the authority to appoint and remove any officer or
officers (other than the auditor) below the ranks of president and vice
chairman.
Section 5.2. Chairman. The chairman shall preside or designate the presiding
officer at all meetings of the board of directors and shareholders. The
chairman shall be the chief executive officer of the association unless
otherwise designated by the board, and may have and exercise such further
powers and duties as from time to time may be conferred upon or assigned to the
chairman by the board of directors. The chairman may establish advisory
committees for any branch, region, or division of the association to advise on
the affairs of such branch, region, or division; provided that such advisory
committee members shall not attend meetings of the board of directors or any
committee thereof, and shall not participate in the management of the
association. If at any time the office of chairman shall be vacant, the powers
and duties of that office shall devolve upon the president; if the office of
president shall be vacant, the powers and duties of that office shall devolve
upon the chairman; and if the office of the chairman and president are vacant,
the board shall designate one or more officers of the association to perform
the duties of chairman until such time as a new chairman is appointed.
Section 5.3. President. The president shall have general executive powers and
may also have and exercise such further powers and duties as may be conferred
upon or assigned by the board or the chairman.
-6-
<PAGE>
Section 5.4. Vice Chairman. Each Vice Chairman shall perform such duties as
may be assigned from time to time by the board of directors or the chairman.
Section 5.5. Secretary. The secretary of the association, or other designated
officer of the association, shall keep accurate minutes of all meetings of the
board of directors; shall attend to the giving of all notices required by these
bylaws; 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 the
bylaws; and shall also perform such other duties as may be assigned from time to
time, by the board of directors or the chairman.
Section 5.6. Auditor. The general auditor of the association, or his designee,
shall be the officer in charge of auditing. Said officer shall be responsible
for the conduct of a program of continuous audits of the association and all of
its departments and shall make, or cause to be made, further examinations as he
deems necessary or are required from time to time by the responsible audit
committee or the board. Said officer shall report the results of audit
activities periodically to the responsible audit committee or the board.
Section 5.7. Other Officers. All other officers shall perform such duties and
exercise such powers as shall pertain to their respective offices, or as shall
be imposed by law, or as may be conferred upon, or assigned to them by the
board of directors or the chairman.
Section 5.8. Resignation. An officer may resign at any time by delivering
notice to the association. A resignation is effective when the notice is given
unless the notice specifies a later effective date.
ARTICLE VI
SIGNING AUTHORITY
Section 6.1. Signing Authority. Each officer of this association, excluding
the auditor and each other officer whose primary duties are auditing in nature,
shall have authority for and on behalf of this association to execute, deliver,
sign and endorse checks, drafts, pledges, certificates, receipts for money,
warehouse receipts, bills of lading or similar documents, contracts arising in
the ordinary course of the business of the association, bankers' acceptances
made by the association, commercial credits of the association, securities and
property received in trust or for deposit, proxies to vote stock held by the
association in any capacity, petitions, foreclosures and other deeds, powers,
leases, assignments, discharges, releases, extensions, purchase agreements,
conveyances, and other written instruments pertaining to real estate or
interest therein and, where indicated, to affix the corporate seal of the
association to any of the foregoing; to guarantee and witness signatures upon
securities, documents or other written
-7-
<PAGE>
instruments; to purchase, sell, assign, pledge or transfer funds or other
securities of the association or within its control as a fiduciary; and,
subject to the approval of such officer or committee as the board may
designate, to accept trusts and appointments and to execute trust indentures
and any other instruments establishing trusts or making appointments. Each
officer at the level of senior vice president or above, shall be empowered to
authorize another person or persons, whether or not such other person or
persons are officers or employees of the association, to sign or endorse any of
the foregoing documents on behalf of the association in a particular
transaction; but such officer shall by signed entry personally note the fact of
such authorization on the records of the association relating to such
transaction. The officer in charge of the international division of the
association, or in his absence his designee, shall be empowered to authorize
another person or persons, whether or not such other person or persons are
officers or employees of the association, to execute documents and do such
other acts and things as may be required in connection with a particular loan
or extension of credit, proceeding before a court or other judicial or
administrative body, or other transaction; but such officer shall by signed
entry personally note the fact of such authorization on the records of the
association relating to such act or transaction. Any one officer at the level of
senior vice president or above shall have authority for and on behalf of the
association to borrow money. The chairman, the president, any vice chairman, any
executive vice president, and the senior vice president or other officer in
charge of investment administration or such other officers as may be designated
by the chairman may each, acting singly, authorize borrowings and request
advances from any Federal Reserve Bank or any Federal Home Loan Bank, as the
case may be, and may agree with said bank upon appropriate terms and collateral
for such transactions. The officers and other employees of the association shall
have such further signature powers as may be specified by the board of directors
or by the chairman or his designee.
ARTICLE VII
STOCK AND STOCK CERTIFICATES
Section 7.1. Transfers. 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 or her shares, succeed to all rights of the prior
holder of such shares. The board of directors may impose conditions upon the
transfer of the stock reasonably calculated to simplify the work of the
association with respect to stock transfer, voting shareholder meetings, and
related matters and to protect it against fraudulent transfer.
Section 7.2. Stock Certificates. Certificates of stock shall bear the
signature of the chairman or president (which may be engraved, printed or
impressed), and shall be signed manually or by facsimile process by the
secretary or assistant secretary, and the seal of the association shall be
engraved thereon. Each certificate shall recite on its face that the stock
represented thereby is transferable only upon the books of the association
properly endorsed.
-8-
<PAGE>
ARTICLE VIII
CORPORATE SEAL
Section 8. Corporate Seal. The board of directors shall provide a seal for
the association. The secretary shall have custody thereof and may designate
such other officers as may have counterparts.
ARTICLE IX
MISCELLANEOUS PROVISIONS
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 bylaws and the
proceedings of all meetings of the shareholders, the board of directors, and
standing committees of the board, shall be recorded in appropriate minute books
provided for that purpose. The minutes of each meeting shall be signed by the
secretary or other officer appointed to act as secretary of the meeting.
ARTICLE X
BYLAWS
Section 10. Amendments. These bylaws may be altered, amended, or added to or
repealed by a vote of a majority of the members of the board then in office at
any meeting, provided that notice thereof shall have been given in the notice
of such meeting.
A true copy
Attest:
Secretary/Assistant Secretary
- ---------------------------------------
Dated at , as of .
--------------------------------------- ----------------------
Revision of January 11, 1993
-9-
<PAGE>
SCHEDULE A
----------
(Attached to the Trustee's Certificates)
of
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Part I. Officer of Shawmut Bank Connecticut, National Association:
<TABLE>
<CAPTION>
Name Title Signature
---- ----- ---------
<S> <C> <C>
Arthur Blakeslee Assistant Vice President /s/ Arthur Blakeslee
------------------------
Michelle K. Blezard Corporate Trust Officer /s/ Michelle K. Blezard
------------------------
Bryan R. Calder Senior Vice President /s/ Bryan R. Calder
------------------------
Steven Cimalore Vice President /s/ Steven Cimalore
------------------------
Alan B. Coffey Assistant Vice President /s/ Alan B. Coffey
------------------------
Debra A. Colon Corporate Trust Officer /s/ Debra A. Colon
------------------------
Jacqueline Connor Corporate Trust Officer /s/ Jacqueline Connor
------------------------
Mari-Elna DeGuia Assistant Vice President /s/ Mari-Elna DeGuia
------------------------
Pablo de la Canal Corporate Trust Officer /s/ Pablo de la Canal
------------------------
Rinette Elovecky Vice President /s/ Rinette Elovecky
------------------------
Robin Bodell Fisher Vice President /s/ Robin Bodell Fisher
------------------------
Mark A. Forgetta Vice President /s/ Mark A. Forgetta
------------------------
Joseph E. Fortuna Assistant Vice President /s/ Joseph E. Fortuna
------------------------
Gilman N. Gauvin Vice President /s/ Gilman N. Gauvin
------------------------
Lynnette Hamilton Vice President /s/ Lynnette Hamilton
------------------------
Elizabeth C. Hammer Vice President /s/ Elizabeth C. Hammer
------------------------
Michael M. Hopkins Vice President /s/ Michael M. Hopkins
------------------------
Vito J. Iacovazzi Vice President /s/ Vito J. Iacovazzi
------------------------
Debra A. Johnson Corporate Trust Officer /s/ Debra A. Johnson
------------------------
Philip G. Kane, Jr. Vice President /s/ Philip G. Kane, Jr.
------------------------
Susan T. Keller Vice President /s/ Susan T. Keller
------------------------
Kathy A. Larimore Assistant Vice President /s/ Kathy A. Larimore
------------------------
Jeffrey D. Masi Assistant Vice President /s/ Jeffrey D. Masi
------------------------
Deborah L. McDonald Vice President /s/ Deborah L. McDonald
------------------------
Frank McDonald, Jr. Vice President /s/ Frank McDonald, Jr.
------------------------
Susan C. Merker Assistant Vice President /s/ Susan C. Merker
------------------------
Robert L. Reynolds Vice President /s/ Robert L. Reynolds
------------------------
Rockwell J. Spalding Vice President /s/ Rockwell J. Spalding
------------------------
Donnee C. Taylor Corporate Trust Officer /s/ Donnee C. Taylor
------------------------
Andrea F. Turlo Vice President /s/ Andrea F. Turlo
------------------------
</TABLE>
Part II. Trustee Administrators (authorized only to attest the Seal of Shawmut
Bank Connecticut, National Association and signature of any officer
named in Part I hereof:
<TABLE>
<CAPTION>
Name Title Signature
---- ----- ---------
<S> <C> <C>
Karen R. Felt Trustee Administrator /s/ Karen R. Felt
-----------------------
Shelley Hassett Trustee Administrator /s/ Shelley Hassett
-----------------------
Eileen D. Pepe Trustee Administrator /s/ Eileen D. Pepe
-----------------------
Cheryl Sowers Trustee Administrator /s/ Cheryl Sowers
-----------------------
Anna M. Vignuolo Trustee Administrator /s/ Anna M. Vignuolo
-----------------------
</TABLE>
<PAGE>
Part III. Authorized Persons (authorized only to attest the Seal of Shawmut Bank
Connecticut, National Association and the signature of any officer
named in Part I hereof):
<TABLE>
<CAPTION>
Name Title Signature
---- ----- ---------
<S> <C> <C>
DANIEL P. BROWN, JR. AUTHORIZED PERSON /s/ DANIEL P. BROWN, JR.
-------------------------
SCOTT L. MURPHY AUTHORIZED PERSON /s/ SCOTT L. MURPHY
-------------------------
THOMAS P. TRESSELT AUTHORIZED PERSON /s/ THOMAS P. TRESSELT
-------------------------
WIILIAM G. ROCK AUTHORIZED PERSON /s/ WIILIAM G. ROCK
-------------------------
DEBORAH SMITH FRISONE AUTHORIZED PERSON /s/ DEBORAH SMITH FRISONE
-------------------------
PAUL R. FISCATELLO AUTHORIZED PERSON /s/ PAUL R. FISCATELLO
-------------------------
LESLIE L. DAVENPORT AUTHORIZED PERSON /s/ LESLIE L. DAVENPORT
-------------------------
THOMAS P. FLYNN AUTHORIZED PERSON /s/ THOMAS P. FLYNN
-------------------------
CARRIE A. BRODZINSKI AUTHORIZED PERSON /s/ CARRIE A. BRODZINSKI
-------------------------
</TABLE>
<PAGE>
_____________________________________________________________________________
Comptroller of the Currency
Administrator of National Banks
_____________________________________________________________________________
Washington, D.C. 20219
Certificate
-----------
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that:
1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et seq.,
as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and
control of all records pertaining to the chartering, regulation and supervision
of all National Banking Associations.
2. "Shawmut Bank Connecticut, National Association", Hartford, Connecticut,
(Charter No. 1338), is a National Banking Association formed under the laws of
the United States and is authorized thereunder to transact the business of
banking on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents at
the Treasury Department, in the City of
Washington and District of Columbia, this
14th day of February, 1995.
/s/ Eugene A. Ludwig
---------------------------------------
Comptroller of the Currency
<PAGE>
_____________________________________________________________________________
Comptroller of the Currency
Administrator of National Banks
_____________________________________________________________________________
Washington, D.C. 20219
Certification of Fiduciary Powers
---------------------------------
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that the
records in this Office evidence "Shawmut Bank Connecticut, National
Association", Hartford, Connecticut, (Charter No. 1338), was granted, under the
hand and seal of the Comptroller, the right to act in all fiduciary capacities
authorized under the provisions of The Act of Congress approved September 28,
1962, 76 Stat. 668, 12 U.S.C. 92a. I further certify the authority so granted
remains in full force and effect.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
Office of the Comptroller of the Currency to
be affixed to these presents at the Treasury
Department, in the City of Washington and
District of Columbia, this 14th day of
February, 1995.
/s/ Eugene A. Ludwig
---------------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
----------------------------------
The undersigned, as Trustee under an Indenture to be entered into between
KMart Corporation and Shawmut Bank Connecticut, National Association, Trustee,
does hereby consent that, pursuant to Section 321(b) of the Trust Indenture Act
of 1939, reports of examinations with respect to the undersigned by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Trustee
By /s/ Mark A. Forgetta
-------------------------------
Mark A. Forgetta
Vice President
Dated:
-21-
<PAGE>
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Expires July 31, 1995
- -------------------------------------------------------------------------------
Please refer to page i, / 1 /
[LOGO] Table of Contents, for
the required disclosure
of estimated burden.
- -------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
(950331)
REPORT AT THE CLOSE OF BUSINESS MARCH 31, 1995 -----------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).
This report form is to be filed by banks with branches and consolidation
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- -------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Susan E. Lester, E.V.P. and C.F.O.
----------------------------------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and
Income (including the supporting schedules) have been prepared in conformance
with the instructions issued by the appropriate Federal regulatory authority
and are true to the best of my knowledge and belief.
/s/ SUSAN E. LESTER
- -------------------------------------------------------------------------------
Signature of Officer Authorized to Sign Report
April 30, 1995
- -------------------------------------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and 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 issued by the appropriate Federal
regulatory authority and is true and correct.
/s/ GUNNAR S. OVERSTROM
- -------------------------------------------------------------------------------
Director (Trustee)
/s/ JOEL B. ALVORD
- -------------------------------------------------------------------------------
Director (Trustee)
/s/ DAVID L. EYLES
- -------------------------------------------------------------------------------
Director (Trustee)
- -------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- -------------------------------------------------------------------------------
FDIC Certificate Number | | | | | |
______________________
(RCRI 9060) CALL NO. 190 31 03-31-95
CERT: 02499 10582 STBK 09-0590
SHAWMUT BANK CONNECTICUT,
NATIONAL A
777 MAIN STREET
HARTFORD, CT 06115
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
FFIEC 031
Page i
/ 2 /
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
_______________________________________________________________________________
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SIGNATURE PAGE Cover
REPORT OF INCOME
Schedule RI--Income Statement.............................. RI-1,2,3
Schedule RI-A--Changes in Equity Capital................... RI-4
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease Losses........... RI-4,5
Schedule RI-C--Applicable Income Taxes by
Taxing Authority......................................... RI-5
Schedule RI-D--Income from
International Operations................................. RI-6
Schedule RI-E--Explanations................................ RI-7,8
REPORT OF CONDITION
Schedule RC--Balance Sheet................................. RC-1,2
Schedule RC-A--Cash and Balances Due
From Depository Institutions............................. RC-3
Schedule RC-B--Securities.................................. RC-3,4,5
Schedule RC-C--Loans and Lease Financing
Receivables:
Part I. Loans and Leases................................. RC-6,7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for June 30 only)... RC-7a,7b
Schedule RC-D--Trading Assets and Liabilities
(to be completed only by selected banks)................. RC-8
Schedule RC-E--Deposit Liabilities......................... RC-9,10,11
Schedule RC-F--Only Assets................................. RC-11
Schedule RC-G--Other Liabilities........................... RC-11
Schedule RC-H--Selected Balance Sheet Items
for Domestic Offices..................................... RC-12
Schedule RC-I--Selected Assets and Liabilities of IBFs..... RC-13
Schedule RC-K--Quarterly Averages.......................... RC-13
Schedule RC-L--Off-Balance Sheet Items..................... RC-14,15,16
Schedule RC-M--Memoranda................................... RC-17,18
Schedule RC-N--Past Due and Nonaccrual Loans,
Leases, and Other Assets................................. RC-19,20
Schedule RC-O--Other Data for Deposit
Insurance Assessments.................................... RC-21,22
Schedule RC-R--Risk-Based Capital.......................... RC-23,24
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of
Condition and Income..................................... RC-25
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)
</TABLE>
DISCLOSURE OF ESTIMATED BURDEN
The estimated average burden associated with this information collection is
30.7 hours per respondent and is estimated to vary from 15 to 200 hours per
response, depending on individual circumstances. Burden estimates include the
time for reviewing instructions, gathering and maintaining data in the required
form, and completing the information collection, but exclude the time for
compiling and maintaining business records in the normal course of a
respondent's activities. Comments concerning the accuracy of this burden
estimate and suggestions for reducing this burden should be directed to the
Office of Information and Regulatory Affairs, Office of Management and Budget,
Washington, D.C. 20503, and to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For information or assistance, National and State nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW,
Washington, D.C. 20429, toll free on (800) 688-FDIC(3342), Monday through
Friday between 8:00 a.m. and 5:00 p.m., Eastern time. State member banks
should contact their Federal Reserve District Bank.
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-1
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Consolidated Report of Income
for the period January 1, 1995-March 31, 1995
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
Schedule RI--Income Statement
<TABLE>
<CAPTION>
----------
| I480 | lesser than -
----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Interest income: | ////////////////// |
a. Interest and fee income on loans: | ////////////////// |
(1) In domestic offices: | ////////////////// |
(a) Loans secured by real estate.................................................... | 4011 100,790 | 1.a.(1)(a)
(b) Loans to depository institutions................................................ | 4019 438 | 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers............. | 4024 68 | 1.a.(1)(c)
(d) Commercial and industrial loans................................................. | 4012 99,096 | 1.a.(1)(d)
(e) Acceptances of other banks...................................................... | 4026 22 | 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: | ////////////////// |
(1) Credit cards and related plans.............................................. | 4054 217 | 1.a.(1)(f)(1)
(2) Other ...................................................................... | 4055 11,933 | 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions.......................... | 4056 0 | 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political | ////////////////// |
subdivisions in the U.S.: | ////////////////// |
(1) Taxable obligations......................................................... | 4503 5 | 1.a.(1)(h)(1)
(2) Tax-exempt obligations...................................................... | 4504 675 | 1.a.(1)(h)(2)
(i) All other loans in domestic offices............................................. | 4058 17,752 | 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs....................... | 4059 0 | 1.a.(2)
b. Income from lease financing receivables: | ////////////////// |
(1) Taxable leases...................................................................... | 4505 235 | 1.b.(1)
(2) Tax-exempt leases................................................................... | 4307 0 | 1.b.(2)
c. Interest income on balances due from depository institutions:(1) | ////////////////// |
(1) In domestic offices................................................................. | 4105 5 | 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs....................... | 4106 2,148 | 1.c.(2)
d. Interest and dividend income on securities: | ////////////////// |
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations..... | 4027 56,574 | 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: | ////////////////// |
(a) Taxable securities.............................................................. | 4506 0 | 1.d.(2)(a)
(b) Tax-exempt securities........................................................... | 4507 1 | 1.d.(2)(b)
(3) Other domestic debt securities...................................................... | 3657 16,142 | 1.d.(3)
(4) Foreign debt securities............................................................. | 3658 57 | 1.d.(4)
(5) Equity securities (including investments in mutual funds)........................... | 3659 1,139 | 1.d.(5)
e. Interest income from assets held in trading accounts.................................... | 4069 0 | 1.e.
----------------------
</TABLE>
____________
(1) Includes interest income on time certificates of deposit not held for
trading.
3
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-2
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
</TABLE>
Schedule RI-- Continued
<TABLE>
<CAPTION> ----------------
Dollar Amounts in Thousands | Year-to-date |
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Interest income (continued) | RIAD Bil Mil Thou |
f. Interest income on federal funds sold and securities purchased | ////////////////// |
under agreements to resell in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4020 3,629 | 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ | 4107 310,926 | 1.g.
2. Interest expense: | ////////////////// |
a. Interest on deposits: | ////////////////// |
(1) Interest on deposits in domestic offices: | ////////////////// |
(a) Transaction accounts (NOW accounts, ATS accounts, and | ////////////////// |
telephone and preauthorized transfer accounts) .............. | 4508 2,766 | 2.a.(1)(a)
(b) Nontransaction accounts: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................... | 4509 5,204 | 2.a.(1)(b)(1)
(2) Other savings deposits .................................. | 4511 12,186 | 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ | 4174 22,892 | 2.a.(1)(b)(3)
(4) All other time deposits ................................. | 4512 24,218 | 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement | ////////////////// |
subsidiaries, and IBFs .......................................... | 4172 11,746 | 2.a.(2)
b. Expense of federal funds purchased and securities sold under | ////////////////// |
agreements to repurchase in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4180 62,992 | 2.b.
c. Interest on demand notes issued to the U.S. Treasury and on | ////////////////// |
other borrowed money ................................................ | 4185 27,396 | 2.c.
d. Interest on mortgage indebtedness and obligations under | ////////////////// |
capitalized leases .................................................. | 4072 211 | 2.d.
e. Interest on subordinated notes and debentures ....................... | 4200 2,867 | 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... | 4073 172,478 | 2.f.
-----------------------
3. Net interest income (item 1.g minus 2.f) ............................... | ////////////////// | RIAD 4074 | 138,448 | 3.
-----------------------
4. Provisions: | ////////////////// |
-----------------------
a. Provision for loan and lease losses ................................. | ////////////////// | RIAD 4230 | 2,366 | 4.a.
b. Provision for allocated transfer risk ............................... | ////////////////// | RIAD 4243 | 0 | 4.b.
-----------------------
5. Noninterest income: | ////////////////// |
a. Income from fiduciary activities .................................... | 4070 20,150 5.a.
b. Service charges on deposit accounts in domestic offices ............. | 4080 16,667 | 5.b.
c. Trading gains (losses) and fees from foreign exchange transactions .. | 4075 (448)| 5.c.
d. Other foreign transaction gains (losses) ............................ | 4076 0 | 5.d.
e. Other gains (losses) and fees from trading assets and liabilities ... | 4077 574 | 5.e.
f. Other noninterest income: | ////////////////// |
(1) Other fee income ................................................ | 5407 11,609 | 5.f.(1)
(2) All other noninterest income* ................................... | 5408 18,755 | 5.f.(2)
-----------------------
g. Total noninterest income (sum of items 5.a through 5.f) ............. | ////////////////// | RIAD 4079 | 67,307 | 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. | ////////////////// | RIAD 3521 | (6)| 6.a.
b. Realized gains (losses) on available-for-sale securities ............ | ////////////////// | RIAD 3196 | 0 | 6.b.
-----------------------
7. Noninterest expense: | ////////////////// |
a. Salaries and employee benefits ...................................... | 4135 70,086 | 7.a.
b. Expenses of premises and fixed assets (net of rental income) | ////////////////// |
(excluding salaries and employee benefits and mortgage interest) .... | 4217 22,014 | 7.b.
c. Other noninterest expense* .......................................... | 4092 66,945 | 7.c.
-----------------------
d. Total noninterest expense (sum of items 7.a through 7.c) ............ | ////////////////// | RIAD 4093 | 159,045 | 7.d.
-----------------------
8. Income (loss) before income taxes and extraordinary items and other | ////////////////// |_______________________
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)| ////////////////// | RIAD 4301 | 44,338 | 8.
9. Applicable income taxes (on item 8) .................................... | ////////////////// | RIAD 4302 | 16,573 | 9.
-----------------------
10. Income (loss) before extraordinary items and other adjustments | ////////////////// |_______________________
(item 8 minus 9) ....................................................... | ////////////////// | RIAD 4300 | 27,765 | 10.
---------------------------------------------
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
4
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 12/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-3
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
Schedule RI--Continued
----------------
| Year-to-date |
----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
11. Extraordinary items and other adjustments: | ////////////////// |
a. Extraordinary items and other adjustments, gross of income taxes* . | 4310 0 | 11.a.
b. Applicable income taxes (on item 11.a)* ........................... | 4315 0 | 11.b.
c. Extraordinary items and other adjustments, net of income taxes | ////////////////// |________________________
(item 11.a minus 11.b) ............................................ | ////////////////// | RIAD 4320 | 0 | 11.c.
12. Net income (loss) (sum of items 10 and 11.c) ......................... | ////////////////// | RIAD 4340 | 27,765 | 12.
----------------------------------------------
--------
| 1481 | lesser
---------------- than
| Year-to-date |
Memoranda ----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ////////////////// |
August 7, 1986, that is not deductible for federal income tax purposes ....................... | 4513 0 | M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// |
(included in Schedule RI, item 8) ............................................................ | 8431 0 | M.2.
3. Estimated foreign tax credit included in applicable income taxes, items 9 and 11.b above ..... | 4309 0 | M.3.
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Taxable equivalent adjustments to "Income (loss) before income taxes and extraordinary | ////////////////// |
items and other adjustments" (item 8 above) .................................................. | 1244 467 | M.4.
5. Number of full-time equivalent employees on payroll at end of current period (round to | //// Number |
nearest whole number) ........................................................................ | 4150 5,102 | M.5.
6. Not applicable | ////////////////// |
7. If the reporting bank has restated its balance sheet as a result of applying push down | //// MM DD YY |
accounting this calendar year, report the date of the bank's acquisition ..................... | 9106 00/00/00 | M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) | ////////////////// |
(included in Schedule RI, items 5.c and 5.e): | //// Bil Mil Thou |
a. Interest rate exposures ................................................................... | 8757 20 | M.8.a.
b. Foreign exchange exposures ................................................................ | 8758 (530)| M.8.b.
c. Equity security and index exposures ....................................................... | 8759 0 | M.8.c.
d. Commodity and other exposures ............................................................. | 8760 0 | M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: | ////////////////// |
a. Net increase (decrease) to interest income ................................................ | 8761 0 | M.9.a.
b. Net (increase) decrease to interest expense ............................................... | 8762 (6,221)| M.9.b.
c. Other (noninterest) allocations ........................................................... | 8763 (19)| M.9.c.
</TABLE>
- ------------------
*Describe on Schedule RI-E--Explanations.
5
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-4
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses.
<TABLE>
<CAPTION>
----------
| I483 | lesser than -
----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Total equity capital originally reported in the December 31, 1994, Reports of Condition | ////////////////// |
and Income................................................................................. | 3215 1,236,358 | 1.
2. Equity capital adjustments from amended Reports of Income, net*............................ | 3216 0 | 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2)....................... | 3217 1,236,358 | 3.
4. Net income (loss) (must equal Schedule RI, item 12)........................................ | 4340 27,765 | 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net......................... | 4346 125,000 | 5.
6. Changes incident to business combinations, net............................................. | 4356 0 | 6.
7. LESS: Cash dividends declared on preferred stock........................................... | 4470 0 | 7.
8. LESS: Cash dividends declared on common stock.............................................. | 4460 0 | 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions | ////////////////// |
for this schedule)......................................................................... | 4411 0 | 9.
10. Corrections of material accounting errors from prior years* (see instructions for this | ////////////////// |
schedule).................................................................................. | 4412 0 | 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities........... | 8433 9,275 | 11.
12. Foreign currency translation adjustments................................................... | 4414 0 | 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above)... | 4415 30,000 | 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal | ////////////////// |
Schedule RC, item 28)...................................................................... | 3210 1,428,398 | 14.
----------------------
</TABLE>
- ------------------
* Describe on Schedule RI-E--Explanations.
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loans and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
<TABLE>
<CAPTION>
----------
| I486 | lesser than -
--------------------------------------------------------
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
------------------------------------------
| Calendar year-to-date |
------------------------------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Loans secured by real estate: | ////////////////// | ///////////////// |
a. To U.S. addressees (domicile)....................................... | 4651 22,794 | 4461 2,633 | 1.a.
b. To non-U.S. addressees (domicile)................................... | 4652 0 | 4662 0 | 1.b.
2. Loans to depository institutions and acceptances of other banks: | ////////////////// | ///////////////// |
a. To U.S. banks and other U.S. depository institutions................ | 4653 0 | 4663 0 | 2.a.
b. To foreign banks.................................................... | 4654 0 | 4664 0 | 2.b.
3. Loans to finance agricultural production and other loans to farmers.... | 4655 0 | 4665 0 | 3.
4. Commercial and industrial loans: | ////////////////// | ///////////////// |
a. To U.S. addressees (domicile)....................................... | 4645 1,347 | 4617 1,303 | 4.a.
b. To non-U.S. addressees (domicile)................................... | 4646 0 | 4618 0 | 4.b.
5. Loans to individuals for household, family, and other personal | ////////////////// | ///////////////// |
expenditures: | ////////////////// | ///////////////// |
a. Credit cards and related plans...................................... | 4656 135 | 4666 67 | 5.a.
b. Other (includes single payment, installment, and all student loans). | 4657 845 | 4667 650 | 5.b.
6. Loans to foreign governments and official institutions................. | 4643 0 | 4627 0 | 6.
7. All other loans........................................................ | 4644 81 | 4628 79 | 7.
8. Lease financing receivables: | ////////////////// | ///////////////// |
a. Of U.S. addressees (domicile)....................................... | 4658 0 | 4668 0 | 8.a.
b. Of non-U.S. addressees (domicile)................................... | 4659 0 | 4669 0 | 8.b.
9. Total (sum of items 1 through 8)....................................... | 4635 25,202 | 4605 4,732 | 9.
-----------------------------------------
6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-5
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI-B--Continued
Part I. Continued
<TABLE>
<CAPTION>
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
-----------------------------------------
Memoranda | Calendar year-to-date |
-----------------------------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1.-3. Not applicable. | ///////////////// | ///////////////// |
4. Loans to finance commercial real estate, construction, and land | ///////////////// | ///////////////// |
development activities (not secured by real estate) included in | ///////////////// | ///////////////// |
Schedule RI-B, part I, items 4 and 7, above............................. | 5409 588 | 5410 247 | M.4.
5. Loans secured by real estate in domestic offices (included in | ///////////////// | ///////////////// |
Schedule RI-B, part I, item 1, above): | ///////////////// | ///////////////// |
a. Construction and land development.................................... | 3582 3,545 | 3583 405 | M.5.a.
b. Secured by farmland.................................................. | 3584 65 | 3585 0 | M.5.b.
c. Secured by 1-4 family residential properties: | ///////////////// | ///////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ///////////////// | ///////////////// |
properties and extended under lines of credit.................... | 5411 269 | 5412 36 | M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties..... | 5413 2,809 | 5414 727 | M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties............ | 3588 2,379 | 3589 329 | M.5.d.
e. Secured by nonfarm nonresidential properties......................... | 3590 13,727 | 3591 1,136 | M.5.e.
-----------------------------------------
</TABLE>
Part II. Changes in Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Balance originally reported in the December 31, 1994, Reports of Condition and Income....... | 3124 283,800 | 1.
2. Recoveries (must equal part I, item 9, column B above)...................................... | 4605 4,732 | 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above)............................... | 4635 25,202 | 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)...................... | 4230 2,366 | 4.
5. Adjustments* (see instructions for this schedule)........................................... | 4815 41,743 | 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, | ///////////////// |
item 4.b)................................................................................... | 3123 307,439 | 6.
---------------------
- ----------------
*Describe on Schedule RI-E--Explanations.
</TABLE>
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
| 1489 | lesser than -
---------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Federal..................................................................................... | 4780 N/A | 1.
2. State and local............................................................................. | 4790 N/A | 2.
3. Foreign..................................................................................... | 4795 N/A | 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b).......... | 4770 N/A | 4.
5. Deferred portion of item 4........................................ | RIAD 4772 | N/A | ///////////////// | 5.
-----------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 12/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-6
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
Part I. Estimated Income from International Operations
<TABLE>
<CAPTION> ----------
| I492 | lesser than -
----------------
| Year-to-date |
----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, | ////////////////// |
and IBFs: | ////////////////// |
a. Interest income booked.................................................................. | 4837 N/A | 1.a.
b. Interest expense booked................................................................. | 4838 N/A | 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs | ////////////////// |
(item 1.a minus 1.b).................................................................... | 4839 N/A | 1.c.
2. Adjustments for booking location of international operations: | ////////////////// |
a. Net interest income attributable to international operations booked at domestic offices. | 4840 N/A | 2.a.
b. Net interest income attributable to domestic business booked at foreign offices......... | 4841 N/A | 2.b.
c. Net booking location adjustment (item 2.a minus 2.b).................................... | 4842 N/A | 2.c.
3. Noninterest income and expense attributable to international operations: | ////////////////// |
a. Noninterest income attributable to international operations............................. | 4097 N/A | 3.a.
b. Provision for loan and lease losses attributable to international operations............ | 4235 N/A | 3.b.
c. Other noninterest expense attributable to international operations...................... | 4239 N/A | 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a | ////////////////// |
minus 3.b and 3.c)...................................................................... | 4843 N/A | 3.d.
4. Estimated pretax income attributable to international operations before capital allocation | ////////////////// |
adjustment (sum of items 1.c, 2.c, and 3.d)................................................ | 4844 N/A | 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect | ////////////////// |
the effects of equity capital on overall bank funding costs................................ | 4845 N/A | 5.
6. Estimated pretax income attributable to international operations after capital allocation | ////////////////// |
adjustment (sum of items 4 and 5).......................................................... | 4846 N/A | 6.
7. Income taxes attributable to income from international operations as estimated in item 6... | 4797 N/A | 7.
8. Estimated net income attributable to international operations (item 6 minus 7)............. | 4341 N/A | 8.
----------------------
<CAPTION>
Memoranda ----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Intracompany interest income included in item 1.a above.................................... | 4847 N/A | M.1.
2. Intracompany interest expense included in item 1.b above................................... | 4848 N/A | M.2.
----------------------
</TABLE>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
<TABLE>
<CAPTION> ----------------
| Year-to-date |
----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Interest income booked at IBFs............................................................. | 4849 N/A | 1.
2. Interest expense booked at IBFs............................................................ | 4850 N/A | 2.
3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs): | ////////////////// |
a. Gains (losses) and extraordinary items.................................................. | 5491 N/A | 3.a.
b. Fees and other noninterest income....................................................... | 5492 N/A | 3.b.
4. Provision for loan and lease losses attributable to international operations booked at | ////////////////// |
domestic offices (excluding IBFs).......................................................... | 4852 N/A | 4.
5. Other noninterest expense attributable to international operations booked at domestic | ////////////////// |
offices (excluding IBFs)................................................................... | 4853 N/A | 5.
----------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-7
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other noninterest
income and other noninterest expense in Schedule RI. (See instructions for
details.)
<TABLE>
<CAPTION>
| I495 | lesser than -
----------------
| Year-to-date |
---------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// |
a. Net gains on other real estate owned..................................................... | 5415 0 | 1.a.
b. Net gains on sales of loans.............................................................. | 5416 0 | 1.b.
c. Net gains on sales of premises and fixed assets.......................................... | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 5.f.(2): | ////////////////// |
-------------
d. | TEXT 4461 | REIMBURSEMENT FROM AFFILIATES | 4461 13,925 | 1.d.
-----------------------------------------------------------------------------------------
e. | TEXT 4462 | | 4462 | 1.e.
-----------------------------------------------------------------------------------------
f. | TEXT 4463 | | 4463 | 1.f.
-----------------------------------------------------------------------------------------
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets................................................ | 4531 4,562 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net losses on other real estate owned.................................................... | 5418 0 | 2.b.
c. Net losses on sales of loans............................................................. | 5419 0 | 2.c.
d. Net losses on sales of premises and fixed assets......................................... | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 7.c: | ////////////////// |
-------------
e. | TEXT 4464 | SFAS NO. 88 BENEFIT ADJUSTMENT | 4464 18,426 | 2.e.
-----------------------------------------------------------------------------------------
f. | TEXT 4467 | | 4467 | 2.f.
-----------------------------------------------------------------------------------------
g. | TEXT 4468 | | 4468 | 2.g.
-----------------------------------------------------------------------------------------
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and | ////////////////// |
applicable income tax effect (from Schedule RI, item 11.b) (itemize and describe | ////////////////// |
all extraordinary items and other adjustments): | ////////////////// |
-------------
a. (1) | TEXT 4469 | | 4469 | 3.a.(1)
-----------------------------------------------------------------------------------------
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a.(2)
------------- ---------------------------
b. (1) | TEXT 4487 | | 4487 | 3.b.(1)
-----------------------------------------------------------------------------------------
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b.(2)
------------- ---------------------------
c. (1) | TEXT 4489 | | 4489 | 3.c.(1)
-----------------------------------------------------------------------------------------
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c.(2)
---------------------------
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, | ////////////////// |
item 2) (itemize and describe all adjustments): | ////////////////// |
-------------
a. | TEXT 4492 | | 4492 | 4.a.
-----------------------------------------------------------------------------------------
b. | TEXT 4493 | | 4493 | 4.b.
-----------------------------------------------------------------------------------------
5. Cumulative effect of changes in accounting principles from prior years (from | ////////////////// |
Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
-------------
a. | TEXT 4494 | | 4494 | 5.a.
-----------------------------------------------------------------------------------------
b. | TEXT 4495 | | 4495 | 5.b.
-----------------------------------------------------------------------------------------
6. Corrections of material accounting errors from prior years (from Schedule RI-A, | ////////////////// |
item 10) (itemize and describe all corrections): | ////////////////// |
-------------
a. | TEXT 4496 | | 4496 | 6.a.
-----------------------------------------------------------------------------------------
b. | TEXT 4497 | | 4497 | 6.b.
----------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-8
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI-E--Continued
<TABLE>
<CAPTION>
| Year-to-date | lesser than -
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
a. | TEXT 4498 | CAPITAL CONTRIBUTION...................................................... | 4498 30,000 | 7.a.
b. | TEXT 4499 |........................................................................... | 4499 | 7.b.
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, | ////////////////// |
item 5) (itemize and describe all adjustments): | ////////////////// |
a. | TEXT 4521 | ADJUSTMENT DUE TO ACQUISITION OF BARCLAYS................................. | 4521 41,743 | 8.a.
b. | TEXT 4522 |........................................................................... | 4522 | 8.b.
9. Other explanations (the space below is provided for the bank to briefly describe, | I498 | I499 | lesser than -
at its option, any other significant items affecting the Report of Income):
No comment |_| (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-1
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 1995
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
| C400 | lesser than -
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1).................................. | 0081 1,129,769 | 1.a.
b. Interest-bearing balances(2)........................................................... | 0071 20,024 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A)............................. | 1754 3,869,407 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)........................... | 1773 942,494 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic offices | ////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ////////////////// |
a. Federal funds sold..................................................................... | 0276 231,700 | 3.a.
b. Securities purchased under agreements to resell........................................ | 0277 160,000 | 3.b.
4. Loans and lease financing receivables: | ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) | RCFD 2122 | 11,518,372 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses ................... | RCFD 3123 | 307,439 | ////////////////// | 4.b.
c. LESS: Allocated transfer risk reserve ....................... | RCFD 3128 | 0 | ////////////////// | 4.c.
d. Loans and leases, net of unearned income, | ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c).................................... | 2125 11,210,933 | 4.d.
5. Trading assets (from Schedule RC-D)....................................................... | 3545 11,350 | 5.
6. Premises and fixed assets (including capitalized leases).................................. | 2145 183,506 | 6.
7. Other real estate owned (from Schedule RC-M).............................................. | 2150 8,591 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M).. | 2130 0 | 8.
9. Customers' liability to this bank on acceptances outstanding ............................. | 2155 15,953 | 9.
10. Intangible assets (from Schedule RC-M).................................................... | 2143 277,715 | 10.
11. Other assets (from Schedule RC-F)......................................................... | 2160 601,669 | 11.
12. Total assets (sum of items 1 through 11).................................................. | 2170 18,663,111 | 12.
----------------------
</TABLE>
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
11
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-2
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC--Continued
<TABLE>
<CAPTION> ---------------------------
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES | /////////////////////// |
13. Deposits: | /////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) ..... | RCON 2200 9,943,636 | 13.a.
----------------------------| |
(1) Noninterest-bearing(1) ................................ | RCON 6631 2,359,779 | /////////////////////// | 13.a.(1)
(2) Interest-bearing ...................................... | RCON 6636 7,583,857 | /////////////////////// | 13.a.(2)
----------------------------| |
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// |
part II) .............................................................................. | RCFN 2200 987,509 | 13.b.
----------------------------| |
(1) Noninterest-bearing ................................... | RCFN 6631 0 | /////////////////////// | 13.b.(1)
(2) Interest-bearing ...................................... | RCFN 6636 987,509 | /////////////////////// | 13.b.(2)
----------------------------| |
14. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | /////////////////////// |
a. Federal funds purchased................................................................ | RCFD 0278 1,894,593 | 14.a.
b. Securities sold under agreements to repurchase......................................... | RCFD 0279 1,840,511 | 14.b.
15. a. Demand notes issued to the U.S. Treasury............................................... | RCON 2840 168,296 | 15.a.
b. Trading liabilities (from Schedule RC-D)............................................... | RCFD 3548 0 | 15.b.
16. Other borrowed money: | /////////////////////// |
a. With original maturity of one year or less............................................. | RCFD 2332 1,570,500 | 16.a.
b. With original maturity of more than one year........................................... | RCFD 2333 317,493 | 16.b.
17. Mortgage indebtedness and obligations under capitalized leases............................ | RCFD 2910 9,186 | 17.
18. Bank's liability on acceptances executed and outstanding.................................. | RCFD 2920 15,953 | 18.
19. Subordinated notes and debentures......................................................... | RCFD 3200 250,000 | 19.
20. Other liabilities (from Schedule RC-G).................................................... | RCFD 2930 237,036 | 20.
21. Total liabilities (sum of items 13 through 20)............................................ | RCFD 2948 17,234,713 | 21.
| /////////////////////// |
22. Limited-life preferred stock and related surplus.......................................... | RCFD 3282 0 | 22.
EQUITY CAPITAL | /////////////////////// |
23. Perpetual preferred stock and related surplus............................................. | RCFD 3838 125,000 | 23.
24. Common stock ............................................................................. | RCFD 3230 19,487 | 24.
25. Surplus (exclude all surplus related to preferred stock).................................. | RCFD 3839 955,984 | 25.
26. a. Undivided profits and capital reserves................................................. | RCFD 3632 347,642 | 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................ | RCFD 8434 (19,715)| 26.b.
27. Cumulative foreign currency translation adjustments....................................... | RCFD 3284 0 | 27.
28. Total equity capital (sum of items 23 through 27)......................................... | RCFD 3210 1,428,398 | 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, | /////////////////////// |
and 28) .................................................................................. | RCFD 3300 18,663,111 | 29.
---------------------------
</TABLE>
<TABLE>
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
<S> <C> <C>
1. Indicate in the box at the right the number of the statement below that best describes the Number
most comprehensive level of auditing work performed for the bank by independent external -------------------
auditors as of any date during 1994................................................................ | RCFD 6724 2 | M.1.
-------------------
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
12
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-3
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
<TABLE>
<CAPTION>
----------
| C405 |lesser
------------------------------------------ than
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
-------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// |
coin .......................................................................... | 0022 604,069 | ////////////////// | 1.
a. Cash items in process of collection and unposted debits .................... | ////////////////// | 0020 463,700 | 1.a.
b. Currency and coin .......................................................... | ////////////////// | 0080 140,369 | 1.b.
2. Balances due from depository institutions in the U.S. ......................... | ////////////////// | 0082 374,588 | 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ......... | 0083 0 | ////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | ////////////////// | ////////////////// |
in the U.S. (including their IBFs) ......................................... | 0085 374,588 | ////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks ........ | ////////////////// | 0070 26,818 | 3.
a. Foreign branches of other U.S. banks ....................................... | 0073 0 | ////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks ................. | 0074 26,818 | ////////////////// | 3.b.
4. Balances due from Federal Reserve Banks ....................................... | 0090 144,318 | 0090 144,318 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, sum of items 1.a and 1.b) ........................................ | 0010 1,149,793 | 0010 1,149,793 | 5.
-------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------
Memorandum Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | ////////////////// |
column B above) .................................................................................... | 0050 374,565 | M.1.
----------------------
</TABLE>
Schedule RC-B--Securities
Exclude assets held for trading.
<TABLE>
<CAPTION>
----------
| C410 |lesser
------------------------------------------------------------------------------------ than
| Held-to-maturity | Available-for-sale |
-------------------------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
-------------------------------------------------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. U.S. Treasury securities ............ | 0211 1,062,428 | 0213 1,015,473 | 1286 691,202 | 1287 666,352 | 1.
2. U.S. Government agency | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and corporation obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
ment agencies(2) ................. | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
agencies(3) ...................... | 1294 0 | 1295 0 | 1297 0 | 1298 0 | 2.b.
-------------------------------------------------------------------------------------
</TABLE>
_____________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
13
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-4
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-B--Continued
-------------------------------------------------------------------------------------
| Held-to-maturity | Available-for-sale |
-------------------------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
-------------------------------------------------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3. Securities issued by states | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and political subdivisions | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
in the U.S.: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. General obligations ........... | 1676 0 | 1677 0 | 1678 46 | 1679 49 | 3.a.
b. Revenue obligations ........... | 1681 0 | 1686 0 | 1690 0 | 1691 0 | 3.b.
c. Industrial development | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and similar obligations ....... | 1694 0 | 1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities (MBS): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Pass-through securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Guaranteed by | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
GNMA ...................... | 1698 0 | 1699 0 | 1701 69,656 | 1702 71,324 | 4.a.(1)
(2) Issued by FNMA | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and FHLMC ................. | 1703 1,628,515 | 1705 1,585,653 | 1706 0 | 1707 0 | 4.a.(2)
(3) Other pass-through
securities ................ | 1709 17,122 | 1710 15,757 | 1711 0 | 1713 0 | 4.a.(3)
b. Other mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities (include CMOs, | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
REMICs, and stripped MBS): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Issued or guaranteed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
by FNMA, HLMC, or GNMA..... | 1714 85,184 | 1715 84,337 | 1716 0 | 1717 0 | 4.b.(1)
(2) Collateralized by MBS | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
issued or guaranteed by | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
FNMA, FHLMC, or | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
GNMA ...................... | 1718 0 | 1719 0 | 1731 0 | 1732 0 | 4.b.(2)
(3) All other mortgage- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
backed securities ......... | 1733 216,096 | 1734 211,846 | 1735 144,203 | 1736 133,089 | 4.b.(3)
5. Other debt securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Other domestic debt | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities .................... | 1737 857,162 | 1738 839,077 | 1739 0 | 1741 0 | 5.a.
b. Foreign debt | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities .................... | 1742 2,900 | 1743 2,900 | 1744 0 | 1746 0 | 5.b.
6. Equity securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Investments in mutual | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
funds ......................... | ////////////////// | ////////////////// | 1747 5,892 | 1748 5,892 | 6.a.
b. Other equity securities | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
with readily determin- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
able fair values .............. | ////////////////// | ////////////////// | 1749 0 | 1751 0 | 6.b.
c. All other equity | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities(1) ................. | ////////////////// | ////////////////// | 1752 65,788 | 1753 65,788 | 6.c.
7. Total (sum of items 1 | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
through 6) (total of | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
column A must equal | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Schedule RC, item 2.a) | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(total of column D must | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
item 2.b) ........................ | 1754 3,869,407 | 1771 3,755,043 | 1772 976,787 | 1773 942,494 | 7.
-------------------------------------------------------------------------------------
</TABLE>
_____________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
14
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-5
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-B--Continued
Memoranda ---------
| C412 | Lesser than -
----------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------
<S> <C>
1. Pledged securities(2) ........................................................... | 0416 3,351,250 | M.1.
2. Maturity and repricing data for debt securities(2)(3)(4) (excluding those in
nonaccrual status): | ////////////////// |
a. Fixed rate debt securities with a remaining maturity of: | ////////////////// |
(1) Three months or less ..................................................... | 0343 17,195 | M.2.a.(1)
(2) Over three months through 12 months ...................................... | 0344 316,833 | M.2.a.(2)
(3) Over one year through five years ......................................... | 0345 3,068,770 | M.2.a.(3)
(4) Over five years .......................................................... | 0346 1,166,672 | M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through //////////////////
2.a.(4)) ................................................................. | 0347 4,569,470 | M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ............................................. | 4544 17,123 | M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly .......... | 4545 153,628 | M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ... | 4551 0 | M.2.b.(3)
(4) Less frequently than every five years .................................... | 4552 0 | M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) | ////////////////// |
through 2.b.(4)) ......................................................... | 4553 170,751 | M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must | ////////////////// |
equal total debt securities from Schedule RC-B, sum of items 1 through 5, | ////////////////// |
columns A and D, minus nonaccrual debt securities included in Schedule RC-N, | ////////////////// |
item 9, column C) ............................................................ | 0393 4,740,221 | M.2.c.
3. Not applicable | ////////////////// |
4. Held-to-maturity debt securities restructured and in compliance with modified | ////////////////// |
terms (included in Schedule RC-B, items 3 through 5, column A, above) ........... | 5365 0 | M.4.
5. Not applicable | ////////////////// |
6. Floating rate debt securities with a remaining maturity of one year or | ////////////////// |
less(2) (included in Memorandum item 2.b.(5) above) ............................. | 5519 0 | M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to | ////////////////// |
available-for-sale or trading securities during the calendar year-to-date | ////////////////// |
(report the amortized cost at date of sale or transfer).......................... | 1778 0 | M.7.
8. High-Risk mortgage securities (included in the held-to-maturity and | ////////////////// |
available-for-sale accounts in Schedule RC-B, item 4.b): | ////////////////// |
a. Amortized cost ............................................................... | 8780 0 | M.8.a.
b. Fair Value ................................................................... | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale | ////////////////// |
accounts in Schedule RC-B, items 2, 3, and 5): | ////////////////// |
a. Amortized cost ............................................................... | 8782 0 | M.9.a.
b. Fair Value ................................................................... | 8783 0 | M.9.b.
----------------------
</TABLE>
- --------------
(2) Includes held-to-maturity securities at amortized cost and available-for-
sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum item 2 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
15
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-6
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
Do not deduct the allowance for loan and lease losses from amounts reported in
this schedule. Report total loans and leases, net of unearned income. Exclude
assets held for trading.
<TABLE>
<CAPTION>
----------
| C415 | lesser than -
-------------------------------------------
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
-------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Loans secured by real estate.......................................... | 1410 4,864,103 | ////////////////// | 1.
a. Construction and land development.................................. | ////////////////// | 1415 71,262 | 1.a.
b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// |
improvements)...................................................... | ////////////////// | 1420 769 | 1.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit.................. | ////////////////// | 1797 372,876 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens..................................... | ////////////////// | 5367 2,922,178 | 1.c.(2)(a)
(b) Secured by junior liens.................................... | ////////////////// | 5368 219,517 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties.......... | ////////////////// | 1460 90,670 | 1.d.
e. Secured by nonfarm nonresidential properties....................... | ////////////////// | 1480 1,186,831 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S..................................... | ////////////////// | 1505 17,793 | 2.a
(1) To U.S. branches and agencies of foreign banks................. | 1506 0 | ////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S........................... | 1507 17,793 | ////////////////// | 2.a.(2)
b. To other depository institutions in the U.S........................ | 1517 0 | 1517 0 | 2.b.
c. To banks in foreign countries...................................... | ////////////////// | 1510 0 | 2.c.
(1) To foreign branches of other U.S. banks........................ | 1513 0 | ////////////////// | 2.c.(1)
(2) To other banks in foreign countries............................ | 1516 0 | ////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers... | 1590 2,547 | 1590 2,547 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile)...................................... | 1763 5,316,433 | 1763 5,316,433 | 4.a.
b. To non-U.S. addressees (domicile).................................. | 1764 0 | 1764 0 | 4.b.
5. Acceptances of other banks: | ////////////////// | ////////////////// |
a. Of U.S. banks...................................................... | 1756 1,957 | 1756 1,957 | 5.a.
b. Of foreign banks................................................... | 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures (i.e., consumer loans) (includes purchased paper)........ | ////////////////// | 1975 549,161 | 6.
a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// |
revolving credit plans)............................................ | 2008 24,213 | ////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans) | 2011 524,948 | ////////////////// | 6.b.
7. Loans to foreign governments and official institutions (including | ////////////////// | ////////////////// |
foreign central banks)................................................ | 2081 0 | 2081 0 | 7.
8. Obligations (other than securities and leases) of states and political | ////////////////// | ////////////////// |
subdivisions in the U.S. (includes nonrated industrial development | ////////////////// | ////////////////// |
obligations).......................................................... | 2107 41,759 | 2107 41,759 | 8.
9. Other loans........................................................... | 1563 729,903 | ////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and unsecured) | ////////////////// | 1545 62,038 | 9.a.
b. All other loans (exclude consumer loans)........................... | ////////////////// | 1564 677,865 | 9.b.
10. Lease financing receivables (net of unearned income).................. | ////////////////// | 2165 11,454 | 10.
a. Of U.S. addressees (domicile) ..................................... | 2182 11,454 | ////////////////// | 10.a.
b. Of non-U.S. addressees (domicile) ................................. | 2183 0 | ////////////////// | 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above....... | 2123 16,738 | 2123 16,738 | 11.
12. Total loans and leases, net of unearned income (sum of items 1 | ////////////////// | ////////////////// |
through 10 minus item 11) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, item 4.a)................................................ | 2122 11,518,372 | 2122 11,518,372 | 12.
-------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-7
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-C--Continued
Part I. Continued
<TABLE>
<CAPTION>
-------------------------------------------
| (Column A) | (Column B) |
| Consolidated | Domestic |
Memoranda | Bank | Offices |
-------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCOM Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above ...................... | 1496 0 | 1496 0 | M.1.
2. Loans and leases restructured and in compliance with modified terms | ////////////////// | ////////////////// |
(included in Schedule RC-C, part I, above): | ////////////////// | ////////////////// |
a. Loans secured by real estate: | ////////////////// | ////////////////// |
----------------------
(1) To U.S. addressees (domicile) ........................................... | 1687 15,774 | M.2.a.(1)
(2) To non-U.S. addressees (domicile) ....................................... | 1689 0 | M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans to | ////////////////// |
individuals for household, family, and other personal expenditures).......... | 8691 4 | M.2.b.
c. Commercial and industrial loans to and lease financing receivables | ////////////////// |
of non-U.S. addressees (domicile) included in Memorandum item 2.b | ////////////////// |
above ....................................................................... | 8692 0 | M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those | ////////////////// |
in nonaccrual status): | ////////////////// |
a. Fixed rate loans and leases with a remaining maturity of: | ////////////////// |
(1) Three months or less .................................................... | 0348 336,451 | M.3.a.(1)
(2) Over three months through 12 months ..................................... | 0349 64,684 | M.3.a.(2)
(3) Over one year through five years ........................................ | 0356 896,761 | M.3.a.(3)
(4) Over five years ......................................................... | 0357 2,048,991 | M.3.a.(4)
(5) Total fixed rate loans and leases (sum of | ////////////////// |
Memorandum items 3.a.(1) through 3.a.(4)) ............................... | 0358 3,346,887 | M.3.a.(5)
b. Floating rate loans with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ............................................ | 4554 6,586,364 | M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ......... | 4555 692,513 | M.3.b.(2)
(3) Every five years or more frequently, but less frequently than | ////////////////// |
annually ................................................................ | 4561 772,743 | M.3.b.(3)
(4) Less frequently than every five years ................................... | 4564 0 | M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) | ////////////////// |
through 3.b.(4)) ........................................................ | 4567 8,051,620 | M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) | ////////////////// |
(must equal the sum of total loans and leases, net, from | ////////////////// |
Schedule RC-C, part I, item 12, plus unearned income from | ////////////////// |
Schedule RC-C, part I, item 11, minus total nonaccrual loans and | ////////////////// |
leases from Schedule RC-N, sum of items 1 through 8, column C) .............. | 1479 11,398,507 | M.3.c.
4. Loans to finance commercial real estate, construction, and land | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// |
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) ................... | 2746 57,178 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, above)....... | 5369 59,484 | M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family | ////////////////// |---------------------
residential properties (included in Schedule RC-C, part I, item | ////////////////// | RCON Bil Mil Thou |
---------------------
1.c.(2)(a), column B, page RC-6) ............................................... | ////////////////// | 5370 1,113,926 | M.6.
-------------------------------------------
</TABLE>
- -------------
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
17
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-8
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets or with $2 billion or more in par/notional amount of off-balance sheet
derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e,
columns A through D).
<TABLE>
<CAPTION>
----------
| C420 | lesser than -
---------------------------
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS | /////////////////////// |
1. U.S. Treasury securities in domestic offices ......................................... | RCON 3531 0 | 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude | /////////////////////// |
mortgage-backed securities) .......................................................... | RCON 3532 0 | 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices | RCON 3533 0 | 3.
4. Mortgage-backed securities (MBS) in domestic offices: | /////////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA .............. | RCON 3534 0 | 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA | /////////////////////// |
(include CMOs, REMICs, and stripped MBS) .......................................... | RCON 3535 0 | 4.b.
c. All other mortgage-backed securities .............................................. | RCON 3536 0 | 4.c.
5. Other debt securities in domestic offices ............................................ | RCON 3537 0 | 5.
6. Certificates of deposit in domestic offices .......................................... | RCON 3538 0 | 6.
7. Commercial paper in domestic offices ................................................. | RCON 3539 0 | 7.
8. Bankers acceptances in domestic offices .............................................. | RCON 3540 0 | 8.
9. Other trading assets in domestic offices ............................................. | RCON 3541 0 | 9.
10. Trading assets in foreign offices .................................................... | RCFN 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity | /////////////////////// |
and equity contracts: | /////////////////////// |
a. In domestic offices ............................................................... | RCON 3543 11,350 | 11.a.
b. In foreign offices ................................................................ | RCFN 3544 0 | 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) .... | RCFD 3545 11,350 | 12.
---------------------------
---------------------------
| ///////// Bil Mil Thou |
---------------------------
LIABILITIES
13. Liability for short positions ........................................................ | RCFD 3546 0 | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and | /////////////////////// |
equity contracts ..................................................................... | RCFD 3547 0 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) | RCFD 3548 0 | 15.
---------------------------
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-9
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
<TABLE>
<CAPTION>
---------
| C425 | lesser than -
----------------------------------------------------------------
| | Nontransaction |
| Transaction Accounts | Accounts |
|-----------------------------------------|--------------------|
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
| accounts (including| demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits | column A) | (including MMDAs) |
----------------------------------------------------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deposits of: | ////////////////// | ////////////////// | ////////////////// |
1. Individuals, partnerships, and corporations ..... | 2201 2,837,204 | 2240 1,907,856 | 2346 6,279,886 | 1.
2. U.S. Government ................................. | 2202 32,138 | 2280 31,819 | 2520 118 | 2.
3. States and political subdivisions in the U.S. ... | 2203 150,309 | 2290 117,521 | 2530 340,898 | 3.
4. Commercial banks in the U.S. .................... | 2206 168,900 | 2310 168,900 | ////////////////// | 4.
a. U.S. branches and agencies of foreign banks .. | ////////////////// | ////////////////// | 2347 0 | 4.a.
b. Other commercial banks in the U.S. ........... | ////////////////// | ////////////////// | 2348 500 | 4.b.
5. Other depository institutions in the U.S. ....... | 2207 83,817 | 2312 83,817 | 2349 0 | 5.
6. Banks in foreign countries ...................... | 2213 578 | 2320 578 | ////////////////// | 6.
a. Foreign branches of other U.S. banks ......... | ////////////////// | ////////////////// | 2367 0 | 6.a.
b. Other banks in foreign countries ............. | ////////////////// | ////////////////// | 2373 0 | 6.b.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ////////////////// |
(including foreign central banks) ............... | 2216 141 | 2300 141 | 2377 0 | 7.
8. Certified and official checks ................... | 2330 49,147 | 2330 49,147 | ////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ////////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// |
item 13.a) ...................................... | 2215 3,322,234 | 2210 2,359,779 | 2385 6,621,402 | 9.
----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): | ////////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts .................... | 6835 879,495 | M.1.a.
b. Total brokered deposits ................................................................ | 2365 1,322,347 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | ////////////////// |
(1) Issued in denominations of less than $100,000 ...................................... | 2343 103 | M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than $100,000 | ////////////////// |
and participated out by the broker in shares of $100,000 or less.................... | 2344 1,322,244 | M.1.c.(2)
d. Total deposits denominated in foreign currencies........................................ | 3776 0 | M.1.d.
e. Preferred deposits (uninsured deposits of states and political subdivisions in the | ////////////////// |
U.S. reported in item 3 above which are secured or collateralized as required under | ////////////////// |
state law) ............................................................................. | 5590 402,081 | M.1.e.
2. Components of total nontransaction accounts (sum of Memorandum items 2.a through 2.d must | ////////////////// |
equal item 9, column C above): | ////////////////// |
a. Savings deposits: | ////////////////// |
(1) Money market deposit accounts (MMDAs) .............................................. | 6810 728,702 | M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ............................................ | 0352 2,015,833 | M.2.a.(2)
b. Total time deposits of less than $100,000 .............................................. | 6648 2,044,632 | M.2.b.
c. Time certificates of deposit of $100,000 or more ....................................... | 6645 1,832,235 | M.2.c.
d. Open-account time deposits of $100,000 or more ......................................... | 6646 0 | M.2.d.
3. All NOW accounts (included in column A above) ............................................. | 2398 962,453 | M.3.
----------------------
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-10
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
<TABLE>
<CAPTION>
Deposit Totals for FDIC Insurance Assessments
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
4. Total deposits in domestic offices (sum of item 9, column A and item 9, column C) | ////////////////// |
(must equal Schedule RC, item 13.a) ....................................................... | 2200 9,943,636 | M.4.
| ////////////////// |
a. Total demand deposits (must equal item 9, column B) .................................... | 2210 2,359,779 | M.4.a.
b. Total time and savings deposits(1) (must equal item 9, column A plus item 9, column C | ////////////////// |
minus item 9, column B) ................................................................ | 2350 7,583,857 | M.4.b.
----------------------
</TABLE>
____________
(1) For FDIC insurance assessment purposes, "total time and savings deposits"
consists of nontransaction accounts and all transaction accounts other than
demand deposits.
<TABLE>
<CAPTION>
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
5. Time deposits of less than $100,000 and open-account time deposits of $100,000 or more | ////////////////// |
(included in Memorandum items 2.b and 2.d above) with a remaining maturity or repricing | ////////////////// |
frequency of:(1) | ////////////////// |
a. Three months or less ................................................................... | 0359 527,484 | M.5.a.
b. Over three months through 12 months (but not over 12 months) ........................... | 3644 562,357 | M.5.b.
6. Maturity and repricing data for time certificates of deposit of $100,000 or more:(1) | ////////////////// |
a. Fixed rate time certificates of deposit of $100,000 or more with a remaining | ////////////////// |
maturity of: | ////////////////// |
(1) Three months or less ............................................................... | 2761 485,603 | M.6.a.(1)
(2) Over three months through 12 months ................................................ | 2762 334,174 | M.6.a.(2)
(3) Over one year through five years ................................................... | 2763 1,009,153 | M.6.a.(3)
(4) Over five years .................................................................... | 2765 3,305 | M.6.a.(4)
(5) Total fixed rate time certificates of deposit of $100,000 or more (sum of | ////////////////// |
Memorandum items 6.a.(1) through 6.a.(4)) .......................................... | 2767 1,832,235 | M.6.a.(5)
b. Floating rate time certificates of deposit of $100,000 or more with a repricing | ////////////////// |
frequency of: | ////////////////// |
(1) Quarterly or more frequently ....................................................... | 4568 0 | M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly .................... | 4569 0 | M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ............. | 4571 0 | M.6.b.(3)
(4) Less frequently than every five years .............................................. | 4572 0 | M.6.b.(4)
(5) Total floating rate time certificates of deposit of $100,000 or more (sum of | ////////////////// |
Memorandum items 6.b.(1) though 6.b.(4))............................................ | 4573 0 | M.6.b.(5)
c. Total time certificates of deposit of $100,000 or more (sum of Memorandum items 6.a.(5) | ////////////////// |
and 6.b.(5)) (must equal Memorandum item 2.c. above) ................................... | 6645 1,832,235 | M.6.c.
----------------------
</TABLE>
____________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
20
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-1
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)
<TABLE>
<CAPTION>
______________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deposits of: | ////////////////// |
1. Individuals, partnerships, and corporations .................................................... | 2621 795,509 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................. | 2623 192,000 | 2.
3. Foreign banks (including U.S. branches and | ////////////////// |
agencies of foreign banks, including their IBFs) ............................................... | 2625 0 | 3.
4. Foreign governments and official institutions (including foreign central banks) ................ | 2650 0 | 4.
5. Certified and official checks .................................................................. | 2330 0 | 5.
6. All other deposits ............................................................................. | 2668 0 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) ........................... | 2200 987,509 | 7.
----------------------
</TABLE>
Schedule RC-F--Other Assets
<TABLE>
<CAPTION>
________
| C430 | lesser
---------------------------- than -
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Income earned, not collected on loans ...................................................... | RCFD 2164 57,923 | 1.
2. Net deferred tax assets(1) ................................................................. | RCFD 2148 87,135 | 2.
3. Excess residential mortgage servicing fees receivable ...................................... | RFCD 5371 24,529 | 3.
4. Other (itemize amounts that exceed 25% of this item) ....................................... | RFCD 2168 432,082 | 4.
_____________ --------------------------------
a. | TEXT 3549 | | RCFD 3549 | | //////////////////////// | 4.a
-----------------------------------------------------------| | | |
b. | TEXT 3550 | | RCFD 3550 | | //////////////////////// | 4.b
-----------------------------------------------------------| | | |
c. | TEXT 3551 | | RCFD 3551 | | //////////////////////// | 4.c
------------------------------------------------------------------------------------------| |
5. Total (sum of items 1 through 6) (must equal Schedule RC, item 11) ......................... | RCFD 2160 601,669 | 5.
----------------------------
Memorandum
----------------------------
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------------------------------
1. Deferred tax assets disallowed for regulatory capital purposes ............................. | RCFD 5610 0 | M.1.
----------------------------
</TABLE>
Schedule RC-G--Other Liabilities
<TABLE>
<CAPTION>
________
| C435 | lesser
---------------------------- than -
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(2) .......................... | RCON 3645 44,817 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ............... | RCFD 3646 112,040 | 1.b.
2. Net deferred tax liabilities(1) ............................................................ | RCFD 3049 0 | 2.
3. Minority interest in consolidated subsidiaries ............................................. | RFCD 3000 0 | 3.
4. Other (itemize amounts that exceed 25% of this item) ....................................... | RFCD 2968 80,179 | 4.
_____________ -------------------------------
a. | TEXT 3552 | | RCFD 3552 | 45,000 | //////////////////////// | 4.a
-----------------------------------------------------------| | | |
b. | TEXT 3553 | | RCFD 3553 | | //////////////////////// | 4.b
-----------------------------------------------------------| | | |
c. | TEXT 3554 | | RCFD 3554 | | //////////////////////// | 4.c
------------------------------------------------------------------------------------------| |
5. Total (sum of items 1 through 6) (must equal Schedule RC, item 20) ......................... | RCFD 2930 237,036 | 5.
----------------------------
</TABLE>
_____________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
21
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-12
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
<TABLE>
<CAPTION>
| C440 | lesser than -
----------------------
| Domestic Offices |
----------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Customers' liability to this bank on acceptances outstanding.............................. | 2155 15,953 | 1.
2. Bank's liability on acceptances executed and outstanding.................................. | 2920 15,953 | 2.
3. Federal funds sold and securities purchased under agreements to resell.................... | 1350 391,700 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase................ | 2800 3,735,104 | 4.
5. Other borrowed money...................................................................... | 3190 1,887,993 | 5.
EITHER | ////////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs............... | 2163 N/A | 6.
OR | ////////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs................. | 2941 967,509 | 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and | ////////////////// |
IBFs)..................................................................................... | 2192 18,643,1111 | 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, | ////////////////// |
and IBFs)................................................................................. | 3129 16,247,204 | 9.
<CAPTION>
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices.
----------------------
| RCON Bil Mil Thou |
----------------------
<S> <C> <C>
10. U.S. Treasury securities.................................................................. | 1779 1,728,780 | 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed | ////////////////// |
securities)............................................................................... | 1785 0 | 11.
12. Securities issued by states and political subdivisions in the U.S. ....................... | 1786 49 | 12.
13. Mortgage-backed securities (MBS): | ////////////////// |
a. Pass-through securities: | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA....................................... | 1787 1,699,839 | 13.a.(1)
(2) Other pass-through securities...................................................... | 1869 17,122 | 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | ////////////////// |
(1) Issued or guaranteed by FNMA, FNLMC, or GNMA....................................... | 1877 85,184 | 13.b.(1)
(2) All other mortgage-backed securities .............................................. | 2253 349,185 | 13.b.(2)
14. Other domestic debt securities............................................................ | 3159 857,162 | 14.
15. Foreign debt securities................................................................... | 3160 2,900 | 15.
16. Equity securities: | ////////////////// |
a. Investments in mutual funds............................................................ | 3161 5,892 | 16.a.
b. Other equity securities with readily determinable fair values.......................... | 3162 0 | 16.b.
c. All other equity securities............................................................ | 3169 65,788 | 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16)..... | 3170 4,811,901 | 17.
----------------------
<CAPTION>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EITHER | ////////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank........................ | 3051 N/A | M.1.
OR | ////////////////// |
2. Net due to the IBF of the domestic offices of the reporting bank.......................... | 3059 N/A | M.2.
----------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-1
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices.
__________
| C445 | Lesser
---------------------- than -
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) ................. | 2133 N/A | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, | ////////////////// |
column A) ..................................................................................... | 2076 N/A | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) .... | 2077 N/A | 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ..................................... | 2898 N/A | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ////////////////// |
part II, items 2 and 3) ....................................................................... | 2379 N/A | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) ..... | 2381 N/A | 6.
----------------------
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-K--Quarterly Averages (1)
----------
| C455 | Lesser
--------------------------- than -
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS | /////////////////////// |
1. Interest-bearing balances due from depository institutions ............................... | RCFD 3381 130,889 | 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) ....... | RCFD 3382 3,478,417 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2) .................... | RCFD 3383 60 | 3.
4. a. Other debt securities(2) .............................................................. | RCFD 3647 1,340,956 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock) . | RCFD 3648 63,197 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic offices | /////////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs ...................... | RCFD 3365 251,455 | 5.
6. Loans: | /////////////////////// |
a. Loans in domestic offices: | /////////////////////// |
(1) Total loans ....................................................................... | RCON 3360 11,242,553 | 6.a.(1)
(2) Loans secured by real estate ...................................................... | RCON 3385 4,959,628 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers ............... | RCON 3386 2,919 | 6.a.(3)
(4) Commercial and industrial loans ................................................... | RCON 3387 4,565,110 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ....... | RCON 3388 557,004 | 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............. | RCFN 3360 0 | 6.b.
7. Trading assets ........................................................................... | RCFD 3401 0 | 7.
8. Lease financing receivables (net of unearned income) ..................................... | RCFD 3484 10,359 | 8.
9. Total assets(4) .......................................................................... | RCFD 3368 18,118,924 | 9.
LIABILITIES | /////////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............ | RCON 3485 947,726 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////////// |
a. Money market deposit accounts (MMDAs) ................................................. | RCON 3486 731,263 | 11.a.
b. Other savings deposits ................................................................ | RCON 3487 2,068,655 | 11.b.
c. Time certificates of deposit of $100,000 or more ...................................... | RCON 3345 1,552,212 | 11.c.
d. All other time deposits ............................................................... | RCON 3469 1,983,503 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs .. | RCFN 3404 789,625 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs .............. | RCFD 3353 4,343,543 | 13.
14. Other borrowed money ..................................................................... | RCFD 3355 1,649,203 | 14.
---------------------------
</TABLE>
- --------------
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or (2) an average of weekly figures (i.e.,
the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
23
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-14
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of
Schedule RC-L. Some of the amounts reported in Schedule RC-L
are regarded as volume indicators and not necessarily as
measures of risk.
<TABLE>
<CAPTION>
__________
| C460 | lesser than
----------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Unused commitments: | ////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home | ////////////////// |
equity lines .......................................................................... | 3814 424,211 | 1.a.
b. Credit card lines ..................................................................... | 3815 0 | 1.b.
c. Commercial real estate, construction, and land development: | ////////////////// |
(1) Commitments to fund loans secured by real estate .................................. | 3816 29,853 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate .............................. | 6550 17,758 | 1.c.(2)
d. Securities underwriting ............................................................... | 3817 0 | 1.d.
e. Other unused commitments .............................................................. | 3818 7,529,404 | 1.e.
2. Financial standby letters of credit and foreign office guarantees ........................ | 3819 1,035,212 | 2.
______________________| ////////////////// |
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 910 | ////////////////// | 2.a.
----------------------| ////////////////// |
3. Performance standby letters of credit and foreign office guarantees ...................... | 3821 105,961 | 3.
a. Amount of performance standby letters of credit conveyed to ______________________| ////////////////// |
others .......................................................... | RCFD 3822 | 0 | ////////////////// | 3.a.
4. Commercial and similar letters of credit ................................................. | 3411 83,030 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by | ////////////////// |
the reporting bank ...................................................................... | 3428 0 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | ////////////////// |
(nonaccepting) bank ...................................................................... | 3429 8,529 | 6.
7. Securities borrowed ...................................................................... | 3432 0 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified | ////////////////// |
against loss by the reporting bank) ...................................................... | 3433 0 | 8.
9. Mortgages transferred (i.e., sold or swapped) with recourse that have been treated as sold | ////////////////// |
for Call Report purposes: | ////////////////// |
a. FNMA and FHLMC residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ...... | 3650 80,150 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date .............. | 3651 63,418 | 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ...... | 3652 0 | 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date .............. | 3653 0 | 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ...... | 3654 0 | 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date .............. | 3655 0 | 9.c.(2)
10. When-issued securities: | ////////////////// |
a. Gross commitments to purchase ......................................................... | 3434 0 | 10.a.
b. Gross commitments to sell ............................................................. | 3435 0 | 10.b.
11. Spot foreign exchange contracts .......................................................... | 8765 8,998 | 11.
12. All other off-balance sheet liabilities (excluded off-balance sheet derivatives) (itemize | ////////////////// |
and describe each component of this item over 25% of Schedule RC, item 28, "Total | ////////////////// |
equity capital") ......................................................................... | 3430 0 | 12.
_____________ _______________________ | ////////////////// |
a. | TEXT 3555 |___________________________________________________| RCFD 3555 | | ////////////////// | 12.a.
-------------
b. | TEXT 3556 |___________________________________________________| RCFD 3556 | | ////////////////// | 12.b.
-------------
c. | TEXT 3557 |___________________________________________________| RCFD 3557 | | ////////////////// | 12.c.
-------------
d. | TEXT 3558 |___________________________________________________| RCFD 3558 | | ////////////////// | 12.d.
----------------------------------------------------------------------------------------| ////////////////// |
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity
capital") ................................................................................ | 5591 0 | 13.
_____________ _______________________ | ////////////////// |
a. | TEXT 5592 |___________________________________________________| RCFD 5592 | | ////////////////// | 13.a.
-------------
b. | TEXT 5593 |___________________________________________________| RCFD 5593 | | ////////////////// | 13.b.
-------------
c. | TEXT 5594 |___________________________________________________| RCFD 5594 | | ////////////////// | 13.c.
-------------
d. | TEXT 5595 |___________________________________________________| RCFD 5595 | | ////////////////// | 13.d.
--------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 03
Address: 777 MAIN STREET Page RC-
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-L--Continued
<TABLE>
<CAPTION>
----------
| C461 | lesser than -
------------------------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange | Equity Derivative | Commodity and |
- ----------------------------------| Contracts | Contracts | Contracts | Other Contracts |
| Off-balance Sheet Derivatives |-----------------------------------------------------------------------------------
| Position Indicators | Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
14. Gross amounts (e.g., notional | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
amounts) (for each column, | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
sum of items 14.a. through | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
14.e must equal sum of items | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
15, 16.a, and 16.b): | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
------------------------------------------------------------------------------------
a. Future contracts.......... | 1,069,500 | 0 | 0 | 0 | 14.a.
------------------------------------------------------------------------------------
| RCFD 8693 | RCFD 8694 | RCFD 8695 | RCFD 8696 |
------------------------------------------------------------------------------------
b. Forward contracts......... | 31,000 | 3,760,608 | 0 | 0 | 14.b.
------------------------------------------------------------------------------------
| RCFD 8697 | RCFD 8698 | RCFD 8699 | RCFD 8700 |
------------------------------------------------------------------------------------
c. Exchange-traded option | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
contracts: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Written options...... | 0 | 0 | 0 | 0 | 14.c.(1)
------------------------------------------------------------------------------------
| RCFD 8701 | RCFD 8702 | RCFD 8703 | RCFD 8704 |
------------------------------------------------------------------------------------
(2) Purchased options.... | 0 | 0 | 0 | 0 | 14.c.(2)
------------------------------------------------------------------------------------
| RCFD 8705 | RCFD 8706 | RCFD 8707 | RCFD 8708 |
------------------------------------------------------------------------------------
d. Over-the-counter option | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
contracts: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Written options....... | 393,500 | 0 | 0 | 0 | 14.d.(1)
------------------------------------------------------------------------------------
| RCFD 8709 | RCFD 8710 | RCFD 8711 | RCFD 8712 |
------------------------------------------------------------------------------------
(2) Purchased options..... | 918,500 | 0 | 0 | 0 | 14.d.(2)
------------------------------------------------------------------------------------
| RCFD 8713 | RCFD 8714 | RCFD 8715 | RCFD 8716 |
------------------------------------------------------------------------------------
e. Swaps .................... | 4,108,867 | 0 | 0 | 0 | 14.e.
------------------------------------------------------------------------------------
| RCFD 3450 | RCFD 3826 | RCFD 8719 | RCFD 8720 |
------------------------------------------------------------------------------------
15. Total gross notional amount | ////////////////// | ////////////////// | ///////////////// | ////////////////// |
of derivative contracts held | ////////////////// | ////////////////// | ///////////////// | ////////////////// |
for trading ................. | 300,000 | 3,760,608 | 0 | 0 | 15.
------------------------------------------------------------------------------------
| RCFD 7186 | RCFD 7187 | RCFD 8723 | RCFD 8724 |
------------------------------------------------------------------------------------
16. Total gross notional amount of| ////////////////// | ////////////////// | ///////////////// | ////////////////// |
derivative contracts held for | ////////////////// | ////////////////// | ///////////////// | ////////////////// |
purposes other than trading: | ////////////////// | ////////////////// | ///////////////// | ////////////////// |
------------------------------------------------------------------------------------
a. Contracts marked to market | 246,500 | 0 | 0 | 0 | 16.a.
------------------------------------------------------------------------------------
| RCFD 8725 | RCFD 8726 | RCFD 8727 | RCFD 8728 |
------------------------------------------------------------------------------------
b. Contracts not marked to | ////////////////// | ////////////////// | ///////////////// | ////////////////// |
market.................... | 5,974,867 | 0 | 0 | 0 | 16.b.
------------------------------------------------------------------------------------
| RCFD 8729 | RCFD 8730 | RCFD 8731 | RCFD 8732 |
------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-16
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Schedule RC-L--Continued
-----------------------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange | Equity Derivative | Commodity and |
_____________________________________ | Contracts | Contracts | Contracts | Other Contracts |
| Off-balance Sheet Derivatives |---------------------------------------------------------------------------------
| Position Indicators | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
17. Gross fair values of | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
derivative contracts: | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
a. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
trading: |////////////////// | ////////////////// | ////////////////// | ///////////////// |
(1) Gross positive |////////////////// | ////////////////// | ////////////////// | ///////////////// |
fair value ............... | 8733 511 | 8734 2,085,400 | 8735 0 | 8736 0 | 17.a.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
fair value ............... | 8737 489 | 8738 2,085,842 | 8739 0 | 8740 0 | 17.a.(2)
b. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
trading that are marked | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
to market: | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
fair value .............. | 8741 0 | 8742 0 | 8743 0 | 8744 0 | 17.b.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
fair value .............. | 8745 956 | 8746 0 | 8747 0 | 8748 0 | 17.b.(2)
c. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
trading that are not | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
marked to market: | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
fair value ............... | 8749 35,440 | 8750 0 | 8751 0 | 8752 0 | 17.c.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ///////////////// |
fair value ............... | 8753 87,461 | 8754 0 | 8755 0 | 8756 0 | 17.c.(2)
-----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1.-2. Not applicable | ///////////////// |
3. Unused commitments with an original maturity exceeding one year that are reported in | ///////////////// |
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments | ///////////////// |
that are fee paid or otherwise legally binding) ............................................ | 3833 3,566,725 | M.3.
a. Participations in commitments with an original maturity ----------------------------| ///////////////// |
exceeding one year conveyed to others ....................... | RCFD 3834 | 60,962 | ///////////////// | M.3.a.
4. To be completed only by banks with $1 billion or more in ---------------------------| ///////////////// |
total assets: | ///////////////// |
Standby letters of credit and foreign office guarantees (both financial and performance) | ///////////////// |
issued to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above.... | 3377 413,932 | M.4.
5. To be completed for the September report only: | ///////////////// |
Installment loans to individuals for household, family, and other personal expenditures that | ///////////////// |
have been securitized and sold without recourse (with servicing retained), amounts | ///////////////// |
outstanding by type of loan: | ///////////////// |
a. Loans to purchase private passenger automobiles ......................................... | 2741 N/A | M.5.a.
b. Credit cards and related plans .......................................................... | 2742 N/A | M.5.b.
c. All other consumer installment credit (including mobile home loans) ..................... | 2743 N/A | M.5.c.
---------------------
</TABLE>
26
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-1
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-M--Memoranda
<TABLE>
<CAPTION>
----------
| C465 | lesser than -
----------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// |
shareholders, and their related interests as of the report date: | ////////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, | ////////////////// |
principal shareholders, and their related interests..................................... | 6164 6,060 | 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount | ////////////////// |
of all extensions of credit by the reporting bank (Including extensions of credit to | ////////////////// |
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// |
of total capital as defined for this purpose in agency regulations. ---------------------| ////////////////// |
| RCFD 6165 | 4 | ////////////////// | 1.b.
---------------------| ////////////////// |
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// |
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b).............. | 3405 0 | 2.
3. Not applicable. | ////////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// |
(include both retained servicing and purchased servicing): | ////////////////// |
a. Mortgages serviced under a GNMA contract................................................ | 5500 25,378 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer.................................................. | 5501 22,762 | 4.b.(1)
(2) Serviced without recourse to servicer............................................... | 5502 781,608 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract............................................ | 5503 57,388 | 4.c.(1)
(2) Serviced under a special option contract............................................ | 5504 2,357,088 | 4.c.(2)
d. Mortgages serviced under other servicing contracts...................................... | 5505 3,131,580 | 4.d.
5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must | ////////////////// |
equal Schedule RC, item 9): | ////////////////// |
a. U.S. addressees (domicile).............................................................. | 2103 15,953 | 5.a.
b. Non-U.S. addressees (domicile).......................................................... | 2104 0 | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing rights.............................................................. | 3164 13,124 | 6.a.
b. Other identifiable intangible assets: | ////////////////// |
(1) Purchased credit card relationships................................................ | 5506 0 | 6.b.(1)
(2) All other identifiable intangible assets........................................... | 5507 4,048 | 6.b.(2)
c. Goodwill ............................................................................... | 3163 260,543 | 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10).................. | 2143 277,715 | 6.d.
e. Intangible assets that have been grandfathered for regulatory capital purposes.......... | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to | ////////////////// |
redeem the debt ........................................................................... | 3295 0 | 7.
----------------------
</TABLE>
- ----------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
27
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-18
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-M--Continued
<TABLE>
<CAPTION>
---------------------------
Dollar Amounts in Thousands | Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
8. a. Other real estate owned: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ........................ | RCFD 5372 0 | 8.a.(1)
(2) All other real estate owned: | /////////////////////// |
(a) Construction and land development in domestic offices ...................... | RCON 5508 814 | 8.a.(2)(a)
(b) Farmland in domestic offices ............................................... | RCON 5509 0 | 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ...................... | RCON 5510 3,125 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices ......... | RCON 5511 0 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ...................... | RCON 5512 4,652 | 8.a.(2)(e)
(f) In foreign offices ......................................................... | RCFN 5513 0 | 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ...... | RCFD 2150 8,591 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ........................ | RCFD 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies .. | RCFD 5375 0 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ...... | RCFD 2130 0 | 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies ............... | RCFD 5376 0 | 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, | /////////////////////// |
item 23, "Perpetual preferred stock and related surplus" .............................. | RCFD 3778 0 | 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include | /////////////////////// |
proprietary, private label, and third party products): | /////////////////////// |
a. Money market funds ................................................................. | RCON 6441 0 | 10.a.
b. Equity securities funds ............................................................ | RCON 8427 0 | 10.b.
c. Debt securities funds .............................................................. | RCON 8428 0 | 10.c.
d. Other mutual funds ................................................................. | RCON 8429 0 | 10.d.
e. Annuities .......................................................................... | RCON 8430 0 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through | /////////////////////// |
10.e. above) ....................................................................... | RCON 8784 0 | 10.f.
--------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
---------------------------
Memorandum Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Interbank holdings of capital instruments (to be completed for the December | /////////////////////// |
report only): | /////////////////////// |
a. Reciprocal holdings of banking organizations' capital instruments.................... | 3836 N/A | M.1.a.
b. Nonreciprocal holdings of banking organizations' capital instruments................. | 3837 N/A | M.1.b.
---------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST=BK: 0590 FFIEC 031
Address: 777 MAIN STREET Page RC-18
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets
The FFIEC regards the information reported
in all of Memorandum item 1, in items 1
through 10, column A, and in Memorandum
items 2 through 4, column A, as confidential.
<TABLE>
<CAPTION>
----------
| C470 | lesser than -
----------------------------------------------------------------
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
----------------------------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Loans secured by real estate: | | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile)................. | | 1246 15,544 | 1247 98,273 | 1.a.
b. To non-U.S. addressees (domicile)............. | C | 1249 0 | 1250 0 | 1.b.
2. Loans to depository institutions and | | ////////////////// | ////////////////// |
acceptances of other banks: | O | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | | ////////////////// | ////////////////// |
institutions.................................. | N | 5378 0 | 5379 0 | 2.a.
b. To foreign banks ............................. | | 5381 0 | 5382 0 | 2.b.
3. Loans to finance agricultural production and | F | ////////////////// | ////////////////// |
other loans to farmers .......................... | | 1597 0 | 1583 33 | 3.
4. Commercial and industrial loans: | I | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile)................. | | 1252 6,043 | 1253 30,154 | 4.a.
b. To non-U.S. addressees (domicile)............. | D | 1255 0 | 1256 0 | 4.b.
5. Loans to individuals for household, family, and | | ////////////////// | ////////////////// |
other personal expenditures: | E | ////////////////// | ////////////////// |
a. Credit cards and related plans................ | | 5384 73 | 5385 105 | 5.a.
b. Other (includes single payment, installment, | N | ////////////////// | ////////////////// |
and all student loans) ....................... | | 5387 461 | 5388 752 | 5.b.
6. Loans to foreign governments and official | T | ////////////////// | ////////////////// |
institutions..................................... | | 5390 0 | 5391 0 | 6.
7. All other loans.................................. | I | 5460 138 | 5461 7,286 | 7.
8. Lease financing receivables: | | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile)................. | A | 1258 0 | 1259 0 | 8.a.
b. Of non-U.S. addressees (domicile)............. | | 1272 0 | 1791 0 | 8.b.
9. Debt securities and other assets (exclude other | L | ////////////////// | ////////////////// |
real estate owned and other repossessed assets).. | | 3506 0 | 3507 0 | 9.
----------------------------------------------------------------
</TABLE>
===============================================================================
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed
portions of past due and nonaccrual loans and leases. Report in item 10 below
certain guaranteed loans and leases that have already been included in the
amounts reported in items 1 through 8.
<TABLE>
<CAPTION>
----------------------------------------------------------------
| RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
----------------------------------------------------------------
<S> <C> <C> <C> <C>
10. Loans and leases reported in items 1
through 8 above which are wholly or partially | | ////////////////// | ////////////////// |
guaranteed by the U.S. Government............... | CONFIDENTIAL | 5613 283 | 5614 238 | 10.
a. Guaranteed portion of loans and leases | | ////////////////// | ////////////////// |
included in item 10 above.................... | | 5616 249 | 5617 227 | 10.a.
----------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-20
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Schedule RC-N--Continued
--------- Lesser
| C473 | than -
-------------------------------------------------------------
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
Memoranda -------------------------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> |<C>
1. Restructured loans and leases included in |
Schedule RC-N, items 1 through 8, above ............... | C C O N F I D E N T I A L | M.1.
2. Loans to finance commercial real estate, | O |
construction, and land development activities | N |
(not secured by real estate) included in | F ----------------------------------------| M.2.
Schedule RC-N, items 4 and 7, above ................... | I | RCON Bil Mil Thou | RCON Bil Mil Thou |
3. Loans secured by real estate in domestic offices | D |---------------------------------------|
(included in Schedule RC-N, item 1, above): | E | ///////////////// | ///////////////// |
a. Construction and land development .................. | N | 2769 135 | 3492 4,931 | M.3.a.
b. Secured by farmland ................................ | T | 3494 0 | 3495 0 | M.3.b.
c. Secured by 1-4 family residential properties: | I | ///////////////// | ///////////////// |
(1) Revolving, open-end loans secured by | A | ///////////////// | ///////////////// |
1-4 family residential properties and | L | ///////////////// | ///////////////// |
extended under lines of credit ................. | | 5399 579 | 5400 2,526 | M.3.c.(1)
(2) All other loans secured by 1-4 family | | ///////////////// | ///////////////// |
residential properties ......................... | | 5402 9,892 | 5403 23,202 | M.3.c.(2)
d. Secured by multifamily (5 or more) | | ///////////////// | ///////////////// |
residential properties ............................. | | 3500 413 | 3501 3,195 | M.3.d.
e. Secured by nonfarm nonresidential properties ....... | | 3503 4,525 | 3504 64,419 | M.3.e.
------------------------------------------------------------
-----------------------------------------
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
-----------------------------------------
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
-----------------------------------------
4. Interest rate, foreign exchange rate, and other | | ///////////////// |
commodity and equity contracts: | | ///////////////// |
a. Book value of amounts carried as assets ............ | CONFIDENTIAL | 3528 0 | M.4.a.
b. Replacement cost of contracts with a | | ///////////////// |
positive replacement cost .......................... | | 3530 0 | M.4.b.
-----------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-21
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-O--Other Data for Deposit Insurance Assessments
<TABLE>
<CAPTION>
----------
| C475 | lesser than -
----------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Unposted debits (see instructions): | ////////////////// |
a. Actual amount of all unposted debits .................................................. | 0030 N/A | 1.a.
OR | ////////////////// |
b. Separate amount of unposted debits: | ////////////////// |
(1) Actual amount of unposted debits to demand deposits ............................... | 0031 0 | 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) .................. | 0032 0 | 1.b.(2)
2. Unposted credits (see instructions): | ////////////////// |
a. Actual amount of all unposted credits ................................................. | 3510 N/A | 2.a.
OR | ////////////////// |
b. Separate amount of unposted credits: | ////////////////// |
(1) Actual amount of unposted credits to demand deposits .............................. | 3512 432,127 | 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ................. | 3514 0 | 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// |
deposits in domestic offices) ............................................................ | 3520 0 | 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in | ////////////////// |
Puerto Rico and U.S. territories and possessions (not included in total deposits): | ////////////////// |
a. Demand deposits of consolidated subsidiaries .......................................... | 2211 26,823 | 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ............................. | 2351 0 | 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries .................. | 5514 0 | 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | ////////////////// |
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) .............. | 2229 0 | 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) . | 2383 0 | 5.b.
c. Interest accrued and unpaid on deposits in insured branches | ////////////////// |
(included in Schedule RC-G, item 1.b) ................................................. | 5515 0 | 5.c.
----------------------
----------------------
Item 6 is not applicable to state nonmember banks that have not been authorized by the | ////////////////// |
Federal Reserve to act as pass-through correspondents. | ////////////////// |
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | ////////////////// |
behalf of its respondent depository institutions that are also reflected as | ////////////////// |
deposit liabilities of the reporting bank: | ////////////////// |
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, | ////////////////// |
Memorandum item 4.a) .................................................................. | 2314 0 | 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, | ////////////////// |
Memorandum item 4.b) .................................................................. | 2315 0 | 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) | ////////////////// |
a. Unamortized premiums .................................................................. | 5516 0 | 7.a.
b. Unamortized discounts ................................................................. | 5517 0 | 7.b.
----------------------
- -----------------------------------------------------------------------------------------------------------------------------------
8. To be completed by banks with "Oakar deposits." ----------------------
Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) | ////////////////// |
of the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction | ////////////////// |
Worksheet(s)) ............................................................................ | 5518 292,130 | 8.
----------------------
- -----------------------------------------------------------------------------------------------------------------------------------
----------------------
9. Deposits in lifeline accounts ............................................................ | 5596 ///////////// | 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// |
deposits in domestic offices) ............................................................ | 8432 0 | 10.
----------------------
</TABLE>
______________
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists
of nontransaction accounts and all transaction accounts other than demand
deposits.
31
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-22
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-O--Continued
<TABLE>
<CAPTION>
----------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for | ////////////////// |
certain reciprocal demand balances: | ////////////////// |
a. Amount by which demand deposits would be reduced if reciprocal demand balances | ////////////////// |
between the reporting bank and savings associations were reported on a net basis | ////////////////// |
rather than a gross basis in Schedule RC-E ............................................ | 8785 0 | 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances | ////////////////// |
between the reporting bank and U.S. branches and agencies of foreign banks were | ////////////////// |
reported on a gross basis rather than a net basis in Schedule RC-E .................... | 8786 0 | 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of | ////////////////// |
collection were included in the calculation of net reciprocal demand balances between | ////////////////// |
the reporting bank and the domestic offices of U.S. banks and savings associations | ////////////////// |
in Schedule RC-E ...................................................................... | 8787 0 | 11.c.
----------------------
Memoranda (to be completed each quarter except as noted)
----------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------------------
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) and 1.b.(1) | ////////////////// |
must equal Schedule RC, item 13.a): | ////////////////// |
a. Deposit accounts of $100,000 or less: | ////////////////// |
(1) Amount of deposit accounts of $100,000 or less ..................................... | 2702 5,150,842 | M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number | ////////////////// |
completed for the June report only) ........................ | RCON 3779 | N/A | ////////////////// | M.1.a.(2)
b. Deposit accounts of more than $100,000: | ////////////////// |
(1) Amount of deposit accounts of more than $100,000 ........... Number | 2710 4,792,794 | M.1.b.(1)
(2) Number of deposit accounts of more than $100,000 ........... | RCON 2722 | 7,524 | ////////////////// | M.1.b.(2)
----------------------------------------------
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by multiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of more
than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a YES NO
method or procedure for determining a better estimate of uninsured --------------------------
deposits than the estimate described above.......................................... | RCON 6861| |///| X | M.2.a.
----------------------
| RCON Bil Mil Thou |
b. If the box marked YES has been checked, report the estimate of uninsured deposits ----------------------
determined by using your bank's method or procedure .................................... | 5597 N/A | M.2.b.
----------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Person to whom questions about the Reports of Condition and Income should be directed: | C477 | lesser than -
--------
ROBERT DUFF, VICE PRESIDENT (203) 986-2474
- -------------------------------------------------------------- ----------------------------------------------------------------
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)
</TABLE>
32
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-22
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-R--Risk-Based Capital
This schedule must be completed by all banks as follows: Banks that reported
total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1994,
must complete items 2 through 9 and Memorandum items 1 and 2. Banks with assets
of less than $1 billion must complete items 1 and 2 below or Schedule RC-R
in its entirety, depending on their response to item 1 below.
<TABLE>
<S> <C>
-----------
| C480 |lesser than
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed -----------
only by banks with total assets of less than $1 billion. Indicate in the appropriate | YES NO |
box at the right whether the bank has total capital greater than or equal to -----------------------
eight percent of adjusted total assets.................................................... | RCFD 6056 | |////| | 1.
-----------------------
For purposes of this test, adjusted total assets equals total assets less cash, U.S.
Treasuries, U.S. Government agency obligations, and 80 percent of U.S. Government-
sponsored agency obligations plus the allowance for loan and lease losses and selected
off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete item 2
below. If the box marked NO has been checked, the bank must complete the remainder
of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based
capital ratio is less than eight percent or that the bank is not in compliance with the
risk-based capital guidelines.
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------
| (Column A) | (Column B) |
|Subordinated Debt(1)| Other |
| and Intermediate | Limited- |
Item 2 is to be completed by all banks. | Term Preferred | Life Capital |
| Stock | Instruments |
-------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments | ////////////////// | ////////////////// |
(original weighted average maturity of at least five years) with a | ////////////////// | ////////////////// |
remaining maturity of: | ////////////////// | ////////////////// |
a. One year or less ...................................................| 3780 0 | 3786 0 | 2.a.
b. Over one year through two years ....................................| 3781 0 | 3787 0 | 2.b.
c. Over two years through three years .................................| 3782 0 | 3788 0 | 2.c.
d. Over three years through four years ................................| 3783 0 | 3789 0 | 2.d.
e. Over four years through five years .................................| 3784 0 | 3790 0 | 2.e.
f. Over five years ....................................................| 3785 250,000 | 3791 0 | 2.f.
-------------------------------------------
3. Not applicable.
-------------------------------------------
| (Column A) | (Column B) |
Items 4-9 and Memorandum item 1 are to be completed | Assets | Credit Equiv- |
by banks that answered NO to item 1 above and | Recorded | alent Amount |
by banks with total assets of $1 billion or more. | on the | of Off-Balance |
| Balance Sheet | Sheet Items(2) |
-------------------------------------------
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
4. Assets and credit equivalent amounts of off-balance sheet items -------------------------------------------
assigned to the Zero percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Securities issued by, other claims on, and claims | ////////////////// | ////////////////// |
unconditionally guaranteed by, the U.S. Government and its | ////////////////// | ////////////////// |
agencies and other OECD central governments ....................| 3794 1,823,286 | ////////////////// | 4.a.(1)
(2) All other ......................................................| 3795 313,104 | ////////////////// | 4.a.(2)
b. Credit equivalent amount of off-balance sheet items ................| ////////////////// | 3796 0 | 4.b.
-------------------------------------------
</TABLE>
______________
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount of assets reported in
column A.
33
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-24
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
</TABLE>
Schedule RC-R--Continued
<TABLE>
<CAPTION>
-------------------------------------------
| (Column A) | (Column B) |
| Assets | Credit Equiv- |
| Recorded | alent Amount |
| on the | of Off-Balance |
| Balance Sheet | Sheet Items(1) |
|--------------------|--------------------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- ----------------------------------------------------------------------------|--------------------|--------------------|
<S> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 20 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Claims conditionally guaranteed by the U.S. Government and its | ////////////////// | ////////////////// |
agencies and other OECD central governments ..................... | 3798 23,366 | ////////////////// | 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Govern- | ////////////////// | ////////////////// |
ment and its agencies and other OECD central governments; by | ////////////////// | ////////////////// |
securities issued by U.S. Government-sponsored agencies; and | ////////////////// | ////////////////// |
by cash on deposit ...............................................| 3799 0 | ////////////////// | 5.a.(2)
(3) All other ........................................................| 3800 3,027,206 | ////////////////// | 5.a.(3)
b. Credit equivalent amount of off-balance sheet items ..................| ////////////////// | 3801 242,427 | 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 50 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................| 3802 3,242,777 | ////////////////// | 6.a.
b. Credit equivalent amount of off-balance sheet items ..................| ////////////////// | 3803 154,097 | 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 100 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................| 3804 10,563,754 | ////////////////// | 7.a.
b. Credit equivalent amount of off-balance sheet items ..................| ////////////////// | 3805 2,856,770 | 7.b.
8. On-balance sheet asset values excluded from the calculation of the | ////////////////// | ////////////////// |
risk-based capital ratio(2) .............................................| 3806 (22,943)| ////////////////// | 8.
9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// |
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, | ////////////////// | ////////////////// |
item 12 plus items 4.b and 4.c) .........................................| 3807 18,970,550 | ////////////////// | 9.
-------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda ----------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------|--------------------|
<S> <C> <C>
1. Current credit exposure across all off-balance sheet derivative contracts covered by the | ////////////////// |
risk-based capital standards..................................................................| 8764 245,300 | M.1.
----------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------
| With a remaining maturity of |
|-----------------------------------------------------------------|
| (Column A) | (Column B) | (Column C) |
| One year or less | Over one year | Over five years |
| | through five years | |
|---------------------|---------------------|---------------------|
2. Notional principal amounts of off-balance | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
sheet derivative contracts(3): |---------------------|---------------------|---------------------|
<S> <C> <C> <C> <C>
a. Interest rate contracts.......................| 3809 284,000 | 8766 4,146,367 | 8767 23,000 | M.2.a.
b. Foreign exchange contracts....................| 3812 3,556,773 | 8769 0 | 8770 0 | M.2.b.
c. Gold contracts................................| 8771 0 | 8772 0 | 8773 0 | M.2.c.
d. Other precious metals contracts...............| 8774 0 | 8775 0 | 8776 0 | M.2.d.
e. Other commodity contracts.....................| 8777 0 | 8778 0 | 8779 0 | M.2.e.
f. Equity derivative contracts...................| A000 0 | A001 0 | A002 0 | M.2.f.
-------------------------------------------------------------------
</TABLE>
(1) Do not report in column B the risk-weighted amount of assets reported in
column A.
(2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of
these securities in items 4 through 7 above. Item 8 also includes on-balance
sheet asset values (or portions thereof) of off-balance sheet interest rate,
foreign exchange rate, and commodity contracts and those contracts (e.g.,
futures contracts) not subject to risk-based capital. Exclude from item 8
margin accounts and accrued receivables as well as any portion of the
allowance for loan and lease losses in excess of the amount that may be
included in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity of 14 days or
less and all futures contracts.
34
<PAGE>
Optional Narrative Statement Concerning the Amounts [35]
Reported in the Reports of Condition and Income
at close of business on March 31, 1995
Shawnut Bank Connecticut, N.A. Hartford, Connecticut
- --------------------------------------------------------------------------------
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief narrative
statement on the amounts reported in the Reports of Condition and Income. This
optional statement will be made available to the public, along with the publicly
available data in the Reports of Condition and Income, in response to any
request for individual bank report data. However, the information reported in
column A and in all of Memorandum item 1 of Schedule RC-N is regarded as
confidential and will not be released to the public. BANKS CHOOSING TO SUBMIT
THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT DOES NOT CONTAIN THE
NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK CUSTOMERS, REFERENCES TO THE
AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN SCHEDULE RC-N OR ANY OTHER
INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE PUBLIC OR THAT WOULD
COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing not to make a
statement may check the "No comment" box below and should make no entries of any
kind in the space provided for the narrative statement; i.e., DO NOT enter in
this space such phrases as "No statement," "Not applicable," "N/A," "No
comment," and "None."
The optional statement must be entered on this sheet. The statement should not
exceed 100 words. Further, regardless of the number of words, the statement must
not exceed 750 characters, including punctuation, indentation, and standard
spacing between words and sentences. If any submission should exceed 750
characters, as defined, it will be truncated at 750 characters with no notice to
the submitting bank and the truncated statement will appear as the bank's
statement both on agency computerized records and in computer-file releases to
the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who thereby
attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing narrative
statement will be deleted from the files and from disclosure; the bank, at its
option, may replace it with a statement, under signature, appropriate to the
amended data.
The optional narrative statement will appear in agency records and in release to
the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
- --------------------------------------------------------------------------------
No comment [X] [C471|C472]
BANK MANAGEMENT STATEMENT (please type or print clearly):
-------------------------------------------April 30, 1995
Signature of Executive Officer of Bank Date of Signature
